EXHIBIT 13.3









Alphaville Urbanismo S.A.



Consolidated Financial Statements
December 31, 2017 and report of independent
registered public accounting firm











F-1


Alphaville Urbanismo S.A. Financial Statements as of December 31, 2017 and 2016 and Report of Independent Registered Public Accounting Firm


|Contents                                                |     
|------------------------------------------------------- | ----
|Report of Independent Registered Public Accounting Firm | F-3 
|Audited consolidated financial statements               |     
|Consolidated statements of financial position           | F-5 
|Consolidated statements of profit or loss               | F-7 
|Consolidated statements of comprehensive income         | F-8 
|Consolidated statements of changes in equity            | F-9 
|Consolidated statements of cash flows - Indirect Method | F-10
|Notes to the consolidated financial statements          | F-11



F-2









Independent Auditors’ Report



The Board of Directors



Alphaville Urbanismo S.A.:



Report on the Financial Statements



We have audited the accompanying consolidated financial statements
of Alphaville Urbanismo S.A. and its subsidiaries (the Company), which comprise the consolidated statement of financial position
as of December 31, 2017, and the related consolidated statements of profit or loss, comprehensive income (loss), changes in
equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.



Management’s Responsibility for the Financial
Statements



Management is responsible for the preparation and fair presentation
of these consolidated financial statements in accordance with accounting practices adopted in Brazil applicable to Real Estate
entities; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation
of consolidated financial statements that are free from material misstatement, whether due to fraud or error.



Auditors’ Responsibility



Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free from material misstatement.



An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’
judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly,
we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements.



We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.



Opinion



In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of Alphaville Urbanismo S.A. and its subsidiaries as
of December 31, 2017, and the results of their operations and their cash flows for the year then ended in accordance with
accounting practices adopted in Brazil applicable to Real Estate entities.









F-3











Emphasis of Matter



Going concern



The accompanying consolidated
financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 1
to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency
that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters
are also described in note 1. The consolidated financial statements do not include any adjustments that might result from
the outcome of this uncertainty. Our opinion is not modified with respect to this matter.



Differences from U.S. Generally
Accepted Accounting Principles



Accounting practices adopted in
Brazil applicable to Real Estate entities vary in certain significant respects from U.S. generally accepted accounting principles.
Information relating to the nature and effect of such differences is presented in note 24 to the consolidated financial statements.



Other Matter



The accompanying consolidated
balance sheet of Alphaville Urbanismo S.A. as of December 31, 2016, and the related statements of income and cash flows for
each of the years in the two-year period ended December 31, 2016 were not audited, reviewed, or compiled by us and, accordingly,
we do not express an opinion or any other form of assurance on them.







São Paulo, Brazil



August 10, 2018



/s/ KPMG Auditores Independentes





F-4


Alphaville Urbanismo S.A. Financial Statements as of December 31, 2017 and 2016 and Report of Independent Registered Public Accounting Firm






Consolidated Statements of Financial Position
December 31, 2017 and 2016
(In thousands of Brazilian reais)



|                                                           |  | Notes |  |  | 2017      |             | 2016
|---------------------------------------------------------- |  | ----- |  |  | --------- | ----------- | ----
|                                                           |  |       |  |  |           | (Unaudited)
|Assets                                                     |  |       |  |  |           |             |     
|Current assets                                             |  |       |  |  |           |             |     
|Cash and cash equivalents                                  |  | 4.1   |  |  | 43,478    |             |     
|Financial investments                                      |  | 4.2   |  |  | 117,896   |             |     
|Trade accounts receivable                                  |  | 5.1   |  |  | 400,452   |             |     
|Lots for sale                                              |  | 6     |  |  | 409,583   |             |     
|Dividends receivable                                       |  | 16.1  |  |  | 2,543     |             |     
|Receivables from related parties                           |  | 16.1  |  |  | 18,867    |             |     
|Other receivables                                          |  | 5.2   |  |  | 56,402    |             |     
|Total current assets                                       |  |       |  |  | 1,049,221 |             |     
|                                                           |  |       |  |  |           |             |     
|Non-current assets                                         |  |       |  |  |           |             |     
|Trade accounts receivable                                  |  | 5.1   |  |  | 910,187   |             |     
|Lots for sale                                              |  | 6     |  |  | 149,047   |             |     
|Other receivables                                          |  | 5.2   |  |  | 59,920    |             |     
|                                                           |  |       |  |  | 1,119,154 |             |     
|                                                           |  |       |  |  |           |             |     
|Investments in associates and jointly-controlled investees |  | 7     |  |  | 36,140    |             |     
|Property and equipment                                     |  | -     |  |  | 40,429    |             |     
|                                                           |  |       |  |  | 76,569    |             |     
|                                                           |  |       |  |  |           |             |     
|Total non-current assets                                   |  |       |  |  | 1,195,723 |             |     
|                                                           |  |       |  |  |           |             |     
|                                                           |  |       |  |  |           |             |     
|Total assets                                               |  |       |  |  | 2,244,944 |             |     



The accompanying notes are an
integral part of these consolidated financial statements.



F-5


Alphaville Urbanismo S.A.


Consolidated Statements of Financial Position
December 31, 2017 and 2016
(In thousands of Brazilian reais)



|                                                               |  | Note               |  |  | 2017      |             | 2016
|-------------------------------------------------------------- |  | ------------------ |  |  | --------- | ----------- | ----
|                                                               |  |                    |  |  |           | (Unaudited)
|Liabilities                                                    |  |                    |  |  |           |             |     
|Current liabilities                                            |  |                    |  |  |           |             |     
|Loans and financing                                            |  | 8                  |  |  | 92,582    |             |     
|Debentures                                                     |  | 9                  |  |  | 41,763    |             |     
|Suppliers                                                      |  | 15(i)(d)           |  |  | 84,296    |             |     
|Salaries, payroll charges, taxes and profit sharing            |  | -                  |  |  | 53,741    |             |     
|Payables for purchase of properties and advances from customer |  | 10                 |  |  | 48,525    |             |     
|Amounts to be transferred to venture partners                  |  | -                  |  |  | 31,876    |             |     
|Dividends payable                                              |  | 16.1               |  |  | 2,263     |             |     
|Obligations assumed on the assignment of receivables           |  | 5                  |  |  | 38,074    |             |     
|Other payables                                                 |  | 17                 |  |  | 20,349    |             |     
|Total current liabilities                                      |  |                    |  |  | 413,469   |             |     
|                                                               |  |                    |  |  |           |             |     
|Non-current liabilities                                        |  |                    |  |  |           |             |     
|Loans and financing                                            |  | 8                  |  |  | 122,042   |             |     
|Debentures                                                     |  | 9                  |  |  | 660,000   |             |     
|Convertible debentures                                         |  | 9                  |  |  | 939,151   |             |     
|Deferred income tax and social contribution                    |  | 13.b               |  |  | 128       |             |     
|Acquisition of ownership interests                             |  | -                  |  |  | 23,629    |             |     
|Provision for legal claims                                     |  | 12                 |  |  | 42,891    |             |     
|Warranty provision                                             |  | -                  |  |  | 28,562    |             |     
|Obligations assumed on the assignment of receivables           |  | 5                  |  |  | 50,094    |             |     
|Other payables                                                 |  | 17                 |  |  | 80,955    |             |     
|Total non-current liabilities                                  |  |                    |  |  | 1,947,452 |             |     
|                                                               |  |                    |  |  |           |             |     
|Equity                                                         |  |                    |  |  |           |             |     
|Capital                                                        |  | 14(i)              |  |  | 459,480   |             |     
|Treasury shares                                                |  | 14(i)              |  |  | (23,185   | )           |     
|Reserve for capital and granting of shares                     |  | 14(i)              |  |  | -         |             |     
|Accumulated losses and profit reserves                         |  | 14 (i) and 14 (ii) |  |  | (577,585  | )           |     
|                                                               |  |                    |  |  | (141,290  | )           |     
|Non-controlling interests                                      |  |                    |  |  | 25,313    |             |     
|Total equity                                                   |  |                    |  |  | (115,977  | )           |     
|                                                               |  |                    |  |  |           |             |     
|Total liabilities and equity                                   |  |                    |  |  | 2,244,944 |             |     



The accompanying notes are an
integral part of these consolidated financial statements.



F-6


Alphaville Urbanismo S.A.


Consolidated Statement of profit or loss
December 31, 2017, 2016 and 2015
(In thousands of Brazilian reais)



|                                                                                           |  | Notes |  |  | 2017     |             | 2016 |             | 2015    
|------------------------------------------------------------------------------------------ |  | ----- |  |  | -------- | ----------- | ---- | ----------- | --------
|                                                                                           |  |       |  |  |          | (Unaudited) |      | (Unaudited)
|Net operating revenue                                                                      |  | 18    |  |  | 108,321  |             |      |             | 716,346 
|Lot development and sales                                                                  |  | 19    |  |  | (420,381 | )           |      |             | (381,595
|Gross profit (loss)                                                                        |  |       |  |  | (312,060 | )           |      |             | 334,751 
|                                                                                           |  |       |  |  |          |             |      |             |         
|Operating (expenses) income                                                                |  |       |  |  |          |             |      |             |         
|Selling expenses                                                                           |  | 19    |  |  | (68,149  | )           |      |             | (70,123 
|General and administrative expenses                                                        |  | 19    |  |  | (85,532  | )           |      |             | (77,400 
|Provision for profit sharing                                                               |  | 16.5  |  |  | (9,227   | )           |      |             | -       
|Income from equity method investments                                                      |  | 7     |  |  | (2,794   | )           |      |             | 5,230   
|Depreciation and amortization                                                              |  | -     |  |  | (13,733  | )           |      |             | (10,457 
|Other expenses, net                                                                        |  | 20    |  |  | (32,894  | )           |      |             | (15,770 
|(Loss) profit before financial income and expenses, and income tax and social contribution |  |       |  |  | (524,389 | )           |      |             | 166,231 
|                                                                                           |  |       |  |  |          |             |      |             |         
|Financial expenses                                                                         |  | 21    |  |  | (262,303 | )           |      |             | (277,824
|Financial income                                                                           |  | 21    |  |  | 10,189   |             |      |             | 20,772  
|                                                                                           |  |       |  |  |          |             |      |             |         
|Loss before income tax and social contribution                                             |  |       |  |  | (776,503 | )           |      |             | (90,821 
|                                                                                           |  |       |  |  |          |             |      |             |         
|Current income tax and social contribution                                                 |  | 13.a  |  |  | (8,878   | )           |      |             | (24,468 
|Deferred income tax and social contribution                                                |  | 13.a  |  |  | 12,263   |             |      |             | 8,310   
|                                                                                           |  |       |  |  |          |             |      |             |         
|Total income tax and social contribution                                                   |  |       |  |  | 3,385    |             |      |             | (16,158 
|                                                                                           |  |       |  |  |          |             |      |             |         
|(Loss) profit for the year                                                                 |  |       |  |  | (773,118 | )           |      |             | (106,979
|                                                                                           |  |       |  |  |          |             |      |             |         
|(Loss) profit attributable to:                                                             |  |       |  |  |          |             |      |             |         
|Non-controlling interests                                                                  |  |       |  |  | (8,976   | )           |      |             | 1,320   
|Owners of the parent                                                                       |  |       |  |  | (764,142 | )           |      |             | (108,299
|                                                                                           |  |       |  |  |          |             |      |             |         
|Basic earnings (loss) per thousand shares - In Reais                                       |  |       |  |  | (6       | )           |      |             | (1      



The accompanying notes are an
integral part of these consolidated financial statements.



F-7


Alphaville Urbanismo S.A.


Consolidated Statements of comprehensive income (loss)
December 31, 2017 and 2016 (In thousands of Brazilian reais)



|                                                             |  |  | 2017     |             | 2016 |             | 2015    
|------------------------------------------------------------ |  |  | -------- | ----------- | ---- | ----------- | --------
|                                                             |  |  |          | (Unaudited) |      | (Unaudited)
|(Loss) profit for the year                                   |  |  | (773,118 | )           |      |             | (106,979
|                                                             |  |  |          |             |      |             |         
|Total comprehensive (loss) income for the year, net of taxes |  |  | (773,118 | )           |      |             | (106,979
|                                                             |  |  |          |             |      |             |         
|Attributable to:                                             |  |  |          |             |      |             |         
|Owners of the parent                                         |  |  | (764,142 | )           |      |             | (108,299
|Non-controlling interests                                    |  |  | (8,976   | )           |      |             | 1,320   



The accompanying notes are an
integral part of these consolidated financial statements.



F-8


Alphaville Urbanismo S.A.


Consolidated Statements of changes in equity
December 31, 2017, 2016 and 2015
(In thousands of Brazilian reais)



|                                          |  |         |  | Attributed
    to Owners of the Parent |         |                              
|----------------------------------------- |  | ------- |  | -------------------------------------- | ------- | -----------------------------
|                                          |  |         |  |                                        |         |                              
|                                          |  | Notes   |  | Capital                                |         | Proposed
    capital increase
|Balances at December 31, 2014 (Unaudited) |  |         |  |                                        | 290,447 |                              
|                                          |  |         |  |                                        |         |                              
|Capital increase:                         |  |         |  |                                        |         |                              
|Exercise of stock options                 |  |         |  |                                        | 840     |                              
|Capital contribution                      |  |         |  |                                        | -       |                              
|Stock option plan                         |  | 21      |  |                                        | -       |                              
|Purchase of treasury shares               |  | 14 (i)  |  |                                        | -       |                              
|Profit for the year                       |  |         |  |                                        | -       |                              
|Allocation:                               |  |         |  |                                        |         |                              
|Legal reserve                             |  | 14 (ii) |  |                                        | -       |                              
|Proposed dividends                        |  | 14 (ii) |  |                                        | -       |                              
|Reserve for retained earnings             |  | 14 (ii) |  |                                        | -       |                              
|Proposed capital increase                 |  | 14 (ii) |  |                                        | -       |                              
|Balances at December 31, 2015 (Unaudited) |  |         |  |                                        | 291,287 |                              
|Dividends                                 |  | 14 (ii) |  |                                        | -       |                              
|Capital increase:                         |  |         |  |                                        | 141,961 |                              
|Loss for the year                         |  |         |  |                                        | -       |                              
|Proposed dividends                        |  | 14 (ii) |  |                                        |         |                              
|Reserve for retained earnings             |  | 14 (ii) |  |                                        | -       |                              
|Balances at December 31, 2016 (Unaudited) |  |         |  |                                        | 433,248 |                              
|                                          |  |         |  |                                        |         |                              
|Capital increase:                         |  |         |  |                                        | 26,232  |                              
|Loss for the year                         |  | -       |  |                                        | -       |                              
|Allocation:                               |  |         |  |                                        |         |                              
|Declared dividends                        |  | 7       |  |                                        | -       |                              
|Absorption of loss with reserves          |  | 14 (ii) |  |                                        | -       |                              
|Balances at December 31, 2017             |  |         |  |                                        | 459,480 |                              
|                                          |  |         |  |                                        |         |                              

The accompanying notes are an
integral part of these consolidated financial statements.



F-9


Alphaville Urbanismo S.A.


Consolidated Statements of cash flows
December 31, 2017, 2016 and 2015
(In thousands of Brazilian reais)



|                                                                             |  | 2017 |            | 2016        |  | 2015       
|---------------------------------------------------------------------------- |  | ---- | ---------- | ----------- |  | -----------
|                                                                             |  |      |            | (Unaudited) |  | (Unaudited)
|Operating activities                                                         |  |      |            |             |  |            
|(Loss) profit before income tax and social contribution                      |  |      | (776,503   | )           |  |            
|Expenses (income) not affecting cash and cash equivalents:                   |  |      |            |             |  |            
|Depreciation and amortization                                                |  |      | 13,733     |             |  |            
|Expenses for agreement on stock option plan (Note 20)                        |  |      | -          |             |  |            
|Interests and charges                                                        |  |      | 192,145    |             |  |            
|Allowance for doubtful accounts and cancelled contracts                      |  |      | 124,458    |             |  |            
|Warranty provision                                                           |  |      | 8,262      |             |  |            
|Provision for legal claims and commitments (Note 12)                         |  |      | 34,068     |             |  |            
|Provision for loss on realization of inventories (Note 6)                    |  |      | 22,278     |             |  |            
|Provision for profit sharing (Note 16.5)                                     |  |      | 9,227      |             |  |            
|Provision for loss on CRI                                                    |  |      | 7,800      |             |  |            
|Write-offs of investments                                                    |  |      | 2,826      |             |  |            
|Write-offs of property and equipment                                         |  |      | 3,527      |             |  |            
|Income from equity method investments (Note 7)                               |  |      | 2,794      |             |  |            
|Financial instruments                                                        |  |      | -          |             |  |            
|                                                                             |  |      |            |             |  |            
|Decrease/(increase) in operating assets:                                     |  |      |            |             |  |            
|Trade accounts receivable                                                    |  |      | 105,745    |             |  |            
|Lots for sale                                                                |  |      | 114,410    |             |  |            
|Other receivables and others                                                 |  |      | (5,689     | )           |  |            
|                                                                             |  |      |            |             |  |            
|Increase/(decrease) in operating liabilities:                                |  |      |            |             |  |            
|Payables for purchase of properties and advances from customers              |  |      | 11,508     |             |  |            
|Suppliers                                                                    |  |      | (10,194    | )           |  |            
|Salaries, payroll charges, taxes and profit sharing                          |  |      | (16,073    | )           |  |            
|Other payables                                                               |  |      | (19,158    | )           |  |            
|Paid income tax and social contribution                                      |  |      | (11,674    | )           |  |            
|Assignment of receivables                                                    |  |      | 8,646      |             |  |            
|Cash (used in) provided by operating activities                              |  |      | (177,864   | )           |  |            
|                                                                             |  |      |            |             |  |            
|Investing activities:                                                        |  |      |            |             |  |            
|Acquisition of property and equipment and intangible assets                  |  |      | (13,569    | )           |  |            
|Purchase of short-term investments                                           |  |      | (1,818,176 | )           |  |            
|Redemption of short-term investments                                         |  |      | 1,717,732  |             |  |            
|Increase in investments (Note 7)                                             |  |      | 593        |             |  |            
|Cash from (used in) provided by investing activities                         |  |      | (113,420   | )           |  |            
|                                                                             |  |      |            |             |  |            
|Financing activities:                                                        |  |      |            |             |  |            
|Increase in loans and financing (Note 8 and 9)                               |  |      | 530,310    |             |  |            
|Payment of loans and financing – principal (Note 8 and 9)                    |  |      | (253,321   | )           |  |            
|Payment of loans and financing – interests (Note 8 and 9)                    |  |      | (94,711    | )           |  |            
|Payment of principal and dividends on payables to venture partners (Note 11) |  |      | (1,200     | )           |  |            
|Paid dividends                                                               |  |      | -          |             |  |            
|Cash provided by (used in) financing activities                              |  |      | 181,078    |             |  |            
|Net increase (decrease) in cash and cash equivalents                         |  |      | (110,206   | )           |  |            
|                                                                             |  |      |            |             |  |            
|Cash and cash equivalents                                                    |  |      |            |             |  |            
|At the beginning of the year (Note 4.1)                                      |  |      | 153,684    |             |  |            
|At the end of the year (Note 4.1)                                            |  |      | 43,478     |             |  |            
|                                                                             |  |      |            |             |  |            
|Net increase (decrease) in cash and cash equivalents                         |  |      | (110,206   | )           |  |            



The accompanying notes are an
integral part of these consolidated financial statements.



F-10


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)






1. Operations



Alphaville Urbanismo S.A. (“AUSA” or “Company”)
is a private corporation with registered office at Av. das Nações Unidas, 8,501, 3rd floor, in the city and state
of São Paulo, Brazil, and operates in the development and urbanization of residential lots. The Company is focused on identifying,
developing and selling residential lots targeted at many markets throughout the Brazilian territory.



As of December 31, 2017, the Company is a subsidiary of Private
Equity AE Investimentos e Participações S.A., which holds a 70% interest in the capital of the Company, while the
remaining 30% is held by Gafisa S.A..



In 2014, Alphaville Urbanismo SA set out the strategic guideline
for only launching ventures with high sales speed to focus on cash generation in detriment of launch volume.



After that, Brazil faced the worst economic crisis of the past
70 years, with the GDP going down 7% between 2014 and 2016 (source: IBGE). The real estate industry was profoundly impacted, with
the volume of medium/high standard venture launches by major development companies falling 60% in the same period.



The combination of a conservative strategy, focused on cash generation,
and the worst economic crisis in the past years, caused the Company to consciously prepare to reduce the volume of new product
launches in the market, which contributed to losses of R$ 773 million in 2017 that, put together with the parent company’s
strategy for financing the company through debt and not equity, resulted negative equity of R$ 116 million in 2017.



The Company thus devised a strategic plan for 2017 and 2018 supported
by six pillars:



1. the management’s and shareholders’ commitment
to complete all ventures already launched;



2. generation of operating cash;



3. adjustment of its bank debt profile for the following
years;



4. the controlling shareholders’ contribution
through convertible debentures to support the above strategy;



5. the monetization of receivables from completed ventures,
as funding alternative, since the urban development industry does not have a credit facility for development;



6. the continuous increment of its landbank and investment
in project approval process so that the Company is prepared to launch quality products when demand is generated.



Therefore, besides reducing launches, the Company took many operating
measures to increase cash generation. Among such measures are the reduction in general and administrative expenses decreasing personnel
by approximately 49% between 2015 and 2017, the carry out of business actions on speeding-up inventory sales and shortening payment
terms, the review of collection and contract formalization processes to increase receipts and reduce cancellations and default,
and partnering with investors and venture partners in projects with significant volume of construction to be carried out.



F-11


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




1. Operations--Continued



Regarding finances, complementing operating initiatives, the
controlling shareholders made a contribution of R$ 0.8 bn in 2016/2017, banks extended their debt terms with the Company.



The controlling shareholders’ contribution was made through
convertible debentures. As a consequence of the chosen modality and established structure, interests for 2017 accrued, impacting
profit or loss, but not representing a cash outflow. Accordingly, both the debentures and the accrued interests generated a liability
in the books amounting to R$0.9 bn, resulting in a net capital deficiency of R$0.1 bn in 2017.



The company has accessed the financial market for monetizing
by receivables and issuing CRIs. Over recent years, the market absorbed R$ 87 million in 2017 and R$ 144 million in 2016 in transactions
involving securitization of receivables.



The success of past issues, the quality of our receivables, and
the solidity of the financing structures that we have offered to our investors confirm that we have strengthened the Alphaville
trademark in the financial market projecting the same solid image that we have in the lot market.



For 2018, the Company keeps following the strategy to access
capital markets to monetize its receivables. In January 2018, the Company raised R$58 million through a CRI, and, in April, it
is in negotiation process to structure new operations, in the due diligence process, and in negotiation with banks and investors.
We thus believe that it is highly probable that we will continue to place securitization operations in the market in the next 12
months.



It is worth noting that the Company has an alternative plan to
the above funding to generate approximately R$ 120 million in operating cash. This plan is comprised of the following: (i) revise
the curve of works - to delay - cash outflows of select ventures, (ii) reduce the G&A expenses related to activities not essential
to carry out the business plan for 2018, and (iii) reduce the plan for investment in new projects and others.



Therefore, the Company’s Management understands that Alphaville
Urbanismo S.A. will go through the worst crisis in this country’s history by enhancing the credibility of its trademark,
not only in the lot market, but also in the financial market. And the Company is ready to contribute to the recovery of the country’s
economic growth, investing in urban development and quality of life of all Brazilians, while consolidating its leadership in the
lot industry and business profitability and earnings. The Company thus believe that the Group will have sufficient funds to continue
as going concern in the foreseeable future.



F-12


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies



2.1 Basis of presentation and preparation of consolidated
financial statements



The consolidated financial statements were authorized
for issue by the Company’s Board of Directors on April 27, 2018.



The consolidated financial statements of the Company
have been prepared and are being presented according to the accounting practices adopted in Brazil (“Brazilian GAAP”),
including the pronouncements issued by the Accounting Pronouncement Committee (CPC), approved by the Brazilian Securities and Exchange
Commission (CVM).



Brazilian GAAP, differs from International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) in certain
respects, including the fact that Brazilian GAAP permits the application of percentage of completion accounting by real estate
companies in more circumstances than are permitted by IFRS and has interpretations on the accounting treatment for cancelations.
This application of Brazilian GAAP is commonly referred to in Brazil as “IFRS applicable to real estate development entities
in Brazil, as approved by the Accounting Pronouncements Committee, or CPC, the CVM and the Federal Accounting Council, or CFC,
including CPC Guideline 04 – Application of the Technical Interpretation ICPC 02 to the Brazilian Real Estate Development
Entities – regarding revenue recognition, and the respective costs and expenses arising from real estate development operations
by reference to the stage of completion (percentage of completion method)”, including the accounting treatment for cancelations.
Accordingly, these consolidated financial statements were prepared in accordance with Brazilian GAAP and have been reconciled to
US GAAP as presented in Note 24.



The financial statements have been prepared on a going
concern basis. Management makes an assessment of the Company’s ability to continue as going concern when preparing the financial
statements.



F-13


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies--Continued



2.1 2.1 Basis of presentation and preparation of consolidated
financial statements--Continued



a) Consolidated financial statements



The consolidated financial statements of the Company
include the financial statements of Alphaville, and its direct and indirect subsidiaries. The Company control these entities when
it is exposed to variable returns from its involvement and has the ability to affect those returns through its power over the entities.
The subsidiaries are fully consolidated from the date the full control commences to the date it ceases to exist.



The Company is a party to consortia in several ventures,
and consolidate them in proportion to the respective interest percentages, according to the technical pronouncement CPC 19 (R2)
Joint Arrangements. The accounting practices were uniformly adopted in all subsidiaries included in the consolidated financial
statements, and the fiscal year of these companies is the same of the Company. See further details in Note 7.



2.1.1 Functional and presentation currency



The individual consolidated financial statements are
presented in reais (presentation currency), which is also the functional currency of the Company and its subsidiaries.



2.2.1. Accounting judgments, estimates and assumptions



Accounting estimates and judgments are evaluated on
an ongoing basis based on historical experience and other factors, including expectations on future events, considered reasonable
under the circumstances.



(i) Judgments



The preparation of the consolidated financial statements
of the Company requires Management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses,
assets and liabilities, as well as the disclosure of contingent liabilities, at the reporting date.



(ii) Estimates and assumptions



The main assumptions related to sources of uncertainty
over future estimates and other important sources of uncertainty over estimates at the reporting date, which may result in different
amounts upon settlement, are discussed below:



a) Impairment loss of assets



Management reviews annually and/or when a specific
event occurs the carrying value of assets with the objective of evaluating events or changes in the economic, operational or technological
circumstances that may indicate an impairment. Should such evidences exist, and the carrying value exceeds the recoverable amount,
a provision for impairment is recognized by adjusting the carrying value to the recoverable amount.
Such impairments are recognized in statement of profit or loss when incurred.



F-14


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies--Continued



2.2 Summary of significant accounting policies



2.2.1. Accounting judgments, estimates and assumptions--Continued



b) Share-based payment transactions



The Company measures, when applicable, the cost of
transactions with employees to be settled with shares based on the fair value of equity instruments on the grant date.



c) Fair value of financial instruments



When the fair values of the financial assets and liabilities
presented in the statement of financial position cannot be obtained in the active market, they are determined using valuation techniques,
including the discounted cash flow method.



d) Estimated cost of construction



Estimated costs, mainly comprising the incurred and
estimated costs for completing the construction projects, are regularly reviewed, based on the progress of construction, and any
resulting adjustments are recognized in profit or loss of the Company.



e) Taxes



There are uncertainties inherent in the interpretation
of complex tax rules and in the value and timing of future taxable income. In the ordinary course of business, the Company and
its subsidiaries are subject to assessments, audits, legal claims and administrative proceedings in civil, tax and labor matters.



Depending on the subject of such investigations, legal
claims or administrative proceedings filed against the Company and its subsidiaries, we could be adversely affected, regardless
of the respective final outcome.



f) Realization of deferred income tax



The initial recognition and maintenance of a deferred
tax asset is carried out when it is probable that taxable profit will be available in subsequent years to offset the deferred tax
asset, based on projections of results, and supported by internal assumptions and future economic scenarios that enable its total
or partial use if the full credit is recorded.



F-15


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies--Continued



2.2 Summary of significant accounting policies--Continued



| | 2.2.2. | Recognition of revenue and expenses
| | ------ | -----------------------------------



(i) Lot sales



For sales on credit of completed lots, revenues are
recognized upon completion of the sale, regardless of the timing of receipt of the contractual amount. In the sale of lots not
developed and residential units in construction, the following procedures were observed:



| | · | The incurred cost that corresponds to the lots and units sold is fully included in profit or loss;
| | - | --------------------------------------------------------------------------------------------------



| | · | The percentage of incurred cost (including land) is determined in relation to its total estimated cost; this percentage is
applied to the total revenues of lots and units sold and adjusted in accordance with the terms established in the sales contracts,
in order to determine the amount of revenue to be recognized in direct proportion to costs;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Revenues recognized in excess of actual payments received from customers are recorded as either a current or non-current asset.
Any payment received in connection with the lot sales that exceeds the amount of revenues recognized is recorded as “Payables
for purchase of property and advances from customers”.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Interest on accounts receivable, as well as the present value adjustment of account receivable, are included in the lots development
and sales when incurred, using the effective interest method.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Taxes levied on the difference between real estate development revenues and the cumulative revenue subject to tax are calculated
and recognized when this difference in revenues is recognized.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Other advertising and publicity expenses, represented by use of media, are recognized in profit or loss when incurred.
| | - | ----------------------------------------------------------------------------------------------------------------------



(ii) ICPC 02 – paragraphs 20 and 21



In accordance with the aforementioned ICPC requirements,
the amounts of revenues recognized and costs incurred are recognized in profit or loss, and the advances received are recognized
in the account “payables for purchase of property and advances from customers”.



F-16


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies--Continued



2.2 Summary of significant accounting policies--Continued



| | 2.2.3. | Financial instruments
| | ------ | ---------------------



Financial instruments are recognized from the date
the Company becomes a party to the contractual provisions of financial instruments, which mainly comprise cash and cash equivalents,
financial investments, account receivable, loans and financing, suppliers, and other debts. Financial instruments not measured
at fair value through profit or loss include any directly related transaction costs.



After initial recognition, financial instruments are
measured as described below:



(i) Financial instruments through profit or loss



An instrument is classified into fair value through
profit or loss if	it is	held for trading, or designated as such when initially recognized.



Financial instruments are designated at fair value
through profit or loss if the Company manages these investments and makes purchase and sale decisions based on their fair value
in accordance with the investment strategy and risk management.



Related transaction costs are recognized in profit
or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and their changes
are recognized in profit or loss.



Subsequent to initial recognition, derivative instruments
are measured at fair value and the changes are recognized in profit or loss - Note 15.



The Company does not adopt the hedge accounting practice.



F-17


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies--Continued



2.2 Summary of significant accounting policies--Continued



| | 2.2.3. | Financial instruments
| | ------ | ---------------------



(ii) Financial assets



Financial assets are classified as financial assets
at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets.
The Company determines the classification of its financial assets at their initial recognition, when it becomes a party to the
contractual provisions of the instrument.



The Company’s financial assets include cash and
cash equivalents, financial investments, trade accounts receivable and other receivables.



Derecognition (Write-off)



A financial asset (or, as the case may be, a portion
of a financial asset or portion of a group of similar financial assets) is derecognized when:



| | · | The rights to receive cash inflows of the asset expire;
| | - | -------------------------------------------------------



| | · | The Company transfers its rights to receive cash inflows from the asset or assume an obligation of fully paying the cash inflows
received, without significant delay, to a third party because of a “pass on” agreement; and (a) the Company substantially
transfers the risks and rewards of the asset, or (b) the Company does not substantially transfer or retain all risks and rewards
related to the asset, but transfers the control over the asset.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



When the Company has transferred its rights to receive
cash inflows of an asset, or signed an agreement to pass it on, and has not substantially transferred or has retained all risks
and rewards related to the asset, an asset is recognized to the extent of the continuous involvement of the Company with the asset.
In this case, the Company also recognizes a related liability. The transferred asset and related liability are measured based on
the rights and obligations that the Company has maintained.



The continuous involvement by means of a guarantee
on the transferred asset is measured at the lower of the original carrying value of the asset and the highest consideration that
may be required from the Company.



F-18


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies--Continued



2.2 Summary of significant accounting policies--Continued



| | 2.2.3. | Financial instruments
| | ------ | ---------------------



(iii) Financial liabilities



After initial recognition, financial liabilities are
measured at amortized cost, using the effective interest rate method. Gains and losses are recognized in the statement of profit
or loss, at the time liabilities are derecognized, as well as during the amortization process using the effective interest rate
method.



Derecognition (Write-off)



When an existing financial liability is substituted
by another from the same creditor, under substantially different terms, or when the terms of an existing liability are significantly
modified, this substitution or change is treated as a derecognition of the original liability and recognition of a new liability,
and the difference in the between the new liability fair value and the existing liability carrying values is recognized in profit
or loss.



Financial instruments – net presentation



Financial assets and liabilities are stated at their
net amounts in the statement of financial position when, and only when, there is a current and enforceable legal right to offset
the recognized amounts, and the Company intends to settle them or realize the asset and settle the liability simultaneously.



F-19


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies--Continued



2.2 Summary of significant accounting policies--Continued



| | 2.2.4. | Cash and cash equivalents and financial investments
| | ------ | ---------------------------------------------------



Cash and cash equivalents substantially comprise demand
deposits and bank certificates of deposit held under resale agreements, denominated in reais, with high market liquidity, for which
there are no penalties or other restrictions for the immediate redemption thereof.



Financial investments include bank deposit certificates,
restricted credits in view of the temporary frozen amounts due to the holding interests of partners (see Note 4.2) and are classified
as financial assets at fair value through profit or loss.



| | 2.2.5. | Trade accounts receivable
| | ------ | -------------------------



These are measured at amortized cost. The classification
between current and non-current is made based on the expected maturity of contract installments. The installments outstanding are
mainly adjusted based on the General Market Price Index (IGP-M).



| | 2.2.6. | Mortgage-backed Securities (CRIs) and Housing Loan Certificate
(CCI)
| | ------ | --------------------------------------------------------------------



The Company carried out the assignment of real estate
receivables for securitization and issue of CRIs. When there is no right of recourse, accounts receivable are derecognized. When
there is right of recourse against the Company, the assigned receivable is not derecognized and financial liability is recorded.
The financial guarantees, when an interest is acquired (subordinated CRI), are recorded on the statement of financial position
in “non-current assets” at its realizable value (Note 5.2).



F-20


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies--Continued



2.2 Summary of significant accounting policies--Continued



| | 2.2.7. | Lots for sale
| | ------ | -------------



Lots for sale are measured at cost of land acquisition
and include the accumulated costs of infrastructure and capitalizable borrowing costs, not in excess of their net realizable values.
In the case of lots under development, the portion in inventory corresponds to the incurred cost of lots not yet sold.



When the cost of lots for sale exceeds the expected
cash flow from sales, completed or in development, an impairment charge is recognized in the period when it is determined that
the amount exceeds its net realizable value.



| | 2.2.8. | Selling expenses - Commissions
| | ------ | ------------------------------



Brokerage expenditures, when applicable, are recorded
in profit or loss under the account “Selling expenses” employing the same percentage-of-completion criteria adopted
for recognizing the revenue from units sold.



| | 2.2.9. | Warranty provision
| | ------ | ------------------



The Company and its subsidiaries recognize a provision
to cover expenditures for repairing lots covered during the warranty period. The warranty period is five years from the delivery
of the lot.



| | 2.2.10. | Investments
| | ------- | -----------



Investments in associates are recorded using the equity
method.



When the Company’s equity in the losses of associates
is higher than the amount invested, the Company recognizes the residual portion in net capital deficiency provided it assumes obligations
and makes payments on behalf of these companies and/or makes advances for future capital increase. For this purpose, the Company
recognizes a provision at an amount considered appropriate to meet the obligations of the associate (Note 7).



F-21


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies--Continued



2.2 Summary of significant accounting policies--Continued



| | 2.2.11. | Property and equipment
| | ------- | ----------------------



Property and equipment are measured at cost, net of
accumulated depreciation and/or any accumulated impairment losses, if applicable.



Depreciation is calculated based on the straight-line
method considering the estimated useful lives of the assets, as follows:



(i)	Vehicles – five years;
(ii)	Furniture, fixtures and installations – ten years;
(iii)	Computers and software licenses – five years.



The residual value, useful life, and depreciation methods
are reviewed annually.



Expenditures incurred in the construction of sales
stands and related furnishings are used in the maximum term of one year, considered as expense upon the launch of the venture.



An item of property and equipment is derecognized when
sold or when no future economic benefits are expected from its use or disposal. Any gain or loss arising from derecognition of
an asset (calculated as the difference between the net disposal proceeds and the carrying value of the asset) is recognized in
profit or loss when the asset is derecognized.



Property and equipment are subject to periodic assessments
of impairment indicators.



F-22


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies--Continued



2.2 Summary of significant accounting policies--Continued



| | 2.2.12. | Income tax and social contribution
| | ------- | ----------------------------------



(i) Current income tax and social contribution



Income taxes in Brazil comprise income tax (25%) and
social contribution (9%), for entities on the standard profit regime, for which the composite statutory rate is 34%. Deferred taxes
for these entities are recognized for all temporary tax differences at the reporting date between the tax bases of assets and liabilities,
and their carrying values.



As permitted by tax legislation, certain subsidiaries
and jointly-controlled investees opted for the presumed profit regime. For these companies, the income tax is calculated on estimated
profits at the rates of 8% and 12% of gross revenues, respectively, on which the rates of the respective tax and contribution are
levied.



(ii) Deferred income tax and social contribution



Deferred taxes are recognized in relation to tax losses
and temporary differences between the carrying values of assets and liabilities for accounting purposes and the corresponding amounts
used for tax purposes.



Deferred tax assets are recognized to the extent that
it is probable that future taxable profit will be available to be used for offsetting deferred tax assets, based on profit projections
made using internal assumptions and considering future economic scenarios that make it possible their full or partial use.



The recognized amounts are periodically reviewed and
the impacts of realization or settlement are reflected in compliance with tax legislation provisions.



| | 2.2.13. | Other current and non-current liabilities
| | ------- | -----------------------------------------



These liabilities are stated at their known or estimated
amounts, plus, when applicable, adjustment for charges and inflation-indexed variations through the end of the reporting period
against profit or loss. When applicable, current and non-current liabilities are recorded at present value based on interest rates
that reflect the term, currency and risk of each transaction.



F-23


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies--Continued



2.2 Summary of significant accounting policies--Continued



| | 2.2.14. | Stock option plan
| | ------- | -----------------



As of December 31, 2017, the Company does not offer any stock
options plan.



| | 2.2.15. | Other employee benefits
| | ------- | -----------------------



The benefits granted to the Company’s employees
and executives include fixed compensation (salaries, social security contributions (INSS), Government Severance Indemnity Fund
for Employees (FGTS), vacation and 13th monthly salary) and variable compensation such as profit sharing, bonus, and share- based
payment. These benefits are recorded in profit or loss for the year, under the account “General and administrative expenses”,
as they are incurred.



The bonus system operates with individual corporate
targets, structured based on the efficiency of corporate goals, followed by the business goals and, finally, individual goals.



The Company and its subsidiaries do not offer private
pension or retirement	plans or	other post- employment benefits.



| | 2.2.16. | Present value adjustment - assets and liabilities
| | ------- | -------------------------------------------------



Assets arising from long or short-term transactions
are adjusted to present value if significant.



In installment sales of not completed units, real estate
development entities adjust receivables by an inflation index, and further discount them to present value, as the agreed inflation
indexes do not include interest. The unwinding of the present value adjustment, considering that an important part of the Company
operations consists of financing its customers, is recognized as revenue.



Accordingly, certain assets are adjusted to present
value based on discount rates that reflect the best estimate of the time value of money.



The applied discount rate is the average rate of the
financing and loans obtained by the Company (Note 5).



| | 2.2.17. | Borrowing costs
| | ------- | ---------------



Borrowing costs are related to ventures during construction
phase and to land during the development of assets for sale, and are capitalized as part of the corresponding asset’s cost,
provided that there are borrowings outstanding. All other borrowing costs are recorded as expense when incurred.



F-24


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies--Continued



2.2 Summary of significant accounting policies--Continued



| | 2.2.18. | Provisions
| | ------- | ----------



Provisions are recognized when the Company has a present
obligation as a result of a past event that can be estimated reliably, and it is probable that an outflow of economic benefits
will be required to settle the obligation.



(i) Provision for legal claims



The Company is a party to various lawsuits and administrative
proceedings. Provisions are recognized for all claims related to lawsuits in relation to which, as a result of a past event, it
is probable that an outflow of resources will be made to settle the claim, and a reasonable estimate can be made.



Contingent liabilities for which losses are considered
possible are only disclosed in a note to financial statements, and those for which losses are considered remote are neither recognized
nor disclosed.



Contingent assets are recognized only when there are
secured guarantees or favorable final and unappealable court decisions. Contingent assets with probable favorable decisions are
only disclosed in the notes.



(ii) Allowance for doubtful accounts



The Company records allowance for doubtful accounts and
cancelled contracts for customers whose installments are more than 360 days past due in the accounts receivable balance based on
the internal policy’s assumptions. These credits have secured guarantees of lots sold, to the extent the corresponding deeds
are granted upon settlement and/or negotiation of receivables from customers.



F-25


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




2. Presentation of financial statements and summary of significant
accounting policies--Continued



2.2 Summary of significant accounting policies--Continued



| | 2.2.19. | Sales taxes
| | ------- | -----------



Revenues, expenses and assets are recognized net of
sales taxes, except:



| | · | when the sales taxes incurred in the purchase of goods or services are not recoverable from tax authorities, in which event
sales taxes are recognized as a portion of the acquisition cost of the asset or expense item, as the case may be; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | when the amounts receivable and payable are shown together with the sales taxes.
| | - | --------------------------------------------------------------------------------



| | · | when the net amount of sales taxes, recoverable or payable, is included as a receivables or payable item in the statement of
financial position.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



Under the non-cumulative taxation regime, the PIS and
COFINS contribution rates are 1.65% and 7.6%, respectively, for companies under the taxable profit taxation regime, levied on gross
revenue and discounting credits determined based on costs and expenses. For companies that opt for the presumed profit taxation
regime, under the cumulative taxation regime, the PIS and COFINS contribution rates are 0.65% and 3%, respectively, on gross revenue,
without deductions in relation to incurred costs.



| | 2.2.20. | Treasury shares
| | ------- | ---------------



Own equity instruments that are repurchased (treasury
shares) are recognized at cost and charged to equity.



No gain or loss is recognized in the statement of profit
or loss upon purchase, sale, issue or cancellation of the Company’s own equity instruments.



| | 2.2.21. | Payables for purchase of properties and advance from
customers
| | ------- | --------------------------------------------------------------



Payables for purchase of lots are recognized at the
amounts corresponding to the contractual obligations assumed. Subsequently they are measured at amortized cost, under the effective
interest method.



F-26


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




3. Pronouncements (new or revised) and interpretation adopted
beginning on January 1, 2017 and new and revised standards and interpretation already issued and not yet adopted



3.1 Pronouncements (new or revised) and interpretation adopted
from 2017



The Company adopted all of the pronouncements (new
or revised) and interpretations issued by the CPC effective as of December 31, 2017, which did not have significant impact on the
profit or loss for the period or equity of the Company.



3.2 New and revised standards and interpretations already
issued and not yet adopted



IFRS 9 – Financial Instruments: replaces the
guidance of IAS 39 (CPC 38) Financial Instruments: Recognition and Measurement, and includes the new models for classification
and measurement of financial instruments, and measurement of prospective expected credit losses for financial and contractual assets,
as well as new requirements for hedge accounting. The standard maintains the existing guidance on the recognition and derecognition
of financial instruments of IAS 39. IFRS 9 is effective for years beginning on or after January 1, 2018.



(i) Classification and measurement of financial assets:
IFRS 9 contains a new approach to the classification and measurement of financial assets that reflects the business model in which
assets are managed and its cash flow characteristics, and contains three main financial asset classification categories: measured
at amortized cost, at fair value through other comprehensive income, and at fair value through profit or loss. The standard eliminates
the categories provided in IAS 39 of held to maturity, loans and receivables and available for sale. Based on its evaluation, the
Company concluded that the new classification requirements will not have a significant impact for the Company.



(ii) Impairment - Financial Assets and Contractual
Assets: IFRS 9 replaces the “incurred loss” model of CPC 38 (IAS 39) for a prospective “expected credit loss”
model. It will require significant judgment about how the changes in economic factors affect expected credit losses, which will
be determined based on weighted probabilities. The new expected loss model will apply to the financial assets measured at amortized
cost or fair value through other comprehensive income, with the exception of investments in equity instruments and contractual
assets. According to CPC 48 / IFRS 9, the expected loss allowances will be measured on one of the following bases: 12-month expected
credit losses, that is, credit losses that result from those default events within 12 months after the reporting date; and full
lifetime expected credit losses, that is, credit losses that result from all possible default events over the life of the financial
instrument. The new standard is applicable beginning on or after January 1, 2018. The standard may be retrospectively adopted,
using the cumulative effect approach.



As a result of the discussions on the IFRS 15 (CPC
47) application from January 1, 2018, see the paragraph about IFRS 15 below, the Company cannot estimate the effects of its adoption.



F-27


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




3.2 New and revised standards and interpretations already
issued and not yet adopted--Continued



IFRS15– This standard introduces new requirements
for measurement and recognition of revenue under IFRS. The IFRS15 Revenue from Contracts with Customers requires an entity to recognize
the amount of revenue reflecting the consideration it expects to receive in exchange for the control over such goods or services.
The new standard is going to replace most of the detailed guidance on the recognition of revenue that currently exists under IFRS,
including the CPC 30 (IAS 18) Revenues. For the specific case of the real estate development sector, maintaining the POC revenue
recognition method or the adoption of the method of keys, for example, will result of the contractual analyses made by Management.
The Company, with the intent to be in line with the market, is following the discussions that gave rise to the CPC consultation
to the IASB’s Interpretation Committee. Therefore, in order to avoid information losses to users of financial statements,
the Company will wait for the completion of such discussions so that it can make the required disclosures.The new standard is applicable
beginning on or after January 1, 2018. The standard may be retrospectively adopted, using the cumulative effect approach.



IFRS 16 –This standard replaces the previous
lease standard, IAS 17/CPC 06 (R1) – Leases, and related interpretation, and establishes the principles for the recognition,
measurement, presentation and disclosure of leases for both parties to a contract, that is, the customers (lessees) and providers
(lessors). Lessees are required to recognize a lease liability reflecting the future lease payments and a “right-of-use assets”
for practically all lease contracts, except certain short-term leases and contracts of low-value assets. For lessors, the criteria
for recognition and measurement of leases in the financial statements are substantially maintained. This standard is effective
beginning on January 1, 2019.



The Company is evaluating the effects of the IFRS 16
on its financial statements and has not yet concluded its analysis on the impact of their adoption.



The entities that disclose their financial statements
according to the accounting practices adopted in Brazil are not permitted to early adopt such IFRS.



F-28


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




4. Cash and cash equivalents and financial investments



4.1 Cash and cash equivalents



|                                                 |  | 2017 |        | 2016       
|------------------------------------------------ |  | ---- | ------ | -----------
|                                                 |  |      |        | (Unaudited)
|Cash and banks                                   |  |      | 10,658 |            
|Securities purchased under resale agreements (a) |  |      | 32,820 |            
|Cash and cash equivalents                        |  |      | 43,478 |            



(a) Securities purchased under resale agreement comprise securities
issued by Banks with a repurchase commitment by the bank, and resale commitment by the customer, at the agreed-upon rates, with
ready liquidity, backed by corporate or government securities, depending on the bank, and are registered with the CETIP.



As of December 31, 2017, most securities purchased under resale
agreement include interest earned from 95% to 100% of Interbank Deposit Certificates (CDI) (from 97.5% to 100.6% of CDI in 2016).
All transactions are with what management considers being top tier financial institutions.



4.2 Financial investments



|                                 |  | 2017 |         | 2016       
|-------------------------------- |  | ---- | ------- | -----------
|                                 |  |      |         | (Unaudited)
|Investment funds (a)             |  |      | 47,497  |            
|Bank certificates of deposit (b) |  |      | 64,766  |            
|Restricted credits (c)           |  |      | 5,633   |            
|Financial investments            |  |      | 117,896 |            



(a) In 2017, the transactions with the Fund (PP Portfolio) with
daily liquidity represented interests earned at 101.6% of CDI in the year (102.93% in 2016).



(b) In 2017, Bank Certificates of Deposit (CDBs) include interest
earned, mostly varying from 97.0% to 100.0% (from 97.5% to 100.6% in 2016) of Interbank Deposit Certificates rate (CDI).



(c) Amounts related to checking accounts that are temporarily
frozen in view of the holding interest of the Landowner, which the Company expects to have them cleared in 45 days or less.



As of December 31, 2017, the recognized amount related to financial
investments is evaluated as held for trading at fair value as measured at fair value through profit or loss.



F-29


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


5. Trade accounts receivable and other receivables



5.1 Trade accounts receivable



|                                    |  | 2017 |           | 2016       
|----------------------------------- |  | ---- | --------- | -----------
|                                    |  |      |           | (Unaudited)
|Committed purchases of lots         |  |      | 1,739,306 |            
|(-) Present value adjustment (AVP)  |  |      | (254,250  | )          
|(-) Allowance for doubtful accounts |  |      | (174,417  | )          
|                                    |  |      | 1,310,639 |            
|Current                             |  |      | 400,452   |            
|Non-current                         |  |      | 910,187   |            

The current and non-current portions fall due in the following
years:



|Maturity                            |  | 2017 |           | 2016
|----------------------------------- |  | ---- | --------- | ----
|Past due:                           |  |      |           |     
|Up to 90 days                       |  |      | 38,026    |     
|From 91 to 180 days                 |  |      | 21,506    |     
|Over 180 days (a)                   |  |      | 111,607   |     
|                                    |  |      | 171,139   |     
|                                    |  |      |           |     
|Falling due:                        |  |      |           |     
|2017                                |  |      | -         |     
|2018                                |  |      | 327,372   |     
|2019                                |  |      | 274,612   |     
|2020                                |  |      | 202,931   |     
|2021 onwards                        |  |      | 763,252   |     
|Total                               |  |      | 1,568,167 |     
|(-) Present value adjustments (AVP) |  |      | (254,250  | )   
|(-) Allowance for doubtful accounts |  |      | (174,417  | )   
|Grand Total                         |  |      | 1,310,639 |     



The balance of trade accounts receivable from lots sold and not
yet completed is not fully reflected in the financial statements. Its recording is limited to the portion of the recognized revenues
net of the amounts already received. The non-recognized balance is disclosed in Note 23.



Advances from customers in excess of the revenues recognized
in the period are shown in Note 10.



Accounts receivable, financed by the Company, are in general
subject to IGP-M and IPCA variation, with revenue being recorded in profit or loss in the account “Revenue from sale of lots”.



The net amount of the present value adjustment recognized in
revenue from real estate development for the year ended December 31, 2017 was an expense of R$539 (R$54,899 in 2016 and R$21,913
in 2015).



The balances of allowance for doubtful accounts and cancelled
contracts are considered sufficient by the Company’s management to cover the estimate of future losses on realization of
the accounts receivable (Note 2.2.18).



F-30


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


5. Trade accounts receivable and other receivables--Continued



Trade accounts receivable from lots were measured at present
value using a discount rate determined according to the criteria described in Note 2.2.16. The average rate applied by the Company
and its subsidiaries was 6.65% in 2017 (6.60% in 2016), plus IGP-M.



On November 14, 2012, the Company and its subsidiaries entered
into an Assignment of Real Estate Receivables Agreement (CCI), which consists of an assignment by the Assignor to the Assignee
of a portfolio comprising select residential real estate receivables performed and to be performed arising out of the Company and
its subsidiaries and jointly-controlled investees. The portfolio continues to be recorded in accounts receivable until it is settled
by the customer.



On December 1, 2016, the Company assigned real estate receivables.
Each Real Estate Receivable is represented by a fraction and/or full Housing Loan Certificate (CCI), depending on the case, issued
by the respective Assignors. The CCIs were acquired by the securitizing company that issued the Mortgage-backed Securities (CRI)
in three respective series, DI Rate Senior CRI, IGPM Senior CRI and Subordinated CRI, subject to public distribution with restricted
efforts. The assigned receivables, discounted to present value, are classified in line item “Obligations assumed on a Assignment
of Receivables”. The credit risk of certain receivables assigned by the Company and its subsidiaries have been retained.



On December 22, 2016, the Company assigned real estate receivables.
Each Real Estate Receivable is represented by a fraction and/or full Housing Loan Certificate (CCI), depending on the case, issued
by the respective Assignors. All of such receivables shall have a repurchase obligation by the Assignor until conditions on Compulsory
Repurchase are adopted. The assigned receivables, discounted to present value, are classified in line item “Obligations assumed
on a Assignment of Receivables”. The totality of the receivables assigned by the Company and its subsidiaries have joint
liability.



On August 18, September 27 and November 8, 2017, the Company
assigned real estate receivables. Each Real Estate Receivable is represented by a fraction and/or full Housing Loan Certificate
(CCI), depending on the case, issued by the respective Assignors. All of such receivables shall have a repurchase obligation by
the Assignor until conditions on Compulsory Repurchase are adopted. The assigned receivables, discounted to present value, are
classified in line item “Obligations assumed on a Assignment of Receivables”. The totality of the receivables assigned
by the Company and its subsidiaries have joint liability.



|Balance as of December 31, 2017 |  |      |        |            
|------------------------------- |  | ---- | ------ | -----------
|                                |  | 2017 |        | 2016       
|                                |  |      |        | (Unaudited)
|Transaction Date                |  |      |        |            
|11/14/2012                      |  |      | 12,567 |            
|12/01/2016                      |  |      | 917    |            
|12/22/2016                      |  |      | 27,178 |            
|08/18/2017                      |  |      | 7,501  |            
|09/27/2017                      |  |      | 14,577 |            
|11/08/2017                      |  |      | 25,428 |            
|Total Securitized               |  |      | 88,168 |            
|                                |  |      |        |            
|Current                         |  |      | 38,074 |            
|Non-current                     |  |      | 50,094 |            



F-31


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




5. Trade accounts receivable and other receivables--Continued



5.2 Other receivables



|                                            |  | 2017 |         | 2016       
|------------------------------------------- |  | ---- | ------- | -----------
|                                            |  |      |         | (Unaudited)
|Advances to venture partners                |  |      | 38,800  |            
|Unrecognized expenses and interests         |  |      | 12,553  |            
|Subordinated mortgage-backed securities (a) |  |      | 23,502  |            
|Judicial deposit (Note 12)                  |  |      | 28,118  |            
|Recoverable taxes                           |  |      | 2,731   |            
|Other realizable amounts                    |  |      | 10,618  |            
|                                            |  |      | 116,322 |            
|Current                                     |  |      | 56,402  |            
|Non-current                                 |  |      | 59,920  |            



(a) Subject to inflation adjustment (IGP-M) and impairment loss
amounting to R$7,800 in 2017.



6. Lots for sale



|                                                 |  | 2017 |         | 2016       
|------------------------------------------------ |  | ---- | ------- | -----------
|                                                 |  |      |         | (Unaudited)
|Land                                             |  |      | 162,066 |            
|Lots in development                              |  |      | 117,367 |            
|Lots completed                                   |  |      | 301,475 |            
|Provision for loss on realization of inventories |  |      | (22,278 | )          
|                                                 |  |      | 558,630 |            
|Current                                          |  |      | 409,583 |            
|Non-current                                      |  |      | 149,047 |            



As mentioned in Note 8, the balance of consolidated capitalized
financial charges as of December 31, 2017 is R$32,244 (R$42,693 in 2016).



F-32


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




7. Investments in associates and jointly-controlled investees



The main information on ownership interests are summarized below:



|                                                 |  |                  |    |                  |  |                       |    |                                                    |  |                                |         | Consolidated |  | Consolidated                             
|------------------------------------------------ |  | ---------------- | -- | ---------------- |  | --------------------- | -- | -------------------------------------------------- |  | ------------------------------ | ------- | ------------ |  | -----------------------------------------
|Investments
    in associates                    |  | Interest
    - % |    | Total
    assets |  | Total
    liabilities |    | Equity
    and advance for future capital increase |  | Profit
    (loss) for the year |         | Investments  |  | Income
    from equity method investments
|                                                 |  | 2017             |    | 2016             |  | 2017                  |    | 2017                                               |  | 2017                           |         | 2016         |  | 2017                                     
|                                                 |  |                  |    | (Unaudited)      |  |                       |    |                                                    |  |                                |         | (Unaudited)  |  |                                          
|SPE Leblon Incorporadora S.A.                    |  |                  | 40 | %                |  |                       | 40 | %                                                  |  |                                | 52,235  |              |  |                                          
|Krahô Empr. Imob. S.A.                           |  |                  | 48 | %                |  |                       | 48 | %                                                  |  |                                | 78,095  |              |  |                                          
|Saneamento Ceará S.A.                            |  |                  | 50 | %                |  |                       | 50 | %                                                  |  |                                | 9,007   |              |  |                                          
|Alphaville Reserva Santa Clara Empr. Imob. Ltda. |  |                  | 25 | %                |  |                       | 25 | %                                                  |  |                                | 16,808  |              |  |                                          
|Gafisa SPE-77 Empr. Imob. Ltda.                  |  |                  | 35 | %                |  |                       | 35 | %                                                  |  |                                | 17,231  |              |  |                                          
|Sociedade Loteadora                              |  |                  | 31 | %                |  |                       | 31 | %                                                  |  |                                | -       |              |  |                                          
|Other
    (b)                                    |  |                  |    |                  |  |                       |    |                                                    |  |                                |         |              |  |                                          
|Total investments                                |  |                  |    |                  |  |                       |    |                                                    |  |                                | 173,377 |              |  |                                          



F-33


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




7. Investments in associates and jointly-controlled investees--Continued



(i) Ownership interests--Continued



a) Change in investments



|                                        |  | 2017 |        | 2016       
|--------------------------------------- |  | ---- | ------ | -----------
|                                        |  |      |        | (Unaudited)
|Opening balance at December 31          |  |      | 43,407 |            
|Profit(Loss) of equity method investees |  |      | (2,794 | )          
|Capital contribution                    |  |      | -      |            
|Advance for future capital increase     |  |      | 98     |            
|Write-off of investments                |  |      | (3,418 | )          
|Dividends received                      |  |      | (1,153 | )          
|Balance at December 31                  |  |      | 36,140 |            



F-34


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




8. Loans and financing



|Type                           |  | Maturity         |  | Annual interest rate     |  | 2017 |         | 2016       
|------------------------------ |  | ---------------- |  | ------------------------ |  | ---- | ------- | -----------
|                               |  |                  |  |                          |  |      |         | (Unaudited)
|Certificate of Bank Credit (a) |  | Aug/18 to Dec/21 |  | CDI +2.35% to CDI +5.50% |  |      | 164,277 |            
|Promissory Note                |  | Nov/20           |  | CDI + 3.45%              |  |      | 50,347  |            
|                               |  |                  |  |                          |  |      | 214,624 |            
|Current portion                |  |                  |  |                          |  |      | 92,582  |            
|Non-current portion            |  |                  |  |                          |  |      | 122,042 |            



(a) It corresponds to credit lines of financial institutions
to obtain funds required for developing ventures.



On August 4, 2015, the Company obtained through a Certificate
of Bank Credit (CCB) the amount of R$50,000 maturing in 60 months, being guaranteed by the fiduciary assignment of selected real
estate receivables, and with the purpose of providing funds to build real estate ventures.



On November 12, 2015, the Company obtained funding through two
Certificates of Bank Credit (CCB), the first (Series 1) amounting to R$150,000 aimed at settling the promissory note issued on
November 22, 2015, and the second (Series 2) amounting to R$100,000; both of which maturing in 48 months and guaranteed by the
fiduciary assignment of real estate receivables, and with the purpose of providing funds to build real estate ventures. The CCB
was assigned to the securitization company that issued the Mortgage-backed Securities (CRI), which had its public distribution
carried out with restrict efforts ended on such date



On December 9, 2015 the Company made the issue and offering of
promissory notes totaling R$30,000 due over of 36 months, being guaranteed by the fiduciary assignment of real estate receivables
and with the purpose of providing funds to build real estate ventures. The promissory notes are issued by the Company in the scope
of the Third Issue of 12 commercial promissory notes, with unit value of R$2,500 on the issue date, under the terms of CVM Instruction
No. 134 and the other applicable legal provisions and regulations. On November 27, 2017, the Company pre-paid the remaining promissory
notes of this issue.



On August 30, 2017, the Company obtained funding through a Certificate
of Bank Credit (CCB) in the amount of R$10,000 maturing in 365 days without pledging a guarantee.



On November 16, 2017, the Company extended the payment term of
the outstanding CCB balance of R$6,000, with the due date on November 25, 2017, to additional 365 days, without pledging a guarantee.



On November 28, 2017 the Company made the issue and offering
of promissory notes totaling R$49,900 maturing over of 36 months, being guaranteed by the fiduciary assignment of real estate receivables.
The promissory notes are issued by the Company in the scope of the Fourth Issue of 34 commercial promissory notes, under the terms
of CVM Instruction No. 134 and the other applicable legal provisions



On December 8, 2017, the Company obtained funding through a Certificate
of Bank Credit (CCB) in the amount of R$10,000 maturing in 48 months being guaranteed by the fiduciary assignment of select real
estate receivables.



F-35


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




8. Loans and financing--Continued



The Company is subject to ratios and default limits (covenants),
mostly comprising limits to total indebtedness. As at the reporting date, the Company is in compliance with its obligations.



|                                                                                                                          |  | Consolidated
|------------------------------------------------------------------------------------------------------------------------- |  | ------------
|                                                                                                                          |  | 2017        
|                                                                                                                          |  |             
|Total accounts receivable plus inventory of finished units required to be 1.3 times greater than net debt (1)             |  |             
|Ratio of Inventory plus Accounts Receivable to Net Debt plus Construction Obligations (2) required to be higher than 1.25 |  |             
|Ratio of accounts receivable to net debt required to always be higher than 1.1                                            |  |             
|Ratio of net debt and equity to convertible debentures required to be always lower than 1.6.                              |  |             



(1) Net Debt = (Short Term Debt + Long Term Debt + Obligations
assumed on the assignment of receivables - Convertible Debentures) - Cash and Cash Equivalents



(2) Construction Obligations = Costs to Be Incurred and Supplier
Payable



The calculation of the debt covenants is in accordance with the
revised terms negotiated in 2017.



Current and non-current portions fall due as follows:



|             |  | 2017 |         | 2016 |  | 
|------------ |  | ---- | ------- | ---- |  | 
|2017         |  |      | -       |      |  | 
|2018         |  |      | 92,582  |      |  | 
|2019 onwards |  |      | 122,042 |      |  | 
|Total        |  |      | 214,624 |      |  | 



Financial expenses are capitalized to the cost of plots under
development, based on the use of funds, and recognized in profit or loss according to the revenue recognition criteria, as shown
below. The capitalization rate used in the determination of the costs of loans eligible to capitalization was 10.26% as of December
31, 2017 (16.20% as of December 31, 2016 and 17,02% as of December 31, 2015).



|                                                             |  |  |  |  |  | 2017 |  | 2016
|------------------------------------------------------------ |  |  |  |  |  | ---- |  | ----
|                                                             |  |  |  |  |  |      |  |     
|Financial expenses                                           |  |  |  |  |  |      |  |     
|Capitalized financial charges                                |  |  |  |  |  |      |  |     
|Net financial charges (Note 21)                              |  |  |  |  |  |      |  |     
|Financial charges included in the line item of lots for sale |  |  |  |  |  |      |  |     
|Opening balance                                              |  |  |  |  |  |      |  |     
|Capitalized financial charges                                |  |  |  |  |  |      |  |     
|Charges recognized in profit or loss                         |  |  |  |  |  |      |  |     
|Closing balance (Note 6)                                     |  |  |  |  |  |      |  |     



F-36


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




9. Debentures



|Placement           |  | Principal - R$ |  | Annual interest |  | Final maturity |  | 2017 |           | 2016       
|------------------- |  | -------------- |  | --------------- |  | -------------- |  | ---- | --------- | -----------
|                    |  |                |  |                 |  |                |  |      |           | (Unaudited)
|First placement     |  | 660,000        |  | CDI+3.05%       |  | Dec/23         |  |      | 701,763   |            
|Second placement    |  | 350,000        |  | IGPM+14.00%     |  | May/20         |  |      | 445,748   |            
|Third placement     |  | 449,998        |  | IGPM+14.00%     |  | Feb/21         |  |      | 493,403   |            
|                    |  |                |  |                 |  |                |  |      | 1,640,914 |            
|Current portion     |  |                |  |                 |  |                |  |      | 41,763    |            
|Non-current portion |  |                |  |                 |  |                |  |      | 1,599,151 |            



Current and non-current portions fall due as follows:



|Maturity     |  | 2017 |           | 2016        |  | 
|------------ |  | ---- | --------- | ----------- |  | 
|             |  |      |           | (Unaudited) |  | 
|2017         |  |      | -         |             |  | 
|2018         |  |      | 41,763    |             |  | 
|2019 onwards |  |      | 1,599,151 |             |  | 
|             |  |      | 1,640,914 |             |  | 



On September 9, 2013, the Company obtained approval for the public
distribution with restricted efforts of its First Placement of non-convertible simple debentures in sole series, which have secured
guarantee, maturing in eight years totaling a maximum of R$800,000, guaranteed by the fiduciary assignment of selected real estate
receivables arising from the Company and its subsidiaries. On December 9, 2013, the amount of R$500,000 was paid-in, on July 17,
2014, R$150,000 was paid-in, and on March 19, 2015, R$150,000 was paid-in. The indenture has clauses that restrict the Company’s
ability of taking some actions, and may require the early maturity in case of non-compliance with these clauses.



The ratios and minimum and maximum amounts required under such
restrictive covenants as of December 31, 2017 are as follows:



|                                                                                                                                 |  | 2017 |      | 2016       
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | -----------
|                                                                                                                                 |  |      |      | (Unaudited)
|First placement                                                                                                                  |  |      |      |            
|Ratio of Inventory plus Accounts Receivable to Net Debt plus Construction Obligations (2) required to be equal to 1.25 or higher |  |      | 2.27 |            
|Ratio of total receivables and net debt (1) required to be equal to 1.1 or higher                                                |  |      | 2.38 |            



(1) Net Debt = (Short Term Debt + Long Term Debt + Obligations
assumed on the assignment of receivables - Convertible Debentures) - Cash and Cash Equivalents



(2) Construction Obligations = Costs to Be Incurred and Supplier
Payable



The calculation of the debt covenants is in accordance with the
revised terms negotiated in 2017.



On May 9, 2016, the Company obtained approval for the private
distribution of its Second Placement of debentures convertible into common shares, in sole series, with no secured guarantee, maturing
in four years totaling a maximum of R$350,000. On May 10, 2016, the amount of R$250,000 was paid-in, and on August 16, 2016, R$106,393
was paid-in, amount adjusted for inflation as described in the indenture. The indenture does not establish financial ratios restricting
the Company (Covenants).





F-37


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


On February 10, 2017, the Company obtained approval for the private
distribution of its Third Placement of debentures convertible into common shares, in sole series, with no secured guarantee, maturing
in four years totaling a maximum of R$450,000. On February 21, 2017, the amount of R$66,000 was paid-in, on March 24, 2017, R$40,000
was paid-in, on April 25, 2017, R$57,694 was paid-in, on May 17, 2017, R$63,658 was paid-in, on June 5, 2017, R$53,836 was paid-in,
and on June 29 R$168,810 was paid-in; the amounts were adjusted for inflation as described in the indenture. The indenture does
not establish financial ratios restricting the Company (Covenants).



F-38


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




10. Payables for purchase of properties and advance from
customers



|                                    |  | 2017 |        | 2016       
|----------------------------------- |  | ---- | ------ | -----------
|                                    |  |      |        | (Unaudited)
|Payables for purchase of properties |  |      | 3,621  |            
|Advance from customers              |  |      | 44,904 |            
|                                    |  |      | 48,525 |            



11. Payables to venture partners



As part of the process of obtaining funds by issuing Certificates
of Bank Credit (CCB) in 2011 of R$35,000, the Company entered into a private instrument for establishing the usufruct of 100% preferred
shares of Alphaville Ribeirão Preto Empreendimentos Imobiliários S.A., over a period of six years, settled in 2017,
recorded based on amortized cost using the effective interest rate of the transaction. As of December 31, 2017, the balance was
R$0 (R$913 in 2016), and the total amount of dividends paid to the holders of preferred shares amounted to R$1,200 (Note 7(i) a).



F-39


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




12. Provisions for legal claims



The Company and its subsidiaries are parties to lawsuits and
administrative proceedings at various courts and government agencies that arise from the ordinary course of business, involving
tax, labor, civil and other matters. Management, based on information provided by its legal counsel and analysis of the pending
claims and, with respect to the labor claims, based on past experience regarding the amounts claimed, recognized a provision for
its best estimate of probable losses on lawsuits in progress. The Company does not expect any reimbursement in connection with
these claims.



In the years ended December 31, 2017 and 2016, the changes in
the provision are summarized as follows:



|                                         |  | Civil lawsuits |        | Tax proceedings |  | Labor claims |     | Total consolidated
|---------------------------------------- |  | -------------- | ------ | --------------- |  | ------------ | --- | ------------------
|Balance at December 31, 2015 (Unaudited) |  |                | 5,348  |                 |  |              | 129 |                   
|Additional provision                     |  |                | 3,383  |                 |  |              | 1   |                   
|Payment or realization of provision      |  |                | (2,058 | )               |  |              | -   |                   
|Balance at December 31, 2016 (Unaudited) |  |                | 6,673  |                 |  |              | 130 |                   
|Additional provision                     |  |                | 28,768 |                 |  |              | -   |                   
|Payment or realization of provision      |  |                | (16    | )               |  |              | (54 | )                 
|Balance at December 31, 2017             |  |                | 35,425 |                 |  |              | 76  |                   
|Non-current portion                      |  |                | 35,425 |                 |  |              | 76  |                   



Civil lawsuits, tax proceedings and labor claims



The Company and its subsidiaries are parties to other labor claims,
tax proceedings and civil lawsuits arising from the ordinary course of business, which, on the opinion of Management and its legal
counsel, expectations of losses are classified as possible, but no provision was recognized to face the respective unfavorable
outcomes. The amount of such claims are described below:



|                |  | 2017 |         | 2016        | 
|--------------- |  | ---- | ------- | ----------- | 
|                |  |      |         | (Unaudited) | 
|Civil lawsuits  |  |      | 362,614 |             | 
|Tax proceedings |  |      | 70,651  |             | 
|Labor claims    |  |      | 23,438  |             | 
|                |  |      | 456,703 |             | 



With the worsening of the economic crisis, the filing of lawsuits
increased, and, accordingly, judicial deposits. As of December 31, 2017, the judicial deposit balance of the Company and its subsidiaries
amounted to R$28,118 (R$7,779 in 2016) recorded in the line item of other receivables in non-current assets (Note 5.2).



ii) Environmental risk



There are various environmental laws at the federal, state and
municipal levels. These environmental laws may result in delays for the Company in connection with adjustments for compliance and
other costs, and impede or restrict ventures. Before the project development agreement, the Company assesses all necessary and
applicable environmental issues, including the possible existence of hazardous or toxic materials, residual substance, trees, vegetation
and the proximity of the land to permanent preservation areas. Therefore, before the launch of a subdivision, the Company obtains
all governmental approvals, including environmental licenses.



F-40


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




12. Provisions for legal claims and commitments--Continued



ii) Environmental risk - Continued



In addition, the environmental legislation establishes criminal,
civil and administrative sanctions to individuals and legal entities for activities considered as environmental infringements or
offenses. The penalties include the stop of development activities, loss of tax benefits, confinement and fines. The cases in dispute
by the Company at civil court have the likelihood of loss considered possible by the legal counsel.



iii) Payable related to the completion of subdivisions



The Company and its subsidiaries are committed to deliver real
estate units that will be built in exchange for the acquired land.



The Company also commits to complete units sold and to comply
with the laws regulating the civil construction sector, including obtaining of licenses from the proper authorities, and compliance
with the terms for starting and delivering the ventures, being subject to legal and contractual penalties.



The Company has commitments to third parties (partners) and partners
in joint ventures:



| | · | Partnership contracts with owners of land, which shall be a partner or real estate partner;
| | - | -------------------------------------------------------------------------------------------



| | · | Commitment to suppliers which are being contracted, or to any third parties in the pre-launch or business evaluation.
| | - | ---------------------------------------------------------------------------------------------------------------------



As of December 31, 2017, the Company, by means of its subsidiaries,
has long-term obligations in the amount of R$16,609 (R$18,991 in 2016), related to the supply of services and raw materials used
in the development of real estate ventures.



The Company has contract for renting the real estate where its
office is located, the monthly cost amounting to R$465 annually adjusted by the IGPM-FGV variation.



F-41


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




13. Income tax and social contribution



a) Current income tax and social contribution



The reconciliation of the effective tax rate for the years ended
December 31, 2017, 2016 and 2015 is as follows:



|                                                                               |  | 2017 |          | 2016        |  | 2015       
|------------------------------------------------------------------------------ |  | ---- | -------- | ----------- |  | -----------
|                                                                               |  |      |          | (Unaudited) |  | (Unaudited)
|(Loss) profit before income tax and social contribution and statutory interest |  |      | (776,503 | )           |  |            
|Income tax calculated at the applicable rate – 34%                             |  |      | 264,011  |             |  |            
|Net effect of subsidiaries taxed by presumed profit                            |  |      | (102,062 | )           |  |            
|Stock option plan                                                              |  |      | -        |             |  |            
|Permanent differences                                                          |  |      | (13,296  | )           |  |            
|Charges on payables to venture partners                                        |  |      | (2,755   | )           |  |            
|Income from equity method investments                                          |  |      | (950     | )           |  |            
|Unrecognized deferred tax assets                                               |  |      | (141,563 | )           |  |            
|                                                                               |  |      | 3,385    |             |  |            
|Current income tax and social contribution expenses                            |  |      | (8,878   | )           |  |            
|Deferred income tax and social contribution expenses                           |  |      | 12,263   |             |  |            



b) Deferred income tax and social contribution



Deferred income tax and social contribution have the following
origin:



|                                                                   |  | 2017 |          | 2016
|------------------------------------------------------------------ |  | ---- | -------- | ----
|Deferred tax assets                                                |  |      |          |     
|Temporary differences – Deferred PIS and COFINS                    |  |      | 3,214    |     
|Provisions for legal claims                                        |  |      | 3,293    |     
|Present value adjustment (AVP)                                     |  |      | 12,582   |     
|Other provisions                                                   |  |      | 28,039   |     
|Tax loss and income tax and social contribution loss carryforwards |  |      | 450,504  |     
|Sub-total of Deferred tax assets                                   |  |      | 497,632  |     
|Unrecognized deferred tax assets (*)                               |  |      | (457,270 | )   
|Sub-total of Deferred tax assets net of valuation allowance        |  |      | 40,362   |     
|Deferred tax liabilities                                           |  |      |          |     
|Taxation of income between cash and accrual basis                  |  |      | (40,490  | )   
|Net position (Deferred tax liability                               |  |      | (128     | )   



* Deferred tax assets are recognized up to the limit of 30% of
the tax base, according to the Income Tax legislation, to the extent they are considered realizable, according to Note 2.2.



F-42


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




14. Equity



(i) Capital



As of December 31, 2017, the subscribed and paid-in capital amounts
to R$459,480 (R$433,248 in 2016) represented by 122,882,644 shares, of which 120,418,615 are registered common shares, without
par value, and 2,464,029 are registered common shares, without par value, held in treasury, in the amount of R$23,185. The Company’s
Board of Directors is authorized to take resolution on the issue of common shares, up to the authorized capital limit, not requiring
amendment to bylaws.



On April 3, 2017, in the Board of Directors’ Meeting, the
increase in the Company’ capital was approved in the amount of R$26,232 by issuing new shares, which were paid-in by the
shareholders with the Subordinated Mortgage- backed Securities shown in the line item “Short-term Securities” (Note
5.2).



The change in the amount of shares is as follows:



|                                            |  | Shares – in thousands Common
|------------------------------------------- |  | ----------------------------
|                                            |  | Capital R$ thousand         
|December 31, 2015 (Unaudited)               |  |                             
|Increase in capital without issue of shares |  |                             
|Repurchase of shares                        |  |                             
|December 31, 2016 (Unaudited)               |  |                             
|Increase in capital without issue of shares |  |                             
|December 31, 2017                           |  |                             



(ii) Allocation of profit or loss and reserves



| | · | Income and capital reserves
| | - | ---------------------------



As of December 31, 2017, the legal reserve, reserve for retaining
earnings and investment, and reserve for share grant capital were fully allocated to offset a portion of the loss for the year.



| | · | Dividends
| | - | ---------



In view of the loss for the year, there is no proposal for dividends
as of December 31, 2017 and 2016.



(iii) Earning (loss) per share



Basic earnings (loss) per share are calculated by dividing the
profit attributable to the Company’s shareholders by the weighted average number of shares issued during the period.



|                                                                     |  | 2017 |          | 2016        |  | 2015       
|-------------------------------------------------------------------- |  | ---- | -------- | ----------- |  | -----------
|                                                                     |  |      |          | (Unaudited) |  | (Unaudited)
|(Loss) profit attributable to the Company’s controlling shareholders |  |      | (764,142 | )           |  |            
|Weighted average number of shares                                    |  |      | 117,883  |             |  |            
|Basic earnings (loss) per thousand shares - In Reais                 |  |      | (6       | )           |  |            



The Company has no outstanding shares that could cause dilution
or convertible debt. Thus, basic and diluted earnings per share are the same.



F-43


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




15. Financial instruments



The Company and its subsidiaries do not use derivatives or any
other risky assets for speculative purposes. The Company and its subsidiaries operations are subject to the risk factors described
below:



(i) Risk considerations



a) Credit risk



The Company and its subsidiaries restrict their exposure to credit
risks associated with cash and cash equivalents, investing only in short-term securities of top tier financial institutions.



With regards to trade accounts receivable, the Company restricts
its exposure to credit risks through sales to a broad base of customers and ongoing credit analysis. Additionally, there is no
relevant history of losses due to the existence of secured guarantee for the recovery of its products in the cases of default during
the construction period. As of December 31, 2017 and 2016, there was no significant credit risk concentration associated with customers.



b) Interest rate risk



Interest rate risk arises from the possibility that the Company
and its subsidiaries may experience gains or losses because of fluctuations in the interest rates of its financial assets and liabilities.
Aiming to mitigating this kind of risk, the Company and its subsidiaries seek to diversify funding in terms of fixed and floating
rates. The interest rates on loans are disclosed in Note 8. The interest rates contracted on financial investments are disclosed
in Note 4.



c) Liquidity risk



Liquidity risk refers to the possibility that the Company and
its subsidiaries do not have sufficient funds to meet their commitments in view of the settlement terms of its rights and obligations.



To mitigate liquidity risks, and to optimize the weighted average
cost of capital, the Company monitors on an on- going basis its indebtedness level according to the market standards and the fulfillment
of ratios (covenants) provided for in loan contracts in order to guarantee that the operating-cash generation and the advance
funding, when necessary, are sufficient to meet the schedule of commitments.



F-44


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


15. Financial instruments--Continued



(i) Risk considerations--Continued



|At December 31, 2017                               |  | Less than 1 year |         | 1 to 3 years |  | 4 to 5 years |            | More than 5 years |  | Total
|-------------------------------------------------- |  | ---------------- | ------- | ------------ |  | ------------ | ---------- | ----------------- |  | -----
|Financial investments (Note 4.2)                   |  |                  | 117,896 |              |  |              | -          |                   |  |      
|Subordinated mortgage-backed securities (Note 5.2) |  |                  | -       |              |  |              | -          |                   |  |      
|Trade accounts receivable (Note 5)                 |  |                  | 498,511 |              |  |              | 477,542    |                   |  |      
|Loans and financing (Note 8)                       |  |                  | (92,582 | )            |  |              | (122,042   | )                 |  |      
|Debentures (Note 9)                                |  |                  | (41,763 | )            |  |              | (1,335,151 | )                 |  |      
|Suppliers                                          |  |                  | (84,296 | )            |  |              | (16,609    | )                 |  |      
|                                                   |  |                  | -       |              |  |              | -          |                   |  |      
|Net effect                                         |  |                  | 397,766 |              |  |              | (996,260   | )                 |  |      



|At December 31, 2016 (Unaudited)                   |  | Less than 1 year |          | 1 to 3 years |  | 4 to 5 years |          | More than 5 years |  | Total
|-------------------------------------------------- |  | ---------------- | -------- | ------------ |  | ------------ | -------- | ----------------- |  | -----
|Financial investments (Note 4.2)                   |  |                  | 17,453   |              |  |              | -        |                   |  |      
|Subordinated mortgage-backed securities (Note 5.2) |  |                  | -        |              |  |              | -        |                   |  |      
|Trade accounts receivable (Note 5)                 |  |                  | 491,231  |              |  |              | 516,978  |                   |  |      
|Loans and financing (Note 8)                       |  |                  | (164,263 | )            |  |              | (150,298 | )                 |  |      
|Debentures (Note 9)                                |  |                  | (157,006 | )            |  |              | (304,000 | )                 |  |      
|Suppliers                                          |  |                  | (94,491  | )            |  |              | (18,991  | )                 |  |      
|Payables to venture partners (Note 11)             |  |                  | (913     | )            |  |              | -        |                   |  |      
|Net effect                                         |  |                  | 92,011   |              |  |              | 43,689   |                   |  |      



d) Fair value classification



The Company uses the following classification to determine and
disclose the fair value of financial instruments by the valuation technique:



F-45


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


15. Financial instruments--Continued



(i) Risk considerations--Continued



Level 1: quoted prices (without adjustments) in active markets
for identical assets or liabilities;



Level 2: inputs different from the quoted prices in active markets
included in Level 1, which are observable for asset or liability, directly (as prices) or indirectly (prices derivate); and



Level 3: inputs to asset or liability not based on observable
market variables (nonobservable inputs).



The fair value classification of financial instruments assets
measured at fair value through profit or loss of the Company presented in the financial statements for the years ended December
31, 2017 and 2016 is as follows.



|                                                   |  | Fair value classification – 2017
|-------------------------------------------------- |  | --------------------------------
|Financial assets                                   |  | Level 1                         
|Financial investments (Note 4.2)                   |  |                                 
|Subordinated mortgage-backed securities (Note 5.2) |  |                                 



|                                                   |  | Fair value classification – 2016 (Unaudited)
|-------------------------------------------------- |  | --------------------------------------------
|Financial assets                                   |  | Level 1                                     
|Financial investments (Note 4.2)                   |  |                                             
|Subordinated mortgage-backed securities (Note 5.2) |  |                                             



In the years ended December 31, 2017 and 2016, there were no
transfers between the levels 1 and 2 fair value valuation, nor were transfers between levels 3 and 2 fair value valuation.



(ii) Fair value of financial instruments



a) Fair value measurement



The following estimate fair values were determined using available
market information and proper measurement methodologies. However, a considerable amount of judgment is necessary to interpret market
information and estimate fair value. Accordingly, the estimates presented in this document are not necessarily indicative of amounts
that the Company could realize in the current market. The use of different market assumptions and/or estimation methodology may
have a significant effect on estimated fair values.



The following methods and assumptions were used in order to estimate
the fair value for each financial instrument type for which the estimate of values is practicable:



F-46


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


15. Financial instruments--Continued



(ii) Fair value of financial instruments--Continued



a) Fair value measurement--Continued



(i) The amounts of cash and cash equivalents, financial investments,
trade accounts receivable and other receivables and other current liabilities approximate their fair values recorded in the financial
statements.



(ii) The fair value of bank loans and other financial debts is
estimated through future cash flows discounted using rates that are available for similar and outstanding debts or terms.



The carrying and fair values of the main financial assets and
liabilities as of December 31, 2017 and 2016 are as follows:



|                                                   |  | 2017           |           | 2016      
|-------------------------------------------------- |  | -------------- | --------- | ----------
|                                                   |  | Carrying value |           | Fair value
|                                                   |  |                |           |           
|Financial assets                                   |  |                |           |           
|Cash and cash equivalents (Note 4.1)               |  |                | 43,478    |           
|Financial investments (Note 4.2)                   |  |                | 117,896   |           
|Subordinated mortgage-backed securities (Note 5.2) |  |                | 23,502    |           
|Trade accounts receivable (Note 5.1)               |  |                | 1,310,639 |           
|Financial liabilities                              |  |                |           |           
|Loans and financing (Note 8)                       |  |                | 214,624   |           
|Debentures (Note 9)                                |  |                | 1,640,914 |           
|Suppliers                                          |  |                | 100,905   |           



b) Risk of debt acceleration



As of December 31, 2017 and 2016, the Company has loans and financing,
with restrictive covenants related to cash generation, indebtedness ratios and other. These restrictive covenants have been complied
with by the Company (as described in Notes 8 and 9) and do not limit its ability to conduct its business as usual.



c) Market risk



The Company carries out the development, construction and sales
of lots. In addition to the risks that affect the real estate market as a whole, such as supply disruptions and volatility in the
prices of construction materials and equipment, changes in the supply and demand for ventures in certain regions, strikes and environmental
rules and zoning, the Company’s operations are particularly affected by the following risks:



F-47


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


15. Financial instruments--Continued



(ii) Fair value of financial instruments--Continued



c) Market risk--Continued



| | · | The state of the economy of Brazil, which may inhibit the development of the real estate industry as a whole, through the slowdown
in economy, increase in interest rates, currency fluctuation and political instability, besides other factors.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Future impediments, as a result of a new regulation or market conditions, to adjust for inflation receivables using certain
inflation indexes, as currently permitted, which could make a venture financially or economically unviable.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The level of interest of buyers in a new venture launched or the sale price per unit necessary to sell all units may be below
expectations, making the venture less profitable than expected.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In the event of bankruptcy or significant financial difficulties of a large company of the real estate industry, the industry
as a whole may be adversely affected, which could decrease the customer confidence in other companies operating in the industry.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Local and regional real estate market conditions, such as oversupply, land shortage in certain regions, or significant increase
in land acquisition cost.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Risk of buyers having a negative perception of the security, convenience and appeal of the Company’s properties, as well
as about their location.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Company’s profit margins may be affected by the increase in operating costs, including investments, insurance premium,
real estate taxes and government rates.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The opportunities for development may decrease.
| | - | -----------------------------------------------



| | · | The building and sale of real estate units may not be completed as scheduled, thus increasing the construction costs or cancellation
of sale contracts.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Delinquency after the delivery of units acquired on credit. The Company has the right to file a collection action to receive
the amounts due and/or repossess the real estate unit from the delinquent buyer, not being possible to guarantee that it will be
able to recover the total amount of the debt balance or, once the real estate unit is repossessed, its sale in satisfactory conditions.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Drop in the market value of land held in inventory, before the development of a real estate venture to which it was intended,
and the incapacity to maintain the margins that were previously projected for such developments.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(iii) Capital stock management



The objective of the Company’s capital stock management
is to guarantee that a strong credit rating is maintained in institutions, in order to support the Company’s business and
maximize value to shareholders.



F-48


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


15. Financial instruments--Continued



(iii) Capital stock management--Continued



The Company includes in its net debt structure: loans and payables
to venture partners less cash and cash equivalents and financial investments (cash and cash equivalents and financial investments):



|                                                                           |  | 2017 |           | 2016
|-------------------------------------------------------------------------- |  | ---- | --------- | ----
|                                                                           |  |      |           |     
|Loans and financing (Note 8)                                               |  |      | 214,624   |     
|Debentures (Note 9)                                                        |  |      | 701,763   |     
|Convertible debentures (Note 9)                                            |  |      | 939,151   |     
|Payables to venture partners (Note 11)                                     |  |      | -         |     
|(-) Cash and cash equivalents and financial investments (Note 4.1 and 4.2) |  |      | (161,374  | )   
|Net debt                                                                   |  |      | 1,694,164 |     
|Equity                                                                     |  |      | (115,977  | )   



(iv) Sensitivity analysis



The following chart shows the sensitivity analysis of financial
instruments for the period of one year.



As of December 31, 2017, the Company has the following financial
instruments:



a) Financial investments, loans and financing indexed to the
Interbank Deposit Certificate (CDI) and IGP-M (debentures);



The following scenarios were considered:



Scenario I: 50% increase in the risk variables used for pricing
Scenario II: 25% increase in the risk variables used for pricing
Scenario III: 25% decrease in the risk variables used for pricing
Scenario IV: 50% decrease in the risk variables used for pricing



As of December 31, 2017:



|                              |  |                            |  | Scenario    
|----------------------------- |  | -------------------------- |  | ------------
|                              |  |                            |  | I           
|                              |  | Risk                       |  | Increase 50%
|Financial investments         |  | Increase/decrease of CDI   |  |             
|Loans and financing           |  | Increase/decrease of CDI   |  |             
|Debentures                    |  | Increase/decrease of CDI   |  |             
|Net effect of CDI variation   |  |                            |  |             
|Trade accounts receivable     |  | Increase/decrease of IGP-M |  |             
|Convertible debentures        |  | Increase/decrease of IGP-M |  |             
|Net effect of IGP-M variation |  |                            |  |             



As of December 31, 2016: (Unaudited)



|                              |  |                            |  | Scenario    
|----------------------------- |  | -------------------------- |  | ------------
|                              |  |                            |  | I           
|                              |  | Risk                       |  | Increase 50%
|Financial investments         |  | Increase/decrease of CDI   |  |             
|Loans and financing           |  | Increase/decrease of CDI   |  |             
|Debentures                    |  | Increase/decrease of CDI   |  |             
|Derivative instruments        |  | Increase/decrease of CDI   |  |             
|Net effect of CDI variation   |  |                            |  |             
|Trade accounts receivable     |  | Increase/decrease of IGP-M |  |             
|Net effect of IGP-M variation |  |                            |  |             



F-49


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




16. Related parties



16.1 Balances with related parties



The transactions with related parties substantially refer to
debit notes and financial contribution to associates and Consortia for development of real estate ventures, which balance is as
follows:



|                               |  | 2017 |        | 2016       
|------------------------------ |  | ---- | ------ | -----------
|Assets                         |  |      |        | (Unaudited)
|Current account (a)            |  |      | 10,215 |            
|Current account with Consortia |  |      | 8,652  |            
|                               |  |      | 18,867 |            
|Dividends receivable           |  |      | 2,543  |            
|                               |  |      | 21,410 |            
|Current                        |  |      | 21,410 |            
|Liabilities                    |  |      |        |            
|Dividends payable              |  |      | 2,263  |            
|                               |  |      | 2,263  |            
|Current                        |  |      | 2,263  |            



(a) The Company participates in the development of real estate
ventures with other partners, directly or through related parties, based on the formation of joint venture. The management structure
of these ventures and the cash management are centralized in the lead partner of the venture, which manages the construction schedule
and budgets. Thus, the lead partner ensures that the investments of the necessary funds are made and allocated as planned. The
sources and use of resources of the venture are reflected in these balances, observing the respective interest, which are not subject
to indexation or financial charges and do not have a fixed maturity date. The average term for the development and completion of
the ventures in which the resources are invested is between 24 and 36 months.



16.2 Endorsements, guarantees and sureties



The Company’s financial operations have endorsement or
surety	to financial institutions, which amount to R$ 1,001,278 as of December 31, 2017 (R$ 1,688,214 in 2016).



F-50


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




16. Related parties--Continued



16.3 Transactions with Management



In the years ended December 31, 2017 and 2016, the amounts recorded
in the account “general and administrative expenses” related to the compensation of the Company’s key management
personnel are as follows:



|                                   |  | As of December 31, 2017 Management compensation
|---------------------------------- |  | -----------------------------------------------
|                                   |  | Board of Directors                             
|Number of members                  |  |                                                
|Annual fixed compensation (in R$): |  |                                                
|Salary/fees                        |  |                                                
|Direct and indirect benefits       |  |                                                
|Monthly compensation (in R$)       |  |                                                
|Total compensation                 |  |                                                



|                                   |  | As of December 31, 2016 (Unaudited) Management compensation
|---------------------------------- |  | -----------------------------------------------------------
|                                   |  | Board of Directors                                         
|Number of members                  |  |                                                            
|Annual fixed compensation (in R$): |  |                                                            
|Salary/fees                        |  |                                                            
|Direct and indirect benefits       |  |                                                            
|Monthly compensation (in R$)       |  |                                                            
|Total compensation                 |  |                                                            



The annual aggregate amount approved to be distributed among
the Company’s management members for the year 2017 as fixed and variable compensation, benefits and charges is up to R$9,696
(R$12,005 in 2016 and R$15,487 in 2015). The Company’s Board of Directors is not remunerated.



16.4 Sales



As of December 31, 2017 and 2016, no lot was sold to the management,
and there was no balance receivable of lots.



16.5 Profit sharing



The Company has a profit sharing plan that entitles its employees
and management members, and those of its subsidiaries, to participate in the distribution of profits the Company.



This plan is tied to the achievement of specific targets, established,
agreed-upon and approved by the Board of Directors at the beginning of each year.



F-51


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




16. Related parties--Continued



16.5 Profit sharing - Continued



|                |  | 2017 |       | 2016 |  | 2015
|--------------- |  | ---- | ----- | ---- |  | ----
|                |  |      |       |      |  |     
|Statutory Board |  |      | 3,312 |      |  |     
|Other employees |  |      | 5,915 |      |  |     
|                |  |      | 9,227 |      |  |     



Profit sharing is	calculated and recognized as	a liability
based on the achievement of the Company’s targets for the period.



17. Other Payables



|                            |  | 2017 |         | 2016
|--------------------------- |  | ---- | ------- | ----
|                            |  |      |         |     
|Deferred PIS and COFINS (a) |  |      | 64,559  |     
|Suppliers                   |  |      | 16,609  |     
|Other accounts payable (b)  |  |      | 20,136  |     
|                            |  |      |         |     
|Total other payables        |  |      | 101,304 |     
|                            |  |      |         |     
|Current                     |  |      | 20,349  |     
|Non-current                 |  |      | 80,955  |     



(a) Provision for taxes on revenue taxable upon realization of
trade accounts receivable.



(b) Refer to contract cancellations, provision for expenses and
other accounts payable.



F-52


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




18. Net operating revenue



|                                             |  | 2017 |          | 2016 |  | 2015
|-------------------------------------------- |  | ---- | -------- | ---- |  | ----
|                                             |  |      |          |      |  |     
|Gross operating revenue                      |  |      |          |      |  |     
|Lot sales                                    |  |      | 237,622  |      |  |     
|Service provision                            |  |      | 2,543    |      |  |     
|Provision for loss on contract cancellations |  |      | (124,458 | )    |  |     
|Deductions from gross revenue                |  |      | (7,386   | )    |  |     
|Net operating revenue                        |  |      | 108,321  |      |  |     



19. Costs and expenses by nature



These are represented by the following:



|                                                 |  | 2017 |          | 2016 |  | 2015
|------------------------------------------------ |  | ---- | -------- | ---- |  | ----
|                                                 |  |      |          |      |  |     
|Cost of lot development and sale:                |  |      |          |      |  |     
|Construction cost                                |  |      | (207,163 | )    |  |     
|Land cost                                        |  |      | (12,554  | )    |  |     
|Development cost                                 |  |      | (152,145 | )    |  |     
|Provision for loss on realization of inventories |  |      | (22,278  | )    |  |     
|Maintenance/warranty                             |  |      | (8,262   | )    |  |     
|Venture cost:                                    |  |      | (402,402 | )    |  |     
|Capitalized financial charges                    |  |      | (17,979  | )    |  |     
|                                                 |  |      | (420,381 | )    |  |     
|Selling expenses:                                |  |      |          |      |  |     
|Marketing                                        |  |      | (56,194  | )    |  |     
|Brokerage and sale commission                    |  |      | (11,955  | )    |  |     
|                                                 |  |      | (68,149  | )    |  |     



|                                     |  | 2017 |         | 2016 |  | 2015
|------------------------------------ |  | ---- | ------- | ---- |  | ----
|General and administrative expenses: |  |      |         |      |  |     
|Salaries and payroll charges         |  |      | (40,429 | )    |  |     
|Employee benefits                    |  |      | (3,364  | )    |  |     
|Travel and utilities                 |  |      | (1,219  | )    |  |     
|Services                             |  |      | (18,720 | )    |  |     
|Rents and condominium fees           |  |      | (9,774  | )    |  |     
|IT                                   |  |      | (9,484  | )    |  |     
|Organizational development           |  |      | (234    | )    |  |     
|Other                                |  |      | (2,308  | )    |  |     
|                                     |  |      | (85,532 | )    |  |     



F-53


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




20. Other expenses, net



|                                                             |  | 2017 |         | 2016 |  | 2015
|------------------------------------------------------------ |  | ---- | ------- | ---- |  | ----
|                                                             |  |      |         |      |  |     
|Provision for contingencies                                  |  |      | (34,065 | )    |  |     
|Expenses of the agreement with the former Parent Company (a) |  |      | -       |      |  |     
|Other net revenue                                            |  |      | 1,171   |      |  |     
|Total Other expenses                                         |  |      | (32,894 | )    |  |     



(a) Expense from the stock option plan with Gafisa S.A.



21. Financial income (expenses)



|                                                        |  | 2017 |          | 2016        |  | 2015       
|------------------------------------------------------- |  | ---- | -------- | ----------- |  | -----------
|                                                        |  |      |          | (Unaudited) |  | (Unaudited)
|Income from financial investments                       |  |      | 9,635    |             |  |            
|Other income                                            |  |      | 554      |             |  |            
|Total financial income                                  |  |      | 10,189   |             |  |            
|Interest on funding, net of capitalization (Note 8) (a) |  |      | (202,581 | )           |  |            
|Banking expenses                                        |  |      | (3,694   | )           |  |            
|Amortization of debenture cost                          |  |      | (11,738  | )           |  |            
|Payables to venture partners                            |  |      | (556     | )           |  |            
|Derivative financial instruments (Note 15 (i)(b))       |  |      | -        |             |  |            
|Granted discounts and other expenses                    |  |      | (43,734  | )           |  |            
|Total financial expenses                                |  |      | (262,303 | )           |  |            
|                                                        |  |      |          |             |  |            
|Net financial income (expenses)                         |  |      | (252,114 | )           |  |            



(a) The interests of convertible debentures amount to R$ 92,085
as of December 31, 2017 (R$ 32,352 in 2016 and R$0,00 in 2015)



22. Insurance



The Company and its subsidiaries have insurance coverage for
personal damages caused to third parties and material damages to tangible assets, as well as against fire hazards, lightning strikes,
electrical damages, natural disasters and gas explosion. The contracted coverage has a maximum limit of R$5,235, considered sufficient
by Management to cover possible risks involving its assets and/or responsibilities.



F-54


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




23. Ventures under construction - information and commitments



|                                                    |  | 2017 |          | 2016
|--------------------------------------------------- |  | ---- | -------- | ----
|                                                    |  |      |          |     
|Unappropriated sales revenue of property sold       |  |      | 302,587  |     
|Unappropriated estimated cost of units sold         |  |      | (137,575 | )   
|Unappropriated estimated cost of units in inventory |  |      | (123,896 | )   



(a) The unappropriated sales revenue of units sold are measured
by the face value of contracts, plus contractual adjustments and deducted for cancelled contracts, not considering the effects
of the levied taxes and present value adjustment.



(b) The estimated cost of units sold to be incurred do not contemplate
financial charges, which are appropriated to properties for sale and profit or loss (cost of real estate sold) in proportion to
the real estate units sold as they are incurred.



F-55


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)




24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015



(a) Description of the GAAP differences



The Company’s accounting policies and its consolidated
financial statements comply with and are prepared in accordance with Brazilian GAAP.



A summary of the Company’s principal accounting policies
under Brazilian GAAP that differ significantly from US GAAP is set forth below



(i) Revenue recognition



Under Brazilian GAAP, real estate development and retail land
sales revenues, costs and related expenses are recognized using the percentage-of-completion method of accounting, by project,
measuring progress towards completion in terms of actual costs incurred versus total budgeted expenditures for each stage of a
development. Land is treated as a portion of budgeted construction costs and is appropriated proportionally to each real estate
development. Under the percentage-of- completion method of accounting, revenues for work completed are recognized prior to receipt
of actual cash proceeds or vice-versa. Revenues start to be recognized under the percentage-of- completion when the Company is
no longer able to cancel the launched project, after the sales period established by law.



Under US GAAP, retail land sales of lots that are subdivisions
of large tracts of land the Company recognizes the sale by the percentage-of-completion method following ASC 976 605-25-4 and 25-6
– Retail Land, which criteria are as follows:



a. The period of cancellation with refund has expired



b. Cumulative payments equal or exceed 10 percent;



c. Receivables are collectible;



d. Receivables are not subject to subordination;



e. There has been progress on improvements. The project’s
improvements have progressed beyond preliminary stages, and there are indications that the work will be completed according to
plan;



f. Development is practical. There is a reasonable expectation
that the land can be developed for the purposes represented and the properties will be useful for those purposes at the end of
the normal payment period.



Additionally, as part of the analysis of this adjustment, the
Company also determined the effect over the minority interest from their consolidated subsidiaries. The reclassification of income
to the minority interest for this adjustment was (R$3,140), R$(10,312) and (R$14,437) for the years ended December 31, 2017, 2016
and 2015 (Note 24(b)(i)).



The Company also determined the effect for their investments
in affiliates that are recognized through the equity method under US GAAP. This reclassification resulted in an equity pick-up
of R$4,729 in December 31, 2017, (R$3,519) in December 31, 2016 and R$1,630 in December 31, 2015 (Note 24(b)(i)).



F-56


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(ii) Classification of balance sheet line items



Under Brazilian GAAP, the classification of certain balance sheet
items is presented differently from US GAAP. The Company has recast its consolidated balance sheet under Brazilian GAAP to present
a condensed consolidated balance sheet in accordance with US GAAP (Note 24(d)(i)). The reclassifications are summarized as follows:



| | · | Under Brazilian GAAP, restricted cash is presented as short-term investment in the balance sheet. For US GAAP purposes, restricted
cash is presented separately outside of short-term investment.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Under BR GAAP accounts receivable present value adjustment and monetary variation are recorded in the operating revenue. For
US GAAP purpose the realization of accounts receivable present value adjustment and monetary variation are classified in the financial
income/expense.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(iii) Classification of statement of income (operations) line
items



Under Brazilian GAAP, in addition to the matters noted above,
the classification of certain income and expense items is presented differently from US GAAP. The Company has recast its statement
of income (loss) prepared under the Brazilian GAAP to present a condensed consolidated statement of income (loss) in accordance
with US GAAP (Note 24(d)(ii)). The reclassifications are summarized as follows:



| | · | The net income differences between Brazilian GAAP and US GAAP (Note 24(b)(i)) were incorporated in the consolidated statement
of operations in accordance with US GAAP.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



(iv) Deferred taxes



Deferred tax differences between Brazilian GAAP and US GAAP are
related to the recognition of deferred tax net of valuation allowance on the adjustments mentioned above.



A valuation allowance is recognized under US GAAP to reduce the
deferred tax asset to the amount more likely than not to be realized, based upon available evidences, both positive and negative,
and the weight of those evidences, Under Brazilian GAAP, deferred tax assets are recognized to the extent it is probable the deferred
tax asset can be utilized. Under both US GAAP and Brazilian GAAP, deferred tax assets, net of valuation allowance are recognized
to the extent supported by reversing taxable temporary differences. During the year, the amount of R$ 23.860 was recognized as
a deferred tax (benefit) while in 2016 and 2015 deferred tax expense in the amount of R$ 7,492 and 11,729 were recognized as a
result of the deferred tax adjustments on the non-tax adjustments mentioned above.



F-57


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(b) Reconciliation of significant differences between Brazilian
GAAP and US GAAP



|(i) Net income (loss)                                                                      |  | 2017 |          | 2016        |  | 2015       
|------------------------------------------------------------------------------------------ |  | ---- | -------- | ----------- |  | -----------
|                                                                                           |  |      |          | (Unaudited) |  | (Unaudited)
|Net (loss) income under Brazilian GAAP attributable to owners of Alphaville Urbanismo S.A. |  |      | (764,142 | )           |  |            
|Net operating revenue                                                                      |  |      | 403,907  |             |  |            
|Operating costs                                                                            |  |      | (86,641  | )           |  |            
|Increase (Decrease) in Interest of equity method investees                                 |  |      | 5,612    |             |  |            
|Present value adjustment and other                                                         |  |      | (2,281   | )           |  |            
|Non-controlling interests on adjustments above                                             |  |      | (3,140   | )           |  |            
|Deferred tax on adjustments above                                                          |  |      | (41,932  | )           |  |            
|Deferred tax valuation allowance on adjustments above                                      |  |      | 23,860   |             |  |            
|Net income (loss) attributable to Ausa under US GAAP                                       |  |      | (464,758 | )           |  |            
|Net income attributable to the non-controlling interests under US GAAP                     |  |      | (5,836   | )           |  |            
|Net income (loss) under US GAAP                                                            |  |      | (470,594 | )           |  |            



|(ii) Equity                                    |  | 2017 |            | 2016 |  | 2015
|---------------------------------------------- |  | ---- | ---------- | ---- |  | ----
|Equity under Brazilian GAAP                    |  |      | (141,290   | )    |  |     
|Revenue recognition - net operating revenue    |  |      | (1,366,530 | )    |  |     
|Revenue recognition - operating costs          |  |      | 689,837    |      |  |     
|Non-controlling interests on adjustments above |  |      | 23,334     |      |  |     
|US GAAP adjustment equity accounted investees  |  |      | (2,664     | )    |  |     
|AUSA – redeemable non-controlling interest     |  |      | -          |      |  |     
|Deferred tax on adjustments above              |  |      | 44,257     |      |  |     
|Ausa
    (deficit) equity under US GAAP        |  |      | (753,056   | )    |  |     
|Non-controlling interests under US GAAP        |  |      | 1,979      |      |  |     
|Retained (Deficit) Equity under
    US GAAP    |  |      | (751,077   | )    |  |     



24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



|Condensed changes in total equity under US GAAP |  | 2017 |          | 2016        |  | 2015       
|----------------------------------------------- |  | ---- | -------- | ----------- |  | -----------
|                                                |  |      |          | (Unaudited) |  | (Unaudited)
|At beginning of the year                        |  |      | (314,531 | )           |  |            
|Stock options                                   |  |      | -        |             |  |            
|Net profit (loss) attributable to Ausa          |  |      | (464,758 | )           |  |            
|Declared mandatory dividend                     |  |      | -        |             |  |            
|Capital increase                                |  |      | 26,232   |             |  |            
|At end of the year / period                     |  |      | (753,056 | )           |  |            



|                                                                  |  | 2017 |            | 2016 |  | 2015
|----------------------------------------------------------------- |  | ---- | ---------- | ---- |  | ----
|Condensed equity under US GAAP                                    |  |      |            |      |  |     
|Equity                                                            |  |      |            |      |  |     
|Common shares, comprising 120.418.615 shares (2016 - 120.418.615) |  |      | 459,480    |      |  |     
|Treasury shares                                                   |  |      | (23,186    | )    |  |     
|Accumulated reserve (losses)                                      |  |      | (1,189,350 | )    |  |     
|Total Alphaville Urbanismo equity                                 |  |      | (753,056   | )    |  |     
|Non-controlling interests                                         |  |      | 1,979      |      |  |     
|Total (deficit) equity                                            |  |      | (751,077   | )    |  |     



F-58


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


(c) Recent US GAAP accounting pronouncements



(i) Recently adopted US GAAP accounting



The adoption of the following Updates is neither applicable
nor had a material impact on our consolidated financial statements.



In August 2014, the FASB issued ASU 2014-15 - Presentation
of financial statements—going concern (Subtopic 205-40). The Update provides U.S. GAAP guidance on management’s responsibility
in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related
footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events
that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial
statements are issued. The amendments in this Update are effective for the annual period ending after December 15, 2016.



F-59


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(i) Recently adopted US GAAP accounting standards--Continued



In January 2015, the FASB issued ASU 2015-01, Income
statement - Extraordinary and unusual items (Subtopic 225-20). The objective of ASU 2015-01 is to simplify the income statement
presentation requirements in Subtopic 225-20 by eliminating the concept of extraordinary items. Extraordinary items are events
and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Eliminating the extraordinary
classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration.
The amendments in ASU 2015-01 are effective for fiscal years, and interim periods within those fiscal years, beginning after December
15, 2015.



In February 2015, the FASB issued ASU 2015-02, Consolidation
(Topic 810) - Amendments to the Consolidation Analysis. ASU 2015-02 affects the following areas: (i) Limited partnerships and similar
legal entities, (ii) Evaluating fees paid to a decision maker or a service provider as a variable interest, (iii) The effect of
fee arrangements on the primary beneficiary determination, (iv) The effect of related parties on the primary beneficiary determination
and (v) Certain investment funds. The amendments in ASU 2015-02 affect reporting entities that are required to evaluate whether
they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation
model. Overall, the amendments in ASU 2015-02 are an improvement to current GAAP because they simplify the Codification and reduce
the number of consolidation models through the elimination of the indefinite deferral of Statement 167 and because they place more
emphasis on risk of loss when determining a controlling financial interest. The amendments in ASU 2015-02 are effective for public
business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015.



In April 2015, the FASB issued ASU 2015-03 –
Interest - Imputation of Interest (Subtopic 835-30). To simplify the presentation of debt issuance costs, ASU 2015-03 requires
that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent
with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by ASU
2015-03. For public business entities, ASU 2015-03 is effective for financial statements issued for fiscal years beginning after
December 15, 2015, and interim periods within those fiscal years.



F-60


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(i) Recently adopted US GAAP accounting standards--Continued



In April 2015, the FASB issued ASU 2015-05 - Intangibles—Goodwill
and Other—Internal-Use Software (Subtopic 350-40). The amendments in this Update provide guidance to customers about whether
a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the
customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses.
If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service
contract. For public business entities, the amendments will be effective for annual periods, including interim periods within those
annual periods, beginning after December 15, 2015.



In May 2015, the FASB issued ASU 2015-07: Disclosures
for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). Under the amendments in this
Update, investments for which fair value is measured at net asset value per share (or its equivalent) using the practical expedient
should not be categorized in the fair value hierarchy. Removing those investments from the fair value hierarchy not only eliminates
the diversity in practice resulting from the way in which investments measured at net asset value per share (or its equivalent)
with future redemption dates are classified, but also ensures that all investments categorized in the fair value hierarchy are
classified using a consistent approach. The amendments in this Update are effective for public business entities for fiscal years
beginning after December 15, 2015.



In July 2015, the FASB issued ASU 2015-11 - Simplifying
the Measurement of Inventory. The amendments in this Update more closely align the measurement of inventory in GAAP with the measurement
of inventory in International Financial Reporting Standards (IFRS). An entity should measure inventory within the scope of this
Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course
of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged
for inventory measured using LIFO or the retail inventory method. For public business entities, the amendments in this Update are
effective for fiscal years beginning after December 15, 2016.



In August 2015, the FASB issued ASU 2015-15 - Presentation
and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. This Accounting Standards Update
adds SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015 Emerging Issues Task Force (EITF) meeting about
the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. For public business
entities, the amendments in this Update should be adopted concurrent with adoption of ASU 2015-03.



F-61


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(i) Recently adopted US GAAP accounting standards--Continued



In September 2015, the FASB issued ASU 2015-16 - Simplifying
the Accounting for Measurement-Period Adjustments. The amendments in this Update require that an acquirer recognize adjustments
to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts
are determined. The amendments in this Update require that the acquirer record, in the same period’s financial statements,
the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to
the provisional amounts, calculated as if the accounting had been completed at the acquisition date. An entity should present separately
on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line
item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized
as of the acquisition date. For public business entities, the amendments in this Update are effective for fiscal years beginning
after December 15, 2015.



In November 2015, the FASB issued ASU 2015-17 - Balance
Sheet Classification of Deferred Taxes. To simplify the presentation of deferred income taxes, the amendments in this Update require
that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments
in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred
tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by
the amendments in this Update. The amendments in this Update will align the presentation of deferred income tax assets and liabilities
with International Financial Reporting Standards (IFRS). For public business entities, the amendments in this Update are effective
for financial statements issued for annual periods beginning after December 15, 2016.



In March 2016, the FASB issued ASU 2016-07 - Simplifying
the Transition to the Equity Method of Accounting. The amendments in this Update eliminate the requirement to retroactively adopt
the equity method of accounting. For public business entities, the amendments in this Update are effective for financial statements
issued for fiscal years beginning after December 15, 2016.



F-62


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(i) Recently adopted US GAAP accounting standards--Continued



In March 2016, the FASB issued ASU 2016-09: Improvements
to Employee Share- Based Payment Accounting. The areas for simplification in this Update involve several aspects of the accounting
for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities,
and classification on the statement of cash flows. The amendments in this Update are effective for annual periods beginning after
December 15, 2016.



In October 2016, the FASB issued ASU 2016-17: Consolidation
(Topic 810): Interests held through Related Parties that are under Common Control. The amendments in this Update do not change
the characteristics of a primary beneficiary in current generally accepted accounting principles (GAAP). Therefore, a primary beneficiary
of a variable interest entity (VIE) has both of the following characteristics: (1) the power to direct the activities of a VIE
that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses of the VIE that could
potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the
VIE. The amendments in this Update improve GAAP because, in situations involving common control, a single decision maker focuses
on the economics to which it is exposed when determining whether it is the primary beneficiary of a VIE before potentially evaluating
which party is most closely associated with the VIE. The amendments in this Update are effective for fiscal years beginning after
December 15, 2016.



In December 2016, the FASB issued ASU 2016-19: Technical
Corrections and Improvements. The amendments in this Update cover a wide range of Topics in the Accounting Standards Codification.
The reason for each amendment is provided before each of the amendments for clarity and ease of understanding. The amendments generally
fall into one of the following types of categories: Amendments related to differences between original guidance and the Accounting
Standards Codification; Guidance clarification and reference corrections; Simplification and Minor improvements. Most of the amendments
in this Update do not require transition guidance and are effective upon issuance of this Update.



The following Updates related to Topic 606 are expected
to have a material impact to our consolidated financial statements, as it follows:



(ii) Recently issued US GAAP accounting standards,
not yet adopted.



In May 2014, the FASB issued ASU 2014-09 - Revenue
from contracts with customers (Topic 606). The amendments in ASU 2014-09 create revenue from contracts with customers (Topic 606),
and supersede the revenue recognition requirements in revenue recognition (topic 605), including most industry-specific revenue
recognition guidance throughout the Industry Topics of the Codification. In addition, the amendments supersede the cost guidance
in revenue recognition—construction-type and production- type contracts (subtopic 605-35), and create new subtopic 340-40,
other assets and deferred costs—Contracts with Customers. In summary, the core principle of Topic 606 is that an entity recognizes
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2014-09 are effective for annual
reporting periods beginning after December 15, 2017.



F-63


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(ii) Recently issued US GAAP accounting standards--Continued



In March 2016, the FASB issued ASU 2016-08 - Principal
versus Agent Considerations (Reporting Revenue Gross versus Net). The core principle of the guidance in Topic 606 is that an entity
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should
apply the following steps: 1. Identify the contract(s) with a customer; 2. Identify the performance obligations in the contract;
3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognize
revenue when (or as) the entity satisfies a performance obligation. The amendments in this Update do not change the core principle
of the guidance. The amendments clarify the implementation guidance on principal versus agent considerations. For public business
entities, the amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with
Customers (Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update
are the same as the effective date and transition requirements of Update 2014-09.



In April 2016, the FASB issued ASU 2016-10: Revenue
from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The core principle of the guidance
in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The
amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update
clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance,
while retaining the related principles for those areas. The effective date and transition requirements for the amendments in this
Update are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by Update 2014-09).



In May 2016, the FASB issued ASU 2016-12: Revenue from
Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The core principle of the guidance in
Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments
in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update affect only
some of the narrow aspects of Topic 606.



F-64


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(ii) Recently issued US GAAP accounting standards--Continued



The effective date and transition requirements for
the amendments in this Update are the same as the effective date and transition requirements for Topic 606 (and any other Topic
amended by Update 2014-09).



In June 2016, the FASB issued ASU 2016-13: Financial
Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this Update
require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected
to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial
asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. In addition, available-for-sale
accounting recognizes that value may be realized either through collection of contractual cash flows or through sale of the security.
Therefore, the amendments limit the amount of the allowance for credit losses to the amount by which fair value is below amortized
cost because the classification as available for sale is premised on an investment strategy that recognizes that the investment
could be sold at fair value, if cash collection would result in the realization of an amount less than fair value. The amendments
in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal
years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those
fiscal years. We are currently evaluating the impacts of the adoption of ASU 2016-13 on our consolidated financial statements.



In August 2016, the FASB issued ASU 2016-15: Statement
of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments. The amendments in this Update provide guidance
on the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt
instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate
of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance
claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies;
distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable
cash flows and application of the predominance principle. The amendments in this Update are effective for fiscal years beginning
after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The adoption of ASU 2016-15
is not expected to have a material impact on our consolidated financial statements.



F-65


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(ii) Recently issued US GAAP accounting standards--Continued



In November 2016, the FASB issued ASU 2016-18: Statement
of Cash Flows (Topic 230): Restricted Cash. The amendments in this Update require that a statement of cash flows explain the change
during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash
equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with
cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash
flows. The amendments in this Update do not provide a definition of restricted cash or restricted cash equivalents. The amendments
in this Update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.
Early adoption is permitted. The adoption of ASU 2016-18 is not expected to have a material impact on our consolidated financial
statements.



In December 2016, the FASB issued ASU 2016-20: Technical
Corrections and Improvements (Topic 606): Revenue from Contracts with Customers. The amendments in this Update include items brought
to the Board’s attention through a variety of sources, including: the Codification’s online feedback mechanism; submissions
to the Transition Resource Group for Revenue Recognition (TRG); and stakeholders’ technical inquiries. The amendments in
this Update affect narrow aspects of the guidance issued in Update 2014-09. The effective date and transition requirements for
the amendments are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update
2014-09). We are currently evaluating the impacts of the adoption of ASU 2016-20 on our consolidated financial statements.



In January 2017, the FASB issued ASU 2017-01: Business
Combinations (Topic 805): Clarifying the Definition of a Business. Under the current implementation guidance in Topic 805, there
are three elements of a business—inputs, processes, and outputs. While an integrated set of assets and activities (collectively
referred to as a “set”) that is a business usually has outputs, outputs are not required to be present. In addition,
all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set
and continue to produce outputs, for example, by integrating the acquired set with their own inputs and processes.



F-66


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(ii) Recently issued US GAAP accounting standards--Continued



The amendments in this Update provide a screen to determine
when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or
disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business.
This screen reduces the number of transactions that need to be further evaluated. The amendments in this Update are effective to
annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted.
The adoption of ASU 2017-01 is not expected to have a material impact on our consolidated financial statements.



In January 2017, the FASB issued ASU 2017-03: Accounting
Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323) - Amendments to SEC
Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. This Accounting Standards
Update adds an SEC paragraph and amends other Topics pursuant to an SEC Staff Announcement made at the September 22, 2016 and November
17, 2016 Emerging Issues Task Force (EITF) meetings: Amendments to Topic 250 - Accounting changes and error corrections; Amendments
to Topic 326 - Financially instruments - Credit losses; Amendments to Topic 606 - Revenue from contracts with customers; Amendments
to Topic 842 - Leases and Amendments to Topic 323 - Investments - Equity method and joint ventures- Income taxes. The effective
date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements
of the respective amended Topics. The adoption of ASU 2017- 03 is not expected to have a material impact on our consolidated financial
statements.



In January 2017, the FASB issued ASU 2017-04: Intangibles—Goodwill
and Other (Topic 350). Under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment
test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge
for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should
not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects
from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.
The amendments in this Update are effective for the Company’s annual or any interim goodwill impairment tests in fiscal years
beginning after December 15, 2019. Early adoption is permitted. The adoption of ASU 2017-04 is not expected to have a material
impact on our consolidated financial statements.



In February 2017, the FASB issued ASU 2017-05: Other
Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20). The amendments in this Update clarify
that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset.
The amendments in this Update also clarify that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial
assets transferred within a legal entity to a counterparty. The amendments in this Update clarify that an entity should identify
each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when
a counterparty obtains control of it. The amendments also clarify that an entity should allocate consideration to each distinct
asset by applying the guidance in Topic 606 on allocating the transaction price to performance obligations. The amendments in this
Update require an entity to derecognize a distinct nonfinancial asset or distinct in substance nonfinancial asset in a partial
sale transaction when it (1) does not have (or ceases to have) a controlling financial interest in the legal entity that holds
the asset in accordance with Topic 810 and (2) transfers control of the asset in accordance with Topic 606. The amendments in this
Update are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within
that reporting period. Early adoption is permitted. The adoption of ASU 2017-05 is not expected to have a material impact on our
consolidated financial statements.



F-67


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(ii) Recently issued US GAAP accounting standards--Continued



In February 2017, the FASB issued ASU 2017-06: Defined
Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965).
The amendments in this Update require all plans to disclose (1) their master trust’s other asset and liability balances and
(2) the dollar amount of the plan’s interest in each of those balances. The amendments will require the health and welfare
benefit plan to disclose the name of the defined benefit pension plan in which those investment disclosures are provided, so that
participants can easily access those statements for information about the 401(h) account assets, if needed. The amendments in this
Update are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The adoption of ASU 2017-06
is not expected to have a material impact on our consolidated financial statements.



In March 2017, the FASB issued ASU 2017-07: Compensation—Retirement
Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The
amendments in this Update require that an employer report the service cost component in the same line item or items as other compensation
costs arising from services rendered by the pertinent employees during the period. The amendments in this Update also allow only
the service cost component to be eligible for capitalization when applicable (for example, as a cost of internally manufactured
inventory or a self-constructed asset).



The amendments in this Update are effective for annual
periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted.
The adoption of ASU 2017-07 is not expected to have a material impact on our consolidated financial statements.



In March 2017, the FASB issued ASU 2017-08: Receivables—Nonrefundable
Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this Update
shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the
premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a
discount; the discount continues to be amortized to maturity. The amendments in this Update are effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The adoption of ASU
2017-08 is not expected to have a material impact on our consolidated financial statements.



In May 2017, the FASB issued ASU 2017-09: Compensation-Stock
Compensation (Topic 718): Scope of Modification Accounting. : The amendments in this Update provide guidance about which changes
to the terms or conditions of a share-based payment award require an entity to apply modification accounting in FASB ASC 718. The
amendments in this ASU are effective for all entities for annual periods, and interim periods within those annual periods, beginning
after December 15, 2017. Early adoption is permitted. The amendments in this update should be applied prospectively to an award
modified on or after the adoption date. The adoption of ASU 2017-09 is not expected to have a material impact on our consolidated
financial statements.



F-68


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(ii) Recently issued US GAAP accounting standards--Continued



In May 2017, the FASB issued ASU 2017-11: Earnings
Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting
for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable
Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.
The amendments in this Update change the classification of certain equity-linked financial instruments (or embedded features) with
down round features. The amendments also clarify existing disclosure requirements for equity-classified instruments. For freestanding
equity-classified financial instruments, the amendments require entities that present earnings per share in accordance with FASB
ASC 260, Earnings Per Share, to recognize the effect of the down round feature when it is triggered. That effect is treated as
a dividend and as a reduction of income available to common shareholders in basic earnings per share. Convertible instruments with
embedded conversion options that have down round features would be subject to the specialized guidance for contingent beneficial
conversion features (in FASB ASC 470), including related earnings per share guidance (in FASB ASC 260). The amendments in Part
II of this Update recharacterize the indefinite deferral of certain provisions of FASB ASC 480, Distinguishing Liabilities from
Equity, that now are presented as pending content in the Codification, to a scope exception. For public business entities, the
amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted.



The amendments in Part II of this Update do not require
any transition guidance because those amendments do not have an accounting effect. The adoption of ASU 2017-11 is not expected
to have a material impact on our consolidated financial statements.



In August 2017, the FASB issued ASU 2017-12: Derivatives
and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This Update improves the financial reporting
of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial
statements. In addition to that main objective, the amendments in this Update make certain targeted improvements to simplify the
application of the hedge accounting guidance in current GAAP. For public business entities, the amendments in this Update are effective
for fiscal years beginning after December 15, 2018. Early application is permitted. The adoption of ASU 2017-12 is not expected
to have a material impact on our consolidated financial statements.



In September 2017, the FASB issued ASU 2017-13: Revenue
Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments
to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements
and Observer Comments (SEC Update). : This Update adds, amends, and supersedes SEC paragraphs of the ASC related to the adoption
and transition provisions of ASU No. 2014-09, Revenue From Contracts with Customers and ASU 2016-02, Leases for public business
entities. It is effective upon issuance.



Based on the assessments and estimates undertaken to
date, the adoption of the requirements above, meaning changing the revenue recognition, from over the time (PoC method) to a point
in time, upon delivery of keys for each real estate unit, generates an expected decrease adjustment, in accordance with ASUs Topic
606, on the opening balance of the Company’s net equity at January 1, 2018 of R$350,673 represented by the following:



F-69


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


|                                                              |  | 01.01.2018
|------------------------------------------------------------- |  | ----------
|Equity under US GAAP current standards                        |  |           
|Revenue recognition - net operating revenue                   |  |           
|Revenue recognition - operating costs                         |  |           
|Non-controlling interests on adjustments above                |  |           
|US GAAP adjustment equity accounted investees                 |  |           
|Deferred tax on adjustments above, net of valuation allowance |  |           
|                                                              |  |           
|Estimated equity upon adoption of ASU 2014-09                 |  |           



F-70


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(ii) Recently issued US GAAP accounting standards--Continued



For the following Updates, we are currently evaluating
the impacts of their adoption on our consolidated financial statements:



In February 2016, the FASB issued ASU 2016-02 - Leases
(Topic 842). The FASB is issuing this Update to increase transparency and comparability among organizations by recognizing lease
assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. To meet that objective,
the FASB is amending the FASB Accounting Standards Codification® and creating Topic 842, Leases. This Update, along with IFRS
16, Leases, are the results of the FASB’s and the International Accounting Standards Board’s (IASB’s) efforts
to meet that objective and improve financial reporting. The core principle of Topic 842 is that a lessee should recognize the assets
and liabilities that arise from leases.



All leases create an asset and a liability for the
lessee in accordance with FASB Concepts Statement No. 6, Elements of Financial Statements, and, therefore, recognition of those
lease assets and lease liabilities represents an improvement over previous GAAP, which did not require lease assets and lease liabilities
to be recognized for most leases. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP.
For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. Earlier application is permitted.



In January 2018, the FASB issued ASU 2018-01: Leases
(Topic 842): Land Easement Practical Expedient for Transition to Topic 842. The amendments in this Update permit an entity to elect
an optional transition practical expedient to not evaluate under Topic 842 land easements that exist or expired before the entity’s
adoption of Topic 842 and that were not previously accounted for as leases under Topic 840. The effective date and transition requirements
for the amendments are the same as the effective date and transition requirements in Update 2016-02.



In June 2016, the FASB issued ASU 2016-13: Financial
Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this Update
require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected
to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial
asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. In addition, available-for-sale
accounting recognizes that value may be realized either through collection of contractual cash flows or through sale of the security.
Therefore, the amendments limit the amount of the allowance for credit losses to the amount by which fair value is below amortized
cost because the classification as available for sale is premised on an investment strategy that recognizes that the investment
could be sold at fair value, if cash collection would result in the realization of an amount less than fair value. The amendments
in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal
years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those
fiscal years.



The following Updates are either not expected to have
a material impact upon their adoption or are not applicable on our consolidated financial statements:



In January 2016, the FASB issued ASU 2016-01 - Recognition
and Measurement of Financial Assets and Financial Liabilities. The amendments in this Update address certain aspects of recognition,
measurement, presentation, and disclosure of financial instruments. For public business entities, the amendments in this Update
are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.



F-71


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(ii) Recently issued US GAAP accounting standards--Continued



In August 2016, the FASB issued ASU 2016-15: Statement
of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments. The amendments in this Update provide guidance
on the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt
instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate
of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance
claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies;
distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable
cash flows and application of the predominance principle. The amendments in this Update are effective for fiscal years beginning
after December 15, 2017.



In October 2016, the FASB issued ASU 2016-16: Income
Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The Board decided that an entity should recognize the
income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Consequently, the
amendments in this Update eliminate the exception for an intra-entity transfer of an asset other than inventory. Two common examples
of assets included in the scope of this Update are intellectual property and property, plant, and equipment. The amendments in
this Update do not include new disclosure requirements; however, existing disclosure requirements might be applicable when accounting
for the current and deferred taxes for an intra-entity transfer of an asset other than inventory. The amendments in this Update
are effective for annual reporting periods beginning after December 15, 2017.



In November 2016, the FASB issued ASU 2016-18: Statement
of Cash Flows (Topic 230): Restricted Cash. The amendments in this Update require that a statement of cash flows explain the change
during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash
equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with
cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash
flows. The amendments in this Update do not provide a definition of restricted cash or restricted cash equivalents. The amendments
in this Update are effective for fiscal years beginning after December 15, 2017.



In January 2017, the FASB issued ASU 2017-01: Business
Combinations (Topic 805): Clarifying the Definition of a Business. Under the current implementation guidance in Topic 805, there
are three elements of a business—inputs, processes, and outputs. While an integrated set of assets and activities (collectively
referred to as a “set”) that is a business usually has outputs, outputs are not required to be present. In addition,
all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set
and continue to produce outputs, for example, by integrating the acquired set with their own inputs and processes. The amendments
in this Update provide a screen to determine when a set is not a business. The screen requires that when substantially all of the
fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable
assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. The amendments
in this Update are effective to annual periods beginning after December 15, 2017.



In January 2017, the FASB issued ASU 2017-03: Accounting
Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323) - Amendments to SEC
Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. This Accounting Standards
Update adds an SEC paragraph and amends other Topics pursuant to an SEC Staff Announcement made at the September 22, 2016 and November
17, 2016 Emerging Issues Task Force (EITF) meetings: Amendments to Topic 250 - Accounting changes and error corrections; Amendments
to Topic 326 - Financially instruments - Credit losses; Amendments to Topic 606 - Revenue from contracts with customers; Amendments
to Topic 842 - Leases and Amendments to Topic 323 - Investments - Equity method and joint ventures- Income taxes. The effective
date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements
of the respective amended Topics.



F-72


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(ii) Recently issued US GAAP accounting standards--Continued



In January 2017, the FASB issued ASU 2017-04: Intangibles—Goodwill
and Other (Topic 350). Under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment
test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge
for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should
not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects
from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.
The amendments in this Update are effective for the Company’s annual or any interim goodwill impairment tests in fiscal years
beginning after December 15, 2019.



In February 2017, the FASB issued ASU 2017-05: Other
Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20). The amendments in this Update clarify
that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset.
The amendments in this Update also clarify that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial
assets transferred within a legal entity to a counterparty. The amendments in this Update clarify that an entity should identify
each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when
a counterparty obtains control of it. The amendments also clarify that an entity should allocate consideration to each distinct
asset by applying the guidance in Topic 606 on allocating the transaction price to performance obligations. The amendments in this
Update require an entity to derecognize a distinct nonfinancial asset or distinct in substance nonfinancial asset in a partial
sale transaction when it (1) does not have (or ceases to have) a controlling financial interest in the legal entity that holds
the asset in accordance with Topic 810 and (2) transfers control of the asset in accordance with Topic 606. The amendments in this
Update are effective for annual reporting periods beginning after December 15, 2017. Early adoption is permitted.



In February 2017, the FASB issued ASU 2017-06: Defined
Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965).
The amendments in this Update require all plans to disclose (1) their master trust’s other asset and liability balances and
(2) the dollar amount of the plan’s interest in each of those balances. The amendments will require the health and welfare
benefit plan to disclose the name of the defined benefit pension plan in which those investment disclosures are provided, so that
participants can easily access those statements for information about the 401(h) account assets, if needed. The amendments in this
Update are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted.



In March 2017, the FASB issued ASU 2017-07: Compensation—Retirement
Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The
amendments in this Update require that an employer report the service cost component in the same line item or items as other compensation
costs arising from services rendered by the pertinent employees during the period. The amendments in this Update also allow only
the service cost component to be eligible for capitalization when applicable (for example, as a cost of internally manufactured
inventory or a self-constructed asset). The amendments in this Update are effective for annual periods beginning after December
15, 2017. Early adoption is permitted. The adoption of ASU 2017-07 is not applicable to our consolidated financial statements.



F-73


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


In March 2017, the FASB issued ASU 2017-08: Receivables—Nonrefundable
Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this Update
shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the
premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a
discount; the discount continues to be amortized to maturity. The amendments in this Update are effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted.



In May 2017, the FASB issued ASU 2017-09: Compensation-Stock
Compensation (Topic 718): Scope of Modification Accounting. : The amendments in this Update provide guidance about which changes
to the terms or conditions of a share-based payment award require an entity to apply modification accounting in FASB ASC 718. The
amendments in this ASU are effective for all entities for annual periods, and interim periods within those annual periods, beginning
after December 15, 2017. Early adoption is permitted. The amendments in this update should be applied prospectively to an award
modified on or after the adoption date.



F-74


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(c) Recent US GAAP accounting pronouncements--Continued



(ii) Recently issued US GAAP accounting standards--Continued



In May 2017, the FASB issued ASU 2017-11: Earnings
Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting
for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable
Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.
The amendments in this Update change the classification of certain equity-linked financial instruments (or embedded features) with
down round features. The amendments also clarify existing disclosure requirements for equity-classified instruments. For freestanding
equity-classified financial instruments, the amendments require entities that present earnings per share in accordance with FASB
ASC 260, Earnings Per Share, to recognize the effect of the down round feature when it is triggered. That effect is treated as
a dividend and as a reduction of income available to common shareholders in basic earnings per share. Convertible instruments with
embedded conversion options that have down round features would be subject to the specialized guidance for contingent beneficial
conversion features (in FASB ASC 470), including related earnings per share guidance (in FASB ASC 260). The amendments in Part
II of this Update recharacterize the indefinite deferral of certain provisions of FASB ASC 480, Distinguishing Liabilities from
Equity, that now are presented as pending content in the Codification, to a scope exception. For public business entities, the
amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted.
The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting
effect.



In August 2017, the FASB issued ASU 2017-12: Derivatives
and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This Update improves the financial reporting
of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial
statements. In addition to that main objective, the amendments in this Update make certain targeted improvements to simplify the
application of the hedge accounting guidance in current GAAP. For public business entities, the amendments in this Update are effective
for fiscal years beginning after December 15, 2018. Early application is permitted.



In November 2017, the FASB issued ASU 2017-14: Income
Statement—Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers
(Topic 606) (SEC Update). : This Update adds, amends, and supersedes SEC paragraphs of the ASC pursuant to Staff Accounting Bulletin
No. 116 and SEC Release 33-10403 and is effective upon issuance.



In February 2018, the FASB issued ASU 2018-02: Income
Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive
Income. The amendments in this Update allow a reclassification from accumulated other comprehensive income to retained earnings
for stranded tax effects resulting from the Tax Cuts and Jobs Act. The amendments in this Update are effective for fiscal years
beginning after December 15, 2018. Early application is permitted



In February 2018, the FASB issued ASU 2018-03, Technical
Corrections and Improvements to Financial Instruments – Overall (Subtopic 825): Recognition and Measurement of Financial
Assets and Financial Liabilities. The amendments in this Update clarify certain aspects of the guidance issued in Update 2016-01.
The amendments in this Update are effective for fiscal years beginning after December 15, 2017.



F-75


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


(d) US GAAP condensed consolidated financial information



Based on the reconciling items and discussion above,
the Alphaville Urbanismo S.A. consolidated balance sheets, statements of income (loss), and statement of changes in shareholders’
equity (see b(ii)) under US GAAP have been recast in condensed format as follows:



F-76


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(d) US GAAP condensed consolidated financial information-
Continued



(i) Condensed consolidated balance sheets under
US GAAP



|                                  |  | 2017 |           | 2016        |  | 2015       
|--------------------------------- |  | ---- | --------- | ----------- |  | -----------
|Assets                            |  |      |           | (Unaudited) |  | (Unaudited)
|Current assets                    |  |      |           |             |  |            
|Cash and cash equivalents         |  |      | 43,478    |             |  |            
|Short-term investments            |  |      | 112,263   |             |  |            
|Restricted short-term investments |  |      | 5,633     |             |  |            
|Trade accounts receivable, net    |  |      | 197,587   |             |  |            
|Properties for sale               |  |      | 1,116,305 |             |  |            
|Other Accounts receivable         |  |      | 77,814    |             |  |            
|Other                             |  |      | 1,553,080 |             |  |            
|Non-current assets                |  |      |           |             |  |            
|Investments in associates         |  |      | 33,475    |             |  |            
|Property and equipment, net       |  |      | 40,429    |             |  |            
|Trade accounts receivable, net    |  |      | 191,492   |             |  |            
|Properties for sale               |  |      | 149,047   |             |  |            
|Other                             |  |      | 59,920    |             |  |            
|Other                             |  |      | 474,363   |             |  |            
|Total assets                      |  |      | 2,027,443 |             |  |            



F-77


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(d) US GAAP condensed consolidated financial information-
Continued



|                                                     |  | 2017 |           | 2016        |  | 2015       
|---------------------------------------------------- |  | ---- | --------- | ----------- |  | -----------
|Liabilities                                          |  |      |           | (Unaudited) |  | (Unaudited)
|Current liabilities                                  |  |      |           |             |  |            
|Loans and financing                                  |  |      | 92,582    |             |  |            
|Debentures                                           |  |      | 41,763    |             |  |            
|Payables for purchase of properties                  |  |      | 3,621     |             |  |            
|Payables for goods and services suppliers            |  |      | 84,296    |             |  |            
|Taxes and labor contributions                        |  |      | 16,550    |             |  |            
|Net capital deficiency of subsidiaries               |  |      |           |             |  |            
|Advances from customers                              |  |      | 552,401   |             |  |            
|Obligations assumed on the assignment of receivables |  |      | 38,074    |             |  |            
|Payables for venture partners                        |  |      | -         |             |  |            
|Declared dividends                                   |  |      | 2,263     |             |  |            
|Other                                                |  |      | 24,981    |             |  |            
|                                                     |  |      | 856,531   |             |  |            
|Non-current liabilities                              |  |      |           |             |  |            
|Loans and financing                                  |  |      | 122,042   |             |  |            
|Debentures                                           |  |      | 1,599,151 |             |  |            
|Payables for purchase of properties                  |  |      | -         |             |  |            
|Obligations assumed on the assignment of receivables |  |      | 50,094    |             |  |            
|Payables to venture partners                         |  |      | -         |             |  |            
|Provisions for legal claims                          |  |      | 42,891    |             |  |            
|Warranty Provision                                   |  |      | 28,562    |             |  |            
|Acquisition of ownership interests                   |  |      | 23,629    |             |  |            
|Other                                                |  |      | 55,620    |             |  |            
|                                                     |  |      | 1,921,989 |             |  |            
|Total Alphaville equity                              |  |      |           |             |  |            
|(753,056)                                            |  |      |           |             |  |            
|(314,531)                                            |  |      |           |             |  |            
|(142,439)                                            |  |      |           |             |  |            
|Non-controlling interest                             |  |      | 1,979     |             |  |            
|Total equity                                         |  |      | (751,077  | )           |  |            
|Total liabilities and equity                         |  |      | 2,027,443 |             |  |            



F-78


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(ii) Condensed consolidated statements of operations under
US GAAP



|                                                                                   |  | 2017 |          | 2016        |  | 2015       
|---------------------------------------------------------------------------------- |  | ---- | -------- | ----------- |  | -----------
|                                                                                   |  |      |          | (Unaudited) |  | (Unaudited)
|Gross operating revenue                                                            |  |      |          |             |  |            
|Real estate development and sales of properties                                    |  |      | 535,268  |             |  |            
|Taxes on services and revenues                                                     |  |      | (23,039  | )           |  |            
|Net operating revenue                                                              |  |      | 512,229  |             |  |            
|Operating costs                                                                    |  |      | (507,022 | )           |  |            
|Gross profit                                                                       |  |      | 5,207    |             |  |            
|Operating income (expenses)                                                        |  |      |          |             |  |            
|Selling general and administrative expenses                                        |  |      | (162,908 | )           |  |            
|Other                                                                              |  |      | (46,628  | )           |  |            
|Income before financial income and expenses and income tax and social contribution |  |      | (204,329 | )           |  |            
|Financial income                                                                   |  |      | 7,908    |             |  |            
|Financial expenses                                                                 |  |      | (262,303 | )           |  |            
|Income (loss) before income tax expense                                            |  |      | (458,725 | )           |  |            
|Current tax expense, including social contribution                                 |  |      | (8,878   | )           |  |            
|Deferred tax expense, including social contribution                                |  |      | (5,809   | )           |  |            
|Total tax expense, including social contribution                                   |  |      | (14,687  | )           |  |            
|Income (loss) before equity in results and                                         |  |      | (473,412 | )           |  |            
|Income from equity method investments                                              |  |      | 2,818    |             |  |            
|Net (loss) income for the year from continuing operations                          |  |      | (470,594 | )           |  |            
|Net (loss) income attributable to the non-controlling interests                    |  |      | 5,836    |             |  |            
|Net (loss) income attributable to Alphaville                                       |  |      | (464,758 | )           |  |            



F-79


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


24. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the year ended
December 31, 2017, 2016 and 2015 - Continued



(iii) Condensed consolidated statements of comprehensive
income (loss)



|                                       |  | 2017 |          | 2016        |  | 2015       
|-------------------------------------- |  | ---- | -------- | ----------- |  | -----------
|                                       |  |      |          | (Unaudited) |  | (Unaudited)
|Net loss for the year                  |  |      | (470,594 | )           |  |            
|Total comprehensive loss, net of taxes |  |      | (470,594 | )           |  |            
|Attributable to:                       |  |      |          |             |  |            
|Non-controlling interests              |  |      | 5,836    |             |  |            
|Owners of Alphaville Urbanismo S.A.    |  |      | (464,758 | )           |  |            



(iv) Additional information – income taxes



Change in the valuation allowance for net operating losses
and temporary differences was as follows:



|                               |  | 2017 |         | 2016        |  | 2015       
|------------------------------ |  | ---- | ------- | ----------- |  | -----------
|                               |  |      |         | (Unaudited) |  | (Unaudited)
|Opening balance at January 1   |  |      | 364,059 |             |  |            
|Change in valuation allowance  |  |      | 117,703 |             |  |            
|Closing balance at December 31 |  |      | 481,762 |             |  |            



The Company recognizes its deferred tax asset net of
a valuation allowance such that the amount of the net deferred tax asset is more likely than not to be realized. During the year
2017, movements in the valuation allowance amounted to a net increase of R$117,703 (R$114,706 In 2016). This is primarily related
to the continuing restructuring process implemented by management.



The Company records the financial statement effects of
an income tax position when it is more likely than not, based on the technical merits, that it will be sustained upon examination.
A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of tax benefit that
is greater than 50 percent likely of being realized upon settlement with a taxing authority.



As of December 31, 2017, 2016 and 2015, the Company has
no amount recorded for any uncertainty in income taxes.



Alphavile Urbanismo S.A. and its subsidiaries file income
tax returns in Brazil. Brazilian income tax returns are subject to inspections by tax authorities for the period beginning in 2012
and forward, i.e., within 5 years after the filing.



(v) Statement of comprehensive income (loss)



Comprehensive income (loss) is comprised of net income
(loss) and other comprehensive income (loss) that include charges or credits directly to equity which are not the result of transactions
with owners.



(vi) Statement of cash flows



For each period for which a statement of operations is
presented and required to be reconciled to US GAAP, SEC rules require that the Company provide either a statement of cash flows
prepared in accordance with US GAAP or IFRS; or furnish in a note to the financial statements a qualified description of the material
differences between cash or funds flows reported in the primary financial statements and cash flows that would be reported in a
statement of cash flows, prepared in accordance with US GAAP.



F-80


Alphaville Urbanismo S.A.  Notes to the consolidated financial statements December 31, 2017, 2016 and 2015 (Amounts in thousands of Brazilian reais, except as otherwise stated)


|Statement of Cash flow |  | 2017 |          | 2016        |  | 2015       
|---------------------- |  | ---- | -------- | ----------- |  | -----------
|                       |  |      |          | (Unaudited) |  | (Unaudited)
|Operating activities   |  |      | (177,864 | )           |  |            
|Investing activities   |  |      | (113,420 | )           |  |            
|Financing activities   |  |      | 181,078  |             |  |            



The Company’s primary differences in net income
(loss) between Brazilian GAAP and net income (loss) for US GAAP are explained in items 24(a) (ii) to (iv) above. The statement
of cash flows for Brazilian GAAP was prepared based on CPC 3(R2) - Statement of Cash Flows.



F-81