Glossary

Amortization: In the debt payment process, the gradual reduction of a debt by means of periodic payments agreed between the creditor and the debtor through the allocation of a lump sum amount to different time periods. The sum may be composed of principal, interest or both, depending on the agreement.

Asset Pledge: Credit model whereby collection is financed as a payment guarantee from another that will be appropriated by the creditor in case of nonpayment of the loan.

Asset Seizure: The process of collection of assets to provide financial guarantee, as a way to guarantee the payment. When the asset seizure is executed a tribunal sells the resources to pay the creditor.

Assign: The person to whom, through an assignment, right, contract or obligation is transferred. The person to whom an assignment is made.

Assignment: Act by which one party (company or individual) transfers to another party one or more rights, duties or properties. For an assignment to be considered valid, it must comply with basic legal requirements such as the existence of both parties’ capacity to request, prepare, and sign a contract.

Backlog Margin: Equals to "Backlog of Results" divided "Backlog of Revenues" to be recognized in future periods.

Backlog of Revenues: As a result of the Percentage of Completion Method of recognizing revenues, we recognize revenues and expenses over a multi-year period for each residential unit we sell. Our backlog of results represents revenues minus costs that will be incurred in future periods from past sales.

Bond: Agreement in which a willing party agrees to satisfy and fulfill the obligations of another, if one does not fulfill their duties or obligations.

Broad CPI: The Broad Consumer Price Index. Today it is calculated monthly by the Brazilian Institute of Geography and Statistics (IBGE). It verifies cost variations with people who earn between 1 and 40 minimum salaries in metropolitan regions such as Belem, Belo Horizonte, Curitiba, Fortaleza, Porto Alegre Recife, Rio de Janeiro, Salvador, São Paulo, municipality of Goiânia and Federal District.

Clearance Certificate: The certificate that verifies the non-existence of any civil, criminal or Federal Court actions or tax liabilities at the time that the entity is transferred to a new owner or ceases to exist.

Commission: An amount paid to the person or company that works as an intermediary in facilitating a business transaction, such as the buying and selling of real estate.

CPI: The Consumer Price Index in the São Paulo municipality is a commonly used indicator of the change of the cost of living for resident families by measuring the fluctuation of the cost of a fixed basket of products and services. Its calculation began in January 1939. Today it is calculated by Brazil’s Economic Research Institute Foundation (FIPE)

Credit Facility Commission: An organization that works to ease and expedite the loan contract or purchase process

Developer: The financial or legal person, commercial or otherwise, though not involved in the construction, arranges or carries out the sale of land parcels, for the building to be constructed. The developer is responsible in the short-term for setting the price, and determining the conditions of the construction and the final project. Only the land owner, builder, or real estate broker can assume the function of developer.

Discharge: Removal of a debt by making full payment. For example, a mortgage discharge is a document formally specifying that a mortgage debt has been paid.

EBITDA (earnings before interest, taxes, depreciation and amortization): A measure of the Company’s operational performance before interest, income tax, depreciation and amortization. The Company’s management does not believe EBITDA stand alone is the best practical measure to assess its operating performance, in light of some of the intrinsic characteristics of the construction and development business. However, it is commonly used in other industries because it allows for comparison to other companies in the same segment. It is worth pointing out that EBITDA is not a metric established under the Brazilian Corporate Law or BR GAAP or US GAAP and may be defined and calculated differently from company to company.

Encumbrance: An act impeding the negotiation of a certain real estate property in the Real Estate Registry which prevents it from being sold or disposed.

Endorsement: The debt payment guarantee that one party (company or individual) gives to another in case the debtor does not pay the debt owed to the creditor. The endorser is the agent who bestows this guarantee.

Equivalent Area: One room’s area in relation to another; used for normalizing the costs of different rooms.

Exchange: In the real estate sector, an exchange is a transaction where the land proprietor enters into a new development undertaking, without pledging financial resources, pledging only with the value of the land, in the exchange of units upon delivery of the project. Such a transaction may also be referred to as a swap.

General Market Price Index (IGP-M): Brazil’s IGP-M is calculated every month by Fundação Getúlio Vargas and published at the end of the month. This index is composed of three other indexes with different weights: Wholesale Price Index (WPI), Consumer Price Index (CPI) and National Construction Cost Index, which are given weights of 60%, 30% and 10%, respectively, in the IGP-M.

Grace Period: A period of time granted by the creditor to the debtor in which the debtor need not pay the debt’s principal, only interest and monetary adjustments.

Guarantee: A financial obligation undertaken by a guarantor in order to ensure the creditor that the debt will be paid in the event the debtor defaults or does not comply with his obligations.

Guarantor: The person who provides a guarantee and is responsible for another party’s debt payment.

Inflation: The increase in the price level for goods or services in an economy that results in the real devaluation of money.

Interest: The fee charged by a lender to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal; the rate is dependent upon the time value of money, the credit risk of the borrower, and the inflation rate.

IOF: A Federal Tax on Credit, Exchange, and Insurance Operations related to the value and furnishing of the deed. The tax was also applied to the issuance of American Depository Receipts per Presidential Decree 7.011 published November 6, 2009.

IPTU: Municipal Property and Urban Land Tax that is applied to a property’s sales value. In a rental scenario, it is the land owner who must pay this tax unless the parties specify in the rental contract that the tenant will pay the tax.

Job Construction: Scenario in which the builder works for a pre-established price, or an agreed-upon price.

Land Development: The activity engaged in to prepare for the construction of buildings or a collection of buildings composed of individual units.

LandBank: Land that Gafisa holds for future development paid either in cash or through swap agreements. Each decision to acquire land is analyzed by our investment committee and approved by our Board of Directors.

Limited Liability Company: A business enterprise that blends elements of a partnership and a corporation. The structure resembles a corporation in that owners and managers receive limited liability and is similar to a partnership in that pass-through income taxation benefits can often be achieved without having to conform fully to requirements that must be met by a corporation.

Management Construction: Context in which a builder charges a percentage over and above the construction price for his services.

Monetary Adjustment: An adjustment established by the parties to an agreement, or imposed by law, that is made in accordance with a ratio adopted for the purpose of measuring currency devaluation and determining an appropriate monetary correction. The ratio adopted that must be expressed by the parties in a contract, and in contracts involving acquisition of real estate, the following ratios may be adopted: Cost ratio (can only be used during the building period); National Civil Construction Index (INCC), Consumers Intention Index (ICC), Basic Unitary Cost (CUB) (these three [price] ratios can be used during the building period as well as after the delivery of keys); General Market Price Index (IGP-M), General Market Price Internal Availability (IGP-DI), Consumer Price Index (IPC). The minimum wage, foreign currency and the TR should not be used as a monetary adjustment index.

Mortgage: A type of guarantee given by the debtor to the creditor in real estate financing. In this type of financing, the creditor owns the real estate property until the debt is fully paid by the debtor.

National Construction Cost Index: A national economic indicator that measures [the fluctuation of] home construction costs. The resulting arithmetic mean established the city index. It is used to adjust construction costs in home financing contracts during the phase that precedes the exchange of keys. This index is also one of the component indexes of the IGP-M, with a weight of 10%.

Nominal Interest: interest before adjustment for inflation (in contrast to real interest, which is adjusted to account for inflation)

Occupancy Permit: Authorization issued by the municipal government so that a real estate property, which has been recently built or remodeled, can be occupied. The permit is only issued after the real estate property has been inspected by construction inspectors (who compare the actual construction with the approved project proposal) and public service inspectors (fire service, power, water and sewage companies).

PoC Method: Under Brazilian GAAP, real estate development revenues, costs and related expenses are recognized using the percentage-of-completion ("PoC") method of accounting by measuring progress towards completion in terms of actual costs incurred versus total budgeted expenditures for each stage of a development.

Preferred Shares: Shares that offer preference in the payment of dividends or capital refund in the event of liquidation of a limited liability company. Ownership of these shares generally does not grant voting rights.

Pre-Sales: Contracted pre-sales are the aggregate amount of sales resulting from all agreements for the sale of units entered into during a certain period, including new units and units in inventory. Contracted pre-sales will be recorded as revenue as construction progresses (PoC method). There is no definition of "contracted pre-sales'' under Brazilian GAAP.

Price Guarantee: A system of financial amortization whereby a table used to calculate and arrange a debt repayment scheme in which interest repayments are constantly decreasing

Private Area: The property area over which the proprietor has private and exclusive rights, excluding the property’s internal walls.

Privately-held Company: Companies whose shares are not traded on a stock exchange or an over-the-counter (OTC) market.

Publicly-held Company: A company that lists shares on a stock exchange which are distributed among a certain number of shareholders. The shares may be traded at the stock exchange or the over-the-counter market.

Real Estate Financing: The funding of construction expenses (for the builder) or of the purchase of real estate property (for the client) to be paid later in installments, including capital amortization and the respective interest, as well as insurance management fees.

Real Estate Investment Fund: Investment fund which enables the investor to purchase shares of the real state project as fund quotas. This investment vehicle is part of a “condominium”, a closed group which will be managed by a financial institution, monitored by CVM. The profits are a result of the payment of rental or hotel fees by lessees or guests. The profits are distributed among investors according to the number of quotas held by each investor in the fund. It enables investors to invest in the real state market while maintaining a greater ability sell their shares when they consider necessary.

Real Estate Launch: The process of introducing the sale of real estate project or units prior to the project’s construction. The launch is preceded by a public campaign, the goal of which is to divulge the attributes of a new project to potential clients. On average, the launch (or bidding) period lasts approximately 3 months, but this may vary in accordance with a project’s particular profile.

Real Estate Lender: The person (financial or legal) that finances the purchase or property for a third party.

Real Estate Loan: Financial contract signed by the Real Estate Lender and Real Estate Purchaser.

Real Estate Purchaser: The person (financial or legal) that purchases a property or that receives financing to buy a property.

Real Estate Registry Certificate: Document issued by the official or the alternate Real Estate Registry Office, upon anyone’s formal request, relative to the bookkeeping entries made.

Real Guarantee: Guarantee constituted by encumbrance over a specific real estate property of the debtor

Reference Tax: Tax to account for savings account adjustments and different contracts and debt, including real estate financing. It is defined monthly by the Central Bank according to the average profits on? a/the bank’s investments.

Refinance: The value that will be financed by a bank for the real estate purchaser, originally financed by its own incorporation, after the occupancy permit of the undertaking.

Registered Share: Share that identifies its owner’s name.

Securization: Securitization is a structured finance tool or process that distributes risk by aggregating debt instruments in a pool, then issues new securities backed by the pool.. In the housing, construction, and development sectors, it is the sale long term rights, referring to installment payments of residential unit sales, the securitization companies issue and refinance the new titles for the final capital market investors. These titles are weighted by assets that generate earnings flows. They are known as “Certificates of Real Estate Earnings” operation or simply CRIs. Real estate credit securitization was introduced by law number 9,514 (20/111997) which created the House Financing System.

SFH: Real Estate Financing System. Created on August 12, 1964 by law number 4,320 to capture resources for the housing area and finance individual house construction.

SFI: Property Financing System created in 1977 by the law number 9,514 (11/20/1997) as an alternative to the House Financing System and the Mortgage Portfolio .The system authorized the securitization of real estate loans and introduction or acquired shares, to promote profitability.

Share: A tradable instrument which represents the smallest fraction of a Limited Liability Corporation’s capital stock.

SPE: Specified Purpose Entity. A company constituted for a specified [social?] business objective that allows the controlling shareholders to the isolate the activities of the SPE from other commercial activities in order to limit liability. It also allows financial agents more access to the assets and earnings generated by the undertaking in the event of company default. Often called a special purpose vehicle, or SPV.

Square Meter (m²): The fundamental unit of surface measurement; unit of area. It is the only standard of the International System (IS). 1 m² = 1.550 inches (in²)

Statutory Lien: The right granted to the creditor, also known as the fiduciary, over the debtor’s assets. It is a guarantee in the financing operation for the purchase of a real estate, where the creditor conveys the real estate to the financer, in guarantee of the acquired debt payment. The debtor acquires direct ownership of the asset, and the fiduciary gains proprietary interest and indirect ownership of the property, allowing them to re-acquire the property in the case of non-payment.

Tax Credit: Title of credit given to guarantee an operation, providing an object as a pledge.

Total Area: The private area added to the sum of the areas referring to the proprietor’s share in the project’s common areas, such as the garage, entrance hall, etc…

Transfer Tax: A tax on the transfer of title to property from one person (or entity) to another.

Useful Area: The apartment’s carpet area added to the balcony area. Also known as the broom area. [necessary?]

VGV: General Sales Value; total revenues derived from all units involved in a real estate development. This value is not necessarily equivalent to accounting revenues.

WPI: The Wholesale Price Index. An indicator of the evolutional rhythm of wholesale prices levels.