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1. PRESENTATION – VISION AND STRATEGY

1.1. Board of Directors’ Message...................................................................................05

1.2. Paranapanema Commitment to Sustainability..................................................... 06

1.3. Sustainability Report Strategy and Structure...................................................... 07 a 09

2. PROFILE

2.1. Paranapanema.............................................................................................................. 12 e 13

2.2. Subsidiaries................................................................................................................... 14 a 19

2.3. Market context............................................................................................................19

2.4. Acknowledgments and highlight.............................................................................. 20 a 22

3. GOVERNANCE STRUCTURE AND MANAGEMENT SYSTEM

3.1. Organizational Culture and Ideology......................................................................24 a 28

3.2. Sustainability Management Model............................................................ ...............28 a 30

3.3. Corporate Governance............................................................................................ 31 a 34

3.4. Economic Management..............................................................................................35 a 40

3.5. Personnel Management..............................................................................................41 a 48

3.6. Client and Supplier Management.............................................................................49 a 53

3.7. Social Management......................................................................................................55 a 60

3.8. Environmental Management......................................................................................62 a 70

4. ANNEXES

IBASE Statement.................................................................................................................73 e 74

Matrix of Indicators............................................................................................................75

Social-Environmental Actions and Millennium Targets................................................78 a 81

Paranapanema at Global Compact..................................................................................82 e 83

Credits...................................................................................................................................84

Contacts................................................................................................................................84

Summary

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Air Sight of Eluma - Utinga

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1.1. Board of Directors’ Message

The year of 2008 meant to Paranapanema the concrete performance of main changes through which the company had been.

In August there was a change in the Group´s management with the election, by the Board of Directors, of Luiz Antonio Ferraz as the Chief Executive Officer. In addition there was the creation of the Financial Corporate Management, the Human Resources Corporate Management, and the reallocation of the Supply area, leading to the consolidation of changes in Paranapanema organizational structure. The changes provided a more suitable structure to the fundamental changes required for its development and capacity to face the turbulences which would mark the end of the year.

The fiscal year ended on December 31, 2008 was marked by relevant challenges, with several goals being reached along the year, representing an important benchmark for PARANAPANEMA – non operating holding, its subsidiaries, its managers and shareholders and remaining stakeholders.

As main goal reached the company completed the debt equationing process on November 13, 2008, characterizing the end of Paranapanema S.A. Financial Restructuring Agreement and Other Covenants with the “Agreement” signatories (shareholder creditors), which had already been started on December 18, 2006.

Taboca sale contributed meaningfully to increase the Company availabilities, enabling also the anticipated redemption of 50% of outstanding debentures of 2nd series of 6th issuance, generating the conversion of remaining convertible debentures into Company common shares, in compliance with the terms of 6th Issuance Deed.

Such events, altogether, made viable a meaningful change of the Company principles, reverting its equity and financial status. With such operations, Paranapanema presented net cash of R$17.7 million at the end of 2008, already deducted the total debt, showing a comfortable financial situation after the restructuring, with stockholder’s equity reaching R$1.2 billion and a capital stock of R$2.1 billion at the end of the year.

For 2009, besides the commitment to migrate from Level 1 to the New Market, the highest level of Bovespa Corporate Governance up to September 30, 2009, with the equationing of non-operation debt, Paranapanema started having a suitable capital structure and a new stage in its management was started so as to also face the global current crisis, engaging measures intended to the corporate strategic planning, organic growth and/or by means of partnerships and strategic alliances, decrease of commodity volatility and the exchange in the Company outcome and adoption of other measures so as to maximize the value for the shareholders as company and tax restructuring analysis.

It is important to stress out the participation of Companies’ employees and remaining partners in the concrete performance of such results and the certainty that only with the engagement and commitment of everybody we can assure the growth and continuity of Paranapanema and its subsidiaries.

The Management

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1.2. Paranapanema Commitment to Sustainability

The concept of sustainability is connected to the sustainable development in its productive activities where we struggle to respect and balance the economic, social, cultural and environmental aspects of the society.

It means to be a measure to configure the human activity, as such that the society, its members and economies may comply with its needs and express its highest current potential and at the same time preserve the biodiversity and natural ecosystems, planning and acting so as to assure its future maintenance. All problems affecting the environment and people’s life quality are interconnected, as well as their causes and the solutions that each person may adopt to change such situation.

Companies’ outcome, nowadays, cannot be dissociated from the increasingly common issue in management: Sustainability. Therefore, the organization wishing to add value and be successful must think, in the over time, in the reward-seeking allied to social and environmental aspects inherent to its business. Those behaving so as to respect the guidance to business sustainability will gain the trust of its partners, customers, shareholders, employees, neighbors and the society in general. The ethical behavior results in relationships more lasting and reliable.

Thus, following a business ethics code so as to perpetuate businesses, Paranapanema has been consolidating its name in the market and reaching higher levels in its relationships.

This Sustainability Report integrates the management philosophy defined for Paranapanema companies and represents our commitment with all our stakeholders with which we interact.

Within the integrated management practices adopted by Paranapanema companies, we restated the premise of enlarging continuously and systematically the social responsibility program coverage, integrating actions with the most diversified publics. With that, we reinforce the approach of a management intended for a growing internalization of the sustainability culture, based on the attention to the economic, social and environmental dimensions.

Such Sustainability Report preparation aims to render account of the Paranapanema business management performance to the stakeholders inside the sustainability features. This is the concrete performance of the challenge of turning such Sustainability Report into a management instrument, a document of dialogue with the market and all publics interacting with Paranapanema companies.

Paranapanema wants to stress out its maintenance commitment of the actions presented and the enhancing of its management model in the search of sustainability.

Modern railroads with high speed trains own an intensive copper system employing 10 tons of

copper per rail km.

Between 1950 and 1960 some countries adopted the “green revolution” which was

based in the usage of enhanced seeds, irrigation and fertilizers

to increase the agricultural productivity.

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1.3. Sustainability Report Strategy and Structure

Paranapanema produces its second Sustainability Report, also based on the Global Reporting Initiative Guidelines for the preparation of reports of such nature, adopting them partially.

Such report reflects the balance between positive and negative aspects of Paranapanema companies’ performance, enabling to create index comparability conditions over time, based on the information accuracy, layout and information presentation clearness, enabling its evaluation, besides the publication periodicity from this one.

The option for Guidelines’ partial adoption as regards materiality principles, with relevant performance indexes in relation to stakeholders and coverage of sustainability themes presented in the report.

The Global Reporting Initiative (GRI) is a long term international process, with the active participation of multiple stakeholders, whose mission is to develop and disclose the Sustainability Report Guidelines of global application.

The Guidelines are used on a volunteer basis by organizations to prepare reports about the economic, environmental and social dimensions of its activities, products and services, helping to understand its contributions for the sustainable development. They also ease the compatibility of sustainability reports, taking into account the information disclosure practical aspects, help to establish benchmarking and evaluate the sustainability performance related to conduct codes, performance standards and voluntary initiatives and serve as facilitating tool for the stakeholders’ participation.

The Guidelines organize the sustainability report concept in terms of economic, environmental and social performance (known as triple bottom line).

They establish essential principles for the preparation of balanced and comprehensive reports about the economic, environmental and social performance of an organization, which shall assure that the reports present a comprehensive view, describing its contribution to the sustainable development and enabling comparisons over time, addressing with credibility the important issues for the stakeholders. They are grouped into four categories:

1. REPORT STRUCTURE (transparency, inclusion and checkability);

2. DECISIONS ON INCLUSION (comprehensiveness, relevance and sustainability context);

3. ASSURANCE OF QUALITY AND RELIABILITY (accuracy, neutrality, comparability);

4. DECISIONS ON ACCESS (clarity and periodicity).

The TRANSPARENCY and INCLUSION principles are the starting points for a report preparation and must be present in all the process decisions.

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The SUSTAINABILITY CONTEXT, COMPREHENSIVENESS and RELEVANCE principles are essential to set forth what must be in included in the report and all information contained in the report must be relevant for the stakeholders’ decision making process.

The report’s content quality and reliability are guided by the NEUTRALITY, COMPARABILITY and ACCURACY principles. The data must be comparable over time with accurate and reliable information so that its users may use it in their decision making processes. The report must present its content in a balanced and impartial way.

The CLARITY and PERIODICITY principles define access and availability so that the stakeholders receive understandable information within periods of time which allow for its effective use.

Finally, the CHECKABILITY principle refers to the capacity of showing that the information and processes subjacent to the report preparation satisfy strict quality and reliability criteria and other similar expectations.

As of the foregoing basis, contained in the GRI document guidelines, Paranapanema prepares this Sustainability Report, aware that it has still been partially adopted.

Dialogue with Stakeholders

The whole report was prepared presenting the companies’ management model, communication channels, evaluation instruments and programs. We considered here each Paranapanema subsidiary strategies in relation to the stakeholders, and understand they are in different levels in the sustainability direction.

Paranapanema carries out its productive and commercial activities in compliance with the Shareholders, Customers, Employees, Third Parties, Suppliers, Government and Society’s needs and privileging the surrounding Communities to its factories. The dialogue with its stakeholders occurs through specific mechanisms, observing each one’s characteristics:

• Ordinary monthly meetings and, whenever required, extraordinary meetings of Paranapanema Board of Management, in which the account rendering to the shareholders is done and the definition of the businesses’ general direction;

• Meeting with customers, made by the sales, production and service area representatives, in which needs are identified and supplied and the routine to keep the information regular flow is established. Technical support periodical visits and customers’ complaint services are also carried out. Caraíba and Eluma conduct satisfaction and service surveys with their customers;

• Through the hierarchical line, supported by several internal communication instruments (intranet, information and/or awareness campaigns, notice boards, outcome presentation, periodical newsletters, event performance, meetings with the Board of Directors, etc.), the employees are informed about the strategic guidelines and the company routine procedures and mobilized to take part in the internal actions and decisions. Caraíba carries out organizational atmosphere and opinion polls about the services of several areas, trying to identify strengths to be maintained and improvement opportunities. Cibrafértil will implant the atmosphere poll in 2009;

• All Paranapanema companies engage their outsourced companies in the quality, safety and technical enhancement programs and their employees, who constantly work in the industrial area, take part in the same events, training, communication and awareness campaigns intended for their own employees;

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• The companies meet with suppliers and audits to provide constant information exchange and create improvement opportunities for the relationships among companies. We stress out the visits to critical suppliers, as well as the service of customers visiting the companies;

• The practice of frank, open and frequent dialogue marks the relationships with the workers’ union in terms of specific agreements which affect the companies’ employees. The collective negotiations are usually carried out through employers’ union intermediation;

• The relationships with society usually occur through participation in associations, foundations, universities, councils, the industry representative bodies and in several civil organizations, in which information and expectations are obtained as regards Paranapanema role in the society and information is provided about its actions which may interest the collectivity.

• As regards the surrounding communities, there are covenants with neighboring City Administrations and community representatives, for local development supporting works, based on the expectation and need surveys, turned into community action programs.

• It serves all the educational community levels by receiving visits from educational entities and other companies, stating about its operation form and opening the company to these visitors;

• Reinforcement of the relationship with family members through the employees and also performance of events involving the participation of relatives in parties (Christmas), campaigns, competition, gift distribution and visits to the factories.

• Paranapanema keeps an open channel with the market serving all stakeholders via site of relationship with investors (www.paranapanema.com.br/ri), by means of “Fale com o RI” [Contact RI]; in addition carrying out periodic meetings with shareholders and investors, including visits to the plants and by means of collective presentations to the capital market in the format of APIMEC meetings – Capital Market and Investment Professionals’ Association;

• Telephone services such as Customer Service or via web such as “Fale Conosco” [Contact us] or “Trabalhe Conosco“ [Careers] are offered to the public at the institutional site www.paranapanema.com.br.

Archeologists found a water conduction system in the pyramids of Egypt. The channels were made

of copper and were in perfect usage conditions even after 5,000 years.

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2.1. Paranapanema

Paranapanema S.A. is one of the largest international class conglomerate in the non ferrous field. Currently, Paranapanema operates with the Copper Division (Caraíba and Eluma) and the Fertilizer Division (Cibrafértil). Its products’ utilization such as electrolytic copper, rod, copper drawn and semi-elaborate wires and its alloys, besides fertilizer is found everywhere: telecommunications, computers, cars, civil construction, agriculture, rockets, among others.

Paranapanema has already performed in the heavy civil construction market, when it started its activities in 1961, having started a diversification process by operating in the mining sector from 1965. Such activity got stronger with the discovery of a tin mine in 1971, resulting in Taboca start-up and the tin steel plant through Mamoré. With the confirmation of cassiterite reservoirs in Pitinga Mine, in Amazonas, in 1982, it starts operating more intensely in the mining field.

In 1994, Paranapanema started up Cibrafértil, in Bahia, starting to operate in the fertilizer segment from February 1995.

In February 1996, Paranapanema acquired the shape we know today, concentrating its activities and investments in the non-ferrous metals segment and ending its civil construction activities, being formed by Caraíba Metais, Cibrafértil, Eluma, Mamoré and Paraibuna de Metais.

With such configuration, Paranapanema was created with the conception to become a conglomerate intended to non-ferrous metal production, of which Brazil was in the need. Upon its constitution, controlled by a pool of funds pension led by Caixa de Previdência dos Colaboradores do Banco do Brasil – PREVI [Employees Social Security Savings of Banco do Brasil], the Management focused the businesses on the copper, tin and zinc areas, restricting the number of companies then existing (73). The zinc-related activities (explored by Paraibuna de Metais) and tin (Mineração Taboca and Mamoré Mineração e Metalurgia) do not belong to Paranapanema any longer, since the former was fully disposed of in 2002 and the latter sold in November 2008.

Its current share composition is as follows:

SHAREHOLDER

%

TOTAL

CAIXA PREV. DOS COLABORADORES DO BANCO DO BRASIL – PREVI 24.37

BNDES PART. SA BNDESPAR 17.52

FUND. PETROBRAS SEGURIDADE SOCIAL – PETROS 12.01

FUND. SISTEL DE SEGURIDADE SOCIAL – SISTEL 5.68

OTHER 40.42

TOTAL 100.00

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With the operating restructuring, Paranapanema took the role of being the holding company only without any operating activities, concentrating all operations in its Subsidiaries. The headquarters are in Eluma, Utinga unit, in Santo André, in the State of São Paulo.

Paranapanema is organized as follows:

Paranapanema is basically divided into three operating divisions per performance segment: Cibrafértil (fertilizers), Caraíba (copper and byproducts) and Eluma (copper laminate, bars, wires, pipes and connections, and its alloys), with the meaningful presence in its respective markets and full utilization of its productive capacities, with updated industrial parks, using state-of--art technology and with more revenue aggregation with higher value product sales and migration into markets providing higher margins.

It has the largest refined copper producer in Brazil and is sales leader, with participation of 36% in terms of sales volume in the domestic market.

It also owns the one of the largest semi-elaborate copper producer in Brazil (copper laminate, bars, wires, tubes and fittings and copper alloys), with participation of 34% in sales volume in the domestic market.

In 2008 our gross revenue exceeded R$ 4.2 billion and exports equivalent to R$ 2.0 billion. The net income was of R$ 3.4 billion.

Paranapanema operates 5 industrial plants, being 1 Caraíba Metais plant (Bahia), 3 Eluma plants (2 in São Paulo and 1 in Espírito Santo), 1 Cibrafértil plant (Bahia).

Found in 1949, the phosphate mine in the coast of Pernambuco is one of the largest sedimentary

phosphate deposits of South America.

The largest hydro power plant of the world, Três Gargantas, in China, owns two generators manufactured in Brazil containing about 25 tons of

copper each.

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2.2. SubsidiariesParanapanema performance takes place through its subsidiaries located in different parts of Brazil

COPPER DIVISION

Caraíba Metais

Caraíba Metais is a copper metallurgy located in Dias d’Ávila, in the Camaçari Petrochemical Pole, Salvador metropolitan region, in the State of Bahia. Started in 1979, integrated with Mineração Caraíba [Caraíba Mining], being nowadays distinct companies.

The copper is produced from concentrate which comes mainly from Chile and is unloaded at Aratú Port, 30 km from the factory, and is traded in the internal market and in different countries, mainly North America and Europe.

The copper concentrate arriving at Caraíba goes through the casting processes, conversion and electrolytic refinement for the copper cathode production, already with 99.99% of purity, one of its products.

At the metallurgic plant the concentrate mixture goes to the flash furnace, where in contact with hot air, fired with oxygen, becomes liquid, with elimination of impurities through slag and gases rich in sulphur, generating the matte, containing 64% of copper. The matte is conveyed in pans into the converser ovens, where iron and almost all sulphur is eliminated. Then matte is transformed into blister, with 98.5% of copper.

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The blister is taken to fire refinery ovens, where the remaining sulphur is removed and the copper purity content reaches 99.6%. The result is the anodic copper, taken to the molding wheel, last casting stage, generating anode plates. As such plates still contain precious metals, such as gold, silver, platinoid and other less noble, such as lead, nickel, tellurium and selenium, they are sent to the electrolytic refinery process and, after 10 days, the purity degree reaches 99.99%.

After such process, anodic mud is left at the electrolysis basin bottom, which is filtered, packed and sent abroad for precious metal recovery, mainly gold and silver. The cathode obtained is the final product for sale or transformation into another even more elaborate product, the 8 mm copper rod. Part of such rod production is transformed into drawn wire with diameters between 1.45mm and 2.58mm.

The Slag is granulated and largely used in the sandblasting of metallic surfaces and cement pouring plants. The gases are chilled to obtain sulphuric acid and oleum, products which Caraíba supplies to chemical, petrochemical and fertilizer industries by pipelines or trucks. Over 500 thousand tons of sulphuric acid and 40 thousand tons of oleum are produced annually.

Caraíba has production capacity of 225 thousand tons annually of electrolytic copper and may transform 223 thousand tons into rod or wire. Up to 2012 its productive capacity will increase to around 277 thousand tons per year, through investment in its expansion and operating improvements.

Around 50% of the production is traded in the internal market. The other half is exported to countries in all continents, mainly North America, Europe and Mercosul.

All Caraíba production is controlled and constantly enhanced in modern chemical and physical analysis laboratories, which support the continuous development of metallurgic processes, in the incessant search for productivity improvement. Such laboratories ensure a cleaner production aligned with the environmental management, quality of raw material, supplies and products deriving from the industrial process.

It is the only refined copper integrated producer and sales leader in Brazil in form of cathode, rod and copper wires, responsible for 36% of domestic sales volume of electrolytic copper. Caraíba represented 70% of Paranapanema revenue in 2008, being responsible for 99% of the national production of refined copper.

The copper plays a fundamental role in our health upon the

development of brain and proper work of heart and liver.

Our body absorbs something between 25 to 60% of the

copper we ingest and the surplus is expelled through the bile in

urine and transpiration.

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Eluma

ELUMA is one of the largest copper semi-elaborate and its alloys Brazilian producers. It is distributed into three industrial units: Utinga and Capuava, in Santo André/SP, and Serra, metropolitan region of Vitória/ES, totaling over 500 thousand square meters of area to produce and trade extruded products (pipes, bars, profiles and wires), laminated (reels, plates and strips) and copper and bronze connections; its products serve mainly refrigeration, civil construction, electrical-electronic, vehicle, mechanical-metallurgy and clothing markets.

Founded in 1943, it is the oldest Paranapanema company. Always concerned about quality, ELUMA holds ISO 9001:2000 certification for its quality management system for all its units. Its products are distributed for all national territory and exported to over 20 countries worldwide, mainly the United States, Italy, Israel, Spain, Turkey, Southeastern Asia, Argentina, Uruguay, Venezuela, Paraguay and others.

Utinga, in Santo André, produces laminates, wires, bars and copper profiles and its alloys. Parts and components for automotive, electrical-electronic, clothing, iron fixtures, rest room fixtures, stamping, machining and others industries are produced from those.

Capuava, also in Santo André, produces copper pipes, used in home and industrial air-conditioning, compressors, components and dozens of other refrigeration systems. Copper pipes for civil construction are also produced, being applied to gas installations (GN and GLP), fire fighting (Hydrants and Sprinklers), industrial installations, solar plate manufacture and mainly hot water installations. Such unit, besides ISO-9001, owns NSF-61 product certification (certified by NSF International), required for trade in the United States and Canada. Such certification ensures that the copper pipes do not contain health-damaging elements and mainly are lead-free.

Serra, in Espírito Santo, produces copper and bronze connections for hot or cold water, industrial and home gas, and fire fighting systems. Such connections are the most used worldwide for being user-friendly and present extraordinary strength and durability, ensuring thus long shelf life.

Serra, besides ISO-9001, owns NSF-61 product certification (certified by NSF International) for copper connections, required for trade in the United States and Canada. Such certification ensures that the copper connections do not contain health-damaging elements and mainly are lead-free.

Its production cycle starts with casting, where the ovens receive mixtures suitable to each kind of product, being the copper the main raw material, combined with other metals, such as zinc or tin. From casting, at 1,250 degrees Celsius, a liquid and homogeneous metal is obtained which passes through a deoxidization process, being transformed into billets and plates, specific formats for pipe, rods and laminate production.

During pipe production, the billets are cut and then submitted to hot extrusion process, generating seamless pipes. Then it is taken to wire drawing, where its diameter and thickness is decreased, and length increased. If required, the pipe is recooked to recover the material plasticity and keep the mechanical properties ideal for the product purpose. Finally, the pipes may be rolled in coils or cut in bars and then it is ready for the final user.

Unidade Eluma em Capuava, Santo André-SP

Unidade Eluma em Vitória -ES

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Bar manufacturing suffers extrusion and wire drawing, generating a massive product which will be transformed into several profiles, round, hexagonal and square rods. Such process may also generate wires of varied sizes and shapes. During lamination, the cast plate passes between steel cylinders, reducing its original thickness. Such principle is applied to the whole lamination line, and the material reaches varied thicknesses, as required by the market. To ease such process, the material is recooked, restoring its mechanical properties.

The connections may be produced by casting or stamping. If casted, the bronze gross pieces are later machined for final finish. If stamped, the pipe segments are mechanically cold conformed until reaching the desired shape. All connections produced by Eluma are composed of only one metal piece, without soldering or discontinuity in its structure.

During all stages, samples are collected for physical and chemical tests in laboratories so as to fully ensure the product quality to be delivered and during all such processes, Eluma recycles 100% of metallic residues derived from production which are returned to Casting, starting productive cycle again.

It is the second largest Brazilian copper semi-elaborate producer holding 34% of market share in copper semi-elaborate sales volume. Eluma represented 22% of Paranapanema total revenue in 2008.

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FERTILIZER DIVISION

Cibrafértil

Created in 1994, it is located 50 km from Salvador, in the Camaçari Industrial Pole. Cibrafértil produces and trades agricultural mineral fertilizer, contributing for producers’ success in Brazil, but mainly in the Northeast and Center-West, helping them to increase productivity.

It produces simple superphosphate with micronutrients and NPK’s, which contain nitrogen, phosphorus and potassium incorporated into the granules, ensuring high quality, cost reduction and productivity increase in the field. The Granulate Simple Superphosphate, Bran Simple Superphosphate, with Ammonia and NPK in the grain turns Cibrafértil into one of the few Brazilian companies to sell exclusive for Mixers. Such products, essential to Brazilian soil, contribute to soil nutrient addition, and are raw material for other fertilizers used in several crops. Its production starts far from Brazilian fields.

The phosphatic rock acquired in the international market is received at Aratú Port, next to Salvador, and later sent for storage at Cibrafértil. For Superphosphate production, the phosphatic rock is ground and classified and its feeding is controlled by a continuous dosing scale, before reacting with sulphuric acid.

The sulphuric acid received from Caraíba is diluted into water and fed in the reactor on a continuous basis, through dosing pumps. In the reactor, the raw materials are mixed by shaking, causing a reaction and generating a pulp which flows continuously by the reactor bottom outlet, falling onto a special conveyor belt called Tapete de Cura [Curing Rug], where the reaction is continued. At the end, the Superphosphate layer formed is broken by a disintegrator and the powdery product is taken to the Galpão de Cura [Curing Pavilion] where it remains for four days. Gases are generated during the reaction process, which, after being recovered in a washer system, shall be reintegrated to the process. Finally, the simple Superphosphate is ready.

For Granulate and NPKs production, the process aims to obtain a granulated fertilizer, meeting Ministry of Agriculture legal requirements, enabling the homogeneity of different kinds of fertilizer. Solid raw material supply is done in a hopper with continuous dosing scale, with dosage of the correct quantities which shall follow to the granulator, where the liquid raw material is added to which, with the addition of water and steam, promotes the granulation of mass contained inside.

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Then, the granulator pours a mass in a rotary drier, where the material is dried with hot air, generated by natural gas burn. The dried product is classified into vibratory strainers, where the rough reject passes through mills and then reaches the fine reject to return to the granulator as recycle. The material selected in the range of 2 to 4 mm is taken to a powder applier, where the oil conditioning takes place to recover the grain and eliminate the dust. The conditioned grain is then sent to storage and shipment. The final product may be shipped in bulk or bags.

Cibrafértil represented 2% of our revenue in 2008.

2.3. Market Context

The economy in 2008 showed big strength, which may be seen in the growing number of formal jobs and in an almost febrile consumption market. Between the euphoria and depression alternating in the last few months, the companies’ managers, caught by the crisis right on the time of preparing the 2009 planning, faced the market instability, first affecting the exchange rate in a volatility which left people and companies baffled.

Another uncertainty respects to the adjustment size affecting the more developed economies and its consequences for Brazil, with an environment of more scarse and expensive money, credit crunch due to interest rate increase.

One of the most affected areas of the economy by the crunch was the agribusiness, in which both banks as input suppliers and trading companies put on hold the financing to producers, very dependent on third parties’ money. When there is ones, the credit for foreign trade operations became selective and much more expensive.

With the financial crisis recrudescence from September 2008, initially in the USA, but with quick international repercussion, there was a sudden North American dollar assessment, a global consumption and metallic commodities demand drop.

The highest uncertainty degree generated lack of liquidity and credit lines, contributing to the global deceleration, investment cut and inventory reduction, affecting also the Brazilian economy, particularly from the third quarter of 2008.

Besides the exchange effects on Paranapanema and operating subsidiaries’ results, other variables must be taken into regard so as to understand 2008 market context, such as the price behavior of copper and other non-ferrous metals used to compose the copper alloys, such as zinc and tin; and the metal inventories at LME – London Metal Exchange, where they are assessed daily and used as reference for both revenue as cost.

The digital subscription line (DSL) technology enabled the telephone

companies to take the existing copper lines to transmit a large amount of

data at a higher speed.

The word adubo [organic fertilizer] comes from Latim ad úbero which means abundant, adjective which perfectly fits to fertilizer when to the matter is

planting.

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2.4. Acknowledgments and Highlights

ACKNOWLEDGMENTS

Paranapanema was included into the 200 largest Grandes Grupos (Big Groups) of Valor Econômico newspaper, occupying 73rd position in 2007.

The Holding was granted with Quem é Quem [Who is Whom] award in Grande ABC for the 2nd position in the sector of Services.

Caraíba was winner of Prêmio Parcerias [Partnership Award] with the work or social responsibility of PAC (Community Support Program) developed with IPGA: TÔ DENTRO [I’M IN] program, which put 40 young people in the work market. The work was evaluated by representatives of Word Bank (IBRD), of Institute of Applied Economic Research (IPEA), United Nations Development Programme (UNDP), Canadian International Development Agency (CIDA), besides representatives of the C&A Institute, Avina Foundation, Arcor Brasil Institute, among others.

The Acid Water Reutilization Project for the production of Acid 45% was granted the FIEB Award of Environmental Performance in the category Cleaner Production, promoted by the Industry Federation’s State of Bahia.

Such case also rendered to Caraíba the National Confederation of Industry – CNI award in the category Sustainable Development, which highlights and acknowledges initiatives in the Environment area.

Caraíba was granted, also, 2 awards in the TOP SOCIAL promoted by the Sales and Marketing Officers’ Association – Bahia, Bahia Commercial Association and Advertisement Bahia Association, the most important social responsibility award in the North and Northeast with the cases Caraíba SOLIDÁRIA [SOLIDARY Caraíba] (volunteer program) and the TÔ DENTRO project (social insertion of young people into the community).

Eluma was granted the Master Award of the National Association of Construction Material Traders – ANAMACO in the segment Copper Tubes and Connections with the 1st position in two categories: Spraying and Big Customers.

In May, Eluma was granted for the 15th time in a row the “Ruy Ohtake Trophy” in the Ranking of Concept and Image in the category of “Copper Tubes and Connections”. Eluma appears as winner in all issues carried out.

HIGHLIGHTS

Paranapanema holding

Preparation and distribution to several publics of the first Paranapanema Sustainability Report of 2007, in Portuguese and English languages.

Paranapanema companies celebrated 1 year of SAP implantation in its business process. Internal research showed 85% of importance perception for the business area and satisfaction of 75% of users with the user of tool in the business area.

In July, Paranapanema changed the health care service provider to BB Saúde (Sul América), a Banco do Brasil company, without prejudice of the employees’ service.

In August Luiz Antonio de Souza Queiroz Ferraz Júnior takes over Paranapanema presidency, elected by the Board of Management, to replace Geraldo Ribeiro do Valle Haenel, who left the Company.

Paranapanema completed the non-operating debt equationing process, started in December 2006, with the reduction of debt of R$1,350 million to only R$52 million.

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Paranapanema also disposed of the assets with the sale of 100% of its shares of Mineração Taboca to Serra da Madeira Participações Ltda., a company indirectly controlled by Minsur S.A. Peruvian mining company, in November 2008, finishing the last stage of the financial restructuring process.

Gross revenue of R$4.3 billion and volume of 479 thousand tons in the 12 months/08 with positive operating performance and profitability increase due to margin improvement;

EBITDA of R$611.1million and margin of 17.6% on net revenue;

Net profit of R$133.0 million in the 12 months/08, reverting the loss of R$109.0 million in the 12 months/07, with net margin of 3.8% on net revenue;

Stockholder’s Equity reached R$1.2 billion on Dec 31, 2008, compared to the negative stockholder’s equity (unsecured liabilities) of R$56.1 million on Dec 31, 2007 due to fiscal year capital and result increase;

Capital Stock increases to R$2.1 billion on Dec 31, 2008 (composed of 313.8 million of shares) in relation to R$967.9 million (72 million of shares) on Dec 31, 2007, due to operations connected to the financial restructuring;

Nov 13, 2008: completed the Paranapanema financial restructuring equationing, started on Dec 18, 2006, by the following operations:

- Private capital increase homologated in RCA of Aug 20, 2008, in the amount of R$514.2 million for conversion of debt confession with shareholder creditors in common shares and cash payment for minoritary subscription;

- Public distribution of 1,839 (400 of the 1st series in 30 months and 1,439 of the 2nd series in 11 years) debentures convertible into common shares, with issuance of the 6th Paranapanema issuance in the amount of R$919.5 million, with closure notice of Aug 20, 2008;

- Financial liquidation of assets disposal of in the tin mining and metallurgy area, with the sale of Mineração Taboca and the subsidiary Mamoré to the Peruvian group Minsur, in the net amount of R$400 million;

Use of Taboca sale funds: (i) increase of availabilities; and (ii) advance redemption of 50% of the 926 remaining debentures of the 2nd series of the 6th issuance, generating consequent mandatory conversion of debentures convertible into the Company common shares, as per 6th Issuance Deed;

Aug 22, 26 and 28, 2008 and Nov 13, 2008: four conversions of debentures into common shares by the shareholder creditors of the Financial Restructuring Agreement and by minoritary shareholders, equivalent to around 50% of the amount issued, whose corresponding capital increases were homologated in RCA of Sep 10, 2008 and Dec 11, 2008;

Dec 31, 2008: liquidated 100% of the debentures convertible of 1st and 2nd series of Paranapanema 6th issuance whose distribution end was on Aug 20, 2008;

Total consolidated debt was reduced from R$2.0 billion on Dec 31, 2007 to R$667.6 million on Dec 31, 2008, being that 66% of the total debt in 2007 was Paranapanema non-operating debt with its shareholder creditors in the short term (up to 360 days), which was paid off in 2008, remaining only one non-operating debt of R$51.8 million already equationed with the creditors;

Comfortable financial situation and proper capital structure after the restructuring, going from net debt of R$1.2 billion on Dec 31, 2007 to net cash of R$17.7 million on Dec 31, 2008, improving Paranapanema equity and financial status and its foundations; and

Corporate Governance: after the capital increase, the Company starting having scattered control, with the commitment to migrate from Bovespa Level 1 to the New Market up to September 2009; and has already adopted the Proxy Statement since April 2008.

22

Caraíba

The operation and maintenance outsourcing of the Oxygen Unit for White Martins was performed, minimizing the production interruption risk.

New facilities for Banco do Brasil and Bradesco branches were prepared, providing more comfort in the service to employees and other users.

So as to implant the ISO 14000 and SA 800, an introduction training was performed which covered all employees.

The Policy, Position, Compensation and Career Plan implantation was performed, as per Hay Group model, for all employees.

The employees’ representatives were elected as per Rule SA 8000.

The following annual production records were registered: Wire drawn (16,743 t), Anodes (290,985 t) and Cathodes (225,441 t).

Eluma

RoHS Certification (Restriction of Hazard Substances) done in 3 months in Capuava unit.

Recertification with ISO 9001:2000 in Capuava, Vitória and Utinga.

NSF International certification of plant in Capuava in Santo André for tubes conveying water for human consumption in USA and Canada.

Certification of Utinga plant in Santo André by Electronuclear as per rule CNEN-NN - 1.16 for supply of copper laminate for Angra Nuclear Plants.

The Environmental diagnosis was performed in the Utinga, Capuava and Serra units so as to get certification ISO-14000.

Construction of ETE – Sanitary Sewer Treatment Plant to treat 750 thousand liters of effluent water per month.

Honor to employee José Torres de Azeredo, which celebrated 30 years of service in Capuava unit, without any labor accident.

ELUMA took part in the Construir Minas [To Build Mines] fair carried out from 18 to 21 of June in Contagem – MG, with a 50m2 stand, where it provided welding trainings for over 600 Tambasa salesmen (one of the largest wholesalers of MG), besides clarifying technical and commercial doubts. During the fair, almost 2,000 civil construction professionals of the state of MG passed by and were accredited with the ELUMA stand.

From 8 to 12 April, it took part in the 16th FEICON BATIMAT (Construction Industry International Fair), deemed the largest Latin America fair in business generation and public visitation, with participation of 680 exhibitors, in 80 thousand m2 of show room in Anhembi, and the total presence of people exceeding 170 thousand people in the five days of event. Over 4,000 people were accredited with ELUMA stand, among customers and people interested in construction or repair, also standing out engineers, architects, installers and shopkeepers.

Cibrafértil

It had a daily production record on Aug 17, 2008 in the Granulation Unit reaching 1,104 tons. In the Acidulation and Granulation Units, it reached the following monthly records respectively, 25,099 tons in August 2008 and 25,008 tons in August 2008.

23

24

3.1. Organizational Culture and Ideology

PARANAPANEMA business philosophy, as non-operating holding, is to provide its subsidiaries with corporate support and strategic vision, with a business orientation by means of the following segments: Copper Division and Fertilizer Division.

This enables the subsidiaries to have high knowledge of its performance market, its suppliers and customers, respecting the respective peculiarities of each Business Unit, including for the formulation of Vision, Mission and Values.

As corporate vision, however, everybody pursues the common goal of maximizing the value for the shareholder, without prejudice of the systemic vision of the sustainable development search for Paranapanema.

ETHICS AND CONDUCT CODESustainability is present in Paranapanema in several aspects of the subsidiaries management and is based on a set of values which reflect such posture.

PARANAPANEMA understands that the ethics in the company must reflect “the welfare promotion and defense”, effectively making part of the peoples’ attitudes and behaviors until it becomes part of the personal and collective beliefs.

The fundamental principles and values for business ethics are: respect to human rights, social-environmental responsible performance, support to children’s labor and forced labor eradication, preventive approach to environmental and labor safety issues and the corruption combat, respect to diversity and reduction of social inequalities. These values, on which we mirror and take the commitment to support individually and collectively, reflect our adhesion to the ethical conventions of global reach.

The posture and relationship ways, gathered in the Ethics and Conduct Code, describe the behaviors and attitudes which must be observed by all the employees in the relationships with the remaining colleagues, suppliers and customers and with their respective companies. Paranapanema Ethics and Conduct Code covers the following subjects:

Prejudices and Pressures respect to personal differences and discrimination combat

Truth as Commitment frank and sincere dialogue practice in every level

Criticisms, Suggestions and Reports

open and freedom atmosphere

Evaluation constant and informed to the evaluated person

Tolerance to Mistakes acceptance of mistake and cause search

Appraisals and Warnings appraisal in public and always constructive and private warning

Privacy personal information shall only be disclosed upon the employees’ authorization

Confidentiality use of business information available to work

Conflict of Interests parallel service rendering and the respect to machinery, equipment, materials and resources

Computer Resources responsibility in the access and use

Effluent elimination as everybody’s social duty

Relationship with Third Parties

internal and external personal treatment, responsibility upon the use of Paranapanema/subsidiary names and free gifts reception

Social Responsibility concern with a socially responsible performance and encouragement to employees’ volunteer work

Work Environment constant environment quality improvement

Labor Relationships relationships with unions and union action treatment

External Relationships relationships with the Community, Shareholders, Competitors, and Governmental Organizations, exploring attitudes and communication channels

25

CARAÍBA IDEOLOGY

Vision

To be a worldwide reference company recognized by its cost competitiveness and product and service excellence.

MissionOperate in the copper market with the quality of its products and services, profitably, ethically, with social and environmental responsibility, exceeding the employees, shareholders, customers and suppliers’ expectations.

BeliefWe believe in:

• the work relationship based on mutual trust and respect and in a leadership open to responsible questioning;

• everybody’s dedication to face and overcome challenges;

• the adjustment capacity to overcome adversities;

• the motivation to conquer and keep customers anywhere in the world;

• the will to learn to reach the business excellence;

• the growing capacity practicing the sustainable development;

• the ethical awareness as the basis of human relationships established in the businesses.

Management Philosophy- Focus on the customer satisfaction and loyalty;

• Focus on the costs, results and business profit maximization;

• Commitment with Quality, Health, Safety and Environment;

• Continuous improvement of the routines, methods, processes and technological development, according to the best market practices;

• Practice of truth, transparency, honesty, justice and integrity;

• Incentive to creativity, innovation and permanent participation of all its employees;

• Encouragement to knowledge and idea exchange, people growth, self-development and professional realization;

• Development of standing partnerships with suppliers;

• Continuous search for sustained growth.

Management PolicyCaraíba has as decisive factor to grow and establish:

• The capacity from its employees to ensure its operations’ routine;

• Its routines’ improvements;

• Solution of problems and reduction or elimination of threats;

• Advantage of opportunities;

• The existence and overcoming of challenges.

For such, the proper atmosphere is that where there is:

• Value addition to individual and collective ability;

• Respect, incentive and satisfaction of its employees;

• Acknowledgment and motivating conditions.

26

In order to make it happen in every hierarchical level, it is necessary:• the leadership and employees performance follow-up and permanent search for value and ability development; • continuous growth of mutual trust and transparency; • increasing delegation of responsibility;• continuous investment in training and education;• encouragement to creativity;• enhancement of the functions and the professional growth.

Quality PolicyMelhorar continuamente seus processos, disponibilizando produtos e serviços, de modo a superar as necessidades dos clientes, criar valor para os acionistas, promover a realização dos colaboradores e desenvolver parcerias com fornecedores essenciais.

Continuously improve its processes, making available products and services so as to exceed the customers’ needs, add value to the shareholders, promote the employees’ performance and develop partnerships with essential suppliers.

Safety, Environmental and Occupational Health Policy (SMS)• To keep updated its copper production and trade processes, its derivatives and byproducts, aiming the continuous improvement of its performance in Safety, Environment and Health.

• Operate preventively as regards the risks to safety and health, in the use of natural resources and in the negative environmental aspects and impacts, inside and outside its industrial units.

• To meet the Safety, Environmental and Healthy Legislations in force and the regulations pertaining to its activities, products and services.

• To implement, keep and improve the Safety, Environment and Health Management System, taking due regard to the stakeholders’ requirements, with defined means for the education and communication of its behavior to the public in general.

• To systematically search for the prevention and elimination of Safety, Environmental and Healthy liabilities resulting from its activities, products and services.

• To implement a suppliers’ and contracted parties’ encouragement system so that they adopt practices compatible with the Company Safety, Environmental and Health Policy.

Competitive AdvantageThe Caraíba Metais competitive advantage is the rendering of differentiated services.

ELUMA IDEOLOGY

Vision

To be leader in Brazil with solid penetration in the international market with products and solutions for applications in copper and its alloys.

MissionProvide our customers with innovating solutions meeting our shareholders, employees and society’s expectations.

Values• Client, our reason to exist.• Creativity & Innovation.• Ethics.• Result orientated.• Quality & Excellence.• Respect to human being, society and environment.

27

Quality PolicyAs regards Quality, we are committed to be an international standard competing company, searching for the continuous improvement of our Quality Management system effectiveness, complying with our customers’ expectations, within the highest team and ethical spirit.

Environment PolicyEluma aims the constant search for environmental preservation for an effective management of its resources, processes and products.

By principle and through the continuous improvement of the environmental management system, the company undertakes to:

• Promote in all company areas the individual responsibility sense in the employment of such policy, stressing out the commitment and importance in relation with the preservation of natural resources and the environment;

• Comply with the applicable legislation and environmental rules, guided by ethical and integrity principles;

• Update and improve continuously the processes and products so as to reduce and prevent environmental impacts and the pollution, using techniques which attach quality and productivity gains with the use of renewable natural resources;

• Constantly evaluate the environmental performance through indicators;

• Engage its suppliers and service provides in the environmental control excellence search process, showing transparency of actions.

BusinessTurn Copper into solutions.

CIBRAFÉRTIL IDEOLOGY

Vision

To be acknowledged as an excellence company in the agribusiness segment.

MissionProvide the agricultural market with quality mineral fertilizer, focused on the customers’ needs, respecting the legal requirements, promoting continuous improvement of production processes and fertilizer trade, establishing partnerships with suppliers and customers, meeting thus the shareholders, employees and community’s expectations.

Values• Safety• Environment• Quality• Productivity• Commitment• Creativity• Respect• Ethics• Social Responsibility

28

BusinessProduction and trade of mineral fertilizer used in agriculture.

Quality PolicySupply the market with mineral fertilizer, focusing on the customers’ needs, respecting the legal requirements, promoting the continuous improvement of its fertilizer production and trade processes, establishing partnerships with its suppliers, and also complying with the shareholders, employees and community’s expectations.

Safety, Environment and Occupational Health Policy (SMS)• To give high importance to Safety, Health and Environment, even if in detriment of its own production;

• To promote the continuous improvement of our processes and products so as to comply with the environmental legislation in force and other requirements subscribed by the organization related to Safety, Health and Environment;

• To implement operating procedures for the environment preservation, eliminating the effluents generation and minimizing the risks against Health and Process Safety;

• Search for the practice of preventive actions against the environment aspects and impacts resulting from its activities, products and services, promoting the education and encouragements of employees, suppliers and customers.

3.2. The Sustainability Management Model

The strategic thinking exercise is the main process to anticipate Paranapanema direction and positioning in the market, allowing the subsidiaries to react, in a faster and planned way, to the changes predicted in key factors of success, through the identification of internal and external critical environmental variables, which influence our business scenario, being fundamental management element for a sustainable development.

With the equationing of non-operation debt, Paranapanema started having a suitable capital structure and a new stage in its management was started so as to also face the global current crisis, engaging the following measures: (i) corporate strategic planning under completion stage; (ii) focus on the organic growth and/or by means of partnerships and strategic alliances, which search for profitability increase, adding more value to its products, increasing its margins and the competitiveness, with scale gains and cost economy; (iii) decrease of commodities volatility and the exchange in the Company outcome through adoption of a corporate hedge policy, with the hiring, from January 2009, of a risk financial manager; (iv) adoption of other measures so as to maximize the value for the shareholders, such as company and tax restructuring analysis; and (v) extension of the Company Corporate Governance level.

There is a Committee structure in the organization, created to discuss specific subjects and support the decision making process.

29

CR Risk Definitions for the corporate risk policy

CT Tax Definitions for tax policy and analysis and follow-up of court demands

CO Budget Budget premise and preparation follow-up based on the strategic planning

CF Financial Financial management follow-up and policy definition

CRH Human Resources Corporate definitions in the HR area for all Companies

TI Information Technology Corporate definitions in the IT area for all Companies

Hold

ing

GTC Communication Work Group

Corporate definitions of Communication actions in all Companies

CDN Business Business Evaluation: budge control, tax planning, tax, production and commercial planning.

Car

aíba

CDG Management Strategic Planning and Projects

Dir

ecti

ve

Elu

ma

R.R. Business results Business Evaluation, results, budget control, production and sales

Tutors Strategic Management Strategic Planning

ASGO Critical analysis of the Quality Management System

Performance evaluation of the quality management system and target definition

Elu

ma

RUN Business Unit Performance Analysis of BU results and performance indicators, analysis of deviations and actions over realized and assessed.

Man

age

me

nt

Cib

rafe

rtil

G.N. Business Management Business analysis, engaging the Board of Directors and area Managers. Passage of strategic information for cascade forward to the areas.

CPRO Production Operation, Maintenance and Industrial Supplies

CPES Staff HR issues (Personnel, Communication and Services)

CQTP Quality, Technology and Processes

Management Practices; Business Improvement; Technology and Processes

CSMA / CTGA

Safety, Health and Environment

Safety, Environment and Occupation Health

Car

aíba

CORM Budget Analysis of deviations between realized and assessed

RQA Area Quality Analysis of Quality Management System, Custormers’ Complaints, Continuous Improvement Indicators.

RE Inventories Analysis of Raw Material Supplies, Inventories, Production and Sales.

Elu

ma

RMA Environment Environmental Management System Development and Evaluation

CTGA Environmental Assurance Environment-related issues

Te

ch

nic

al

Cib

raf.

SEG Safety Health and Safety issues

30

The sustainability management, made available in all subsidiaries, follows such market information and business transparency model, reinforced by its adhesion to BOVESPA Corporate Governance, responsible management of environmental variables inherent to their productive processes, focus on staff safety and life quality, management of each subsidiary influence in the surrounding communities. Thus, Paranapanema seeks to internalize a culture intended to sustainability and integrates it to its management practices.

COMMUNICATION

Communication structures support the spread of decision, guidance, guidelines, organization values and everything inherent to each Company and the Paranapanema, as regards their audience.

One portion of the formal communication occurs through cascade system from the Board of Directors, Management and Heads to the employees, in the up-down style, mainly translated into committee, technical and work group meetings, outcome follow-up or simply information forward.

Another important part is the use of different broadcast media spread all over the Companies which serve people internally and externally. Such media is usually used in combination with multimedia strategy, to reach its public more effectively.

Among the most used vehicles in the Companies and Paranapanema, we outline:

Type Public

President Outcome Presentation I

Endomarketing campaigns I

Board of Directors’ base meetings I

Advertisement events I

Stay connected I

Paranapanema Newsletter I/E

Intranet I

Outdoors, indoors and busdoors I/E

Organizational atmosphere survey I

Survey with customers E

Press publication of company acts and balances I / E

I/E

Notice boards I

Management and Balance Report E

Sustainability Reports I/E

RI Meetings / Presentations with analysts / investors E

Environment and Accident Prevention Weeks I

Communication systems (fax, telephone, e-mail, mail) I/E

Sites (General and Investor Relationship) I/E

Institutional Videos I/E

Subtitle: I = reaches internal public E = reaches external public I/E = both publics

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3.3. Corporate Governance

O Paranapanema Corporate Governance model is based on principles of equitable participation, fair legal structure applied to everyone, transparency in decisions and their inspection, responsibility in relation to society, decisions orientated to consensus between involved parties and with long term perspective for a sustainable development, equality of everyone before the company goals and guarantee that everyone will be heard, production of results to meet the corporate interests and also those of remaining stakeholders and opening to evaluate and inspect its acts by the public in general.

A good example can be found in the Ethics Code, reviewed in 2007, which defines the relationships with shareholders, with and between employees, with the society, communities surrounding its facilities, competitors, governmental bodies, defining boundaries, postures conducts to be adopted

Paranapanema adhered in Dec/2007, to Bovespa Corporate Governance Level 1, which means a commitment to widen the information level to the market and was another important stage of administrative, operating, corporate and financial reorganization project, started in 2004, aiming to reduce the debt and increase the productive capacity, trying to widen even more the Company competitiveness in the market with the commitment to migrate to a New Market – highest level of Corporate Governance of Brazilian Capital Market up to September 2009.

The Company already complies with Bovespa regulation for the New Market registration, such as: (i) outstanding shares in the market are responsible for almost 75% of capital stock, when the minimum required is 25%; (ii) the common shares ensure Tag Along, that is, in case of disposal of control, the minoritary shareholders receive the same amount from the controllers, or main partners; (iii) we have

32

already disclosed the cash flow and added value; (iv) we are already preparing the financial statements in the international accountability models – IFRS – International Financial Report Standard; lacking only (v) adhesion to the Arbitration Chamber upon the agreement execution; and (vi) turn the capital into 100% of common shares, being today of 99.7%, remaining still 0.3% of outstanding preferred shares, which may have a compulsory migration to common shares entitled to vote as a way of registration preparation.

The main goal is the Company Corporate Governance level extension, bigger proactivity and construction of relationship with shareholders and stakeholders, mainly because that after the capital increases deriving from the financial restructuring, Paranapanema started having scattered control and no shareholder individually has over 24% of the capital besides the absence of shareholders’ covenant.

BOARD MANAGEMENT

O Paranapanema Board of Management establishes general strategic policies, besides defining general commercial policies, electing directors and inspecting their management.

It is composed by 7 effective members and 7 substitutes. The President and Vice-President election is made by majority of votes of present members in the first meeting after the elected members’ inducement.

They meet preferably once a month or whenever required, as president call, but not less than once in each year, to state about the management report and Board of Directors accounts.

According to Corporation Law, each member must have at least one share, may reside in Brazil or abroad and must be elected by shareholders in a general meeting, and they are prohibited to vote in any meeting, or act in any operation or business in which they have conflict of interests with the Paranapanema.

The term of office of our Board of Management’s members is of 2 years, unified, entitled to reelection. The Bylaws does not establish age for compulsory retirement of our members. The Board of Management composition is as follows:

Name Position Election Term

Joaquim Ferreira Amaro Chairman Apr 25, 2008 2 years

Juraci Masiero Vice-Chairman Apr 25, 2008 2 years

Valmir Marques Camilo Adviser Apr 25, 2008 2 years

José Afonso Alves Castanheira Adviser Apr 25, 2008 2 years

Claudio Salgueiro Garcia Munhoz Adviser Apr 25, 2008 2 years

Mauricio França Rubens Adviser Apr 30, 2009 1 year

Silvio Tini de Araújo Adviser Apr 25, 2008 2 years

Maria Aparecida Cordeiro Katsurayama Alternate Apr 25, 2008 2 years

Jorge Luiz Callitto Alternate Apr 25, 2008 2 years

Reinaldo Leme de Oliveira Alternate Apr 25, 2008 2 years

Maurício Rocha Neves Alternate Apr 25, 2008 2 years

Carlos Alberto Cardoso Moreira Alternate Apr 25, 2008 2 years

Bruno Oliva Girardi Alternate Apr 30, 2009 1 year

Antonio Rigotto Alternate Apr 25, 2008 2 years

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Name Position Election Term

Luiz Antonio de Souza Queiroz Ferraz Júnior

CEO and Chief Financial and Management Officer

Aug 13, 2008 2 years

Doris Beatriz França Wilhelm Investors Relations Officer May 7, 2008 2 years

BOARD OF DIRECTORS

The Directors are legal representatives, mainly responsible for Paranapanema administration and policy and general guideline implementation as established by the Board of Management. They are elected by the Board of Management with term of office coinciding with those of its members, and may be reelected and dismissed at any time.

Currently our Executive Board is composed by 2 members, elected in the Board of Management Meeting, with term of office of 2 years. Paranapanema’s Board of Directors is:

A brief curriculum description is provided below with highlight to our Directors’ main occupations:

Luiz Antonio de Souza Queiroz Ferraz Júnior. Director President and Financial and Management Director. Brazilian citizen, born on Jan 12, 1948, administrator, graduated from Fundação Getúlio Vargas [Getúlio Vargas Foundation]. He started his career in 1973 at Banco Bandeirantes de Investimento, from where he left in 1978 as operating manager. In 1978 he joined Cotia group starting his activities as financial manager, and from 1980 he took over the financial department and in 1983 the Financial Vice-Presidency. In 1988 he was at Italmagnésio S/A Indústria e Comércio as International Investment Director and in 1989 he joined Ferro-Ligas as Financial Director. He stayed at Silex Trading in 1994 for 6 months as Financial Director. In 1995/1996 he returned to Ferro-Ligas as Financial Director and in 1996/1998 he worked at Rheem Group as Director President. In 1988 he joined Walter Torre group, as Finance Corporate Superintendent. Since May 2005 he has been the Financial and Management Director of Paranapanema S.A. and of its subsidiaries. At the RCA of Aug 13, 2008 he was elected Director President, accumulating the position of Financial and Management Director.

Doris Beatriz França Wilhelm. Investor Relationship Director. Brazilian citizen, born on Dec 17, 1954, economist, graduated from Universidade Federal do Rio Grande do Sul [Federal University of Rio Grande do Sul] – UFRGS (1979) with Specialization in Industrial Economy (1984) at the same University and Master Degree in International Finances at Westminster University – London (1996). She also has taken several courses of development and extension in the areas of Financial Statement Conversion at USGAAP and IFRS; Digital Era Businesses (FGVPec); Web Marketing; Political Economy of Development and Politics of Global Finance (LSE - London School of Economics - London); Business Presentations, Management Focus, Socialization, Negotiation (IIC - London) and Marketplace & Negotiation at London University, among others. Her professional career was developed in the capital market in the areas of investment and relationship with investors in big-sized companies. Since October 2007 she has been the Investor Relationship Director of Paranapanema S.A., Caraíba Metais S.A and Eluma S.A. Indústria e Comércio. Previously she was the Investor Relationship Manager at Grendene S.A.(IPO); Companhia de Tecidos Norte de Minas – Coteminas; Votorantim Papel e Celulose S.A.; AMBEV / Cia. Antarctica Paulista; and Unibanco – União de Bancos Brasileiros S.A. In the areas of investment and credit analysis she worked for Banco Iochpe de Investimentos S.A.; Banco de Comércio e Indústria de São Paulo – Comind; and Banco Maisonnave de Investimentos S.A. She has been Adviser and former Chairwoman of the Executive Board of Directors of IBRI – Brazilian Investor Relationship Institute, period 2004 - 2005 and member of IBGC – Brazilian Corporate Governance Institute. Since October 2007 she has been the Investor Relationship Director of Paranapanema S/A and its subsidiaries.

The Presidency, Financial and Management Department and the Investor Relationship Department are located in the city of Santo André, in the State of São Paulo, at Rua Felipe Camarão, no. 500.

34

TAX BOARD

It’s a body independent from management and external audit, responsible for inspecting the managers’ acts and analyzing financial statements, reporting its notes to the shareholders.

Paranapanema Tax Board is permanent, composed by at least three and at most five effective members and equal number of alternates. They cannot be part of Board of Management, Board of Directors or employee chart of the Company or any subsidiary of the same, nor an officer’s spouse or relative until third degree.

Our Tax Board is formed by 5 effective members and equal number of alternates, elected at the Shareholder General Meeting, with term of office up to the General Meeting which reviews the accounts of the social year ended on December 31, 2008. The following members compose it:

In 1842, John Bennet Lawes founds in England the first superphosphate plant

of the world.

Name Position Election Term of

Office

João Bosco Oliveira dos Santos Adviser Apr 30, 2009 1 Year

Edmundo de Macedo Soares e Silva Filho Adviser Apr 30, 2009 1 Year

José Luiz Guimarães Jr. Adviser Apr 30, 2009 1 Year

Henrique Jager Adviser Apr 30, 2009 1 Year

José Ferraz Ferreira Filho Adviser Apr 30, 2009 1 Year

Lucy da Silva Brandão Alternate Apr 30, 2009 1 Year

João Botelho Alternate Apr 30, 2009 1 Year

Anisvaldo Bomfim Daltro Alternate Apr 30, 2009 1 Year

Aloísio Kok Alternate Apr 30, 2009 1 Year

Luiz Fonseca de Souza Meirelles Filho Alternate Apr 30, 2009 1 Year

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3.4. Econonomic Management

The Subsidiaries’ economic-financial management is centralized in Paranapanema. The Controllership activity is not centralized and the Holding has a controller, and the controllers serving Eluma and responding for Caraíba and Cibrafértil are connected to the Holding. In 2008 Paranapanema produced the following results.

CONSOLIDATED FINANCIAL-ECONOMIC PERFORMANCE

Aligned with the harmonization process of international accounting practices, Paranapanema and its subsidiaries adopted fully the provisions of Law no. 11.638/07 and Provisional Measure no. 449/08 for the year ended on December 31, 2008. The accounting statements of 2007 were prepared for the purposes of legal publication by the legislation in force on December 31, 2007, as set forth by the technical Pronouncement CPC 13, except in the item other non-operating revenues (expenses), which was presented in other net operating revenues (expenses) as per MP no. 449/08. The conciliation between 2008 without the impact of Law no. 11.638/07 and with the full adoption of corresponding CPCs and instructions of CVM.

The consolidated gross revenue of R$4.3 billion in 2008 was lower than 2007, for the effect of the reduction in the consumption and prices of commodities, which affected the volumes of the subsidiaries and for the dollar assessment due to the global market crisis.

The performance was damaged mainly by the 2008 4th quarter performance when the international crisis effects could be felt, particularly in the markets of metallic and fertilizer commodities.

The internal market, with gross revenue of R$2.3 billion, decreased in volume in 2008, despite the growth verified in the volume of Caraíba and Eluma, which were not enough to offset the drop verified in the Cibrafértil volume. The domestic gross revenue raised its participation in the consolidated gross revenue in 2008, remaining with 52.5% (49.4% in 2007).

Consolidated Financial Indicators

R$ thousand 2004 2005 2006 2007 2008

Gross Revenue 3,044,844 3,201,630 4,803,489 4,762,693 4,284,931

Net Revenue 2,471,934 2,702,692 4,118,182 4,043,168 3,481,354

Gross Profit 404,438 247,642 522,680 91,814 179,539

Cash Generation - EBITDA 380,837 232,251 508,590 96,633 611,108

EBITDA Margin 15.4% 8.6% 12.3% 2.4% 17.6%

Net Profit (Loss) adjusted 76,214 (4,617) 240,668 (109,032) 133,014

Capital Stock 963,692 963,692 963,880 967,880 2,067,969

Stockholder’s Equity (216,519) (236,772) 48,980 (56,052) 1,193,231

PARANAPANEMA S/A – Consolidated 2007 2008 Change 2008 / 2007

Gross Revenue (R$ thousand)

4.762.692

4.284.931 -10.0%

Internal Market

2.354.660

2.249.717 -4.5%

Foreign Market

2.408.033

2.035.214 -15.5%

Volume of Sales (in t)

509.310

478.957 -6.0%

Internal Market

351.365

328.689 -6.5%

Foreign Market

157.945

150.268 -4.9%

36

The foreign market, with export revenue of R$2.0 billion volume drop in 2008, was responsible for 47.5% of the consolidated gross revenue in 2008, below 2007, due to the demand retraction conditions of global markets.

Paranapanema consolidated gross revenue distribution in the last four years can be seen in the chart below:

REVENUE OF PARANAPANEMA AND SUBSIDIARIES PER MARKET.

Due to the biggest allocation of Eluma and Cibrafértil sales for the domestic market, given its products’ characteristics, there is a concentration of consolidated revenue for the internal market. Caraíba in its turn reduced the export sales in 2008, moving a little towards the domestic market by the market current conditions.

SALES VOLUME OF THE SUBSIDIARIES PER PRODUCT GROWS IN THE COPPER DIVISION.

There was sale volume growth in the Copper Division (Caraíba and Eluma) and drop in the Fertilizer Division while the Tin Division, despite being already disposed of, further contributed negatively to the volume drop up to mid-November of 2008.

The chart below shows the sale volume per product, byproduct and subsidiary:

1 Reclassified composition of sales volumes, including item Other copper products2 Included the sale of Copper Anode3 Byproducts are not counted in the total volume of Caraíba4 Includes Anodic Mud, Oleum and Slag

2008

Share % Paranapanema Caraíba Eluma Taboca Caraíba

Gross Revenue 100.0% 100.0% 100.0% 100.0% 100.0%

Internal Market 52.5% 42.2% 86.5% 35.7% 91.4%

Foreign Market 47.5% 57.8% 13.5% 64.3% 8.6%

Volume of sales by Product (t) 2007 2008 Change 2008 /2007

Caraíba1 224.550 236.938 5.5% Anode/Cathode2 97.410 106.603 9.4% Rod 114.996 110.415 -4.0% Wire Drawn 9.369 14.484 54.6% Other copper products 2.775 5.436 95.9% Byproducts3 819.710 811.211 -1.0% Sulfuric Acid 538.783 459.302 -14.8% Others4 280.927 351.909 25.3% Eluma 63.091 63.917 1.3% Copper semi-elaborated 63.091 63.917 1.3% Taboca 9.312 6.898 -25.9% Tin 7.383 5.358 -27.4% FeNbTa alloy 1.929 1.540 -20.2% Cibrafertil 212.357 171.204 -19.4% Fertilizers SSP (powder or grain) 198.860 158.190 -20.5% Fertilizers NPK 13.497 13.014 -3.6% Paranapanema Consolidated 509.310 478.957 -6.0%

Internal Market Foreign Market

Gross revenue per Market - in %

37

PARANAPANEMA CONSOLIDATED NET REVENUE

The Copper Division is responsible for 92% of the consolidated revenue. Paranapanema Consolidated net revenue in 2008 reached R$3.5 billion, registering a drop of 13.9% in relation to the prior year, falling proportionally more than the gross revenue, due to the higher concentration of sales in the internal market, where the higher taxes are applied.

The year performance was affected mainly by the 4th quarter of 2008, when the drop was stressed for all subsidiaries.

COST OF SOLD PRODUCTS

Paranapanema cost of sold products (CPV) consolidated was of R$3.3 billion in 2008, 16.4% below 2007, with drop in all subsidiaries, except Cibrafértil, due to the metal price reduction effect in the international market.

The highest increase verified in the CPV occurred at Cibrafértil, because the average cost of the main raw materials, such as sulphur acid (supplied by Caraíba) and the Phosphatic Rock (imported) was kept in a higher level along 2008.

GROSS PROFIT

There was strong recovery of Paranapanema consolidated gross profit and that of the remaining subsidiaries, except for Cibrafértil, due to the adverse market conditions for the fertilizer industry since September of 2008.

SALE, GENERAL AND ADMINISTRATIVE EXPENSES

In 2008 the operating expenses (sales, general, administrative, officers and employees’ compensation) in the subsidiaries and Paranapanema remained practically stable, representing 3.3% of the net revenue.

OTHER OPERATING NET REVENUES (EXPENSES)

The account other operating expenses in the amount of R$444.3 million in 2008, against R$24.5 million in 2007 mainly derives from the investment sale effects (Taboca disposal) and the provisions and reversions of provisions for tax contingency (explanatory note no. 16). Due to MP no. 449/08, other non-operating revenues (expenses) started to be presented together with other operating revenues (expenses) also in 2007.

CASH OPERATING GENERATION (EBITDA) CONSOLIDATED

Paranapanema operating result before the interest rates, taxes, depreciation and amortizations (EBITDA) was of R$611.1 million in 2008, with meaningful increase in relation to the R$96.7 million of 2007, whose variation in R$514.4 million was explained mainly: (i) by the improvement of R$87.7 million in

Sales Volume by product (t) 2007 2008 Change 2008 / 2007

Paranapanema COGS Consolidated

3.951.354

3.301.815 -16.4%

Caraíba 3.014.922 2.433.340 -19.3%

Eluma 708.702 670.706 -5.4%

Taboca 254.908 237.489 -6.8%

Cibrafértil 60.000 81.831 36,4%

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the gross profit; (ii) by the operating expenses staying stable; and (iii) by the increase of R$419.9 million in other operating expenses deriving mainly from Taboca sale.

The EBITDA margin was raised to 17.6% of the net revenue in 2008 (2.4% in 2007).

NET FINANCIAL RESULT CONSOLIDATED

The 2008 financial result was a net expense of R$335.8 million, above the R$86.7 million of 2007.

The financial result was explained: (i) by the dollar depreciation of 32% year against year, increasing the passive exchange variation; (ii) by the increase of operating debt (assignment of Taboca debt to Caraíba as ACC of R$177.7 million to face the liquidity crisis, credit letter usage reduction and to assure the working capital need of the Company; (iii) by the application of new accounting rules related to the financial instruments and derivatives (see explanatory note no. 19); (iv) by the reduction of foreign suppliers’ financing terms which remained below 360 days; (v) lower active exchange variation upon the fall of availabilities, explained by the higher need of raw material purchase at sight after the international crisis having caused a credit scarcity; and (vi) the correction of debt and debenture confession was up to November 13, 2008, due to its liquidity.

PROVISIONS FOR COURT DEMANDS

In 2008, the consolidated provisions for net contingencies of court deposits (explanatory note no. 14), totaled R$652.6 million in 2008, against R$709.6 million in 2007, with drop of 8%. The provisions for contingencies were constituted to face the probable losses in administrative and court cases related to tax, labor and civil issues, being the most relevant amount that related to the presumed credit IPI of R$563.2 million in 2008 (R$539.6 million in 2007), responsible for 83% of the gross provisions.

NET PROFIT

The Company net profit in 2008 reached R$133.0 million against loss of R$109.0 million in 2007, representing a margin of 3.8% of the net revenue against negative net margin of 2.7% in 2007. The performance was explained by the cash operating generation (EBITDA) increase and by the other operating revenues.

NET (CASH) DEBT

The total debt, including the short and long term consolidated debt on December 31, 2008 totaled R$667.6 million, with reduction of 67.1% on the balance of December 31, 2007 of R$2.0 billion, showing a reduction of R$1.3 billion in Paranapanema non-operating debt. Such drastic reduction was explained by the increases of capital and debt conversions into common shares, as well as by the financial liquidation of convertible debentures with capital resources provided by subscription of minoritary shareholders and asset disposal of which made viable the debt anticipated liquidation.

EBITDA - R$ thousand 2007 2008 Change 2008 / 2007

Paranapanema Consolidated

96.663

611.108 532,2%

Caraíba 62.198 45.996 -26.0% Eluma 32.757 90.603 176.6% Taboca 12.938 2.050 70.4% Cibrafértil 11.457 (1.006) NS

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With the non-operating debt reduction, Paranapanema stockholder’s equity reaches R$1.2 billion on December 31, 2008, representing reversion of outstanding liability of R$56.1 million on December 31, 2007.

The chart below shows the debt profile, remaining non-operating only the balance of R$51.8 million already equationed with the creditors, showing a much more solid financial situation:

In the calculation of availabilities, the account of exchanges receivable abroad was considered, showing a meaningful improvement in the Company financial situation in 2008, going from net debt of R$1.2 billion on December 31, 2007 to a net cash of R$17.7 million on December 31, 2008.

The availabilities fell by the changes in the raw material purchase form due to the international crisis since the markets were closed, reducing suppliers’ financing, which reduced the terms of 360 days to 180 days and started demanding more purchases in cash, consuming the Company cash.

The risks inherent to the Company exchange exposure and the sensitiveness analysis are shown in the Explanatory Note no. 19, related to Financial Instruments as per Law no. 11.638/07.

INVESTMENTS

In 2008 Paranapanema invested R$97.8 million consolidated against R$181.3 million in 2007.

Out of such total, R$54.6 million were invested in Caraíba in 2008 against R$119.6 million in 2007, directed to improvements in the several production lines and projects for safety and environment.

The investment reduction in 2008 was due to the fact that in 2007 there was a maintenance general stop (biannual) which did not occur in 2008.

At Caraíba electrolysis, a new transformer-rectifier was installed, 31% of the electrolytic cells for cathode production and 100% of the start plate cells were replaced with cells with more modern design and material. This raised the electrolysis capacity for 230,000 t/year in December 2008 and shall rise to 240,000 t/year in September 2009 when 100% of the cells shall be replaced. Additionally, it is worth mentioning the investments made to reactivate the oxy-free rod production plant, the revert processing installation and the new class II industrial residue landfill.

Caraíba “Acid Water” Project installation brought meaningful cost reductions to the company besides deserving several environmental awards.

Copper Division Fertilizer Division Consolidated

Caraíba Consolidate Eluma Cibrafértil Paranapanema

R$ thousand Dec 31,

2008 Dec 31,

2007 Dec 31,

2008 Dec 31,

2007 Dec 31,

2008 Dec 31,

2007 Dec 31,

2008 Dec 31,

2007

Total Debt** 537.338 393.817 67.167 27.950 11.250 1.846 667.608 2.031.054

Short Term 339.680 216.443 39.123 22.636 11.250 1.834 441.906 1.749.859

Operating 339.680 216.443 39.123 22.636 11.250 1.834 390.053 406.346

Non-operating ** 0 0 0 0 0 0 51.853 1.343.513

Long Term 197.658 177.374 28.044 5.314 0 12 225.702 281.195

Availabilities * 535.528 594.881 148.171 217.034 183 1.760 685.315 865.900

Net (cash) Debt 1.810 (201.064) (81.004) (189.084) 11.067 86 (17.707) 1.165.154

* includes receivable accounts of exchange to be liquidated abroad ** includes bank debt and confession of debt of Financial Restructuring Agreement with creditor shareholders, liquidated on Nov 13, 2008

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In 2008 R$12.3 million were invested in Eluma against R$7.7 million in 2007 into the following programs: (i) around 42% allocated for expansion projects; (ii) 37% for maintenance; and (iii) 21% for improvements in distribution and logistics, quality, computers and others. Investments (CAPEX) for 2009 - 2012 may be of around R$60 million between maintenance and future capacity extension if the projects are approved, which may lead the Company from 78 thousand t / year counting from

the beginning of 2010 to up to 92 thousand t / year in 2012, increasing the added value of product mix.

And at Cibrafértil the investment were of around 3.8 million in improvements and maintenance.

EFFECTS ON THE FINANCIAL STATEMENTS AND INITIAL ADOPTION OF LAW NO. 11.638/07 AND PROVISIONAL MEASURE NO. 449/08

The application impacts of Law on the Stockholder’s Equity and on the Revenue Statements were detailed in the financial statements, 2008

The Stockholder’s Equity consolidated before the adjustments introduced by the law was of R$1,177.6 million, going to R$1,193.2 million after the law.

The effects on the net profit consolidated with the full law application moved the profit from R$170.4 million to a net profit of R$133.0 million in 2008 due to the fair amount measurement of financial applications classified as destined to negotiation and derivatives and adjustments at present amount of qualifying monetary assets and liabilities.

The gold classification in 18 or 24 karats is established by the quantity of copper used in its composition. Additionally, the

copper confers to gold the flexibility required for jewelry and object

manufacture.

The copper recyclability is bigger than that any

other metal. So far, only 12% of the world resources have been

extracted.

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3.5. Personnel Manegement

Paranapanema human resources management is done through programs existing in all Companies, which interact presenting outcomes based on participation and engagement of workforce members.

Paranapanema workforce in 2008 was of 3,504 people, being 2,378 employees and 63 trainees. Additionally 1,063 employees from contracted companies with own supervision work as third parties in maintenance, safety, cleaning, feeding and transportation, without direct supervision from the Companies.

Employees’ Profi le

PARTICIPATIVE MANAGEMENT

The personnel management is performed by Companies’ leaders, and the Human Resources areas integrate Recruiting and Selection, Compensation, Qualifi cation and Personal Development, Health and Safety processes intended to workforce satisfaction and welfare.

The HR areas defi ne the work organization and position structure, where the performance focus of the practices related to personnel management is defi ned, especially the work systems. The management is participative, acting through hierarchical levels of each Organization.

It is important to stress out that the actions to be implanted are followed up continuously during management meetings of Management or Business analysis, consolidating thus a management to reach performance targets.

Staff Caraíba Eluma Cibrafértil Holding Total

Direct employees 880 1.399 90 09 2.378

At Paranapanema 37.0% 58.8% 3.8% 0.4% 100%

Women Black

In relation to Total of Employees 8.3% 18.4%

Data for 2006 only with numbers of Caraíba

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PEOPLE SELECTION AND HIRING

The personnel selection process is internal and external, and privileges the “home silver”. It is carried out mainly in a competitive way, being widely spread internally, so that the employees may take part or indicate candidates.

In some companies the recruiting and selection activities encourage the hiring of manpower from the neighboring communities, but equality and justice prevail in all activities, through the use of the best human resources available, in a transparent way and through free participation of everybody, ensuring thus the good standing image. In addition to the neighboring locations, the trainees and former trainees are a personnel recruiting source, as well as employees rendering services as temporary workers.

The selection instruments envisage: Résumé Evaluation, Written and Practice Tests, Group Dynamic, Interview, Psychological Evaluation and Medical Exams.

The educational and experience requirements are established in the Position Description, and the skills required, as well as the performance requirements, are defined by the requesting party and HR area.

The new employees, before being sent to the work centers, take an Integration Program in each Company, which promotes their multifunctional integration, making it easy the cooperation between areas. Upon integration, they receive the Ethics and Conduct Code, besides safety and environmental information. Even the third party employees take safety and environment Integration training.

COMPENSATION

Paranapanema adopts the fixed and variable compensation systems. The first one is based on the policy which takes into regard the market and the internal consistency. The second results from the compliance with the targets negotiated with the employees.

The variable compensation is a transparent process, defined, implanted and followed up by every employee. The Profit or Outcome Sharing Program aims to encourage target reaching, based on the company budget, providing bigger integration between the Company and its employees by sharing business targets and goals, encouraging productivity and enabling economic participation of employees in the Company annual outcome.

Compensation, acknowledgment, encouragement, bonus and award granting adopted by the market are annually surveyed, analyzed and compared with those practiced by us, and, if necessary, corrective measures coherent with our policies are adopted.

The promotion criteria are based on the personal skill and reinforce the employees’ development, being established in the Company position access criteria.

It is important to stress out that every practice related to the work systems is integrated and aligned with

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the Company and Paranapanema objectives, leading to alignment between employees and businesses’ objectives, encouraging thus the obtainment of high performance targets and promoting Paranapanema excellence culture.

The holding has a committee which meets periodically, chaired by one of the Board of Management’s members so as to define the main human resources policies for corporate actions. In 2007, this group, supported by Hay Group consultancy, defined the position and compensation policies, envisaging the operating positions, staff and executives so as to better take the synergy of all Companies and also a career plan, which were implemented in 2008 at Caraíba and the implantation at Eluma is predicted for 2009.

QUALIFICATION AND DEVELOPMENT

The training management and personnel development policies and guidelines at Paranapanema Companies seek for the employees’ performance improvement in their respective current and future positions or functions in frame with the strategies established, showing the training importance for business goals’ consecution

Each Company has its specific training to meet operating needs and/or learning gaps detected through understanding between the managers and employees, seeking to widen their own knowledge and skills to meet the Companies’ performance needs in a very competitive environment, so as to always pursue excellence. There’s also Institutional Training Plans intended to several areas and related to strategic results aimed.

The training, development and education training needs are done in two moments. First, in a Personnel Management committee meeting where, in the light of strategic goals, the institutional trainings required to reach such goals are defined.

The second moment aims to identify the training needs linked to operating level performance, resulting from skill gaps identified for each position. The needs can also be considered based on individual performance target negotiation, upon dialogue between managers and employees, who decide about the trainings required to meet the work targets negotiated.

As reported, the personnel qualification and development are designed so as to envisage the employees and Companies’ needs. The training planning, performance and evaluation are incumbent to the personnel management area, the Companies’ Human Resources area. The specific trainings are planned and performed by the interested areas, using external entities or on the job training, being evaluated and followed up in a decentralized way.

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QUALIFICATION EVALUATION

The internal trainings are carried out in classrooms and/or workplaces (OJT). For such, the Companies own special rooms or Training Centers with infrastructure and resources for computer and multimedia training.

Some Companies, besides the Training Centers, have decentralized rooms through several units which integrate the organization structure equipped with instruction equipment required and with good ergometric comfort.

To assess the qualification and development processes’ effectiveness, whenever applicable and relevant, three kinds of evaluation are used:

• Reaction – measurement, at the end of the course, through questionnaire, of the training applicability.

• Effectiveness – whenever applicable, after a certain period of time following the end of the training.

• Comparison - performance improvement through the skill gap reduction from one evaluation to another.

In some Companies, in order to assess the qualification and development processes’ effectiveness, the information obtained through the Organizational Atmosphere Survey and Discharge Interviews is also taking into regard. Additionally, performance evaluation systems based on skills and abilities are used, within three models: Leadership Competences, Behavioral Competence of Operating Level and Operating Level Skills.

PARTICIPATION AND COOPERATION

There is the reinforcement of the participation in multifunctional groups so as to encourage cooperation, effective communication and knowledge and skill sharing, such as Management Policy committees, Problem Solution groups (like Quality Control Circles – CCQ), Learning groups, etc., which provide the employees with opportunities to develop initiative, creativity, innovation and all its individual potential in group, homogeneous or heterogeneous.They additionally enable the creation of a pleasant environment and contribute to strengthen its Company. Their works effectively contribute to improve the organizational processes, including work conditions.The decision process counts on the participation of employees, who are enquired to validate or indicate changes which will affect their work. This occurs also during the target annual negotiation which integrates the Profit or Outcome Sharing Program – PPR.

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PERSONAL AND PROFESSIONAL DEVELOPMENT

Since one’s hiring, the employees take part in several guidance, counseling, employability, work rotation and career development methods, used for one’s personal and professional qualification and development. Among the main methods we cite:

Team Reinforcement – intended to articulate the employees as teams or autonomous groups;

Quality Control Circles/CCQ – intended to solve problems in the work area;

Video-Via Project – To make better use of the 720 hour/year spent with the employee commuting at Caraíba, audiovisual equipment was installed on the buses, which were transformed into schools and culture and leisure moving centers.

Educational Support Plan (PAE/PAED) – reimbursement of percentage of costs for special courses correlated with activities developed in the Companies.

E-learning (Distance Education) – search for new training and educational alternatives which provide bigger accessibility, agility, flexibility, and low cost, upon e-learning technology.

Program 5S- training which adds value to the work environment, developing the consciousness for organization, work cleaning and safety, being the base for Quality management.

Access Chart – the career development is provided through access to positions of different levels, including between Companies.

Trainee Program – it aims to capture young talents and prepare them to perform, in medium and long term, technical and/or management functions required to the Companies.

Creativity – encourages the personnel creative potential, enabling to develop solutions for problems and propose improvements to work and/or environment.

Basic Safety, Environment and Occupation Health Training – to inform all the own and contracted parties’ employees about the risks existing at work and their several prevention forms, avoiding damages to the worker’s physical integrity and health and to the environment.

Collaborators benefited by PAE/PAED

Year Master’s degree

Specialization / MBA

Graduation Technical Total

2008 00 14 47 25 86

2007 02 42 70 80 194

2006 02 54 100 104 260

2005 08 36 22 72 138

2004 12 18 18 86 134

Total 24 164 257 367 812

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In 2008, we carried a total of 56,048 hours of training in behavioral, quality , technical qualification, safety and environment areas. We invested a total of R$ 651,778.00 thousand in training, development and education.

Such investment in personnel’s development, allied to the recruiting and personnel selection policy, has brought benefits to Paranapanema Companies, which are reflected in the productivity increase for the main products and the fulfillment of vacant positions which represent promotions or reclassifications, with the internal personnel.

BENEFITS

Besides legal benefits, other conditions and programs are offered to the collaborators of Paranapanema Companies, seeking to attract and mainly retain the collaborator at the Company, creating a more attractive work environment. Know the main ones:

Year R$/employee

2008 274,09

Benefit Coverage Notes

MEDICAL CARE Corporate Medical-hospital and dentistry service in wide network. It includes dependent

PRIVATE SOCIAL SECUTIRY Corporate Through BrasilPrev

LIFE INSURANCE GROUP Corporate Up to 60 compensations, funeral aid, basic goods basket and medical care for 12 months for family members

CHRISTMAS BASKETS Corporate To all employees

COVENANT WITH DRUGSTORE Eluma 2 units in Santo André/SP and Serra/ES

COVENANT WITH SUPERMARKET Eluma 2 units in Santo André/SP

RECREATIONAL AREA Eluma Leisure center in the Units. In Serra (ES) there are a resting female’s area with TV set

DAY CARE CENTER AID Eluma / Caraíba Covenants with local entities

PROSTHESIS AID Caraíba / Cibrafértil Acquisition of glasses, contact lenses, prosthesis and orthopedic devices

SOCIAL SERVICE Caraíba Collaborators and family members at Caraíba

LIBRARY Caraíba Technical collection and consultation books and Internet

BOOK CLUB Caraíba Books and DVDs of education, leisure and culture

TRIBUTE TO EMPLOYEES Caraíba Employees with 10, 20, 25 and 30 years of service

CARAÍBA SOLIDÁRIA Caraíba Support to entities accredited with volunteers

INSERTION OF DISABLED PEOPLE

(COGNITIVE) Caraíba APAE support

MANAGING THE OWN FUTURE Caraíba Preparation for company dismissal of collaborators on the verge of retirement

INSERTION OF PEOPLE DERIVING

FROM INSS AND THOSE REINTEGRATED

Caraíba Ease of his/her effective return to work

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OCCUPATIONAL HEALTH

Paranapanema Companies provide their collaborators with medical service at the industrial units for emergency, besides covenants with health units in the cities.

The control of all occupational exams set forth in law is done, especially the health periodic exams. The occupational diseases and labor accidents have medical service followed up by the Companies and the resulting costs are assumed by them.

The main activities resulting from the outcomes obtained by the identification of risks and dangers to health are detailed in the documents below, required by “NR 7” and “NR 9”, as well as the Companies’ Occupational Health policies:

PCMSO - Medical Control and Occupational Health Program –to diagnose the occupational disease cases, as well as to collect data and information to support programs which are capable of providing the employees with a better life quality.

PPRC – Coronary Risk Prevention Program – seeks to guide the employees as regards the cardiovascular disease risks and recommends preventive measures.

Smile Program (Oral Health) – in partnership with SESI (Industry Social Service) two dentist offices are kept inside Caraíba, one office was installed for clinical treatments, and the second to meet the prosthesis needs, without burden to collaborators.

LABOR SAFETY

The safety in the work practice is always a priority at Paranapanema. The activities are performed so as not put the people, equipment or facilities’ integrity into a risky position. This policy aims to create a good work environment, providing all who works for Paranapanema with the best conditions.

The main dangers and risks related to safety and ergonomy are identified, particularly, by means of:

Safety Audits, performed by the safety area and behavioral audits (unsafe act identification) performed by safety technicians and leaderships.

Environmental condition monitoring, with follow-up of physical, chemical and biological agents of exposure. The risks are identified and evaluate through PPRA.

Specific studies conducted by Safety and Environment areas of Labor Medicine.

Direct interview with the employees through the Organizational Atmosphere Survey in the Companies.

Performance of the Accident Prevention Internal Commission - CIPA.

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Thus, the main activities resulting from outcomes obtained by the dangers and risk identification to the hygiene, ergonomy and industrial safety are detailed in the documents below, required by the “NR 7” and “NR 9”.

PPRA – Environmental Risk Prevention Program – aims to maintain the employee’s health and integrity through control of environmental risk occurrence existing or future at work.

PCA – Auditive Conservation Program – aims to protect and preserve the employee’s health potentially exposed to noise, through the adoption of engineering measures to control the exposure.

PPR – Breathing Protection Program – aims to protect the employee as regards the exposure to agents which affect the respiratory system.

DE – Ergonomic Diagnostic – ergonomic survey of the activities carried out by the workers potentially exposed to the ergonomic agents for the osteomuscular disease prevention.

PRG – Risk Management Program – aims the process risk management subject to cause accidents which result in big personal, material or environmental losses.

Work accident and occupational disease records are kept, as well as those related to the cause investigations, and action plans to neutralize the risks are prepared.

The work force is instructed as regards the proper use of the individual and collective protection equipment (EPIs and EPCs), due to risks. The protection equipment is technically specified by safety areas and tested by the users before the approval.

The Companies have Emergency Brigade, made up by collaborators from several operating areas, duly trained, coordinated by safety technicians.

WELFARE, SATISFACTION AND MOTIVATION

The HR areas of the Companies identify factors affecting people’s welfare, satisfaction and motivation, through information analysis obtained through qualification and people development processes’ evaluations, feedback received from collaborators, benchmarking visits to other companies, 5S internal audits, wage surveys in the market and survey with collaborators;

To formally measure the welfare, satisfaction and motivation degree of the people, Caraíba periodically carries out an Organizational Atmosphere Survey. This survey is carried out with internal resources, reaching 75% of forecast population. Answers are considered good when obtain grade above 6, of maximum 10 points. The questions are grouped into the following aspects: Leadership, Relationship, Acknowledgment Systems, Working Conditions, Physical Environment, Professional Development, Company Image, Alignment with Organizational Values and Survey Evaluation.

The organizational atmosphere suitable to people welfare, satisfaction and motivation is kept through a set of services, benefits, programs and policies made available to the work force, called Work Life Quality Program.

The main employee desires are identified through specific analyses carried out by the HR, which envisage the employee direct questioning through spontaneous feedback registration. These outcomes are consolidated and analyzed by the Management Personnel committee, being later submitted to approval, for future implantation.

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3.6. Client and Supplier Management

SUPPLIERS

Any sustainability culture success relies on the productive chain and suppliers, since they are the Companies’ action commitment extension.

Paranapanema has a total of 11,758 suppliers accredited, including national and foreign material suppliers, service provides and agents.

With SAP implantation there has been material and service registration centralization.

Grouping, Selection and Qualification

The Supplier and Partner Management process comprises qualification and accreditation, relationship and performance management of suppliers. After documentation evaluation, the supplier may be grouped as follows:

• Foreign Supplier – 329 accredited

• Service Supplier– 3,657 accredited;

• Material Supplier– 6.279 accredited;

• Transportation Supplier– 1.493 accredited;

The process requirements managed by Supplies areas derive from operating and support areas. Mostly, the challenge is mostly the organization performance improvement.

Supplier and Partner Management

The copper inhibits the growth of a large variety of parasites, algees, bacteria and virus. Therefore, the utilization of copper tubes and

connections in hydraulic systems protects also the health.

The copper defends the cells against oxidation, decreasing the risks of

câncer and heart diseases. Together with enzymes found in and around the cells, the copper helps the human body to neutralize the free radicals to preent

the cell destruction.

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During qualification and accreditation, suppliers are those who are:

• Certified with NBR ISO 9001 by duly acknowledged entities whose certification envisages the material manufacturing process or system of the material supplied to the Company;

• Qualified through user and/or unit responsible for hiring request, after testing performance.

Relationship with Suppliers

An evaluation is applied quarterly to the accredited transportation companies. In case of third party service suppliers, an evaluation is carried out annually and Group 5 was defined considering that 90% of such are for maintenance services. The technical evaluations for accrediting companies responsible for key equipament maintenance are incumbent to the areas following up the service performance.

Material supplier performance occurs twice a year and the evaluation is performed automatically by SAP based on the following criteria: price, quality and supply. Each quality material supplier is informed after evaluation end by formal letter. Based on score the supplier may pass, be under concession or fail. The suppliers with grades below 55 shall be notified and corrective action plans shall be requested.

Main communication and feedback forms include the following: fax, e-mail, telephone, meetings and visits to suppliers.

We outline the electronic trade system, considered by Eletronic Market an implantation benchmark for electronic surveys.

Cost Minimization and Improvement Encouragement

To reduce costs related to supply management, including product or supplier audits, Paranapanema focus on lasting relationship establishment, turning the suppliers into partners aiming mutual growth, seeking to have a relationship well above a simple commercial interaction.

Such partnerships are formalized by medium and long term contracts and foresee periodic meetings to review the agreed conditions and what can be done to optimize the outcome for both parties.

Among other actions to minimize supply costs are:

• Increment continuous supply contracts, reducing inventories and demobilizing working funds;

• Reduce the number of purchase active supplier and renegotiate supply contracts;

• Identify group common suppliers to increase negotiation power;

• Use Electronic Trade and Reversal Auction by Mercado Eletrônico, enabling acquisition process improvement and purchase handling and material reception.

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CUSTOMERS

A Paranapanema performance in relation to its Clients reflects the application of value set (Vision, Mission, Belief, Management Philosophy, Ethics and Conduct Code Policies).

The knowledge and image management in relation to the customers and market and, later, its relationship and satisfaction, is structured through management practices and work standards, which take into account its needs and expectations, allowing thus to deepen further its requirements’ understanding.

Market Segmentation and Customer Grouping

The performance markets are defined mainly due to the product kinds and characteristics and its geographic location, basic conditions for a competitive performance.

So, the markets are selected and the customers grouped considering mainly the attributes required for the products and those related to the logistic conditions, and applied to both clients and current markets, and competition and potential markets.

Market Needs and Requirement Identification

Current and future needs and client purchase decision factors (current, former and potential clients) and market (competition) are identified through methods and involve:

- Prospection and sales promotion, commercial, technical visits.

- Visits related to product associated services.

- Contacts with Traders, Agents, and International Consumers.

- Specialized publications.

- Seminar, Congress and International Event participation.

- Customer Satisfaction Technical and Commercial Surveys.

- Client Complaint.

The requirement identification method information is consolidated by commercial/marketing areas and analyzed, understood, reviewed and approved in Commercial Management Meetings, enabling to discover new trends and know better our clients and market and, more meaningfully, anticipate to new opportunities, identifying requirements not fully understood as a need by own clients, and may generate modification actions in our organizational processes.

Brand Disclosure and Promotion

The image, brand, product and service advertisement and improvement actions disclosed to current and potential clients in several market segments, is performed by the Company through institutional communication vehicles.

Message clarity, authenticity and proper content, so as to reinforce credibility and ensure positive image, are ensured through Marketing areas, so as messages developed are reviewed before its disclosure, so as not to generate expectations exceeding what is really offered. There’s also a concern with the qualification of professionals rendering services of ads’ creation used to support advertising actions and publicity. Additionally, the “Visual Identity Manual” defines all parameters of our brand (logo, uniforms, printed material,etc).

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Relationship with Customers

Relationship channel selection is defined based on the market and clients’ needs identified from requirement identification methods and information consolidated by Commercial and Marketing areas of the Companies.

The informations are discloseds to customers through communication means to customers and market, widely disclosed, making available relationship channels so that the clients may request support, do business and communicate its complaints and suggestions, that is, really express themselves. Such access channels vary due to different customers groups’ peculiarities and several market segments related to each Company, and may encompass: direct telephone with commercial areas, Foreign Market Agents, E-mail, Fax, Technical, Institutional or Service Visits, and website.

Complaint or Suggestion Addressing

Customers’ complaints, suggestions and requests are handled in a structured and systematic way through each Company service Standards, so as to eliminate causes and search satisfaction.

The complaint follow-up is performed respecting evaluation term and client return, to ensure prompt and effective service or solution.

Therefore, all and any customers statement, via telephone, fax, internet, letter or oral upon visits, is collected by any corresponding Company area and sent to the commercial/marketing area which adopts the required measures, providing proper destination to the subject.

Satisfaction Measurement

In some Companies, the clients’ satisfaction measurement, fidelity evaluation and dissatisfaction factor identification are obtained through surveys, mainly the Client Satisfaction Survey.

Information is obtained through quantitative method, through questionnaires answered by commercial and technical personnel, via mail (with telephone follow-up) or personally.

Additionally, the client dissatisfaction is also evaluated by the indexes related to the complaint handling process, which includes client complaint number. The client fidelity is evaluated by market-related indexes, which includes sales evolution and market share in relation to competition in each client.

The data concerning 2008 refers only to Caraíba Metais since Eluma started carrying out clients’ surveys every 2 years and Cibrafértil does not carry out formal survey.

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Main Customers

Eluma and Cibrafértil portrays strong concentration in internal market, for their product features, while Caraíba (cathodes, rods and wires) has focused more on recent exports, as a result of big external demand for such commodities.

The international target market for Caraíba is made of wire and metallic cable plants for electrical purposes, that is, in Mercosul (Argentina, Uruguay and Paraguay), besides those established in countries more easily accessible to availabilities and logistic costs, from Caraíba Metais location: USA, Canada, Australia, Costa Rica, England, Argentina, Uruguay, Venezuela, Bolivia, Nigeria, China, Taiwan and others. The internal market is the favorite, although the rod and cathode export is an alternative considered in the company market mix, and in the Brazilian market adverse situations.

Due to the business profile, Cibrafértil client portfolio is restricted, although valuable – they are local fertilizer producers and multinational regional offices. Since 2006, Cibrafértil has also been an export company. Its first export was to Argentina. In 2007, it exported again to such country. In both cases, the exported product was Bulk Granulate Simple Superphosphate (GSSP 20%). In 2008 the product exported was Bulk Granulate Simple Superphosphate (GSSP 18%) to Uruguay.

In the Eluma’s case, besides internal market, also acts in several MERCOSUL countries, Europe and Asia, like Argentina, Bolivia, Canada, China, Spain, United States of america, Ireland, Israel, Italy, Lebanon, Paraguay, Syria, Switzerland, Turkey, Ukraine, Uruguay and Venezuela.

Invented in Germany and brought to Brazil by

Fernando Hackradt e Cia., Nitrofoska was the first full

fertilizer in the world.

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55

3.7. Social Management

The Social Management is one big concern of Paranapanema. Besides trying to improve its collaborators’ life quality, it also tries to offer conditions to improve such quality outside work environment.

Besides programs already mentioned in the Personnel Management chapter directly affecting its collaborators, it also implements programs which affect family members, accredited dependent, industrial facility neighboring communities and other social groups.

From the already described programs and which also serve people outside work environment, we cite the most meaningful due to its social reach:

Medical Service to the whole Paranapanema, with medical, hospital, dentist service.

Private Social Security, implanted in 2002, by BrasilPrev for Paranapanema.

Group Life Insurance.

Delivery Christmas Baskets to all collaborators of Paranapanema.

Insertion of Disabled supported by APAE in activities at Caraíba.

Reinsertion of collaborators deriving from INSS for a full fitting to Caraíba work environment.

Other practices may also be cited as capable of improving personnel and family life quality:

Happy Children’s Day and Surprise Christmas

Such actions provide the delivery of toys to collaborators’ dependent from 0-11 years on Children’s Day and at Christmas. All collaborators with dependent in such age strip were benefited in 2008.

Christmas Party

To increase company, collaborators and family integration, Caraíba, Cibrafértil, and Eluma promote Christmas Party at their units. Eluma performs them at Santo André/SP and Vitória/ES Units. Caraíba and Cibrafértil do so together at Associação dos Empregados da Caraíba Metais/AECM club.

During the whole day the collaborator and dependent enjoy concerts, children and adult games, besides special food.

At Christmas Party, Eluma encourages the collaborators do donate 1 kg of food to be delivered on the party day. In 2008, they collected around 310 kg of food delivered to the Centro de Recuperação Camille Flamarion [Camille Flamarion Rehabilitation Centre] located in Mauá São Paulo Metropolitan Region.

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Education Aid Plan

It works at Caraíba and Cibrafértil (PAE), Eluma (PAED) to encourage their collaborators to complement/widen their studies. It reimburses a percentage of the course amount taken by the collaborator, since it’s related to his/her position, contributing to his/her professional growth. Intended to technical, graduation and post-graduation courses (specialization,MBA). To run for scholarship the collaborator must work at the company for a year at minimum. The number of vacancies, criteria and budget are defined in each Company.

Student Training Stage

It works at Paranapanema , based on the belief that young talent development is critical for the business and country future. Together with universities, the company offers Trainee Program, which represents excellent opportunity for students start their professional careers.

Vacancies are offered to graduate or technical-level dynamic students, interested in a challenging career at a company of Paranapanema size.

Reading and Writing Learning Program

Created in 2005 from educational survey which detected that many collaborators hadn’t taken preliminary school. The company, together with Educational State Department and Formação Profissional de Santo André implanted Eluma PAE-Reading and Writing Learning Program intended to complement its collaborators’ education.

Thus, the Company maintains a school in its premises where up to 2008 preliminary school subjects are taught. Nowadays the Secondary School is being implemented and they intend to reach a public of 80 collaborators. Besides regular subjects, Utinga and Capuava Units, in Santo André, have computer rooms intended to students’ digital inclusion. 110 students took preliminary school classes in 2006 to 2008. In 2008 the investment was R$ 320,000.00, between transportation, meal and teachers.

Family at the Plant

It receives Caraíba and Cibrafértil collaborators’ relatives, once every four months, and develops artistic, educational, ludic and cultural works to improve family relationship.

Medical-Hospital Care

It serves non dependent legal relatives like: parents, children above 21 years, parents-in-law, uncles, brothers, cousins of Caraíba collaborators through AECM.

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Santa Catarina Solidarity Action

In compliance with its Social Responsibility commitment, Eluma, in November 2008, mobilized its collaborators to take part in the Solidarity Action to help flooding victims occurred in Santa Catarina. At that time, hundreds of donations were collected: food, clothing and shoes. Together with a transportation company, also taking part in the Action, it sent the donations free of charge. Caraíba also took part in the solidarity action by sending food and shoes.

2008 MC Happy Day Campaing

ELUMA was one of the companies sponsoring 2008 MC Dia Feliz [MC Happy Day] Campaign, which is a world action and this year was carried out on August 30. The amounts collected with the sales of BIG MAC snack were sent to Ronald MC Donald ABC house which serves children with cancer.

Learning Underage

Eluma Learning Underage project intends to encourage the first job, ensuring the youth with opportunity to learn a profession and practice it. The project is performed in its Santo André/SP and Vitória/ES units together with non-profitable institutions developing a different educational proposal to generate new talents, offering to the teenager technical-professional formation suitable to their development, preparing teenagers for work market, providing a learning so they plan a Professional career and better future.

For the Project success, which counts on 11 learning underage, values such as: respect to people, social responsibility and citizenship, professional and personal integrity, commitment with outcomes, technical competence, trust and credibility are transmitted. It invested 111 thousand reals in 2008.

Cibrafértil takes part in such Program by hiring 2 minors who work in the administrative area and receive one minimum wage.

Young Patroller

Eluma also develops Young Patroller project which intends to encourage first job for needy young people. Such project was developed to improve life quality not only of its employees but also of people living in the community.

Volunteer

At Caraíba (Caraíba Solidária) and Cibrafértil there’s a program to encourage employees’ citizenship practice, intended to develop communities, encouraging social responsibility growth and strengthening the company as citizen. Such procedure applies to all employees interested in participating. 840 people were benefited at Caraíba in 2008 through institutions and groups acting in the served Communities.

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Caraíba Metais Employee Association - AECM

Founded in 1986, AECM serves Caraíba and Cibrafértil employees and relatives. Its Office is at Caraíba Metallurgy its social Center in Salvador, with area of 38 thousand m2 with barbecue kiosks, bar and restaurant, soccer field, sports courts, swimming-pools, show stage, video room, game room, playground, nursery, parking lot and plenty of green area. It also provides the employees with drugstore covenants, cell phone operator and perfume shop, video rental shop, high school and college, language courses and health insurance for relatives. It organizes Mothers’ Day, Children’s Day and June Festival events, besides the 2 companies’ employee end of the year party.

Community Support Program - PAC

Caraíba Metais has developed since 1989, PAC – Community Support Program in Dias d´Ávila and São Sebastião do Passé. Such program is justified because the Company plays its Social Responsibility role and strengthens its image upon the public, based on social-economic problem solution practices in a participative way together with City Administrations and Community representatives, in programs for education, health and environment.

The works were initially intended to education in Dias D’Ávila, comprising the construction of 5 schools and widening/rebuilding of more 7, training and recycling of 320 teachers and principals, besides Total Quality Management implantation in 15 schools. Since 2000, they’ve been applied to Dias d´Ávila (Leandrinho) and São Sebastião do Passé (Lamarão do Passé) with all participants’ contribution – Company, City Administration and Community, in a shared management based on the community requirements.

The following activities were developed in Leandrinho, Dias d´Ávila rural zone, and Lamarão do Passé, São Sebastião do Passé rural zone, in 2008.

EDUCATIONAL AREA:

Maintenance of New Directions program with formation of young and adult students at night school with night courses of clothing customatization, hairdressing, barbery, dolls, biscuit, knitting, painting, among others so as to generate jobs and income for such population.

Uniform and school material supply for all students of Nestor da Silva Carvalho school, in Leandrinho, the only community school.

TÔ DENTRO program intended to place the youth into the work market performed in Lamarão together with IPGA (Applied Management Survey Institute) to qualify 18-26-year-old people, completing high school, unemployed in social vulnerability situation, for market insertion. The main result was the qualification of 40 people, 22 of them in services and sales techniques and 18 in low voltage electrical installations, with employment and income generation ensured in 25% of the graduating people. In 2008, we completed the 2nd class in Lamarão graduating 29 young students between18 and 29 years old, and we’re trying to insert them into the work market. In October 2008, we started, and it’s currently under course, the 1st class in Leandrinho, being composed by 27 young people between 18 and 26 years old.

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HEALTH AREA:

Social Dentistry Program in Leandrinho, performing 360 treatments in the community, inside oral health program.

Health care to Leandrinho community by hiring a doctor, who served 799 people. The service is based on the basic care, characterized by a set of actions in the individual and collective ambit, covering health promotion and protection, damage prevention, diagnosis, treatment, so as to improve quality life through:

Ambulatory clinic service; First aid emergency service; minor procedures (sutures); Pre-delivery assistance; Risk group follow-up (hypertension, diabetes and breathing diseases); Family planning; Pediatrics service (puericulture) and visit to patients in bed.

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ENVIRONMENT AREA:

Thirty environmental agents and leaders of community Leandrinho and Lamarão do Passé with the training of awareness and Entrepreneurship.

More than 80% of copper extracted is

being used and further shall be reused for many years without losing its

properties.

Colombo ships owned copper layer on the submersed portions to extend hull life. Nowadays the ships use copper based paint for

the same purpose.

Social Investments – Amounts 2004 2005 2006 2007 2008

% of net revenue destined to social actions Without

registration 0,03% 0,01% 0,0%

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3.8. Environmental Management

Paranapanema manages the production aspects and impacts of its Companies on the environment and its image as regards the society, through management practices and work standards based on the society’s needs and expectations, enabling thus to deepen more its requirements’ understanding.

The company performance in relation to the Society reflects its values’ application (Vision, Mission, Belief, Management Philosophy, Policies and Ethics and Conduct Code) presented in item 3.1. Hereof. The general performance has provided good results, through participation in associations, foundations, universities, councils, sector bodies and civil organizations, where it obtains information and expectations related to its role in the society and may provide information on the Companies’ actions including the environmental variable. As regards neighboring communities in its influence area, the Companies develop effective actions supporting local development, severally or together with Government Agencies, Institutions and local community representatives, and follows up the action implementation.

ENVIRONMENTAL MANAGEMENT SYSTEM - SGA

Each Company, through its Environmental Management System - SGA, seeks to anticipate public issues concerning ecosystem and society, whether through environmental impact survey performance in the influence area, or trying to meet and exceed requirements in force. SGA is based in operating units through sector procedures and targets, being also responsible for consultation support and environmental performance presentation through Environmental Performance report.

This enables to know, evaluate and handle current and potential aspects and impacts of products, processes and facilities on ecosystem and society, struggling to anticipate public issues.

Upon identification we consider: cause-effect relationship between aspects and impacts, whether the impact is beneficial or adverse, or occurs in normal, abnormal our emergency conditions, the impact geographic coverage, severity degree and occurrence frequency/probability, legal, regulation and contractual requirements, stakeholders’ demands and potential costs concerning sanctions and recovery of damaged areas. Risk anticipated analysis is also conducted in the projects.

Within the SGA context, many practices are intended to natural resource preservation and optimization (renewable, non renewable) and ecosystem preservation, which we can include: Waste Combat, Selective Collection, Damaged Area Recovery, Environmental Impact Evaluation programs, etc.

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O SGA IN THE COMPANIES

ELUMA

A ELUMA reutilizes 98% of the water used for manufacturing and develops residue management system. All byproducts are treated trying to eliminate any contaminants deriving from industrial process, as set forth by strict environmental standards in force.

In all processes Eluma recycles 100% of its production metallic residues derived from its production, which return to Casting, starting again the productive cycle.

Additionally, there’s a selective collection program, which all collaborators take part consciously in favor of environment and community. The disposable glasses collected at the Company are given to Santo André Collector Cooperative, and then recycled and sold turning into income for the Cooperative needy families.

The sustainable development is part of Eluma commitment, that is, to produce and trade products semimanufactured of copper and its alloys, contributing to its collaborators’ welfare and that of the community where it is inserted, for the country growth and return to the shareholder, integrating it properly to the environment.

We believe that this may be obtained through respect to the laws, rules, habits in each region where the company operates.

Inserted into the globalized scenario and working with a totally recyclable raw material, ELUMA tries continuously to fit to increasingly more strict international environmental standards.

In such sense, ELUMA, through its environmental management system development, is committed to improve continuously its industrial processes as per the legislation and in compliance with its environmental policy. In view of that Eluma has investments already made and others set forth which assure the respect to the Environment.

Environmental Policy Paranapanema

Indicators 2005 2006 2007 2008

Amount invested in environmental improvement projects (R$ thousand)

10.610 6.297 46.192 35.103

% of amount invested in improvements in relation to invoicing

0,4 0,24 1,35 1,33

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Investments Made

Construction of two sewage biological treatment stations;

Installation of acid gas washer in the electrolysis;

Fitting of residue center which assures the management of all residues generated in the manufacturing and administrative units;

Annual monitoring of all atmospheric emissions deriving from our production equipment;

Implantation of 654 eolic exhausters in the manufacturing units diminishing the power consumption and assuring better thermal comfort without utilization of electric power;

Potentialization of two industrial water treatment stations, assuring the reutilization of around 98% of industrial water, contributing actively to the water supply reduction.

Construction of cabin for forklift washing for correct treatment of contaminated water deriving from washing;

Construction of painting cabin with filter systems, avoiding thus environment and air contamination;

Utilization of chemicals free of zinc in the chilling tower treatment;

Plantation of 3,200 Acácia Mangium trees and 4,000 Mimosa Caesalpineafolia trees so as to increase the plant green area and consequently contribute to greenhouse effect reduction.

Investments Predicted

Construction of two segregation and dehydration stations for the decantation mud and industrial water recovery;

Implantation of a new exhaustion system in the Casting to improve the internal environment conditions and better control of atmospheric emissions;

Constant search upon the development of supplies with high environmental performance for utilization in the processes;

Industrial pipeline changes so as to use less noble water in toilets;

Rain water collection capacity increase so as to better use such noble supply;

Certification ISO 14001.

For ELUMA, an avant-guard company is not made only by direct investments, but also with the spread of environmental awareness and responsibility, nature respect and preservation, so as to meet the needs present without compromising future generations.

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CIBRAFÉRTIL

The environment also receives special care. Cibrafértil has invested in its production process improvements in the last years, ensuring emissions suitable to Bahia Environmental Resources Center standards. Its main projects are:

Implantation of liquid effluent treatment plant (ETEL), with reutilization of 100% of liquid and solid effluent generated at the Unit.

Granulator gas washer acquisition to better control ammonia content and particle material generated.

Acidulation gas washing system replacement, controlling fluoride content and particle material generated.

Obsolete equipment replacement like Acidulation Chimney, to better disperse fluoride and particle material contained gases.

Investments Made

Mill gross recycler installation.

New Sleeve Filter installation at Silo of Acidulation Grounded Rock.

Construction of new granulation feed.

Investments Predicted

Construct new curing warehouse;

Construct boxes for rock storage;

Leak-free the unit floor with anti-corrosion material;

Install another stage in the gas washing system;

Closure of wall nexto the rock mill building;

Construction of internal partitions and closure of western wall.

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CARAÍBA

Environmental Management is essential to Caraíba success. Part of process-generated effluents, gases and residues is captured and recycled internally or transformed into products. The remaining effluents and residues receive treatment and discharge under environmental standards in force, controlled by wide monitoring system.

Besides rationally using the natural resources, Caraíba widely discuss the environmental issue management with all sectors involved, looking for integrated solutions with the employees, neighboring communities and official areas related to environmental issues, including by providing training in environmental issues to neighboring community leaders, the Environmental Agents. The constant focus on sustainable development protects the ecosystems, on which men rely to live.

The collaborators are periodically informed about social and environmental issues, including the importance of preserving environment, through communication of occurrences damaging the environment and non renewable natural resource preservation suggestions

Main Environmental Projects

Use of industrial organic residues to recover Damaged areas.

Recovery of damaged areas around Caraíba to stabilize and recompose eroded areas, sand removal of natural streams and vegetal re-composition.

Landfill for industrial solid residues, resulting in soil and water table protection

Copper slag reutilization as byproduct, used to sandblast metallic surfaces, cement pouring industry, paving and civil construction. It also assigns to the community so as to pave local roads.

Environment Partner Program where, through CRA covenant, a small service rendering company was adopted (Roupas do Pólo, specialized in uniform clean-up and industrial individual protection equipment and our supplier) passing on to them technical procedures and of Environmental Management, including inspections and audits. That’s why it was acknowledged by CRA as “gold” category in partner evaluation award.

Residue Integrated Management Program focused on reutilization and recycling. Landfill for industrial solid residues

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Effluent Reduction and Reutilization Program to establish the Company Hydric Balance and identify improvement opportunities of water utilization besides waste combat.

Atmospheric emission reduction: in the last 8 years it was above 80% in gas emissions.

ENERGIBA Project with Bahia Federal University, UNICAMP and supported with FINEP resources for optimization of energetic resources used in the Company.

45%-concentration sulphuric acid production project, by using the effluent called “acid water”, transforming a residual effluent into byproduct saleable and decreasing considerably (around 75%) the residue discharge (plaster) in the residue landfill. This project won FIEB 2008 award and CNI 2008 award of sustainable development.

Fitting of SGA (Environmental Management System) to Rule ISO 14001, and initial external audit has already been used in November 2008 and certification predicted for early 2009.

Out of a Boeing 747-200 total weigh 2% are copper, which means around 4 tons. The electric

copper wires and cables in its interior add to 190 km.

The copper is economic because matching of handling, flexibility

and easy joint enable to save time, material and costs.

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ENVIRONMENTAL INDICATORS

Reutilization Recovery Areas

Caraíba Indicator 2005 2006 2007 2008

Solid residue reutilization 41% 43% 47% 66%

Recovery of degraded areas (ha accumulated) 136 180 190 190

Usage of Resources

Caraíba Indicators 2005 2006 2007 2008

Power annual consumption (kwh) 327.940.798 362.289.516 337.229.313 355.857.088

Power consumption per ton of copper (kwh) 1.647,61 1.649,13 1.544,90 1.578,50

Water annual consumption (m3) 1.941.059 2.511.470 2.917.044 2.884.490

Water consumption per ton of copper (m3/t) 9,75 11,43 13,36 12,80

Eluma Indicators 2005 2006 2007 2008

Power annual consumption (kwh) 6.679,21 7.445,85 7.668,73 7.811,62

Power consumption per ton of copper (kwh) 0,53 0,54 0,50 0,51

Water annual consumption (m3) 105.873 120.996 129.252 83.230

Water consumption per ton of copper (m3/t) 0,75 0,77 0,75 0,50

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Eluma Indicators 2005 2006 2007 2008

Natural gas annual consumption (m3) 2.979.756 3.966.687 4.568.412 3.314.944

Natural gas consumption per ton produced (m!/t)

41,01 46,79 51,39 34,05

Fossil fuel annual consumption

Caraíba Indicators 2005 2006 2007 2008

Diesel (l) 380.000 337.749 280.000 285.000

Fuel (t) 56 55 377 444

Natural gas (m3) 33.386.682 34.844.968 36.129.802 36.801.782

Other Environmental Indicators

Paranapanema Indicators 2005 2006 2007 2008

Annual quantity of solid residues generated (t) 430.984 509.920 446.117 499.388

Quantity of residues generated (t) 182.448 220.632 210.605 271.815

Caraíba Indicators 2005 2006 2007 2008

Rate of sulphuric specific emissions into the air (kg sulphuric / ton of raw material)

11,86 6,73 11,94 4,67

Concentration of SO2 in the air quality stations (µg/m3) 7,2 4,4 6,7 5,1

Reutilization of slag (%) 57 57 62 70

Eluma Indicator 2005 2006 2007 2008

Copper recovery via electrolysis of acid solution saturated of pickling process (Kg)

7.000 4.294 3.277 3.692

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Residue Generation

Type / unit Destination 2005 2006 2007 2008

Plaster mud (t) Caraíba landfill 108,449 126,743 101,929 26,156

Contaminated floor (t) Caraíba landfill 3,018 1,548 1,564 2,493

Fines of slag granulation (t)

Caraíba landfill 2,155 2,223 1,419 2,579

Glass wool (t) Caraíba landfill 195 91 124 103

Caraíba landfill (Slag) 134,754 162,551 129,692 104,435 Granulated slag (t)

Trade (byproduct) 181,000 214,836 209,143 251,894

Ordinary residues (t) Limpec landfill 734 426 1,032 2,227

Total (t) 430,305 508,418 444,903 389,887

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IBASE Statement

Balanço Social Anual / 2008 - Paranapanema

2008 2007

1 – Calculation Base Amount (Thousand reals)

Amount (Thousand

reals)

Nete Revenue (RL) 3.481.354 4.043.168

Operating result (RO) 173.513 -84.583

Gross payroll (FPB) 192.871 193.622

2008 2007

2 - Internal Social Indicators Amount (Thousand reals)

Amount (Thousand

reals)

Meals 9.702 9.690

Compulsory social charges 49.342 50.603

Private social security 2.955 3.032

Health 13.880 16.179

Labor safety and health 2.697 2.143

Education 1.491 1.634

Culture 143 56

Professional qualification and development 711 385

Day care center or aid 92 129

Profit or result sharing 11.602 11.290

Others 13.372 3.153

Total – Internal social indicators 105.987 98.294

2008 2007

3 - External Social Indicators Amount (Thousand reals)

Amount (Thousand

reals)

Education 0 0

Culture 0 151

Health and cleaning 0 0

Sports 0 0

Combat to hunger and food safety 0 0

Others 0 94

Total of contributions to the society 0 245

Taxes (excluded social charges) 665.484 559.187

Total – external social indicators 665.484 559.432

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2008 2007 4 - Environmenal Indicators Amount (Thousand reals) Amount (Thousand reals)

Investments related with company production / operation 97.805 181.330

Investments in external programs and/or projects 0 0

Total of investment in environment 97.805 181.330

As regards the establishment of “annual targets” to minimize residues, the general consumption in production / operation and increase the effectiveness in the utilization of natural resources, the company

( ) doesn’t own targets (x) meets 51 to 75% ( ) meets 0 to 50% ( ) meets 76 to 100%

( ) doesn’t own targets (x) meets 51 to 75% ( ) meets 0 to 50% ( ) meets 76 to 100%

2008 2007 5 - Functional Body Indicators

Valor (Mil reais) Valor (Mil reais)

No. of employees at the end of year 2.378 3.288

No. of hiring during the year 302 311

No. of outsourced employees 1.063 1.817

No. of trainees 63 134

No. of employees over 45 years old 683 853

No. of women working in the company 197 294

% of head positions occupied by women 9,50% 4,40%

No. of black people working in the company 437 456

% of head positions occupied by black people 3,20% 7,10%

No. of disabled people or requiring special care 107 61

6 - Information related to exercise of business citizenship

2008 2009 Targets

Relation between highest and lowest compensation at the company 39,1% Not defined

Total number of work accidents 117 Not defined

The company social and environmental projects were defined by:

( ) directors ( x ) directors and management

( ) all employees ( ) directors ( x ) directors and management

( ) all employees

The company social and environmental projects were defined by:

( ) directors and management

( ) all employees (x ) everybody + CIPA

( ) directors and management

( ) all employees (x ) everybody + CIPA

As regards union freedom, collective negotiation right and personnel internal representative, the company:

( ) doesn’t involve

( ) follows OIT rules

(x ) encourages and follows OIT

( ) won’t involve

( ) shall follow OIT rules

(x ) shall encourage and follow OIT

The private social security envisages: ( ) directors ( ) directors and management

(x ) all employees ( ) directors ( ) directors and management

(x ) all employees

Profit or result sharing envisages: ( ) directors ( ) directors and management

(x ) all employees ( ) directors ( ) directors and management

( x) all employees

During supplier selection, the same ethic, social responsibility and environmental Standards adopted by the companies:

( ) aren’t considered

(x ) are suggested ( ) are requested ( ) shall not be considered

( x) shall be suggested

( ) shall be requested

As regards employee participation in volunteer work programs, the company:

( ) doesn’t involve

( ) supports (x) organizes and encourages

( )won’t involve

( ) shall support (x ) shall organize and encourage

Number of total complaints and criticism from consumers:

at empresa 86

at Procon 0

In Court 0

at empresa 64

at Procon 0

In Court 0

% of complaints and criticism solved: at empresa 100 %

at Procon 0%

In Court %

at empresa 100%

at Procon 0%

In Court 0%

Total amount added to distribute (in thousand R$)

In 2008: 1.127.529 In 2007: 627.482

Added Amount Distribution (DVA):

20,0% government 17,0% collaborators 2,0 % shareholders 50,0 % third parties 11,0% withheld

25,0% government 32,0% collaborator 0,0% shareholders 60,0% third parties (17,0)% withheld

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Matriz de Indicadores

PERFORMANCE

INDICATORS DESCRIPTION PAGE

Indicators and Performance consolidated. 35

Gross Revenue. Volume of sales. 35

Paranapanema and Subsidiaries Revenues by Market 36

Volume Sales by Product 36

Net Revenue. Product Cost. Gross Protif. 37

Expenses and other Net Operating Revenues 37

EBITDA consolidated. Net Financial Restul consolidated 38

Provisions for Court Actioins. Net Profit 38

Net (Cash) Debt. Investments 39

Effects on the Financial Statements and initial adoption of Law 11.638/07 and MP 449/08 40

Economic

Annual Social Balance – IBASE 73

Quantity of employees of the companies and 41

Collaborators’ profile – Women and Black People 41

Collaborators’ profile – Person with special needs and those over 45 years old 41

Education Support Plan – PAE/PAED 45

Training – Hours and Total Cost 46

Personnel

Training – Cost per Employee 46

Quantity of suppliers accredited 49 Customers and Suppliers Percentage of Customers’ Satisfaction 52

Quantity of educated personnel in Eluma 56

Learning Underage Program – quantity and investment 57

PAC – Educatioin: Tô Dentro program – quantity of people served in the community 59

PAC – Health – Medical services in the community 59

Social

Social Investment – percentage of net revenue 60

Amount invested in Environmental Improvement 63

Investments made and predicted in Eluma 64

Investments made and predicted in Cibrafertil 65

Investments made and predicted in Caraíba 66

Reutilization / Recovery of areas 68

Use of resources – Energy and Water - in Caraíba and Eluma 68

Consumption of Fossil Fuels 69

Quantity of solid residues generated and recycled 69

Specific emissions of sulphur at Caraíba 69

Concentration of SO2 at the air quality stations 69

Reutilization of Slage at Caraíba 69

Recovery of copper via electrolysis of acid solution saturated Prickling process 69

Environmental

Residue Generation at Caraíba 70

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“Toda a sociedade que pretende

assegurar a liberdade aos homens deve começar por

garantir-lhes a existência.”

(Léon Blum)

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Social-Environmental Actions and Millenium Targets

The goals are challenges for the world companies up to 2015 taken by 191 countries which signed the UNO Millenium Declaration. The Millenium Goals take into regard the following world problems:

EXTREME POVERTY AND HUNGER ERADICATION

Thousands of people in the world live in extreme poverty without having anything to eat. Due to lack of employment and income, they don’t buy and starve.

Paranapanema Actions:

Volunteer Groups organize food collection movements for people from entities assisted and also distribute meals do homeless people.

Focused on the qualification to ease a future insertion into the work market there are arts and craftsmanship workshops, computing formation, boiler and welding classes.

It helps with food and clothing to the people affected by flooding in Santa Catarina in 2008.

Project in Santo André, the Young Patrollers, encourages the first job for needy young people.

In the units of São Paulo and Espírito Santo we highlight the Learning Underage project for professional qualification and placement into work market as well as in the Fertilizer unit in Bahia.

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REACH THE UNIVERSAL PRELIMINARY SCHOOL

Besides numberless children without access to education, many of them at school have to stop studying before completing the basic cycle.

Paranapanema Actions:

Group of Volunteers develops a encouragement and motivation project for reading in Leandrinho, district of Dias d’Ávila/BA. Another group provides school reinforcement classes also in communities next to Caraíba.

While widening the children’s and teenagers’ horizon of possibilities, the volunteers provide music and painting classes (arts) besides the support given to the educational institution in the continued education.

Project in Santo André highlights the concern in complementing the education of its employees from learning and reading to preliminary and secondary school; the classes are held at the own units and count with the Education Department support. In Bahia, similar program eradicated the iliteracy in Caraíba and nowadays its employees have full secondary education.

Eluma educational covenants with preliminary, secondary, technical, college and language course institutions.

PROMOTE THE EQUALITY BETWEEN GENDERS AND WOMEN AUTONOMY

Violence against women, moral and sexual harassment, wage differences, access to health and education are some discriminating behaviors to which women are exposed.

Paranapanema Actions:

Group of Volunteers qualifies mothers of a day care center in business management so that they may generate their own income, favoring their autonomy.

At Paranapanema there is no difference between women’s and men’s salaries in the same position.

REDUCE INFANT MORTALITY

Every year 11 million babies die due to diverse causes.

Paranapanema Action:

Health programs in the communities provide service, follow-up, guidance, pre-delivery care to mothers and future mothers, guide the family planning and support puericulture (pediatrics service).

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IMPROVE THE MOTHER’S HEALTH

In poor and in development countries at every 48 deliveries 1 mother dies.

Paranapanema Action:

Health programs in the communities around the metallurgy in Bahia privilege the woman’s health with service, follow-up, guidance and pre-deliver care.

COMBAT HIV/AIDS, YELLOW FEVER AND OTHER DISEASES.

In large world regions, deadly epidemies have been destroying generations and terminating any development possibility.

Paranapanema Actions:

Health programs in the communities provide lectures and transmissible sexual diseases (DST) campaigns and endemic diseases.

The units promote periodically vaccination campaigns against Influenza and Measles.

Promotion of vaccination campaigns against Influenza and Measles and clarification campaigns about Dengue.

Annually in the Accident Prevention Internal Weeks – SIPAT, lectures are provided about DST, focusing AIDS prevention.

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ASSURE THE ENVIRONMENTAL SUSTAINABILITY

The water and decontamination are two key environmental factors for the human life quality. Everybody together for the Development. The joint of several sectors (public, private and civil society) is essential for target reach.

Paranapanema Actions:

Projects implemented in the metallurgy unit in Bahia intended for natural resource preservation such as reutilization of water used in the industrial process and use of alternative energy sources.

Development of selective collection and recycling programs in Paranapanema units.

Programs of Environmental Agents, community people trained to work as community leadership and Caraíba interlocutor for environmental actions of the surrounding area.

Certification of Caraíba Metais in ISO 14000.

Eluma ROHS (Restriction of Hazard Substances) Certification, Capuava unit.

Integrated management of manufacturing residues focusing on reutilization and recycling.

Tree planting to increase the unit green area or recovery of degraded areas.

ESTABLISH WORLD PARTNERSHIP FOR THE DEVELOPMENT

Favoring the thinking about importance of international cooperation.

Paranapanema Actions:

Partnership in the Environment Partners program, sponsoring small companies in the adoption of correct environmental actions.

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Paranapanema at Global Compact

The Global Compact is an initiative from Organization of the United Nations (ONU), aiming to mobilize international business community to adopt, in their business practices, essential and internationally values that are accepted in human rights, work relations, environment and corruption fight sections, described on 10 Principles.

The Global Compact is a voluntary initiative which purpose is to provide guidelines to support sustainable growth and develop of citizenship, through compromised and innovative corporate leadership.

The United Nation agencies, companies, unions, non-governmental organizations and another partner in the building of a more including and equal global market are taking part at the Global Pact. Currently, there are more than 5,200 joint and signatory organizations in 150 networks around the world.

Paranapanema is signatory from United Nations Global Compact and the Brazilian Network which has been giving support to Global Pact since June 2008 and as a participant adopts and embraces 10 principles that are:

Humans Rights

1º. Companies shall support and respect human right protection internationally recognized; and

2º. To assure its participation and the non-violation of these rights.

Work Relations

3º. Companies must support the freedom of association and the effective recognition of right of collective bargaining;

4º. The elimination of all forms of mandatory or compulsory work;

5º. The effective abolition of child labour; and

6º. To eliminate discrimination at work.

Environment

7º. Companies must support a preventive approach to environmental challenges;

8º. To develop initiatives to promote greater environmental liability; and

9ª. To encourage the development and diffusion of eco friendly technology.

Corruption Fight

10º. The companies shall fight against all forms of corruption, including corruption and bribe.

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Paranapanema, through its representatives Caraíba Metais, Cibrafertil and Eluma, has been developing and implementing a number of actions to accomplish the appropriate principles such as: certification from ISO 14000 of environmental rule, preparation to safety and health rules implementation, OHSAS 18000 and social responsibility, SA 8000, redistribution of Code of Ethics reinforcing fight against corruption, guidance on suppliers’ contracts about child labor.

Paranapanema has also a representative in Brazilian Committee of Caring for Climate from ONU Global Pact in Brazil, whose official launch will take place during International Conference from Ethos Institute - Congress of Companies and Social Responsibility from 15 to 18/06/09.

Caring for Climate is an additional Platform of Global Compact for those participants that want to forward on the solutions about climate changes and there are already 355 signatories around the world, to demonstrate leadership in the theme about climate changes, both collective and individual level, in addition to be an important opportunity to reflect about how the companies and organizations may get involved in crisis period contributing for a more sustainable world. At the program launch, the presence of Claude Fussler, director in charge for the program all of the world, is expected and the companies will be invited to join this initiative.

In addition, Paranapanema was invited by UN Global Compact Office and accepted to join the project regarding fields test to elaborate Anti-Corruption Field-testing of Global Compact Reporting Guidance, effective on May, 18th, 2009.

At Environmental area, in June 2009, the inventory of GEE – effects of greenhouse gas emissions – has been started at Eluma and may be increased to the other companies, according to internal and previous analysis and consultants.

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Contacts

CORPORATE CENTER

Rua Felipe Camarão, 5OO - Utinga - Santo André/SP - CEP O9.22O-9O1, tel.: (11) 4463-76O4 www.paranapanema.com.br

CARAÍBA METAIS

Via do Cobre, 37OO, AIO, COPEC - Dias d’Ávila/BA - CEP 42.85O-OOO - tel.: (71) 22O3-15OO

CIBRAFÉRTIL

Rua Alfa, 1428, AIN, COPEC – Camaçari/BA - CEP 42.81O-290 - tel.: (71) 22O2-42O1

ELUMA – Utinga

Rua Felipe Camarão, 5OO - Utinga - Santo André/SP - CEP O9.22O-9O1 - tel.: (11) 4463-76O4

ELUMA - Capuava

Av. Alexandre de Gusmão, 865 - Capuava - Santo André/SP - CEP O9111-31O - tel.: (11) 4998-2OOO

ELUMA - Vitória

Rua Atalydes Moreira de Souza, 1O4O - bairro Civit, setor I – Serra/ES - CEP 29.168-O6O tel.: (27) 3341-1O11

Credits

Issue: 2ª Edição – abril / 2009

Coordination:DRI – Diretoria de Relações com Investidores / ParanapanemaDoris WilhelmGRA – Comunicação Caraíba MetaisSergio Hinz

Caraíba, Cibrafértil, and Eluma collaboration:

Cícero Gomes, Danubia Fernandes, Denise Soratto, Eduardo Copello, Erica Mitiko Motikawa, Giovane Firmino Moura, Giselle Santana, Hernani da Silveira Jr, Jacinta Alves, José Antonio Rinaldi, José Arnaldo Vasconcelos, José Mário Pinho de Assis Jr. Kátia Pierre, Luciana Costa, Luciana Miranda Pagnoncelli, Luciene Almeida, Mário Sesso, Michelle Taborda, Milena Pessoa, Raul Sibon, Vanderlei Bermejo e Walter Oliveira.

Graphic Project: : APS Comunicação – 71. 3240.8709 | 9977.4522 | www.apscomunicacao.com.br