US$75000000 Lupatech Finance Limited - Banco Best

OFFERING CIRCULAR
US$75,000,000
Lupatech Finance Limited
(an exempted company incorporated under the laws of the Cayman Islands)
9.875% Guaranteed Perpetual Bonds
Unconditionally and irrevocably guaranteed by:
Lupatech S.A. and its subsidiaries Carbonox Fundição de Precisão Ltda., Cordoaria São Leopoldo Off Shore S.A.,
Esferomatic S.A., Gasoil Serviços Ltda., Itasa Industria y Tecnología en Aceros S.A., Jefferson Solenoidbras Ltda., Jefferson
Sudamericana S.A., K&S Tubular Services Ltda., Lupatech Petroima Equipamentos para Petróleo Ltda., Metalúrgica Ipê
Ltda., Metalúrgica Nova Americana Ltda., Mipel Indústria e Comércio de Válvulas Ltda., Ocean Coating Revestimentos
Ltda., Steelinject Injeção de Aços Ltda., Valmicro Indústria e Comércio de Válvulas Ltda. and
Válvulas Worcester de Argentina S.A.
Lupatech Finance Limited, or Lupatech Finance, an exempted company incorporated under the laws of the Cayman Islands, is an
entity incorporated for the purpose of offering bonds. The bonds offered by this offering circular are referred to as the “new bonds.” The
new bonds are being offered as additional debt securities under an indenture pursuant to which, on July 10, 2007, Lupatech Finance issued
US$200,000,000 of guaranteed perpetual bonds bearing interest of 9.875% per year. The guaranteed perpetual bonds issued on July 10,
2007 are referred to in this offering circular as the “initial bonds.” The initial bonds and the new bonds will constitute a single class of debt
securities under the indenture and are collectively referred to as the “bonds.” The new bonds will initially be sold to investors at a price
equal to 98.768% of the principal amount thereof, plus accrued interest from April 10, 2008.
The bonds will be perpetual bonds with no fixed final maturity date and will be repaid only in the event that Lupatech Finance
redeems or repurchases the bonds or upon acceleration due to an event of default, as described under “Description of the Bonds.”
Lupatech Finance may, at its option, redeem the bonds, in whole or in part, at 100% of their principal amount plus accrued
interest and certain additional amounts, if any, on any interest payment date on or after July 10, 2012 or at any time upon the occurrence of
specified events relating to the applicable tax law, as described under “Description of the Bonds—Redemption.”
The new bonds and the initial bonds will be unconditionally and irrevocably, jointly and severally, guaranteed by Lupatech S.A.
and its subsidiaries Carbonox Fundição de Precisão Ltda., Cordoaria São Leopoldo Off Shore S.A., Esferomatic S.A., Gasoil Serviços
Ltda., Itasa Industria y Tecnología en Aceros S.A., Jefferson Solenoidbras Ltda., Jefferson Sudamericana S.A., K&S Tubular Services
Ltda., Lupatech Petroima Equipamentos para Petróleo Ltda., Metalúrgica Ipê Ltda., Metalúrgica Nova Americana Ltda., Mipel Indústria e
Comércio de Válvulas Ltda., Ocean Coating Revestimentos Ltda., Steelinject Injeção de Aços Ltda., Valmicro Indústria e Comércio de
Válvulas Ltda. and Válvulas Worcester de Argentina S.A., or, collectively, the Guarantors.
The bonds will be senior unsecured obligations of Lupatech Finance, ranking equal in right of payment with all of its other
existing and future senior unsecured debt. The guarantees of the bonds will rank pari passu with all unsecured and unsubordinated
obligations of each of the Guarantors.
Application has been made to list the new bonds on the Official List of the Luxembourg Stock Exchange and admit the new
bonds for trading on the Euro MTF market of the Luxembourg Stock Exchange (Euro MTF). See “Listing and General Information.” The
new bonds are expected to be eligible for trading in the PORTAL Market at the time of issuance thereof.
Investing in the bonds involves risks. See “Risk Factors” beginning on page 19 for a discussion of certain
information that you should consider before investing in the bonds.
For a more detailed description of the bonds, see “Description of the Bonds” beginning on page 116.
The new bonds have not been registered under the U.S. Securities Act of 1933, as amended, or the Securities Act, and are being
offered only to non-U.S. persons outside the United States in accordance with Regulation S. For more information about restrictions on
transfer of the bonds, see “Notice to Investors” beginning on page 146.
The new bonds will be delivered to purchasers in book-entry form through The Depository Trust Company, or DTC, and its
direct and indirect participants, including Clearstream Banking, S.A. Luxembourg, or Clearstream Luxembourg, and Euroclear Bank S.A./
N.V., as operator of the Euroclear System, or Euroclear, on or about June 30, 2008.
Joint Lead Managers and Book-Running Managers
Citi Merrill Lynch & Co.
The date of this offering circular is June 23, 2008.

You should rely only on the information contained in this offering circular. Neither Lupatech
Finance, the Guarantors, nor Citigroup Global Markets Limited or Merrill Lynch, Pierce, Fenner & Smith
Incorporated, or the initial purchasers, has authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information, you should not rely on it.
None of Lupatech Finance, the Guarantors or the initial purchasers is making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted.
TABLE OF CONTENTS
Enforceability of Judgments.........................................................................................................................................vi
Cautionary Statement Regarding Forward-Looking Statements ............................................................................... viii
Presentation of Financial and Other Information..........................................................................................................ix
Summary........................................................................................................................................................................1
Summary of Terms and Conditions...............................................................................................................................9
Summary Financial and Other Information .................................................................................................................13
Risk Factors.................................................................................................................................................................19
Use of Proceeds ...........................................................................................................................................................28
Exchange Rates ...........................................................................................................................................................29
Capitalization...............................................................................................................................................................30
Selected Financial and Other Information ...................................................................................................................31
Management’s Discussion and Analysis of Financial Condition And Results of Operations .....................................37
Unaudited Pro Forma Combined Statement of Operations .........................................................................................62
Industry and Regulatory Overview..............................................................................................................................65
Business.......................................................................................................................................................................75
Ownership and Management .....................................................................................................................................108
Related Party Transactions ........................................................................................................................................114
Description of The Bonds..........................................................................................................................................116
Taxation.....................................................................................................................................................................132
European Union Directive on Taxation of Savings Income ......................................................................................138
Plan of Distribution ...................................................................................................................................................140
Form of Bonds...........................................................................................................................................................143
Notice To Investors ...................................................................................................................................................146
ERISA and Certain Other Considerations .................................................................................................................148
Validity of Bonds ......................................................................................................................................................149
Independent Auditors ................................................................................................................................................150
Listing and General Information ...............................................................................................................................151
Index To Financial Statements .................................................................................................................................. F-1
This offering circular constitutes a prospectus for the purpose of the Luxembourg Law dated July 10, 2005
on Prospectuses for Securities.
In this offering circular, the terms “Lupatech,” “we,” “us,” “our” and “our company” mean, unless
otherwise indicated, Lupatech S.A. and its subsidiaries unless expressly stated otherwise or unless the context
indicates otherwise, and all references to “Lupatech Finance” refer to Lupatech Finance Limited. The term “Brazil”
refers to the Federative Republic of Brazil and the term “Argentine” refers to the Republic of Argentina. The term
“Brazilian government” refers to the federal government of the Federative Republic of Brazil and the term
“Argentine government” refers to the federal government of the Republic of Argentina.
This offering circular does not constitute an offer to sell, or a solicitation of an offer to buy, any bond
offered hereby by any person in any jurisdiction in which it is unlawful for such person to make an offer or
solicitation. Neither the delivery of this offering circular nor any sale made hereunder shall under any
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circumstances imply that there has been no change in our affairs or that the information set forth in this
offering circular is correct at any date subsequent to the date of this offering circular.
This offering circular has been prepared solely for use in connection with the proposed offering of the
bonds described herein. Lupatech Finance, the Guarantors and the initial purchasers reserve the right to reject any
offer to purchase, in whole or in part, for any reason, or to sell less than all of the bonds offered by this offering
circular. No person is authorized to give any information or to make any representation not contained in this
offering circular and any information or representation not so contained must not be relied upon as having been
authorized by or on behalf of Lupatech Finance, the Guarantors or the initial purchasers. By accepting delivery of
this offering circular, prospective investors agree to the foregoing and to make no photocopies of this offering
circular.
The distribution of this offering circular and the offering of the bonds in certain jurisdictions may be
restricted by law. It may only be used for the purpose for which it has been published. Persons into whose
possession this offering circular comes are required by us and the initial purchasers to inform themselves about and
to observe any such restrictions. See “Notice to Investors” for information concerning certain transfer restrictions
applicable to the bonds.
You acknowledge that:
• you have been afforded an opportunity to request from us, and to review, all additional information
considered by you to be necessary to verify the accuracy of, or to supplement, the information
contained in this offering circular;
• you have had the opportunity to review all of the documents described herein;
• you have not relied on the initial purchasers or any person affiliated with the initial purchasers in
connection with your investigation of the accuracy of such information or your investment decision;
and
• no person has been authorized to give any information or to make any representation concerning us or
the bonds other than those as set forth in this offering circular. If given or made, any such other
information or representation should not be relied upon as having been authorized by us or the initial
purchasers.
In making an investment decision, prospective investors must rely on their own examination of our
business and the terms of this offering circular, including the merits and risks involved. The bonds have not been
approved or recommended by any federal or state securities commission or regulatory authority. Furthermore, these
authorities have not passed upon or endorsed the merits of the offering or confirmed the accuracy or determined the
adequacy of this offering circular. Any representation to the contrary is a criminal offense.
This offering is being made in reliance upon an exemption from registration under the Securities Act for an
offer and sale of securities that does not involve a public offering. The bonds are subject to restrictions on
transferability and resale and may not be transferred or resold except as permitted under the Securities Act and
applicable state securities laws, pursuant to registration or exemption therefrom. In making your purchase, you will
be deemed to have made certain acknowledgments, representations and agreements set forth in this offering circular
under the caption “Notice to Investors.” You should be aware that you may be required to bear the financial risks of
this investment for an indefinite period of time.
Application has been made to list the new bonds on the Official List of the Luxembourg Stock Exchange and
admit the new bonds for trading on the Euro MTF market of the Luxembourg Stock Exchange (Euro MTF). The
new bonds are expected to be eligible for trading in the PORTAL Market at the time of issuance thereof.
We accept full responsibility for the information contained in this offering circular and, having taken all
reasonable care to ensure that such is the case, declare that the information contained in this offering circular is, to
ii

the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. We
cannot assure you, however, that the information from other sources contained in this offering circular is accurate or
complete. We accept responsibility for correctly extracting and reproducing such information. To the extent that
documents or other information are summarized in this offering circular, we refer you to such other documents and
information for a more complete understanding of what we discuss in this offering circular. No person has been
authorized to give information or to make any representation concerning us or our notes other than as contained in
this offering circular; if given or made, such other representation should not be relied upon as having been
authorized by us.
THE NEW BONDS AND THE INITIAL BONDS ISSUED PREVIOUSLY HAVE NOT BEEN AND
WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OR WITH ANY SECURITIES REGULATORY
AUTHORITY OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE,
COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF,
OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS
UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER,
OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
NOTICE TO RESIDENTS OF BRAZIL
The bonds have not been, and will not be, registered with the Comissão de Valores Mobiliários, or the
CVM, the Brazilian securities commission. Any public offering or distribution, as defined under Brazilian laws and
regulations, of the bonds in Brazil is not legal without such prior registration. Documents relating to the offering of
the bonds, including this offering circular, as well as information contained therein, may not be supplied or
distributed to the public in Brazil, as the offering of the bonds is not a public offering of securities in Brazil, nor may
they be used in connection with any offer for subscription or sale of the bonds to the public in Brazil. Each of the
initial purchasers has agreed not to offer or sell the bonds in Brazil, except in circumstances that do not constitute a
public offering or distribution of securities under applicable Brazilian laws and regulations or pursuant to an express
exemption of registration with the CVM, pursuant to Brazilian law and regulations.
NOTICE TO RESIDENTS IN ARGENTINA
This offering circular has not been and will not be filed with the Argentine National Securities Commission
(Comisión Nacional de Valores), or CNV, and, therefore, neither the CNV nor any other Argentine regulatory
authority has reviewed, approved or rendered any opinion in respect of the accuracy of the information contained
herein. The bonds may not be publicly offered within Argentina unless in compliance with Argentine Law No.
17,811, Decree No. 677/01 (as amended from time to time) and other applicable Argentine law and regulations, and
unless the CNV has granted its public offering authorization.
iii

NOTICE TO MEMBERS OF THE PUBLIC OF THE CAYMAN ISLANDS
SECTION 194 OF THE COMPANIES LAW (2007 REVISION) OF THE CAYMAN ISLANDS
PROVIDES THAT AN EXEMPTED COMPANY (SUCH AS LUPATECH FINANCE) THAT IS NOT LISTED
ON THE CAYMAN ISLANDS STOCK EXCHANGE IS PROHIBITED FROM MAKING ANY INVITATION
TO THE PUBLIC IN THE CAYMAN ISLANDS TO SUBSCRIBE FOR ANY OF ITS BONDS. EACH
PURCHASER OF THE BONDS AGREES THAT NO INVITATION MAY BE MADE TO THE PUBLIC IN THE
CAYMAN ISLANDS TO SUBSCRIBE FOR THE BONDS.
NOTICE TO RESIDENTS OF THE UNITED KINGDOM
Each of the initial purchasers has represented and agreed that (1) it has only communicated or caused to be
communicated and will only communicate or cause to be communicated any invitation or inducement to engage in
investment activity (within the meaning of section 21 of The Financial Services and Markets Act of 2000, or the
FSMA) received by it in connection with the issue or sale of any bonds in circumstances in which section 21(1) of
the FSMA does not apply to us; and (2) it has complied, and will comply, with all applicable provisions of the
FSMA with respect to anything done by it in relation to the bonds in, from or otherwise involving the United
Kingdom.
NOTICE TO RESIDENTS OF THE EUROPEAN ECONOMIC AREA
In relation to each Member State of the European Economic Area which has implemented the Prospectus
Directive (each, a “Relevant Member State”), each of the initial purchasers has represented and agreed that with
effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State
(the “Relevant Implementation Date”) it has not made and will not make an offer of the bonds to the public in that
Relevant Member State prior to the publication of a prospectus in relation to the bonds which has been approved by
the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member
State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus
Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of
bonds to the public in that Relevant Member State at any time (i) to legal entities which are authorized or regulated
to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in
securities; (b) to any legal entity which has two or more of (a) an average of at least 250 employees during the last
financial year; (b) a total balance sheet of more than €43,000,000, and (c) an annual net turnover of more than
€50,000,000, as shown in its last annual or consolidated accounts; or (ii) in any other circumstances which do not
require the publication by the issuer of a prospectus pursuant to Article 3 of the Prospectus Directive. For the
purposes of this provision, the expression an “offer of bonds to the public” in relation to any bonds in any Relevant
Member State means the communication in any form and by any means of sufficient information on the terms of the
offer and the bonds to be offered so as to enable an investor to decide to purchase or subscribe the bonds, as the
same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member
State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing
measure in each Relevant Member State.
NOTICE TO RESIDENTS OF FRANCE
This document is furnished to you solely for your information and may not be reproduced or redistributed
to any other person. This document does not constitute an offer or an invitation to subscribe for or to purchase any
securities and neither this document nor anything contained herein shall form the basis of any contract or
commitment whatsoever. This paragraph is applicable only to residents of France. This document may not be
distributed to the public in France or used in connection with any offer for subscription or sale of securities in
France other than in accordance with article L-411-2 of the Code Monétaire et Financier and Décret No. 98-880
iv

dated October 1, 1998. This document has not been submitted to the Autorité des Marchés Financièrs for approval
and does not constitute an offer for sale or subscription of securities.
NOTICE TO RESIDENTS OF HONG KONG
Each of the initial purchasers has represented and agreed that (1) it has not offered or sold, and will not
offer or sell, in Hong Kong, by means of any document, any bonds other than to persons whose ordinary business is
to buy or sell shares or debentures, whether as principal or agent, or in circumstances which do not constitute an
offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong and (2) it has not
issued, or had in its possession for the purpose of issue, and will not issue, or have in its possession for the purpose
of issue, whether in Hong Kong or elsewhere, any invitation, document or advertisement relating to the bonds,
which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if
permitted to do so under the securities laws of Hong Kong) other than with respect to bonds which are or are
intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the
meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that
Ordinance.
NOTICE REGARDING SINGAPORE OFFERING
This offering circular has not been registered as a prospectus with the Monetary Authority of Singapore, or
the MAS, and the bonds are offered in Singapore pursuant to exemptions invoked under section 274 and/or
section 275 of the Securities and Futures Act (chapter 289) of Singapore, or the SFA. Accordingly, each of the
initial purchasers has represented and agreed that it will not offer or sell the bonds nor make the bonds the subject of
an invitation for subscription or purchase, nor will it circulate or distribute this offering circular or any other
document or material in connection with the offer or sale, or invitation for subscription or purchase, of the bonds,
whether directly or indirectly, to the public or any member of the public in Singapore other than (a) to an
institutional investor or other person specified in section 274 of the SFA, (b) to a sophisticated investor, and in
accordance with the conditions, specified in section 275 of the SFA or (c) otherwise pursuant to, and in accordance
with the conditions of, any other applicable provision of the SFA.
See “Risk Factors” for a description of certain factors relating to an investment in the bonds, including
information about our business. Neither Lupatech nor the initial purchasers nor any of its or their representatives is
making any representation to any prospective investor regarding the legality of an investment in the bonds under
applicable legal investment or similar laws. You should not consider any information in this offering circular to be
legal, business, accounting or tax advice. Prospective investors should consult with their own advisors as to legal,
tax, business, financial, accounting and related aspects of a purchase of the bonds.
v

Cayman Islands
ENFORCEABILITY OF JUDGMENTS
We have been advised by our Cayman Islands legal counsel, Maples and Calder, that there is no statutory
enforcement in the Cayman Islands of judgments obtained in New York or Brazil. However, a judgment obtained in
such jurisdiction will be recognized and enforced in the courts of the Cayman Islands at common law, without any
re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the
Grand Court of the Cayman Islands, provided such judgment is given by a foreign court of competent jurisdiction,
imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given, is final, is
not in respect of taxes, a fine or a penalty and was not obtained in a manner and is not of a kind the enforcement of
which is contrary to natural justice or the public policy of the Cayman Islands.
Brazil
We and the Guarantors that are domiciled in Brazil are incorporated under the laws of Brazil. All of our
directors and executive officers and the directors and executive officers of such Guarantors reside in Brazil, and
substantially most of our and their assets are located in Brazil. As a result, it may not be possible or it may be
difficult for you to effect service of process upon us, the Brazilian Guarantors or these persons within the United
States or to enforce against us, the Brazilian Guarantors or these persons in the United States court judgments
predicated upon the civil liability provisions of the federal securities laws of the United States.
We have been advised by our Brazilian legal counsel, Machado, Meyer, Sendacz e Opice Advogados, that
a final conclusive judgment for the payment of money rendered by any New York state or federal court sitting in
New York City in respect of the payment of the bonds would be recognized in the courts of Brazil (to the extent that
Brazilian courts may have jurisdiction), and such courts would enforce such judgment without any retrial or
reexamination of the merits of the original action only if such judgment has been previously ratified by the Brazilian
Superior Court of Justice (Superior Tribunal de Justiça), such ratification being available only if the U.S. judgment:
• fulfills all formalities required for its enforceability under the laws of the State of New York;
• is for payment of a certain and liquid amount;
• is issued by a competent court after proper service of process on the parties, which service must
comply with Brazilian law if made in Brazil, or after sufficient evidence of the parties’ absence has
been given, as established pursuant to applicable law;
• is not subject to appeal;
• is authenticated by the Brazilian consulate in the State of New York and is accompanied by a sworn
translation into the Portuguese language; and
• is not against Brazilian public policy, good morals or national sovereignty.
Notwithstanding the foregoing, no assurance can be given that such ratification would be obtained, that the
process described above could be conducted in a timely manner or that a Brazilian court would enforce a monetary
judgment for violation of the U.S. securities laws with respect to the bonds.
We have also been advised that:
• original actions may be brought in connection with this offering circular predicated solely on the
federal securities laws of the United States in Brazilian courts and, subject to applicable law, that
Brazilian courts may enforce such liabilities in such actions against us or the directors and officers and
certain advisors named herein (provided that provisions of the federal securities laws of the United
States do not contravene Brazilian public policy, good morals or national sovereignty and provided
further that Brazilian courts can assert jurisdiction over the particular action);
vi

Argentina
• a plaintiff, whether Brazilian or non-Brazilian, who resides outside Brazil or is outside Brazil during
the course of the litigation in Brazil and who does not own real property in Brazil, must post bond to
secure the payment of the defendant’s legal fees and court expenses as determined by the Brazilian
judge, except in those cases where the enforcement of foreign judgments is duly confirmed by the
Brazilian Superior Court of Justice;
• Brazilian law limits investors’ abilities as judgment creditors to satisfy a judgment against debtors by
attaching their assets; and
• any disputes or controversies relating to the listing rules of Novo Mercado, our bylaws, Law No. 6,404,
dated December 15, 1976, as amended, the rules of CMN, the Central Bank, the CVM and BOVESPA,
as well as other rules applicable to Brazilian capital markets in general, must be submitted to
arbitration conducted in accordance with “Rules of the Market Arbitration Chamber” of BOVESPA,
provided that the dispute or controversies are not in respect of non-waivable rights.
The Guarantors that are Argentine entities are stock corporations (sociedades anónimas) organized under
the laws of Argentina. All of the directors, members of the oversight committees and officers of these companies
reside outside the United States. All or a substantial portion of the assets of these entities and of such directors,
overseers and officers are located outside the United States. As a result, it may not be possible for investors to effect
service of process outside Argentina upon the Argentine Guarantors or such persons, or to enforce judgments against
them obtained in courts outside Argentina predicated upon civil liabilities of the Argentine Guarantors or such
directors, overseers and officers under the laws of jurisdictions other than Argentina, including any judgment
predicated upon United States federal securities laws. Pursuant to the terms of the indenture, our Argentine
Guarantors will (i) agree that any New York state or U.S. federal court sitting in the Borough of Manhattan, City and
State of New York, will have non-exclusive jurisdiction to hear and determine any suit, action or proceeding or
arbitral award arising out of or relating to the indenture, the bonds and the guarantees and, for such purposes,
irrevocably submit to the jurisdiction of such courts and (ii) name an agent for service of process in the Borough of
Manhattan, New York City. See “Description of the Bonds.”
Foreign judgments would be recognized and enforced by the courts in Argentina provided that the
requirements of Article 517 of the Federal Civil and Commercial Procedure Code (if enforcement is sought before
federal courts) are met. These requirements include (i) the judgment, which must be final in the jurisdiction where
rendered, must have been issued by a court competent pursuant to Argentine principles regarding international
jurisdiction and must have resulted from a personal action, or an in rem action with respect to personal property if
such property was transferred to Argentine territory during or after the prosecution of the foreign action, (ii) the
defendant against whom enforcement of the judgment is sought must have been personally served with the summons
and, in accordance with due process of law, must have been given an opportunity to defend against foreign action,
(iii) the judgment must be valid in the jurisdiction where rendered and its authenticity must be established in
accordance with the requirements of Argentine law, (iv) the judgment must not violate the principles of public
policy of Argentine law, and (v) the judgment must not be contrary to a prior or simultaneous judgment of an
Argentine court.
We have been advised by Pérez Alati, Grondona, Benites, Arntsen & Martínez de Hoz (h), our Argentine
legal counsel, that there is doubt as to the enforceability in Argentina, in original actions or in actions for
enforcement of judgments of United States courts, of civil liabilities predicated solely upon the federal securities
laws of the United States.
vii

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This offering circular contains statements that are or may constitute forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995. Our estimates and forward-looking
statements are mainly based on our current expectations and estimates on future events and that which affect or may
affect our businesses and results of operations. Although we believe that these estimates and forward-looking
statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made
in light of information currently available to us.
Our estimates and forward-looking statements may be influenced by the following factors, among others:
• economic, political and business conditions in the geographic markets where we operate and
particularly in Brazil and Argentina;
• our indebtedness level and other financial liabilities, our ability to repay our indebtedness and comply
with our financial obligations and our ability to arrange financing when necessary and under
reasonable conditions;
• our ability to continue to acquire other companies and integrate them into our production chain;
• our ability to implement our strategy and business plans;
• inflation, currency and interest rate fluctuations;
• existing and future laws and regulations applicable to the segments in which we operate, including
those relating to government measures and changes in fiscal policy and environmental and tax laws;
• increases in our costs;
• our ability to access an uninterrupted supply of raw materials and services at reasonable prices and
with economies of scale;
• our expectations concerning the growth of the oil and gas, chemical and automotive industries,
including expectations related to the growth of Petrobras;
• our expectation that Petrobras will continue to require a minimum level of participation by Brazilian
suppliers of goods and services in the projects for which it solicits bids;
• other factors that may affect our financial condition, liquidity and results of operations; and
• other risks factors discussed under “Risk Factors.”
The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar
words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements
speak only as of the date they were made, and we undertake no obligation to update or to review any estimate and/or
forward-looking statement because of new information, future events or other factors. Estimates and forwardlooking
statements involve risks and uncertainties and are not guarantees of future performance. Our future results
may differ materially from those expressed in these estimates and forward-looking statements. In light of the risks
and uncertainties described above, the estimates and forward-looking statements discussed in this offering circular
might not occur and our future results and our performance may differ materially from those expressed in these
forward-looking statements due to the factors mentioned above, among others. Because of these uncertainties, you
should not make any investment decision on the bonds solely based on these estimates and forward-looking
statements.
viii

PRESENTATION OF FINANCIAL AND OTHER INFORMATION
All references in this offering circular to “real,” “reais” or the symbol “R$” are to the Brazilian real, the
legal currency of Brazil. All references to “U.S. dollars,” “dollars,” “dollar” or “US$” are to the U.S. dollar, the
legal currency of the United States. All references in this offering circular to “peso” or “pesos” are to the Argentine
peso, the legal currency of Argentina.
Unless otherwise indicated, all financial information relating to us that is presented in U.S. dollars in this
offering circular has been translated from reais using the PTAX-800 exchange selling rate of R$1.749 to US$1.00 as
of March 31, 2008, as published by the Brazilian Central Bank (Banco Central do Brasil), or the Central Bank,
through its electronic system SISBACEN. PTAX-800 is the average of all rates traded on the commercial exchange
market during a day as calculated by the Central Bank at market closing. These translations should not be
considered representations that any such amounts have been, could have been or could be converted into U.S.
dollars at that or at any other exchange rate as of that or any other date. The real/dollar exchange rate may fluctuate
widely, and the exchange rate as of March 31, 2008 may not be indicative of future exchange rates. See “Exchange
Rates” for information regarding exchange rates for the Brazilian currency since January 1, 2003.
Financial Statements
Our consolidated financial statements for periods through December 31, 2007 have been prepared in
accordance with accounting practices adopted in Brazil, or Brazilian GAAP, which are based on:
• Brazilian Law No. 6,404/76, as amended by Brazilian Law No. 9,457/97, Brazilian Law No.
10,303/01, Brazilian Law No. 11,638/07 and by other laws from time to time, which we refer to
hereinafter as the Brazilian Corporate Law;
• the rules and regulations of the CVM; and
• the accounting standards issued by the Brazilian Institute of Independent Accountants (Instituto dos
Auditores Independentes do Brasil), or the IBRACON, and the Brazilian Federal Accounting Council
(Conselho Federal de Contabilidade), or the CFC.
As described in note 2 to our unaudited consolidated financial information for the three-month period
ended March 31, 2008, the Brazilian Corporate Law was amended in December 2007 by Law No. 11,638, effective
January 1, 2008, which introduced changes to accounting practices adopted in Brazil. Although the law is already
effective, the main changes introduced by it still depend on specific regulation by the different regulatory bodies.
During this transition phase, the CVM is not requiring the implementation of all the changes introduced by the law
in financial statements filed with it for interim periods during 2008, but certain specific changes are still required, as
established in CVM Instruction No. 469. As a result, our unaudited consolidated financial information as of and for
the quarter ended March 31, 2008 and the comparative financial information for the three-month period ended
March 31, 2007, which have been prepared in accordance with the instructions of the CVM, do not reflect the
effects of all the changes to accounting practices adopted in Brazil that were introduced by Law No. 11,638/07. For
purposes of this offering circular, therefore, “Brazilian GAAP” refers to accounting practices adopted in Brazil for
periods through December 31, 2007 and “CVM Instructions” refers to the accounting practices prescribed by the
CVM for the presentation of quarterly financial information for interim period during 2008, including the
corresponding comparative period for 2007.
Brazilian GAAP and CVM Instructions differ in certain significant respects from the accounting principles
generally accepted in the United States, or U.S. GAAP. Argentine GAAP, which is the basis of the presentation of
the separate financial statements of Delta included herewith also differs in certain significant respects from U.S.
GAAP. Such differences might be material to the financial information herein. The company has made no attempt
to identify or quantify the impact of those differences. In making an investment decision, investors must rely upon
their own examination of the Company, the terms of the offering and the financial information of the Company and
of the businesses acquired included in this offering circular. Potential investors should consult their own
professional advisors for an understanding of the differences between Brazilian GAAP and Argentine GAAP and
United States GAAP, and how those differences might affect the financial information herein.
ix

The following financial information is included in this offering circular:
• our consolidated financial statements as of and for the years ended December 31, 2005, 2006 and
2007, audited by PricewaterhouseCoopers Auditores Independentes, as stated in their reports appearing
herein;
• our unaudited interim consolidated financial information as of and for the three-month period ended
March 31, 2008. With respect to the unaudited consolidated interim financial information for the
three-month period ended March 31, 2008 included in this offering circular, Deloitte Touche Tohmatsu
Auditores Independentes reported that they have applied limited procedures in accordance with
Brazilian professional standards for a review of such information. However, their separate report dated
May 8, 2008 appearing herein states that they did not audit and they do not express an opinion on that
unaudited consolidated interim financial information. Accordingly, the degree of reliance on their
report on information for the three-month period ended March 31, 2008 should be restricted in light of
the limited nature of the review procedures applied. In addition, the auditor’s limited review report for
the interim financial information for the three-month period ended March 31, 2008, issued by Deloitte
Tohmatsu Auditores Independentes, includes an emphasis paragraph mentioning that the interim
financial statements for that period has been prepared in conformity with the CVM Instructions and do
not include all the changes in accounting practices introduced by Law No. 11,638/07;
• our unaudited interim consolidated financial information as of and for the three-month period ended
March 31, 2007. With respect to the unaudited consolidated interim financial information for the
three-month period ended March 31, 2007 included in this offering circular, PricewaterhouseCoopers
Auditores Independentes reported that they have applied limited procedures in accordance with
Brazilian professional standards for a review of such information. However, their separate report dated
June 3, 2008, appearing herein, states that they did not audit and that they do not express an opinion on
that unaudited consolidated interim financial information. Accordingly, the degree of reliance on their
report on information for the three-month period ended March 31, 2007 should be restricted in light of
the limited nature of the review procedures applied. The review report for the three-month period
ended March 31, 2007, issued by PricewaterhouseCoopers Auditores Independentes, includes an
emphasis paragraph mentioning that the interim financial statements for that period have been prepared
in conformity with CVM Instructions and do not include all the changes in accounting practices
introduced by Law No. 11,638/07;
• the unadited interim carve-out financial information of Cordoaria São Leopoldo Off-Shore Ltda.
(which was converted into a sociedade anônima on April 17, 2007 and renamed Cordoaria São
Leopoldo Off Shore S.A.), or CSL Offshore, as of and for the three-month period ended March 31,
2007, presenting, on a carve-out basis, the financial position and results of operations of the oil
platform-anchoring rope business, or the CSL Offshore Business, of Cordoaria São Leopoldo Ltda., or
CSL, for such period. With respect to the unaudited interim carve-out financial information for the
three-month period ended March 31, 2007 included in this offering circular, PricewaterhouseCoopers
Auditores Independentes reported that they have applied limited procedures in accordance with
Brazilian professional standards for a review of such information. However, their separate report dated
June 15, 2007, appearing herein, states that they did not audit and that they do not express an opinion
on that unaudited interim carve-out financial information. Accordingly, the degree of reliance on their
report on information for the three-month period ended March 31, 2007 should be restricted in light of
the limited nature of the review procedures applied;
• the audited financial statements of Gasoil Serviços Ltda., as of and for the six-month period ended
June 30, 2007, which have been audited by BDO Trevisan Auditores Independentes, as stated in their
report appearing herein. See “Risk Factors” for more information on the Gasoil financial statements;
and
• the unaudited interim financial information of Delta Compresión S.R.L., as of and for the six-month
period ended September 30, 2007 and the audited financial statements for the twelve-month period
x

ended March 31, 2007, which have been reviewed and audited by Mr. Juan Carlos Fernandez,
respectively, as stated in their report appearing herein.
The financial statements of Gasoil as of and for the six month periods ended June 30, 2006 (which are
included as comparative information with respect to the financial statements of Gasoil as of and for the six months
ended June 30, 2007) have not been audited or subject to a limited review by BDO or any other independent
accountant. Therefore, considering the fact that the financial statements as of and for the six months ended June 30,
2006 have not been audited or reviewed by any independent accountant and that the audit of the financial statements
for the year ended December 31, 2006 resulted in a qualified report as indicated in “Risk Factors”, the degree of
reliance on such financial information as of and for the six month periods ended June 30, 2006 should be restricted
in light of the limited nature of the review procedures applied. See “Risk Factors—Risks Relating to our
Company—The audited financial statements of Gasoil for the year ended December 31, 2006, which contained a
qualified opinion from BDO, have not been included in this offering circular” for more information on the Gasoil
financial statements.
Our consolidated financial statements included in this offering circular consolidate the financial position
and results of operations of Lupatech and the following subsidiaries:
For the years ended December 31, 2005, 2006 and 2007:
• Metalúrgica Nova Americana Ltda., or MNA; and
• Lupatech North America, LLC, or Lupatech North America.
For periods since the respective dates of acquisition of:
• Carbonox Fundição de Precisão Ltda., or Carbonox (of which we acquired a controlling interest in
April 2005 and subsequently acquired all outstanding shares on December 31, 2005 and the results of
which we began to consolidate as of May 1, 2005);
• Metalúrgica Ipê Ltda., or Mipel-SP (which we acquired in April 2006 and the results of which we
began to consolidate as of April 1, 2006);
• Itasa Industria y Tecnología en Aceros S.A., or Itasa (which we acquired in June 2006 and the results
of which we began to consolidate as of June 1, 2006);
• Válvulas Worcester de Argentina S.A., or Worcester, and its subsidiary Esferomatic S.A., or
Esferomatic (which we acquired in December 2006 and the results of which we began to consolidate as
of January 1, 2007);
• Cordoaria São Leopoldo Off Shore S.A., or CSL Offshore (which we acquired in April 2007 and the
results of which we began to consolidate as of April 1, 2007);
• Lupatech Petroima Equipamentos para Petróleo Ltda., or Petroima (which we acquired in April 2007
and the results of which we began to consolidate as of April 1, 2007);
• Gasoil Serviços Ltda., or Gasoil (which we acquired in July 2007 and the results of which we began to
consolidate as of July 1, 2007);
• Kaestner & Salermo Comércio e Serviços Ltda., or K&S, and its subsidiary Ocean Coating
Revestimentos Ltda, or Ocean (which we acquired in July 2007 and the results of which we began to
consolidate as of July 1, 2007);
• Jefferson Sudamericana S.A., or Jefferson (which we acquired in November 2007 and the results of
which we began to consolidate as of October 1, 2007);
xi

• Jefferson Solenoid Valves U.S.A., Inc., or Jefferson Valves (which we acquired in November 2007 and
the results of which we began to consolidate as of October 1, 2007);
• Jefferson Solenoidbras Ltda., or Jefferson Solenoidbras (which we acquired in November 2007 and
the results of which we began to consolidate as of October 1, 2007);
• Valjeff S.A. de C.V., or Valjeff (which we acquired in November 2007 and the results of which we
began to consolidate as of October 1, 2007);
• Delta Compresión S.R.L., or Delta Compresión (which we acquired in January 2008 and the results of
which we began to consolidate as of October 1, 2007);
• Compresores Panamericanos S.R.L., or Compresores (which we acquired in January 2008 and the
results of which we began to consolidate as of October1, 2007); and
• Aspro do Brasil Sistemas de Compressão para GNV Ltda., or Aspro (which we acquired in January
2008 and the results of which we began to consolidate as of October 1, 2007).
For periods since the respective dates of incorporation of:
• Mipel Indústria e Comércio de Válvulas Ltda., or Mipel Sul (incorporated during 2005);
• Valmicro Indústria e Comércio de Válvulas Ltda., or Valmicro (incorporated during 2006); and
• Steelinject Injeção de Aços Ltda., or Steelinject (incorporated during 2006).
The financial position and results of operations of both Valmicro and Steelinject, prior to their
incorporation as part of our new corporate structure created in 2006, were included in our financial statements since
the start of their operations, in 1984 and 1995, respectively.
Pro Forma Statement of Operations
Between January 1, 2007 and the date of this offering circular, we made the following acquisitions:
(i) Petroima and CSL Offshore, both in April 2007, (ii) Kaestner & Salermo (K&S) and Gasoil, both in July 2007,
(iii) Jefferson in November 2007, and (iv) Aspro, Delta Compresión and Compressores in January 2008. The
acquisitions of CSL Offshore, Gasoil, Delta Compresión and Compresores are referred to as the Pro Forma
Acquisitions. See “Summary—Corporate Structure” and “Summary—Recent Events.”
Solely for the purpose of reflecting the Pro Forma Acquisitions, which are the most significant acquisitions
since January 2007 (based on the net income of the acquired companies) we have prepared and included in this
offering circular unaudited pro forma combined financial information for the year ended December 31, 2007, or the
pro forma statement of operations. The pro forma statement of operations presents on a pro forma basis the effects
of the Pro Forma Acquisitions. The pro forma statement of operations is derived from our consolidated statement of
operations (which consolidated the results of CSL Offshore, Gasoil, Delta Compresión and Compresores
Panamericanos from the date of their acquisitions by us), combined on a pro forma basis with results of (i) Gasoil
derived from the audited financial statements for the six-month period ended June 30, 2007, prepared in accordance
with Brazilian GAAP; (ii) Delta Compresión and Compresores derived from their combined unaudited financial
statement of income for the nine-month period ended September 30, 2007, prepared in accordance with Brazilian
GAAP and (iii) CSL Offshore derived from the unaudited carve-out financial statement of income for the threemonth
period ended March 31, 2007.
The unaudited pro forma combined statement of operations for the year ended December 31, 2007 has been
prepared to reflect the effect of the Pro Forma Acquisitions as if they had taken place on January 1, 2007. The pro
forma statement of operations should be read together with our historical consolidated financial statements as of and
for the year ended December 31, 2007.
xii

The pro forma statement of operations is presented for illustrative purposes only and is not necessarily
indicative of our actual consolidated results of operations would have been had the Pro Forma Acquisitions been
consummated by us on January 1, 2007 or on any other date, and it is not indicative of our future results of
operations or financial position. The pro forma statement of operations has been prepared based upon available
information and upon certain assumptions that we believe are reasonable. The pro forma statement of operations
has not been prepared in accordance with rules for preparation of pro forma statement of operations established by
any regulatory body such as the U.S. Securities and Exchange Commission, or SEC. For important information as
to how we compiled the pro forma statement of operations, see “Unaudited Pro Forma Combined Statement of
Operations” and the notes to the pro forma statement of operations included elsewhere in this offering circular.
Business segments
We divided our flow segment into the flow segment and the oil & gas segment in September 2007. Before
September 2007, we divided our business in two business segments: flow and metal. Therefore, the data and
financial information for the oil & gas segment is only presented for the three-month periods ended March 31, 2008
and its comparatives for 2007. Consequently, the data and financial information for our flow segment for the years
ended December 31, 2005, 2006 and 2007 is not comparable to the data and financial information for our flow
segment for the three month periods ended March 31, 2007 and 2008. There are no specific regulations for
presentation of segment information by the CVM or otherwise that would require presenting the prior period
segment information on the new basis, and the Company has elected not to do so.
Rounding
Certain amounts and percentages included in this offering circular have been rounded to facilitate their
presentation. The totals presented in certain tables therefore may not be an arithmetic aggregation of the figures that
precede them.
Market Information
We have obtained certain industry, demographic, market and competitive position data, including market
forecasts, used throughout this offering circular from internal surveys, market research, publicly available
information and industry publications. We have made these statements on the basis of information from third-party
sources that we believe are reliable, such as the Brazilian Institute of Geography and Statistics (Instituto Brasileiro
de Geografia e Estatística), or the IBGE, and the Central Bank, among others. Industry and government
publications, including those referenced here, generally state that the information presented therein has been
obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not
guaranteed. Although we have no reason to believe that any of this information or these reports is inaccurate in any
material respect, we have not independently verified them. Similarly, internal surveys, industry forecasts and
market research, while believed to be reliable, have not been independently verified, and neither we nor the initial
purchasers make any representation as to the accuracy of such information. We are not aware of official market
share data. For that reason, market share information included in this offering circular is based on our estimates.
Notices
All notices to holders of the bonds will, so long as the bonds are listed on the Official List of the
Luxembourg Stock Exchange and the rules of such exchange so require, be published in a daily newspaper with
general circulation in Luxembourg (which is expected to be the Luxemburger Wort), or, alternatively, on the website
of the Luxembourg Stock Exchange (www.bourse.lu).
xiii

SUMMARY
This summary highlights selected information about us. It may not contain all of the information that may
be important to you. Before investing in the bonds, you should read this entire offering circular carefully for a more
complete understanding of our business and this offering, including our financial statements and the related notes
and the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operation” included elsewhere in this offering circular.
Our Company
Our business is divided into three business segments: the oil & gas segment, which produces products and
services for the oil and gas industry, including anchoring ropes for deepwater platforms, valves, tools for oil
exploration, gas compressors, tube coating and services; the flow segment, which produces industrial valves,
primarily for the chemical, petrochemical, pharmaceutical, pulp and paper, ethanol and construction industries; and
the metal segment, which produces sand castings, investment castings and powder injection molding, or PIM, parts,
primarily for the automotive industry. We believe our products are recognized for their high level of specialization,
technological innovation and quality. We are a leader in the Southern Common Market (Mercado Comum do Sul),
or Mercosul, trading area in the production of industrial valves and equipment for flow control and automation,
primarily for the Brazilian oil and gas industry, and a leading global producer of polyester ropes for platform
anchoring. In the flow segment, our valve brands “Valmicro,” “Mipel,” “Jefferson” and “Valbol” are leading brands
in their segments in Mercosul. In the oil & gas segment, our synthetic fiber rope brand UltraSeven® is the only
Brazilian brand in the market. We are also the leading Brazilian producer of complex parts and sub-systems for the
global automotive industry in our metal segment, and we are recognized in the international market for our
development and production.
Oil & gas segment
We believe we are well-positioned to take advantage of the increasing opportunities expected to result from
higher levels of investment in the international and Brazilian oil and gas industry, primarily in construction and
maintenance of offshore oil and gas production platforms and in projects to increase oil and gas exploration
capacity. Petróleo Brasileiro S.A., or Petrobras, Brazil’s state-owned oil company, is our largest client in the
industry and has announced plans to invest approximately US$112 billion from 2008 to 2012, an increase of
approximately 28.6% compared to its previous capital expenditures program for the years 2007 to 2011. We believe
that Brazilian oil and gas investment rates will be significantly higher than investment rates in other major Brazilian
sectors, and should rise due to construction of the infrastructure necessary for oil and gas production in newly
discovered reserves in Brazil. Since September 2007, Petrobras has announced four significant new discoveries of
oil and gas reserves that could potentially position Brazil amongst the 10 largest oil producers globally. Our other
main clients in this segment include Repsol YPF, Petrobras Argentina, British Petroleum, Total, Chevron, Tenaris,
Exxon Mobil, and Shell.
Success in the oil & gas segment depends largely on the ability of suppliers to meet strict quality and
technological standards imposed by their clients, the largest of which, in Brazil, are Petrobras and its engineering,
procurement and construction, or EPC, partners. We believe that we are one of the few Brazilian suppliers of
industrial valves whose products have received the highest quality rating, level “A,” from Petrobras. Our products
and manufacturing processes incorporate state-of-the-art technology and have also been awarded quality
management certifications issued by internationally-recognized institutions.
We believe that the Brazilian government’s current policy of promoting the use of Brazilian-made
products, or the local content, such as ours, in its projects, especially when combined with the small number of
Brazilian manufacturers with sufficient capacity to make the necessary capital investments to meet the industry’s
strict manufacturing requirements, will continue to benefit our business. Sales to Petrobras, directly or through EPC
companies, accounted for 41.5%, 40.7%, 31.0% and 40.4% of our consolidated total gross sales revenue in 2005,
2006, 2007 and the first quarter of 2008, respectively.
1

Flow segment
We are a leader in the Mercosul trading area in the manufacture and sale of industrial valves. Our valves,
marketed under our well-known brands “Valmicro,” “Mipel,” “Valbol” and “Jefferson,” are used in several
industrial segments including the chemical, pharmaceutical, steel, food, ethanol, construction, agriculture, and paper
and pulp industries. Our clients include Rhodia, BASF, Braskem, Companhia Vale do Rio Doce, Votorantim, Sadia
and Companhia de Gás de São Paulo - Comgás (part of the British Gas group).
In addition to our leading position in our sector, we benefit from the experience and close relationships we
have established over the years with customers who have already installed a large number of our products in their
industrial plants. We are also recognized for the quality of our maintenance services and our highly skilled sales
force.
Metal segment
We are a leader in the Brazilian market for investment castings and are widely recognized in the
international market for the development and production of parts, sub-assemblies and components used in the global
automobile industry. In 2006, General Motors, or GM, named us the global “Supplier of the Year” for powertrain
applications, which demonstrates GM’s recognition of the high level of quality of our products in this category. Our
investment casting division, Microinox, has been able to establish long-term partnerships with its customers
because, we believe, of its innovative development skills and the quality of its products. Our PIM subsidiary,
Steelinject, is a pioneer in Latin America in the use and development of this technology for the production of highly
complex metal and ceramic parts for industrial products requiring a higher level of technical specification and
performance. We believe our Itasa division is one of the best sand casting manufacturers in Latin America,
specializing in the production of value-added alloys with a high resistance to corrosion such as duplex and super
duplex, used in valves and pumps used mainly in the oil and gas industry. We supply a wide range of customers,
including General Motors, OPEL, Bosch, Dana, MWM-International and Eaton.
Financial Data
The table below sets forth our net revenue and adjusted EBITDA for the periods indicated, as well as
related percentages:
Three-month period ended
March 31, Year ended December 31,
2008 2008 2007 2007 Pro Forma (1) 2007 2007 2006 2005
(in millions of
US$, except
percentages) (2)
(in millions of reais,
except percentages)
2
(in millions of
US$, except
percentages) (2)
(in millions of
reais, except
percentages)
(in millions of
US$, except
percentages) (1)
(in millions of reais,
except percentages)
Net
revenue ........ 80.0 140.0 67.3 262.0 458.3 221.3 387.0 223.6 173.2
Oil & gas segment (3) ..... 59.7% 59.7% 25.7% - - - - - -
Domestic market..... 64.8% 64.8% 92.8% - - - - - -
Export market ......... 35.2% 35.2% 7.2% - - - - - -
Flow segment ............... 26.4% 26.4% 46.8% 81.6% 81.6% 78.3% 78.3% 66.9% 62.5%
Domestic market..... 90.7% 90.7% 95.5% 86.0% 86.0% 82.7% 82.7% 57.8% 72.3%
Export market ......... 9.3% 9.3% 7.5% 14.0% 14.0% 17.3% 17.3% 42.2% 27.7%
Metal segment .............. 13.9% 13.9% 27.5% 18.4% 18.4% 21.7% 21.7% 33.1% 37.5%
Domestic market..... 66.7% 66.7% 61.8% 65.5% 65.5% 65.5% 65.5% 66.6% 75.5%
Export market ......... 33.3% 33.3% 38.2% 34.5% 34.5% 34.5% 34.5% 33.4% 24.5%
Adjusted EBITDA (4) ... 19.4 33.9 18.5 64.0 112.0 54.9 96.0 59.5 49.6
Oil & gas
segment (3) 59.8% 59.8% 28.1% - - - - - -
Flow segment.......... 35.8% 35.8% 61.1% 95.8% 95.4% 95.4% 95.4% 83.2% 86.9%
Metal segment ........ 4.4% 4.4% 10.8% 4.2% 4.6% 4.6% 4.6% 16.8% 13.1%
___________________
(1) For important information as to how we compiled pro forma statement of operations, see “Presentation of Financial and Other Information,”
“Unaudited Pro Forma Combined Statement of Operations” and the notes to the pro forma statement of operations included elsewhere in
this offering circular.

(2) Solely for the convenience of the reader, real amounts for the year ended December 31, 2007 and the three-month period ended March 31,
2008 have been translated into U.S. dollars at an exchange rate of R$1.749 per US$1.00, the exchange rate in effect on March 31, 2008
(subject to rounding adjustments). These translations should not be considered representations that any such amounts have been, could have
been or could be converted into U.S. dollars at that or at any other exchange rate as of that or any other date. See “Exchange Rates.”
(3) The oil & gas segment was part of the flow segment until September 2007. Consequently, net revenue and EBITDA for the oil & gas
segment is only presented for the three-month period ended March 31, 2008 and also for comparative purposes the three-month period
ended March 31, 2007. See “Presentation of Financial Information – Business Segments.”
(4) Adjusted EBITDA means income before net financial expenses, income tax and social contribution, depreciation and amortization, nonoperating
results and non-recurring expenses. Adjusted EBITDA is not a measure defined under Brazilian GAAP, does not represent cash
flow for the periods indicated and should not be regarded as a replacement for net income as an indicator of the performance of our
operations or as a replacement for cash flow as an indicator of liquidity. Adjusted EBITDA has no standardized meaning and our definition
may not be comparable with adjusted EBITDA as used by other companies. We use adjusted EBITDA as defined in this offering circular
for purposes of measuring our performance. See “Management’s Discussion and Analysis of Financial Conditions and Results of
Operations—Adjusted EBITDA” for the calculation of adjusted EBITDA.
Our Competitive Strengths
We believe that our competitive strengths are as follows:
Uniquely positioned to benefit from the high level of investment in the oil and gas industry. We are wellpositioned
to benefit from increasing global investments in the oil and gas industry, primarily from investment in the
Brazilian deep-sea oil and gas market, due to: (i) our leading position in the market; (ii) our proven ability to meet
high quality specifications and deliver technologically advanced products, including meeting the special
requirements of the deepwater oil segment; (iii) our sales structure; (iv) the small number of Brazilian manufacturers
capable of making the capital investments required to compete in the industry; (v) our highly specialized line of
products for deep-sea oil exploration and production; and (vi) the Brazilian government’s policy of promoting
products manufactured domestically.
Proven capacity for growth with profitability. We believe we will be able to continue to manage our
growth so that increases in revenues will translate into increased profitability. From 2003 to 2007, our net revenues
increased at an average annual compounded rate of approximately 41.2% and our adjusted EBITDA increased at an
average annual compounded rate of approximately 56.4%.
Recognized track record of successfully integrating acquired companies. We believe we have a successful
track record of executing acquisitions, both domestically and internationally, and integrating the acquired
companies, including MNA, Carbonox, Mipel-SP, Petroima, CSL Offshore, Gasoil, K&S and Aspro do Brasil in
Brazil, and Itasa, Esferomatic, Worcester, Delta and Compresores, jointly referred to as “Delta,” and Jefferson in
Argentina. In addition to the synergies and economies of scale resulting from our acquisitions, we have
implemented an efficient management model, which enables the companies we acquire to quickly produce and sell
products with the same quality, productivity and profitability standards we have adopted.
Market leadership and established core products. We are the leading Mercosul company in the
manufacture of industrial valves. The valves marketed under our “MNA,” “Valmicro,” “Mipel,” “Valbol” and
“Jefferson” brands have been installed on offshore production platforms, on offshore production sites on oil and gas
pipelines and in the plants of some of the largest industrial groups operating in the Mercosul countries. We believe
we have a significant market share and a wide network of suppliers and resellers throughout Brazil and Argentina.
By fostering close relationships with our customers, we have been able to take advantage of emerging opportunities
in the industries we serve and, as a result, we have sold more than 3.4 million “Valmicro” brand valves and over
570,000 “MNA” brand valves over the last 24 years.
High quality products and superior maintenance services. Petrobras has certified us as a level “A” supplier
due to the quality of our products and excellence of our manufacturing processes, and our products are also certified
by international leading institutions. Our products incorporate state-of-the-art technology developed by our research
center together with our customers. In addition, unlike our international competitors, our local presence in Brazil
and Argentina ensures proximity to our customers and fast, efficient delivery of maintenance services, which we
believe strengthens our relationships. We believe those factors constitute significant competitive advantages over
other competitors in the segments in which we operate.
Well-organized and skilled business structure in Brazil and abroad. We believe that we are one of a small
number of Mercosul suppliers capable of meeting the needs of our customers in multiple regions throughout Brazil
3

and Argentina due to our sales and technical support staff and our highly skilled, accredited suppliers and resellers.
In addition, we export our products to approximately 40 countries and have independent representatives in the
United States, Europe, Asia and elsewhere in Latin America. Due to the critical application of our products, we
believe our agility and effectiveness increase our appeal while consolidating our leading position.
Limited Exposure to Oil Price Volatility. Our business is related to the capital expenditure programs of our
customers. Although the revenues of our oil industry customers are directly affected by the volatility of
international oil prices, the capital expenditure programs of these customers are not generally based on the price of
oil. Rather, the investments that these oil companies make in their infrastructure are driven by their maintenance
and expansion needs. In addition, we believe that certain of our customers have developed long-term strategies
focused more on maintaining Brazil’s oil self-sufficiency over maximizing profit. The fact that our activities are,
therefore, linked to the more stable needs of our customers tends to limit our exposure to oil price volatility, which
may affect other companies in the oil and gas industry.
Skilled, experienced management and a results-oriented culture. Our management team is highly skilled
and experienced. Our senior managers have worked for us for an average of 24 years. An important component of
our executives’ compensation is tied to our growth and profitability through a profit sharing program that aligns our
executives’ interests with those of our shareholders. In addition, in 2006 we approved a stock option plan in order to
further align our executives’ interest with those of our shareholders.
Effective corporate governance practices. We are listed on the Novo Mercado segment of the São Paulo
Stock Exchange (Bolsa de Valores de São Paulo), or the BOVESPA. The rules governing the Novo Mercado
require high standards of corporate governance. Prior to our listing, we had a history of private equity investors in
our shareholder base, such as Bozano Simonsen Advent—Fundo Mútuo de Investimentos em Empresas Emergentes,
CRP Caderi Capital de Risco S.A., GP Investimentos and the Natexis Mercosul Fund. In addition, BNDES
Participações S.A., or BNDESPAR, the investment company of the BNDES (Banco Nacional de Desenvolvimento
Econômico e Social), is currently one of our shareholders. We believe our relationships with these investors
established a culture of transparency that focused on the creation of shareholder value, and facilitated our adoption
of effective corporate governance practices that were consistent with the practices required of publicly-held
companies.
Our Strategy
We believe that the global oil and gas industry will continue to grow significantly over the coming years
due to new energy-related investments announced by key industry participants, as well as by the need for industry
participants to maintain their existing infrastructure and to repair and revamp oil platforms and refineries. Most of
those projects will be developed in Brazil, the Gulf of Mexico and the western coast of Africa in deep-sea water
fields, which require special equipment and services. We have developed new technologies that have already been
tested and are in operation in several offshore projects, giving us an important advantage in attracting other
customers with projects in deepwaters. Our main objective is to leverage our market leadership to take advantage of
the opportunities associated with these investments. Moreover, we will try to increase our market share in the global
automobile supply chain, while taking advantage of other opportunities to grow and invest in complementary
businesses and products. To accomplish these goals we plan to:
Consolidate our leadership position in the market through strategic acquisitions. Participants in the
segments in which we operate in Latin America consist mainly of small and mid-sized, family-owned companies.
We believe this fragmentation represents an important opportunity for considerable growth through acquisitions.
We intend to continue transferring our technological and industrial know-how to the companies we acquire so that
they can manufacture and market products at our same level of quality, productivity and profitability. When
opportunities arise in the market, we also intend to selectively acquire companies whose technology and/or products
can be integrated into our production chain to position ourselves as a solution provider.
Enhance productive capacity through prudent investment. In line with our history, we are prudently
investing in the expansion of our plants to increase our capacity, productivity and ability to achieve economies of
scale to enable us to respond to increased demand for our products.
4

Expand our product portfolio by developing new technologies and products. We are committed to
maintaining our market leading position and to further penetrating our target markets by offering an increasingly
comprehensive line of products and services, based on the new technologies and new products that we develop to
meet our customers’ evolving requirements. In 2005, we established our Research and Development Center (Centro
de Pesquisa e Desenvolvimento Lupatech), or CPDL, in order to enable us to better develop our manufacturing
processes and products and to develop technological innovations in all three segments.
Increase strategic partnerships in the metal segment. We intend to increase strategic development
partnerships in the metal segment in order to meet the specific needs of our customers. To do so, we intend to
continue investing in engineering and development, focused on the needs of our customers, in order to offer a
complete solution to our customers, particularly in the automotive industry.
Continued investments in operating efficiency and cost reduction. We will continue to invest in the
optimization and automation of our production processes and in new technologies that allow our costs to remain low
relative to our net revenues and allow us to be competitive in the international markets.
Corporate Structure
The chart below sets forth our subsidiaries in each of our business segments as of March 31, 2008:
___________________
(*) Lupatech North America represents Esferomatic, Worcester, MNA and Valmicro in the North American market.
The main businesses of our subsidiaries are as follows:
Oil & gas segment
MNA. Acquired by us in 2000, MNA is a leader in Brazil in the research, development, manufacturing and
marketing of manual and automated ball valves and automation systems for companies operating in the oil and gas
industry, in particular Petrobras and its EPC partners, as well as gas distributors.
CSL Offshore. Acquired by us in April 2007, CSL Offshore produces a new generation of synthetic fiber
ropes used for anchoring oil and gas platforms in deep-sea and ultra deep-sea waters, using proprietary technology
developed in Brazil.
Gasoil. Acquired by us in July 2007, Gasoil inspects and maintains equipment and machinery used in the
oil and gas industry.
Esferomatic. Acquired by us in December 2006, Esferomatic is a leader in Argentina in the manufacture of
ball valves for special applications, mainly oil and gas. We estimate that Esferomatic, along with Worcester had a
market share of approximately 60% of the Argentine ball valve market in 2007.
5

Petroima. Acquired by us in April 2007, Petroima manufactures tools for the oil and gas sector and
provides precision machinery services primarily to the automotive and agricultural equipment industries.
K&S. Acquired by us in July 2007, K&S provides various services to the oil and gas industry, including
the inspection and repair of equipment.
Delta. We acquired a 50% stake of Delta Compresión and Compresores Panamericanos in January 2008.
Delta is a producer of vehicular natural gas, or VNG, compression systems. With two production facilities located
in Argentina, Delta’s compression units are estimated to be in use in about 20% of the VNG stations around the
world.
Aspro. We acquired a 50% stake of Aspro in January 2008. Aspro is a producer of VNG compression
systems. With a production facility located in Brazil, Aspro sells its compression units mainly in Brazil and had an
estimated market share of 70% on the new compression systems sold in 2007 and a market share of approximately
58%, when considering all the compression systems installed.
Lupatech North America. In 2006, Lupatech North America was relocated to Houston, Texas, where it
operates as a sales office in order to identify new business opportunities among our international customers and to
develop new oil industry customers.
Flow segment
Worcester. Acquired by us in December 2006, Worcester is a leader in Argentina in the manufacture of
ball valves for special applications in the flow segment. We estimate that Worcester, along with Esferomatic, held a
market share of approximately 60% of the Argentine ball valve market in 2007. Worcester markets its products
under the tradename “Valbol.”
Valmicro. Formed in 1984, Valmicro has been a leader in Brazil since 1996 in the manufacture and
marketing of standard low- and medium-pressure industrial valves. The brand “Valmicro” is highly regarded for its
high quality and value-added. In 2008, Valmicro was awarded the “Top One” award for the thirteenth consecutive
year in the ball valve category in the “Top Five” survey by the magazine Industrial Equipment News (Noticiário de
Equipamentos Industriais), or NEI, which measures brand recognition by consumers.
Mipel-SP. Acquired by us in April 2006, Mipel-SP is the Brazilian leader in the production of copper
industrial valves. Mipel-SP’s products are used in different industry segments, including the chemical,
petrochemical, maritime, food, pharmaceutical, civil construction, basic sanitation, irrigation, and agro-industrial
segments.
Mipel Sul. Commencing operations in June 2006, Mipel Sul manufactures manual ball valves for the
carbon steel and stainless steel industrial markets, and focuses its sales on the network of independent distributors
and resellers that sell the valves produced by Mipel-SP.
Jefferson. Acquired by us in November 2007, Jefferson is the leader in Argentina in the manufacture of
solenoid valves and magnetic controls for the oil and gas, refrigeration and heating industries.
Carbonox. Acquired by us in 2005, Carbonox manufactures bulk, low-cost investment casting parts to
supply raw material for MNA, Valmicro, Mipel-Sul, Jefferson, Worcester and Esferomatic using state-of-the-art
technologies and modern manufacturing facilities.
Metal segment
Microinox. Founded in August 1980, Microinox manufactures complex, high-precision and hightechnology
parts in over 150 different metal machining alloys using the investment casting process. Parts are
developed jointly with our customers, particularly in the automotive industry, in order to meet their specific needs
for parts and components for new products as well as replacement parts and components for existing products.
Steelinject. Formed in 1995, Steelinject is a pioneer in Latin America in manufacturing precision parts
using PIM technology, Steelinject produces metal and ceramic parts. This state-of-the-art process in the metallurgy
6

industry allows for a significant reduction in the lead-time required for production, reduces production costs and
lessens the environmental impact of parts production. Steelinject is a large-scale manufacturer, with dimensional
precision and exceptional parts surface finishing for market segments that require high technology and high quality
products. Steelinject’s products have a wide range of applications in different market segments, including
automotive, computers and printers, orthodontics and defense. In line with our continued effort of technology
development, we obtained a patent in Brazil and abroad for one of the most complex phases in the production
process used by Steelinject.
Itasa. Acquired in June 2006, Itasa is one of the most respected foundries for casting valve bodies, valve
components and pump bodies for oil in Latin America. Itasa specializes in sand casting alloys with a high resistance
to corrosion, primarily to be used in valves and pump bodies and components, which are sold principally to the oil
and gas, petrochemical and chemical sectors.
Research and Development
Due to the nature of the sectors in which we operate, we consistently invest in research and development,
including the engineering of our processes and products. From 2003 to 2007, we invested approximately US$5.0
million in the research and development of our manufacturing processes and products. In 2005, we established the
CPDL, in order to enable us to better develop our manufacturing processes and products and to develop
technological innovations in all our segments. Our CPDL was established with financial support from the Ministry
of Science and Technology’s Studies and Projects Funding Board (Financiadora de Estudos e Projetos), or FINEP.
We plan to invest approximately R$7.0 million in our CPDL in 2008.
In addition to the support we receive from FINEP, we also have partnerships with various universities,
especially the Federal University of Santa Catarina (Universidade Federal de Santa Catarina), for the joint
developments of technologies and the training of our professionals.
Recent Events
On April 24, 2008, we signed a US$25 million credit facility agreement, through our partial subsidiary
Aspro, with the Société de Promotion et de Participation pour la Coopération Economique S.A, or PROPARCO, a
financial development institution that is co-owned by the AFD. The amount outstanding under this credit facility
will be paid over eight years, with a two year grace period, and was used to make the final payment for Delta and
Aspro acquisition.
Our head offices are located at Rua Dalton Lahm dos Reis, No. 201, Caxias do Sul, Rio Grande do Sul,
Brazil. The telephone number of our investor relations department is +55 (11) 2134-7000.
Lupatech Finance
Lupatech Finance, the issuer of the bonds, is an exempted company incorporated with limited liability in
the Cayman Islands and a wholly-owned subsidiary of Lupatech. The purpose of Lupatech Finance is to engage in
transactions related to the offering of the bonds as well as other financing transactions involving Lupatech or its
subsidiaries. Prior to the issuance of the initial bonds, Lupatech Finance had not engaged in any business activity.
The memorandum and articles of association of Lupatech Finance restrict the scope of its business operations to
issuing the bonds, complying with its obligations under the bonds, using the proceeds of the bonds in the manner
described in this offering circular and engaging in financing transactions involving Lupatech or its subsidiaries. The
principal executive offices of Lupatech Finance are located at Rua Dalton Lahm dos Reis, No. 201, Caxias do Sul,
Rio Grande do Sul, Brazil.
We have not included any financial statements for Lupatech Finance in this offering circular. Lupatech
Finance is not required by Cayman Islands law, and does not intend, to publish audited financial statements. If
Lupatech Finance is required to publish financial statements in the future, they will be available at the office of the
7

paying agent in Luxembourg. In addition, Lupatech Finance does not intend to furnish to the trustee or the holders
of the bonds any financial statements of, or other reports relating to, Lupatech Finance.
8

SUMMARY OF TERMS AND CONDITIONS
This summary highlights information presented in greater detail elsewhere in this offering circular. This
summary is not complete and does not contain all the information you should consider before investing in the bonds.
You should carefully read this entire offering circular before investing in the bonds, including “Risk Factors” and
our consolidated and combined financial statements.
Issuer .........................................................................Lupatech Finance
Guarantors .................................................................Lupatech S.A., Carbonox Fundição de Precisão Ltda.,
Cordoaria São Leopoldo Off Shore S.A., Esferomatic S.A.,
Gasoil Serviços Ltda., Itasa Industria y Tecnología en Aceros
S.A., Jefferson Solenoidbras Ltda., Jefferson Sudamericana
S.A., K&S Tubular Services Ltda., Lupatech Petroíma
Equipamentos para Petróleo Ltda., Metalúrgica Ipê Ltda.,
Metalúrgica Nova Americana Ltda., Mipel Indústria e Comércio
de Válvulas Ltda., Ocean Coating Revestimentos Ltda.,
Steelinject Injeção de Aços Ltda., Valmicro Indústria e
Comércio de Válvulas Ltda. and Válvulas Worcester de
Argentina S.A.
Bonds offered ............................................................US$75,000,000 aggregate principal amount of 9.875%
perpetual bonds.
Guarantees .................................................................The Guarantors will irrevocably and unconditionally, jointly
and severally, guarantee the full and punctual payment of
principal, interest, additional amounts and all other amounts that
may become due and payable in respect of the bonds.
Issue Date ..................................................................June 30, 2008
Issue price..................................................................98.768% of the principal amount, plus accrued interest since
April 10, 2008.
Maturity date .............................................................The bonds are perpetual bonds with no fixed final maturity date
and no sinking fund provisions.
Interest payment dates ...............................................January 10, April 10, July 10 and October 10, commencing on
July 10, 2008 with respect to the new bonds.
Interest .......................................................................The new bonds will bear interest from June 30, 2008 at the
annual rate of 9.875%, payable quarterly in arrears on each
interest payment date.
Ranking .....................................................................The bonds will be senior unsecured obligations of Lupatech
Finance ranking:
• equal in right of payment to other existing and future
senior unsecured debt of Lupatech Finance;
• senior in right of payment to Lupatech Finance’s
subordinated debt; and
• effectively subordinated to debt and other liabilities
(including subordinated debt and trade payables) of
Lupatech’s subsidiaries and to secured debt of Lupatech
Finance to the extent of such security.
Prior to the issuance of the new bonds, Lupatech Finance had
US$200 million of debt outstanding.
9

The guarantees will be senior unsecured obligations of each of
the Guarantors ranking:
• equal in right of payment to other existing and future
senior unsecured debt of that Guarantor;
• senior in right of payment to any subordinated debt of that
Guarantor; and
• effectively subordinated to debt and other liabilities
(including subordinated debt and trade payables) of that
Guarantor’s subsidiaries and to secured debt of that
Guarantor and its subsidiaries to the extent of such
security.
Optional redemption..................................................Lupatech Finance may, at its option, redeem the bonds, in
whole or in part, on any interest payment date on or after
July 10, 2012, at 100% of the principal amount plus accrued
interest and additional amounts, subject to a minimum amount
of the bonds remaining outstanding if a redemption is made in
part. See “Description of the Bonds—Redemption—Optional
Redemption.”
Tax redemption..........................................................Lupatech Finance may redeem the bonds, in whole but not in
part, at 100% of their principal amount plus accrued interest and
additional amounts, if any, upon the occurrence of specified
events relating to the applicable tax law. See “Description of the
Bonds—Redemption—Tax Redemption.”
Additional amounts....................................................All payments in respect of the bonds or the guarantees, as
applicable, will be made without withholding or deduction for
any Cayman Islands, Brazilian, Argentine or other applicable
jurisdiction’s taxes or other governmental charges unless such
withholding or deduction is required by law. In the event we are
required to withhold or deduct amounts for any Cayman
Islands, Brazilian, Argentine or other applicable jurisdiction’s
taxes or other governmental charges, Lupatech Finance, in
respect of the bonds, and the Guarantors, in respect of the
guarantees, will pay such additional amounts as may be
necessary in order that the amount you receive will equal the
amount that you would have received if no withholding tax or
deduction had been applicable, subject to certain exceptions set
forth under “Description of the Bonds—Additional Amounts.”
Covenants ..................................................................The indenture limits the creation of liens and will permit
Lupatech to consolidate or merge with, or transfer all or
substantially all of its assets to, another person only if it
complies with certain requirements.
However, these limitations are subject to a number of important
exceptions. See “Description of the Bonds—Covenants.”
Events of default........................................................The indenture will set forth the events of default applicable to
the bonds, including an event of default triggered by crossacceleration
of other debt in an amount of US$30 million or
more.
Further issuances .......................................................Lupatech Finance may from time to time without notice to or
consent of the holders of the bonds create and issue an
unlimited principal amount of additional bonds of the same
10

series as the initial bonds.
Use of proceeds .........................................................We intend to use the net proceeds from the offering of the
bonds to make investments to support the growth of our current
activities, including (i) repayment of current indebtedness;
(ii) the acquisition of other companies operating in the segments
in which we operate, as well as of companies holding
technology or producing products used in our production chain;
(iii) the improvement and expansion of our current facilities and
the construction of new facilities to increase our capacity;
(iv) investment in information technology to optimize processes
and increase controls; (v) working capital purposes; and
(vi) interest payments on our outstanding indebtedness.
Form and denomination; settlement ..........................The bonds will be issued in the form of global bonds in fully
registered form without interest coupons, as described under
“Form of the Bonds.” The global bonds will be exchangeable
or transferable, as the case may be, for definitive certificated
bonds in fully registered form without interest coupons only in
limited circumstances. The bonds will be issued in registered
form in denominations of US$2,000 and integral multiples of
US$1,000 in excess thereof. See “Description of the Bonds—
Form, Denomination and Title” and “Form of the Bonds.”
The bonds will be delivered in book-entry form through the
facilities of DTC for the accounts of its participants, including
Euroclear and Clearstream Luxembourg.
Notice to investors.....................................................The bonds have not been registered under the U.S. Securities
Act of 1933 and are subject to limitations on transfers, as
described under “Notice to Investors.”
Listing........................................................................Application has been made to list the new bonds on the Official
List of the Luxembourg Stock Exchange and admit the new
bonds for trading on the Euro MTF market of the Luxembourg
Stock Exchange (Euro MTF). The new bonds are expected to
be eligible for trading in the PORTAL Market at the time of
issuance thereof.
In 2003, the European Commission issued a Directive of the
European Parliament and of the Council on the harmonization
of transparency requirements with regard to information about
issuers whose securities are admitted to trading on a regulated
market in the European Union (2003/0045(COD)). If this
directive, which is known as the Transparency Directive, would
require us to publish financial information either more regularly
than we otherwise would be required to, or according to
accounting principles which are materially different from the
accounting principles which we would otherwise use to prepare
our published financial information, we may seek an alternative
admission to listing, trading and/or quotation for the bonds by
another listing authority, stock exchange and/or quotation
system outside the European Union, such as the Zurich Stock
Exchange.
The new bonds will be eligible for trading in the PORTAL
Market at the time of issuance thereof.
11

Governing law ...........................................................The indenture and the bonds will be governed by the laws of the
State of New York.
Trustee, registrar, transfer agent and principal
paying agent..........................................................The Bank of New York
Luxembourg paying agent and transfer agent............The Bank of New York (Luxembourg) S.A.
Luxembourg listing agent..........................................The Bank of New York (Luxembourg) S.A.
12

SUMMARY FINANCIAL AND OTHER INFORMATION
Our summary consolidated financial information as of and for the years ended December 31, 2005, 2006
and 2007 presented below derives from our consolidated financial statements, included elsewhere in this offering
circular, which were prepared in accordance with Brazilian GAAP and audited by PricewaterhouseCoopers
Auditores Independentes, as stated in their reports appearing herein.
Our summary consolidated financial information as of and for the three-month period ended March 31,
2008 presented below derives from our unaudited interim consolidated financial information, included elsewhere in
this offering circular, which were prepared in accordance with CVM Instructions. Deloitte Touche Tohmatsu
Auditores Independentes reported that they have applied limited procedures in accordance with CVM Instructions
for a review of such information and it does not include any changes in accounting practices in accordance with Law
No. 11,638. The separate report dated May 8, 2008 appearing herein states that they did not audit and they do not
express an opinion on that unaudited consolidated interim financial information. The review report for the threemonth
period ended March 31, 2008, issued by Deloitte Touche Tohmatsu Auditores Independentes, includes an
emphasis paragraph mentioning that the interim financial statements for that period have been prepared in
conformity with CVM Instructions and do not include all the changes in accounting practices introduced by Law
No. 11,638/07.
Our summary consolidated financial information as of and for the three-month period ended March 31,
2007 presented below derives from our unaudited interim consolidated financial information, included elsewhere in
this offering circular, which were prepared in accordance with CVM Instructions. With respect to the unaudited
consolidated interim financial information for the three-month period ended March 31, 2007 included in this
offering circular, PricewaterhouseCoopers Auditores Independentes reported that they have applied limited
procedures in accordance with Brazilian professional standards for a review of such information. However, their
separate report dated June 3, 2008 appearing herein states that they did not audit and they do not express an opinion
on that unaudited consolidated interim financial information. Accordingly, the degree of reliance on their report on
information for the three-month periods ended March 31, 2007 should be restricted in light of the limited nature of
the review procedures applied. The review report for the three-month period ended March 31, 2007, issued by
PricewaterhouseCoopers Auditores Independentes, includes an emphasis paragraph mentioning that the interim
financial statements for that period have been prepared in conformity with CVM Instructions and do not include all
the changes in accounting practices introduced by Law No. 11,638/07.
Our consolidated financial information as of and for the year ended December 31, 2007 includes the
financial position of Lupatech S.A. and the subsidiaries we acquired during 2007. Our consolidated financial
information as of and for the three-month period ended March 31, 2007 does not include the financial condition and
results of the companies we acquired after March 2007: CSL Offshore, Petroima, K&S, Gasoil, Jefferson, Aspro
and Delta. For further information on Gasoil financial statements, see “Risk Factors.” Our consolidated results of
operations for the year ended December 31, 2007 include the results of the subsidiaries acquired during 2007 from
their respective date of acquisition. For further information on the recent acquisitions, see “Business—Corporate
Structure” and “Business—Recent Events.”
The unaudited pro forma combined statements of operations present the financial position and the results of
our company, together with the results of CSL Offshore, Gasoil and Delta on a pro forma basis as if the acquisitions
had taken place on January 1, 2007. For a demonstration of the way in which our unaudited pro forma combined
statement of operations was compiled, see “Unaudited Pro Forma Combined Statement of Operations” and the notes
to the pro forma statement of operations included elsewhere in this offering circular.
The unaudited pro forma combined statement of operations is not necessarily indicative of the results of
operations that would have been obtained if the abovementioned companies had been acquired in 2007 or on any
other date, and they are not indicative of future results of operations.
Our financial statements presented in this offering circular are prepared in accordance with Brazilian
GAAP in the case of the financial statements as of and for the years ended December 31, 2005, 2006 and 2007 and
in accordance with CVM Instructions for the financial information as of and for the three-month periods ended
March 31, 2007 and 2008. This financial information should be read in conjunction with our consolidated financial
statements and the related notes and the sections entitled “Presentation of Financial and Other Information,”
13

“Selected Financial and Other Information” and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” included elsewhere in this offering circular.
Solely for the convenience of the reader, real amounts as of and for the year ended December 31, 2007 and
as of and for the three-month period ended March 31, 2008 have been translated into U.S. dollars at the selling rate
as reported by the Central Bank on March 31, 2008 of R$1.749 to US$1.00. The U.S. dollar equivalent information
should not be construed to imply that the amounts in reais represent, or could have been or could be converted into,
U.S. dollars at such rates or at any other rate. See “Exchange Rates.”
Statement of Income Information
14
Three-month period ended March 31,
2008 2008 2007
(in millions of
US$) (in millions of reais)
Gross sales and services.................................................................................................... 88.1 154.1 74.5
Taxes on sales.................................................................................................................... (8.1) (14.1) (7.2)
Net revenue........................................................................................................................ 80.0 140.0 67.3
Cost of sales and services.................................................................................................. (51.8) (90.6) (40.5)
Gross profit........................................................................................................................ 28.2 49.4 26.8
Operating income (expenses)............................................................................................ (28.5) (49.8) (23.4)
Selling..................................................................................................................... (6.5) (11.3) (5.9)
General and administrative..................................................................................... (4.7) (8.3) (4.7)
Management compensation.................................................................................... (0.3) (0.6) (0.4)
Financial expenses.................................................................................................. (18.1) (31.7) (12.2)
Financial income .................................................................................................... 7.8 13.6 6.0
Goodwill amortization............................................................................................ (6.6) (11.5) (6.2)
Other operating income (expenses)........................................................................ (0.1) (0.1) -
Operating profit (loss) ....................................................................................................... (0.2) (0.4) 3.4
Non-operating income (expenses), net ............................................................................. - 0.1 -
Profit (loss) before social contribution, income tax and statutory profit sharing............. (0.2) (0.3) 3.4
Current income tax and social contribution...................................................................... (3.3) (5.7) (3.5)
Deferred income tax and social contribution.................................................................... 1.0 1.7 0.3
Employee profit sharing.................................................................................................... (0.1) (0.2) (0.2)
Net income (loss) .............................................................................................................. (2.6) (4.5) -

2007
(pro forma)
(in millions
of US$)
Year ended December 31,
2007
(pro forma) (1) 2007 2007 2006 2005
(in millions of (in millions
reais) of US$) (in millions of reais)
Gross sales and services.......................................... 286.3 500.7 244.4 427.5 250.9 200.7
Taxes on sales.......................................................... 24.2 (42.4) (23.2) (40.5) (27.3) (27.6)
Net revenue.............................................................. 262.0 458.3 221.3 387.0 223.6 173.2
Cost of sales and services........................................ (168.3) (294.3) (140.4) (245.6) (132.6) (100.1)
Gross profit.............................................................. 93.7 163.9 80.8 141.4 91.0 73.1
Operating income (expenses).................................. (123.1) (215.3) (99.0) (173.2) (53.0) (34.9)
Selling........................................................... (20.6) (36.1) (18.1) (31.6) (23.0) (19.1)
General and administrative........................... (16.5) (28.9) (14.5) (25.3) (10.0) (7.8)
Management compensation.......................... (1.2) (2.1) (1.2) (2.1) (1.5) (1.2)
Financial expenses........................................ (48.0) (84.0) (45.3) (79.3) (18.7) (11.2)
Financial income .......................................... 7.5 13.1 13.8 24.1 15.7 4.3
Goodwill amortization.................................. (39.0) (68.2) (28.6) (50.0) (3.5) -
Other operating income (expenses).............. (5.1) (9.0) (5.1) (9.0) (12.1) -
Operating profit (loss) ............................................. (29.3) (51.3) (18.2) (31.8) 38.0 38.2
Non-operating income (expenses), net ................... (0.2) (0.4) 0.2 0.4 0.3 (1.7)
Profit (loss) before social contribution, income
tax and statutory profit sharing.......................... (29.6) (51.7) (18.0) (31.4) 38.3 36.4
Current income tax and social contribution............ (17.8) (31.2) (13.6) (23.8) (13.3) (2.9)
Deferred income tax and social contribution.......... (6.5) (11.3) 4.2 7.3 2.6 0.2
Employee profit sharing.......................................... (0.9) (1.6) (0.9) (1.6) (3.8) (2.9)
Minority interests .................................................... - - - - - 1.2
Net income (loss) .................................................... (41.9) (73.2) (28.3) (49.5) 23.8 32.00
___________________
(1) For important information as to how we compiled the pro forma statement of operations, see “Presentation of Financial and Other
Information,” “Unaudited Pro Forma Combined Statement of Operations” and the notes to the pro forma statement of operations included
elsewhere in this offering circular.
15

Balance Sheet Information
16
As of March 31,
2008 2008 2007
(in millions of US$) (in millions of reais)
Current assets ................................................................................................. 300.5 525.5 333.0
Cash and banks............................................................................................... 97.5 170.5 9.5
Marketable securities ..................................................................................... 1.8 3.1 170.0
Accounts receivable ....................................................................................... 94.1 164.5 59.0
Inventories...................................................................................................... 73.8 129.1 73.7
Deferred income tax and social contribution................................................. 0.1 0.2 0.4
Taxes recoverable........................................................................................... 21.6 37.7 16.8
Other accounts receivable .............................................................................. 10.9 19.0 3.5
Prepaid expenses ............................................................................................ 0.8 1.4 0.1
Long-term assets ............................................................................................ 11.6 20.3 9.4
Taxes recoverable........................................................................................... 2.5 4.4 2.6
Deferred income tax and social contribution................................................. 7.3 12.8 5.8
Other accounts receivable .............................................................................. 1.8 3.1 1.0
Permanent assets ............................................................................................ 315.3 551.5 208.7
Total assets ..................................................................................................... 627.4 1,097.3 551.1
Current liabilities............................................................................................ 134.9 235.9 54.6
Suppliers......................................................................................................... 22.4 39.1 14.1
Loans and financing ....................................................................................... 57.1 99.8 5.3
Perpetual bonds .............................................................................................. 4.5 8.0 -
Debentures...................................................................................................... - - 2.5
Salaries and wages ......................................................................................... 4.7 8.2 4.9
Taxes and social contributions....................................................................... 5.9 10.4 5.4
Dividends and interest on own capital payable ............................................. - - 5.8
Advances from customers.............................................................................. 17.7 31.0 0.8
Participation in results.................................................................................... 0.2 0.3 2.8
Related parties ................................................................................................ - - -
Accounts payable for the acquisition of investments .................................... 14.0 24.4 3.4
Income tax payable......................................................................................... 3.9 6.8 5.9
Other accounts payable .................................................................................. 4.5 7.9 3.7
Long-term liabilities....................................................................................... 348.1 608.8 251.5
Loans and financing ....................................................................................... 142.4 249.0 15.1
Debentures...................................................................................................... - - 227.0
Provision for contingencies............................................................................ 4.3 7.5 5.1
Perpetual bonds .............................................................................................. 200.0 349.8 -
Taxes and social contributions....................................................................... - - -
Deferred income tax and social contribution................................................. 0.1 0.1 0.1
Accounts payable for the acquisition of investments .................................... 0.9 1.6 3.7
Other accounts payable .................................................................................. 0.5 0.8 0.5
Shareholders’ equity....................................................................................... 144.5 252.7 245.0
Total liabilities and stockholders’ equity....................................................... 627.4 1,097.3 551.1

17
As of December 31,
2007 2007 2006 2005
(in millions
of US$) (in millions of reais)
Current assets ............................................................................................ 307.5 537.8 356.7 94.9
Cash and banks.......................................................................................... 33.8 59.1 11.5 4.7
Marketable securities ................................................................................ 102.5 179.2 192.7 25.9
Accounts receivable .................................................................................. 68.9 120.5 61.9 33.4
Inventories................................................................................................. 72.1 126.1 71.2 26.9
Deferred income tax and social contribution............................................ 0.1 0.2 0.4 -
Taxes recoverable...................................................................................... 19.7 34.4 14.2 2.8
Other accounts receivable ......................................................................... 10.0 17.5 4.5 1.0
Prepaid expenses ....................................................................................... 0.5 0.8 0.2 0.2
Long-term assets ....................................................................................... 10.5 18.3 9.3 3.3
Taxes recoverable...................................................................................... 2.4 4.2 2.5 2.8
Deferred income tax and social contribution............................................ 6.3 11.1 5.6 0.4
Other accounts receivable ......................................................................... 1.7 3.0 1.1 0.1
Permanent assets ....................................................................................... 315.5 551.9 203.9 55.1
Total assets ................................................................................................ 633.4 1,107.9 569.9 153.3
Current liabilities....................................................................................... 135.6 237.2 73.1 67.5
Suppliers.................................................................................................... 26.0 45.5 18.9 11.3
Loans and financing .................................................................................. 35.7 62.5 10.4 23.5
Debentures................................................................................................. - - 9.8 -
Salaries and wages .................................................................................... 4.8 8.4 5.0 2.9
Taxes and social contributions.................................................................. 6.2 10.9 4.4 4.7
Dividends and interest on own capital payable ........................................ - - 5.8 15.3
Advances from customers......................................................................... 4.3 7.5 0.7 3.0
Participation in results............................................................................... 0.7 1.3 3.1 2.3
Related parties ........................................................................................... - - - 0.1
Accounts payable for the acquisition of investments ............................... 44.3 77.4 3.7 2.5
Deferred income tax and social contribution............................................ - - 2.1 -
Income tax payable.................................................................................... 8.3 14.6 6.1 0.3
Other accounts payable ............................................................................. 5.2 9.1 3.1 1.6
Long-term liabilities.................................................................................. 351.0 614.0 251.1 17.4
Suppliers.................................................................................................... - - - -
Loans and financing .................................................................................. 142.8 249.7 14.1 14.9
Debentures................................................................................................. - - 227.0 -
Provision for contingencies....................................................................... 4.3 7.5 5.2 -
Perpetual bonds ......................................................................................... 202.5 354.2 - -
Taxes and social contributions.................................................................. 0.5 0.8 0.8 0.9
Deferred income tax and social contribution............................................ 0.1 0.1 0.1 0.2
Accounts payable for the acquisition of investments ............................... 2.2 3.8 3.8 1.4
Other accounts payable ............................................................................. 0.2 0.3 - -
Minority interests ...................................................................................... - - - (0.1)
Shareholders’ equity.................................................................................. 146.8 256.7 245.7 68.5
Total liabilities and stockholders’ equity.................................................. 633.4 1,107.9 569.9 153.3

The following table shows our net revenues and EBITDA for our segments in the indicated periods:
Three-month period ended March 31, Year ended December 31,
2008 2008 2007 2007 Pro Forma 2007 2007 2006 2005
(in millions
(in millions
of US$,
of US$, (in millions of (in millions of
except
percentages)
(in millions of reais, except
percentages)
except
percentages)
reais, except
percentages)
US$, except
percentages)
(in millions of reais, except
percentages)
Net revenue.... 80.0 140.0 67.3 262.0 458.3 221.3 387.0 223.6 173.2
Oil & gas
segment ...... 59.7% 59.7% 25.7% - - - - - -
Flow segment
................... 26.4% 26.4% 46.8% 81.6% 81.6% 78.3% 78.3% 66.9% 62.5%
Metal
segment ...... 13.9% 13.9% 27.5% 18.4% 18.4% 21.7% 21.7% 33.1% 37.5%
Adjusted
EBITDA (2) .... 19.4 33.9 18.5 64.0 112.0 54.9 96.0 59.5 49.6
Oil & gas
segment ...... 59.8% 59.8% 28.1% - - - - - -
Flow segment
................... 35.8% 35.8% 61.1% 95.8 95.8% 95.4% 95.4% 83.2% 86.9%
Metal
segment ...... 4.4% 4.4% 10.8% 4.2% 4.2% 4.6% 4.6% 16.8% 13.1%
___________________
(1) Adjusted EBITDA means income before net financial expenses, income tax and social contribution, depreciation and amortization, nonoperating
results and non-recurring expenses. Adjusted EBITDA is not a measure defined under Brazilian GAAP, does not represent cash
flow for the periods indicated and should not be regarded as a replacement for net income as an indicator of the performance of our
operations or as a replacement for cash flow as an indicator of liquidity. Adjusted EBITDA has no standardized meaning and our definition
may not be comparable to adjusted EBITDA as used by other companies. We use adjusted EBITDA as defined in this offering circular for
purposes of measuring our performance. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations—
Adjusted EBITDA” for the calculation of adjusted EBITDA.
The chart below shows certain of our indebtedness information for the periods indicated:
As of and for the three-month period ended
March 31, As of and for the year ended December 31,
2008 2008 2007 2007 2007 2006 2005
(in millions
of US$) (in millions of reais)
18
(in millions
of US$) (in millions of reais)
Total indebtedness........................... 404.0 706.6 249.9 381.0 666.5 261.3 38.4
Total cash and banks and marketable
securities.......................................... 99.3 173.6 179.5 136.5 238.3 204.2 30.6
Indebtedness, net ............................. 304.7 533.0 70.4 244.8 428.1 57.1 7.8
Adjusted EBITDA........................... 19.4 33.9 18.5 54.9 96.0 59.5 49.6
Net Indebtedness/Adjusted
EBITDA (1) ....................................... 4.8x 4.8x 1.1x 4.5x 4.5x 1.0x 0.2x
___________________
(1) With respect to the three-month periods ended March 31, 2007 and 2008, the net indebtedness to adjusted EBITDA ratio has been obtained
by dividing net indebtedness as of March 31, 2007 and 2008, respectively, by adjusted EBITDA for the twelve-month periods ended
March 31, 2007 and 2008.
For further information on our indebtedness, see “Management’s Discussion and Analysis of Financial
Conditions and Results of Operations—Indebtedness” and note 10 to each of our interim and annual financial
statements included elsewhere in this offering circular.

RISK FACTORS
An investment in our bonds involves a high degree of risk. You should carefully consider the risks
described below before making an investment decision, as well as the other information presented in this offering
circular and particularly our financial statements and their respective explanatory notes. Other risks that are
presently unknown to us or that are presently regarded as immaterial may have an adverse impact on our business
and the price of our bonds, and you may lose all or part of your investment.
For the purposes of this section, the indication that a risk, uncertainty or problem may or will have “an
adverse effect” on us or “affect us adversely” means that the risk, uncertainty or problem could or would have an
adverse effect on our and/or our subsidiaries’ business, financial condition, results of operations and/or prospects,
and/or the trading price of the bonds. You should view similar expressions in this section as having a similar
meaning. For more information, see “Cautionary Statement Regarding Forward-Looking Statements.”
Risks Relating to Brazil
The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian
economy. This influence, as well as Brazilian political and economic conditions, may adversely affect us and the
trading price of the bonds.
The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes
significant changes in policy and regulations. The Brazilian government’s actions to control inflation and other
policies and regulations have often involved, among other measures, increases in interest rates, changes in tax
policies, price controls, currency devaluations, capital controls and limits on imports. We may be adversely affected
by changes in policy or regulations involving or affecting factors, such as:
• interest rates;
• monetary policy;
• exchange controls and restrictions on remittances outside Brazil, such as those which were briefly
imposed in 1989 and early 1990;
• currency fluctuations;
• inflation;
• liquidity of domestic capital and lending markets;
• tax policies; and
• other political, social and economic developments in or affecting Brazil.
Uncertainty over whether the Brazilian government will implement changes in policies or regulations
affecting these or other factors in the future may contribute to economic uncertainty in Brazil and to heightened
volatility in the Brazilian securities markets.
Inflation and government efforts to combat inflation may contribute significantly to economic uncertainty in
Brazil, which could harm our business and the trading price of our bonds.
Brazil has in the past experienced extremely high rates of inflation. Inflation and the government measures
to combat inflation, along with the public speculation about possible future governmental measures, has had
significant negative effects on the Brazilian economy, and contributed to economic uncertainty in Brazil and
heightened volatility in the Brazilian securities market. More recently, the annual rate of inflation, as measured by
the general market price index (Índice Geral de Preços—Mercado), or the IGP-M, has decreased from has decreased
from 9.95% in 2000 to 7.7% in 2007. The Brazilian government’s measures to control inflation have often included
the maintenance of a tight monetary policy and high interest rates, thereby restricting the availability of credit and
19

educing economic growth. As a result, interest rates have fluctuated significantly. For example, the official interest
rates in Brazil at the end of 2005, 2006, 2007 and at March 31, 2008 were 17.75%, 18.0%, 13.25% and 11.25%,
respectively, as set by the Brazilian Committee on Monetary Policy (Comitê de Política Monetária), or the COPOM.
Future Brazilian government actions, such as interest rate decreases, intervention in the foreign exchange
market and actions to adjust or fix the value of the real, may trigger increases in inflation. If Brazil experiences high
inflation in the future, we may not be able to adjust the prices we charge our customers to offset the effects of
inflation on our cost structure, which may have a material adverse effect on us.
Exchange rate instability may adversely affect the Brazilian economy and the trading price of our bonds.
As a result of several pressures, the Brazilian currency has been devalued periodically in relation to the
U.S. dollar and other foreign currencies during the last four decades. Throughout this period, the Brazilian
government has implemented various economic plans and utilized a number of exchange rate policies, including
sudden devaluations, periodic mini-devaluations during which the frequency of adjustments has ranged from daily to
monthly, floating exchange rate systems, exchange controls and dual exchange rate markets. From time to time,
there have been significant fluctuations in the exchange rate between the Brazilian currency and the U.S. dollar and
other currencies. For example, the real depreciated against the U.S. dollar 18.7% in 2001 and 52.3% in 2002.
Although the real appreciated 11.6%, 8.7% and 17.2% against the U.S. dollar in 2005, 2006, and 2007 respectively,
there can be no assurance that the real will not depreciate or be devalued against the U.S. dollar again. On
March 31, 2008, the U.S. dollar-real exchange rate was R$1.749 per US$1.00.
Depreciations of the real relative to the U.S. dollar could create additional inflationary pressures in Brazil
and lead to increases in interest rates, which may negatively affect the Brazilian economy as a whole, as well as the
trading price of our bonds.
Developments and the conditions prevailing in other emerging market countries have in the past significantly
affected the availability of credit and resulted in considerable decreases in investor demand and volume of
foreign investments in Brazil.
There can be no assurance that future developments in emerging market countries and government
measures in these countries would not adversely affect the availability of credit in the local and international
markets, thereby negatively affecting the Brazilian economy, our business and results of operations. If our access to
the capital and finance markets is restricted, we could have difficulties in implementing our capital expenditure plan
and maintaining our market share, which may adversely affect our financial condition and results of operations and
the market value of the bonds.
Risks Relating to Argentina
Political, economic and social instability in Argentina may adversely impact our business operations in
Argentina.
During 2001 and 2002, Argentina went through a period of severe political, social and economic crisis.
Although general economic conditions have shown improvement and political protests and social disturbances have
considerably diminished since the economic crisis of 2001 and 2002, the rapid and radical nature of the changes in
the Argentine social, political, economic and legal environment over the past five years and the absence of a clear
political consensus in favor of any particular set of economic or political policies have given rise to significant
uncertainties about the country’s economic and political future. It is unclear whether the economic and political
instability experienced over the past years will continue and it is possible that, despite recent economic growth,
Argentina may experience another recession, higher inflation, unemployment and greater social unrest. As a result,
these factors may result in a material adverse effect on our results of operations and financial condition.
During its crisis in 2001 and 2002, Argentina experienced social and political turmoil, including civil
unrest, riots, looting, nationwide protests, strikes and street demonstrations. Despite Argentina’s ongoing economic
recovery and relative stabilization, the social and political tensions and high levels of poverty and unemployment
continue. These conditions could adversely affect our relations with our employees, which could affect our
operations. Future government policies to preempt or respond to social unrest may include expropriation,
20

nationalization, forced renegotiation or modification of existing contracts, suspension of the enforcement of
creditors’ rights and shareholders’ rights, new taxation policies, including royalty and tax increases and retroactive
tax claims, and changes in laws, regulations and policies affecting foreign trade, exchange controls and investment.
These policies could destabilize the country and adversely and materially affect the economy and in turn our
business.
The depreciation of the Argentine peso, in conjunction with general political, economic and social instability,
may negatively affect confidence in the Argentine economy and may adversely affect the results of operations of
our Argentine subsidiaries and, consequently, our results of operations.
The peso has been subject to major devaluations in the past and may suffer significant fluctuations in the
future. One-to-one parity between the U.S. dollar and the peso was ended in 2002 by legislation authorizing the
Argentine government to set the exchange rate and revoking the requirement that the Central Bank of Argentina
(Banco Central de la República Argentina), or BCRA, maintain an amount of gold and reserves equal to the supply
of pesos in Argentina. During 2002, the peso/U.S. dollar exchange rate fluctuated significantly and, consequently,
the BCRA intervened on several occasions, selling dollars to decrease the volatility of the peso. We cannot predict
if any policies and actions adopted by the Argentine government to control the devaluation of the peso will be
successful. In addition, we cannot predict which monetary policies will be adopted by the Argentine government
and the impact of such policies on the value of the peso. The devaluation of the peso and the uncertainty about its
future value against the U.S. dollar and other currencies may adversely affect the Argentine economy, our financial
condition and our results of operation.
Emergency economic legislation has been extended through December 31, 2008. We cannot predict the
outcome of any policies that may be adopted by the Argentine government under this legislation, including with
respect to inflation, interest rates, taxes and price controls, and how such policies would affect the Argentine
economy and companies in Argentina, including our Argentine subsidiaries. Economic, social and political
developments in Argentina, which are beyond our control, may adversely affect the business, financial condition and
results of operations of our subsidiaries in Argentina and, consequently, our results of operations.
Inflation has significantly increased after the revocation of the so-called Convertibility Law in Argentina and
may continue to increase and negatively affect the results of operations and the financial condition of our
Argentine subsidiaries.
After several years of price stability under the convertibility regime, which established a fixed exchange
rate of one U.S. Dollar per one peso, the formal devaluation of the peso in January 2002 created pressures on
domestic prices that generated high inflation in 2002 before they substantially stabilized in 2003. In 2002, the
inflation rate (as measured by changes in the consumer price index, or CPI) reached 41.0% according to data
published by the Instituto Nacional de Estatfísticas y Censos, or INDEC. Despite a decline to 3.7% in 2003, the rate
of inflation increased again to 6.1% in 2004 and to 12.3% in 2005, in each case according to data published by
INDEC. In 2006, according to INDEC data, the rate of inflation decreased to 9.8%, in part due to several actions
implemented by the Argentine government to control inflation and monitor prices for most relevant goods and
services, which included price support arrangements agreed to by the Argentine government and private sector
companies in several industries and markets. In 2007, the inflation rate year-on-year, according to INDEC data, was
8.5%. However, despite the decrease in inflation in 2007, uncertainty surrounding future inflation and the status of
the price support agreements implemented in 2006 could slow Argentine economic growth. In the past, inflation has
materially undermined the Argentine economy and the government’s ability to create conditions that would permit
growth. A return to a high inflation environment would also undermine Argentina’s foreign competitiveness by
diluting the effects of the peso devaluation, with the same negative effects on the level of economic activity. A high
inflation environment could also undermine our results of operations as a result of a lag in cost adjustments. In
addition, a return to high inflation would undermine the confidence in Argentina’s banking system in general, which
may limit the availability of domestic and international credit to businesses, which could adversely affect our ability
to finance our working capital needs on favorable terms.
Any revision of the official financial and economic information and statistics of Argentina or of the
calculation method made by the BCRA or any other entity of the Argentine government that provides information
and statistics may reveal a different financial and economic situation in Argentina which could affect the Argentine
economy in general and our financial condition.
21

In light of the history of hyperinflation in Argentina, we cannot predict that the Argentine government will
be able to maintain strict monetary and fiscal policies to control inflation. In the past, inflation significantly harmed
the Argentine economy and the ability of the Argentine government to foster the growth of companies operating in
Argentina. In addition, the Argentine government’s actions to combat inflation may lead to an economic
deceleration and a reduction in purchasing power of the Argentine population, which may adversely affect the
business of our Argentine subsidiaries, financial condition and results of operations. In addition, the Argentine
government’s actions to combat inflation, combined with uncertainties as to future policies that may be implemented
by the government to control inflation, could increase the volatility of the Argentine capital markets. Any future
measures taken by the Argentine government to control inflation, including adjustments of interest rates,
interventions in the foreign exchange market and other actions to adjust or fix the value of the peso, may adversely
affect the Argentine economy, the business of our Argentine subsidiaries, financial condition, and results of
operations, and consequently, our business, financial condition, and results of operations.
The Argentine government has exercised, and continues to exercise, significant influence over the Argentine
economy, which may impact the business of our Argentine subsidiaries in Argentina.
The Argentine economy has been characterized by frequent, and occasionally drastic, intervention by the
Argentine government, which has often changed monetary, credit and other policies. The actions of the Argentine
government to control inflation, among other policies, have involved wage and price controls, fluctuation of base
interest rates, the freezing of bank accounts in 2002 and the recent establishment of a quota for the export of beef
through May 2007. Actions taken by the Argentine government in connection with the economy may adversely
affect Argentine companies, including our Argentine subsidiaries, and consequently may adversely affect our
financial condition and results of operations.
Risks Relating to our Company
We may be unable to successfully implement our growth strategy.
Our growth strategy involves increasing our sales and our market share in the oil & gas, flow and metal
segments. The successful implementation of this strategy is subject to certain risks, including the existence of
demand for our products, changes in the regulatory environment, macroeconomic factors, our capacity to
successfully compete, development of the sectors we perform in, our ability to control costs, our capacity to secure
capital for investment in development and technology, and our ability to retain a skilled labor force. If a failure in
any of these areas occurs, we may be unable to successfully implement our growth strategy and we may be
adversely affected.
We may be unsuccessful in finding attractive acquisitions and successfully integrating them; our historical
financial statements do not fully reflect our recent acquisitions.
As part of our business strategy, we have grown by making strategic acquisitions. It is our intention to
continue this strategy. Our capacity to continue to successfully expand our business through acquisitions depends
on several factors, including our capacity to identify attractive acquisitions, to obtain any required debt and equity
financing at a reasonable cost and to negotiate favorable terms for such transactions. The successful integration of
new businesses will depend on our capacity to satisfactorily manage these businesses and reduce costs. If we are
unable to cut costs or to benefit from other gains that we expected from acquisitions, we may be adversely affected.
Future acquisitions may require us to incur additional debt, which may affect us adversely.
Acquisitions may also expose us to liabilities associated with the acquired companies or their employees.
Any due diligence we perform in an acquisition and any contractual guarantees or indemnifications that we may
receive from the sellers of such companies may be insufficient to protect us or compensate us for all such liabilities.
Any significant liability associated with an acquisition may have an adverse effect on us.
In addition, between January 1, 2007 and the date of this offering circular, we made the following
acquisitions: (i) Petroima and CSL Offshore, both in April 2007, (ii) Kaestner & Salermo (K&S) and Gasoil, both
in July 2007, (iii) Jefferson in November 2007, and (iv) Aspro and Delta in January 2008. We have consolidated the
results of the acquired companies in our financial statements only as of the dates of their respective acquisitions by
us, and have consolidated the financial position of as of December 31, 2007 and the results of operations for the
22

period ended March 31, 2008. The pro forma statement of operations is presented for illustrative purposes to reflect
the acquisitions of CSL Offshore, Gasoil and Delta on our company only for the year ended December 31, 2007.
Therefore, it is not possible to fully compare the effects of our recent acquisitions with our historical financial
performance or to compare the pro forma statement of operations with our historical financial statements. For
further discussion, see “Presentation of Financial and Other Information,” “Unaudited Pro Forma Combined
Statement of Operations” and the notes to the pro forma statement of operations included elsewhere in this offering
circular.
A significant portion of our sales in the oil & gas segment is dependent on Petrobras projects.
In the oil & gas segment, our major customers are Petrobras and its EPC partners. In 2007, sales to these
customers accounted for approximately 68.0% of our gross revenues in the oil & gas segment and 31.0% of our total
gross revenues. We cannot guarantee that we will maintain a long-term relationship with Petrobras or any of its
EPC partners. Our customers generally acquire our products and services through purchase orders for which there is
not a guarantee of long-term supply. For instance, Petrobras may place a purchase order for our services during one
phase of a new oil platform construction and not during a subsequent phase. In addition, as a rule, the acquisition of
goods and services by Petrobras is dependent on bidding processes. If Petrobras fails to totally or partially proceed
with a particular project or changes its business plan, or if Petrobras reduces its investments and, as a result, reduces
its needs for our products and services, or if the demand for our products from Petrobras’s EPC partners decreases
and we are not successful in increasing our customer base, we may be adversely affected. Furthermore, if we are
unable to meet the qualification and specification requirements imposed by Petrobras on its suppliers, including
those concerning the quality of raw materials that we purchase from other parties, we may be prevented from
supplying goods and services to Petrobras and we may be adversely affected.
Since 2003, the Brazilian government has encouraged the supply of goods and services in Petrobras’s oil
and gas industry projects by Brazilian companies, and the National Agency of Petroleum, Natural Gas and Biofuels
(Agência Nacional de Petróleo, Gás Natural and Biocombustíveis), or the ANP, and Petrobras have included in their
bidding processes specified minimum required amounts of goods and services that must be supplied by Brazilian
companies. In the event of a change in this governmental policy or if the ANP or Petrobras reduce Brazilian
purchasing requirements, we may be adversely affected.
A significant portion of our sales in the metal segment is to the automotive industry.
In 2007, our sales to the automotive industry represented 61% of the gross revenue of our metal segment
and 12% of our total gross revenue. The automotive industry is characterized by the strong bargaining power of the
producers of vehicles in relation to their suppliers because it is a highly concentrated sector with few producers that
have the capacity to choose between suppliers of parts, components, molds and subsystems from all over the world.
In addition, the automotive industry is technology and capital intensive and is characterized by long-term
relationships between producers and suppliers and long product development and operation cycles that increase the
time suppliers require to see a positive return on their investments.
If we are not able to successfully compete, to respond to the technological and quality requirements of our
clients or to establish and maintain long-term partnerships with our clients in the automotive industry, we may be
adversely affected.
We are subject to operating risks associated with the use of our products in critical applications.
Some of the products we manufacture, due to their applications, have inherent and significant risks of civil
liability for damages to third parties. For instance, our industrial valves are used on oil extraction platforms and in
production lines of important Brazilian and international companies. Any faulty operation of these valves can cause
severe loss to our customers and result in our obligation to indemnify those customers for damages. Any significant
liability associated with any fault of our products may affect us adversely.
23

Losses and other liabilities that are not covered by our insurance policies may result in additional costs in our
operations.
We maintain insurance policies of various kinds, some of which are required by law. The occurrence of
losses or other liabilities that may not be covered by those policies or that exceed their limits may result in
significantly and unforeseeably higher costs, which may affect us adversely.
We have been facing increased competition in certain areas of our business.
We compete in Brazil and abroad with other suppliers of goods and services in the oil and gas and
automobile industries, among others. Some of our competitors have greater financial resources than we do. In order
to remain competitive, we need to (i) continue investing in facilities, sales channels, post-sales support and technical
assistance to our customers, and (ii) maintain a favorable relationship with our customers. If we do not have
sufficient resources to continue to make these investments or otherwise are not able to satisfactorily compete, we
may be adversely affected.
The audited financial statements of Gasoil for the year ended December 31, 2006, which contained a qualified
opinion from BDO, have not been included in this offering circular.
We acquired Gasoil in July 2007. BDO issued a qualified opinion in its report accompanying the Gasoil
audited financial statements for the year ended December 31, 2006, and internal policies at BDO do not permit the
inclusion of the qualified report in this offering circular. BDO’s qualified report, dated August 6, 2007, contained
exceptions referring to the following matters: (a) lack of follow-up of the physical inventory of the inventory;
(b) absence of analytical controls over the permanent assets and the documentation that support accounting entries,
preventing a comparison with the values registered in the accounting records; and (c) the absence of necessary
information and documentation for the application of auditing procedures in the cost of sales line item. As a result,
we have only included the audited financial statements for the six-month periods ended June 30, 2007 and the
accompanying accountants’ report dated August 14, 2007, which does not include any qualifications.
Risks Related to the Industries in Which We Operate
The industries in which our products are sold, especially the oil and gas and automotive industries, may face
slowdowns.
The industries in which our products are sold, especially the oil and gas and automotive industries, in Brazil
and abroad, have historically fluctuated between periods of supply shortage, price increase and high margins and
periods of capacity surplus, price reductions and low margins. Historically, such slowdown periods generally
decrease scheduled investments and delay expansion projects. Our growth is related to the strong performance of
the industries in which we operate, especially the oil and gas and automotive industries. As a result, any such
fluctuations and other events that adversely affect these industries or our clients, including periods of economic
slowdown, may adversely affect us and our financial performance.
Our business assumes a long-term relationship with clients and ongoing participation in the development of new
products.
Our products in all three segments require long periods for product specification and development,
investments and operating cycles. Our competitiveness depends on the ability to provide products whose costs,
quality and terms are compatible with the demands of clients. In the event any competitor is able to provide
products under more competitive conditions or of a superior quality, we may have difficulties in finding new
markets for our products quickly enough to avoid a significant adverse effect on us. In the event we cannot continue
to develop new products for our clients, our revenue may be adversely affected, given that the manufacturing phases
of valves, parts and assembly subsets generally demand extended time periods for the substitution or renewal of a
client’s product line.
24

The industries in which we operate are subject to rapid technological innovations.
The industries in which we operate are subject to rapid and continuous technological innovations. Our
positive results depend on our ability to continue to develop improvements in our processes and products and
provide innovative solutions to our clients in response to the rapid changes in technological benchmarks and market
expectations. In case we are not able to develop technological improvements and new technological benchmarks,
whether due to an inability to obtain funds or to retain and employ qualified personnel, we may be adversely
affected.
Changes in environmental laws and regulations may adversely affect us.
Our activities are subject to strict environmental legislation at the federal, state and municipal levels
regarding, among other things, the elimination of solid wastes and the disposal of liquid, industrial and sanitary
effluents. If we are found to violate such laws, regulations, licenses and authorizations or we fail to maintain the
required licenses or authorizations, we may face administrative sanctions, such as fines or revocation of
authorizations, or we, including our directors and executive officers, may be subject to criminal sanctions. We may
also be required to bear significant corrective environmental expenses. Governmental agencies and other authorities
may also introduce more strict laws and regulations or amendments to existing laws and regulations, thus requiring
that we undertake additional expenses for environmental compliance. Any such action by governmental agencies
may adversely affect us.
Risks Relating to the Bonds and the Guarantees
Lupatech Finance has no operations of its own, so that holders of the bonds must depend on Lupatech to provide
Lupatech Finance with sufficient funds to make payments on the bonds when due.
Lupatech Finance is a special purpose, direct wholly-owned subsidiary of Lupatech and is an exempted
company incorporated with limited liability under the laws of the Cayman Islands on June 19, 2007. Lupatech
Finance was established to issue the bonds and act as a finance subsidiary of Lupatech. Accordingly, the ability of
Lupatech Finance to pay principal, interest and other amounts due on the bonds will depend upon Lupatech’s
financial condition and results of operations. In the event of an adverse change in Lupatech’s financial condition or
results of operations, Lupatech Finance may not have sufficient funds to repay all amounts due on or with respect to
the bonds.
The bonds have no maturity date or sinking fund provisions and are not redeemable at the option of holders of
the bonds.
The bonds have no fixed final maturity date or any sinking fund provisions and are not redeemable at the
option of holders of the bonds. As a result, holders of the bonds will be entitled to receive a return of the principal
amount of their investment only if we elect to redeem or repurchase the bonds or in the event of acceleration due to
an event of default. Therefore, you should be aware that you may be required to bear the financial risks of an
investment in the bonds for an indefinite period of time.
There are no financial covenants in the bonds.
Neither we nor any of our subsidiaries are restricted from incurring additional debt or liabilities, including
additional senior debt, under the bonds or the indenture. If we incur additional debt or liabilities, our ability to pay
our obligations on the bonds could be adversely affected. We expect from time to time to incur additional debt and
other liabilities.
The foreign exchange policy of Brazil or Argentina may affect the ability of the Guarantors that are Brazilian or
Argentine companies, respectively, to make money remittances outside Brazil or Argentina in respect of the
Guarantees.
Under Brazilian regulations, Brazilian companies are not required to obtain authorization from the Central
Bank in order to make payments in U.S. dollars outside Brazil under guarantees in favor of foreign persons, such as
the holders of the bonds. We cannot assure you that these regulations will continue to be in force at the time the
25

Guarantors that are Brazilian companies may be required to perform their payment obligations under the
Guarantees. If these regulations or their interpretation are modified and an authorization from the Central Bank is
required, those Guarantors that are Brazilian companies would need to seek an authorization from the Central Bank
to transfer the amounts under the guarantees out of Brazil or, alternatively, make such payments with funds held by
the Guarantors outside Brazil. We cannot assure you that such an authorization will be obtained or that such funds
will be available.
In Argentina, since the amendment of the convertibility law in December 2001, the Argentine government
has imposed several restrictions on the purchase of foreign currency in the exchange market and the transfer of
funds outside of Argentina. The foreign exchange control regulations in Argentina may restrict the transfer of funds
outside Argentina for payments required to be made by those Guarantors that are domiciled in Argentina.
Judgments of Brazilian and Argentine courts enforcing the Brazilian or Argentine Guarantors’ respective
obligations under the bonds are payable only in Brazilian reais or Argentine pesos, respectively.
If proceedings were brought in the courts of Brazil seeking to enforce the Brazilian Guarantors’ obligations
under the bonds, the Brazilian Guarantors would not be required to discharge their obligations in a currency other
than reais. Any judgment obtained against the Brazilian Guarantors in Brazilian courts in respect of any payment
obligations under the bonds will be expressed in reais equivalent to the U.S. dollar amount of such payment at the
exchange rate published by the Central Bank (i) on the date on which such judgment is rendered or (ii) on the date
on which the judicial proceeding was filed, in which case the amount due in reais would be subject to a monetary
correction as determined by the relevant court. Similarly, if proceedings were brought in the courts of Argentina
seeking to enforce the Argentine Guarantors’ obligations under the bonds, the Argentine Guarantors’ would not be
required to discharge their obligations in a currency other than Argentine pesos, and any judgment obtained against
the Argentine Guarantors in respect of payment obligations under the bonds would be subject to monetary
correction. There can be no assurance that such rates of exchange will afford you full compensation of the amount
invested in the bonds plus accrued interest.
Payments on the bonds and the guarantees will be junior to any secured debt obligations of Lupatech Finance
and the Guarantors, as the case may be.
The bonds and the guarantees will constitute senior unsecured obligations of Lupatech Finance and the
Guarantors, respectively, and will rank equal in right of payment with all of the other existing and future senior
unsecured indebtedness of Lupatech Finance and the Guarantors, respectively. Although the holders of the bonds
will have a direct, but unsecured claim on the assets and property of Lupatech Finance, payment on the bonds will
be subordinated to any secured debt of Lupatech Finance to the extent of the assets and property securing such debt.
Payment on the bonds will also be effectively subordinated to the payment of secured debt and other creditors of the
Guarantors.
In addition, under Brazilian and Argentine law, the obligations of the Brazilian and the Argentine
Guarantors, respectively, under the guarantees are subordinated to certain statutory preferences, including claims for
salaries, wages, secured obligations, social security, taxes, court fees, expenses and costs. In the event of the
Brazilian or Argentine Guarantors’ liquidation, such applicable statutory preferences will have preference over any
other claims, including claims by any holder of the bonds.
Prior to the issuance of the new bonds, Lupatech Finance had US$200 million outstanding from the
issuance of the initial bonds. As of March 31, 2008, on a consolidated basis, Lupatech and its subsidiaries had
approximately R$706.6 million of total indebtedness. Approximately R$14 million of this total amount was
structurally senior to the bonds being sold in this offering, including R$9.5 million of secured debt of Lupatech and
R$4.5 million of debt of Lupatech’s subsidiaries.
The guarantees may not be enforceable.
The guarantees provide a basis for a direct claim against the Guarantors; however, it is possible that the
guarantees may not be enforceable under Brazilian or Argentine law. While Brazilian and Argentine law do not
prohibit the giving of guarantees and, as a result, do not prevent the guarantees of the bonds from being valid,
binding and enforceable against the Guarantors, in the event that a Guarantor becomes subject to a reorganization
26

proceeding or to bankruptcy, the relevant guarantee, if granted up to two years before the declaration of bankruptcy,
may be deemed to have been a fraudulent transfer and declared void, based upon the Guarantor being deemed not to
have received fair consideration in exchange for such guarantee. The validity and enforceability of the guarantees
granted by the Guarantors that are Argentine entities requires that the guarantees be in the best interest of the
Argentine Guarantors and that the Argentine Guarantors receive fair and adequate consideration for the granting of
the guarantees. Similar concepts exist under United States law.
In addition, under Brazilian and Argentine law, a guarantee is considered accessory to the underlying or
principal obligation and the nullity of the principal obligation causes the nullity of the accessory obligation.
Therefore, in case our underlying obligations under the bonds or the indenture are declared null, the guarantees
would, under Brazilian and Argentine law, be deemed to be null as well.
We are likely to be classified as a passive foreign investment company for 2008, and will likely be so classified in
later years, which could result in adverse U.S. federal income tax consequences for U.S. investors.
From a U.S. federal income tax standpoint, the bonds are expected to be characterized as equity interests in
Lupatech Finance, rather than as indebtedness. For this reason, and based on the composition of our income and
assets, we believe that we are likely to be classified as a “passive foreign investment company,” or PFIC, for U.S.
federal income tax purposes. PFIC characterization could result in adverse U.S. tax consequences to you if you are
a U.S. investor. In particular, absent a “qualified electing fund” or a “QEF” election, as described below, a U.S.
investor would be subject to U.S. federal income tax at ordinary income rates, plus a possible interest charge, in
respect of any gain derived from the sale or other disposition of the bonds, as well as on the receipt of payments on
the bonds in excess of 125% of the average amount of payments over certain specified time periods. Special U.S.
federal incomes tax filing requirements also apply to an investment in equity interests in a PFIC. Alternatively,
under a QEF election, a U.S. investor would be required to annually include in gross income its pro rata share of the
ordinary earnings and net capital gains of Lupatech Finance, as computed under U.S. federal income tax principals.
In general, a foreign corporation is classified as a PFIC for any taxable year in which either (1) 75% or more of its
gross income is “passive income” or (2) 50% or more of its assets produce, or are held for the production of, passive
income. The Issuer is a special purpose company whose activities will be limited to providing financing for the
activities of certain related affiliates. As such the PFIC determination for the Issuer will depend in large part on the
terms of its inter-company financing arrangements, and the nature of the income and operations of the related
companies that obtain financing from the Issuer. Furthermore, the PFIC determination for the Issuer is not entirely
clear due to the complexity and application of the relevant rules and will be affected by a number of factors
including business plans and operations of the Issuer.
27

USE OF PROCEEDS
The total net proceeds from the sale of the bonds are approximately US$73 million, after deducting
commissions paid to the initial purchasers and estimated offering expenses. We intend to use the net proceeds from
the offering of the bonds to make investments to support the growth of our current activities, including (i) repayment
of current indebtedness; (ii) the acquisition of other companies operating in the segments in which we operate, as
well as of companies holding technology or producing products used in our production chain; (iii) the improvement
and expansion of our current facilities and the construction of new facilities to increase our capacity; (iv) investment
in information technology to optimize processes and increase controls; (v) working capital purposes; and
(vi) interest payments on our outstanding indebtedness.
28

EXCHANGE RATES
On May 29, 2008, the National Monetary Council (Conselho Monetário Nacional), or CMN, enacted
Resolution No. 3,568. The regulation allows, subject to certain procedures and specific regulatory provisions, the
purchase and sale of foreign currency and the international transfer of reais by a foreign person or legal entity,
without limitation as to amount. However, the underlying transaction must be valid. Foreign currencies may be
purchased through financial institutions domiciled in Brazil and authorized to operate in the exchange market. The
purchase and sale of foreign currency in Brazil has to be carried out through these institutions. On March 12, 2008,
pursuant to Resolution No. 3,548, the Central Bank announced new regulations in order to allow Brazilian exporters
of goods and services to keep all of the proceeds received as payment for their exports outside of Brazil. The past
regulations set forth that Brazilian exporters were obliged to remit to Brazil all funds received outside of Brazil as
payment for their exports. Such regulations were amended in 2006 to allow Brazilian exporters to keep a portion of
these funds abroad in accounts maintained with financial institutions located outside Brazil and such new regulations
currently allow exporters to keep a portion or all of these funds abroad in accounts maintained with financial
institutions located outside of Brazil, invest these funds abroad or use these funds for the payment of obligations of
such Brazilian exporters outside of Brazil.
Since 1999, the Central Bank has allowed the real/U.S. dollar exchange rate to float freely, and, since then,
the real/U.S. dollar exchange rate has fluctuated considerably. Since the beginning of 2001, the Brazilian exchange
market has been volatile, and, until early 2003, the value of the real declined relative to the U.S. dollar. The real
appreciated against the U.S. dollar in 2005, 2006 and 2007 and in the three-month period ended March 31, 2008. At
March 31, 2008, the exchange rate for U.S. dollars was R$1.749 per US$1.00. In the past, the Central Bank has
intervened occasionally to control unstable movements of foreign exchange rates. We cannot predict whether the
Central Bank or the Brazilian government will continue to let the real float freely or will intervene in the exchange
rate market through a currency band system or otherwise. The real may depreciate or appreciate against the U.S.
dollar substantially in the future. For more information on these risks, see “Risk Factors — Risks Relating to
Brazil.”
The following tables set forth the selling rate, expressed in reais per U.S. dollar (R$/US$), for the periods
indicated:
Year Period-end Average (1) Low High
2003 ................................................................................................ 2.889 3.072 2.822 3.662
2004 ................................................................................................ 2.654 2.926 2.654 3.205
2005 ................................................................................................ 2.341 2.434 2.163 2.762
2006 ................................................................................................ 2.138 2.177 2.059 2.371
2007 ................................................................................................ 1.771 1.948 1.733 2.156
2008 (through June 23, 2008) ........................................................ 1.612 1.701 1.604 1.830
Month Period-end Average(2) Low High
January 2008 .................................................................................. 1.760 1.774 1.741 1.830
February 2008 ................................................................................ 1.683 1.728 1.672 1.768
March 2008..................................................................................... 1.749 1.708 1.670 1.749
April 2008....................................................................................... 1.687 1.689 1.658 1.753
May 2008........................................................................................ 1.629 1.661 1.629 1.695
June 2008 (through June 23, 2008)................................................ 1.612 1.625 1.604 1.643
___________________
Source: Central Bank.
(1) Represents the average of the exchange rates on the closing of each day during the year.
(2) Represents the average of the exchange rates on the closing of each day during the month.
Exchange rate fluctuations may adversely affect our financial condition and the market price of the bonds.
See “Risk Factors — Risks Relating to Brazil — Exchange rate instability may adversely affect the Brazilian
economy and the trading price of our bonds.”
29

CAPITALIZATION
The following table sets forth our debt and capitalization as of March 31, 2008 derived from our unaudited
interim financial information on an actual basis and on a proforma as adjusted basis giving effect to the issuance of
the bonds offered hereby and the use of proceeds hereof. You should read this table in conjunction with our
financial statements and the related notes and with the sections entitled “Selected Financial and Other Information”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere
in this offering circular.
At March 31, 2008
Actual As Adjusted (3)
(in millions)
(reais) (US$) (1) (reais) (US$) (1)
Cash equivalents and temporary cash investments... 173.6 99.3 173.6 99.3
Current loans and financing and perpetual bonds..... 107.8 61.6 - -
Long term loans and financing.................................. 249.0 142.4 227.2 129.9
Long term perpetual bonds........................................ 349.8 200.0 479.4 274.1
Total debt (loans and financing) ............................... 706.6 404.0 706.6 404.0
Total shareholders’ equity......................................... 252.7 144.5 252.7 144.5
Total capitalization (2) ................................................. 959.3 548.5 959.3 548.5
___________________
(1) Translated for convenience only using the exchange rate as reported by the Central Bank on March 31, 2008 for reais into U.S.
dollars of R$1.749 to US$1.00. These translations should not be considered representations that any such amounts have been,
could have been or could be converted into U.S. dollars at that or at any other exchange rate as of that or any other date.
(2) Total capitalization corresponds to total current and long-term debt (loans, financing and perpetual bonds) plus total
shareholders’ equity.
(3) This adjustment gives effect to the receipt of the gross proceeds from the offering of the new bonds being offered, which are
accounted for as debt under Brazilian GAAP. Gross proceeds in US dollars have been translated using the exchange rate as
reported by the Central Bank on March 31, 2008 for US dollars into reais of US$ 0.518 to R$1.00.
30

SELECTED FINANCIAL AND OTHER INFORMATION
Our selected consolidated financial information as of and for the years ended December 31, 2005, 2006 and
2007 presented below derives from our consolidated financial statements, included elsewhere in this offering
circular, which were prepared in accordance with Brazilian GAAP and audited by PricewaterhouseCoopers
Auditores Independentes, as stated in their reports appearing herein.
Our selected consolidated financial information as of and for the three-month period ended March 31, 2008
presented below derives from our unaudited interim consolidated financial information, included elsewhere in this
offering circular, which were prepared in accordance with CVM Instructions. Deloitte Touche Tohmatsu Auditores
Independentes reported that they have applied limited procedures in accordance with CVM Instructions for a review
of such information and it does not include any changes in accounting practices in accordance with Law No. 11,638.
The separate report dated May 8, 2008 appearing herein states that they did not audit and they do not express an
opinion on that unaudited consolidated interim financial information. The review report for the three-month period
ended March 31, 2008, issued by Deloitte Touche Tohmatsu Auditores Independentes, includes an emphasis
paragraph mentioning that the interim financial statements for that period have been prepared in conformity with
CVM Instructions and do not include all the changes in accounting practices introduced by Law No. 11,638/07.
Our selected consolidated financial information as of and for the three-month period ended March 31, 2007
presented below derives from our unaudited interim consolidated financial information, included elsewhere in this
offering circular, which were prepared in accordance with CVM Instructions. With respect to the unaudited
consolidated interim financial information for the three-month period ended March 31, 2007 included in this
offering circular, PricewaterhouseCoopers Auditores Independentes reported that they have applied limited
procedures in accordance with Brazilian professional standards for a review of such information. However, their
separate report dated June 3, 2008 appearing herein states that they did not audit and they do not express an opinion
on that unaudited consolidated interim financial information. Accordingly, the degree of reliance on their report on
information for the three-month periods ended March 31, 2007 should be restricted in light of the limited nature of
the review procedures applied. The review report for the three-month period ended March 31, 2007, issued by
PricewaterhouseCoopers Auditores Independentes, includes an emphasis paragraph mentioning that the interim
financial statements for that period have been prepared in conformity with CVM Instructions and do not include all
the changes in accounting practices introduced by Law No. 11,638/07.
Our consolidated financial information as of and for the year ended December 31, 2007 includes the
financial position of Lupatech S.A. and the subsidiaries we acquired during 2007. Our consolidated financial
information as of and for the three-month period ended March 31, 2007 does not include the financial condition and
results of the companies we acquired after March 2007: CSL Offshore, Petroima, K&S, Gasoil, Jefferson, Aspro
and Delta. For further information on Gasoil financial statements, see “Risk Factors.” Our consolidated results of
operations for the year ended December 31, 2007 include the results of the subsidiaries acquired during 2007 from
their respective date of acquisition. For further information on the recent acquisitions, see “Business—Corporate
Structure” and “Business—Recent Events.”
The unaudited pro forma combined statements of operations present the financial position and the results of
our company, together with the results of CSL Offshore, Gasoil and Delta on a pro forma basis as if the acquisitions
had taken place on January 1, 2007. For a demonstration of the way in which our unaudited pro forma combined
statement of operations was compiled, see “Unaudited Pro Forma Combined Statement of Operations” and the notes
to the pro forma statement of operations included elsewhere in this offering circular.
The unaudited pro forma combined statement of operations is not necessarily indicative of the results of
operations that would have been obtained if the abovementioned companies had been acquired in 2007 or on any
other date, and they are not indicative of future results of operations.
Our financial statements presented in this offering circular are prepared in accordance with Brazilian
GAAP in the case of the financial statements as of and for the years ended December 31, 2005, 2006 and 2007 and
in accordance with CVM Instructions for the financial information as of and for the three-month periods ended
March 31, 2007 and 2008. This financial information should be read in conjunction with our consolidated financial
statements and the related notes and the sections entitled “Presentation of Financial and Other Information,”
31

“Selected Financial and Other Information” and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” included elsewhere in this offering circular.
Solely for the convenience of the reader, real amounts as of and for the year ended December 31, 2007 and
as of and for the three-month period ended March 31, 2008 have been translated into U.S. dollars at the selling rate
as reported by the Central Bank on March 31, 2008 of R$1.749 to US$1.00. The U.S. dollar equivalent information
should not be construed to imply that the amounts in reais represent, or could have been or could be converted into,
U.S. dollars at such rates or at any other rate. See “Exchange Rates.”
Statement of Income Information
32
Three-month period ended March 31,
2008 2008 2007
(in millions of
US$) (in millions of reais)
Gross sales and services.................................................................................................... 88.1 154.1 74.5
Taxes on sales.................................................................................................................... (8.1) (14.1) (7.2)
Net revenue........................................................................................................................ 80.0 140.0 67.3
Cost of sales and services.................................................................................................. (51.8) (90.6) (40.5)
Gross profit........................................................................................................................ 28.2 49.4 26.8
Operating income (expenses)............................................................................................ (28.5) (49.8) (23.4)
Selling..................................................................................................................... (6.5) (11.3) (5.9)
General and administrative..................................................................................... (4.7) (8.3) (4.7)
Management compensation.................................................................................... (0.3) (0.6) (0.4)
Financial expenses.................................................................................................. (18.1) (31.7) (12.2)
Financial income .................................................................................................... 7.8 13.6 6.0
Goodwill amortization............................................................................................ (6.6) (11.5) (6.2)
Other operating income (expenses)........................................................................ (0.1) (0.1) -
Operating profit (loss) ....................................................................................................... (0.2) (0.4) 3.4
Non-operating income (expenses), net ............................................................................. - 0.1 -
Profit (loss) before social contribution, income tax and statutory profit sharing............. (0.2) (0.3) 3.4
Current income tax and social contribution...................................................................... (3.3) (5.7) (3.5)
Deferred income tax and social contribution.................................................................... 1.0 1.7 0.3
Employee profit sharing.................................................................................................... (0.1) (0.2) (0.2)
Net income (loss) .............................................................................................................. (2.6) (4.5) -

2007
(pro forma)
(in millions
of US$)
Year ended December 31,
2007
(pro forma) (1) 2007 2007 2006 2005
(in millions of (in millions
reais) of US$) (in millions of reais)
Gross sales and services.......................................... 286.3 500.7 244.4 427.5 250.9 200.7
Taxes on sales.......................................................... 24.2 (42.4) (23.2) (40.5) (27.3) (27.6)
Net revenue.............................................................. 262.0 458.3 221.3 387.0 223.6 173.2
Cost of sales and services........................................ (168.3) (294.3) (140.4) (245.6) (132.6) (100.1)
Gross profit.............................................................. 93.7 163.9 80.8 141.4 91.0 73.1
Operating income (expenses).................................. (123.1) (215.3) (99.0) (173.2) (53.0) (34.9)
Selling........................................................... (20.6) (36.1) (18.1) (31.6) (23.0) (19.1)
General and administrative........................... (16.5) (28.9) (14.5) (25.3) (10.0) (7.8)
Management compensation.......................... (1.2) (2.1) (1.2) (2.1) (1.5) (1.2)
Financial expenses........................................ (48.0) (84.0) (45.3) (79.3) (18.7) (11.2)
Financial income .......................................... 7.5 13.1 13.8 24.1 15.7 4.3
Goodwill amortization.................................. (39.0) (68.2) (28.6) (50.0) (3.5) -
Other operating income (expenses).............. (5.1) (9.0) (5.1) (9.0) (12.1) -
Operating profit (loss) ............................................. (29.3) (51.3) (18.2) (31.8) 38.0 38.2
Non-operating income (expenses), net ................... (0.2) (0.4) 0.2 0.4 0.3 (1.7)
Profit (loss) before social contribution, income
tax and statutory profit sharing.......................... (29.6) (51.7) (18.0) (31.4) 38.3 36.4
Current income tax and social contribution............ (17.8) (31.2) (13.6) (23.8) (13.3) (2.9)
Deferred income tax and social contribution.......... (6.5) (11.3) 4.2 7.3 2.6 0.2
Employee profit sharing.......................................... (0.9) (1.6) (0.9) (1.6) (3.8) (2.9)
Minority interests .................................................... - - - - - 1.2
Net income (loss) .................................................... (41.9) (73.2) (28.3) (49.5) 23.8 32.00
___________________
(1) For important information as to how we compiled the pro forma statement of operations, see “Presentation of Financial and Other
Information,” “Unaudited Pro Forma Combined Statement of Operations” and the notes to the pro forma statement of operations included
elsewhere in this offering circular.
33

Balance Sheet Information
34
As of March 31,
2008 2008 2007
(in millions of US$) (in millions of reais)
Current assets ................................................................................................. 300.5 525.5 333.0
Cash and banks............................................................................................... 97.5 170.5 9.5
Marketable securities ..................................................................................... 1.8 3.1 170.0
Accounts receivable ....................................................................................... 94.1 164.5 59.0
Inventories...................................................................................................... 73.8 129.1 73.7
Deferred income tax and social contribution................................................. 0.1 0.2 0.4
Taxes recoverable........................................................................................... 21.6 37.7 16.8
Other accounts receivable .............................................................................. 10.9 19.0 3.5
Prepaid expenses ............................................................................................ 0.8 1.4 0.1
Long-term assets ............................................................................................ 11.6 20.3 9.4
Taxes recoverable........................................................................................... 2.5 4.4 2.6
Deferred income tax and social contribution................................................. 7.3 12.8 5.8
Other accounts receivable .............................................................................. 1.8 3.1 1.0
Permanent assets ............................................................................................ 315.3 551.5 208.7
Total assets ..................................................................................................... 627.4 1,097.3 551.1
Current liabilities............................................................................................ 134.9 235.9 54.6
Suppliers......................................................................................................... 22.4 39.1 14.1
Loans and financing ....................................................................................... 57.1 99.8 5.3
Perpetual bonds .............................................................................................. 4.5 8.0 -
Debentures...................................................................................................... - - 2.5
Salaries and wages ......................................................................................... 4.7 8.2 4.9
Taxes and social contributions....................................................................... 5.9 10.4 5.4
Dividends and interest on own capital payable ............................................. - - 5.8
Advances from customers.............................................................................. 17.7 31.0 0.8
Participation in results.................................................................................... 0.2 0.3 2.8
Related parties ................................................................................................ - - -
Accounts payable for the acquisition of investments .................................... 14.0 24.4 3.4
Income tax payable......................................................................................... 3.9 6.8 5.9
Other accounts payable .................................................................................. 4.5 7.9 3.7
Long-term liabilities....................................................................................... 348.1 608.8 251.5
Loans and financing ....................................................................................... 142.4 249.0 15.1
Debentures...................................................................................................... - - 227.0
Provision for contingencies............................................................................ 4.3 7.5 5.1
Perpetual bonds .............................................................................................. 200.0 349.8 -
Taxes and social contributions....................................................................... - - -
Deferred income tax and social contribution................................................. 0.1 0.1 0.1
Accounts payable for the acquisition of investments .................................... 0.9 1.6 3.7
Other accounts payable .................................................................................. 0.5 0.8 0.5
Shareholders’ equity....................................................................................... 144.5 252.7 245.0
Total liabilities and stockholders’ equity....................................................... 627.4 1,097.3 551.1

35
As of December 31,
2007 2007 2006 2005
(in millions
of US$) (in millions of reais)
Current assets ............................................................................................ 307.5 537.8 356.7 94.9
Cash and banks.......................................................................................... 33.8 59.1 11.5 4.7
Marketable securities ................................................................................ 102.5 179.2 192.7 25.9
Accounts receivable .................................................................................. 68.9 120.5 61.9 33.4
Inventories................................................................................................. 72.1 126.1 71.2 26.9
Deferred income tax and social contribution............................................ 0.1 0.2 0.4 -
Taxes recoverable...................................................................................... 19.7 34.4 14.2 2.8
Other accounts receivable ......................................................................... 10.0 17.5 4.5 1.0
Prepaid expenses ....................................................................................... 0.5 0.8 0.2 0.2
Long-term assets ....................................................................................... 10.5 18.3 9.3 3.3
Taxes recoverable...................................................................................... 2.4 4.2 2.5 2.8
Deferred income tax and social contribution............................................ 6.3 11.1 5.6 0.4
Other accounts receivable ......................................................................... 1.7 3.0 1.1 0.1
Permanent assets ....................................................................................... 315.5 551.9 203.9 55.1
Total assets ................................................................................................ 633.4 1,107.9 569.9 153.3
Current liabilities....................................................................................... 135.6 237.2 73.1 67.5
Suppliers.................................................................................................... 26.0 45.5 18.9 11.3
Loans and financing .................................................................................. 35.7 62.5 10.4 23.5
Debentures................................................................................................. - - 9.8 -
Salaries and wages .................................................................................... 4.8 8.4 5.0 2.9
Taxes and social contributions.................................................................. 6.2 10.9 4.4 4.7
Dividends and interest on own capital payable ........................................ - - 5.8 15.3
Advances from customers......................................................................... 4.3 7.5 0.7 3.0
Participation in results............................................................................... 0.7 1.3 3.1 2.3
Related parties ........................................................................................... - - - 0.1
Accounts payable for the acquisition of investments ............................... 44.3 77.4 3.7 2.5
Deferred income tax and social contribution............................................ - - 2.1 -
Income tax payable.................................................................................... 8.3 14.6 6.1 0.3
Other accounts payable ............................................................................. 5.2 9.1 3.1 1.6
Long-term liabilities.................................................................................. 351.0 614.0 251.1 17.4
Suppliers.................................................................................................... - - - -
Loans and financing .................................................................................. 142.8 249.7 14.1 14.9
Debentures................................................................................................. - - 227.0 -
Provision for contingencies....................................................................... 4.3 7.5 5.2 -
Perpetual bonds ......................................................................................... 202.5 354.2 - -
Taxes and social contributions.................................................................. 0.5 0.8 0.8 0.9
Deferred income tax and social contribution............................................ 0.1 0.1 0.1 0.2
Accounts payable for the acquisition of investments ............................... 2.2 3.8 3.8 1.4
Other accounts payable ............................................................................. 0.2 0.3 - -
Minority interests ...................................................................................... - - - (0.1)
Shareholders’ equity.................................................................................. 146.8 256.7 245.7 68.5
Total liabilities and stockholders’ equity.................................................. 633.4 1,107.9 569.9 153.3

The following table shows our net revenues and EBITDA for our segments in the indicated periods:
Three-month period ended March 31, Year ended December 31,
2008 2008 2007 2007 Pro Forma 2007 2007 2006 2005
(in millions
(in millions
of US$,
of US$, (in millions of (in millions of
except
percentages)
(in millions of reais, except
percentages)
except
percentages)
reais, except
percentages)
US$, except
percentages)
(in millions of reais, except
percentages)
Net revenue.... 80.0 140.0 67.3 262.0 458.3 221.3 387.0 223.6 173.2
Oil & gas
segment ...... 59.7% 59.7% 25.7% - - - - - -
Flow segment
................... 26.4% 26.4% 46.8% 81.6% 81.6% 78.3% 78.3% 66.9% 62.5%
Metal
segment ...... 13.9% 13.9% 27.5% 18.4% 18.4% 21.7% 21.7% 33.1% 37.5%
Adjusted
EBITDA (2) .... 19.4 33.9 18.5 64.0 112.0 54.9 96.0 59.5 49.6
Oil & gas
segment ...... 59.8% 59.8% 28.1% - - - - - -
Flow segment
................... 35.8% 35.8% 61.1% 95.8 95.8% 95.4% 95.4% 83.2% 86.9%
Metal
segment ...... 4.4% 4.4% 10.8% 4.2% 4.2% 4.6% 4.6% 16.8% 13.1%
___________________
(1) Adjusted EBITDA means income before net financial expenses, income tax and social contribution, depreciation and amortization, nonoperating
results and non-recurring expenses. Adjusted EBITDA is not a measure defined under Brazilian GAAP, does not represent cash
flow for the periods indicated and should not be regarded as a replacement for net income as an indicator of the performance of our
operations or as a replacement for cash flow as an indicator of liquidity. Adjusted EBITDA has no standardized meaning and our definition
may not be comparable to adjusted EBITDA as used by other companies. We use adjusted EBITDA as defined in this offering circular for
purposes of measuring our performance. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations—
Adjusted EBITDA” for the calculation of adjusted EBITDA.
The chart below shows certain of our indebtedness information for the periods indicated:
As of and for the three-month period ended
March 31, As of and for the year ended December 31,
2008 2008 2007 2007 2007 2006 2005
(in millions
of US$) (in millions of reais)
36
(in millions
of US$) (in millions of reais)
Total indebtedness........................... 404.0 706.6 249.9 381.0 666.5 261.3 38.4
Total cash and banks and marketable
securities.......................................... 99.3 173.6 179.5 136.5 238.3 204.2 30.6
Indebtedness, net ............................. 304.7 533.0 70.4 244.8 428.1 57.1 7.8
Adjusted EBITDA........................... 19.4 33.9 18.5 54.9 96.0 59.5 49.6
Net Indebtedness/Adjusted
EBITDA (1) ....................................... 4.8x 4.8x 1.1x 4.5x 4.5x 1.0x 0.2x
___________________
(1) With respect to the three-month periods ended March 31, 2008 and 2007, the net indebtedness to adjusted EBITDA ratio has been obtained
by dividing net indebtedness as of March 31, 2008 and 2007, respectively, by adjusted EBITDA for the twelve-month periods ended
March 31, 2008 and 2007.
For further information on our indebtedness, see “Management’s Discussion and Analysis of Financial
Conditions and Results of Operations—Indebtedness” and note 10 to each of our interim and annual financial
statements included elsewhere in this offering circular.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is based on and should be read in conjunction with our audited consolidated
financial statements for the years ended December 31, 2005, 2006 and 2007, the unaudited consolidated interim
financial information for the three-month periods ended March 31, 2007 and 2008, and the related notes and the
financial information presented under the section entitled “Selected Financial and Other Information” included
elsewhere in this offering circular. The following discussion contains estimates and forward-looking statements that
involve risks and uncertainties. Our actual results may differ materially from those discussed in these estimates and
forward-looking statements as a result of various factors, including, without limitation, those set forth in the
“Forward-Looking Statements” and “Risk Factors” sections of this offering circular. Our audited consolidated
financial statements for the years ended December 31, 2005, 2006 and 2007, and our unaudited consolidated
interim financial information for the three-month periods ended March 31, 2007 and 2008 included in this offering
circular have been prepared in accordance with Brazilian GAAP, which differs in certain respects from U.S. GAAP.
Overview
Our business is divided into three business segments: the oil & gas segment, which produces products and
services for the oil and gas industry, including anchoring ropes for deepwater platforms, valves, tools for oil
exploration, gas compressors, tube coating and services; the flow segment, which produces industrial valves,
primarily for the chemical, petrochemical, pharmaceutical, pulp and paper, ethanol and construction industries; and
the metal segment, which produces sand castings, investment castings and powder injection molding, or PIM, parts,
primarily for the automotive industry. We believe our products are recognized for their high level of specialization,
technological innovation and quality. We are a leader in the Mercosul, trading area in the production of industrial
valves and equipment for flow control and automation, primarily for the Brazilian oil and gas industry, and a leading
global producer of polyester ropes for platform anchoring. In the flow segment, our valve brands “Valmicro,”
“Mipel,” “Jefferson” and “Valbol” are leading brands in their segments in Mercosul. In the oil & gas segment, our
synthetic fiber rope brand UltraSeven® is the only Brazilian brand in the market. We are also the leading Brazilian
producer of complex parts and sub-systems for the global automotive industry in our metal segment, and we are
recognized in the international market for our development and production.
Comparability Limits of Financial Statements
Since the beginning of our operations, we have expanded through acquisitions. For further information
about the acquired companies, see “⎯Recent Acquisitions.” These acquisitions are reflected in our financial
statements, included elsewhere in this offering circular. See “Presentation of Financial and Other Information” for
further information on our financial statements. Because of its materiality and impact on our financial statements,
the following events should be highlighted:
• CSL Offshore (which we acquired in April 2007 and the results of which we began to consolidate as of
April 1, 2007);
• Gasoil (which we acquired in July 2007 and the results of which we began to consolidate as of July 1,
2007); and
• Delta (which we acquired in January 2008 and the results of which we began to consolidate as of
October 1, 2007).
For information purposes only, we also present elsewhere in this offering circular the following financial
statements:
• the unaudited carve-out interim financial statements of CSL Offshore, as of and for the year ended
March 31, 2007, presenting, on a carve-out basis, the financial position and results of operations of the
CSL Offshore business of CSL, for such period. With respect to the unaudited carve-out interim
financial statements of CSL Offshore for the three-month period ended March 31,2007 included in this
offering circular, PricewaterhouseCoopers Auditores Independentes reported that they have applied
limited procedures in accordance with Brazilian professional standards for a review of such
37

information. However, their separate report dated June 15, 2007 appearing herein states that they did
not audit and they do not express an opinion on that unaudited consolidated interim financial
information. Accordingly, the degree of reliance on their report on information for the three-month
period ended March 31, 2007 should be restricted in light of the limited nature of the review
procedures applied;
• the audited financial statements of Gasoil, as of and for the six-month period ended June 30, 2007,
which have been audited by BDO Trevisan Auditores Independentes, as stated in their report appearing
herein. See “Risk Factors” for more information on Gasoil financial statements; and
• the unaudited interim financial statements of Delta, as of and for the six-month period ended
September 30, 2007 and the audited financial statements for the twelve-month period ended March 31,
2007, which have been reviewed and audited by Mr. Juan Carlos Fernandez, as stated in their report
appearing herein. See “Presentation of Financial and Other Information” for further information.
As a consequence of these acquisitions, the comparability of our financial statements for any given period
is necessarily limited, and the performance of certain aspects of our business may not be evident from the discussion
of our results of operations that appears in this section.
Brazilian Economic Conditions
Since the present administration took office, the Brazilian economy has moved towards increased stability,
as a result of the continued implementation of the macroeconomic policies of the previous administration and a
focus on fiscal responsibility.
The year 2005 was marked by accusations of corruption against members of the executive and legislative
branches of the Brazilian government belonging to the president’s parties, and by the Central Bank’s effort to reach
the annual inflation target of 4.5%, resulting in interest rates being kept at high levels. However, in November, the
economic slowdown led the Brazilian government to begin reducing the basic interest rate in order to stimulate
economic growth. On December 31, 2005, the basic interest rate as published by the Central Bank was 18.0% a
year. The real appreciated by 13.4% against the U.S. dollar in 2005, and, despite that appreciation, Brazil achieved
a trade surplus of US$44.8 billion. The average unemployment rate decreased from 11.5% to 9.8% in the main
metropolitan regions of Brazil, according to unemployment estimates published by the IBGE. Inflation, as
measured by the IPCA, was 5.7%, and the average TJLP interest rate was 9.8%. GDP grew 2.9%.
In 2006, the presidential elections did not disturb the macroeconomic environment in Brazil. Despite
continuing accusations of corruption and the resignation of the Minister of Finance, Antônio Pallocci, the real
appreciated 8.7% against the U.S. dollar. This appreciation did not prevent Brazil from reaching its highest trade
surplus ever, totaling US$46.1 billion in 2006. Brazil’s country risk index, as measured by the EMBI+ (Emerging
Markets Bond Index Plus) index, closed the year at 192 points. The average unemployment rate increased from
9.8% in 2005 to 10.0% in 2006 in the main metropolitan regions of Brazil, according to unemployment estimates
disclosed by the IBGE. Inflation, as measured by the IPCA, closed the year below the 4.5% target, at 3.1%, and the
average TJLP interest rate was 7.9% for the same period. GDP grew 3.7% in 2006.
In 2007, the rate of economic growth and monetary stability in Brazil increased. During this period,
Brazil’s international reserves reached US$180.3 billion. Economic growth continued accelerating, supported by
further reductions in the SELIC rate, which on December 31, 2007 was 11.25% and an increase in credit
availability. In 2007 the Brazilian trade surplus was US$40 billion. The average unemployment rate decreased from
10% on December 31, 2006 to 9.3% on December 31, 2007 in the main metropolitan regions of Brazil, according to
the IBGE. Inflation, as measured by the IPCA, closed the period ended December 30, 2007 at 4.5% and the average
TJLP interest rate was 6.37% for the same period.
In the first quarter of 2008, the economic production data indicated an increase in domestic demand. In
order to reduce the risk of inflation pressures, the COPOM decided to increase the SELIC rate on April 16, 2008 to
11.75%. In the first quarter of 2008, the Brazilian trade surplus was US$2.84 billion, and international reserves
reached US$195.2 billion. The average unemployment rate decreased from 9.3% on December 31, 2007 to 8.35%
38

on February 29, 2008 in the main metropolitan regions of Brazil, according to the IBGE. Inflation, as measured by
the IPCA, was 1.5% for the three months ended March 31, 2008.
The table below shows GDP growth, inflation, interest rates and the U.S. dollar exchange for the periods
indicated.
Three-month period ended
March 31,
Year ended December 31,
2008 2007 2007
(in percentages)
2006 2005
GDP growth...................................................... 2.4% 4.39% 5.4% 3.7% 2.9%
Inflation (IGP-M) (1) .......................................... 1.5% 1.1% 7.7% 3.8% 1.2%
Inflation (IPCA) (2) ............................................ 1.7% 1.3% 4.5% 3.1% 5.7%
INPC (3) .............................................................. 11.2% 0.5% 5.2% 2.8% 5.0%
CDI (4) ................................................................ 8.3% 12.7% 11.8% 15.2% 19.1%
TJLP (5) .............................................................. 6.3% 6.5% 6.4% 7.9% 9.8%
Appreciation (devaluation) of the real vs. U.S.
dollar in the period ........................................... 7.3% 4.1% 20.5% 9.3% 14.0%
Exchange rate at year end—US$1.00 .............. 1.749 2.050 1.771 2.138 2.341
Average exchange rate—US$1.00 (6) ................ 1.738 2.108 1.448 2.177 2.434
___________________
Sources: Fundação Getulio Vargas, IpeaData, Central Bank and Bloomberg.
(1) Inflation (IGP-M) is the general market price index measured by Fundação Getulio Vargas.
(2) Inflation (IPCA) is the broad consumer price index as measured by IBGE.
(3) The INPC or National Consumer Price Index is published by the IBGE and measures inflation for families with incomes of between one
and eight minimum salaries in the nine largest metropolitan areas of Brazil, as well as Brasília and the city of Goiânia, Goiás state.
(4) The CDI rate is the average of the fixed rates of interbank deposits for one business day as registered with and settled by the CETIP system.
(5) The TJLP is the long-term interest rate published every quarter by the Central Bank. The figures correspond to the average of the period
indicated.
(6) Average exchange rate in the period indicated.
Argentine Macroeconomic conditions
The Argentine economy has experienced significant volatility in recent decades, characterized by periods
of low or negative growth and high variable levels of inflation. Inflation reached its peak in the late 1980s and early
1990s. The annual inflation rate as measured by the consumer price index was approximately 388% in 1988,
4,924% in 1989 and 1,344% in 1990. Due to inflationary pressures prior to the 1990s, the Argentine currency was
devalued repeatedly and macroeconomic instability led to broad fluctuations in the real exchange rate of the
Argentine currency relative to the U.S. dollar. To address these pressures, past Argentine governments implemented
various plans and utilized a number of exchange rate systems.
Strong economic growth in the world’s developed economies and favorable raw material pricing from 2003
through 2007 provided favorable conditions for Argentina’s economic recovery. GDP grew by 8.7% in 2003, 9.0%
in 2004, 9.2% in 2005, 8.5% in 2006 and 8.7%, based on preliminary data, in 2007. Public finances both at national
and provincial levels recorded a consolidated primary surplus of approximately 5.5% of GDP in 2004, 4.5% in 2005,
3.5% in 2006 and 3.2%, based on preliminary data, in 2007. Argentina has also maintained a trade surplus, which
from 2003 to 2007 averaged approximately 7% of GDP.
The annual wholesale price index, according to the INDEC, increased by 2% in 2003, 7.9% in 2004, 10.6%
in 2005, 7.1% in 2006 and 14.4% in 2007. According to a recent report published by the International Monetary
Fund, however, most private sector analysts believe that actual inflation is considerably higher than reflected in
official data. The government’s main strategy to fight increasing inflation has been the establishment of agreed
price controls with private companies.
With its economic recovery well under way, in 2005, Argentina successfully completed the restructuring of
a substantial portion of its bond indebtedness and cancelled all of its debt with the International Monetary Fund.
Moreover, the economic growth rate of Argentina remained strong during 2007. Preliminary data show
that real GDP increased 8.7% compared with 2006, driven by fixed investment and private consumption.
39

Total exports from Argentina increased by 20% year over year to US$55.9 billion in 2007, mainly driven
by an increase in exports of agricultural products, while imports increased by 31% in the same period due to higher
growth in consumption and investment. The trade surplus decreased by 9.4%, falling from US$12.3 billion in 2006
to US$11.2 billion in 2007.
The Argentine Central Bank continued its policy of accumulating international reserves and maintaining a
competitive exchange rate during 2007. Central Bank reserves were at US$46 billion at the end of the year, and the
peso/dollar buying exchange rate increased to Ps.3.15 per dollar, a 2.9% nominal depreciation. The real exchange
rate of the Argentine peso against a basket of currencies, measured using INDEC’s inflation rate based on the
consumer price index, showed a 10% real depreciation throughout the year.
Government fiscal revenues increased by 33% in 2007 and extraordinary revenues of Ps.7.814 million were
generated as a result of pension reform, but an even higher rise in public expenditures (46%) led to a reduction in the
national primary fiscal surplus from 3.5% of GDP in 2006 to 3.2% of GDP, based on preliminary data, in 2007. In
relation to public debt, two issues are still pending: (i) a portion of the defaulted debt that was not included in the
2005 debt swap (the so-called “Paris Club”) has not yet been resolved and (ii) certain government bondholders have
not accepted the government’s debt restructuring proposal.
The Argentine economy has begun 2008 with favorable prospects in terms of economic growth, but with
concerns over inflation, energy supply and the international economic context in the near future.
Three-month period ended
March 31,
Year ended December 31,
2008 2007 2007
(in percentages)
2006 2005
GDP growth...................................................... N/A N/A 8.7% 8.5% 9.2%
Inflation ............................................................ 8.5% 9.5% 8.8% 10.9% 9.6%
Interest rate....................................................... N/A 9.2% 11.1 8.6% 6.2%
Appreciation (devaluation) of the peso vs. US
dollar in the period ........................................... 2.0% 0.6% 2.9% 1.0% 1.8%
Exchange rate at year end—US$1.00 .............. 3.168 3.077 3.129 3.042 3.012
Average exchange rate—US$1.00 (6) ................ 3.153 3.080 3.046 3.054 2.904
___________________
Source: The Economist Intelligent Unit
Factors Affecting the Results of Our Operations
Interest rates
For decades, Brazil has experienced extremely high inflation rates. In order to curb inflation, the Brazilian
government has introduced several policies aimed at restricting credit and reducing consumption. One of the main
policies to curb inflation has been an increase in interest rates. As a result, the base interest rate, the reference rate
for the Special System for Settlement and Custody (Sistema Especial de Liquidação e de Custódia), or SELIC, has
varied significantly in recent years. During 2005, the Central Bank raised the SELIC and the rate reached 16.50%
by the year-end. By December 31, 2006, the SELIC decreased to 13.25% and by the end of 2007, the SELIC
decreased further to 11.75%. As of June, 2008, the SELIC was 11.75% per year.
Our financial expenses are greatly affected by high interest rates in Brazil. The main interest rates by
which we are affected are the TJLP, which applies to our long-term agreements, and the Interbank Deposit
Certificate rate (Certificado de Depósito Interbancário), or CDI, which principally applies to our short-term
agreements, including the instruments we use to finance our working capital. The annual average TJLP was 7.9%
and 6.37% in 2006 and 2007, respectively, and the annual average CDI was 15.2% and 11.8% in 2006 and 2007,
respectively. The average TJLP and CDI were 6.25% and 11.2%, respectively, for the three-month period ending
March 31, 2008.
Exchange rates
In 2007, our net operating revenue and cost of sales and services were adversely affected by approximately
3% due to the fluctuation of the real in relation to foreign currencies.
40

Commodity prices and raw material prices
The prices of our main raw materials, such as metallic alloys, stainless steel and carbon steel scrap and
polyester, are established by the international market and are subject to the factors that affect such prices
internationally.
Critical Accounting Policies
Critical accounting policies are those that are important both to the portrayal of the financial condition and
results of operations and that require management’s most difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effect of matters that are inherently uncertain. As the number of
variables and assumptions affecting the possible future resolution of the uncertainties increases, those judgments
become even more subjective and complex. In order to provide an understanding about how management forms its
judgments about future events, including the variables and assumptions underlying the estimates, and the sensitivity
of those judgments to different circumstances, we identify the following policies as critical accounting policies:
• allowance for doubtful accounts;
• impairment, depreciation and amortization of property, plant and equipment;
• investments, goodwill, intangible assets and amortization;
• deferred taxes; and
• contingencies.
Allowance for doubtful accounts
The allowance for doubtful accounts is recorded in an amount management considers sufficient to cover
any probable expected losses on the realization of accounts receivable from customers. The estimated amount of the
allowance for doubtful accounts may be modified as a result of changes of expectations regarding the recoverability
of the amounts involved or changes in the financial condition of customers.
Impairment, depreciation and amortization of property, plant and equipment
We periodically assess the need to perform impairment tests of long-lived assets (or asset groups) based on
various indicators such as the level of their business profitability and technological developments. When necessary,
upon the occurrence of any negative triggering event such as a significant loss in market value of property, plant and
equipment or significant adverse change in the extent or manner in which a long-lived asset is being used, cash flow
studies are prepared to determine if the accounting value of the property, plant and equipment is recoverable through
the profitability resulting from its business. In order to estimate future cash flows, we make various assumptions
and estimates. These assumptions and estimates can be influenced by different external and internal factors, such as
economic and industry trends, interest rates, foreign exchange rates, changes in business strategies and in the type of
products offered to the market.
We recognize expenses related to the depreciation and amortization of our property, plant and equipment
based on the straight-line method. The useful life of assets is reviewed periodically based on existing facts and
circumstances. The determination of useful lives requires considerable judgment and is inherently uncertain, due to
changes in technology and industry competition, which could cause early obsolescence of the property, plant and
equipment. If we are required to materially change the assumptions used, depreciation expense, obsolescence writeoff
and the net book value of property, plant and equipment could be materially altered.
Investments, goodwill, intangible assets and amortization
Goodwill or negative goodwill recorded on the acquisition of an equity interest in a company is computed
as the difference between the purchase consideration and the underlying book value of the investment acquired.
Goodwill is attributed among either: (i) the difference between book value and market value of assets (normally
41

fixed assets), (ii) the estimated future profitability or (iii) to the extent goodwill is not attributed to either of (i) or
(ii), it must be attributed to what Brazilian GAAP identifies as “other reasons,” which effectively is a residual value.
Goodwill attributable to future profitability is amortized over a period not exceeding ten years. Goodwill attributed
to fixed assets is amortized over the remaining lives of the assets. Negative goodwill is only amortized upon
realization of the related asset through sale or disposal. Write-down of the carrying value of goodwill is made if and
when appropriate.
Deferred taxes
The recognition of deferred tax assets and liabilities is based on the temporary differences between the
financial statement carrying amounts and the tax basis of assets and liabilities. Tax loss carryforwards and
deductible temporary differences are only recognized to the extent that realization against future taxable income is
considered probable. For CVM-listed companies, future projected taxable income is discounted to present value and
tax losses expected to be offset against such income over a maximum ten-year period are recorded as assets.
Projections of future taxable income require the selection of significant assumptions, and different assumptions may
generate significant differences in the estimates of taxable income and, therefore, on the amount of deferred tax
assets to be recognized in the financial statements.
Contingencies
We are currently party to tax, labor and civil proceedings. We make provisions on our books when there is
an expectation that a loss on the claim is probable and can be reasonably estimable. Estimates of probability of
losses have been developed based on consultations with outside tax counsel and are based upon an analysis of
potential results, assuming a combination of litigation and settlement strategies. Future change in circumstances
may require us to reassess the probability of losses and whether a contingent liability should be recorded for which
originally no provision was made or requiring to revert a provision originally recorded.
Adjusted EBITDA
Our adjusted EBITDA means income before net financial expenses, income tax and social contribution,
depreciation and amortization, non-operating results and non-recurring results. Our adjusted EBITDA is not a
measure defined under Brazilian GAAP, does not represent cash flow for the periods indicated and should not be
regarded as a replacement for net income as an indicator of the performance of our operations or as a replacement
for cash flow as an indicator of liquidity. Our adjusted EBITDA has no standardized meaning and our definition
may not be comparable to adjusted EBITDA as used by other companies. We use adjusted EBITDA as defined in
this offering circular for purposes of measuring our performance.
The following table shows the calculation of our adjusted EBITDA per segment:
Three-month period ended March 31, Year ended December 31,
2008 2007 2007 2006 2005
Oil &
Oil &
Gas Flow Metal Gas Flow Metal Flow Metal Flow Metal Flow Metal
(in millions of reais)
Net revenue....................................... 83.6 36.9 19.5 17.3 31.5 18.5 302.9 84.1 149.6 74.0 108.2 64.9
Cost of sales and services................. (54.4) (19.8) (16.4) (9.7) (16.1) (14.7) (174.3) (71.3) (76.8) (55.8) (48.2) (51.9)
Gross profit....................................... 29.2 17.1 3.1 7.6 15.4 3.8 128.6 12.8 72.8 18.2 60.0 13.0
Selling expenses ............................... (6.2) (3.2) (1.8) (2.0) (2.2) (1.7) (23.8) (7.7) (15.8) (7.3) (12.2) (6.9)
General and administrative
expenses............................................ (4.8) (2.4) (1.1) (0.9) (2.9) (0.9) (20.9) (4.3) (6.2) (3.8) (3.4) (4.4)
Depreciation and amortization ......... 2.6 1.0 1.5 0.5 1.2 0.9 10.1 4.4 3.3 3.9 1.7 4.5
Management compensation.............. (0.3) (0.2) (0.1) (0.1) (0.2) (0.1) (1.7) (0.5) (1.1) (0.4) (0.8) (0.4)
Other operating income
(expenses), net.................................. (0.1) - - 0.1 0.1 0.1 0.5 0.1 (0.3) (0.2) - -
Employee profit sharing................... - (0.1) (0.1) - (0.1) (0.1) (1.1) (0.4) (3.3) (0.5) (2.2) (0.6)
Minority interest............................... - - - - - - - - - - 0.1 1.1
Adjusted EBITDA per segment ....... 20.4 12.1 1.4 5.2 11.3 2.0 91.6 4.4 49.5 10.0 43.1 6.5
42

The following table shows a reconciliation of our adjusted EBITDA to net income for each of the periods
presented:
Three-month period ended
March 31, Year ended December 31,
2008 2007 2007 2006 2005
(in million of reais)
Adjusted EBITDA................................................. 33.9 18.5 96.0 59.5 49.6
Depreciation and amortization .............................. (5.1) (2.6) (14.5) (7.3) (6.3)
Goodwill amortization .......................................... (11.5) (6.2) (50.0) (3.5) -
Non recurring expenses (1) ...................................... - (0.3) (9.6) (11.6) -
Financial income ................................................... 13.6 6.0 24.1 15.7 4.3
Financial expenses................................................. (31.7) (12.2) (79.3) (18.7) (11.2)
Non-operating income (expenses) ........................ 0.1 - 0.4 0.3 (1.7)
Income tax and social contribution ....................... (3.9) (3.2) (16.4) (10.7) (2.7)
Net income........................................................ (4.5) - (49.5) 23.8 32.0
___________________
(1) Non-recurring expenses correspond: (a) for the year ended December 31, 2006, to direct expenses from our initial public offering of R$8.3
million and fees relating to due diligence, legal advice and related matters for acquisitions in the amount of R$ 3.3 million, (b) for the threemonths
ended March 31, 2007, to additional expenses related to our initial public offering and (c) for the year ended December 31, 2007, to
direct expenses from the perpetual bonds offering of R$5.9 million relating to due diligence, legal advice and related matters for
acquisitions in the amount of R$3.7 million.
Segment Data
The table below shows our principal financial indicators for our two business segments for the years ended
December 31, 2005, 2006 and 2007 and for our three business segments for the three-month periods ended
March 31, 2008 and 2007. See “Presentation of Financial Information – Business Segments.”
As of and for the three-month period
ended March 31, As of and for the year ended December 31,
2008 2008 2007 2007 2007 2006 2005
(in
millions of
US$) (1) (in millions of reais)
43
(in
millions of
US$) (1) (in millions of reais)
Net revenue ..................................................... 80.0 140.0 67.3 221.3 387.0 223.6 173.2
Oil and gas segment ......................................... 47.8 83.6 17.3 - - - -
Flow segment ................................................... 21.1 36.9 31.5 173.2 302.9 149.6 108.2
Metal segment .................................................. 11.1 19.5 18.5 48.1 84.1 74.0 64.9
Cost of sales and services............................... 51.8 90.6 40.5 140.4 245.6 132.6 100.1
Oil and gas segment ......................................... 31.1 54.4 9.7 - - - -
Flow segment ................................................... 11.3 19.8 16.1 99.7 174.3 76.8 48.2
Metal segment .................................................. 9.4 16.4 14.7 40.8 71.3 55.8 51.9
Gross profit ..................................................... 28.2 49.4 26.8 80.8 141.4 91.0 73.1
Oil and gas segment ......................................... 16.7 29.2 7.6 - - - -
Flow segment ................................................... 9.8 17.1 15.4 73.5 128.6 72.8 60.0
Metal segment ..................................................
___________________
1.8 3.1 3.8 7.3 12.8 18.2 13.0
(1) Solely for the convenience of the reader, real amounts for the year ended December 31, 2007 and the three-month period ended March 31,
2008 have been translated into U.S. dollars at the exchange rate as reported by the Central Bank, on March 31, 2008 of R$1.749 to
US$1.00.
Principal Components of Operating Results
The principal components of our income statement are as follows:
Gross sales and services
Gross sales and services are composed of revenues from the sales of our products (pieces, parts, molds and
related products, obtained through precision casting processes, steel and ceramics injection, as well as valves and

equipment for automation, movement and control of fluids) and services (mainly comprising the outsourcing of
industrialization services of the above products), which are derived from our flow and metal segments.
Taxes on sales
Our taxes on sales comprise value-added taxes (ICMS), excise tax (IPI—Imposto Sobre Produtos
Industrializados) and other taxes on revenue (Program for Social Integration Tax (Programa de Integração Social),
or PIS, and the Contribution for the Financing of Social Security (Contribuição para Financiamento da Seguridade
Social), or COFINS.
Cost of sales and services
Our cost of sales and services are composed primarily of raw materials, labor, depreciation, and general
manufacturing costs. Costs of sales and services during a given period represents the cost of the products produced
in that period (production cost) plus the positive or negative variation observed in the inventory between the
beginning and the end of the period.
Operating income and expense
Our operating income and expense includes selling, general and administrative, financial income and
expenses and other operating expenses, as detailed below:
Selling expenses. Selling expenses consist primarily of shipping costs, sales commissions, marketing and
advertisement expenses.
General and administrative expenses. General and administrative expenses include primarily management
costs and legal fees, benefits, outsourced services such as auditing and consulting, payroll, corporate expenses
(publication of records, financial statements, etc.), legal expenses and other expenses. The most significant general
and administrative expense consists of payments to employees, benefits and outsourced services.
Financial income. Financial income is primarily related to interest and other income, including foreign
exchange gains and losses, and earnings from short-term investments.
Financial expenses. Financial expenses correspond to interest and other charges in connection with loans
and financings as well as foreign exchange gain and losses and the tax on financial activities (CPMF).
Other operating income (expenses). Other operating income (expenses) are non-recurring revenues or
expenses not classified in the categories above.
Non-operating income and expense
Non-operating income and expense corresponds to income and expenses not related to our recurring
operations.
Income tax and social contribution
Income tax and social contribution payable is calculated pursuant to criteria set forth in the applicable tax
laws. Certain companies are allowed to calculate these taxes according to two different criteria. Under the “real
profit regime,” companies are required to pay income and social contribution taxes based on their actual net income,
which is net income determined pursuant to accounting practices adopted in Brazil adjusted to reflect the provisions
of tax law. The applicable income tax rate is 15% plus a 10% surcharge and the social contribution rate is 9%.
Under the “presumed profit regime,” certain companies with gross revenues in the previous fiscal year lower than
R$48 million are allowed to compute and pay taxes based on an amount of taxable income that does not necessarily
correspond to their actual net income but which is determined based on a percentage of their revenues (the
applicable percentage is currently 8% in the case of revenues for products, 32% for services and 100% for financial
revenues). The applicable income tax rate applied to the net income so determined is 15% plus 10% surcharge and
the social contribution tax rate is 12%. In addition, certain differences exist between the tax basis and the book basis
of assets and liabilities, which are recognized as deferred taxes.
44

Argentine income tax is imposed on the worldwide income of both Argentine individuals and Argentine
corporate entities, including local branches of foreign entities. Individuals are taxed at progressive rates ranging
from 9% to 35%. Corporate entities are taxed at a flat 35% rate. Capital gains made by Argentine corporate entities
on the sale or exchange of assets are taxed at 35%. Losses may be carried forward for five fiscal periods. Dividends
are generally exempt from income tax to the recipient. Assets are depreciated according to a straight-line
depreciation and depreciation periods are set by the taxpayer within reasonable limits. Buildings are depreciated
over a 50-year period. Land is not depreciable. Capital gains from the sale or exchange of shares issued by
Argentine corporations are exempt from income tax when made by non resident persons. Interest paid to non
resident financial institutions not in low or zero tax jurisdictions are subject to a 15.05% withholding tax. Interest
paid to other non-resident persons is subject to a 35% withholding tax. Tax treaties may provide for a reduced
withholding tax rates.
Employee profit sharing
Employee profit sharing corresponds to amounts paid to our employees under our profit sharing and
variable compensation plans, which amounts are calculated based on our EBITDA.
Results of Operations
In the following discussion, references to increases or decreases in any period or year are made by
comparison with the corresponding prior period or year, except as context otherwise indicates.
Comparison of three-month periods ended March 31, 2008 and 2007
General
For the purpose of providing the investor further information on the three-month periods ended March 31,
2008 and 2007, we have prepared two quarterly comparisons. The first comparison, which is set forth in the first
paragraph of each line item discussion below provides a comparison of the results of the assets and businesses of
Lupatech in the first three months of 2007 with those same assets and businesses of Lupatech in the first three
months of 2008. The first comparison, therefore, does not include for the three months ended March 31, 2008 the
results of operations of Aspro, Jefferson, K&S, Gasoil, Delta, Petroima and CSL Offshore, all of which were
acquired after March 31, 2007. We refer to the first comparison as the “same-business” comparison. The second
comparison, which is set forth in the second paragraph of each line item discussion below, compares the first quarter
2007 results of Lupatech with the first quarter 2008 results of Lupatech, including the companies acquired after
March 31, 2007 (Aspro, Jefferson, K&S, Gasoil, Delta, Petroima and CSL Offshore). We refer to the second
comparison as the “year-on-year” comparison. See “Risk Factors—Risks Relating to our Company—We may be
unsuccessful in finding attractive acquisitions and successfully integrating them; our historical financial statements
do not fully reflect our recent acquisitions.”
In addition, we divided our flow segment into the flow segment and the oil & gas segment in
September 2007. Before September 2007, we divided our business in two business segments: flow and metal.
Therefore, the data and financial information for the oil & gas segment is only presented for the three-month periods
ended March 31, 2008 and its comparatives for 2007. Consequently, the data and financial information for our flow
segment for the years ended December 31, 2005, 2006 and 2007 is not comparable to the data and financial
information for our flow segment for the three month periods ended March 31, 2007 and 2008. There are no
specific regulations for presentation of segment information by the CVM or otherwise that would require presenting
the prior period segment information on the new basis, and the Company has elected not to do so.
Gross sales and services. Our same-business gross sales and services revenue increased R$17.5 million, or
23.5%, from R$74.6 million in the first quarter of 2007 to R$92.1 million in the first quarter of 2008. Oil and gas
segment gross sales and services increased R$14.6 million, or 73.0%, from R$20.0 million in the first quarter of
2007 to R$34.6 million in the first quarter of 2008. This increase was primarily attributable to better market
conditions, resulting from higher buying activity in the oil and gas segment. Flow segment gross sales and services
increased R$1.5 million, or 4.4%, from R$33.9 million in the first quarter of 2007 to R$35.4 million in the first
quarter of 2008, also due to better market conditions in Brazil which led to an increase in sales volume. Metal
45

segment gross sales increased R$1.5 million, or 7.2%, from R$20.7 million in the first quarter of 2007 to R$22.2
million in the first quarter of 2008 due to the increase in sales volume.
Market 2008
The following table shows the breakdown of our same-business gross revenue by segment and market:
Oil & gas segment Flow segment
Three-month periods ended March 31,
Metal segment
% of
% of
% of
% of
% of
total 2007 total 2008 total 2007 total 2008 total 2007
(in millions of reais, except percentages)
Domestic. 29.3 84.5 18.7 93.5 32.8 92.7 31.5 92.9 15.7 70.7 13.6 66.0
Export ..... 5.3 15.5 1.3 6.5 2.6 7.3 2.4 7.1 6.5 29.3 7.0 34.0
Total........ 34.6 100.0 20.0 100.0 35.4 100.0 33.9 100.0 22.2 100.0 20.7 100.0
Our year-on-year gross sales and services revenue increased R$79.5 million, or 106.7%, from R$74.6
million in the first quarter of 2007 to R$154.1 million in the first quarter of 2008. Oil and gas segment gross sales
increased R$71.5 million, or 358.0%, from R$20.0 million in the first quarter of 2007 to R$91.5 million in the first
quarter of 2008 due primarily to the consolidation of the five acquisitions made during 2007 and to better market
conditions, resulting from an increase in sales in the oil and gas segment discussed above. Flow segment gross sales
and services increased R$6.6 million, or 19.4%, from R$33.9 million in the first quarter of 2007 to R$40.5 million in
the first quarter of 2008. This increase was principally due to better market conditions in Brazil which led to an
increase in sales volume and the consolidation of Jefferson made during 2007, which was not consolidated in the
first quarter of 2007. Metal segment gross sales increased by R$1.5 million, or 7.3%, from R$20.7 million in the
first quarter of 2007 to R$22.2 million in the first quarter of 2008, due to the increase in sales volume.
Market 2008
The following table shows the breakdown of our year-on-year gross revenue by segment and market:
Oil & gas segment Flow segment
Three-month periods ended March 31,
Metal segment
% of
% of
% of
% of
% of
total 2007 total 2008 total 2007 total 2008 total 2007
(in millions of reais, except percentages)
Domestic. 62.1 67.9 15.2 76.2 37.1 91.6 31.5 93.1 15.7 70.7 13.6 63.2
Export ..... 29.4 32.1 5.7 23.8 3.4 8.4 2.4 6.9 6.5 29.3 7.0 36.8
Total........ 91.5 100.0 20.0 100.0 40.5 100.0 33.9 100.0 22.2 100.0 20.7 100.0
Taxes on sales. Same-business taxes on sales increased R$3.2 million, or 44.3%, from R$7.2 million in the
first quarter of 2007 to R$10.4 million in the first quarter of 2008. Oil and gas segment taxes on sales increased
R$1.6 million, or 62.2%, principally due to the increase in our revenues in the period. Flow segment taxes on sales
increased R$1.1 million, or 48.6%, and metal segment taxes on sales increased R$0.4 million, or 18.8%, mainly as a
result of a higher percentage of domestic sales, as opposed to exports, along with an increase in our revenues in the
period.
Year-on-year taxes on sales were R$7.2 million in the first quarter of 2007 and R$14.1 million in the first
quarter of 2008. Oil and gas segment taxes on sales increased R$5.1 million, or 193.3%, primarily due to the
consolidation of the five acquisitions made during 2007, which were not consolidated in the first quarter of 2007,
and due to better market conditions. Flow segment taxes on sales increased R$1.3 million, or 57.2%, principally due
to increased sales in Brazil, which are taxed at a higher rate than exports, and the consolidation of Jefferson made
during 2007, which was not consolidated in the first quarter of 2007. Metal segment taxes on sales increased R$0.4
million, or 18.8%, principally due to an increase in sales in Brazil, which are taxed at a higher rate than exports.
Net revenue. Our same-business net revenue increased R$14.5 million, or 21.6%, from R$67.3 million in
the first quarter of 2007 to R$81.8 million in the first quarter of 2008. Oil and gas segment net revenue increased
R$13.0 million, or 75.2%, from R$17.3 million in the first quarter of 2007 to R$30.4 million in the first quarter of
2008. Flow segment net revenue increased R$0.4 million, or 1.4%, from R$31.5 million in the first quarter of 2007
to R$31.9 million in the first quarter of 2008. Metal segment net revenue increased R$1.1 million, or 5.9%, from
R$18.4 million in the first quarter of 2007 to R$19.5 million in the first quarter of 2008.
46
% of
total
% of
total

Our year-on-year net revenue increased R$72.7 million, or 108.0%, from R$67.3 million in the first quarter
of 2007 to R$140.0 million in the first quarter of 2008. Oil and gas segment net revenue increased R$66.3 million,
or 382.3%, from R$17.3 million in the first quarter of 2007 to R$83.6 million in the first quarter of 2008. Flow
segment net revenue increased R$5.4 million, or 17.0%, from R$31.5 million in the first quarter of 2007 to R$36.9
million in the first quarter of 2008. Metal segment net revenue increased R$1.1 million, or 5.9%, from R$18.4
million in the first quarter of 2007 to R$19.5 million in the first quarter of 2008.
The following table shows the breakdown of our year-on-year net revenue by segment:
Three-month period ended March 31,
Segment 2008 % of total 2007 % of total
(in million of reais, except percentages)
Oil and gas................................................................................................ 83.6 59.7 17.3 25.7
Flow.......................................................................................................... 36.9 26.4 31.5 46.9
Metal......................................................................................................... 19.5 13.9 1.4 27.4
Total.......................................................................................................... 140.0 100.0 67.3 100.0
Cost of sales and services. Our cost of sales and services is composed primarily of raw materials, labor,
depreciation, and general manufacturing costs. Costs of sales and services during a given period represents the cost
of the products produced in that period (production cost) plus the positive or negative variation observed in the
inventory between the beginning and the end of the period.
Same-business cost of sales and services increased R$13.8 million, or 34.2%, from R$40.5 million in the
first quarter of 2007 to R$54.3 million in the first quarter of 2008. Oil and gas segment cost of sales and services
increased R$10.4 million, or 106.9%, due to organic growth. Flow segment cost of sales increased R$1.7 million, or
10.4%, as a consequence of higher revenues and metal segment cost of sales increased R$1.8 million, or 12.2%, as a
consequence of higher fixed costs in production processes and the wider range of products sold which resulted in
lower profit margins.
The following table shows the breakdown in percentage terms of our year-on-year cost of sales and
services by segment for the periods indicated:
Three-month period ended March 31,
Cost structure 2008 2007
(in percentages)
Oil and gas
Raw materials........................................................................................................................... 68.2 61.8
Labor......................................................................................................................................... 18.7 24.3
Manufacturing expenses........................................................................................................... 8.4 9.5
Depreciation ............................................................................................................................. 4.7 4.4
Total.......................................................................................................................................... 100.0 100.0
Flow
Raw materials........................................................................................................................... 68.1 70.1
Labor......................................................................................................................................... 19.5 15.4
Manufacturing expenses........................................................................................................... 8.5 8.0
Depreciation ............................................................................................................................. 3.9 6.4
Total.......................................................................................................................................... 100.0 100.0
Metal
Raw materials........................................................................................................................... 42.4 50.8
Labor......................................................................................................................................... 31.7 28.9
Manufacturing expenses........................................................................................................... 10.9 8.5
Energy ...................................................................................................................................... 6.5 6.0
Depreciation ............................................................................................................................. 8.5 5.9
Total.......................................................................................................................................... 100.0 100.0
Year-on-year cost of sales and services increased R$50.1 million, or 123.8%, from R$40.5 million in the
first quarter of 2007 to R$90.6 million in the first quarter of 2008, primarily due to organic growth and acquisitions,
as well as increased fixed costs in services provided, and for the factors discussed in the same-business discussion
above.
47

Gross profit. As a result of the factors described above, our same-business gross profit increased R$0.7
million, or 2.6%, from R$26.8 million in the first quarter of 2007 to R$27.5 million in the first quarter of 2008. Oil
and gas segment gross profit increased R$2.7 million, or 35.5%, from R$7.6 million in the first quarter of 2007 to
R$10.3 million in the first quarter of 2008. Flow segment gross profit decreased R$1.3 million, or 8.4%, from
R$15.4 million in the first quarter of 2007 to R$14.1 million in the first quarter of 2008. Metal segment gross profit
decreased R$0.7 million, or 18.3%, from R$3.8 million in the first quarter of 2007 to R$3.1 million in the first
quarter of 2008.
The following table shows the breakdown of same-business gross profit by segment for the indicated
periods, as well as their respective percentage changes:
Three-month period ended March 31,
Segment 2008 % of total 2007 % of total
(in million of reais, except percentages)
Oil and gas............................................................................................... 10.3 37.3 7.6 28.4
Flow......................................................................................................... 14.1 51.4 15.4 57.4
Metal........................................................................................................ 3.1 11.3 3.8 14.1
Total......................................................................................................... 27.5 100.0 26.8 100.0
As a result of the factors discussed above, our year-on-year gross profit increased R$22.6 million, or
84.1%, from R$26.8 million in the first quarter of 2007 to R$49.4 million in the first quarter of 2008. Oil and gas
segment gross profit increased R$21.6 million, or 282.8%, from R$7.6 million in the first quarter of 2007 to R$29.2
million in the first quarter of 2008. Flow segment gross profit increased R$1.7 million, or 11.0%, from R$15.4
million in the first quarter of 2007 to R$17.1 million in the first quarter of 2008. Metal segment gross profit
decreased R$0.7 million, or 18.3%, from R$3.8 million in the first quarter of 2007 to R$3.1 million in the first
quarter of 2008.
The following table shows the breakdown of year-on-year gross profit by segment for the indicated periods,
as well as their respective percentage changes:
Three-month period ended March 31,
Segment 2008 % of total 2007 % of total
(in million of reais, except percentages)
Oil and gas................................................................................................ 29.2 59.1 7.6 28.4
Flow.......................................................................................................... 17.1 34.6 15.4 57.5
Metal......................................................................................................... 3.1 6.3 3.8 14.2
Total.......................................................................................................... 49.4 100.0 26.8 100.0
Operating income (expenses). Same-business operating expenses (excluding financial income, financial
expenses, goodwill amortization and other operating income (expenses)) were R$11.0 million in the first quarter of
2007 and R$11.5 million in the first quarter of 2008.
The following table shows the breakdown of our same-business operating expenses for the periods
indicated.
Three-month period ended March 31,
Operating expenses (excluding financial income, financial expenses and goodwill
amortization) 2008 2007
(in millions of reais)
Selling............................................................................................................................................. (7.5) (5.9)
General and administrative ............................................................................................................ (3.7) (4.7)
Management compensation............................................................................................................ (0.3) (0.4)
Selling expenses. Our same-business sales expenses increased R$1.6 million, or 27.5%, from R$5.9
million in the first quarter of 2007 to R$7.5 million in the first quarter of 2008, primarily as a result of a more
intensive marketing activity, which assisted us to boost our backlog.
48

General and administrative expenses. Our same-business general and administrative expenses decreased
R$1.0 million, or 21.3%, from R$4.7 million in the first quarter of 2007 to R$3.7 million in the first quarter of 2008.
This decrease was primarily due to a reduction in the regular general and administrative expenses as a result of our
efforts to maintain low expenses.
Management compensation. Our same-business management compensation decreased R$0.1 million, or
25.0%, from R$0.4 million in the first quarter of 2007 to R$0.3 million in the first quarter of 2008.
Year-on-year operating expenses increased R$9.2 million, or 83.2%, from R$11.0 million in the first
quarter of 2007 to R$20.2 million in the first quarter of 2008.
The following table shows the breakdown of our year-on-year operating expenses for the periods indicated.
Three-month period ended March 31,
Operating expenses (excluding financial income, financial expenses and goodwill
amortization) 2008 2007
(in millions of reais)
Selling............................................................................................................................................ (11.3) (5.9)
General and administrative ........................................................................................................... (8.3) (4.7)
Management compensation........................................................................................................... (0.6) (0.4)
Selling expenses. Our year-on-year sales expenses increased R$5.4 million, or 92.0%, from R$5.9 million
in the first quarter of 2007 to R$11.3 million in the first quarter of 2008, primarily as a result of the consolidation of
new businesses and more intensive marketing activity, which helped us to boost our backlog.
General and administrative expenses. Our year-on-year general and administrative expenses increased
R$3.6 million, or 77.3%, from R$4.7 million in the first quarter of 2007 to R$8.3 million in the first quarter of 2008.
This increase was primarily due to the seven acquisitions made after the first quarter of 2007.
Management compensation. Our year-on-year management compensation increased R$0.2 million, or
29.2%, from R$0.4 million in the first quarter of 2007 to R$0.6 million in the first quarter of 2008. The increase
was primarily due to an increase in the compensation paid to members of our management team.
Financial income, financial expenses, goodwill amortization and other operating income (expenses).
These net expenses increased R$17.1 million, or 136.8%, from R$12.5 million in the first quarter of 2007 to R$29.6
million in the first quarter of 2008.
The following table shows the breakdown of our year-on-year financial income, financial expenses, goodwill
amortization and other operating income (expenses) for the periods indicated.
Three-month period ended March 31,
Financial income, financial expenses, goodwill amortization and other operating
income (expenses) 2008 2007
(in millions of reais)
Financial income .................................................................................................................... 13.6 6.0
Financial expenses.................................................................................................................. (31.7) (12.2)
Goodwill amortization ........................................................................................................... (11.4) (6.2)
Other operating income (expenses)........................................................................................ (0.1) (0.1)
Financial income. Our year-on-year financial income increased R$7.6 million, or 127.0%, from R$6.0
million in the first quarter of 2007 to R$13.6 million in the first quarter of 2008. This increase was caused by the
positive impact on indebtedness indexed to foreign currency due to the appreciation of the real against the U.S.
dollar.
Financial expenses. Our year-on-year financial expenses increased R$19.5 million, or 160.5%, from
R$12.2 million in the first quarter of 2007 to R$31.7 million in the first quarter of 2008. This increase was primarily
caused by the negative impact of the consolidation of the companies in countries where the currencies depreciated
against the real, in addition to the increase in our indebtedness.
49

Goodwill amortization. Our year-on-year goodwill amortization increased R$5.2 million, from R$6.2
million in the first quarter of 2007 to R$11.4 million in the first quarter of 2008. This increase was primarily caused
by the amortization in the first quarter of 2008 of the seven companies acquired.
Other operating income (expenses). Our year-on-year financial other net operating income was stable at
R$0.1 million as expenses in the first quarter of 2007 and in the first quarter of 2008.
Operating profit (loss). Our year-on-year operating profit decreased from an operating profit of R$3.4
million in the first quarter of 2007 to an operating loss of R$0.4 million in the first quarter of 2008. The decrease in
operating profit was primarily caused by a lower gross margin, higher amortization of goodwill on the acquisitions,
and a lower net financial result during the first quarter of 2008.
Non-operating income (expenses). Our year-on-year non-operating income remained stable at R$0.1
million in both periods.
Income tax and social contribution. Our year-on-year current income tax and social contribution increased
R$2.2 million, or 62.4%, from R$3.5 million in the first quarter of 2007 to R$5.7 million in the first quarter of 2008.
This increase, despite the lower income before taxes, was primarily due to the recognition of non-deductible
expenses (amortization of goodwill) and the consolidation of the results from companies subject to the presumed
profit regime.
Employee profit sharing. Our year-on-year employee profit sharing increased R$0.1 million, or 17.6%,
from R$0.1 million in the first quarter of 2007 to R$0.2 million in the first quarter of 2008.
Net income (loss). As a result of the factors discussed above, our year-on-year net loss increased R$4.6
million, from a net profit of R$0.1 million in the first quarter of 2007 to a net loss of R$4.5 million in the first
quarter of 2008.
Comparison of years ended December 31, 2007 and 2006
Gross sales and services. Our gross sales and services revenue increased R$176.6 million, or 70.4%, from
R$250.9 million in 2006 to R$427.5 million in 2007. Of this increase, revenues from the flow segment, which grew
by 97.7%, accounted for R$332.5 million, while revenues from the metal segment, which grew by 14.9%, accounted
for R$95.0 million. The flow segment’s growth was caused by strong orders from our oil and natural gas customers
relating to the construction of new platforms, as well as the consolidation of the revenues from the acquisition of
seven companies (Aspro, Jefferson, K&S, Gasoil, Delta, Petroima and CSL Offshore), while the metal segment’s
growth was due to an increase in exports and the development of new customers in the automotive industry, thereby
increasing sales volume.
The following table shows the breakdown of our gross revenue by segment and market:
Market 2007
Flow segment
Year ended December 31,
Metal segment
% of
% of
% of
total 2006 total 2007 total 2006
(in millions of reais, except percentages)
Domestic.................................................. 259.7 78.1 104.4 62.1 65.9 69.4 58.7 71.0
Export ...................................................... 72.9 21.9 63.8 37.9 29.0 30.6 24.0 29.0
Total......................................................... 332.5 100.0 168.2 100.0 95.0 100.0 82.7 100.0
Taxes on sales. Taxes on sales increased R$13.2 million, or 48.4%, from R$27.3 million in 2006 to R$40.5
million in 2007. In the flow segment, taxes on sales increased 73.0%, from R$17.1 million in 2006 to R$29.6
million in 2007. In the metal segment, the taxes on sales increased 6.9%, from R$10.2 million in 2006 to R$10.9
million in 2007. Sales taxes represented 9.5% of our gross sales and services in 2007 and 10.9% in 2006. This
increase was primarily caused by a different product portfolio and different tax systems in countries where we
increased our exposure during 2007.
50
% of
total

Net revenue. Our net revenue increased R$163.4 million, or 73.1%, from R$223.6 million in 2006 to
R$387.0 million in 2007. The flow segment grew by 100.5%, from R$151.1 million in 2006 to R$302.9 million in
2007. The metal segment grew by 16.0%, from R$72.5 million in 2006 to R$84.1 million in 2007.
The following table shows the breakdown of our net revenue by segment:
Year ended December 31,
Segment 2007 % of total 2006 % of total
(in million of reais, except percentages)
Flow............................................................................................................. 302.9 78.3 151.1 67.6
Metal............................................................................................................ 84.1 21.7 72.5 32.4
Total............................................................................................................. 387.0 100.0 223.6 100.0
Cost of sales and services. Cost of sales and services increased R$113.0 million, or 85.2%, from R$132.6
million in 2006 to R$245.6 million in 2007. Flow segment cost of sales grew by 127.5%, from R$76.6 million in
2006 to R$174.3 million in 2007. Metal segment cost of sales grew by R$15.3 million, or 27.3%, from R$56.0
million in 2006 to R$71.3 million in 2007. The increase in the cost of sales and services of the flow segment was
mainly due to organic growth and the consolidation of seven acquisitions in 2007.
The following tables show the breakdown in percentage terms of our cost of sale and services by segment
for the periods indicated:
51
At December 31,
Cost structure 2007 2006
(in percentages)
Flow
Raw materials....................................................................................................... 74.3 63.2
Labor..................................................................................................................... 15.8 22.0
Manufacturing expenses....................................................................................... 7.0 11.8
Depreciation ......................................................................................................... 3.0 2.9
Total...................................................................................................................... 100.0 100.0
Metal
Raw materials....................................................................................................... 50.5 53.5
Labor..................................................................................................................... 28.4 28.9
Manufacturing expenses....................................................................................... 10.9 5.9
Energy .................................................................................................................. 4.6 5.9
Depreciation ......................................................................................................... 5.6 5.9
Total...................................................................................................................... 100.0 100.0
Gross profit. As a result of the factors discussed above, our gross profit increased R$50.4 million, or
55.4%, from R$91.0 million in 2006 to R$141.4 million in 2007. The flow segment’s gross profit grew by 72.5%,
from R$74.5 million in 2006 to R$128.6 million in 2007. The metal segment’s gross profit decreased by 22.4%,
from R$16.5 million in 2006 to R$12.8 million in 2007.
The following table shows the breakdown of our gross profit by segment:
Year ended December 31,
Segment 2007 % of total 2006 % of total
(in million of reais, except percentages)
Flow.............................................................................................................. 128.6 90.9 72.8 80.0
Metal............................................................................................................. 12.8 9.1 18.2 20.0
Total.............................................................................................................. 141.4 100.0 91.0 100.0
Operating expenses. Our operating expenses increased R$24.6 million, or 71.3%, from R$34.5 million in
2006 to R$59.1 million in 2007. The following table shows the breakdown of our operating expenses for the
indicated periods.

Year ended December 31,
Operating expenses (excluding financial income, financial expenses and goodwill amortization) 2007 2006
(in millions of reais)
Selling....................................................................................................................................................... (31.6) (23.0)
General and administrative ...................................................................................................................... (25.3) (10.0)
Management compensation...................................................................................................................... (2.2) (1.5)
Selling expenses. Our selling expenses increased R$8.6 million, or 37.4%, from R$23.0 million in 2006 to
R$31.6 million in 2007, primarily as a result of the consolidation of seven companies during 2007.
General and administrative expenses. General and administrative expenses increased R$15.3 million, or
152.1%, from R$10.0 million in 2006 to R$25.3 million in 2007, primarily as a result of the consolidation of seven
companies during 2007.
Management compensation. Our management compensation increased R$0.7 million, or 46.7% from
R$1.5 million in 2006 to R$2.2 million in 2007.
Financial income, financial expenses, goodwill amortization and other operating income (expenses). These
net expenses increased R$95.6 million, or 514.0%, from R$18.6 million in 2006 to R$114.2 million in 2007.
The following table shows the breakdown of our financial income, financial expenses, goodwill
amortization and other operating income (expenses) for the periods indicated.
Year ended
December 31,
Financial income, financial expenses, goodwill amortization and other operating income (expenses) 2007 2006
(in millions of reais)
Financial income ................................................................................................................................................................... 24.1 15.7
Financial expenses................................................................................................................................................................. (79.3) (18.7)
Goodwill amortization .......................................................................................................................................................... (50.0) (3.5)
Other operating income (expenses)....................................................................................................................................... (9.0) (12.1)
Financial income. Our financial income increased R$8.4 million, or 53.5%, from R$15.7 million in 2006
to R$24.1 million in 2007 as a result of investments of the funds we raised through the issuance of perpetual bonds
by Lupatech Finance in July 2007 and the positive impact on indebtedness of the appreciation of the real against the
U.S. dollar.
Financial expenses. Our financial expenses increased R$60.6 million, or 224.1%, from R$18.7 million in
2006 to R$79.3 million in 2007 primarily due to greater investments in our growth program, which generated
interest accruals, and the negative impact of the consolidation of the companies in countries where the currencies
depreciated against the real, specifically in Argentina.
Goodwill amortization. Our goodwill amortization increased R$46.5 million, or 1,328.6%, from R$3.5
million in 2006 to R$50.0 million in 2007. This increase was mainly a result of the consolidation of the companies
acquired during 2007 (Aspro, Jefferson, K&S, Gasoil, Petroima and CSL Offshore).
Other operating income (expenses). Other operating expenses decreased 25.6%, from R$12.1 million in
2006 to R$9.0 million in 2007, primarily as a result of lower amount of non-recurring expenses in 2007, such as
acquisitions and expenses related to the public offering of securities.
Operating profit (loss). Our operating results decreased R$69.8 million, or 183.7%, from a net profit
R$38.0 million in 2006 to a net loss of R$31.8 million in 2007 due to the amortization of goodwill from
acquisitions, financial expenses arising from investments in our acquisition program and non-recurring expenses,
such as those from our issuance of perpetual bonds in July 2007 and acquisition-related fees.
Non-operating income (expenses). Our non-operating income (expenses) increased R$0.1 million, from a
non-operating income of R$0.3 million in 2006 to non-operating income of R$0.4 million in 2007.
52

Income tax and social contribution. Our current income tax and social contribution increased R$10.5
million, or 79.0%, from R$13.3 million in 2006 to R$23.8 million in 2007. This increase was due to the recognition
of non-deductible expenses (amortization of goodwill) and the consolidation of the results from companies subject
to the presumed profit regime.
Employee profit sharing. Our employee profit sharing decreased R$2.2 million, or 57.9%, from R$3.8
million in 2006 to R$1.6 million in 2007, as a result of our higher EBITDA results in 2006 (because adjusted
EBITDA is the basis for computing the amounts payable under the employee profit sharing program, as set forth in
our employee profit sharing plan). Approximately 2,363 employees benefited from our employee profit sharing in
2007, equivalent to approximately half of our workforce at the end of that year.
Net income (loss). As a result of the factors discussed above, our net income decreased R$73.3 million, or
308.0%, from a net income of R$23.8 million in 2006 to a net loss of R$49.5 million in 2007.
Comparison of Years Ended December 31, 2006 and 2005
Gross sales and services. Our gross sales and services revenue increased R$50.2 million, or 25.0%, from
R$200.7 million in 2005 to R$250.9 million in 2006. Of this increase, revenues from the flow segment, which grew
by 35.9%, accounted for R$166.5 million, while revenues from the metal segment, which grew by 7.9%, accounted
for R$84.3 million. The flow segment’s growth was caused by strong orders from our oil and natural gas customers
relating to the construction of new platforms, as well as the consolidation of the revenues from the acquisition of
Mipel-SP, while the metal segment’s growth was due to an increase in exports, the development of new customers
in the automotive industry and the consolidation of the revenues from the acquisition of Itasa.
The following table shows the breakdown of our gross revenue by segment and market:
Market 2007
Flow segment
Year ended December 31,
Metal segment
% of
% of
% of
total 2006 total 2007 total 2006
(in millions of reais, except percentages)
Domestic.................................................. 103.4 75.6 92.6 62.1 59.6 11.7 62.3 70.7
Export ...................................................... 63.1 24.4 29.9 37.9 24.7 111.0 15.9 29.3
Total......................................................... 166.5 100.0 122.5 100.0 84.3 35.9 78.2 100.0
Taxes on sales. Taxes on sales decreased R$0.3 million, or 1.1%, from R$27.6 million in 2005 to R$27.3
million in 2006. In the flow segment, taxes on sales increased 18.3%, from R$14.3 million in 2005 to R$16.9
million in 2006. In the metal segment, the taxes on sales decreased 21.8%, from R$13.2 million in 2005 to R$10.4
million in 2006. Sales taxes represented 10.9% of our gross sales and services in 2006 and 13.8% in 2005. This
decrease was primarily caused by higher volumes of exports, which are exempt from sales taxes.
Net revenue. Our net revenue increased R$50.4 million, or 29.1%, from R$173.2 million in 2005 to
R$223.6 million in 2006. The flow segment grew by 38.2%, from R$108.2 million in 2005 to R$149.6 million in
2006. The metal segment grew by 14.0%, from R$64.9 million in 2005 to R$74.0 million in 2006.
The following table shows the breakdown of our net revenue by segment:
Year ended December 31,
Segment 2006 % of total 2005 % of total
(in million of reais, except percentages)
Flow........................................................................................................... 149.6 66.9 108.2 62.5
Metal.......................................................................................................... 74.0 33.1 64.9 37.5
Total........................................................................................................... 223.6 100.0 173.2 100.0
Cost of sales and services. Cost of sales and services increased R$32.5 million, or 32.5%, from R$100.1
million in 2005 to R$132.6 million in 2006. The flow segment grew by 59.3%, from R$48.2 million in 2005 to
R$76.8 million in 2006. The metal segment grew by R$3.9 million, or 7.5%, from R$51.9 million in 2005 to
53
% of
total

R$55.8 million in 2006. The increase in the cost of sales and services of the flow segment was primarily due to
organic growth in sales and the incorporation of the cost of sales and services of Mipel-SP into our consolidated
figures. The increase in the cost of sales and services of the metal segment was primarily due to the incorporation of
the cost of goods and services of Itasa into our consolidated figures and higher output, which resulted in increased
costs.
The following tables show the breakdown in percentage terms of our cost of sale and services by segment
for the periods indicated:
54
December 31,
Cost structure 2005 2006
(in percentages)
Flow
Raw materials....................................................................................................... 72.0 63.2
Labor..................................................................................................................... 17.7 22.0
Manufacturing expenses....................................................................................... 7.7 11.8
Depreciation ......................................................................................................... 2.6 2.9
Total...................................................................................................................... 100.0 100.0
Metal
Raw materials....................................................................................................... 45.7 53.5
Labor..................................................................................................................... 26.5 28.9
Manufacturing expenses....................................................................................... 14.7 5.9
Energy .................................................................................................................. 4.6 5.9
Depreciation ......................................................................................................... 8.5 5.9
Total...................................................................................................................... 100.0 100.0
Gross profit. As a result of the factors discussed above, our gross profit increased R$17.9 million, or
24.5%, from R$73.1 million in 2005 to R$91.0 million in 2006. The flow segment’s gross profit grew by 21.3%,
from R$60.0 million in 2005 to R$72.8 million in 2006. The metal segment’s gross profit increased by 39.2%, from
R$13.0 million in 2005 to R$18.2 million in 2006.
The following table shows the breakdown of our gross profit by segment:
Year ended December 31,
Segment 2006 % of total 2005 % of total
(in million of reais, except percentages)
Flow.......................................................................................................... 72.8 80.0 60.0 82.1
Metal......................................................................................................... 18.2 20.0 13.0 17.9
Total.......................................................................................................... 91.0 100.0 73.1 100.0
Operating expenses. Our operating expenses increased R$18.1 million, or 51.9%, from R$34.9 million in
2005 to R$53.0 million in 2006. The following table shows the breakdown of our operating expenses for the
indicated periods.
Year ended December 31,
Operating expenses (excluding financial income, financial expenses and goodwill amortization) 2006 2005
(in millions of reais)
Selling....................................................................................................................................................... (23.0) (19.1)
General and administrative ...................................................................................................................... (10.0) (7.8)
Management compensation...................................................................................................................... (1.5) (1.2)
Selling expenses. Our selling expenses increased R$3.9 million, or 20.4%, from R$19.1 million in 2005 to
R$23.0 million in 2006, primarily as a result of an increase in the amount of sales commissions we paid and the
expenses incorporated into our consolidated results due to the acquisitions we made in 2006.
General and administrative expenses. General and administrative expenses increased R$2.2 million, or
28.2%, from R$7.8 million in 2005 to R$10.0 million in 2006, primarily due to non-recurring expenses in the

egular course of our activities, including costs from the acquisitions of Mipel-SP, Itasa, Worcester and Esferomatic
and legal, consulting and audit fees.
Management compensation. Our management compensation increased R$0.3 million, or 25.0% from
R$1.2 million in 2005 to R$1.5 million in 2006.
Financial income, financial expenses, goodwill amortization and other operating income (expenses). These net
expenses increased R$11.7 million, or 169.6%, from R$6.9 million in 2005 to R$18.6 million in 2006.
The following table shows the breakdown of our financial income, financial expenses, goodwill
amortization and other operating income (expenses) for the periods indicated, as well as their percentage change.
Year ended December 31,
Financial income, financial expenses, goodwill amortization and other operating
income (expenses) 2006 2005
(in millions of reais)
Financial income .................................................................................................................... 15.7 4.3
Financial expenses.................................................................................................................. (18.7) (11.2)
Goodwill amortization ........................................................................................................... (3.5) -
Other operating income (expenses)........................................................................................ (12.1) -
Financial income. Our financial income grew R$11.4 million, or 265.1%, from R$4.3 million in 2005 to
R$15.7 million in 2006 as a result of financial investments made using the proceeds from our initial public offering
and the offering of the debentures.
Financial expenses. Our financial expenses increased R$7.5 million, or 67.0%, from R$11.2 million in
2005 to R$18.7 million in 2006 primarily due to accrued interest arising from the R$227.0 million debenture issue.
In addition, CPMF (financial transaction tax) on transactions involving the proceeds from our initial public offering,
the debenture issue and the acquisitions made during the period accounted for approximately R$2.0 million.
Goodwill amortization. Our goodwill amortization increased R$3.5 million, from no result in 2005 to
R$3.5 million in 2006. This increase was primarily caused by our investments in the acquisitions of Carbonox, Itasa
and Mipel-SP during the period.
Other operating income (expenses). Other operating expenses amounted to R$12.1 million in 2006
compared to a negligible amount in 2005, primarily as a result of the non-recurring expenses related to our initial
public offering process, the debenture offering and fees to lawyers and accountants involved in the acquisition
processes, including due diligence.
Operating profit. Our operating results decreased R$0.2 million, or 0.5%, from R$38.2 million in 2005 to
R$38.0 million in 2006.
Non-operating income (expenses). Our non-operating income (expenses) increased R$2.0 million, from a
net expense of R$1.7 million in 2005 to net operating income of R$0.3 million in 2006.
Income tax and social contribution. Our current income tax and social contribution increased R$10.4
million, or 358.6%, from R$2.9 million in 2005 to R$13.3 million in 2006. This increase related to the compulsory
change in the tax system for MNA from presumed income regime to actual income regime, which has a higher
effective tax rate.
Employee profit sharing. Our employee profit sharing increased R$0.9 million, or 31.0%, from R$2.9
million in 2005 to R$3.8 million in 2006, as a result of our higher adjusted EBITDA results in 2006 (because
adjusted EBITDA is the basis for computing the amounts payable under the employee profit sharing program, as set
forth in our employee profit sharing plan). Approximately 600 employees benefited from our employee profit
sharing in 2006, equivalent to approximately half of our workforce at the end of that year.
Net income. As a result of the factors discussed above, our net income decreased R$8.2 million, or 25.6%,
from R$32.0 million in 2005 to R$23.8 million in 2006.
55

Liquidity and Capital Resources
Our primary capital requirements are for:
• investments for strategic acquisitions;
• investments for the development of state-of-the-art technology;
• investments for the expansion and modernization of our industrial complex, machinery and equipment;
• the payment of interest on our indebtedness; and
• the distribution of dividends and other cash distributions to our shareholders.
Historically, our main source of liquidity has been cash flow from operations, revenues derived from the
financial application of our available funds and marketable securities, and long-term financings.
Cash flow
Three-month period
ended March 31, Year ended December 31,
2008 2007 2007 2006 2005
(in million of reais)
Net cash from (used) in operating activities ................................ (88.4) 0.1 (51.5) 5.0 41.0
Net cash from (used) in investment activities.............................. (16.9) (13.5) (395.9) (192.0) (24.6)
Net cash from (used) in financing activities ................................ 40.5 (11.3) 464.9 356.7 4.1
Increase in cash and banks and marketable securities ................. (64.7) (24.7) 17.6 169.8 20.5
At the beginning of the period ..................................................... 238.3 204.3 204.3 30.6 9.9
Cash and banks and marketable securities from companies
acquired................................................................................. - - 16.5 3.8 0.2
At the end of the period................................................................ 173.6 179.5 238.3 204.3 30.6
Operating activities
Our net cash flow from operating activities in the three-month period ended March 31, 2008 was R$88.4
million, mainly as a result of working capital requirements, primarily on accounts receivable and taxes payable. In
addition, payments related to the acquisition of companies in 2007, in the amount of R$53 million were made in the
three-month period ended March 31, 2008. Our cash flow from operating activities in 2007 decreased R$56.5
million, or 930.0%, from an inflow of R$5.0 million in 2006 to an outflow of R$51.5 million in 2007. This decrease
was mainly caused by higher working capital requirements during the period, primarily on accounts receivable,
recoverable taxes (impostos a recuperar) and lower accounts payable to suppliers. Our cash flow from operating
activities decreased from R$41.0 million in 2005 to R$5.0 million in 2006, mainly caused by a decrease in our net
income to R$23.8 million in 2006, as compared to R$32.0 million in 2005.
Investment activities
Our investments in fixed, intangible/deferred assets and acquisitions in 2007, 2006 and 2005 and the threemonth
period ended March 31, 2008 totaled R$395.9 million, R$197.7 million, R$24.6 million and R$16.9 million,
respectively, including the investments in acquisitions and deferred charges related to research and development
projects of our products. Our investments were generally carried out as part of our acquisition strategy and in order
to meet the growing demand for our products. The following table summarizes the investments made in the
indicated periods.
56

57
Three-month period
ended March 31, Year ended December 31,
2008 2007 2006 2005
(in millions of reais)
Acquisitions............................................................................................. - 334.0 170.2 3.0
Machinery, facilities and others.............................................................. 17.3 56.8 25.8 20.3
Deferred assets ........................................................................................ 2.1 5.2 1.7 1.3
Adjustments of goodwill changes........................................................... 2.5 - - -
Total......................................................................................................... 16.9 395.9 197.7 24.6
In 2007, the investment increase relates to goodwill assets from the acquisitions of Aspro, Jefferson, K&S,
Gasoil, Delta, Petroima and CSL Offshore and acquisitions of fixed assets for our plants.
In 2006, the investment increase relates to goodwill assets from the acquisitions of Mipel-SP, Itasa,
Worcester and Esferomatic and acquisitions of fixed assets for our plants.
Financing activities
Our cash provided by and used in financing activities amounted to R$356.7 million in 2006, R$464.9
million in 2007 and R$40.5 million as of March 31, 2008. Our funds are mainly used to pay for acquisitions, our
financing costs and to finance our capital expenditures. As of March 31, 2008, we have R$99.8 million outstanding
as current loans and financing and R$249.0 million outstanding as long-term loans and financing. In addition, we
have R$357.8 million outstanding as perpetual bonds. See “—Indebtedness” below for a description of our loans
and financing.
Indebtedness
As of March 31, 2008, our indebtedness was R$706.6 million, reflecting an increase of R$40.1 million
compared to December 31, 2007 due to short-term financing to meet working capital needs. Of this amount, R$99.8
million was short-term debt related to financings and loans and R$249.0 million of the debt was long-term debt. In
addition, we have R$357.8 million outstanding as perpetual bonds of Lupatech Finance.
Our total indebtedness at December 31, 2007 was R$666.5 million. Of this amount, R$54.5 million was
short-term debt related to financings and loans and R$249.7 million was related to long-term debt. In addition, we
have R$362.3 million outstanding as perpetual bonds.
Our total indebtedness at December 31, 2006 was R$261.3 million. R$20.2 million of this debt was current
debt, of which R$10.4 million related to financings and loans and R$9.8 million related to debentures and R$241.1
million of this debt was long-term debt, of which R$14.1 million related to financings and loans and R$227.0
million related to our debentures, which we repaid and cancelled in November 2007.
We intend to pay the principal and interest payments of our short- and long-term indebtedness with the
resources generated from our operating activities.
In the three-month period ended March 31, 2008, our adjusted EBITDA was R$33.9 million and our debt
servicing costs was R$31.7 million. Our adjusted EBITDA for the three-month period ended March 31, 2008 was
thus 1.1 times our debt servicing costs. Our adjusted EBITDA for the year ended December 31, 2007 was R$96.0
million and our debt servicing costs was R$79.3 million. Our adjusted EBITDA for 2007 was thus 1.2 times our
debt servicing costs.

The following table contains a profile of our consolidated indebtedness for the indicated periods:
Description Index
Interest
rates
(per
years) Current
At March 31, AT December 31,
(in millions of reais)
2008 2007 2006
Long-
Term Total Current
58
Long-
Term Total Current Long-Term Total
Local currency
FINEP............................ TJLP 3.5% 0.3 - 0.3 0.4 - 0.4 0.4 0.4 0.8
BRDE ............................ TJLP 6.3% 1.5 1.8 3.2 1.4 2.2 3.6 1.5 3.6 5.1
BRDE ............................ Fixed 12.95% 0.6 1.0 1.6 0.7 1.1 1.7 0.7 1.5 2.2
Safra............................... Fixed 13.95% 0.3 0.4 0.6 0.3 0.4 0.7 0.3 0.6 0.9
FINAME........................ TJLP 5.95% 1.0 1.3 2.3 1.0 1.4 2.4 0.9 1.7 2.6
Export financing............
Banco Mercantil do
TJLP 5.5% - - - - - - 0.2 - 0.2
Brasil..............................
Banco Industrial e
- 21.6% 0.4 - 0.4 0.7 - 0.7 - - -
Comercial
BNDES – working
CDI 8.7% 1.3 0.4 1.7 1.4 0.8 2.2 - - -
capital ............................
Financing – research
and technology
TJLP 3.5% - - - - - - 2.9 - 2.9
incentive ........................ TJLP (3.5)% 0.9 5.4 6.3 0.9 5.8 6.7 0.8 5.1 5.9
Working capital ............. CDI 0.068% - - - - - - 1.8 - 1.8
Working capital ............. Fixed
105%
24.24% - - - - - - - - 0.1
Debentures..................... CDI - - - - - - - 9.8 227.0 236.8
Unibanco ....................... TJLP 1.5% 0.3 1.0 1.3 0.3 1.1 1.4 - - -
Banco Itaú...................... CDI 1.2% 7.4 160.0 167.4 2.6 160.0 162.6 - - -
Banco Itaú...................... TJLP 1.3% 1.0 3.1 4.1 1.0 3.3 4.4 0.1 - 0.2
Banco Itaú......................
Unibanco overdraft
- 22.8% 0.4 - 0.4 0.8 - 0.8 - - -
account...........................
Santander overdraft
CDI 1.6% 40.2 - - - - - - - -
account........................... -
109.9%
- 38.2 - 38.2 39.1 - - - - -
Citibank ......................... CDI - 3.3 68.4 71.6 1.0 69.5 70.5 - - -
Total local currency .... - - 97.0 242.9 339.9 51.8 245.7 297.5 19.6 240.0 259.6
Foreign currency - -
Basket of
Export financing............ US$ currencies - - - - - - 0.1 - 0.1
Banco HSBC ................. US$ 6.3% 1.3 - 1.3 1.4 - 1.4 - - -
Banco da Patagônia ....... US$ 6.4% 0.9 - 0.9 0.9 - 0.9 - - -
Banco Itaú...................... Libor 8.75% 0.4 0.3 0.8 0.4 0.4 0.9 0.5 1.1 1.6
Banco Itaú......................
Total foreign
Libor 5.6% 0.1 5.8 5.9 - 3.5 3.5 - - -
currency........................ 2.8 6.1 8.9 2.7 3.9 6.7 0.6 1.1 1.7
Perpetual bonds ............. US$ 9.875% 8.0 349.8 357.8 8.0 354.3 362.3 - - -
Total.............................. 107.8 598.8 706.6 62.5 604.0 666.5 20.2 241.1 261.3
See notes to each of our quarterly and annual financial statements included elsewhere in this offering
circular for more information regarding loans and financing.

The chart below shows certain of our indebtedness information for the periods indicated:
As of and for the three-month period
ended March 31, As of and for the year ended December 31,
2008 2008 2007 2007 2007 2006 2005
(in millions
of US$) (2) (in millions of reais)
59
(in millions
of US$) (2) (in millions of reais)
Total indebtedness........................................... 404.0 706.6 249.9 381.1 666.5 261.3 38.4
Total cash and banks and marketable
securities.......................................................... 99.3 173.6 179.5 136.2 238.3 204.2 30.6
Indebtedness, net ............................................. 304.7 533.0 70.4 244.8 428.1 57.1 7.8
Adjusted EBITDA........................................... 19.4 33.9 18.5 54.9 97.5 59.5 49.6
Net Indebtedness/ adjusted EBITDA (1) ........... 4.8x 4.8x 1.1x 4.5x 4.5x 1.0x 0.2x
(1) With respect to the three-month periods ended March 31, 2008 and 2007, the net indebtedness to adjusted EBITDA ratio has been obtained
by dividing net indebtedness as of March 31, 2008 and 2007 by adjusted EBITDA for the twelve-month periods ended March 31, 2008 and
2007, respectively.
(2) Solely for the convenience of the reader, real amounts for the year ended December 31, 2007 and the three-month period ended March 31,
2008 have been translated into U.S. dollars at the exchange rate as reported by the Central Bank, on March 31, 2008 of R$1.7491 to
US$1.00.
Long-term financing, excluding perpetual bonds, matures as follows:
Maturity At March 31, At December 31,
2008 2007 2006
(in millions of reais)
2008 ................................................................................................................. - - 5.3
2009 ................................................................................................................. 91.3 - 4.3
2010 ................................................................................................................. 120.5 122.3 2.5
2011 ................................................................................................................. 33.6 120.2 1.6
2012 ................................................................................................................. 3.6 4.6 0.4
2013 ................................................................................................................. - 2.5 -
Total................................................................................................................. 249.0 249.7 14.1
Debentures. In October 2006, we issued a total of 22,700 non-convertible debentures for the long-term
financing of our operations. Those debentures were refinanced for a longer term and lower interest credit lines,
maturing in November 2010. We bought all of the debentures back and cancelled them.
We did not pay any dividends or interest on shareholders’ equity in 2008 and 2007. We paid dividends
amounting R$7.7 million and interest on shareholders’ equity amounting to R$12.2 million in 2005 and dividends
amounting to R$5.8 million in 2006. The table below sets forth the information on payment of dividends and
interest on shareholders’ equity for the periods indicated.
Year ended December 31,
2007 2006 2005
(in millions of reais)
Interest on shareholders’ equity ...................................................................... - - 12.2
Dividends......................................................................................................... - 5.8 7.7
Total interest on shareholders’ equity and dividends ..................................... - 5.8 19.9
The decrease in the total amount paid as interest on shareholders’ equity in 2007 was mainly due to our net
loss, resulting mainly from the amortization of goodwill, and had no cash impact. Our current dividend policy is
25% of net income after legal reserve (5% of net income).
Facility agreement
On April 24, 2008, we signed a US$25 million credit facility agreement, through our partial subsidiary
Aspro, with PROPARCO, a financial development institution that is co-owned by the French Development Agency,
or AFD, with interest rate at semi-annual LIBOR (USD) plus 4.5% per semester. The amount outstanding will be

paid over eight years, with a two year grace period, and was used to make the final payment for the Aspro and Delta
acquisition.
According to the agreement, we have to pay the following fees: commitment fee of 0.5% per annum,
calculated on the undisbursed amount; appraisal fee of US$ 50,000; front-end fee of 1.3% of the facility amount,
which at the date of the execution of the facility was approximately US$0.3 million payable on the earliest of 30
days as from the date the facility or the date of disbursement; and monitoring fee of US$10,000.
In addition, we must comply at all times with the following financial ratios: current ratio above 1.2; debt to
equity ratio no higher than 1.5; debt service coverage ratio higher than 1.5 if net cash is lower than or equal to
US$2.0 million; debt service coverage ratio higher than 1.4 if net cash is higher than US$2.0 million but lower than
or equal to US$ 5.0 million; and debt service coverage ratio higher than 1.3 if net cash is higher than US$5.0
million. Ratios will be calculated by the auditors on the basis of the last annual audited consolidated financial
statements.
Furthermore, if we sell or assign any part of our assets (excluding current assets) having an aggregate value
for any fiscal year in excess of US$5.0 million and if we do not use the proceeds of these sales or assignments to
purchase similar assets having a similar use for our business, PROPARCO may request that we make immediately a
mandatory prepayment to PROPARCO of an amount equivalent to such gross proceeds to be applied against the
early repayment of the credit facility.
In the event we are requested to make a mandatory prepayment in respect to any amounts due to another of
our creditors, PROPARCO may request that a similar amount be immediately prepaid to PROPARCO to be applied
against the early repayment of the credit facility.
Recent Acquisitions
Since June 30, 2007, we continued to expand our business through the following acquisitions:
Gasoil Serviços Ltda.
On July 2007, we acquired 100.0% of the capital stock of Gasoil Serviços Ltda, or Gasoil, a company that
maintains machinery employed in the oil and gas industry. The total value of the acquisition was R$89.6 million.
K&S Tubular Services Ltda. and its subsidiary Ocean Coating Revestimentos Ltda.
On July 2007, we acquired 100.0% of the capital stock of K&S and its subsidiary Ocean Coating
Revestimentos Ltda., or Ocean, through Lupatech Oil Tools Indústria de Ferramentas Ltda, our wholly owned
subsidiary. K&S and Ocean provide services related to inspection and repair of equipment in the oil and gas
industry. Lupatech is the guarantor of this acquisition.
The total value of this acquisition was R$32 million. According to the purchase agreement, the purchase
price depends on the recognition of a minimum consolidated EBITDA of R$10.7 million for the 12-month period
between January 1, 2008 and December 31, 2008, January 1, 2009 and December 31, 2009, January 1, 2010 and
December 31, 2010 and January 1, 2011 and December 31, 2011 or a minimum consolidated EBITDA of R$42.9
million of the four-year period from January 1, 2008 to December, 2011, of. In case K&S and Ocean do not achieve
this EBITDA, the purchase price will be reduced in the ratio of 1 to 4, i.e., for each R$1.00 of insufficient EBITDA,
the purchase price will be reduced in R$4.00, until the limit of R$22.4 million
If the accumulated EBITDA for each of the 12-month periods mentioned above is less than R$10.7 million
due to changes in K&S and Ocean’s cost structure by us, the sellers are discharged from any liability related to the
targeted EBITDA. In case of interruption of activities resulting from unexpected circumstances or matters related to
governmental licenses, the period for the achievement of the EBITDA will be postponed for period equal to the
period of the interruption of activities mentioned above.
The purchase price will also be reduced by the amount of the K&S and Ocean liabilities combined on June
30, 2007.
60

Jefferson Sudamericana S.A., Jefferson Solenoid Valves U.S.A., Inc., Jefferson Solenoidbras Ltda. and Valjeff
S.A. de C.V.
On November 12, 2007 we acquired 100% stake of Jefferson Sudamericana S.A., Jefferson Solenoid
Valves U.S.A., Inc., Jefferson Solenoidbras Ltda. and Valjeff S.A. de C.V., or Jefferson, through our wholly owned
subsidiaries Gasoil and Worcester. Jefferson manufactures solenoid valves and magnetic controls for the oil and
gas, refrigeration and heating industries.
The value of this acquisition was US$22.7 million. Pursuant to the purchase agreement, we agreed to pay
the contingent purchase price based on the future profits of the acquired investment. This earn-out provision
establishes that the purchasers will pay the sellers an annual amount equivalent to 25.0% of the EBITDA exceeding
US$4.5 million, calculated for the years ended December 31, 2008, 2009 and 2010. If the EBITDA amount does
not reach the threshold mentioned above, the balance between this minimum amount and the amount of the actual
EBITDA will be a discount in the following years.
Delta Compressión S.R.L. and Compresores Panamericanos S.R.L.
On January 2008, we acquired 50% of Delta. Delta is a producer of vehicular natural gas compression
system worldwide.
Aspro do Brasil Sistemas de Compressão para GNV Ltda.
On January 2008, we acquired 50% of Aspro. Aspro is a producer of VNG compression systems.
Off-Balance Sheet Transactions
We do not engage in any off-balance sheet transactions or have commitments other than those recorded in
our financial statements. We do not have any subsidiaries other than those included in our consolidated financial
statements and we do not have any interests in or relationships with any special purpose companies that are not
reflected in our consolidated financial statements.
Quantitative and Qualitative Market Risks
Interest rate risk
We are exposed to several market risks, including those arising from interest and exchange rate variations.
Our income is affected by interest rate variations that influence the interest expenses arising from debt
instruments, purchase agreements that use variable rates and interest income from cash and investment. Our risk
related to interest rate variation is significant to the extent it may cause an increase to the costs of the financings
mentioned above. As of March 31, 2008, we had R$337.7 million in floating rate indebtedness. A 10% increase in
the interest rate of such floating rate indebtedness would increase our interest expense by approximately R$4.0
million per year. Our R$337.7 million in floating rate indebtedness does not include our perpetual bonds, which
have fixed interest rates at 9.875%.
Exchange rate risk
As of March 31, 2008, our total current and long-term indebtedness indexed to foreign currency amounted
to R$366.7 million, or 51.9% of our total indebtedness. R$357.8 million of the R$366.7 million is the perpetual
bonds, equivalent to US$200 million. The initial bonds represent approximately 97.6% of our debt in foreign
currency.
61

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Between January 1, 2007 and the date of this offering circular, we made the following acquisitions:
(i) Petroima and CSL Offshore, both in April 2007, (ii) K&S and Gasoil, both in July 2007, (iii) Jefferson in
November 2007, and (iv) Aspro and Delta in January 2008 (which we consolidate beginning October 1, 2007).
We have consolidated the results of CSL Offshore, Gasoil and our ownership interest (50%) of Delta in our
financial statements only as from the dates of their respective acquisitions by us, and have consolidated the financial
position of CSL Offshore, Gasoil and 50% of Delta as of December 31, 2007. The pro forma statement of
operations is presented for illustrative purposes to reflect the effect of the acquisitions of CSL Offshore, Gasoil and
Delta (in the case of Delta, on a proportional consolidated basis) on our results of operations only for the year ended
December 31, 2007. Therefore, it is not possible to fully compare the effects of our recent acquisitions with our
historical financial performance or to compare the Pro Forma Statement of Operations with our historical financial
statements. For further discussion, see “Presentation of Financial and Other Information,” and the notes to the pro
forma statement of operations included elsewhere in this offering circular.
Solely for the purpose of providing a better understanding of our results, taking into account the Pro Forma
Acquisitions, we have prepared and present below the unaudited pro forma combined statement of operations,
reflecting on a pro forma basis the effects of the Pro Forma Acquisitions.
The unaudited pro forma combined statement of operations derives from our consolidated statement of
operations (which consolidated the results of CSL Offshore, Gasoil and 50% of Delta from the date of their
acquisitions by us), combined on a pro forma basis with (i) the results of operations of CSL Offshore from
January 1, 2007 to March 31, 2007; (ii) the results of operations of Gasoil from January 1, 2007 to June 30, 2007;
and (iii) the combined results of operations of Delta from January 1, 2007 to September 30, 2007.
The unaudited pro forma combined statement of operations for the year ended December 31, 2007 has been
prepared to reflect the effect of the Pro Forma Acquisitions as if they had taken place on January 1, 2007.
The unaudited pro forma combined statement of operations is presented for comparative purposes only and
does not purport to represent our actual consolidated results of operations or what our results of operations would
have been had the Pro Forma Acquisitions been consummated by us on January 1, 2007 or on any other date, and it
is not indicative of our future results of operations or financial position. The unaudited pro forma combined
statement of operations has been prepared based upon available information and upon certain assumptions that we
believe are reasonable. The pro forma statement of operations has not been prepared in accordance with rules for
preparation of pro forma statement of operations establish by any regulatory body such as the SEC. The unaudited
pro forma combined statement of operations should be read in conjunction with, and is qualified in its entirety by
reference to, the additional information included in this offering circular, including:
• our audited financial statements, prepared in accordance with Brazilian GAAP;
• the pro forma statement of operations;
• the unaudited carve-out financial statements of CSL Offshore, prepared in accordance with Brazilian
GAAP;
• the audited financial statements of Gasoil prepared in accordance with Brazilian GAAP;
• the audited and unaudited financial statements of Delta prepared in accordance with Argentine GAAP;
and
• The information in “Management’s Discussion and Analysis of Financial Condition and Results of
Operation.”
62

Unaudited Pro Forma Combined Statement of Operations
Lupatech
CSL
Offshore Gasoil Delta
(in millions of reais)
Combined
63
Pro forma
adjustments
Pro forma
Combined
Gross sales and services..................... 427.5 7.8 24.7 40.8 500.7 - 500.7
Taxes on sales..................................... (40.5) - (1.9) - (42.4) - (42.4)
Net revenues...................................... (387.0) 7.8 22.8 40.8 458.3 - 458.3
Cost of sales and services................. (245.6) (3.6) (18.7) (26.4) (294.3) - (294.3)
Gross profit ....................................... 141.4 4.2 4.0 14.4 163.9 - 163.9
Operating income (expenses) ..........
Selling ......................................... (31.6) (0.1) (2.0) (2.4) (36.1) - (36.1)
General and administrative......... (25.3) (0.2) (1.8) (1.6) (28.9) - (28.9)
Management compensation ........ (2.1) - - - (2.1) - (2.1)
Financial income......................... 24.1 - - 0.7 24.8 (11,7) 13.1
Financial expenses...................... (79.3) (0.5) (0.8) - (80.7) (3.3) (84.0)
Goodwill amortization................ (50.0) - - - (50.0) (18.2) (68,2)
Other operating income
(expenses) ................................... (9.0) - 1.1 (1.0) (9.0) - (9.0)
(173.2) (0.8) (3.6) (4.4) (182.0) (33.3) (215.3)
Operating profit (loss)...................... (31.8) 3.4 0.5 10.0 (18.0) (33.3) (51.3)
Non-operating income (expenses),
net ....................................................... 0.4 - (0.7) (0.1) (0.4) - (0.4)
Profit (loss) before social
contribution, income tax and
statutory profit sharing............... (31.5) 3.4 (0.2) 9.9 (18.4) (33.3) (51.7)
Income tax and social
contribution ..................................
Current ............................. (23.8) (0.6) (3.0) (3.7) (31.2) - (31.2)
Deferred............................ 7.3 - - - 7.3 4.0 11.3
(16.4) (0.6) (3.0) (3.7) (23.8) 4.0 (19.8)
Employees and directors’ profit
sharing ................................................ (1.6) - - - (1.6) - (1.6)
Net income (loss) for the year.......... (49.5) 2.7 (3.2) 6.2 (43.9) (29.3) (73.2)
Net income (loss) per thousand
shares............................................. (1,044.24) (1,542.38)
Pro Forma Adjusted EBITDA
The table below sets forth the calculation of pro forma adjusted EBITDA for the periods presented. This
pro forma adjusted EBITDA calculation, which is not in accordance with Brazilian GAAP, does not represent cash
flow for the periods presented and should not be considered a substitute for cash flow as an indicator of liquidity.
Pro forma adjusted EBITDA do not have standardized meanings and our definitions of pro forma adjusted EBITDA
may not be the same or comparable with those used by other companies:

64
Year ended December 31, 2007
(in thousands
of reais)
(in thousands
of US$)
Gross profit........................................................................................................................................ 163.9 93.7
Selling expenses ................................................................................................................................ (36.1) (20.6)
General and administrative expenses................................................................................................ (31.0) (17.7)
Other operating income (expenses), net............................................................................................ 0.6 0.3
Employee profit sharing.................................................................................................................... (1.6) (0.9)
Depreciation and amortization .......................................................................................................... 16.2 9.3
Pro forma adjusted EBITDA (1) .......................................................................................................... 112.0 64.0
___________________
(1) Adjusted EBITDA means income before net financial expenses, income tax and social contribution, depreciation and amortization, nonoperating
results and non-recurring expenses. Adjusted EBITDA is not a measure defined under Brazilian GAAP, does not represent cash
flow for the periods indicated and should not be regarded as a replacement for net income as an indicator of the performance of our
operations or as a replacement for cash flow as an indicator of liquidity. Adjusted EBITDA has no standardized meaning and our definition
may not be comparable to Adjusted EBITDA as used by other companies. We use Adjusted EBITDA as defined in this Offering Circular
for purposes of measuring our performance. See “Management’s Discussion and Analysis of Financial Conditions and Results of
Operations—Adjusted EBITDA” for the calculation of Adjusted EBITDA. Adjusted EBITDA above has been computed on a pro forma
basis.
The table sets forth the reconciliation of pro forma adjusted EBITDA to pro forma net income (loss) for the
periods presented.
Year ended December 31, 2007
(in thousands
of reais)
(in thousands
of US$)
Pro forma adjusted EBITDA.......................................................................................................... 112.0 64.0
Depreciation and amortization ....................................................................................................... (16.2) (9.3)
Goodwill amortization ................................................................................................................... (68.2) (39.0)
Non-recurring expenses ................................................................................................................. (9.6) (5.5)
Financial income ............................................................................................................................ 13.1 7.5
Financial expenses.......................................................................................................................... (84.0) (48.0)
Non-operating income.................................................................................................................... (0.4) (0.2)
Income tax and social contribution ................................................................................................ (19.8) (11.3)
Pro forma net loss........................................................................................................................... (73.2) (41.9)

General
INDUSTRY AND REGULATORY OVERVIEW
This section presents an overview of two of the principal industry sectors in which we operate: the oil and
natural gas industry (oil & gas segment) and the foundry industry (metal segment). The oil & gas, flow and metal
segments accounted for 59.7%, 26.4% and 13.9%, respectively, of our net revenues for the three-month period
ended March 31, 2008.
The Oil and Natural Gas Industry in Brazil
The Brazilian constitution provides that the Brazilian government owns the rights to explore all of the
crude oil and natural gas reserves in Brazil. Brazilian law grants the Brazilian government a monopoly over the
research, development, production, refining and transportation of oil and its by-products in Brazil. Historically,
Petrobras was given the exclusive right to exploit the government’s monopoly. Beginning in 1995, the Brazilian
government initiated a major reform of the regulatory system of the oil and gas sector by approving a constitutional
amendment authorizing the Brazilian government to contract with any public or private company to perform the
activities that were previously reserved for Petrobras and by passing the Petroleum Law. The Petroleum Law
allowed for competition in all oil and natural gas sector segments in Brazil. As a result of the constitutional
amendment and the subsequent implementation of the changes provided for by the Petroleum Law, the Brazilian oil
and natural gas industry has become progressively more competitive.
The Petroleum Law also created an independent regulatory agency, the ANP, to regulate the oil and natural
gas sector in order to increase competition and provide lower prices and better services to end consumers. The ANP
is also responsible for regulating conditions related to oil and natural gas exploration and development and granting
new development concessions. In addition, the Petroleum Law granted Petrobras the right to exclusively develop oil
reserves in all sites in which it had already started production for a period of 27 years from the date the site was
declared commercially exploitable. The Petroleum Law also established procedures enabling Petrobras, our largest
client, to explore and, in the case of successful drilling, develop exclusively for three years those areas in which
Petrobras provides evidence that it performed prospecting prior to the passage of the Petroleum Law.
By November 2007, public announcements with respect to discoveries have reached five billion to eight
billion barrels of oil equivalent, or BOE, at the Tupi field in the Santos basin led many industry observers to increase
their estimates of Brazil’s oil and natural gas reserves. This year, Petrobras announced the discovery of the Jupiter
natural gas field in the coast of the Rio de Janeiro state. If these estimates prove correct, Brazil could move from the
24th largest holder of proven oil and natural gas reserves worldwide, as it was ranked in December 2007, to the 17th
position in 2008. Taking into account the estimates of the reserves relating to Tupi and Jupiter (a field located in the
Atlantic Ocean), Brazil could become the 15th largest holder of proven oil and natural gas reserves worldwide.
Considering the vast and still untapped estimated potential oil and gas resources in the entire pre-salt reservoirs from
Espírito Santo to the Santos basin, Brazil’s position among the main petroleum countries of the world could move to
9th place, between Venezuela and Nigeria.
65

Countries Oil and Gas
(billion of boe) Position
(in billions of BOE)
Former USSR countries .......................................................................................................... 493.7 1 st
Iran........................................................................................................................................... 314.4 2 nd
Saudi Arabia............................................................................................................................ 308.9 3 rd
Qatar ........................................................................................................................................ 174.9 4 th
United Arab Emirates.............................................................................................................. 136.3 5 th
Iraq........................................................................................................................................... 135.1 6 th
Kuwait ..................................................................................................................................... 112.7 7 th
Venezuela ................................................................................................................................ 107.1 8 th
Brazil (after Tupi).................................................................................................................... Between 70 and 100 9 th
Nigeria ..................................................................................................................................... 68.9 10 th
USA ......................................................................................................................................... 67.0 11 th
Libya........................................................................................................................................ 49.8 12 th
Algeria ..................................................................................................................................... 40.6 13 th
Norway .................................................................................................................................... 26.7 14 th
___________________
Source: for Brazil, analysts estimates, for the other countries, data are from BP Statistical Review 2006.
According to the ANP, as of August 2007, Brazil had approximately 7.5 million square kilometers (1.9
billion acres) of sedimentary areas mostly spread across 29 main sedimentary basins, of which roughly 2.5 million
square kilometers are located offshore. Concessions for exploration and production have been granted for less than
4% of these areas and only 22,000 oil wells have been drilled across the Brazilian sedimentary basins to date. In
contrast, over 40,000 wells are drilled in the United States and Canada every year. Petrobras’s legislated monopoly
position, which existed until 1997, was partially responsible for this relatively underdeveloped position.
Exploration and Development
During the period in which Petrobras exercised its monopoly over oil and gas operations, it held the right to
control all production, exploration and development areas in Brazil. When the monopoly ended, the Brazilian
government was authorized to contract with any public or private company. In 1998, ANP started the bidding
processes for the granting of concessions and Petrobras had to compete to acquire concessions.
Domestic Content
Domestic content is the term which defines, in the concession agreements entered into by ANP with the
winners of the bidding rounds, the minimum percentage of participation required of Brazilian companies that are
suppliers of goods, systems and services in economic activities related to the activities set forth in the concession
agreement. This percentage is established in the invitations to bid disclosed prior to the bidding rounds.
The concession agreement establishes that the concessionaires must hire Brazilian suppliers whenever these
suppliers offer prices, terms and quality conditions equivalent to those of other suppliers. The domestic content
requirement in oil and natural gas exploration and production activities has contributed to the development and
growth of the Brazilian oil and gas industry.
Since 1999, the ANP has carried out nine bidding rounds of blocks for the exploration and production of oil
and natural gas in Brazil. The eighth bidding round, scheduled to occur in November 2006, was only partially
completed. The ANP decided to cancel this bidding round due to a series of lawsuits. ANP is currently awaiting for
the decision of the Federal Supreme Court (Supremo Tribunal Federal), or STF, the highest court in Brazil, on the
merits of these lawsuits in order to reschedule the eighth bidding round, which is tentatively scheduled for 2008.
The ninth bidding round, which was carried out on September 27, 2007, was also subject to controversies. The
tender for bid originally included 312 blocks available for bidding but, upon resolution of the National Council of
Energy Policy (Conselho Nacional de Política Energética), or CNPE, 41 of these blocks were withdrawn from the
bidding process. These areas, located in the so-called pre-salt layer in the Espírito Santo, Campos and Santos
basins, were withdrawn because they are said to be critical to Brazil. In the beginning of November 2007, Petrobras
announced that there was evidence of a large volume of oil and natural gas reserves in the pre-salt layer, which runs
for 800 kilometers between the Espírito Santo and Santa Catarina shorelines. Market analysts estimate that reserves
in Brazil could exceed 70 billion BOE, almost five times the current level of reserves, based on the volume that
could be produced in this region.
66

The ninth bidding round offered 271 blocks in nine sedimentary basins (Campos, Espírito Santo, Pará-
Maranhão, Parnaíba, Pernambuco-Paraíba, Potiguar, Recôncavo, Rio do Peixe and Santos), totaling 73,079 square
kilometers. Of this total, 117 blocks were acquired by bidders. Despite the withdrawal of 41 blocks around the Tupi
field, this bidding round resulted in record proceeds in the amount of R$2.1 billion, higher than the R$1.08 billion
recorded in the seventh bidding round. However, these proceeds were below the R$3 billion to R$4 billion
estimated by the ANP before the commencement of the ninth round. The agency licensed 67 of the 72 companies, a
record number, which demonstrated elevated interest in participating in the new bidding round. Large companies in
the industry such as Shell, Exxon and Chevron did not participate in the bidding process. The table below sets forth
the companies that acquired the most blocks (alone or with other companies).
Companies Bids Purchases
OGX 25 21
Petrobras.................................................................................................................................................. 56 27
Cia Vale do Rio Doce ............................................................................................................................. 16 9
___________________
Source: ANP.
The first to the fourth bidding rounds, carried out between 1999 and 2002, did not require the use of a
minimum amount of domestic content, but it did require a minimum amount of 70% of products and services from
the domestic market.
From 2003, the Brazilian government started to support and fostered the strengthening of the domestic
market of suppliers of goods and services, in particular with respect to projects related to the oil and gas industry.
Since 2003, the CNPE issued Resolution No.8, of July 21, 2003, which established that the ANP must
determine minimum percentages of domestic goods and services to be used in the exploration and production of oil
and natural gas and adjust these percentages in accordance with the growth of Brazilian industrial production
capacity and technological developments. By the fifth bidding round, carried out in 2003, a minimum percentage
set in relation to blocks located onshore, in shallow water and in deep water established by the ANP. The weight of
the use of domestic products and services in offshore blocks score grew from 15% (in the first to the fourth bidding
rounds) to 40%.
In the seventh and eighth bidding rounds, carried out in 2005 and 2006, changes were introduced to the
domestic content rules. In addition to the requirement of overall minimum percentage, the offers were limited to a
pre-established maximum price. These bidding rounds took into consideration the location of the blocks according
to four criteria: onshore, shallow water with depth of up to 100 meters, shallow water with depth between 100 and
400 meters and deep water with depth above 400 meters. A list containing areas and sub areas, both for exploration
and development of the blocks, establishes a minimum percentage of domestic product use utilized in connection
with each of these areas and sub areas. The company offered percentages of domestic content. The overall
domestic content score, both for the exploration and development of the blocks, was calculated by multiplying the
domestic content percentage offers related to items and sub items by the respective scores. Another new procedure
in the bidding rounds was the adoption of the domestic content manual as a tool to measure the contractual domestic
content. The domestic content score in connection with these bidding rounds was weighted at 20%.
The consolidated results indicate an average domestic content of 65%, resulting in an annual average of
US$12.6 billion invested in the domestic supplier market in Brazil between 2008 and 2012.
67

Domestic
Amount Spent on
Services and
Products in the
Domestic Market
Business Area
Investment (2008-2012) Purchases
(in billions of US$) (in billions of US$) (%)
E&P ....................................................................................................................... 54.6 29.5 54%
Supply.................................................................................................................... 31.4 24.3 77%
G&E....................................................................................................................... 6.6 5.0 76%
Distribution............................................................................................................ 2.5 2.4 100%
Corporate Areas..................................................................................................... 2.3 1.9 80%
Total......................................................................................................................
___________________
Source: Petrobras.
97.4 63.1 65%
Brazilian suppliers
In 2003, the CNPE required the ANP to establish a minimum rate of capital and services to be provided by
Brazilian companies in the development and production of oil and natural gas projects. The rate was to be
continuously adjusted as the local sector’s production capacity developed. After the fifth bidding round in 2003, it
became mandatory for local suppliers to be a part of every project, with the minimum level of their involvement
regulated by the ANP. Although it is not required by law, the Brazilian government has also encouraged Petrobras
to require a minimum level of domestic supplier participation in its projects. The ANP’s bidding process has led to
an increase in the level of domestic supplier involvement.
In 2003, the Brazilian government also created PROMINP, focused on increasing domestic supplier
participation by identifying demand for goods and services, mapping local production capacity and promoting the
development of local supply in the oil and gas industry. PROMINP is under the supervision of the Ministry of
Mines and Energy (Ministério de Minas e Energia), or MME, and Petrobras.
Petrobras’s business plan
Petrobras’s strategic goals and planning are supervised by the MME. Its activities are also subject to
regulations issued by the MME, among other agencies. Petrobras’s publicly-disclosed business plan for 2008 to
2012 estimates investments of approximately US$112.4 billion for the period, representing an average of US$22.4
billion annually, with an emphasis on exploration and production, or E&P, projects and downstream investment as
shown below.
2008-2012
(US$ billions - Includes International )
$2.60 / 2%
$2.60 / 2%
$4.30 / 4%
$6.70 / 6%
68
$1.50 / 1%
$29.60 / 26% $65.10 / 59%
E&P Downstream G&E Petrochemical
Distribution Corporation Biodiesel
___________________
Source: Petrobras’s Business Plan 2008-2012 (August 14, 2007).

The chart below shows the percentage of total investments estimated for 2008 to 2012 in Brazil and abroad.
2008-2012 Period
(US$ billions)
13%
69
87%
Brazil International
___________________
Source: Petrobras’s Business Plan 2008-2012 (August 14, 2007).
Purchase of goods and services by Petrobras
The Petroleum Law established that a simplified bidding process should be carried out prior to the
execution of agreements by Petrobras in connection with the purchase of goods and services. This process is
regulated by Decree No. 2,745, dated August 24, 1998.
The bidding process is not required to be carried out in case of events set forth in Article 24 of the General
Bidding Law. Among these events are:
• cases of emergency, such as situations that may result in losses or adversely affect the safety of people,
construction work, services, equipment and other products;
• when the establishment of objective criteria for the analysis of the proposals is not possible in
connection with the purchase of materials, equipment or items under the standards established by an
applicable official agency; and
• when parts and spare parts will be used in order to maintain the validity of the equipment’s technical
warranty.
The bidding process will not be required whenever there are not enough suppliers in the market. In
general, the purchase of valves requires a bidding process. We set forth below some examples of situations in which
the bidding process will not be required:
• purchase of materials, equipment or items that may be provided by the manufacturer, company or
exclusive commercial representative, without favoring any specific company;
• in connection with the engagement of unique technical services performed by specialized professionals
or companies, such as technical opinions and inspections; and
• in connection with the establishment of partnerships, joint ventures and other association methods of a
contractual nature to undertake the activities contained in Petrobras’s corporate purpose.
Petrobras can use the following types of bidding processes, among others, in connection with the purchase
of goods and services that are not classified as a waiver of the bidding process:

• competition. Refers to the type of bidding in which the participation of any interested party with the
characteristics required in the invitation to bid is permitted;
• price survey. Refers to the type of bidding between individuals or legal entities previously registered
with and classified by Petrobras, operating in the area related to the bidding process; and
• invitation. Refers to the type of bidding between individuals or legal entities, operating in the bidding
a minimum of three which may or may not be registered in Petrobras’ database.
According to the complexity and specialization of the work, service or supply to be provided, the bidding
processes can be classified as better price, technical or a combination of these types.
Part of the purchase of goods and services by Petrobras is carried out by means of agreements entered into
with EPCs and intermediaries that provide packages or “turn key” projects to Petrobras and, therefore, are
responsible for the purchase of these products and services, and engagement of third parties.
Supplier database
Petrobras maintains a database of companies interested in participating in providing products or services to
Petrobras.
Petrobras evaluates the following characteristics in connection with potential suppliers:
• technical criterion. Used to evaluate a company’s technical capacity with respect to the manufacturing
of products and/or the rendering of services.
• economic criterion. Used to establish evidence of a company’s general economic and financial
feasibility need to ensure the satisfactory supply and service its products and/or services.
• legal criterion. Used to provide information and monitoring services concerning a company’s good
standing with respect to compliance with such company’s obligations imposed by the market and
government agencies.
• SMS criterion (health, environmental and safety). Used to provide information on the level of
implementation of health, environmental and safety matters by judging and encouraging the obtaining
of certificates issued in accordance with the ISO 14001 and OHSAS 18001 rules.
• managerial/ social responsibility criterion. Used to provide providing information on a company’s
managerial and social responsibility practices by evaluating its commitment to quality and continuous
improvement.
The evaluation of and information concerning a company’s registration are available for use by Petrobras
for purposes of selecting suppliers that will be allowed to participate in the bidding and engagement processes. In
addition to the information contained in the initial register, a supplier’s performance during its work with Petrobras
is also considered in the selection of the companies.
A suppliers’ database must be updated on an annual basis. The updating process must be commenced by
the suppliers at minimum 30 days prior to the end of the CRCC validity period, upon the filling of the questionnaires
and delivery of the applicable documentation.
Conditions for the Supply of Materials to Petrobras
The content of the Conditions for the Supply of Materials to Petrobras – CFM 2005 will regulate the
relationship between the parties, except if otherwise set forth in the agreement entered into between Petrobras and a
supplier.
70

In addition to the conditions established in each agreement, such as those that define the corporate purpose,
applicable law and compliance with sanitation and safety rules, the conditions include the following significant
specifications:
• the supplier’s liability is limited to 100% of the purchase price of the respective agreement, expressly
excluding liability for loss of profits – taking into consideration, however, that such limit is not
applicable to damages incurred by third parties in view of an action or omission by the supplier, which
must be indemnified by Petrobras;
• the products and services provided by the suppliers must be guaranteed for a period of 12 months from
the beginning of use of the of such product or service or a period of 18 months from delivery of such
product and service, whichever is earlier;
• payments due by Petrobras will be made within 30 days from the delivery of the respective collection
documentation;
• failure by the supplier to comply with the conditions under the agreement will result in the payment of
a fine at the percentage rate of 0.1% per day on the agreement price, up to the limit of 10.0% of the
total value of the respective agreement, in the event of noncompliance not resulting in the termination
of the respective agreement by Petrobras, or 100.0% of the total value of the respective agreement, in
the event of noncompliance resulting in the termination (also provided that, in the latter event, the
period between the agreement execution date and termination date will be considered as the period for
application of the fine);
• along with noncompliance with the conditions set forth in the agreement, bankruptcy, reorganization
proceedings and changes in the supplier’s corporate structure that affect the execution of the
agreement, can also lead to the termination of the agreement by Petrobras upon 30 days’ previous
notice. In the latter cases, Petrobras must pay to the supplier the value corresponding to the executed
portion of the agreement, as well as the value of the materials purchased by the supplier and used in the
execution of the agreement, that cannot be returned to the respective suppliers of the supplier;
• the agreement can be terminated by Petrobras due to reasons of public interest, high significance and
broad knowledge, as justified and determined by Petrobras; and
• the supplier can terminate the agreement in the event of interruption in the execution of the agreement
for a period greater than 120 days, upon instructions provided in writing by Petrobras, or in the event
of delinquency for a period greater than 90 days with regard to payments to be made by Petrobras.
The Foundry Industry
Introduction
The foundry industry is characterized by the production of intermediate products used to supply to other
industries in the production of final products. The industry’s production process consists mainly of the casting of
steel, iron or non-ferrous metal and metallurgy (mainly, aluminum, copper, magnesium and zinc). In general, metal
and metallurgy and their alloys, in liquid form, are cast into molds to form a particular product or object. The molds
are made of special sand aggregated with resins especially for this purpose and the parts obtained usually need to be
finished or machined. There are, however, several specific foundry processes for different applications. The
segmentation of the industry is due to the complexity and technical and qualitative requirements involved in the
foundry process. Among the segments existing in Brazil, we focus on the conventional investment casting and PIM
segments.
In 2006, world foundry production totaled 91.4 million tons. Currently, the largest foundry producers are
China, the United States, Japan, India and Russia. According to the 41 st Annual Census of World Casting
Production, Brazil was ranked seventh in 2006. In 2001, the United States was overtaken by China in terms of total
casting production, reflecting the trend within the industry of less developed countries increasing their production of
less complex and lower quality casting, due to the high environmental costs associated with casting production. The
71

gap between China and the rest of the world continues to grow. With a 15% production increase in 2006 over 2005,
China now accounts for close to a third of total global production. Brazil achieved a 4% increase in 2006, to 3.1
million tons produced. The charts below show the development of world casting production and the ranking of the
world foundry production in 2006.
100
90
80
70
60
50
40
30
20
10
0
Development of World Foundry Production
(in millions of metric tons)
___________________
Source: Modern Casting Magazine and 41st Annual Census of World Casting Production.
28.1
China
68.3
12.5
USA
70.6
World Foundry Production – 2006
(in millions of metric tons)
7.9 7.2 6.9
Japan
India
73.6
Russia
5.5
Germany
3.1 2.6 2.4 2.0
___________________
Source: Modern Casting Magazine and 41st Annual Census of World Casting Production.
The Foundry Industry in Brazil
79.7
Brazil
85.7
Italy
91.4
2001 2002 2003 2004 2005 2006
France
Korea
According to the Brazilian Association of the Foundry Industry (Associação Brasileira de Fundição), or
ABIFA, in 2006 the installed capacity of the Brazilian foundry industry was approximately 3.7 million tons per year,
with output of approximately 83.4% of capacity, or a production of 3.1 million tons, and revenues of approximately
US$6.0 billion. The charts below show the development of the foundry industry in Brazil.
72

7
6
5
4
3
2
1
0
Revenue of the Foundry Industry in Brazil – 2001-2006 Production of the Foundry Industry in Brazil
(in billions of US$) (in thousands of tons)
2.3
2.5
2.9
4.2
5.6
6.0
2001 2002 2003 2004 2005 2006
___________________
Source: ABIFA.
73
3,500
3,000
2,500
2,000
1,500
1,000
500
-
1,761
1,970
2,249
2,830
2,969
3,087
2001 2002 2003 2004 2005 2006
In 2005, 82.9% of the total volume of foundry products produced in Brazil were iron products; the
remainder were steel products (10%) and non-ferrous metal products (8%). According to ABIFA estimates, there
are approximately 1,372 foundry companies (including captive foundry companies) in Brazil, of which
approximately 95% are small- and medium-sized Brazilian companies. As a result of the small size of the majority
of the companies in Brazil, the capacity for a rapid expansion of the industry in order to meet increases in the
demand for foundry products is low.
The Brazilian foundry industry is competitive in the international market due to the low cost of labor and
materials. This fact is evidenced by the 28.4% growth rate per year of export sales and revenues of US$1.4 billion
in 2005. However, due to the small size and lack of traditional recognition in foreign markets, the Brazilian foundry
industry’s exports as a share of its total sales and revenues remains low (25% and 23%, respectively, in 2006). The
graphs below show the development of Brazilian foundry exports and the export share of total production.
___________________
Source: ABIFA.
Brazilian Foundry Exports
(in thousands of tons) Export Share in Total Production
While the industry remains dependent on labor, it is becoming more automated, allowing for higher
margins as a result of increased productivity and lower payroll costs. According to ABIFA, the largest part of
foundry production is concentrated in São Paulo and in the Southern region of Brazil, accounting for 35.3% and
29.7%, respectively, of Brazilian production in 2005. The other principal regions of production are the Central-
Western and Minas Gerais regions, accounting for 25.4% of production, and the Rio de Janeiro region, accounting
for 6.9% of production.
The majority of the demand for foundry products is from the automotive and spare parts industry sectors,
which accounted for approximately 52% of total foundry sales in 2006. Other industries with a significant share in
the demand for foundry products are steel and iron (23%), capital goods (12%) and infrastructure (2%). The
automotive and spare parts industry sectors are characterized by long product development cycles due to the high

level of quality and security required by automobile manufacturers. In order to increase its competitiveness in the
local and foreign markets, the autoparts industry in Brazil is instituting a certification process for its products, a
trend that has been followed by its suppliers and large- and medium-sized foundry companies.
The products manufactured for the automotive industry undergo development and test cycles before
reaching the production line. These cycles range from one to two years and generally consist of a period for
negotiating and specifying commercial and technical matters associated with an engineering project as well as a
period for developing and approving the project’s tooling and production. After the presentation of a prototype, a
period of tests is initiated that may range from six months to a year. Only after the successful completion of tests is
the production of the part or set initiated. As a result of these relatively long product development cycles and the
high costs associated with developing projects, it is difficult for automobile manufacturers to change suppliers.
According to the National Association of Autoparts Manufacturers (Sindicato Nacional da Indústria de
Componentes para Veículos Automotores), or Sindipeças, in 2007 Brazilian autoparts industry revenues amounted to
US$35.9 billion, representing 2.7% of GDP. Of this total, approximately 63.4% of revenues originated from
carmakers, 16.1% from exports, 12.5% from spare parts and 8.0% from inter-industry sales, demonstrating that the
majority of foundry production went to supply the demand from the automotive industry.
The automotive industry, in turn, is characterized by its significant influence on and importance to the
Brazilian economy. According to the Brazilian Automotive Industry Association (Associação Nacional dos
Fabricantes de Veículos Automotores), or ANFAVEA, the automotive industry represented 18.0% of the Brazilian
industrial GDP in 2007, with total net revenue of approximately US$58.2 billion, of which 89.9% related to the sale
of vehicles and 10.1% to the sale of agricultural machines. Brazil was the world’s 9 th largest producer of vehicles,
based on 2005 data, and Brazil has the world’s 10 th largest fleet of vehicles, with 24.0 million units, based on 2006
data. The Brazilian automotive industry’s growth is strongly related to GDP growth and improved purchasing
power. In recent years, the expansion of credit and financing lines, together with an increase in available income,
has triggered the increase in sales of both light and heavy vehicles. The graphs below show the historical
development of the Brazilian automotive and autoparts industries’ revenues.
-
40
30
20
10
11.3
Autoparts Industry Revenue Automotive Industry Revenue
(in billions of US$) (in billions of US$)
13.3
18.5
25.3
28.5
36.0
2002 2003 2004 2005 2006 2007
___________________
Source: Sindipeças and ANFAVEA.
74
-
70
60
50
40
30
20
10
36.0 35.3
44.5
45.7
48.3
58.2
2002 2003 2004 2005 2006 2007

Our Company
BUSINESS
Our business is divided into three business segments: the oil & gas segment, which produces products and
services for the oil and gas industry, including anchoring ropes for deepwater platforms, valves, tools for oil
exploration, gas compressors, tube coating and services; the flow segment, which produces industrial valves,
primarily for the chemical, petrochemical, pharmaceutical, pulp and paper, ethanol and construction industries; and
the metal segment, which produces sand castings, investment castings and powder injection molding, or PIM, parts,
primarily for the automotive industry. We believe our products are recognized for their high level of specialization,
technological innovation and quality. We are a leader in the Mercosul, trading area in the production of industrial
valves and equipment for flow control and automation, primarily for the Brazilian oil and gas industry, and a leading
global producer of polyester ropes for platform anchoring. In the flow segment, our valve brands “Valmicro,”
“Mipel,” “Jefferson” and “Valbol” are leading brands in their segments in Mercosul. In the oil & gas segment, our
synthetic fiber rope brand UltraSeven® is the only Brazilian brand in the market. We are also the leading Brazilian
producer of complex parts and sub-systems for the global automotive industry in our metal segment, and we are
recognized in the international market for our development and production.
Oil & gas segment
We believe we are well-positioned to take advantage of the increasing opportunities expected to result from
higher levels of investment in the international and Brazilian oil and gas industry, primarily in construction and
maintenance of offshore oil and gas production platforms and in projects to increase oil and gas exploration
capacity. Petróleo Brasileiro S.A., or Petrobras, Brazil’s state-owned oil company, is our largest client in the
industry and has announced plans to invest approximately US$112 billion from 2008 to 2012, an increase of
approximately 28.6% compared to its previous capital expenditures program for the years 2007 to 2011. We believe
that Brazilian oil and gas investment rates will be significantly higher than investment rates in other major Brazilian
sectors, and should rise due to construction of the infrastructure necessary for oil and gas production in newly
discovered reserves in Brazil. Since September 2007, Petrobras has announced four significant new discoveries of
oil and gas reserves that could potentially position Brazil amongst the 10 largest oil producers globally. Our other
main clients in this segment include Repsol YPF, Petrobras Argentina, British Petroleum, Total, Chevron, Tenaris,
Exxon Mobil, and Shell.
Success in the oil & gas segment depends largely on the ability of suppliers to meet strict quality and
technological standards imposed by their clients, the largest of which, in Brazil, are Petrobras and its engineering,
procurement and construction, or EPC, partners. We believe that we are one of the few Brazilian suppliers of
industrial valves whose products have received the highest quality rating, level “A,” from Petrobras. Our products
and manufacturing processes incorporate state-of-the-art technology and have also been awarded quality
management certifications issued by internationally-recognized institutions.
We believe that the Brazilian government’s current policy of promoting the use of Brazilian-made
products, or the local content, such as ours, in its projects, especially when combined with the small number of
Brazilian manufacturers with sufficient capacity to make the necessary capital investments to meet the industry’s
strict manufacturing requirements, will continue to benefit our business. Sales to Petrobras, directly or through EPC
companies, accounted for 41.5%, 40.7%, 31.0% and 40.4% of our consolidated total gross sales revenue in 2005,
2006, 2007 and the first quarter of 2008, respectively.
Flow segment
We are a leader in the Mercosul trading area in the manufacture and sale of industrial valves. Our valves,
marketed under our well-known brands “Valmicro,” “Mipel,” “Valbol” and “Jefferson,” are used in several
industrial segments including the chemical, pharmaceutical, steel, food, ethanol, construction, agriculture, and paper
and pulp industries. Our clients include Rhodia, BASF, Braskem, Companhia Vale do Rio Doce, Votorantim, Sadia
and Companhia de Gás de São Paulo - Comgás (part of the British Gas group).
In addition to our leading position in our sector, we benefit from the experience and close relationships we
have established over the years with customers who have already installed a large number of our products in their
75

industrial plants. We are also recognized for the quality of our maintenance services and our highly skilled sales
force.
Metal segment
We are a leader in the Brazilian market for investment castings and are widely recognized in the
international market for the development and production of parts, sub-assemblies and components used in the global
automobile industry. In 2006, General Motors, or GM, named us the global “Supplier of the Year” for powertrain
applications, which demonstrates GM’s recognition of the high level of quality of our products in this category. Our
investment casting division, Microinox, has been able to establish long-term partnerships with its customers
because, we believe, of its innovative development skills and the quality of its products. Our PIM subsidiary,
Steelinject, is a pioneer in Latin America in the use and development of this technology for the production of highly
complex metal and ceramic parts for industrial products requiring a higher level of technical specification and
performance. We believe our Itasa division is one of the best sand casting manufacturers in Latin America,
specializing in the production of value-added alloys with a high resistance to corrosion such as duplex and super
duplex, used in valves and pumps used mainly in the oil and gas industry. We supply a wide range of customers,
including General Motors, OPEL, Bosch, Dana, MWM-International and Eaton.
Financial Data
The table below sets forth our net revenue and adjusted EBITDA for the periods indicated, as well as
related percentages:
Three-month period ended
March 31, Year ended December 31,
2008 2008 2007 2007 Pro Forma (1) 2007 2007 2006 2005
(in millions of
US$, except
percentages) (2)
(in millions of reais,
except percentages)
76
(in millions of
US$, except
percentages) (2)
(in millions of
reais, except
percentages)
(in millions of
US$, except
percentages) (1)
(in millions of reais,
except percentages)
Net
revenue ........ 80.0 140.0 67.3 262.0 458.3 221.3 387.0 223.6 173.2
Oil & gas segment (3) ..... 59.7% 59.7% 25.7% - - - - - -
Domestic market..... 64.8% 64.8% 92.8% - - - - - -
Export market ......... 35.2% 35.2% 7.2% - - - - - -
Flow segment ............... 26.4% 26.4% 46.9% 81.6% 81.6% 78.3% 78.3% 66.9% 62.5%
Domestic market..... 90.7% 90.7% 95.5% 86.0% 86.0% 82.7% 82.7% 57.8% 72.3%
Export market ......... 9.3% 9.3% 7.5% 14.0% 14.0% 17.3% 17.3% 42.2% 27.7%
Metal segment .............. 13.9% 13.9% 27.4% 18.4% 18.4% 21.7% 21.7% 33.1% 37.5%
Domestic market..... 66.7% 66.7% 61.8% 65.5% 65.5% 65.5% 65.5% 66.6% 75.5%
Export market ......... 33.3% 33.3% 38.2% 34.5% 34.5% 34.5% 34.5% 33.4% 24.5%
Adjusted EBITDA (4) ..... 19.4 33.9 18.5 64.0 112.0 54.9 96.0 59.5 49.6
Oil & gas
segment (3) 59.8% 59.8% 27.6% - - - - - -
Flow segment.......... 35.8% 35.8% 61.1% 95.8% 95.8% 95.1% 95.1% 83.4% 86.5%
Metal segment ........ 4.4% 4.4% 11.3% 4.2% 4.2% 4.9% 4.9% 16.6% 13.5%
___________________
(1) For important information as to how we compiled pro forma statement of operations, see “Presentation of Financial and Other Information,”
“Unaudited Pro Forma Combined Statement of Operations” and the notes to the pro forma statement of operations included elsewhere in
this offering circular.
(2) Solely for the convenience of the reader, real amounts for the year ended December 31, 2007 and the three-month period ended March 31,
2008 have been translated into U.S. dollars at an exchange rate of R$1.749 per US$1.00, the exchange rate in effect on March 31, 2008
(subject to rounding adjustments). These translations should not be considered representations that any such amounts have been, could have
been or could be converted into U.S. dollars at that or at any other exchange rate as of that or any other date. See “Exchange Rates.”
(3) The oil & gas segment was part of the flow segment until September 2007. Consequently, net revenue and EBITDA for the oil & gas
segment is only presented for the three-month period ended March 31, 2008 and also for comparative purposes the three-month period
ended March 31, 2007. See “Presentation of Financial Information – Business Segments.”
(4) Adjusted EBITDA means income before net financial expenses, income tax and social contribution, depreciation and amortization, nonoperating
results and non-recurring expenses. Adjusted EBITDA is not a measure defined under Brazilian GAAP, does not represent cash
flow for the periods indicated and should not be regarded as a replacement for net income as an indicator of the performance of our
operations or as a replacement for cash flow as an indicator of liquidity. Adjusted EBITDA has no standardized meaning and our definition
may not be comparable with adjusted EBITDA as used by other companies. We use adjusted EBITDA as defined in this offering circular

for purposes of measuring our performance. See “Management’s Discussion and Analysis of Financial Conditions and Results of
Operations—Adjusted EBITDA” for the calculation of adjusted EBITDA.
Our Competitive Strengths
We believe that our competitive strengths are as follows:
Uniquely positioned to benefit from the high level of investment in the oil and gas industry. We are wellpositioned
to benefit from increasing global investments in the oil and gas industry, primarily from investment in the
Brazilian deep-sea oil and gas market, due to: (i) our leading position in the market; (ii) our proven ability to meet
high quality specifications and deliver technologically advanced products, including meeting the special
requirements of the deepwater oil segment; (iii) our sales structure; (iv) the small number of Brazilian manufacturers
capable of making the capital investments required to compete in the industry; (v) our highly specialized line of
products for deep-sea oil exploration and production; and (vi) the Brazilian government’s policy of promoting
products manufactured domestically.
Proven capacity for growth with profitability. We believe we will be able to continue to manage our
growth so that increases in revenues will translate into increased profitability. From 2003 to 2007, our net revenues
increased at an average annual compounded rate of approximately 41.2% and our adjusted EBITDA increased at an
average annual compounded rate of approximately 56.4%.
Recognized track record of successfully integrating acquired companies. We believe we have a successful
track record of executing acquisitions, both domestically and internationally, and integrating the acquired
companies, including MNA, Carbonox, Mipel-SP, Petroima, CSL Offshore, Gasoil, K&S and Aspro do Brasil in
Brazil, and Itasa, Esferomatic, Worcester, Delta and Compresores, jointly referred to as “Delta,” and Jefferson in
Argentina. In addition to the synergies and economies of scale resulting from our acquisitions, we have
implemented an efficient management model, which enables the companies we acquire to quickly produce and sell
products with the same quality, productivity and profitability standards we have adopted.
Market leadership and established core products. We are the leading Mercosul company in the
manufacture of industrial valves. The valves marketed under our “MNA,” “Valmicro,” “Mipel,” “Valbol” and
“Jefferson” brands have been installed on offshore production platforms, on offshore production sites on oil and gas
pipelines and in the plants of some of the largest industrial groups operating in the Mercosul countries. We believe
we have a significant market share and a wide network of suppliers and resellers throughout Brazil and Argentina.
By fostering close relationships with our customers, we have been able to take advantage of emerging opportunities
in the industries we serve and, as a result, we have sold more than 3.4 million “Valmicro” brand valves and over
570,000 “MNA” brand valves over the last 24 years.
High quality products and superior maintenance services. Petrobras has certified us as a level “A” supplier
due to the quality of our products and excellence of our manufacturing processes, and our products are also certified
by international leading institutions. Our products incorporate state-of-the-art technology developed by our research
center together with our customers. In addition, unlike our international competitors, our local presence in Brazil
and Argentina ensures proximity to our customers and fast, efficient delivery of maintenance services, which we
believe strengthens our relationships. We believe those factors constitute significant competitive advantages over
other competitors in the segments in which we operate.
Well-organized and skilled business structure in Brazil and abroad. We believe that we are one of a small
number of Mercosul suppliers capable of meeting the needs of our customers in multiple regions throughout Brazil
and Argentina due to our sales and technical support staff and our highly skilled, accredited suppliers and resellers.
In addition, we export our products to approximately 40 countries and have independent representatives in the
United States, Europe, Asia and elsewhere in Latin America. Due to the critical application of our products, we
believe our agility and effectiveness increase our appeal while consolidating our leading position.
Limited Exposure to Oil Price Volatility. Our business is related to the capital expenditure programs of our
customers. Although the revenues of our oil industry customers are directly affected by the volatility of
international oil prices, the capital expenditure programs of these customers are not generally based on the price of
oil. Rather, the investments that these oil companies make in their infrastructure are driven by their maintenance
77

and expansion needs. In addition, we believe that certain of our customers have developed long-term strategies
focused more on maintaining Brazil’s oil self-sufficiency over maximizing profit. The fact that our activities are,
therefore, linked to the more stable needs of our customers tends to limit our exposure to oil price volatility, which
may affect other companies in the oil and gas industry.
Skilled, experienced management and a results-oriented culture. Our management team is highly skilled
and experienced. Our senior managers have worked for us for an average of 24 years. An important component of
our executives’ compensation is tied to our growth and profitability through a profit sharing program that aligns our
executives’ interests with those of our shareholders. In addition, in 2006 we approved a stock option plan in order to
further align our executives’ interest with those of our shareholders.
Effective corporate governance practices. We are listed on the Novo Mercado segment of the BOVESPA.
The rules governing the Novo Mercado require high standards of corporate governance. Prior to our listing, we had
a history of private equity investors in our shareholder base, such as Bozano Simonsen Advent—Fundo Mútuo de
Investimentos em Empresas Emergentes, CRP Caderi Capital de Risco S.A., GP Investimentos and the Natexis
Mercosul Fund. In addition, BNDESPAR, the investment company of the BNDES, is currently one of our
shareholders. We believe our relationships with these investors established a culture of transparency that focused on
the creation of shareholder value, and facilitated our adoption of effective corporate governance practices that were
consistent with the practices required of publicly-held companies.
Our Strategy
We believe that the global oil and gas industry will continue to grow significantly over the coming years
due to new energy-related investments announced by key industry participants, as well as by the need for industry
participants to maintain their existing infrastructure and to repair and revamp oil platforms and refineries. Most of
those projects will be developed in Brazil, the Gulf of Mexico and the western coast of Africa in deep-sea water
fields, which require special equipment and services. We have developed new technologies that have already been
tested and are in operation in several offshore projects, giving us an important advantage in attracting other
customers with projects in deepwaters. Our main objective is to leverage our market leadership to take advantage of
the opportunities associated with these investments. Moreover, we will try to increase our market share in the global
automobile supply chain, while taking advantage of other opportunities to grow and invest in complementary
businesses and products. To accomplish these goals we plan to:
Consolidate our leadership position in the market through strategic acquisitions. Participants in the
segments in which we operate in Latin America consist mainly of small and mid-sized, family-owned companies.
We believe this fragmentation represents an important opportunity for considerable growth through acquisitions.
We intend to continue transferring our technological and industrial know-how to the companies we acquire so that
they can manufacture and market products at our same level of quality, productivity and profitability. When
opportunities arise in the market, we also intend to selectively acquire companies whose technology and/or products
can be integrated into our production chain to position ourselves as a solution provider.
Enhance productive capacity through prudent investment. In line with our history, we are prudently
investing in the expansion of our plants to increase our capacity, productivity and ability to achieve economies of
scale to enable us to respond to increased demand for our products.
Expand our product portfolio by developing new technologies and products. We are committed to
maintaining our market leading position and to further penetrating our target markets by offering an increasingly
comprehensive line of products and services, based on the new technologies and new products that we develop to
meet our customers’ evolving requirements. In 2005, we established our CPDL in order to enable us to better
develop our manufacturing processes and products and to develop technological innovations in all three segments.
Increase strategic partnerships in the metal segment. We intend to increase strategic development
partnerships in the metal segment in order to meet the specific needs of our customers. To do so, we intend to
continue investing in engineering and development, focused on the needs of our customers, in order to offer a
complete solution to our customers, particularly in the automotive industry.
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Continued investments in operating efficiency and cost reduction. We will continue to invest in the
optimization and automation of our production processes and in new technologies that allow our costs to remain low
relative to our net revenues and allow us to be competitive in the international markets.
History and Development
We began operations in August 1980 under the name Microinox, producing cast components for valves by
using the investment casting process. In 1984, we formed Valmicro to produce industrial valves to sell to the
industrial market through suppliers and resellers. Valmicro was supplied with Microinox investment casting parts,
allowing it to be more competitive in the market in which it competed. Since 1996, Valmicro has been a leader in
Brazil in the manufacture and marketing of standard low- and medium-pressure industrial valves. In 1989,
Valmicro began to sell directly to customers in the industrial market without the intermediation of dealers or
distributors. Accordingly, Valmicro increased its product line, adding more value and technology to its products in
order to meet the specific needs of its end consumers. In 1993, Valmicro merged with Microinox and we adopted
our current corporate name, Lupatech S.A. In 1992, we invested in Esferomatic, an Argentinean manufacturer of
ball valves. From 1992 to 1998, Esferomatic sales increased roughly three-fold. In 1998, due to projected
difficulties exporting from Argentina to Brazil because of imminent changes in the foreign exchange regime, we
made the strategic decision to sell our investment in Esferomatic.
In 1995, Steelinject began to implement the PIM process for producing metal and ceramic parts to supply
several market segments. In 2000, we acquired 76% of the shares of MNA, a manufacturer of industrial valves for
critical applications. Since 1972, MNA has developed and produced valves requiring highly specialized engineering
and technological specifications, primarily for the oil and gas industry. In 2001, we acquired the remaining shares
of MNA. Since the acquisition, we have made significant investments in order to make this subsidiary the most
modern Brazilian manufacturer of industrial and ball valves. In 2002, we formed Lupatech North America as part of
a joint venture between our subsidiary Lupatech Investments and the U.S. company Ideal Controls. This unit was
formed to sell valve lines produced by Valmicro and MNA and to operate as a valve distribution and storage center.
In December 2005, the joint venture was terminated. Lupatech North America was relocated to Houston, Texas, in
2006, where it operates as a sales office, focused primarily on the sale of our valve lines for the oil and gas industry.
In the first half of 2005, we acquired 51% of the voting capital of Carbonox. Carbonox replaced Microinox
as the producer of investment casting supplies to Valmicro and MNA. In December 2005, we acquired the
remaining Carbonox shares. In mid-2005, we formed a new company, named Mipel-Sul, and we also started
construction of a plant in Veranópolis, Rio Grande do Sul, for the production of ball valves for sale to the
distributors of industrial suppliers. In 2006, our Valmicro and Steelinject divisions were established as our separate
subsidiaries. In 2006, we also acquired Mipel-SP, the Brazilian leader in the production of copper industrial valves,
Itasa, one of the most respected foundries for casting valve bodies, valve components and pump bodies for oil in
Latin America, and Worcester and Esferomatic, leaders in Argentina in the manufacture of ball valves for special
applications, mainly oil and gas.
In May 2006, our common shares began trading on the Novo Mercado segment of the BOVESPA under the
symbol “LUPA3.”
In April 2007, we acquired Petroima and certain assets of Zmach to begin producing tools for oil
production. In the first quarter of 2009, we will make a second payment to the sellers of these assets. On April 3,
2007, we acquired CSL Offshore, which was the platform-anchoring rope business of CSL Offshore. CSL Offshore
produces a new generation of synthetic fiber ropes used for anchoring oil and gas platforms in deep-sea and ultra
deep-sea waters, using proprietary technology developed in Brazil.
In July 2007, we acquired Gasoil, which operates in the manufacture and maintenance of equipment such
as umbilical reels, baskets and skids, the inspection and machining of API and PREMIUM threads, the manufacture,
inspection and maintenance of tools and accessories for drilling columns, completion and production, the inspection,
maintenance and operation of completion systems such as dual bore risers and drill pipe risers, the inspection,
maintenance and operation of tubing and casing, the inspection and maintenance of drill risers and drill strings and,
the design, construction and assembly of natural gas compression stations.
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In July 2007, we acquired Kaestner & Salermo (K&S), which specializes in tubular services, including
machinery, maintenance and inspection of tubes and coating through the use of anticorrosion materials in tubes and
equipments for oil and gas applications.
In November 2007, we acquired Jefferson. Located in Argentina, Jefferson is a solenoid valves and level
controls producer, which are used to handle several kinds of elements, such as air, water, liquid nitrogen and
corrosive products sold to the petroleum, food & beverage, refrigeration, heating, automobile, textile and
petrochemical industries, among others. On the same date, we also acquired three of Jefferson’s distribution offices
in Brazil, Mexico and the United States.
In January 2008, we acquired a 50% stake in Aspro. Aspro is a producer of VNG compression systems.
With a production facility located in Brazil, Aspro sells its compression units mainly in Brazil and had an estimated
market share of 70% on the new compression systems sold in 2007 and 58% on the installed compression systems.
On the same date we acquired a 50% stake of Delta. Delta is a producer of VNG compression systems
worldwide. With two production facilities located in Argentina, Delta’s compression units are estimated to be in use
in about 20% of the VNG stations around the world.
In March 2008, we signed a memorandum of understanding to acquire Gávea Sensors for R$9 million.
Gávea Sensors manufactures fiber optic sensors primarily for the oil & gas segment, which can also be applied to
structural health monitoring, with a growing presence in the energy segment and aeronautical industry. The
company develops, produces, and sells fiber optic sensors based on fiber Bragg grating and refractometry
technologies, to maintain downhole monitoring of flow, pressure and temperature in oil and gas wells. Other Gávea
Sensors products are fiber optic accelerometers, thermometers, strain sensors, leak detectors and other sensors to
several applications, as well as measurement units and data management software. The conclusion of this
acquisition is subject to due diligence conclusion and management approval.
Recent Events
On April 24, 2008, we signed a US$25 million credit facility agreement, through our partial subsidiary
Aspro, with PROPARCO, a financial development institution that is co-owned by the AFD. The amount
outstanding under this credit facility will be paid over eight years, with a two year grace period, and was used to
make the final payment for Delta and Aspro acquisitions.
Corporate Structure
The chart below sets forth our subsidiaries and divisions in our oil & gas, flow and metal segments as of
March 31, 2008:
___________________
(*) Lupatech North America represents Esferomatic, Worcester, MNA and Valmicro in the North American market.
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Business Segments
Oil & gas segment
Our oil & gas segment comprises the subsidiaries MNA, Esferomatic, CSL Offshore, Petroima, Gasoil,
K&S and the partial subsidiaries Aspro and Delta. This segment mainly services the oil and gas industry, primarily
in deep waters.
MNA
MNA manufactures a broad line of manual and automated block valves for industrial use and is the primary
Brazilian supplier of ball valves to the oil and gas sector.
Our valve line featuring on/off control comprises:
• floating and trunnion mounted ball valves with special features such as fire-safe, double block and
bleed, metal seating, and top entry manual and automated operation;
• double block and bleed plug valves;
• gate valves;
• globe valves; and
• check valves.
These valves are produced in sizes from 0.5” to 42”, with pressure classes from 150 to 2,500 pounds per
square inch, or psi. Approximately 95.0% of the valves produced by MNA are ball valves. This line serves several
industrial markets, such as the oil and gas industry (onshore, offshore and transportation applications), the
petrochemical industry, the chemical industry, and the paper and pulp industry.
In general, the valves produced by MNA are customized to meet the needs of each customer, requiring
state-of-the-art technology and engineering. MNA also provides value-added services, such as the recovery and
refurbishment of valves, “start-up” and “commissioning” services, valve and equipment automation services,
rendering of services abroad (maritime platforms) and technical support. The number of valves produced monthly
varies according to the valve gages produced. On average, between 900 and 1,000 valves are produced monthly or
approximately 12,000 valves per year. A new facility for MNA is being built in the city of Nova Odessa, São Paulo
state. The production will be gradually transferred to the new factory, starting by the end of 2008. When
concluded, which we expected will be by the third quarter of 2009, we will close the old factory and the new facility
will expand MNA’s production capacity by approximately 100%.
Raw Materials and Suppliers. MNA manufactures valves using different materials, including carbon steel
cast, stainless steel cast, alloy steel cast, forged carbon steel, forged stainless steel and the super duplex alloy,
depending on the application of the valves. Approximately 90.0% of the MNA valves are manufactured using the
sand casting process. MNA uses outsourced domestic and international molding to manufacture the valve
components based on the patterns it creates. Our main cast suppliers are our subsidiary Itasa, Fundição Técnica Sul
Americana, or FTSA, Engenharia e Materiais Ltda., or Engemasa and Grupo Engenharia, or GE. MNA is not
dependent on any of these suppliers.
The quality of the molded parts we use in our valves directly influences the quality and service life of these
valves. When products are received from suppliers, MNA performs quality control testing and returns any cast or
forged part that does not comply with the standards of quality required by the market. Our raw material return rate
is approximately 2.0%.
Production Process. The production process of the MNA valves is similar to the production process of the
Valmicro valves. See “—Flow Segment—Valmicro—Production Process.”
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Sales, Marketing and Distribution. MNA products are sold by independent sales representatives located in
Brazil and abroad. We hire independent commercial representatives with in-depth knowledge and technical
specialization. Our marketing efforts include market research, advertising campaigns in technical magazines and
participation in the main trade fairs in Brazil and abroad. Together with Valmicro, MNA publishes “Valmicro
Press,” a periodical covering technical and market issues in the oil & gas segment, which is distributed to
approximately 14,500 customers and opinion makers in the areas where we operate. MNA primarily exports its
products to the United States, Singapore, Malaysia, Colombia, Bolivia and Chile.
MNA uses road transportation, port and air services for the distribution of its products. Most of MNA’s
exported products are shipped through the Santos port, located approximately 200 km from the Americana plant.
Customers. The main customers of MNA are Petrobras and its EPC partners, such as SBM, FSTP Brasil,
TS Gás, Estaleiro Mauá and Jurong Shipyards. In 2005, 2006 and 2007, approximately 98% of the sales of MNA
were made directly to Petrobras (70% of these sales) and its EPC partners (30% of these sales).
For over 25 years, MNA has been a Petrobras CRCC-registered company, enabling it to provide goods and
services to Petrobras and its EPC partners. The CRCC must be updated annually. MNA is already registered at the
Master Vendor List Offshore, or MVLO, by Petrobras. As of the date of this offering circular, MNA has supplied
approximately 570,000 valves to Petrobras. From 2005 to 2008, MNA manufactured approximately 18,800 valves
to the following Petrobras oil and gas platform projects: P 34, P 50, P 54, P 51, P 52, P 56, P 53, Manati and
Mexilhão.
Besides the major offshore projects, MNA is also supplying to the most important PLANGAS (emergency
gas planning, developed by Petrobras) projects, such as Cacimbas III, Cabiúnas II and Mexilhão onshore (Consórcio
Caraguatatuba).
Petrobras classifies its suppliers according to the rating they obtain during the CRCC registration process
and the Guaranteed Quality of Materials and Services Program (Programa de Garantia da Qualidade de Materiais e
Serviços Associados), or PGQMSA, audit process. MNA has been classified by Petrobras as a level “A” supplier,
which represents Petrobras’s highest classification level. MNA’s file with Petrobras is being updated in order to
meet new and more comprehensive managerial standards, as well as SMS practices, as defined by the Petrobras
Suppliers’ Management Program (Programa de Gestão de Fornecedores da Engenharia), or PROGEFE.
Competition. We believe that MNA is the largest Brazilian supplier of ball valves to the Brazilian oil and
gas industry. In the Brazilian market, MNA’s main competitors are KSB, On Off Valves and Tecval. In the foreign
market, MNA’s main competitors are Cooper Cameron Corporation and Velan Inc.
Quality Control and International Certifications. The quality and state-of-the-art technology of the MNA
products sold in the industrial valve market are certified according to international quality standards. MNA is
certified by the API (API6-A and API6-D) and was also granted ISO 9000:2000 certification. Additionally, MNA
has obtained ABS Quality Evaluations certification for its fire-safe ball valves and its vacuum ball valves.
Esferomatic
Founded in 1969, Esferomatic was reacquired by us in December 2006 when we acquired Worcester, its
controlling shareholder. Esferomatic produces ball valves for special high technology applications in its plant
located in Buenos Aires, Argentina, and focuses its production on automated and manual ball valves ranging in size
from 0.25” to 12”, which it manufactures under the “Esferomatic” trademark. We estimate that Esferomatic, jointly
with Worcester, holds a nearly 60% share of the Argentine valve market for the industrial sector, and has a strong
presence in the high technology oil and gas industry.
Raw Materials and Suppliers. Esferomatic manufactures valves using different materials, including carbon
steel cast, stainless steel cast, alloy steel cast, forged carbon steel, forged stainless steel and the super duplex alloy,
depending on the application of the valves. The main supplier is our subsidiary, Itasa, which is located in Argentina.
Production Process. The Esferomatic valves production process is substantially similar to the production
process of MNA and Valmicro. See “—Flow Segment—Valmicro—Production Process.”
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Sales, Marketing and Distribution. The Esferomatic sales, marketing and distribution process is
substantially similar to the sales, marketing and distribution process of Worcester. See “—Flow Segment—
Worcester—Sales, Marketing and Distribution.”
Customers. Esferomatic’s principal customers are Repsol YPF, Petrobras Argentina, British Petroleum,
Total, Chevron, Tenaris, Exxon Mobil and Shell.
Competition. The Argentine ball valve market is extremely concentrated. Together with Worcester,
Esferomatic has a nearly 60% share of the Argentine ball valve market. The main competitors in Argentina are
Wenlen, Tyco and Spirax Sarco.
International Certifications. Esferomatic products are certified under international quality standards,
including API 607, API 6D and CE Certified.
CSL Offshore
In April 2007, we acquired CSL Offshore. With a plant located in São Leopoldo, in Rio Grande do Sul
state, CSL Offshore produces a new generation of synthetic fiber ropes used for anchoring platforms in deep-sea and
ultra deep-sea waters, using proprietary technology developed in Brazil, under the trademark Ultraseven®.
Raw Materials and Suppliers. CSL Offshore ropes are produced with synthetic fibers, primarily polyester.
The principal supplier of these fibers is Kordsa Brasil, located in Bahia, Brazil.
Production Process. The CSL Offshore rope production process uses a proprietary technology developed
in Brazil that incorporates the most efficient technique for the manufacture of synthetic fiber ropes for oil and gas
deep-sea and ultra deep-sea waters platform anchorage activity. CSL Offshore has a production capacity of 7,200
tons of synthetic ropes per year and we believe it has a current utilization rate of approximately 90%.
Sales, Marketing and Distribution. CSL Offshore ropes are sold directly to final customers.
Customers. CSL Offshore’s principal customers are Petrobras (which accounts for approximately 65% of
CSL Offshore’s sales), Chevron, Shell and British Petroleum. We recently signed a commercial agreement with the
Vicinay Group to jointly explore market opportunities for polyester ropes and links for oil platform anchoring. The
Vicinay Group is a global leader in the production of links to oil and gas platforms. With more than 200 years of
experience in Spain and China, in addition to an association with Brasilamarras in Brazil, it has a vast commercial
network throughout the main off-shore oil and gas producing regions. Therefore, this agreement will allow CSL
Offshore to geographically diversify its markets, especially in the Gulf of Mexico, Western Africa, and Asia.
Competition. CSL Offshore is a world leader in the development and manufacture of synthetic fiber ropes
for deep-sea water application. The main competitors of CSL Offshore are Quintas e Quintas, Oliveira Sá, and
ScanRope.
Quality Control and International Certifications. The line of products produced and sold by CSL Offshore
have ISO 9001:2000 certification and it is currently seeking ISO 14001 certification.
In addition, CSL Offshore has the only testing machine with tension capacity of 1,500 tons in the southern
hemisphere. This capacity was extended to 1,700 tons, increasing the strategic differential of CSL Offshore,
resulting in gains in time and productivity. CSL Offshore is the only cable manufacturer that has its own testing
equipment, testing the prototypes in real-size scale, increasing the quality of its cables.
Petroima
We acquired Petroima and certain assets of Zmach in April 2007 to begin producing tools for oil
exploration. Petroima has two business lines: (i) oil and gas, which is focused on the manufacture of tools for the
oil and gas sector, such as swivels, tension rings for wet “Christmas tree” settings, packers, tubing seals, bridge
plugs, work over tools and connectors for use in oil fields (both offshore and onshore), consisting of a portfolio of
approximately 250 products; and (ii) precision machinery, which is focused on the supply of precision machinery
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services mainly to the automotive industry and agricultural equipment. Petroima has two industrial facilities in
Brazil: one in Simões Filho, in Bahia state, and one in Caxias do Sul, in Rio Grande do Sul state.
Raw Materials and Suppliers. Petroima tools are produced with steel alloys and stainless steel 316.13
chrome and super 13 chrome. The raw materials are furnished by well-recognized worldwide suppliers of pipes
with no juncture or bars, some of them have manufacturing plants in Brazil. Its principal supplier is VEM do Brasil
S.A., which is located in Belo Horizonte, Mato Grosso.
Production Process. The Petroima product line of tools for oil wells is made up of more than 200 models
of products, considering the variation in sizes to adapt to all types of oil and gas wells.
The tools are manufactured with enhanced steel, in accordance with the characteristics of each well, and
they offer high mechanic and/or corrosion resistance.
We built a testing well inside Petroima to simulate tasks during the oil production process in order to
reproduce the actual conditions of use of the tools, allowing us to analyze several conditions for the use of the
products.
We monitor all stages of the production process of the tools, in addition to having state-of-the-art systems
perform the dimensional analysis with precision. American Petroleum Institute, or API, rules and the certification
ISO 9001:2000 assure quality industrial management. The operating equipments plant (which includes a total of 42
units) is the most modern in Brazil because a majority of the equipment was acquired last year and is equipped with
state-of-the-art commands, which allow better speed for cut and quick change of tools, reducing the operating and
set-up times and consequently reducing costs.
Productivity is controlled by electronic monitoring systems adapted to each equipment. These systems
advise us in real time with respect to production levels.
In the business unit, tension rings are sawn and forged vertically and horizontally to be shaped and
assembled as final products afterwards. In the precision machinery line, the parts are forged in Computer Numerical
Control, or CNC, precise machine lathes and Robodrills (high performance steel manufacturing machines by
FANUC Ltd. in Japan), according to the dimensions and design chosen by the customer.
Sales, Marketing and Distribution. The sales team, in addition to the engineering team and the technicians,
has been in the market for more than 20 years, experienced in providing support to the oil and gas companies in
Brazil. We have sales technicians in all oil and gas regions of the country, assisting Petrobras and other oil and gas
companies.
We have maintenance centers in the Southeast and the Northeast regions, prepared to render maintenance
services in accordance with our maintenance contracts, mainly with respect to equipment taken from the wells for
repair or reassembly.
Petroima established a sales strategy for the foreign market, including Argentina, Venezuela and the United
States, which are reached through local partnerships that are already active in the oil and gas industry.
In addition, we have a technical team focusing in services to customers and prepare of adequate quotations,
in addition to providing the development of the tools production process.
In the business unit, we sell our products through direct sales team and an outsourced sales force. The
outsourced sales force has more than 25 years of experience in this industry. In the precision production unit, we
sell our spare parts to customers directly through a manager and a sales supervisor.
Customers. Petroima’s principal customers are Petrobras, Repsol, Chevron and Total, in the oil and gas
unit, and Random and Dana, in the precision machinery unit.
Competition. The oil and gas tools manufacture and service market is extremely fragmented. The main
competitors of Petroima are Weatherford, B&S, Surco and Petrol, in the oil and gas unit, and Demore, Fercorte,
New Hubner and Camfer, in the precision machinery unit.
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International Certifications. Petroima is ISO 9001-2000 certified.
Gasoil
We acquired Gasoil in July 2007. Gasoil operates in the manufacture and maintenance of equipment such
as umbilical reels, baskets and skids, the inspection and machining of API and PREMIUM threads; the manufacture,
inspection and maintenance of tools and accessories for drilling columns, completion and production; the inspection,
maintenance and operation of completion systems such as dual bore risers and drill pipe risers; the inspection,
maintenance and operation of tubing and casing; the inspection and maintenance of drill risers and drill strings; and
the design, construction and assembly of natural gas compression stations.
Suppliers. The main suppliers are V&M do Brasil S.A., White Martins Gases Industriais Ltda., Aços F.
Sacchelli Ltda., Planquimica Industrial e Comercial Ltda. and Gerdau Comercial de Aços S.A.
Sales, Marketing and Distribution. Gasoil renders services in the places indicated by each customers,
which can be oil platforms.
Customers. The main clients are Petrobras (which accounts for approximately 79% of Gasoil’s sales),
V&M, Halliburton, Schlumberger, Universal Compresión and Drill Quip.
Competition. Gasoil competes directly with Weatherford, which is located in Caxias do Sul, Brazil.
International Certifications. Gasoil is ISO 9001 certified. In addition, it is also certified by VAM
SERVICES to produce and render services to V&M.
K&S
K&S renders services to the oil and gas sector, including the non-destructive inspection of equipment and
pipelines, recovery of threads, modification and maintenance of pipelines, external and internal cleaning of
pipelines, industrial digital inspection, coatings for pipelines and accessories, maintenance of the internal coating,
electromechanic cleaning inside pipelines and development and technology focusing on the oil and gas sector.
plant.
Raw Materials and Suppliers. Our main suppliers are 3M and JERA.
Production Process. The production process is different for the coating plant and the pipeline maintenance
In the coating plant, we produce coatings for pipelines and accessories with special paint. We
decontaminate the pipelines using high temperatures to remove the organic materials. Then, we clean the pipeline to
make the surface even. This process is done internally, with no damage to the environment. Following the cleaning
process, we apply the painting and control the temperature for a few hours to finalize the process.
With respect to the pipeline maintenance plant, the pipelines are cleaned in a special process using high
pressure water. After being internally and externally cleaned, the pipeline is inspected by specialized equipment in
order to identify cracks and measure the thickness of the walls. We then separate the pipelines that need repair and
work on them.
Sales, Marketing and Distribution. K&S works actively inside companies, such as Petrobras or to final
customers, mainly companies that are rendering outsourced services to Petrobras. After the technical approval, we
start negotiating the agreement or single orders.
The sales team is composed of a sales manager, a business agent to identify new opportunities in the state
of Espírito Santo, in Bacia Campos and Santos and a sales agent in the Northeast region. After the potential
customer is identified, our technical team participates in the negotiation to review consistency and benefits of the
proposal.
All current agreements were executed through our participation in public bids (Petrobras) or directly
executed with Petrobras because there is no competition in the area to justify a public bid.
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Customers. K&S’s main customers are Petrobras (which accounts for approximately 37% of K&S’s sales),
Weatherford, Smith, Transocean, PCP Engevix e Frank’s.
Competition. In the coatings area, K&S competes with Tuboscope, a European company that uses similar
technology. In the Northeast region, K&S competes with Nova Coating, which is present in a specific segment but
has plans to expand its participation to the coatings area.
Quality Control and International Certifications. K&S is ISO 9001:2000 certified.
Delta
We acquired Delta in January 2008. Delta provides compression systems to gas stations that sell natural
gas. A package sold by Delta normally includes one compressor, one storage unit, one control panel and two to
three dispensers.
Raw Materials and Suppliers. Delta uses steel raw materials in the majority of the production processes to
manufacture its equipment and compression systems. Delta acquires these raw materials from local steel suppliers
focused on the manufacturing of components to gas compressors.
Production Process. The head offices and the manufacturing unit are located in Escobar (Buenos Aires,
Argentina) in addition to a small unit in the city of Pablo Podestá, also in Argentina. The Escobar unit is responsible
for the manufacturing of the main components of the compression system and the assembly of equipment to be sold
in Argentina and other markets, such as Colombia, Ukraine, Iran, India and Venezuela, except for Brazil.
Delta has a unique system to control the quality of the manufacture of the products sold. Currently, Delta
manufactures approximately 79% of the components used in its products, higher than any competitors. Delta
develops more new products more quickly in order to meet the special needs of clients in a more efficient way in
comparison to our competitors.
Sales, Marketing and Distribution. Delta sells its products through its sales department in Argentina. In
other regions, sales agents represent Delta. Some of the sales representatives may also have some other operating
responsibilities, such as technical support, installation and maintenance.
Delta is negotiating a representation agreement with a local group in Pakistan to expand to that market.
Currently, Pakistan is the third largest market for natural gas.
Customers. In general, Delta’s final customers include VNG distributors (such as Shell and Esso), public
companies in the oil and gas segments (such as PDVSA and Petrobras) and independent players in each market.
Our main customers are YPF, Esso, Shell, Total, Deltagas, BG, GNS, Gastron, Texaco, ZAP, Molecular, Natugás
and Forza.
Competition. We believe that Delta is a market leader in Latin America. The main competitors are Agira
and Galileo, both from Argentina.
gas.
International Certifications. Delta received the following certifications: ISO 9001:2000 and ISO 14001.
Aspro
We acquired Aspro in January 2008. Aspro provides compression systems to gas stations that sell natural
Raw Materials and Suppliers. Aspro uses steel raw materials, bought from local suppliers, and
components, especially bareshafts, from manufacturers such as Delta, to manufacture its equipment and
compression systems.
Production Process. The head offices and the manufacturing unit are located in Campo Largo (Paraná,
Brasil). In this plant, the compression system is assembled using the components acquired from different suppliers.
The products are sold mainly to local customers.
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Sales, Marketing and Distribution. In general, Aspro’s final customers are VNG distributors (such as
Shell, Esso and BR Distribuidora, a subsidiary of Petrobras, and independent players).
Aspro sells its products through its own sales team and outsourced agents.
Customers. The main customers are Petrobras and Ipiranga (which was partially acquired by Petrobras in
2007) representing approximately 32% of Aspro’s sales in 2007.
Flow segment
Competition. The main competitors are Galileo and Agira, from Argentina, and Junqueira, from Brazil.
Our flow segment comprises the subsidiaries Valmicro, Carbonox, Mipel-Sul, Mipel-SP, Worcester
(Valbol), Jefferson, Lupatech Investments and Lupatech North America. These companies produce and sell valves
for industrial applications.
Valmicro
In January 2006, the Valmicro division began to operate as one of our subsidiaries, under the corporate
name Valmicro Indústria e Comércio de Válvulas Ltda. Valmicro manufactures industrial, manual and automated
valves ranging in size from 0.25” to 10”. Most of the valves Valmicro produces are ball valves. Valmicro
manufactures valued-added technological products according to the specific needs of its customers, as well as low
and medium pressure valves that are sold to end users and distributed by dealers and resellers. Since the beginning
of its operations in 1984, Valmicro has manufactured more than 3.4 million valves. In 2008, Valmicro was ranked
for the thirteenth consecutive year as the top manufacturer and most recognized brand in the ball valve category in
the Brazilian valve industry, according to the “Top Five” research conducted by NEI magazine. The Valmicro plant
is located in Caxias do Sul, Rio Grande do Sul state.
Raw Materials and Suppliers. Valves can be manufactured by casting, forging or investment casting.
Approximately 70% of the valves manufactured by Valmicro are produced through the investment casting process.
Since 2005, Valmicro’s investment casting supplies have been provided by our subsidiary Carbonox. The other
valves are derived from melted masses or covers supplied by Itasa, an affiliate of Lupatech, or from Valmicro’s own
tools, when the masses and covers are supplied by Forjas Taurus.
Production Process. After the raw materials have passed quality control testing, the valve components are
subjected to a machining process by automated machines as well as valve-measurement tests, a dye check, magnetic
particle tests and radiographic tests, among others. After the machining process, the valve components are
assembled and a pre-test quality assessment is made, together with the customer, when applicable. If the part is
approved, the valve is painted and submitted for final inspection and pneumatic and hydraulic testing in accordance
with international standards. At this point, product quality certificates and registrations are issued and the valves are
packed and shipped.
Sales, Marketing and Distribution. Valves manufactured by Valmicro are sold by independent sales
representatives located in Brazil and Latin America. We hire independent commercial representatives with in-depth
knowledge and technical specialization. We also sell Valmicro products through approximately 42 dealers and 330
distributors and resellers of hydraulic materials. Our marketing efforts include market research, advertising
campaigns in technical magazines and participation in the principal trade fairs in Brazil and abroad. Together with
MNA, Valmicro publishes “Valmicro Press,” a periodical covering technical and market issues in the flow segment,
which is distributed to approximately 14,500 customers and market makers in the areas where we operate. Valmicro
products are primarily sold to end consumers that are industrial companies that use the valves in their plants.
Valmicro has entered into both verbal and written agreements for the supply of valves for maintenance of numerous
industrial plants of our customers.
Valmicro uses third-party highway and port services for the distribution of its products. The products that
Valmicro exports are shipped through the Rio Grande port, Rio Grande do Sul state, located approximately 430 km
from the Caxias do Sul plant.
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Customers. Valmicro services to several industry sectors. As of March 31, 2008, Valmicro’s main
customers were from the food, chemical, pharmaceutical, oil and gas industries. Valmicro’s principal customers are
Petrobras, Ajinomoto, Braskem, BASF, Cargill, Votorantim, Sadia and Rhodia.
We export our valves to the United States, Chile, Argentina, Bolivia and Uruguay.
Competition. Valmicro is the leader in the industrial ball valves segment in Brazil and we believe it is
highly regarded in Brazil and abroad. We believe that Valmicro’s market share in the Brazilian ball valves market
was approximately 25% in 2007. The ball valve market is extremely fragmented. Valmicro’s main competitors in
the industrial valves market are Micromazza-PMP Ltda., Metalúrgica Golden Arts Ltda. (MGA) and Niagara
Indústria e Comércio de Válvulas Ltda. Valmicro’s main competitors in the higher value-added valves segment of
the domestic market are Flowserve Corporation and Spirax Sarco Indústria e Comércio Ltda. Valmicro’s main
competitors in the foreign market are Appolo, Rhino, SFV Modentic (China) and Kace (Korea).
Quality Control and International Certifications. Valmicro products are created and developed as part of
highly detailed design projects and with components from suppliers that meet our rigorous quality standards. Many
of these suppliers are ISO 9000 certified. After the assembling of these products, hydrostatic and pneumatic tests
are performed on test benches, which are periodically certified through tracking standards. The benches are of a
proprietary design specifically developed for the evaluation of the Valmicro valves. These tests and evaluations
provide us with the ability to provide the highest quality parts with the durability required by the most demanding
markets and customers. All Valmicro products contain a warranty against any manufacturing, operating or parts
defects, except for sealings, which need to be replaced on a regular basis. This warranty is effective for a period of
12 months from the product’s installation or for a period of 18 months from its delivery date, whichever occurs first.
Valmicro provides continuous technical support in Brazil to its customers during the useful service life of its
products.
Valmicro has been certified since 1995 under ISO 9000 Quality Systems (currently ISO 9001:2000) and
certified under Environmental Management since 2001(currently ISO 9001:2000 and ISO 14001:2004). In addition,
in early 2007, Valmicro was certified API Q1 (ISO/TS 29001) and API 6D by the American Petroleum Institute, or
API. Moreover, Valmicro is certified by the British Standards Institution, or BSI, for fire-safe valves, and since
2005 it has been an approved supplier to Petrobras (currently a Level “A” approved supplier) and the National
Petroleum Industry Organization (Organização Nacional da Indústria do Petróleo), or ONIP.
Carbonox
Carbonox, which we acquired in 2005, is dedicated to the production of investment casting parts in large
quantities and at low cost specialty parts for valves, to be used as a raw material in the production processes of
MNA, Valmicro, Mipel-Sul, Mipel-SP, Petroima, Jefferson, Worcester and Esferomatic. Carbonox produces parts
with weights varying from 1 gram to 30 kilograms, based on various alloy types. Carbonox has an installed capacity
of 100 tons per month and is currently using almost its entire installed capacity. The Carbonox plant is located in
Veranopólis, Rio Grande do Sul state, and covers an area of 160,000 square meters, with a constructed area of 5,000
square meters.
Raw Materials and Suppliers. The raw materials used by Carbonox are the same as those used by
Microinox. See “—Metal Segment—Microinox—Raw Materials and Suppliers.”
Production Process. The Carbonox production process is substantially similar to the Microinox process
although Carbonox does not render services in covering, machining and thermal treatment. See “—Metal
Segment—Microinox—Production Process.”
Quality Control and International Certifications. Carbonox follows strict quality control procedures
including mechanical tests and metallographic controls. Carbonox was also awarded ISO 9001:2000 certification.
Customers. Carbonox supplies approximately all of its parts as stainless steel and carbon steel investment
casts to MNA, Valmicro, Mipel-Sul, Mipel-SP, Petroima, Jefferson, Worcester and Esferomatic.
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Competition. The investment casting industry in Brazil and abroad is made up of several companies
focused on different operating areas. Carbonox faces competition from local and foreign investment casters that
produce parts with less value-added and whose main competitive differential is price.
Mipel-SP
Mipel-SP produces bronze metal valves (ball, gate, globe and retention models). Diverse industrial
segments, such as chemical, petrochemical, maritime, food, pharmaceutical, civil construction, basic sanitation,
irrigation and agribusiness, use Mipel-SP products. The Mipel-SP plant is located in Jacareí, São Paulo state.
Raw Materials and Suppliers. Mipel-SP valves are produced from molten bronze, which is purchased from
several suppliers. Mipel-SP is not substantially dependent on any one of these suppliers.
Production Process. The bronze melting process precedes the valve production process. See “Metal
Segment—Itasa—Production Process” for further information. The bronze metal valve production process is
similar to the production processes of MNA and Valmicro. See “Flow Segment—Valmicro—Production Process.”
Sales, Marketing and Distribution. Mipel-SP sells its valves through an extensive distribution network of
distributors and dealers, with approximately 945 sales points spread throughout Brazil. Mipel-SP products are also
sold in other countries in Latin America, Asia, the Middle East, Oceania and Africa. Mipel-SP products are sold in
23 other countries.
Mipel-SP uses third-party highway and port services for the distribution of its products. Most of Mipel-
SP’s exports are shipped through the Santos port, located approximately 180 km from the Jacareí plant.
Customers. Mipel-SP products are sold to valve distributors and dealers directly, one of the largest being
Comercial Rimar Ltda.
Competition. Mipel-SP is the leader in the Brazilian bronze valve industry. Approximately 20% of its
sales are made to the civil construction sector and 65% in the industrial sector. Principal Mipel-SP competitors
include Duratex S.A. (through the Deca trademark), Docol Metais Sanitários Ltda. and Metalúrgica Tata Ltda.
Quality Control and International Certifications. All aspects of the production of Mipel-SP valves are
subjected to high-quality control testing, from the selection of raw materials used until the final product. The tests
performed include spectometric chemical analysis, calibration verification, pneumatic safety testing, weight-loss
testing, underwater air safety testing, fatigue testing and traction testing.
Mipel-SP is ISO 9001:2000 certified for the manufacture of bronze valves, and also has ISO/TS
29001:2003 certification for the oil, natural gas and petrochemical industries, among others.
Mipel-Sul
Mipel-Sul’s plant located in Veranópolis, Rio Grande do Sul state, became operational in late June 2006.
Mipel-Sul produces carbon and stainless steel ball manual valves for the industrial market under the MIPEL®
trademark. Its production capacity is approximately 250,000 valves per year.
Raw Material and Suppliers. Mipel-Sul valves are produced through investment casting in carbon and
stainless steel. The main investment casts supplier is Carbonox, our subsidiary, which is located in the same
industrial complex as Mipel-Sul.
Production Process. Mipel-Sul’s valve production process is substantially similar to that of MNA and
Valmicro. See “Flow Segment—Valmicro—Production Process.”
Sales, Marketing and Distribution. Mipel-Sul valves are sold through an extensive network of distributors
and dealers with approximately 815 sales points spread throughout Brazil. Mipel-Sul products are also sold to other
countries in Latin America, Asia, the Middle East, Oceania and Africa. Mipel-Sul uses the same distribution
channels used by Mipel-SP.
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Competition. The ball valve market is extremely fragmented. The main competitors of Mipel-Sul are
Micromazza-PMP Ltda., MGA-Metalúrgica Golden Arts Ltda. and Niagara Indústria e Comércio de Válvulas Ltda.
Quality Control. The product lines produced and sold by Mipel-Sul resulted from the technological
developments of CPDL and the investments by FINEP.
We carry out hydrostatic and pneumatic testing after products are assembled on testing benches that have
been certified through tracking standards. The benches are of a proprietary design specifically developed to evaluate
Mipel-Sul valves. These tests and evaluations allow us to offer the highest quality parts that are durable enough to
satisfy the most demanding markets and customers.
All Mipel-Sul products contain a warranty against any manufacturing, operating or parts defects, except for
sealings.
Worcester
Founded in 1967, Worcester was acquired (with its subsidiary Esferomatic) by us in December 2006 for
R$117.5 million, which we paid in full on the closing date. With a plant located in Buenos Aires, Argentina,
Worcester produces ball valves for special high technology applications and focuses its production on automated
and manual ball valves ranging in size from 0.25” to 12”, under the Valbol trademark.
Raw Materials and Suppliers. Worcester valves are manufactured by casting, forging or investment
casting. The main supplier is Anhui, which is located in China.
Production Process. The production process of the Worcester valves is similar to the production process of
the MNA and Valmicro valves. See “—Flow Segment—Valmicro—Production Process.”
Sales, Marketing and Distribution. Approximately 80% of the products manufactured by Worcester are
sold to customers directly and 20% are sold to dealers. Worcester and Esferomatic products are exported to Chile,
Canada, Ecuador, Bolivia, Venezuela, Colombia, Peru, Uruguay, Israel and Spain.
Customers. Worcester’s principal customers are Repsol YPF, Petrobras Argentina, British Petroleum,
Total, Chevron, Tenaris, Exxon Mobil and Shell.
Competition. The Argentine ball valve market is extremely concentrated.
International Certifications. Worcester valves are certified under international quality standards, including
ISSO 9001/2000, API 607, API 6D and API CE.
Jefferson
Jefferson is a market leader in Argentina in the manufacture of solenoid valves and magnetic level controls.
Its product line is composed of more than 3,000 items to meet the needs of the industries for which we supply
products, especially the food, refrigeration, heating and oil and gas industries.
Its manufacturing unit is located in the city of Buenos Aires, close to the local airport and the banking
district. The unit covers 3,500 square meters and employs more than 100 employees.
Raw Materials and Suppliers. The main raw materials are bronze, brass, steel and iron. The main
suppliers are Lupatech, Carbonox and Itasa. The other raw materials are supplied by local companies.
Production Process. The production process of the valves is complex as a result of the wide range of
products. The number of final products is greater than 3,000 and taking into account components, more than 30,000
parts and products are involved in the process.
Sales, Marketing and Distribution. Besides using a wide network of distributors in Argentina, Jefferson’s
subsidiaries (Jefferson Solenoid Valves U.S.A., Inc., Jefferson Solenoidbras Ltda. and Jefferson Sudamericana S.A.)
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are a critical part of the sales strategy in Brazil, México and United States, respectively, in addition to other parts of
the world.
Customers. Jefferson’s main clients are Delta, Monsanto, Domus Robótica, Atlas Copco, Sancor, Aluar,
Panamérican Energy, Petrobras, Siderar Argentina and Repsol YPF.
Competition. Jefferson competes directly with three international companies: Asco, Parker and Danfoss,
all from the United States.
International Certifications. All manufacturing processes are ISO 9001:2000 certified and the certified
products are certified in accordance with international rules including UL, CSA and ATEX.
Lupatech North America
In 2002, we incorporated Lupatech North America, as a result of a joint venture between Lupatech
Investments, already dissolved, and Ideal Controls, a North American corporation. The unit was incorporated to
operate as a valve sales and distribution center with local inventory. On December 16, 2005, the joint venture was
terminated. Lupatech North America was relocated to Houston, Texas, in 2006, where it operates as a business sales
office primarily focused on the sale of our valve lines to companies in the oil and gas industry.
Metal segment
Our metal segment is comprised of the Microinox division and our subsidiaries Steelinject and Itasa.
Microinox
Microinox manufactures parts from diverse iron and steel alloys with high complexity levels and quality
standards. Microinox uses the investment casting process to manufacture its parts. Microinox also performs
machining and assembly services and offers a diversified variety of finishing and surface protection services. The
investment casting process reduces the amount of machinery required to produce the parts, lowering the costs of the
finished parts. The Microinox engineering department, together with CPDL, supports customers in projects
involving new components or the substitution of products, by working together with the customer’s engineering
department to develop new parts to meet their specific needs. Microinox parts range in size from 10 to 400
millimeters in size, and weigh from 1 gram to approximately 20 kilograms. Microinox is able to vary its products to
meet the needs of its customers in terms of quantity, size of manufactured batch, geometrical complexity and
materials. Microinox’s production capacity is currently approximately 140 tons per month of finished parts, and this
capacity should be increased by 60 tons until October 2008. Part of the production capacity that is currently unused
will be used in new projects. The Microinox plant is located in Caxias do Sul, Rio Grande do Sul state.
Raw Material and Suppliers. Microinox manufactures several types of alloys, including: carbon steels;
low, medium and high alloy steels; austenitic and martensitic stainless steels; nickel alloys; cobalt alloys; high
manganese steels; and other specific steels based on the customers’ needs. The main raw materials used in the
investment casting process, in addition to alloys, are natural or vegetal waxes, ceramics, sandpapers and abrasives,
which are purchased from local suppliers. Microinox does not significantly depend on any supplier in particular.
Metal is acquired as stamping scrap, similar to the alloy used in the manufacture of parts. Alloys are adjusted to
serve the specifications of each product by using nickel and molybdenum, among others materials. Microinox has
also entered into partnerships with suppliers of components not manufactured by Microinox, such as roller bearings
and valve lifters that are used in the sub-assemblies and assemblies that Microinox supplies to the automotive
industry.
Production Process. Set forth below is a description of the investment casting parts production process:
• a wax part is prepared from a metallic mold by using the injection process;
• the wax parts are assembled in a parts stem, and the resulting set is known as a “wax parts tree;”
• the wax parts tree goes through the covering process, and is dipped into a ceramic dip;
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• over the wet slurry covering refractory materials with different granulations are applied until a shell
covers the part. The ceramic skin on the wax parts tree is air-dried;
• through heat and pressure, the dewaxing of the wax parts tree is carried out by taking out the wax from
the shell interior. This wax is then reused at the beginning of the process;
• the hollow mold is calcinated at high temperatures and acquires sufficient strength to support the
melted liquid metal;
• after laboratorial analysis, the calcinated shell is directly filled with melted steel;
• after solidification of the metal, the ceramic material is broken through vibration, and then the metallic
parts tree is jet-cleaned;
• the parts are separated from the metallic parts tree through breaking or cutting with an abrasive disk;
• grinding of the gate in each part. The gate is responsible for the junction of the part to the tree;
different types of jet blasting are also carried out, based on the finishing required by the customer.
After the ingate is grinded, all parts are manually jet-blasted with steel balls, contributing to a uniform
finishing;
• Visual, dimensional and metallographic inspection of the parts; and
• Delivery of the finished product to the customer.
In addition, the part can be finished through machining, zinc-coating, electropolishing and/or painting,
according to the each customer’s needs.
Automotive Industry. Microinox’s products for the automotive industry go through a product development
and testing cycle, referred to as a qualification process, prior to going to production. This cycle can vary in length
from six months to one year. Initially, a product’s engineering specifications are finalized with the active
involvement of our engineering staff. Subsequently, the tools and products are developed and approved after a
protype has been created and submitted to testing for between six months and one year. After the completion of this
testing, the production process for these parts begins. This stage of the process is referred to as the ramp-up.
Quality Control and International Certifications. Microinox was awarded ISO 9001:2000 and QS
9000:1998 certifications as well as the Certificate of Compliance with European Standards 97/23/EC (PED). In
April 2006, Microinox was audited as part of its ISO/TS 16.949:2002 certification in order to comply with our
automotive customers’ requirements. Microinox assures the quality of its parts through tailoring inspection methods
with its customers, such as radiographs, magnaflux and penetrating fluids, among others. Additionally, Microinox is
audited by quality-control assembly companies to ensure its compliance with their specific requirements.
Sales and Distribution. Sales of parts produced by Microinox are carried out by independent sales
representatives in Brazil and abroad. Microinox hires independent commercial representatives with in-depth
technical knowledge and specialization. The independent representatives visit the companies responsible for the
system and assembly in order to present the investment casting process.
Microinox exports its products to Germany, Italy, United States and Mexico, among others.
Microinox uses third-party highway, port and air services for the distribution of its products. Exported
products are shipped through the port of Rio Grande, Rio Grande do Sul, located approximately 430 km from the
Caxias do Sul plant. Our exports are generally made on a consolidated basis.
In January 2008, Microinox signed a memorandum of understanding with Neterwala group (India) to form
a joint venture (Lupanet Automotive Ltd.) to benefit from opportunities to supply spare parts to the automotive
industry, bringing the excellence of the two groups together and its respective competitive advantages of both
partners to continue the growth of Lupatech in the foreign market.
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Customers. Microinox’s main customers are General Motors, OPEL, Indústria Mecânica Samot (Bosch),
ZF do Brasil.
Competition. The investment casting industry in Brazil and abroad comprises companies focused on
several areas. We believe that Microinox’s market share in the Brazilian commercial investment casting industry is
approximately 20%. Competition in this industry is driven by companies’ efforts to offer the highest quality
solutions at the lowest costs to the extent the market allows. Because the period from development to production is
lengthy, requires significant investments and includes long operating cycles, the decision to change supplier
involves significant risk, expense and delay. After the production of a vehicle has started using parts developed with
one supplier, it is very difficult to change to another supplier.
Microinox also competes against other companies’ processes, such as conventional casting, machined parts,
forged parts and sintered parts. Commonly, the specific part profile will define which metallurgical process is the
most adequate. The advantages of the investment casting process are the metallurgical quality at a low level of
porosity and the production of complex parts in a semi-finished stage, allowing for the elimination of several
machining operations. The main competitor of Microinox in the local market is Fupresa S.A. In the foreign market,
the main competitors of Microinox are Hichiner Mfg. Co. and Howmet Castings, located in the United States;
Feinguss Blank GmbH and Buderus A.G., located in Germany; and Doncasters Incasting and Midland, located in
the United Kingdom.
Steelinject
Since 1995, Steelinject has been a pioneer in Latin America in the use of PIM technology, producing
complex and value-added technical parts through the PIM process. In January 2006, the Steelinject division began
to operate as one of our subsidiaries under the corporate name Steelinject—Injeção de Aços Ltda. Steelinject works
together with its customers to engineer and develop parts to meet each customer’s specific needs. In general, the
period between development and production ranges from six months to one year. We have obtained a patent
registration for one of the most complex production processes, referred to as plasma reactor debinding, and we have
applied for the registration of a new patent for a plasma reactor binder and sintering extraction in Brazil, Europe and
the United States. See “Intellectual Property—Patents.”
The Steelinject plant is located in Caxias do Sul, Rio Grande do Sul state. The plant utilizes the most
advanced quality standards and is able to develop parts conforming to strict requirements and complex geometric
shapes, as required by the markets that Steelinject supplies, such as the autoparts, orthodontics, computer and printer
markets.
Raw Materials and Suppliers. The main raw material used in the injection process is steel powder. Due to
the fact that there are no local steel powder suppliers, Steelinject acquires steel powder from suppliers in the United
States, Europe and Asia. In addition, Steelinject uses binders, such as plastics and paraffins (polymers), which are
purchased from local suppliers. Steelinject does not significantly depend on any local or foreign supplier.
Production Process. Set forth below is a description of the PIM production process:
• thin powder, metallic or ceramic materials are mixed with an organic binder and thermoplastic resins
until becoming a homogeneous mixture;
• after the preparation, the mixture is granulated, making it possible to feed injection machines similar to
the ones used in plastic injection;
• the mixture is also injected into the mold to fill the cavity, similar to the process used in traditional
plastic injection; and
• the parts are then submitted to chemical and thermal debinding, undergoing a sintering process, and
making it ready for its intended use or secondary operations, such as gauging, surface treatment and
heat treatment.
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Quality Control and International Certifications. On May 9, 2008, Steelinject was recommended by TÜV
Rheinland for ISO 9001:2000 recertification, evidencing our commitment to quality. Steelinject has a laboratory it
uses to evaluate raw materials in order to assure product quality. All raw materials not approved are promptly
returned to the suppliers.
Sales and Distribution. Steelinject products are sold by independent sales representatives located in Brazil
and abroad. Steelinject contracts independent commercial representatives with in-depth knowledge and technical
backgrounds.
Exports are directed mainly to Germany, Italy, United States and Argentina.
Steelinject uses third-party highway, port and air services to distribute Steelinject products. Export
products are shipped through the port of Rio Grande, Rio Grande do Sul state, located approximately 430 km from
the Caxias do Sul plant. Our exports are carried out on a consolidated basis.
Customers. In 2007, Steelinject’s main customers were Ind. Material Bélico do Brasil –IMBEL, Abzil
Indústria e Comércio, Master Sistemas Automotivos, Festo Automação, Robert Bosch, Eaton, Stihl Incorporated and
Andreas Stihl Moto Serras.
Competition. Steelinject is the sole relevant “non-integrated” manufacturer (i.e., that does not produce
parts for its own use) in the Brazilian PIM market. Steelinject’s main competitors abroad are Ecrimesa SpA.
(Spain), Schunk GmbH Co. (Germany), PCC-AFT Co. (United States) and GKN—Sinter Metals (United Kingdom
and Germany).
Steelinject faces competition from other processes, such as forging, investment casting and sintering, which
are available at low costs but cannot match the dimensional accuracy, covering and shape complexity of injected
parts.
Itasa
Itasa produces parts in carbon steel, stainless steel and special metal machining alloys (including duplex
and super duplex, which are machining alloys of stainless steel with higher levels of corrosion resistance and valueadded).
Itasa specializes in producing machining alloy pieces and other components such as valves and pumps.
Itasa’s founding ovens allow for the casting of approximately 120 tons per month of finished parts, and
Itasa can assemble components weighing up to 3,500 kilograms.
The Itasa plant is located in the city of Paraná in the province of Entre Rios, Argentina, with a total area of
22,000 square meters and a constructed area of 6,000 square meters.
Raw Materials and Suppliers. Itasa’s principal raw materials are the metal machining alloys acquired in
the form of scrap metal machining alloys in the specific metal league form to be used in the production of the parts.
If necessary, the machining alloys will be corrected in order to observe product specifications.
Production Process. The investment casting process consists of the following phases: molding, fusion,
melting, cooling down, solidification and separation.
During the fusion process, the raw material is heated until its melting point, after which it is filled or
injected into the mold. Once it is cooled down, the raw material solidifies, transformed into the part corresponding
to the base mold. Once the mold is removed, any extra material is removed and the part is cleaned. The production
process of Itasa is sufficiently rapid such that soon after the preparation of the mold the finished parts can be
produced.
Itasa has three thermal treatment ovens with automatic programmers and temperature control, with full
capacity to treat eight tons of finished parts simultaneously.
Quality Control and International Certifications. Itasa adheres to a strict quality management system of its
raw materials and final products, as well as its production process, using chemical analysis and physical inspection,
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metallographic and non-intrusive inspections (magnetic particles and penetrating liquids). The controls are
complemented with the help of external laboratories that are certified for the specific inspections. Itasa also holds
ISO 9001/2000 certification. Moreover, Itasa maintains a specialized technical assistance service and permanent
commercial advisory for its customers.
Sales, Marketing and Distribution. Sales of Itasa’s products are made directly and distributed by thirdparty
highway and port services. Itasa’s main export markets are Brazil and Venezuela.
Customers. Itasa’s principal customers are companies that manufacture valves and pumps for the oil, gas,
petrochemical and chemical industries, among others, such as: MNA, Valmicro, Esferomatic, Worcester, Tyco
Flow Control Argentina, Spirax-Sarco, Flowserve, Equipetrol, Wenlen S.A., Dallas Deca S.R.L., Thorssa S.A. and
Cameron.
Competition. Itasa is a small-scale foundry, specializing in highly-resistant, anti-corrosion machining
alloys. Its primary competitors in the carbon steel and stainless steel machining alloys markets are Acerias 4C and
Enerbon. We are not aware of any competitors in the special metal machining alloys industry, primarily the duplex
and super duplex machining alloys.
Investments
Our projected growth requires investments to expand and to improve our existing operations. The table
sets forth the summary of our investment plans for 2008.
Segment
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Capital
expenditures -
expansion
Capital
expenditures -
improvements
(in thousands of reais)
Capital
expenditures -
Total
Oil & gas .............................................................................................................. 48,332 3,528 51,860
Flow...................................................................................................................... - 6,984 6,984
Metal..................................................................................................................... 9,372 2,997 12,369
Research and development................................................................................... N/A N/A 4,230
Total...................................................................................................................... 57,704 13,509 75,443
Our principal investments in 2008 will focus on the expansion of our production capacity. We anticipate
that our capital expenditures for expansion will represent 76.5% of the total amount of investments in the period.
The capital investments for improvements represent approximately 3.0% of our consolidated gross revenue.
The oil & gas segment is our principal investment focus, representing 83.8% of the capital expenditures for
expansion. These investments are necessary to prepare us to meet the future demands that may result from the
growth in demand for oil, gas and oil- and gas-related products.
Our principal capital expenditure for expansion will be the new manufacturing unit of MNA, which we
anticipate will begin operations this year. This industrial unit will have double the capacity of the current unit. See
“– Business Segments – Oil & Gas Segment – MNA.”
In 2006, we initiated the implementation of SAP R3 in our industrial units. This process requires the
adaptation to technological platforms and computers. In 2007, we implemented SAP in four companies of the group
(Mipel-SP, Microinox, Steelinject and CSL Offshore), and we are in process of installing the system in the
remaining units.
Research and Development
In 1999, we won the FINEP Award for Technological Innovation for the application of plasma in the
process of metal molding used by Steelinject. From 2003 to 2007, we invested approximately R$10 million in
research and development. In addition to FINEP support, we have partnerships with several universities, including
the Universidade Federal de Santa Catarina.

In 2005, we established the CPDL in order to develop processes and products and to seek technological
innovation, in all three segments. CPDL received FINEP financial support of an estimated R$8 million during 2005,
2006 and 2007. CPDL works with well-known university professors carrying out cutting-edge research to develop
new and innovative products and manufacturing processes. We are the first Brazilian valve company with a
technological center to improve our product offerings.
Oil & gas segment and flow segment
Metal segment
The main investments in research and development in the oil & gas and flow segments target:
• studies to identify alternate materials to block valves (reduction of costs and improvement of the
product);
• preparation of testing system for Petrobras’s valves in accordance with rule NBR 15827 in order to
assure the sale of the certified valves, in accordance with the rule;
• development of valves for paper and cellulose manufacturing facilities (potential new market);
• development of valves for use with chlorine production (targeting chemical industries, which is a
potential new market); and
• development of valves for use in lower temperatures of up to -100ºC (new market).
The main investments in research and development in the metal segment target:
• implementation of the production process of accessories for valves through a centrifuge process
(reduction of costs at Carbonox /Valmicro);
• implementation of new production processes at Microinox; and
• feasibility study to improve the cut and polish of parts in the finishing of Carbonox’s products
(reduction of costs and safety).
Intellectual Property
Trademarks
We own approximately 64 registered trademarks and have 23 trademark applications under the analysis of
the Brazilian patent and trademark office (Instituto Nacional da Propriedade Industrial), or INPI. Our most
important trademarks are “Lupatech,” “Valmicro,” “Microinox,” “Steelinject,” “Metalúrgica Nova Americana,”
“MNA,” “Mipel,” “Esferomatic,” “Carbonox,” “CSL,” “Petroima,” “Gasoil,” “Jefferson” and “Aspro” which are all
registered or in the process of registration with the INPI. The Valmicro trademark, in addition to being registered in
Brazil, is also registered in the United Kingdom, the United States, Argentina, Uruguay and Mexico. “Itasa,”
“Valbol,” “Esferomatic,” “Jefferson” and “Aspro” are registered in Argentina, and “Mipel” and “IPÊ” are registered
in Chile.
Delta has the trademark “Aspro” also registered in Armenia, Bolivia, Chile, Colombia, Mexico, Peru and
Uruguay, and the trademark “Aspro GNC” registered in Brazil, the European Union and Turkey. The following
trademarks are under analysis for registration: “Delta Compresión” in Argentina, Brazil and the Ukraine, “Aspro”
in India, Bangladesh, Russia, Thailand, Georgia, Pakistan, Egypt, Venezuela, Nigeria and the United States, “Aspro
GNV” in Brazil and “Aspro GNC” in Iran, China, Indonesia, Myanmar, Malaysia and the Emirates.
Jefferson has its trademark “Jefferson” also registered in India, Mexico, Peru, Uruguay and the United
States, and “Greentop” in Mexico.
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Our policy is to protect our trademarks by registering them with the proper authorities and to renew them
when necessary (usually every ten years).
Patents
We own a patent granted in Brazil related to Plasma Assisted Debinding, or PAD, a system used in the PIM
process. This system reduces the debinding step from between 35-50 hours to 7-10 hours. We also own three
patents in the flow and oil & gas segment with the following titles: “a construction arrangement for ball valve;” “a
construction arrangement for fluid field determined application valves;” and “quick opening self-closing gate
valve.”
We also have a patent registration related to the Plasma Assisted Debinding and Sintering, or PADS,
system. With the PADS system, it is possible to debind and sinter in one step and heat treat the same parts during
their cooling down process, reducing the lead time operation from 70-75 hours to only 12 hours. We have another
file patent registration whose title is “pressure gauge de-pressurizing equipment.” In addition, we have applied for
the registration of the patents relating to the PAD and PADS systems abroad through the International Patent
Cooperation Treaty. As a result, we obtained patent registration for the PAD system in the United States and
Europe. In Germany, we have filed a patent request related to the PADS system, which is currently under review.
Delta has the patent “compressor with double bareshaft” granted in Iran and under analysis in Argentina,
Bangladesh and Pakistan.
We also have four industrial design registrations in Brazil protecting the design of our inventions and other
patents in Brazil and in other countries.
Agreements
We invest, through licensing or development, in state-of-the-art technology related to our business.
Accordingly, we have entered into an agreement for technical and industrial cooperation with the The Engineering
and Teaching Foundation of Santa Catarina (Fundação do Ensino e Engenharia de Santa Catarina), or FEESC,
linked to the Universidade Federal de Santa Catarina, for an undetermined period. Under this agreement, FEESC
assigns to us the rights associated with the patent for the PADS system for PIM parts. The agreement sets forth that
the inventions resulting from this process shall be our property in exchange for our paying to FEESC a percentage
(15% or 30%, depending on the use) of our revenues from the sale of plasma technology.
We have also entered into a patent license and technology transfer agreement with Parmatech Corporation,
or Parmatech, through which we are authorized to manufacture steel injected parts using the Parmatech process upon
the payment of 2.5% of our net sales of those products. This agreement expired on April 16, 2008, and
consequently we are now able to use the technology without having to pay royalties to Parmatech.
Gasoil has an agreement with Vallourec Mannesmann Oil & Gas France in connection with “Juntas VAM”
and the license of patents and know-how related thereto. We also have an agreement with Morro Grande
Administração e Assessoria Ltda. in connection with oil extraction, equipment, know-how and services.
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Employees
The following table sets forth the number of our employees at December 31, 2005, 2006 and 2007 and
March 31, 2007 and 2008.
At March 31, At December 31,
2008 2007 2007 2006 2005
Valmicro.......................................................................... 115 90 106 91 87
MNA................................................................................ 252 222 232 227 209
Microinox ........................................................................ 513 523 525 488 414
Lupatech (Support and CPDL) ....................................... 87 70 81 69 46
Steelinject ........................................................................ 101 91 91 86 57
Carbonox ......................................................................... 97 101 105 97 123
Mipel-Sul......................................................................... 26 27 23 24 -
Mipel-SP.......................................................................... 133 123 140 127 -
Itasa.................................................................................. 104 90 100 85 -
Petroima........................................................................... 159 - 119 - -
K&S................................................................................. 60 - 60 - -
Gasoil............................................................................... 223 - 272 - -
CSL Offshore .................................................................. 137 - 133 - -
Esferomatic...................................................................... 54 55 56 - -
Worcester......................................................................... 183 167 188 - -
Jefferson .......................................................................... 101 - 109 - -
Delta ................................................................................ 376 - 381 - -
Aspro ............................................................................... 103 - 110 - -
Total................................................................................. 2,824 1,524 2,831 1,282 936
Unions
The main union of our employees is the Union of Metallurgical, Mechanical and Electric Workers of the
areas where our industrial complexes are located. All of our employees are members of this union. We have a good
relationship with the unions and have not experienced any work stoppages as a result of a strike since our
incorporation.
Benefits and Profit Sharing Plans
We offer a health care plan to our employees that includes accredited hospitals, dental care and special
plans with drugstores. The employees who work in the Caxias do Sul and Veranópolis industrial complexes benefit
from several lines of buses and vans for transportation provided by us to the plant. The Americana industrial
complex employees receive transportation vouchers. All of our industrial units are equipped with a cafeteria shop
that offers several types of meals. The menus are designed by nutritionists and the meals are prepared by unrelated
third-party corporations.
We have a program that pays employees a bonus based on the number of years they have been with our
company. The program is based on annual service calculations based upon our date of incorporation or on annual
service calculations from the dates that we acquired them, as the case may be. The bonuses paid are as follows:
(i) after five years of service, a plaque and an award of half of the employee’s monthly salary; (ii) after ten years of
service, a plaque and an award of the employee’s entire monthly salary; and (iii) after each successive five-year
period thereafter, a plaque and an award amounting to one and a half times the employee’s monthly salary.
We offer a profit sharing program for all employees of Lupatech, Valmicro, Steelinject, MNA, Carbonox,
Itasa, Worcester, Esferomatic, Mipel-SP and Mipel Sul based on whether each business unit meets its performance
goals. When performance goals are attained, additional income is paid to our employees on a semi-annual basis.
We expect that all of the new Lupatech Brazilian subsidiaries and Jefferson will be part of this plan by the end of
2008.
In 2005, we began to offer a variable compensation plan to officers, managers, supervisors and heads of
Lupatech and its subsidiaries. During the year 2007, we included all the subsidiaries in this program. We expect
that all of the new Lupatech Brazilian subsidiaries and Jefferson will be part of this plan by the end of 2008. This
plan is tied to the attainment of individual performance goals, varying in accordance with the area of expertise of the
employee and company-wide goals based on achieving EBITDA targets. In 2005, 2006 and 2007 we distributed the
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aggregate of R$2.9 million, R$3.8 million and R$1.6 million, respectively, under the profit sharing program and the
variable compensation plan programs.
On April 19, 2006 we approved a stock option plan for our directors, executive officers, managers, senior
employees and certain external counsel. See “Management—Stock Option Plan.”
Occupational Health and Safety
Procedures involving occupational health and safety are included in the following programs, among others:
• environmental risk prevention program;
• occupational health and medical control program;
• ergonomics program; and
• hearing conservation program, in addition to specific programs and preventive measures.
Training and Development
Team skills are fundamental to the professional and personal growth of our employees, and their
development is considered to be a priority to us. We provide intensive training to our employees, and our
employees also have access to courses offered internally and by specialized corporations.
Since 2000, we have maintained a partnership with local schools that allows us to subsidize 100% of the
costs of our employees to complete primary school and 70% of the costs for secondary school. In 2000, the
percentage of employees who had not completed primary school was 42%. In 2007, this percentage was reduced to
only 8%. According to the area to be studied, we also assist our employees with up to 50% of their post-secondary
education costs. As of December 31, 2007, 2% of our employees had undertaken post-secondary studies, 16% had
either completed or undertaken some secondary school studies, 59% had either completed or undertaken some high
school studies, and 23% had completed or undertaken some primary and middle school studies.
In 2005, 2006 and 2007 we invested R$0.6 million, R$0.5 million and R$0.5 million, respectively, in the
training and development of our employees.
Outsourced Employees
We have entered into agreements with outside corporations to provide non-essential activities, such as
cleaning, security and food preparation. As of March 31, 2008, we had approximately 127 outsourced employees.
Environmental Matters
Our industrial units are subject to several environmental laws and regulations at the municipal, state and
federal levels. In order to operate our plants in Brazil, we must comply with administrative procedures required by
our environmental licenses. The construction, installation, operation, expansion and modification of activities using
natural resources, effectively or potentially considered to be pollutants, as well as ventures capable of, in any way,
causing environmental damage, require licensing with the proper state and/or federal entity of the National
Environment System (Sistema Nacional do Meio Ambiente), or SISNAMA.
Law No. 6938, dated August 31, 1981, outlined the National Environmental Policy (Política Nacional do
Meio Ambiente), or PNMA. In addition, it regulates civil liability for damages caused to the environment, which are
of an objective nature (strict liability), i.e., irrespective of fault. It means that demonstration of the cause-effect
relationship between damage caused and action or inaction suffices to trigger the obligation to redress environmental
damage. The fact that the wrongdoer’s operations are supported by environmental licenses does not exclude such
liability.
The National Environmental Policy further expanded the list of entities and individuals liable for
environmental damages and established a joint liability among polluting agents. In case of environmental damage to
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an industrial area, it may be difficult to identify the source of environmental damages and intensity thereof. The
victim of such damages or whomever the law so authorizes, as indicated below, is not compelled to sue all polluting
agents within the same proceeding. Because liability is of a joint nature, the aggrieved party may choose one of the
polluting agents (that which meets all requirements to appear as defendant, or simply that with the healthiest
economic standing) to redress damages. A polluting agent so sued will have a right of recourse against the other
polluting agents.
In this regard, because environmental civil liability is of an objective nature, the contracting of third parties
to carry out any services in our development projects, including, for example, the suppression of vegetation,
treatment and final disposal of solid waste and earthmoving services, does not release us from liability for any
environmental damages caused by the contractor.
In the criminal area, liability is of a subjective nature, and the Environmental Crimes Act (Federal Law No.
9.605, dated February 12, 1998) applies to every person, whether an individual or legal entity, which contributes to
actions deemed damaging to the environment.
Furthermore, it is important to specifically mention that the Environmental Crimes Act attributes criminal
liability to legal entities. As a result, upon the occurrence of an environmental violation, a legal entity’s officer,
administrator, director, manager, agent or proxy will also be subject to criminal penalties. It should be noted that,
with respect to judicial actions, a settlement within the civil and administrative spheres, through redressing the
damage, does not prevent prosecution in the criminal area if an environmental crime has actually occurred. Should
the violator be convicted and sentenced to a freedom-restrictive penalty (confinement or imprisonment) such
penalties may be replaced with a right-restrictive penalty and the violator may be convicted to render services to the
community.
The Environmental Crimes Act is regulated by Federal Decree No 3,179/99 with respect to administrative
penalties. Every action or omission that infringes legal rules pertaining to environment usage, enjoyment, support,
protection and restoration, including operation without the required environmental licenses, is deemed an
administrative violation of an environmental nature, which may be punished by means of a single or daily fine,
denunciation of work or activity, full or partial suspension of activities, right-restrictive penalty and damage
redressing, among others.
Fines will be applied based on the unit, hectare, cubic meter, kilogram or other applicable measure,
depending on the damaged asset and will vary between R$50 and R$50,000,000. Environmental protection and the
restoration of environmental degradation are the goals of the foregoing legal statutes. Therefore, enforceability of
fines contemplated by Federal Decree No. 3,179/99 may be suspended upon the signing of a commitment statement
approved by the appropriate environmental authority whereby the violator undertakes to take specific steps to
redress the environmental damage. Upon fulfillment of all such obligations, the applicable fine may be reduced by
up to 90%.
Moreover, the process of environmental licensing, regulated in Resolution 237/97 from the National
Environment Council (Conselho Nacional de Meio Ambiente) or CONAMA, includes a three-phase system, in
which each license is conditioned to the issuance of the previous one, in the following order: Previous License,
Installation License and Operation License.
Since Petroima is located in the city of Simões Filho, Bahia state, the competent agency to conduct the
licensing procedure is the State Environmental Agency of Bahia (Centro de Recursos Ambientais), or CPA. The
environmental licensing procedure in this state encompasses five licenses: the location license (licença de
localização), installation license (licença de instalação), operation license (licença de operação), simplified license
(licença simplificada), which authorizes the location, installation and operation of the companies that are considered
small business due to their production rate, and amendment license (licença de alteração), which authorizes any
change, modification, expansion or reduction of activity or enterprise that already exists.
In addition, each license also establishes inspection conditions, restrictions and measures applicable to the
venture. Therefore, the environmental agency is empowered to revoke any issued environmental license, with a
valid reason, whenever the conditions imposed are violated or inadequately complied with, or in cases of
supervening and serious environmental or health risks.
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We currently have valid environmental licenses, issued by state agencies, in relation to Lupatech S.A.,
Valmicro, Carbonox, Gasoil, Steelinject, Aspro, Mipel SP, MNA and CSL Offshore, and substantially comply with
conditions set forth by the licenses of each industrial plant with exception to Gasoil and Mipel-SP. Mipel Sul holds
a valid license issued by the city of Veranópolis, the competent entity to issue such license according to the
Resolution 021/2002 of Rio de Janeiro state environmental council. In addition, the K&S and both units of
Petroima, Caxias do Sul and Simões Filho units are in the process of attaining the applicable environmental licenses.
At the municipal level, Mipel-Sul holds a valid license issued by the Municipality of Veranópolis. We have certain
units currently under the equipment extension or installation process, among them MNA, which is undergoing the
licensing process before the Company of Environmental Sanitation Technology of the State of São Paulo
(Companhia de Tecnologia de Saneamento Ambiental), or CETESB, Steelinject in Caxias do Sul, and Mipel Sul in
Veranópolis, which is undergoing the licensing process before the state of Rio Grande do Sul environmental agency
Henrique Luiz Roessler (Fundação Estadual de Proteção Ambiental Henrique Luis Roesller), or FEPAM.
Our environmental management policy is aimed at minimizing and recycling waste that we generate and
promoting the collective awareness regarding the conservation of natural resources. In compliance with
environmental legislation, solid wastes, when not reused in other production processes, must be properly treated and
disposed. The policies are aimed at minimizing the environmental impact of our operations, promoting the re-use of
raw materials and promoting the conservation of natural resources, such as water and electrical power.
We have a waste disposal site inside one of the Lupatech Caxias do Sul unit, licensed by the FEPAM, for
the disposal of the large amount of waste generated by the production process of ceramic skin. This waste disposal
site is monitored semi-annually through soil and subterranean water analysis. Half of the waste the Caxias do Sul
unit generates each month is recycled for industrial use. In the Veranópolis site, there is a similar landfill that is
under review for licensing by the state environmental agency in order to meet the requirements for Carbonox’s
waste disposal.
The waste disposal sites in Caxias do Sul and Veranópolis also have storage facilities that were designed to
comply with the existing local regulations regarding the storage of solid waste. Both storage houses are sheltered
and have an impermeable floor and a liquid containment system to avoid any leakage to the soil around outside. A
similar facility is being built on the CSL Offshore site, however, we do not have the proper license for this activity.
Regarding the federal regulations, the registration before the Brazilian Institute of Environment and
Renewable Natural Resources (Instituto Brasileiro do Meio Ambiente e Recursos Naturais Renováveis), or IBAMA,
is mandatory for every legal entity or individual which is involved in activities considered to have actual or potential
polluting effects and/or extraction, production, transportation and commercialization of products considered
hazardous to the environment, or the production of fauna products or hazardous byproducts.
According to IBAMA’s Normative Ordinance No. 96, dated March 30, 2006, activities related to
metallurgy must be registered. The non-compliance with the requirement of registration before the IBAMA may
subject the business to minor pecuniary penalties.
Law No. 10.165, dated December 27, 2000, requires that some businesses registered before IBAMA must
pay an Environmental Inspection and Control Fee (Taxa de Controle e Fiscalização Ambiental), or TCFA. The
amount to be paid depends on the size of the company and on the intensity of the activities’ potential polluting
effects. According to Annex VIII of the said law, activities related to metallurgy are considered to have high
polluting effects and intense use of environmental resources, and thus are subject to the payment of the TCFA.
We have certificates that attest to the registration before IBAMA of Steelinject, Mipel-SP, Carbonox,
Valmicro, Mipel-Sul, Petroima (Caxias do Sul unit), Gasoil, Lupatech and CSL Offshore. With exception of Mipel-
SP and Carbonox, these certificates also attest to our payment of the TCFA.
The following uses of water resources rely on the authorization from the public authorities: the
(i) deviation or impounding of water from a water body for final consumption, public supply or use in production
processes; (ii) impounding of water from an underground water body for final consumption or use in production
processes; and (iii) disposal of sewage waste and other liquid or gaseous residues, whether treated or not, into a
water body for dilution, transportation or final disposal.
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Each authorization: (i) is conditional on the usage priorities established in the relevant water resource
plans; (ii) must observe the class in which the water body is categorized and the maintenance of appropriate
waterway transportation, if applicable; and (iii) must be effected by means of an act by the appropriate federal, state
or federal district executive authority.
We have water use grants issued by the State of São Paulo Water and Electric Energy Department
(Departamento de Águas e Energia Elétrica do Estado de São Paulo), or DAEE, regarding our unit located in
Americana, São Paulo state, and by the Department of Water Resources of the State of Rio Grande do Sul
Environment Secretariat (Departamento de Recursos Hídricos da Secretaria do Meio Ambiente do Rio Grande do
Sul), or DRH, regarding our units located in Caxias do Sul and Veranópolis, Rio Grande do Sul state.
We have the same environmental concern regarding liquid wastes. The Lupatech Integrated System for
Treatment of Liquid Effluent (Sistema Integrado de Tratamento de Efluentes Líquidos), or SITEL, has been
operating in the Caxias do Sul unit since 2003. This system is responsible for the treatment of 100% of our
industrial and sanitary effluents. The Veranópolis plant also has a system for the treatment of industrial liquid
effluents that are generated there. We are always seeking to ensure that we are properly disposing of the effluents
by natural means by performing a test using chemical and toxic analysis. The Americana unit has a Fluid
Recirculation System that currently serves three locations where valve tests are performed. In these locations, the
system intakes and filtrates the fluid used in valve tests. All processes are continuously monitored in order to ensure
efficiency.
On a periodic basis, we organize educational and awareness campaigns geared toward instructing our
employees and the community about environmental protection. Three years ago, we developed an environmental
program for public school students of Caxias do Sul named “Sou consciente, cuido do Meio Ambiente” (I am aware
and I take care of the environment), which in 2004 received a “Best Program” award from the magazine Expressão
Ecologia. The program allows us to present to students a company that is concerned about both productivity and the
protection of the environment.
In 2006, the Environmental Office of the State of Rio Grande do Sul (Secretaria de Estado de Meio
Ambiente do Rio Grande do Sul), or SEMA, recognized our concern for the environment by awarding us the Rio
Grande do Sul Environmental Responsibility prize.
Argentine Law
The enactment of Articles 41 and 43 in the Argentine National Constitution, as amended in 1994, as well as
new Argentine federal, provincial and municipal legislation, has strengthened the legal framework dealing with
damage to the environment. Legislative and government agencies have become more vigilant in enforcing the laws
and regulations regarding the environment, increasing sanctions for environmental violations.
Under the amended Articles 41 and 43 of the National Constitution, all Argentine inhabitants have both the
right to an undamaged environment and a duty to protect it. The primary obligation of any person held liable for
environmental damage is to rectify such damage according to and within the scope of applicable law. The Argentine
government sets forth the minimum standards for the protection of the environment and the provinces and
municipalities establish specific standards and implementing regulations.
Federal, provincial and municipal laws and regulations relating to environmental quality in Argentina affect
our local operations. These laws and regulations set standards for certain aspects of environmental quality, provide
for penalties and other liabilities for the violation of such standards, and establish remedial obligations in certain
circumstances.
In general, we are subject to the requirements of the following federal environmental regulations (including
the regulations issued thereunder):
• National Constitution (Articles 41 and 43);
• Law No. 25,675 on National Environmental Policy;
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• Law No. 25,612 on Integrated Management of Industrial and Service Industry Waste;
• Law No. 24,051 on Hazardous Waste;
• Law No. 20,284 on Preservation of Air Resources;
• Law No. 25,688 on Environmental Management of Waters;
• Law No. 25,670 on the Management and Elimination of Polychlorinated Biphenyls;
• Criminal Code; and
• Civil Code, which sets forth the general rules of tort law.
These Argentine laws address environmental issues, including limits on the discharge of industrial wastes,
investigation and cleanup of hazardous substances, workplace safety and health, natural resource damages claims
and toxic tort liabilities. Furthermore, these laws typically require compliance with associated regulations and
permits and provide for the imposition of penalties in case of non-compliance (including revocation of the licenses
to operate).
Social Action
In addition, we are subject to various other federal, provincial and municipal regulations, including:
(i) Registro de Matrícula Habilitante: Pursuant to Resolution No. 139/1995 y 29/07 of the Ente
Nacional Regulador del Gas (ENARGAS), all companies rendering services related to the VNG
industry must be registered with the Registro de Matricula Habilitante.
(ii) Registro Industrial de la Nación: Pursuant to Resolution No. 146/07 and 211/07 all companies
developing industrial activities in Argentina must be registered with the National Industrial
Registry (Registro Industrial de la Nación).
(iii) Registro de Hidrocarburos o VNG dispensador de máquinas: Pursuant to Resolution No.
1102/2004 of the Secretariat of Energy, all companies involved with hydrocarbon or VNG
dispenser machines must be registered with the Registry of Hydrocarbon or VNG Dispenser
Machines.
(iv) Registro de Residuos Especiales: Law No. 11,720 of the Province of Buenos Aires (as amended
and supplemented) regulates the generation, manipulation, transportation and disposal of
hazardous substances. It establishes the obligation to obtain a special permit, the Hazardous
Waste Permit, with the Registro de Residuos for all industries which registration shall be renewed
annually. Similar regulations are in place in other provinces of Argentina.
(v) Municipal licenses: Municipal regulations require a municipal permit to operate industrial facility.
In many jurisdictions, such permit is conditioned to the obtaining of applicable environmental
approvals by the competent environmental agency. Such environmental approval is granted upon
completion of an environmental impact assessment study (Evaluación de Impacto Ambiental).
We have a volunteer group responsible for the promotion of several campaigns such as blood donation,
chocolate donation for Easter, and the donation of clothes and books all year long. This program aims to involve
employees in social action and to encourage them to contribute to a better society.
We promote an annual global action program for our employees, their families and the community that
includes medical consultations and exams. The program also includes several children’s attractions and gift
distributions.
In addition, since 2000, we have conducted an energy rationalization program, which aims to significantly
reduce energy consumption.
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We also support culture and our community ties through the sponsorship of the making of Brazilian movies
such as “Nossa Senhora do Caravaggio” and “O Quatrilho,” as well as through the preservation of the São Pelegrino
Church in Caxias do Sul.
Properties
We have 15 industrial complexes, two located in the city of Caxias do Sul, one in the city of São Leopoldo
and one in the city of Veranópolis, Rio Grande do Sul state, one in the city of Americana and one in the city of
Jacareí, São Paulo state, one in the city of Simões Filho, Bahia state, one in the city of Macaé, Rio de Janeiro state,
one in the city of Rio das Ostras, Rio de Janeiro state, one in the city of Campo Largo, Paraná state and one in the
province of Entre Rios and four in the province of Buenos Aires, Argentina.
The Lupatech—Microinox Division and Steelinject are located in the industrial complex in Caxias do Sul,
which has a total area of 41,992 square meters and a constructed area of 8,513 square meters. This property has
3,200 square meters of its total area burdened with an agreement for forfeiture. In addition, 27,512 square meters of
its total area are mortgaged and is encumbered with judgment liens.
The Carbonox, Valmicro and Mipel-Sul facilities are located in the industrial complex in Veranopólis,
which has a total area of 161,645 square meters and a constructed area of 3,827 square meters. This property is
mortgaged on behalf of Banco do Estado do Rio Grande do Sul S.A., as a guarantee of the industrial credit
certificate dated February 3, 2003 that was to mature on February 15, 2008 and which was prepaid on August 18,
2006. In 2006, we entered into a new financing agreement with Banco Regional de Desenvolvimento do Extremo
Sul- BRDE and we mortgaged the property twice. This financing matures in July 2012.
The industrial complex located in São Leopoldo includes CSL Offshore, and it has a total area of 17,433
square meters and constructed area of 10,846 square meters. This property is owned by Cordoaria São Leopoldo
S.A. previous controlling shareholder of CSL Offshore and it is mortgaged on behalf of six creditors and is
encumbered with judgment liens. CSL Offshore entered into a purchase agreement with Cordoaria São Leopoldo
S.A. to acquire this property subject to the termination of the existing liens and encumbrances.
The industrial complex located in Jacareí has a total area of 20,000 square meters and a constructed area of
6,329 square meters, with 3,289 square meters pending confirmation at the Real Estate Registry. This property is
encumbered with judgment liens.
Gasoil is located in the industrial complex in Macaé, which has a total area of 50,000 square meters and
constructed area of 5,300 square meters, in addition to 4,007 constructed square meters related to the expansion
planned to be concluded in June 2008.
K&S has been granted a concession by the city of Rio das Ostras to operate its activities in an area of
41,912 square meters. The conclusion of the industrial complex in this area is planned to June 2008.
The industrial complex located in the province of Entre Rios, Argentina, is composed of Itasa’s two owned
properties, with total areas of 11,700 square meters and 11,274 square meters. On November 3, 2004, we
mortgaged this property to BankBoston N.A. to guarantee a credit line opened in favor of Itasa up to the amount of
US$250,000 and the outstanding debt of Itasa on that date in the total approximate amount of R$99,400
(approximately US$48,500). This outstanding debt had been paid off and its related mortgage is released.
Worcester and Esferomatic are located in industrial complexes in Buenos Aires, Argentina. The Worcester
plant consists of 15,164 square meters of total area and the Esferomatic plant consists of 2,603 square meters of total
area.
Delta has an industrial complex in the city of Escobar, in the province of Buenos Aires, Argentina, with
68,000 square meters of total area and a constructed area of 18,000 square meters, in addition to a small unit in the
city of Pablo Podestá, also in Argentina. Aspro has an industrial complex in the city of Campo Largo, Paraná state,
Brazil, with 112,500 square meters of total area and 4,500 square meters of constructed area. The three properties
will be mortgaged on behalf of PROPARCO, as a guarantee of a lease in the amount of US$25,000,000.00, dated
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April 25, 2008, as agreed by the parties in the facility agreement. The registration process of the mortgage is under
review by the Real Estate Registry Office of Campo Largo.
Jefferson has one building used as a storage facility in Buenos Aires, Argentina, with 990 square meters of
constructed area, and one industrial complex also in Buenos Aires with 3,200 square meters of constructed area.
In 2007, MNA acquired a land parcel located at Nova Odessa, in the city of Americana, São Paulo state,
which has a total are of approximately 150,000 square meters. 1,310.80 square meters of the total area of the
property is subject to be expropriated by the Municipality of Americana. This area will be used for the construction
of the new MNA plant (MNA is currently located in a rented property). The new MNA plant will begin its activities
this year. This unit will have double the production capacity of our current plant and it will be installed in the new
area targeting the oil and gas segment in the countryside of the state of São Paulo (Brazil). The total area of the
complex is approximately 20,000 square meters.
Rented properties
The industrial complex located in Americana is occupied and leased by MNA and consists of a total area of
10,300 square meters and a constructed area of 7,200 square meters. This property is leased and the lease period has
been renewed until August 2010. The monthly lease payment is R$17,600. We are the guarantor under the lease.
In addition, MNA is a tenant in three other properties used as warehouses and as an employee dining area. The
agreements’ lease periods expires on September 30, 2008, and the monthly lease payments total R$4,500.
We have leased our commercial office, located in the city of São Paulo, São Paulo state, until January 31,
2009 at a monthly rental of R$5,400.
Jefferson leases two buildings, both used as storage facilities. One has 360 square meters of constructed
area and the monthly lease payment is AR$2,900. The other building, with 406 square meters of constructed area,
has a monthly lease payment of AR$2,500.
The Lupatech North America head office has a lease for a Houston, Texas office that will expire on
June 30, 2009. The monthly rental amount is US$905.
Petroima has leased its industrial complex located in the city Caxias do Sul, Rio Grande do Sul state, since
April 2007. The complex has a total constructed area of 3,461.8 square meters. The term of this agreement is
indeterminate and the total monthly lease payment is R$17,000.00. In addition, Petroima leases out a 440 square
meter hangar in the city of Simões Filho, Bahia state. The lease period has been renewed until June 2008. The total
monthly lease payment is R$2,653.68.
Insurance
Our policy regarding insurance coverage is to maximize coverage without paying excessive premium costs
and to fully comply with legislative and contractual obligations. We have insurance against material damages
resulting from fire, explosion and other accidents that may occur during the normal course of our activities and
insurance for specific risks, with civil liability coverage for our officers and board members and insurance covering
product recall. We believe the amounts covered in our insurance policies are sufficient for a corporation of our size,
operating in our business and facing the risks associated with our operations. However, we cannot guarantee that
the insurance amount maintained will be sufficient to protect us against significant losses, or that the insurance
currently existing will be renewed. See note 17 to each of the quarterly and annual financial statements included
elsewhere in this offering circular for more information regarding insurance.
Legal Proceedings
We are party to several judicial and administrative lawsuits related to civil, tax and labor claims that arise
during the normal course of our business. As of March 31, 2008, civil claims amounted to R$0.5 million, labor
claims amounted to R$3.3 million and tax claims amounted to R$29.1 million. Our provisions for probable losses in
judicial and administrative lawsuits based on the opinion of our legal advisors amounted to R$11.7 million,
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including judicial deposits, and was mainly related to tax claims. Moreover, as of March 31, 2008, we had judicial
deposits in the amounts of R$0.2 million relating to labor claims and R$4.0 million relating to tax claims.
We believe that our provisions for judicial and administrative lawsuits are sufficient to cover probable
losses. We do not believe that any of the lawsuits or individual administrative proceedings currently pending would
have any adverse effect on our financial position or results of operations if decided unfavorably and we do not
believe that any unfavorable decision would materially affect our activities.
Tax claims
As of March 31, 2008, we were involved in 86 tax claims that totaled the amount of approximately R$ 29.1
million. We have provisioned R$ 11.5 million for our tax contingencies. In addition, we have judicial deposits that
totaled the amount of approximately R$ 4.0 million. The primary tax claims against us include:
PIS offsetting against other federal taxes. We obtained a final decision authorizing us to offset PIS credits
against debits of this tax (the legal provisions in force at the time of the issuance of such decision prohibited the
offset of different tax credits). At the moment of the offset request, the legislation in effect allowed the offset of any
credits against debits of taxes administered by the Federal Revenue Service, and, therefore, we requested the offset
of PIS credits against debits of other federal taxes. However, the Federal Revenue Service did not authorize the
offset arguing that it was not in compliance with the judicial decision that authorized such offsets. We appealed
from such decision, which is pending judgment by the Federal Revenue Service. On March 31, 2008, the amount
involved in this lawsuit totaled approximately R$2.5 million. Our legal advisors responsible for these proceeding
deemed such liability as possible loss.
Arbitration of Revenues. The Brazilian government filed four tax foreclosures against us aiming the
collection of debts related to, among other things, the following taxes: income tax, social contribution, IPI and PIS.
As of March 31, 2008, we were awaiting judgment of our special and extraordinary appeals filed against
unfavorable decisions. The second instance judgment based its decision on evidence found in the banking
documents of third parties. Our legal advisors responsible for the lawsuit deemed that an unfavorable outcome is
remote due to the fact that the Superior Court of Justice (Superior Tribunal de Justiça), or STJ, has decided in a
similar situation that banking documents of third parties are not sufficient evidence and that such third-party banking
documents are generally obtained in an illegal manner. On March 31, 2008, the amount involved in these lawsuits
totaled approximately R$ 10.0 million.
Social Security Contribution. The Federal Revenue Service filed two tax assessments against us aiming the
collection of debts related to social security contribution. The first one refers to services rendered by small-business
owners which were considered as employees, related to the period comprehended between January, 1996 and June,
2003. The second one is related to social security contribution imposed on benefits credited or paid to employees,
regarding the food expenses without the use of PAT (Programa de Alimentação do Trabalhador), in the period of
January, 1996 to December, 1997 and January, 2001 to December, 2005. In addiction, The Federal Revenue
Services filed another tax assessment imposing a penalty for the absence of information on GFIP of the occurrence
of the taxable events above described. We presented administrative defenses which were decided against us. Thus,
we presented appeals that, until the present moment, wait for judgment. On March 31, 2008, the amounts involved
in those proceedings totaled approximately R$ 3.8 million. Our legal advisors responsible for these proceedings
deemed such liabilities as a possible loss.
Social Security Contribution. The Brazilian government filed a tax foreclosure against us aiming the
collection of debts related to social security contribution imposed on payments made to directors of the company, in
the period of November, 1991 to October, 1996. A favorable first court decision was enacted based on the argument
that the directors were shareholders. The Brazilian government presented an appeal from which we received a
favorable judgment. After this judgment, the Brazilian government presented a special appeal which was admitted
based on the argument that both payments (to an employed director and to a shareholder director) are subject to the
imposition of social security contribution. We opposed a motion to clarify the decision, which, until this moment,
waits for decision. On March 31, 2008, the amount involved in this lawsuit totaled approximately R$ 3.1 million.
Our legal advisors responsible for this proceeding deemed such liability as a possible loss.
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Labor Lawsuits
As of March 31, 2008, we were the defendant in 50 labor lawsuits filed before Brazilian labor courts, 17 of
which were indemnity claims arising from labor accidents and claims alleging injuries suffered at work, including
hearing loss attributable to excessive noise. As of March 31, 2008, the total amount of labor lawsuits against us was
R$3.3 million and our provision for labor lawsuits totaled R$0.3 million. The main claims arising from the labor
lawsuits are for damages related to labor accidents, unpaid health hazard bonuses, unpaid overtime and claims
related to employee salaries.
Civil Lawsuits
As of March 31, 2008, we were party in 35 lawsuits involving civil issues, with a total amount of claims
against us of R$0.5 million. As of March 31, 2008, our provision for civil lawsuits totaled less than R$0.1 million.
See note 14 to each of the quarterly and annual financial statements included elsewhere in this offering
circular for more information regarding contingencies.
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Ownership
OWNERSHIP AND MANAGEMENT
As of March 31, 2008, we had 47,581,446 common shares (ações ordinárias) outstanding.
Our common shares are traded on the BOVESPA, and we are listed under the Novo Mercado rules on the
BOVESPA.
Principal Shareholders
The table below presents certain information as of March 31, 2008, regarding (i) any person known to us as
the owner of more than 5% of our outstanding common shares, and (ii) the total amount of our common shares
owned by members of our board of directors and our executive officers as a group.
Number of Percentage of
Shareholders
common shares common shares
LUPAPAR................................................................................................................................................. 11,747,231 24.69
BNDESPAR .............................................................................................................................................. 5,460,038 11.48
Executive officers and members of the board of directors....................................................................... 2,127,212 4.47
Others ........................................................................................................................................................ 28,246,965 59.37
Management
Lupatech Finance
The board of directors of Lupatech Finance consists of three directors, Nestor Perini, Thiago Alonso de
Oliveira and Gilberto Pasquale da Silva. The directors are elected by majority approval at the ordinary
shareholders’ meeting for a term of one year or until such time they are removed from office by an ordinary
shareholders’ resolution. The board of directors of Lupatech Finance was appointed shortly after its incorporation.
The directors’ terms, the manner in which they are elected and other related issues are established in the
memorandum and articles of association of Lupatech Finance.
Lupatech
In addition to being subject to the rules set forth by the Brazilian Corporate Law we are also subject to the
Listing Rules of the Novo Mercado.
Our bylaws provide for a board of directors (Conselho de Administração) consisting of up to seven
directors and a board of executive officers (Diretoria Executiva) consisting of up to nine officers, both with an equal
number of alternates. Our bylaws also provide for a non-permanent fiscal council, composed of at least three and no
more than five members, with an equal number of alternates, which may be established at the request of our
shareholders. Finally, our bylaws provide for an audit committee consisting of three members elected by our board
of directors.
Board of directors
Our board of directors is our decision-making body responsible for formulating general guidelines and
policies for our business, including our long-term strategies. Among other things, our board of directors is
responsible for appointing and supervising our executive officers.
Our board of directors meets at least once every quarter and at any other times when a meeting is called by
its chairman. The decisions of our board of directors are taken by the majority vote of its members. In the event of
a tie vote, the chairman of our board of directors has, in addition to his personal vote, the right to cast a tie-breaking
vote. In addition, pursuant to the Brazilian Corporate Law, a member of our board of directors is prevented from
voting in any shareholders’ or board of directors’ meeting, or from acting in any business or transaction, in which he
may have a conflict of interest with our company.
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Under the Brazilian Corporate Law, a company’s board of directors must have at least three members and
each of the members of the board of directors must be a shareholder of the company. There is no requirement as to
the minimum number of shares that an individual must hold in order to serve as a director. Our bylaws provide for a
board of directors of up to seven members with an equal number of alternates, from which at least 20% are
independent members as determined by the Listing Rules of the Novo Mercado. The Listing Rules of the Novo
Mercado define an independent director as a member of the board of directors that (i) has no link to the company
other than the ownership of shares; (ii) is not a controlling shareholder or the spouse or immediate family member of
a controlling shareholder or was not linked to any company or association during the last three years that was a
controlling shareholder; (iii) was not an employee or executive officer of our company, a controlling shareholder or
any company controlled by our company; (iv) is not a material direct or indirect supplier or customer of our
company; (v) is not an employee or executive officer of any company that is a supplier to our company; and
(vi) does not receive compensation from our company, excluding any compensation that is paid to all members of
our board of directors.
Our directors are elected at our shareholders’ general meeting for a unified two-year term of office. Our
directors may be reelected and are subject to removal at any time by a vote of our shareholders gathered at a
shareholders’ general meeting.
The Listing Rules of the Novo Mercado also provide that all members of our board of directors and our
board of executive officers shall execute a management compliance statement as a requirement for serving on the
board. As a result of this compliance statement, our directors and executive officers are personally responsible for
complying with the Contract for Participation in the Novo Mercado, the Market Arbitration Chamber Rules and the
Listing Rules of the Novo Mercado.
The current members of our board of directors were elected on March 24, 2008, and their term of office
expires at the time of the annual shareholders’ general meeting to be held in 2010. The name, age and position of
the current members of our board of directors are shown in the table below:
Names Age Position
Nestor Perini............................................................................................................................................. 55 Chairman
Clóvis Benoni Meurer .............................................................................................................................. 56 Director
José Teófilo Abu-Jamra ........................................................................................................................... 60 Director
José Mauro Mettrau Carneiro da Cunha* ................................................................................................ 57 Director
Marcelo Cabrera da Costa........................................................................................................................ 57 Director
Luiz Gonzaga de Mello Belluzzo*........................................................................................................... 67 Director
José Coutinho Barbosa*........................................................................................................................... 65 Director
Fabio Sotelino da Rocha .......................................................................................................................... 50 Alternate
___________________
* Independent director.
None of our directors is entitled to any severance compensation in the event of dismissal from office,
except for unpaid portions related to prior years. Our directors are not subject to mandatory retirement due to age.
The following is a brief summary of the business experience and principal outside business interests of the
current members of our board of directors.
Nestor Perini. Mr. Perini holds a bachelor’s degree in business administration from E.A.E.S.P. of the
Fundação Getulio Vargas. He started his career as an administrative trainee and was later promoted to
administrative manager of São Paulo Alpargatas S.A., a position that he held until 1980. From 1991 to 1994, he was
the president of the Chamber of Industry, Commerce and Services of Caxias do Sul. He was also professor of
business strategies and experiences (Vivências) at the Universidade de Caxias do Sul until 2000. He was the vice
president of the Federation of the Industries of the State of Rio Grande do Sul (FIERGS) from 1993 to 2002.
Currently, he is the chairman of our board of directors and our chief executive officer.
Clóvis Benoni Meurer. Mr. Meurer holds a bachelor’s degree in economics and business administration
from Pontifícia Universidade Católica of Rio Grande do Sul. He is a member of the board of directors of various
companies such as Marcopolo S.A., Expresso Mercúrio S.A., CP Eletrônica S.A, Moinho do Nordeste S.A. and
Teikon S.A. He is also the vice president of the Brazilian Associate of Venture Capital and Private Equity
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(Associação Brasileira de Venture Capital e Private Equity), or ABVCAP, and has worked in private equity and
venture capital since 1981. Currently, he is a member of our board of directors.
José Teófilo Abu-Jamra. Mr. Abu-Jamra holds a bachelor’s degree in business administration and
economics from PUC/RS and master’s and doctorate degrees from the London School of Economics. He has
extensive business experience, particularly at Cordoaria São Leopoldo S.A., where he led the research, development
and manufacturing processes of the synthetic fiber ropes for deep-sea oil platform anchoring for Petrobras.
Marcelo Cabrera da Costa. Mr. Costa holds a bachelor’s degree in accounting from the Universidade
Federal do Rio de Janeiro. He joined the BNDES as an investment analyst in 1980 and in 1991 he was part of the
group that created the Contec Program that directed the investment decisions of the BNDESPAR in the capital stock
of small and medium size companies operating in the technology sector. In 1994 he became a manager of the
BNDES and as a manager participated in the launching of the first fund of emerging companies in Brazil. In 2005
he was promoted to be a Department Head of the BNDES in the capital markets area.
José Mauro Mettrau Carneiro. Mr. Carneiro holds a bachelor’s degree in engineering from the Catholic
University of Petropolis and a post-graduate degree in Industrial Projects and Transports from (Universidade
Federal do Rio de Janeiro – COPPEAD), or UFRJ—COPPEAD. He was a member of the board of directors of
Aracruz, Telemar, Eletrobrás, Light, Ibemec and Funcex. He worked for the BNDES from 1974 to 2005, and was a
vice president and officer there for 12 years. He was also vice president of Strategic Planning of Braskem S.A. from
2003 to 2005. Currently, he is a partner of his own consulting firm, JMM Consultoria.
Luiz Gonzaga de Mello Belluzzo. Mr. Belluzzo holds a bachelor’s degree in law from Universidade de São
Paulo. In 1965, he has a degree on economic development from CEPAL/ILPES. He concluded his post-graduation
degree in 1969, focused in industrial development and programming. He is the former secretary of economic
policies of the Ministry of Economy, former secretary of science and technology of the state of São Paulo. In
addition, he was a co-founder of Faculdade de Campinas, or FACAMP, a university located in the city of
Campinas, São Paulo state. He is a professor of financial and monetary policies in the post-graduation courses in the
Universidade de Campinas. Currently, he is a professor at FACAMP.
José Coutinho Barbosa. Mr. Barbosa holds a bachelor’s degree in geology from the Escola de Minas de
Ouro Preto (MG). He started working at Petrobras in 1965, where we held management and technical positions, in
Brazil and abroad. He is the former chief executive officer of Petrobras América Inc., in Houston, Texas (from 1987
to 1991), former deputy chief executive officer of Petrobras Internacional S.A. (from 1992 to 1998), production and
exploitation officer of Petrobras from 1999 to 2003. Mr. Barbosa resigned from Petrobras to become a partner of
Net Pay Óleo & Gás Ltda., a consulting company focused in the oil and gas segment.
Fabio Sotelino da Rocha. Mr. Rocha holds a bachelor’s degree in engineering and a post-graduate degree
in economic engineering, both from the Universidade do Estado do Rio de Janeiro, or UERJ, and a master’s degree
in finance and business administration from COPPEAD-UFRJ. He also attended courses at IBC; Gyorgy Varga-
Financial and New York University. He joined the BNDES in 1982, where he is the superintendent of the capital
market department. Currently, he is an alternate member of our board of directors.
Executive officers
Under the Brazilian Corporate Law, a company’s executive officers must have at least two members, each
of whom must be resident in Brazil but is not required to be a shareholder of the company. Furthermore, no more
than one-third of a company’s directors may serve as members of its board of executive officers at any given time.
The members of our board of executive officers are our legal representatives and are primarily responsible
for managing our day-to-day operations and implementing the general policies and guidelines set forth at our
shareholders’ general meetings and by our board of directors. Our bylaws require that our board of executive
officers be composed of up to nine members. The members of our board of executive officers are appointed by our
board of directors for one-year terms, and may be reelected or removed by our board of directors at any time.
Currently our board of executive officers consists of three members, elected at the meeting of our board of
directors held on March 25, 2008 for a term of office of one year. Our board of executive officers is made up of a
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chief executive officer, a chief financial and investor relations officer and various other executive officers without a
specific designation.
The name, age and position of the current members of our board of executive officers are shown in the
table below:
Names Age Position
Nestor Perini....................................................................................................................... 55 Chief executive officer
Chief financial officer and
Thiago Alonso de Oliveira................................................................................................. 37
Investor relations officer
Gilberto Pasquale da Silva ................................................................................................. 51 Officer
None of our executive officers is entitled to any severance compensation in the event of dismissal from
office, except the unpaid portions related to prior years.
The following is a summary of the business experience and principal outside business interests of the
current members of our board of executive officers.
Nestor Perini. See “—Board of Directors.”
Thiago Alonso de Oliveira. Mr. Oliveira holds a bachelor’s degree in law from Pontifícia Universidade
Católica of São Paulo and a post-graduate degree in finance from Escola de Administração de Empresas de São
Paulo of the Fundação Getulio Vargas. He started his career at Price Waterhouse (Consulting and Advisory
Services). He worked as an investment banker focused on mergers and acquisitions for Banco WestLB do Brasil
S.A., where he was a senior vice president, and for Banco Standard de Investimentos S.A., where he was the head of
corporate finance. He operated private equity funds such as TCW—Latin America Partners and Governança e
Gestão. Currently, he is our chief financial officer and investors relations officer and is also responsible for our
financial area.
Gilberto Pasquale Da Silva. Mr. Silva holds a bachelor’s degree in accounting from the Universidade de
Caxias do Sul and a post-graduate degree in financial administration from the Universidade Caxias do Sul. From
1973 to 1988, he was the administrative and finance officer of Móveis Schnardie Ltda. In 1988, He became the
officer responsible for the controllership, costs, finance, supplies, human resources and IT areas of MNA and
Carbonox. Currently, he is an officer of our company responsible for our administrative area.
Fiscal council
Under the Brazilian Corporate Law, the fiscal council is a corporate body independent from the
management of the company and its external auditors. The fiscal council is not a permanent body or a nonpermanent,
and whenever installed, must consist of no less than three and no more than five members. The primary
responsibility of the fiscal council is to review management’s activities and the company’s financial statements and
to report its finding to the shareholders of the company. The fiscal council is not equivalent to an audit committee
as contemplated by the Exchange Act. Under the Brazilian Corporate Law, a fiscal council must be established at a
shareholders’ general meeting upon request of shareholders representing at least 10% of the shares with voting
rights, and its members shall remain in office until the annual shareholders’ general meeting of the year following
their election. Pursuant to CVM Instruction No. 324, dated January 13, 2000, as amended, shareholders
representing 2% of companies with a capital stock of over R$150,000,000 of the voting shares may request the
installation of the fiscal council. Each member of the fiscal council is entitled to receive compensation in an amount
equal to at least 10% of the average amount paid to each executive officer (excluding benefits and profit sharing).
Under the Brazilian Corporate Law, individuals who are also employees or members of the administrative
bodies of our company or spouses or parents of our management cannot serve on the fiscal council.
Our bylaws provide for a non-permanent fiscal council composed of at least three members and a
maximum of five members, which can be formed and have its members elected by the annual shareholders’ meeting,
if requested by the shareholders. When in operation, the compensation of the members of our fiscal council is set at
the shareholders’ general meeting that elects them.
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We do not currently have a fiscal council.
Audit committee
Pursuant to our bylaws, our board of directors can constitute an audit committee that would be composed of
three members elected by our board of directors. Audit committee members are not required to be shareholders of
our company but must be resident in Brazil. Our audit committee would be responsible for supervising our financial
control activities and proposing to our board of directors which firm should serve as our external auditors.
We do not currently have an audit committee.
Our Relationship with our executive officers and directors
As of the date of this offering circular, there were no contracts of any type or any other material agreements
entered into by us with any of our directors or executive officers. The table below shows the number of common
shares issued by us and held by our directors and executive officers, as of the date of this offering circular.
Number of common shares Percentage of the
Directors /Executive officers
held
outstanding shares
Gilberto Pasquale da Silva ....................................................................................... 54,998 0.12
Clóvis Benoni Meurer (2) .......................................................................................... 27,915 0.06
Nestor Perini (1) ......................................................................................................... 21,871 0.05
Thiago Alonso de Oliveira....................................................................................... 14,998 0.03
Marcelo Cabrera da Costa........................................................................................ 2 0.00
Fabio Sotelino da Rocha .......................................................................................... 2 0.00
José Teófilo Abu-Jamra (3) ........................................................................................ 1 0.00
José Mauro Mettrau Carneiro da Cunha .................................................................. 1 0.00
Luiz Gonzaga de Mello Belluzzo............................................................................. 1 0.00
José Coutinho Barbosa.............................................................................................
___________________
1 0.00
(1) Mr. Nestor Perini is the chairman of our board of directors and our chief executive officer, as well as a shareholder of Lupapar, our largest
shareholder.
(2) Mr. Clóvis Benoni Meurer holds, indirectly through Honor Serviços e Participações S.S., 300,000 common shares of our company,
representing 0.9199999% of our total capital stock.
(3) Mr. José Teófilo Abu-Jamra holds, indirectly through Cordoria CSL International, 1,707,422 common shares of our company, representing
3.58842% of our total capital stock.
There is no family relation between our directors and executive officers, nor between our directors and
executive officers.
Compensation
Under our bylaws, the company’s shareholders are responsible for establishing the aggregate amount paid
to members of the board of directors, the board of executive officers and the members of the fiscal council, when
installed. Once the shareholders establish an aggregate amount of compensation, the members of the board of
directors are then responsible for setting individual compensation levels.
In our shareholders’ general meeting held on April 2, 2008, the aggregate compensation for the members of
our board of directors and of our board of executive officers was set at up to R$3.0 million for the year 2008. For
2007, the aggregate compensation of our board of directors and board of executive officers was R$2.5 million.
Stock option plan
In our special shareholders’ general meeting held on April 19, 2006, our shareholders approved a stock
option plan under which our board of directors can grant options to purchase our shares to our directors, executive
officers, managers, senior employees and specified external Brazilian counsel.
The options to be granted under our stock option plan will represent no more than 5% of our total capital
stock as of the date of the granting of such option. The purchase price for each of our shares shall be equal to at
least 90% of the value determined by the average price of our shares in the three days prior to the granting of the
option, adjusted according to the IGPM index plus six percent.
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Unless otherwise decided by our board of directors, the term for the exercise of the options will be seven
years from the date the options are granted. The beneficiaries of our options may exercise their rights to purchase
our shares in equal installments throughout five years (20% at the end of each year).
On July 20, 2006, January 2, 2007, and January 2, 2008 our board of directors approved the first, second
and third issuance of stock options, respectively, to our executive officers and managers and to our external
Brazilian counsel amounting to an aggregate of 921,965 common shares.
Names
The stock option grants have the following features:
113
Number of
common shares
Number of
employees Exercise price
First issuance ....................................................................................... 530,609 28 R$13.93
Second issuance................................................................................... 391,356 27 R$32.34
Third issuance......................................................................................
___________________
* To be defined
* * R$54.36
As of March 31, 2008, 210,531 and 38,183 common shares from the first and second stock option grants,
respectively, had been exercised.

RELATED PARTY TRANSACTIONS
In the normal course of our business we carry out transactions with related parties at prices, terms, financial
rates and other conditions comparable to those carried out in the market. These transactions include, among others,
purchases of products and services, financing agreements and the grating of guarantees.
Purchase and Sale of Products and Services
Carbonox supplies investment casting parts to Valmicro, Mipel-Sul and MNA. In 2007, these transactions
totaled R$15.1 million. For the three-month period ended March 31, 2008 these transactions totaled approximately
R$3.8 million.
Valmicro supplies valves to MNA and Lupatech North America. In 2007, these sales totaled
approximately R$4.0 million. For the three-month period ended March 31, 2008 these sales represented
approximately R$2.5 million.
MNA supplies valves to Valmicro. In 2007, these sales totaled approximately R$1.7. For the three-month
period ended March 31, 2008 these sales represented approximately R$0.2 million.
Itasa supplies metal machining alloys to MNA, Valmicro, Esferomatic and Worcester. Itasa related party
sales represented approximately R$3.5 million in 2007. For the three-month period ended March 31, 2008 these
sales represented approximately R$0.7 million.
Worcester supplies valves to Esferomatic. In 2007, these sales totaled approximately R$0.7 million. For
the three-month period ended March 31, 2008 these sales represented approximately R$0.2 million.
Mipel Sul supplies valves to Valmicro and MNA. In 2007, these sales totaled approximately R$0.4
million. For the three-month period ended March 31, 2008 these sales represented approximately R$0.02 million.
Petroima supplies products to Gasoil. In 2007, these sales totaled approximately R$0.3 million. For the
three-month period ended March 31, 2008, these sales represented approximately R$1.0 million.
Lupatech supplies valves to Mipel Sul and Valmicro. In 2007, these sales totaled approximately R$1.1
million. For the three-month period ended March 31, 2008, no sales were made.
Delta supplies compressors to Aspro. In 2007, these sales totaled approximately R$8.2 million. For the
three-month period ended March 31, 2008, these sales represented approximately R$7.9 million.
Purchases and sales between us and our consolidated subsidiaries are eliminated in the consolidated
financial statements.
Loan Agreement
We use loan agreements between our subsidiaries in order to meet any working capital needs of each of
them. These loans do not have a determined value and are done in accordance with a credit line agreement executed
between the parties. Below is a description of the agreements that currently have an outstanding balance.
We have entered into loan agreements with Gasoil. As of March 31, 2008, the outstanding balance of these
loans was approximately R$0.4 million.
We have entered into loan agreements with Ocean Coating. As of March 31, 2008, the outstanding balance
of these loans was approximately R$0.4 million.
We have entered into loan agreements with Steelinject. As of March 31, 2008, the outstanding balance of
these loans was approximately R$0.8 million.
We have entered into loan agreements with K&S. As of March 31, 2008, the outstanding balance of these
loans was approximately R$13.0 million.
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We have entered into loan agreements with Petroima. As of March 31, 2008, the outstanding balance of
these loans was approximately R$13.0 million.
We have entered into loan agreements with Mipel. As of March 31, 2008, the outstanding balance of these
loans was approximately R$0.5 million.
CSL Offshore entered into loan agreements with Lupatech. As of March 31, 2008, the outstanding balance
of these loans was approximately R$8.0 million.
CSL Offshore entered into loan agreements with Lupatech Oil Tools. As of March 31, 2008, the
outstanding balance of these loans was approximately R$41.4 million.
CSL Offshore entered into loan agreements with Lupatech Finance. As of March 31, 2008, the outstanding
balance of these loans was approximately US$35.8 million.
MNA entered into loan agreements with Lupatech. As of March 31, 2008, the outstanding balance of these
loans was approximately R$91.8 million.
MNA entered into loan agreements with Lupatech Oil Tools. As of March 31, 2008, the outstanding
balance of these loans was approximately R$15.6 million.
MNA entered into loan agreements with Lupatech Finance. As of March 31, 2008, the outstanding balance
of these loans was approximately US$15.3 million.
Gasoil entered into loan agreements with Lupatech Finance. As of March 31, 2008, the outstanding
balance of these loans was approximately US$57.5 million.
Valmicro entered into loan agreements with MNA. As of March 31, 2008, the outstanding balance of these
loans was approximately R$1.9 million.
Guarantees
We are the guarantors for four financing agreements entered into by MNA. The proceeds were used to
withdraw the outstanding debentures that we had. The outstanding balance on these agreements as of March 31,
2008 was R$236.8 million.
We and our subsidiaries Valmicro and MNA are the guarantors for several financing agreements entered
into by Lupatech and MNA mainly for working capital financing. The outstanding balance on these agreements as
of March 31, 2008 was R$70.5 million.
In addition, we and our subsidiaries Carbonox, CSL Offshore, Esferomatic, Itasa, Petroima, Metalúrgica
Ipê Ltda., Metalúrgica Nova Americana Ltda., Mipel Sul, Steelinject, Valmicro and Worcester are the guarantors for
the issuance of the initial bonds by Lupatech Finance in the total amount of US$200 million.
See note 11 to each of the quarterly and annual financial statements included elsewhere in this offering
circular for more information regarding related party transactions.
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DESCRIPTION OF THE BONDS
The following summary describes certain provisions of the bonds and the indenture. This summary is
subject to and qualified in its entirety by reference to the provisions of the indenture and the bonds. You may obtain
copies of the indenture and specimen bonds upon request to Lupatech at the addresses set forth under “Where You
Can Find More Information.”
Lupatech Finance issued US$200 million aggregate principal amount of 9.875% guaranteed perpetual
bonds pursuant to an indenture, dated as of July 10, 2007, among Lupatech Finance, the Guarantors, The Bank of
New York, as trustee (which term includes any successor as trustee under the indenture) registrar, transfer agent and
principal paying agent, and The Bank of New York (Luxembourg) S.A., as Luxembourg paying agent, transfer agent
and Luxembourg listing agent. Lupatech Finance has, under the indenture, appointed a registrar, paying agents and
transfer agents, which are identified on the inside back cover page of this offering circular. A copy of the indenture,
including the form of the bonds, is available for inspection during normal business hours at the offices of the trustee
and any of the other paying agents set forth on the inside back cover page of this offering circular. The trustee or
any paying agent will also act as transfer agent and registrar in the event that Lupatech Finance issues certificates for
the bonds in definitive registered form as set forth in “Form of Bonds—Individual Definitive Bonds.”
The new bonds offered hereby and the initial bonds will be treated as a single class of debt securities under
the indenture, including for the purposes of determining whether the required percentage of the holders of record has
given approval or consent to an amendment or waiver or joined in directing the trustee to take certain actions on
behalf of all the holders. The new bonds represent approximately 27.3% of all the bonds issued under the indenture
on the date of the closing of this offering.
This description of the bonds is a summary of the material provisions of the bonds and the indenture. You
should refer to the indenture for a complete description of the terms and conditions of the bonds and the indenture,
including the obligations of Lupatech Finance, the Guarantors and your rights.
You will find the definitions of capitalized terms used in this section under “—Certain Definitions.” For
purposes of this section of this offering circular, references to “Lupatech” refer only to Lupatech S.A. and not its
Subsidiaries.
General
The bonds:
• will be senior unsecured obligations of Lupatech Finance;
• will be fully and unconditionally guaranteed by the Guarantors;
• will be in an aggregate principal amount of US$275,000,000;
• will be perpetual bonds with no fixed final maturity date;
• will be issued in denominations of US$2,000 and integral multiples of US$1,000 in excess thereof;
• will be represented by one or more registered bonds in global form and may be exchanged for bonds in
definitive form only in limited circumstances; and
• will not be required to be registered under the Securities Act.
• Interest on the bonds:
• will accrue at the rate of 9.875% per annum;
• will accrue from the date of issuance or from the most recent interest payment date;
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• will be payable in cash quarterly in arrears on January 10, April 10, July 10 and October 10 of each
year. Interest will be payable on the new bonds commencing on July 10, 2008, the date of their
issuance, or from the most recent interest payment date to which interest has been provided for;
• will be payable to the holders of record on December 26, March 26, June 26 and September 26
immediately preceding the related interest payment dates; and
• will be computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of, and interest and any additional amounts on, the bonds will be payable, and the transfer of
bonds will be registrable, at the office of the trustee, and at the offices of the paying agents and transfer agents,
respectively. Lupatech Finance initially will maintain the principal paying agent in New York, New York, the
United States. For so long as the bonds are listed on the Euro MTF market of the Luxembourg Stock Exchange and
the rules of that stock exchange will so require, Lupatech Finance will maintain a paying agent and transfer agent in
Luxembourg.
The indenture does not limit the amount of debt or other obligations that may be incurred by Lupatech
Finance, the Guarantors or any of the Subsidiaries. The indenture does not contain any restrictive covenants or other
provisions designed to protect holders of the bonds in the event Lupatech Finance, any of the Guarantors or any of
the Subsidiaries participates in a highly leveraged transaction or upon a change of control.
Lupatech Finance is entitled, without the consent of the holders, to issue additional bonds under the
indenture on the same terms and conditions as the bonds being offered hereby in an unlimited aggregate principal
amount, or the additional bonds. The bonds and the additional bonds, if any, will be treated as a single class for all
purposes of the indenture, including waivers and amendments. Unless the context otherwise requires, for all
purposes of the indenture and this “Description of the Bonds,” references to the bonds include the initial bonds, the
new bonds and any other additional bonds actually issued.
Guarantees
Each of the Guarantors will unconditionally and irrevocably, jointly and severally guarantee, on a senior
unsecured basis, the due and punctual payment of all amounts due and payable on the bonds (including the payment
of additional amounts described under “—Additional Amounts”) when and as the same shall become due and
payable . No Subsidiary of Lupatech, other than the Guarantors, is or will be obligated to guarantee the bonds.
The guarantees will be limited to the maximum amount that would not render the Guarantors’ respective
obligations subject to avoidance under applicable fraudulent conveyance laws. By virtue of this limitation, the
Guarantors’ respective obligations under the guarantees could be significantly less than amounts payable with
respect to the bonds, or the Guarantors may have effectively no obligation under the guarantees. See “Risk
Factors—Risks Relating to the Bonds and the Guarantees—The guarantees may not be enforceable.”
Ranking
Bonds
The bonds will constitute direct senior unsecured obligations of Lupatech Finance. If Lupatech Finance
were to issue any debt other than the bonds, the bonds would rank at least pari passu in priority of payment with all
other existing and future senior unsecured indebtedness of Lupatech Finance, subject to certain statutory preferences
under applicable law, including labor and tax claims.
The obligations of Lupatech Finance under the bonds will rank:
• equal in right of payment to all other existing and future senior unsecured debt of Lupatech Finance,
subject to certain statutory preferences under applicable law, including labor and tax claims;
• senior in right of payment to Lupatech Finance’s subordinated debt; and
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• effectively subordinated to the debt and other obligations (including subordinated debt and trade
payables) of Lupatech’s Subsidiaries that are not Guarantors and jointly controlled companies and to
secured debt of Lupatech Finance to the extent of such security.
Guarantees
The obligations of each Guarantor under the bonds will rank:
• pari passu in priority of payment with all existing and future senior unsecured indebtedness of that
Guarantor, subject to certain statutory preferences under applicable law, including labor and tax
claims;
• senior in right of payment to any subordinated debt of that Guarantor; and
• effectively subordinated to the debt and other obligations (including subordinated debt and trade
payables) of that Guarantor’s subsidiaries and jointly controlled companies and to secured debt of that
Guarantor to the extent of such security.
Lupatech Finance is a financing subsidiary of Lupatech. Lupatech Finance’s ability to service its debt,
including the bonds, is dependent upon the cash flows of Lupatech and its other Subsidiaries. Certain laws restrict
the ability of Lupatech and its Subsidiaries to pay dividends or make loans or advances. If these restrictions were
applied to Subsidiaries other than the Guarantors then Lupatech Finance would not be able to use the earnings of
those Subsidiaries to make payments on the bonds.
None of Lupatech’s Subsidiaries other than the Guarantors is guaranteeing the bonds. Claims of creditors
of such non-guarantor Subsidiaries, including trade creditors and creditors holding indebtedness or guarantees issued
by such non-guarantor Subsidiaries, and claims of preferred stockholders of such non-guarantor Subsidiaries
generally will have priority with respect to the assets and earnings of such non-guarantor Subsidiaries over the
claims of Lupatech Finance’s creditors, including holders of the bonds. Accordingly, the bonds will be effectively
subordinated to creditors (including trade creditors) and preferred stockholders, if any, of Lupatech’s non-guarantor
Subsidiaries. The indenture does not require any existing Subsidiaries of Lupatech (other than the Guarantors) or
any future Subsidiaries of Lupatech to guarantee the bonds, and it does not restrict any Guarantor from disposing of
its assets to a third party or a Subsidiary of Lupatech that is not guaranteeing the bonds.
As of March 31, 2008 Lupatech and its Subsidiaries had approximately R$706.6 million of total
indebtedness. Approximately R$14 million of this total amount was structurally senior to the bonds being sold in
this offering, including R$9.5 million of secured debt of Lupatech and R$4.5 million of debt of Lupatech’s
Subsidiaries.
Redemption
The bonds will not be redeemable, except as described below. Any optional or tax redemption may require
the prior approval of the Central Bank.
Optional Redemption
The bonds will be redeemable, from time to time, at the option of Lupatech Finance, in whole or in part, on
any interest payment date on or after July 10, 2012, upon giving not less than 30 nor more than 60 days’ notice to
the holders (which notice will be irrevocable), at 100% of the principal amount thereof, plus accrued and unpaid
interest and any additional amounts payable with respect thereto; provided that if Lupatech Finance does not redeem
the entire aggregate principal amount of the bonds outstanding at the time of any such redemption, then after giving
effect to such redemption at least the greater of (a) US$150 million aggregate principal amount of the bonds and
(b) 30% of the original aggregate principal amount of the bonds (excluding any Additional Bonds) shall remain
outstanding.
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Tax Redemption
The bonds will be redeemable, at the option of Lupatech Finance, in whole, but not in part, upon giving not
less than 30 nor more than 60 days’ notice to the holders (which notice will be irrevocable), at 100% of the principal
amount thereof, plus accrued interest and any additional amounts payable with respect thereto, only if (i) Lupatech
Finance has or will become obligated to pay additional amounts as discussed below under “—Additional Amounts”
with respect to such bonds; or (ii) any of the Guarantors has or will become obligated to pay additional amounts as
discussed below under “—Additional Amounts” with respect to payments on the guarantees, in either case, in excess
of the additional amounts that would be imposed on such payments as of the date of the indenture (determined
without regard to any interest, fees, penalties or other additions to tax) and as a result of any change in, or
amendment to, the treaties, laws, regulations or administrative tax practice of a Taxing Jurisdiction (as defined
below under “—Additional Amounts”), or any change in the application or official interpretation of such laws or
regulations, which change or amendment occurs after the date of the indenture, and (iii) such obligation cannot be
avoided by Lupatech Finance or the Guarantors taking reasonable measures available to it. For the avoidance of
doubt, reasonable measures do not include changing the jurisdiction of incorporation of Lupatech Finance, any of
the relevant Guarantors as the case may be, or any of the Subsidiaries. No such notice of redemption will be given
earlier than 60 days prior to the earliest date on which Lupatech Finance or any of the Guarantors, as the case may
be, would be obligated to pay such additional amounts if a payment in respect of such bonds were then due.
Prior to the publication or mailing of any notice of redemption of the bonds as described above, Lupatech
Finance must deliver to the trustee an officers’ certificate to the effect that the obligations of Lupatech Finance to
pay additional amounts cannot be avoided by Lupatech Finance taking reasonable measures available to it. Lupatech
Finance will also deliver an opinion of an independent legal counsel of recognized standing stating that Lupatech
Finance or the relevant Guarantor, as the case may be, either would be or should be obligated to pay additional
amounts due to a change, or amendment to, treaties, laws, regulations or administrative tax practice of a Taxing
Jurisdiction or any change in the application or official interpretation of such laws or regulations thereof (as
described above). The trustee will accept this certificate and opinion as sufficient evidence of the satisfaction of the
conditions precedent set forth in clauses (i) and (ii) of the preceding paragraph, in which event it will be conclusive
and binding on the holders.
Open Market Purchases
Lupatech Finance or its affiliates may at any time purchase bonds in the open market or otherwise at any
price. Any such purchased bonds may be held in treasury but will not be resold, except in compliance with
applicable requirements or exemptions under the relevant securities laws in transactions that do not affect the ability
of non-affiliated holders of bonds to resell such bonds without restriction.
Payments
Lupatech Finance and the Guarantors will make all payments on the bonds and the related guarantees, as
applicable, exclusively in such coin or currency of the United States as at the time of payment will be legal tender
for the payment of public and private debts.
Lupatech Finance or any of the Guarantors will make payments of principal and interest on the bonds to the
principal paying agent (as identified on the inside back cover page of this offering circular), which will pass such
funds to the trustee and the other paying agents or to the holders. See “Taxation—Brazilian Taxation.”
Lupatech Finance or any of the Guarantors will make payments of principal to the principal paying agent
for distribution to the holders upon surrender of the relevant bonds at the specified office of the trustee or any of the
paying agents. Lupatech Finance or any of the Guarantors will pay principal on the bonds to the persons in whose
name the bonds are registered at the close of business on the 15th day before the due date for payment. Payments of
principal and interest in respect of each bond will be made by the paying agents by U.S. dollar check drawn on a
bank in New York City and mailed to the holder of such bond at its registered address. Upon application by the
holder to the specified office of any paying agent not less than 15 days before the due date for any payment in
respect of a bond, such payment may be made by transfer to a U.S. dollar account maintained by the payee with a
bank in New York City.
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Under the terms of the indenture, payment by Lupatech Finance or any of the Guarantors of any amount
payable under the bonds or a guarantee, as applicable, on the due date thereof to the principal paying agent in
accordance with the indenture will satisfy such obligation of Lupatech Finance or such Guarantors to make such
payment; provided, however, that the liability of the principal paying agent shall not exceed any amounts paid to it
by Lupatech Finance or any of the Guarantors, or held by it, on behalf of the holders under the indenture. Lupatech
Finance and each of the Guarantors have agreed in the indenture to indemnify the holders in the event that there is a
subsequent failure by the trustee or any paying agent to pay any amount due in respect of the bonds in accordance
with the indenture (including, without limitation, any failure to pay any amount due as a result of the imposition of
any present or future taxes, duties, assessments, fees or governmental charges of whatever nature (and any fines,
penalties or interest related thereto) imposed or levied by or on behalf of New York City, New York, the United
States or any political subdivision or authority thereof or therein, having power to tax) as will result in the receipt by
the holders of such amounts as would have been received by them had no such failure occurred.
All payments will be subject in all cases to any applicable tax or other laws and regulations, but without
prejudice to the provisions of “—Additional Amounts.” No commissions or expenses will be charged to the holders
in respect of such payments.
Subject to applicable law, the trustee and the paying agents will pay to Lupatech Finance upon request any
monies held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter,
holders entitled to such monies must look to Lupatech Finance for payment as general creditors. After the return of
such monies by the trustee or the paying agents to Lupatech Finance, neither the trustee nor the paying agents shall
be liable to the holders in respect of such monies.
Listing of the Bonds
The new bonds will be listed on the Official List of the Luxembourg Stock Exchange and traded on the
Euro MTF market of the Luxembourg Stock Exchange.
If maintaining the listing of the bonds on the Luxembourg Stock Exchange would require Lupatech Finance
and the Guarantors to publish financial information either more regularly than they otherwise would be required to
under applicable law, or according to accounting principles which are materially different from the accounting
principles which they would otherwise use to prepare their published financial information, or if costs relating
thereto are unduly burdensome, Lupatech Finance may seek an alternative admission to listing, trading and/or
quotation for the bonds by another listing authority, stock exchange and/or quotation system.
The new bonds will be eligible for trading in the PORTAL Market.
Form, Denomination and Title
The bonds will be in registered form without coupons attached in amounts of US$2,000 and integral
multiples of US$1,000 in excess thereof.
Bonds sold in offshore transactions in reliance on Regulation S will be represented by one or more
permanent global bonds in fully registered form without coupons deposited with a custodian for and registered in the
name of a nominee of DTC for the accounts of Euroclear and Clearstream Luxembourg. Bonds represented by the
global bonds will trade in DTC’s Same-Day Funds Settlement System and secondary market trading activity in such
bonds will therefore settle in immediately available funds. There can be no assurance as to the effect, if any, of
settlements in immediately available funds on trading activity in the bonds. Beneficial interests in the global bonds
will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its direct and
indirect participants, including Euroclear and Clearstream Luxembourg. Except in certain limited circumstances,
definitive registered bonds will not be issued in exchange for beneficial interests in the global bonds. See “Form of
Bonds—Global Bonds.”
Title to the bonds will pass by registration in the register. The holder of any bond will (except as otherwise
required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any
notice of ownership, trust or any interest in it, writing on, or theft or loss of, the definitive bond issued in respect of
it) and no person will be liable for so treating the holder.
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Transfer of Bonds
Bonds may be transferred in whole or in part in an authorized denomination upon the surrender of the bond
to be transferred, together with the form of transfer endorsed on it duly completed and executed, at the specified
office of the registrar or the specified office of any transfer agent. Each further bond to be issued upon exchange of
bonds or transfer of bonds will, within three Business Days of the receipt of a request for exchange or form of
transfer, be mailed at the risk of the holder entitled to the bond to such address as may be specified in such request
or form of transfer.
Bonds will be subject to certain restrictions on transfer as more fully set out in the indenture. See “Notice
to Investors.” Transfer of beneficial interests in the global bonds will be effected only through records maintained
by DTC and its participants. See “Form of Bonds.”
Transfer will be effected without charge by or on behalf of Lupatech Finance, the registrar or the transfer
agents, but upon payment, or the giving of such indemnity as the registrar or the relevant transfer agent may require,
in respect of any tax or other governmental charges which may be imposed in relation to it. Lupatech Finance is not
required to transfer or exchange any bond selected for redemption.
No holder may require the transfer of a bond to be registered during the period of 15 days ending on the
due date for any payment of principal or interest on that bond.
Additional Amounts
All payments by Lupatech Finance or any of the Guarantors in respect of the bonds or the guarantees, as
applicable, will be made free and clear of, and without withholding or deduction for or on account of, any present or
future taxes, duties, assessments, fees or other governmental charges of whatever nature (and any fines, penalties or
interest related thereto) imposed or levied by or on behalf of the Cayman Islands, the jurisdiction of incorporation of
any of the Guarantors or any jurisdiction from or through which payments are made or are deemed to be made or
any political subdivision or authority of or in such jurisdictions having the power to tax (“Taxes” and such
jurisdictions, “Taxing Jurisdictions”), unless such withholding or deduction is required by law. In that event,
Lupatech Finance or the relevant Guarantor, as applicable, will pay to each holder such additional amounts as may
be necessary in order that every net payment made by Lupatech or any of the Guarantors, as applicable, on each
bond after deduction or withholding for or on account of any present or future Tax imposed upon or as a result of
such payment will not be less than the amount then due and payable on such bond. The foregoing obligation to pay
additional amounts, however, will not apply to or in respect of:
(1) any Tax which would not have been imposed but for the existence of any present or former connection
between such holder, on the one hand, and a Taxing Jurisdiction or any political subdivision or authority of or in a
Taxing Jurisdiction, on the other hand (including, without limitation, such holder being or having been a citizen or
resident thereof or having been engaged in a trade or business or present therein or having, or having had, a
permanent establishment therein), other than the mere receipt of such payment or the ownership or holding of such
bond;
(2) any Tax to the extent it would not have been so imposed but for the presentation by such holder for
payment on a date more than 30 days after the date on which such payment became due and payable or the date on
which payment thereof is duly provided for, whichever occurs later;
(3) any Tax to the extent that such tax, duty, assessment or other governmental charge would not have been
imposed but for the failure of such holder to comply with any certification, identification or other reporting
requirements concerning the nationality, residence, identity or connection with the relevant Taxing Jurisdiction of
the holder if (a) such compliance is required or imposed by law as a precondition to exemption from all or a part of
such tax, duty, assessment or other governmental charge and (b) at least 30 days prior to the date on which Lupatech
Finance or any of the Guarantors, as applicable, will apply this clause (3), Lupatech Finance or any of the
Guarantors, as applicable, will have notified all holders of bonds that some or all holders of bonds will be required
to comply with such requirement;
(4) any estate, inheritance, gift, sales, capital gains, transfer, excise, personal property or similar Tax;
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(5) any Tax which is payable other than by deduction or withholding from payments of principal of or
interest on the bond; or
(6) any combination of the above.
Lupatech Finance or any of the Guarantors, as applicable, will also pay any present or future stamp, court
or documentary taxes or any other excise or property taxes, charges or similar levies which arise in any jurisdiction
from the execution, delivery, registration or the making of payments in respect of the bonds or the guarantees,
excluding any such taxes, charges or similar levies imposed by any jurisdiction outside of Brazil, Argentina or the
Cayman Islands other than those resulting from, or required to be paid in connection with, the enforcement of the
bonds or the guarantees following the occurrence of any Event of Default.
No additional amounts will be paid with respect to a payment on any bond to a holder that is a fiduciary,
partnership, or limited liability company or other than the sole beneficial owner of such payment to the extent a
beneficiary or settlor with respect to such fiduciary or a member of such partnership or limited liability company or
beneficial owner would not have been entitled to receive payment of the additional amounts had the beneficiary,
settlor, member or beneficial owner been the holder of the bond.
Lupatech Finance or any of the Guarantors, as applicable, will provide the trustee with the official
acknowledgment of the relevant taxing authority (or, if such acknowledgment is not available, without unreasonable
burden or expense, a certified copy thereof or, if such certified copy is not available, other documentation
satisfactory to the trustee) evidencing any payment of taxes in respect of which Lupatech Finance or any of the
Guarantors, as applicable, has paid any additional amounts. Copies of such documentation will be made available by
the trustee to the holders of the bonds or the paying agents, as applicable, upon request therefor.
All references in this offering circular, the indenture or the bonds to principal of, interest on or any other
amount payable in respect of the bonds will include any additional amounts payable by Lupatech Finance in respect
of such principal and such interest.
Covenants
The indenture contains the following covenants:
Limitation on Liens
Lupatech Finance and each of the Guarantors will not, and Lupatech will not permit any Subsidiary to,
create or suffer to exist any Lien upon any of its property or assets now owned or hereafter acquired by it or on any
Capital Stock of Lupatech or any Subsidiary, securing any obligation unless contemporaneously therewith effective
provision is made to secure the bonds equally and ratably with such obligation for so long as such obligation is so
secured. The preceding sentence will not require Lupatech Finance, any of the Guarantors or any Subsidiary to
equally and ratably secure the bonds if the Lien consists of the following:
(1) any Lien existing on the date of the indenture, and any extension, renewal or replacement thereof or of
any Lien in clause (2), (3) or (4) below (or successive extensions, renewals or replacements); provided, however,
that the total amount of Debt so secured is not increased;
(2) any Lien on any property or assets (including Capital Stock of any person) securing Debt incurred
solely for purposes of financing the acquisition, construction or improvement of such property or assets after the
date of the indenture; provided that (a) the aggregate principal amount of Debt secured by the Liens will not exceed
(but may be less than) the cost (i.e., purchase price) of the property or assets so acquired, constructed or improved
and (b) the Lien is incurred before, or within 120 days after the completion of, such acquisition, construction or
improvement and does not encumber any other property or assets of Lupatech Finance, any of the Guarantors or any
Subsidiary; and provided, further, that to the extent that the property or asset acquired is Capital Stock, the Lien also
may encumber other property or assets of the person so acquired;
(3) any Lien securing Debt for the purpose of financing all or part of cost of the acquisition, construction or
development of a project; provided that the lenders of such Debt expressly agree to limit their recourse in respect of
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such Debt to assets (including Capital Stock of the project entity) and/or revenues of such project with an aggregate
value of not more than the amount of such Debt; and provided, further, that the Lien is incurred before, or within
120 days after the completion of, that acquisition, construction or development and does not apply to any other
property or assets of Lupatech or any Subsidiary;
(4) any Lien existing on any property or assets of any person before such property, assets or person is
acquired by, merged into or consolidated with Lupatech or any Subsidiary after the date of the indenture; provided
that (a) the Lien is not created in contemplation of or in connection with such acquisition, merger or consolidation
except for any Lien created as a condition to such acquisition, merger or consolidation that substitutes a Lien on
such property or assets but does not include any additional property or assets, (b) the Debt secured by the Liens may
not exceed the Debt secured on the date of such acquisition, merger or consolidation and (c) the Lien will not apply
to any other property or assets of Lupatech or any of its Subsidiaries;
(5) any Lien imposed by law that was incurred in the ordinary course of business, including, without
limitation, carriers’, warehousemen’s and mechanics’ liens and other similar encumbrances arising in the ordinary
course of business, in each case for sums not yet due or being contested in good faith by appropriate proceedings;
(6) any pledge or deposit made in connection with workers’ compensation, unemployment insurance or
other similar social security legislation, any deposit to secure appeal bonds in proceedings being contested in good
faith to which Lupatech or any Subsidiary is a party, good faith deposits in connection with bids, tenders, contracts
(other than for the payment of Debt) or leases to which Lupatech or any Subsidiary is a party or deposits for the
payment of rent, in each case made in the ordinary course of business;
(7) any Lien in favor of performance or return-of-money bonds, issuers of surety bonds or letters of credit
or other obligations of a like nature issued pursuant to the request of and for the account of Lupatech or any
Subsidiary in the ordinary course of business;
(8) judgment Liens not giving rise to an Event of Default so long as such Lien is bonded in accordance with
applicable law and any appropriate legal proceedings that may have been duly initiated for the review of such
judgment have not been finally terminated or the period within which such proceedings may be initiated has not
expired;
(9) any Lien securing taxes, assessments and other governmental charges, the payment of which are not yet
due or are being contested in good faith by appropriate proceedings and for which such reserves or other appropriate
provisions, if any, have been established as required by the generally accepted accounting practices of the applicable
jurisdiction of Lupatech or the relevant Subsidiary;
(10) minor defects, easements, rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of business and encumbrances consisting of zoning restrictions, licenses, restrictions on the use of
property or assets or minor imperfections in title that do not materially impair the value or use of the property or
assets affected thereby, and any leases and subleases of real property that do not interfere with the ordinary conduct
of the business of Lupatech or any Subsidiary, and which are made on customary and usual terms applicable to
similar properties;
(11) any Liens (a) arising from banker’s liens, rights of set-off, or similar rights and remedies of any person
with respect to any deposit account or other funds maintained with a creditor depositary institution of Lupatech or
any Subsidiary arising in the ordinary course of business and not constituting a financing transaction, (b) over any
dedicated cash collateral account that is funded solely with receivables that are subject to Liens permitted by any
other clause in this covenant, “—Limitation on Liens” and (c) over any dedicated cash collateral account established
or securities deposited to defease Debt of Lupatech or any Subsidiary, which defeasance is in accordance with the
requirements of the indenture;
(12) any Liens granted to secure borrowings from, directly or indirectly, (a) BNDES, or any other Brazilian
governmental development bank or credit agency or (b) any international or multilateral development bank
(including but not limited to the International Finance Corporation, or IFC), government-sponsored agency, exportimport
bank or official export-import credit insurer;
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(13) any Liens on the inventory or receivables of Lupatech or any Subsidiary securing the obligations of
such person under any lines of credit or working capital facility or in connection with any structured export or
import financing or other trade transaction; provided that the aggregate principal amount of Debt incurred that is
secured by receivables that will fall due in any calendar year shall not exceed (a) with respect to transactions secured
by receivables from export sales, 50% of Lupatech’s consolidated gross revenues from export sales for the
immediately preceding calendar year; or (b) with respect to transactions secured by receivables from domestic
(Brazilian) sales, 50% of such Person’s consolidated gross revenues from sales within Brazil for the immediately
preceding calendar year; and provided, further, that Advance Transactions will not be deemed transactions secured
by receivables for purpose of the above calculation; and
(14) in addition to the foregoing Liens set forth in clauses (1) through (13) above, Liens securing Debt of
Lupatech or any Subsidiary (including, without limitation, guarantees of Lupatech or any Subsidiary) which do not
in aggregate principal amount, at any time of determination, exceed 20% of Consolidated Net Tangible Assets.
Limitation on Transactions with Affiliates
Lupatech will not, and Lupatech will not permit any of its Subsidiaries to, enter into any transaction or
series of related transactions (including any Investment or any purchase, sale, lease or exchange of any property or
the rendering of any service) with or with respect to any Affiliate of Lupatech (other than a Subsidiary of Lupatech)
unless such transaction or series of related transactions are as favorable to Lupatech or such Subsidiary as terms that
would be obtainable at the time for a comparable transaction or series of related transactions in arm’s-length
dealings with an unrelated third person. Lupatech will post the minutes of any such meetings of its board of directors
approving such transaction on its corporate website.
Limitation on Consolidation, Merger or Transfer of Assets
Lupatech will not, nor will Lupatech permit any of the other Guarantors to, consolidate with or merge with
or into, or convey, transfer or lease all or substantially all of its assets to, any person, unless:
(1) the resulting, surviving or transferee person or persons (if not Lupatech Finance or such Guarantor) will
be a person or persons organized and existing under the laws of Brazil, the United States of America, any State
thereof or the District of Columbia, Canada, Argentina, any other country (or political subdivision thereof) that is a
member country of the European Union or of the Organisation for Economic Co-operation and Development on the
date of the indenture, or any other country the laws of which would not permit the resulting, surviving or transferee
person or persons to avoid the obligations of Lupatech Finance or any of the Guarantors, as applicable, under the
bonds and the indenture, and such person or persons expressly assume, by a supplemental indenture to the indenture,
executed and delivered to the trustee, in the case of Lupatech Finance, all the obligations of Lupatech Finance under
the bonds and the indenture and, in the case of such Guarantor, all the obligations of such Guarantor, as applicable,
under the indenture;
(2) the resulting, surviving or transferee person or persons (if not Lupatech Finance or such Guarantor), if
not organized and existing under the laws of the Cayman Islands, Brazil or Argentina, undertakes, in such
supplemental indenture, to pay such additional amounts in respect of principal and interest as may be necessary in
order that every net payment made in respect of the bonds after deduction or withholding for or on account of any
present or future Tax imposed by the country in which the transferee is organized or any political subdivision or
taxing authority thereof or therein will not be less than the amount of principal and interest then due and payable on
the bonds, subject to the same exceptions set forth under clauses (1) through (4) under “Additional Amounts” but
adding references to the country in which the transferee is organized to the existing references in such clauses to a
Taxing Jurisdiction and the transferee shall have the right to a tax redemption as described above under “—Tax
Redemption,” treating the country in which the transferee is organized as a Taxing Jurisdiction and changing the
“date of the indenture” in clause (1) under “—Tax Redemption” to the “date of the supplemental indenture”;
(3) immediately prior to such transaction and immediately after giving effect to such transaction, no
Default or Event of Default will have occurred and be continuing; and
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(4) Lupatech Finance will have delivered to the trustee an officers’ certificate and an opinion of legal
counsel of recognized standing, each stating that such consolidation, merger, conveyance, transfer or lease and such
supplemental indenture, if any, comply with the indenture.
The trustee will accept such certificate and opinion as sufficient evidence of the satisfaction of the
conditions precedent set forth in this covenant, in which event it will be conclusive and binding on the holders.
Reporting Requirements
Lupatech will provide or make available to the trustee the following reports (and will also provide the
trustee with electronic versions or, in lieu thereof, sufficient copies of the following reports referred to in
clauses (1) through (4) below for distribution, at its expense, to all holders of bonds):
(1) an English language version of its annual audited consolidated financial statements prepared in
accordance with Brazilian GAAP promptly upon such financial statements becoming available but not later than 120
days after the close of its fiscal year;
(2) an English language version of its unaudited quarterly financial statements prepared in accordance with
Brazilian GAAP (including, as supplementary information, an unaudited condensed consolidated balance sheet and
an unaudited condensed consolidated statement of operations, in each case, prepared in accordance with Brazilian
GAAP), promptly upon such financial statements becoming available but not later than 60 days after the close of
each fiscal quarter (other than the last fiscal quarter of its fiscal year);
(3) simultaneously with the delivery of each set of financial statements referred to in clauses (1) and
(2) above, an officers’ certificate stating whether a Default or Event of Default exists on the date of such certificate
and, if a Default or Event of Default exists, setting forth the details thereof and the action which Lupatech Finance is
taking or proposes to take with respect thereto;
(4) without duplication, English language versions or summaries of such other reports or notices as may be
filed or submitted by (and promptly after filing or submission by) Lupatech Finance or any of the Guarantors with
(a) the CVM, (b) the Luxembourg Stock Exchange or any other stock exchange on which the bonds may be listed or
(c) the SEC (in each case, to the extent that any such report or notice is generally available to its security holders or
the public in Brazil or elsewhere and, in the case of clause (c), is filed, submitted or posted pursuant to
Rule 12g3-2(b) under, or Section 13 or 15(d) of, the Exchange Act, or otherwise); and
(5) upon any director or executive officer of Lupatech Finance becoming aware of the existence of a
Default or Event of Default, an officers’ certificate setting forth the details thereof and the action which Lupatech
Finance is taking or proposes to take with respect thereto.
Delivery of the above reports to the trustee is for informational purposes only and the trustee’s access to, or
receipt of, such reports will not constitute constructive notice of any information contained therein or determinable
from information contained therein, including Lupatech Finance’s and each of the Guarantors’ compliance with any
of its covenants in the indenture (as to which the trustee is entitled to rely exclusively on officers’ certificates).
Events of Default
An “Event of Default” occurs if:
(1) Lupatech Finance defaults in any payment of interest (including any related additional amounts) on any
bond when the same becomes due and payable, and such default continues for a period of 30 days;
(2) Lupatech Finance defaults in the payment of the principal (including any related additional amounts) of
any bond when the same becomes due and payable upon redemption or otherwise;
(3) Lupatech Finance or any of the Guarantors fails to comply with any of the covenants described under
“Covenants—Limitation on Liens”, “—Limitation on Transactions with Affiliates” or “—Limitation on
Consolidation, Merger or Transfer of Assets”, and such failure continues for 30 days after the notice specified
below;
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(4) Lupatech Finance or any of the Guarantors fails to comply with any of its covenants or agreements in
the bonds or the indenture (other than those referred to in (1), (2) and (3) above), and such failure continues for 60
days after the notice specified below;
(5) Lupatech Finance, any of the Guarantors or any Significant Subsidiary defaults under any mortgage,
indenture or instrument under which there may be issued or by which there may be secured or evidenced any Debt
for money borrowed by Lupatech Finance, any such Guarantor or any such Significant Subsidiary (or the payment
of which is guaranteed by Lupatech Finance, any such Guarantor or any such Significant Subsidiary) whether such
Debt or guarantee now exists, or is created after the date of the indenture, which default (a) is caused by failure to
pay principal of or premium, if any, or interest on such Debt after giving effect to any grace period provided in such
Debt on the date of such default (“Payment Default”) or (b) results in the acceleration of such Debt prior to its
express maturity and, in each case, the principal amount of any such Debt, together with the principal amount of any
other such Debt under which there has been a Payment Default or the maturity of which has been so accelerated,
totals US$30 million (or the equivalent thereof at the time of determination) or more in the aggregate;
(6) one or more final judgments or decrees for the payment of money of US$30 million (or the equivalent
thereof at the time of determination) or more in the aggregate are rendered against Lupatech Finance, any of the
Guarantors or any Significant Subsidiary and are not paid (whether in full or in installments in accordance with the
terms of the judgment) or otherwise discharged and, in the case of each such judgment or decree, either (a) an
enforcement proceeding has been commenced by any creditor upon such judgment or decree and is not dismissed
within 30 days following commencement of such enforcement proceedings or (b) there is a period of 60 days
following such judgment during which such judgment or decree is not discharged, waived or the execution thereof
stayed;
(7) certain events of bankruptcy or insolvency of Lupatech Finance, any of the Guarantors or any
Significant Subsidiary; or
(8) any guarantee of the bonds ceases to be in full force and effect or any of the Guarantors denies or
disaffirms its obligations under its guarantee of the bonds.
A Default under clause (3) or (4) above will not constitute an Event of Default until the trustee or the
holders of at least 25% in principal amount of the bonds outstanding notify Lupatech Finance and the Guarantors of
the Default and Lupatech Finance or a Guarantor, as the case may be, does not cure such Default within the time
specified after receipt of such notice.
The trustee is not to be charged with knowledge of any Default or Event of Default or knowledge of any
cure of any Default or Event of Default unless either (a) an attorney, authorized officer or agent of the trustee with
direct responsibility for the indenture has actual knowledge of such Default or Event of Default or (b) written notice
of such Default or Event of Default has been given to the trustee by Lupatech Finance or any holder.
If an Event of Default (other than an Event of Default specified in clause (7) above) occurs and is
continuing, the trustee or the holders of not less than 25% in principal amount of the bonds then outstanding may
declare all unpaid principal of and accrued interest on all bonds to be due and payable immediately, by a notice in
writing to Lupatech Finance, and upon any such declaration such amounts will become due and payable
immediately. If an Event of Default specified in clause (7) above occurs and is continuing, then the principal of and
accrued interest on all bonds will become and be immediately due and payable without any declaration or other act
on the part of the trustee or any holder.
Subject to the provisions of the indenture relating to the duties of the trustee in case an Event of Default
occurs and is continuing, the trustee will be under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any of the holders, unless such holders have offered to the trustee indemnity
reasonably satisfactory to the trustee. Subject to such provision for the indemnification of the trustee, the holders of
a majority in aggregate principal amount of the outstanding bonds will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power
conferred on the trustee.
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Defeasance
Lupatech Finance or any of the Guarantors may at any time terminate all of its obligations with respect to
the bonds (“defeasance”), except for certain obligations, including those regarding any trust established for a
defeasance and obligations to register the transfer or exchange of the bonds, to replace mutilated, destroyed, lost or
stolen bonds and to maintain agencies in respect of bonds. Lupatech Finance or any of the Guarantors may at any
time terminate its obligations under certain covenants set forth in the indenture, and any omission to comply with
such obligations will not constitute a Default or an Event of Default with respect to the bonds issued under the
indenture (“covenant defeasance”). In order to exercise either defeasance or covenant defeasance, Lupatech Finance
or any of the Guarantors must irrevocably deposit in trust, for the benefit of the holders of the bonds, with the trustee
money or U.S. government obligations, or a combination thereof, in such amounts as will be sufficient, in the
opinion of an internationally recognized firm of independent public accountants expressed in a written certificate
delivered to the trustee, without consideration of any reinvestment, to pay the principal of, and interest on the bonds
to redemption or maturity and comply with certain other conditions, including the delivery of an opinion of counsel
as to certain U.S. tax matters.
Amendment, Supplement, Waiver
Subject to certain exceptions, the indenture may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the bonds then outstanding, and any past Default or Event of
Default or compliance with any provision may be waived with the consent of the holders of at least a majority in
principal amount of the bonds then outstanding. However, without the consent of each holder of an outstanding bond
affected thereby, no amendment or waiver may:
(1) reduce the rate of or extend the time for payment of interest on any bond;
(2) reduce the principal of any bond;
(3) reduce the amount payable upon redemption of any bond or change the time at which any bond may be
redeemed;
bond;
(4) change the currency for payment of principal of, or interest on, any bond;
(5) impair the right to institute suit for the enforcement of any right to payment on or with respect to any
(6) waive certain payment defaults with respect to the bonds;
(7) reduce the principal amount of bonds whose holders must consent to any amendment or waiver; or
(8) make any change in the amendment or waiver provisions which require each holder’s consent.
The holders of the bonds will receive prior notice as described under “—Notices” of any proposed
amendment to the bonds or the indenture or any waiver described in the preceding paragraph. After an amendment
or waiver described in the preceding paragraph becomes effective, Lupatech Finance is required to mail to the
holders a notice briefly describing such amendment or waiver. However, the failure to give such notice to all holders
of the bonds, or any defect therein, will not impair or affect the validity of the amendment or waiver.
The consent of the holders of the bonds is not necessary to approve the particular form of any proposed
amendment or waiver. It is sufficient if such consent approves the substance of the proposed amendment or waiver.
Lupatech Finance, the Guarantors and the trustee may, without the consent or vote of any holder of the
bonds, amend or supplement the indenture or the bonds for the following purposes to:
(1) cure any ambiguity, omission, defect or inconsistency;
(2) comply with the covenant described under “—Limitation on Consolidation, Merger or Transfer of
Assets”;
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(3) add guarantees or collateral with respect to the bonds;
(4) add to the covenants of Lupatech or any of the Guarantors for the benefit of holders of the bonds;
(5) surrender any right conferred upon Lupatech or any of the Guarantors;
(6) evidence and provide for the acceptance of an appointment by a successor trustee;
(7) comply with any requirements of the SEC in connection with any qualification of the indenture under
the U.S. Trust Indenture Act of 1939, as amended;
(8) provide for the issuance of Additional Bonds; or
(9) make any other change that does not materially and adversely affect the rights of any holder of the
bonds, or to conform the indenture to this “Description of the Bonds.”
Notices
For so long as bonds in global form are outstanding, notices to be given to holders will be given to the
depositary, in accordance with its applicable policies as in effect from time to time. If bonds are issued in
certificated form, notices to be given to holders will be deemed to have been given upon the mailing by first class
mail, postage prepaid, of such notices to holders of the bonds at their registered addresses as they appear in the
trustee’s records. For so long as the bonds are listed on the Euro MTF market of the Luxembourg Stock Exchange
and it is required by the rules of the Luxembourg Stock Exchange, publication of such notices to the holders of the
bonds in English in a leading newspaper having general circulation in Luxembourg (which is expected to be the
Luxemburger Wort) or, alternatively, on the website of the Luxembourg Stock Exchange (www.bourse.lu).
Trustee
The Bank of New York is the trustee under the indenture.
The indenture contains provisions for the indemnification of the trustee and for its relief from
responsibility. The obligations of the trustee to any holder are subject to such immunities and rights as are set forth
in the indenture.
Except during the continuance of an Event of Default, the trustee needs to perform only those duties that
are specifically set forth in the indenture and no others, and no implied covenants or obligations will be read into the
indenture against the trustee. In case an Event of Default has occurred and is continuing, the trustee shall exercise
those rights and powers vested in it by the indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of the
indenture will require the trustee to expend or risk its own funds or otherwise incur any financial liability in the
performance of its duties thereunder, or in the exercise of its rights or powers, unless it receives indemnity
satisfactory to it against any loss, liability or expense.
Lupatech Finance and its affiliates may from time to time enter into normal banking and trustee
relationships with the trustee and its affiliates.
Governing Law and Submission to Jurisdiction
The bonds and the indenture will be governed by the laws of the State of New York.
Each of the parties to the indenture will submit to the jurisdiction of the U.S. federal and New York State
courts located in the Borough of Manhattan, City and State of New York for purposes of all legal actions and
proceedings instituted in connection with the bonds and the indenture. Lupatech Finance and each of the Guarantors
has appointed National Registered Agents, Inc., 875 Avenue of the Americas, Suite 501, New York, New York
10001, as its authorized agent upon which process may be served in any such action.
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Currency Indemnity
U.S. dollars are the sole currency of account and payment for all sums payable by Lupatech Finance or any
of the Guarantors under or in connection with the bonds, including damages. Any amount received or recovered in a
currency other than U.S. dollars (whether as a result of, or of the enforcement of, a judgment or order of a court of
any jurisdiction, in the winding-up or dissolution of Lupatech Finance, any of the Guarantors or otherwise) by any
holder of a bond in respect of any sum expressed to be due to it from Lupatech Finance or any of the Guarantors will
only constitute a discharge to Lupatech Finance or such Guarantor, as the case may be, to the extent of the U.S.
dollar amount which the recipient is able to purchase with the amount so received or recovered in that other currency
on the date of that receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date
on which it is practicable to do so). If that U.S. dollar amount is less than the U.S. dollar amount expressed to be due
to the recipient under any bond, Lupatech Finance and each of the Guarantors will jointly and severally indemnify
such holder against any loss sustained by it as a result; and if the amount of U.S. dollars so purchased is greater than
the sum originally due to such holder, such holder will, by accepting a bond, be deemed to have agreed to repay
such excess. In any event, Lupatech Finance and each of the Guarantors will jointly and severally indemnify the
recipient against the cost of making any such purchase.
For the purposes of the preceding paragraph, it will be sufficient for the holder of a bond to certify in a
satisfactory manner (indicating the sources of information used) that it would have suffered a loss had an actual
purchase of U.S. dollars been made with the amount so received in that other currency on the date of receipt or
recovery (or, if a purchase of U.S. dollars on such date had not been practicable, on the first date on which it would
have been practicable, it being required that the need for a change of date be certified in the manner mentioned
above). These indemnities constitute a separate and independent obligation from the other obligations of Lupatech
Finance, will give rise to a separate and independent cause of action, will apply irrespective of any indulgence
granted by any holder of a bond and will continue in full force and effect despite any other judgment, order, claim or
proof for a liquidated amount in respect of any sum due under any bond.
Certain Definitions
The following is a summary of certain defined terms used in the indenture. Reference is made to the
indenture for the full definition of all such terms as well as other capitalized terms used herein for which no
definition is provided.
“Advance Transaction” means an advance from a financial institution involving either (a) a foreign
exchange contract (Adiantamento sobre Contrato de Câmbio, or ACC) or (b) an export contract (Adiantamento
sobre Contrato de Exportação, or ACE).
“Affiliate” means, with respect to any specified person, (a) any other person which, directly or indirectly, is
in control of, is controlled by or is under common control with such specified person or (b) any other person who is
a director or officer (i) of such specified person, (ii) of any subsidiary of such specified person or (iii) of any person
described in clause (a) above. For purposes of this definition, control of a person means the power, direct or indirect,
to direct or cause the direction of the management and policies of such person whether by contract or otherwise and
the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Brazil” means the Federative Republic of Brazil.
“Brazilian GAAP” means accounting practices prescribed by Brazilian Corporate Law, the rules and
regulations issued by the CVM and the accounting standards issued by the Brazilian Institute of Independent
Accountants (Instituto dos Auditores Independentes do Brasil), in each case as in effect from time to time.
“Business Day” means any day other than a Saturday, a Sunday or a legal holiday or a day on which
banking institutions or trust companies are authorized or obligated by law to close in The City of New York or São
Paulo, Brazil.
“Capital Lease Obligations” means, with respect to any person, any obligation which is required to be
classified and accounted for as a capital lease on the face of a balance sheet of such person prepared in accordance
with Brazilian GAAP; the amount of such obligation will be the capitalized amount thereof, determined in
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accordance with Brazilian GAAP; and the Stated Maturity thereof will be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
“Capital Stock” means, with respect to any person, any and all shares of stock, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in (however designated, whether voting or nonvoting),
such person’s equity including any preferred stock, but excluding any debt securities convertible into or
exchangeable for such equity.
“Consolidated Net Tangible Assets” means the total amount of assets of Lupatech and its Subsidiaries
already net of applicable depreciation, amortization and other valuation reserves, less (a) all current liabilities
excluding intercompany Debt and (b) all goodwill, trade names, trademarks, patents, and other intangibles as set
forth on the most recent financial statements delivered by Lupatech to the trustee in accordance with “Covenants—
Reporting Requirements”.
“CVM” means the Brazilian Securities Commission.
“Debt” means, with respect to any person, without duplication:
(a) the principal of and premium, if any, in respect of (i) indebtedness of such person for money borrowed
and (ii) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which
such person is responsible or liable;
(b) all Capital Lease Obligations of such person;
(c) all obligations of such person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such person and all obligations of such person under any title retention agreement
(but excluding trade accounts payable or other short-term obligations to suppliers payable within 180 days, in each
case arising in the ordinary course of business);
(d) all obligations of such person for the reimbursement of any obligor on any letter of credit, banker’s
acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations
(other than obligations described in clauses (a) through (c) above) entered into in the ordinary course of business of
such person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing
is reimbursed no later than the tenth Business Day following receipt by such person of a demand for reimbursement
following payment on the letter of credit);
(e) all Hedging Obligations of such persons;
(f) all obligations of the type referred to in clauses (a) through (d) of other persons and all dividends of
other persons for the payment of which, in either case, such person is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, including by means of any guarantee (other than obligations of other persons that
are customers or suppliers of such person for which such person is or becomes so responsible or liable in the
ordinary course of business to (but only to) the extent that such person does not, or is not required to, make payment
in respect thereof);
(g) all obligations of the type referred to in clauses (a) through (e) of other persons secured by any Lien on
any property or asset of such person (whether or not such obligation is assumed by such person), the amount of such
obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so
secured; and
(h) any other obligations of such person which are required to be, or are in such person’s financial
statements, recorded or treated as debt under Brazilian GAAP.
“Default” means any event which is, or after notice or passage of time or both would be, an Event of
Default.
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“guarantee” means any obligation, contingent or otherwise, of any person directly or indirectly
guaranteeing any Debt or other obligation of any person and any obligation, direct or indirect, contingent or
otherwise, of such person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation of such person (whether arising by virtue of partnership arrangements, or by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or pay, or to maintain financial statement
conditions or otherwise) or (b) entered into for purposes of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term “guarantee” will not include endorsements for collection or deposit in the ordinary
course of business. The term “guarantee” used as a verb has a corresponding meaning.
“Guarantors” means each of Lupatech S.A. and its subsidiaries Carbonox Fundição de Precisão Ltda.,
Cordoaria São Leopoldo Off Shore S.A., Esferomatic S.A., Gasoil Serviços Ltda., Itasa Industria y Tecnología en
Aceros S.A., Jefferson Solenoidbras Ltda., Jefferson Sudamericana S.A., K&S Tubular Services Ltda., Lupatech
Petroima Equipamentos para Petróleo Ltda., Metalúrgica Ipê Ltda., Metalúrgica Nova Americana Ltda., Mipel
Indústria e Comércio de Válvulas Ltda., Ocean Coating Revestimentos Ltda., Steelinject Injeção de Aços Ltda.,
Valmicro Indústria e Comércio de Válvulas Ltda. and Válvulas Worcester de Argentina S.A., or, collectively, the
Guarantors.
“Hedging Obligations” means, with respect to any person, the obligations of such person pursuant to any
interest rate swap agreement, foreign currency exchange agreement, interest rate collar agreement, option or futures
contract or other similar agreement or arrangement designed to protect such person against changes in interest rates
or foreign exchange rates.
“holder” means the person in whose name a bond is registered in the register.
“Investment” means, with respect to any person, any loan or advance to, any acquisition of Capital Stock,
equity interest, obligation or other security of, or capital contribution to or other investment in, such person.
“Lien” means any mortgage, pledge, security interest, conditional sale or other title retention agreement or
other similar lien.
“person” means any individual, corporation, partnership, joint venture, trust, unincorporated organization
or government or any agency, department or political subdivision thereof.
“Significant Subsidiary” means any Subsidiary of Lupatech S.A. which at the time of determination either
(a) had assets which, as of the date of Lupatech S.A.’s most recent quarterly consolidated balance sheet, constituted
at least 10% of Lupatech S.A.’s total assets on a consolidated basis as of such date, or (b) had revenues for the 12month
period ending on the date of Lupatech S.A.’s most recent quarterly consolidated statement of income which
constituted at least 10% of Lupatech S.A.’s total revenues on a consolidated basis for such period.
“Stated Maturity” means, with respect to any security, the date specified in such security as the fixed date
on which the principal of such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such security at the option of the holder
thereof upon the happening of any contingency unless such contingency has occurred).
“Subsidiary” means any corporation, association, partnership or other business entity of which more than
50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (a) Lupatech S.A., (b) Lupatech S.A. and one or
more Subsidiaries or (c) one or more Subsidiaries.
“Wholly-owned Subsidiary” means a Subsidiary all of the Capital Stock of which (other than directors’
qualifying shares) is owned by Lupatech S.A. or another Wholly-owned Subsidiary.
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TAXATION
The following discussion summarizes certain Cayman Islands, Brazilian, U.S. federal income, and
European Union income tax considerations that may be relevant to the ownership and disposition of the bonds. This
summary does not describe all of the tax considerations that may be relevant to you or your situation, particularly if
you are subject to special tax rules. You should consult your tax advisors about the tax consequences of investing in
and holding the bonds, including the relevance to your particular situation of the considerations discussed below, as
well as of state, local and other tax laws.
Brazilian Taxation
The following discussion summarizes the main Brazilian tax considerations relating to the acquisition,
ownership and disposition of the bonds by an individual, entity, trust or organization that is not resident or domiciled
in Brazil for purposes of Brazilian taxation (“Non-Resident Holder”). The following discussion does not address all
of the Brazilian tax considerations relating to the acquisition, ownership and disposition of the bonds applicable to
any particular Non-Resident Holder. Therefore, each Non-Resident Holder should consult his/her/its own tax
advisor concerning the Brazilian tax consequences in respect of the bonds.
Payments on the bonds made by Lupatech Finance and gains on the bonds
Generally, a holder that is a Non-Resident Holder is taxed in Brazil only when income is derived from
Brazilian sources or gains are realized on the disposition of assets located in Brazil. Therefore, based on the fact
that Lupatech Finance is considered for tax purposes as domiciled abroad, any income (including interest and
original issue discount, if any) paid by Lupatech Finance in respect of the bonds issued by it in favor of a Non-
Resident Holder are not subject to withholding or deduction in respect of Brazilian income tax or any other taxes,
duties, assessments or governmental charges in Brazil, provided that such payments are made with funds held by
Lupatech Finance outside of Brazil.
Capital gains generated outside Brazil as a result of a transaction between two non-residents of Brazil with
assets located in Brazil are subject to tax in Brazil, according to article 26 of Law No. 10,833, enacted on
December 29, 2003. Based on the fact that the bonds are issued abroad and, thus, the bonds will not fall within the
definition of assets located in Brazil for purposes of Law No. 10,833, gains on the sale or other disposition of the
bonds made outside Brazil by a Non-Resident Holder to another Non-Resident Holder are not subject to Brazilian
taxes. Notwithstanding, considering the general and unclear scope of this legislation and the absence of judicial
guidance in respect thereof, we cannot assure prospective investors that such interpretation of this law will prevail in
the courts of Brazil.
Gains recognized by a Non-Resident Holder from the sale or other disposition of the bonds in case the
bonds are deemed to be located in Brazil may be subject to income tax in Brazil at a rate of 15%, or 25%, if such
Non-Resident Holder is located in a tax haven jurisdiction (i.e., countries which do not impose any income tax or
which impose it at a maximum rate lower than 20% or where the laws impose restrictions on the disclosure of
ownership of securities), unless a lower rate is provided for in an applicable tax treaty between Brazil and the
country where the Non-Resident Holder has its domicile.
Payments on the bonds made by Lupatech
If, by any chance, any Guarantor which is considered resident or domiciled in Brazil (“Brazilian
Guarantor”)—such as Lupatech—is required to carry out any payment as a guarantor in connection with the bonds
to a Non-Resident Holder, Brazilian tax authorities could attempt to impose withholding income at maximum rate of
25%, being the rate variable depending on the nature of the payment and the domicile of the respective Non-
Resident Holder. Lower income tax rates may be provided for in applicable tax treaties. There is some uncertainty
regarding the applicable tax treatment to payments of the principal amount of the bonds by a Brazilian Guarantor to
Non-Resident Holders. Amounts remitted abroad in payment of principal of the bonds by a Brazilian Guarantor to
Non-Resident Holders could be subject to Brazilian withholding income tax at a rate of up to 25%.
In the event a Brazilian Guarantor is required to carry out any payment as a guarantor in connection with
the bonds to a Non-Resident Holder, the Brazilian Guarantor would be required to pay such additional amounts as
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may be necessary to ensure that the net amounts receivable by the Non-Brazilian Holder after withholding for taxes
will equal the amounts that would have been payable in the absence of such withholding.
Because the Brazilian government did not approve the extension of the Temporary Contribution on
Financial Transactions, or CPMF Tax, it is no longer in effect as of December 31, 2007. However, during the time
in which such tax was in effect, it was levied on transactions carried out by a holder of securities in Brazil that
resulted in the transfer of reais from an account maintained by such holder (or its custodian) with a Brazilian
financial institution at the rate of 0.38%.
No assurance can be given that the CPMF Tax will not be imposed again in the future. Nevertheless, the
Brazilian government implemented some modifications to the Tax on Financial Transactions (Imposto sobre
Operações de Crédito, Câmbio e Seguro, ou relativas a Títulos e Valores Mobiliários) or IOF, to reduce the impact
of the termination of the CPMF Tax collection, as described below.
Brazilian law imposes a Tax on Foreign Exchange Transactions, or IOF/Exchange Tax, due on the
conversion of reais into foreign currency and on the conversion of foreign currency into reais. Currently, as a
substitute for the CPMF Tax, the IOF/Exchange Tax rate for almost all foreign currency exchange transactions is
0.38%. The Brazilian government is permitted to increase this rate at any time up to 25%. However, any increase in
rates may only apply to future transactions.
Generally, there is no stamp, transfer or other similar tax in Brazil with respect to the transfer, assignment
or sale of any debt instrument outside Brazil (including the bonds) nor any inheritance, gift or succession tax
applicable to the ownership, transfer or disposition of the bonds, except for gift and inheritance taxes imposed in
some states of Brazil on gifts and bequests by individuals or entities not domiciled or residing in Brazil to
individuals or entities domiciled or residing within such Brazilian states.
THE ABOVE DESCRIPTION IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS
OF ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF BONDS. PROSPECTIVE
PURCHASERS OF THE BONDS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.
U.S. Federal Income Taxation
ANY DISCUSSION OF U.S. FEDERAL INCOME TAX ISSUES SET FORTH IN THIS OFFERING
CIRCULAR WAS WRITTEN IN CONNECTION WITH THE PROMOTION AND MARKETING OF THE
TRANSACTIONS DESCRIBED IN THIS OFFERING CIRCULAR. SUCH DISCUSSION WAS NOT
INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, BY ANY PERSON FOR THE
PURPOSE OF AVOIDING ANY U.S. FEDERAL INCOME TAX PENALTIES THAT MAY BE IMPOSED ON
SUCH PERSON. EACH INVESTOR SHOULD SEEK ADVICE BASED ON ITS PARTICULAR
CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
General
The following summary describes the principal U.S. federal income tax consequences to “U.S. Holders” (as
defined below) of purchasing, holding and disposing of the bonds. This summary is based on the U.S. Internal
Revenue Code of 1986, as amended, or the “Code”, its legislative history, existing final, temporary and proposed
Treasury Regulations, administrative pronouncements by the United States Internal Revenue Service, or “IRS,” and
judicial decisions, all as currently in effect and all of which are subject to change (possibly on a retroactive basis)
and to different interpretations. This summary only applies to bonds held as capital assets (generally, for
investment) and does not discuss all of the tax consequences that may be relevant to a holder in light of its particular
circumstances or to holders subject to special rules, such as:
• financial institutions;
• insurance companies;
• tax-exempt organizations;
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• real estate investment trusts;
• regulated investment companies;
• pass-through entities for U.S. federal income tax purposes (such as entities treated as partnerships and
grantor trusts for U.S. federal income tax purposes) or investors who hold the bonds through passthrough
entities;
• U.S. expatriates;
• persons who own 10% or more of the outstanding bonds for U.S. federal income tax purposes;
• dealers or traders in securities or currencies;
• persons that will hold the bonds as a position in a “straddle” or as a part of a “hedging,” “conversion”
or “integrated” transaction for U.S. federal income tax purposes; or
• persons that have a functional currency other than the U.S. dollar.
Moreover, this description does not address the U.S. federal estate and gift tax or alternative minimum tax
consequences of the acquisition, ownership or disposition of bonds, and does not discuss any aspect of state, local or
foreign tax law. Persons considering the purchase of the bonds should consult their own tax advisers with regard to
the application of the U.S. federal income tax laws to their particular situations as well as any tax consequences
arising under the laws of any state, local or foreign taxing jurisdictions.
For purposes of this summary, a “U.S. Holder” is a beneficial owner of the bonds who, for U.S. federal
income tax purposes, is:
• an individual citizen or resident of the United States;
• a corporation created or organized in or under the laws of the United States or any state thereof (or the
District of Columbia);
• an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
• a trust if such trust validly elects to be treated as a U.S. person for U.S. federal income tax purposes or
if (i) a court within the United States is able to exercise primary supervision over its administration and
(ii) one or more U.S. persons have the authority to control all of the substantial decisions of such trust.
If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds the
bonds, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the
activities of the partnership. Such a partner or partnership should consult its tax advisor as to its tax consequences.
The issuer believes that it would likely be classified as a PFIC, and thus, you should review the discussion
below under “—Passive Foreign Investment Company Considerations.” As discussed therein if the Issuer is
classified as a PFIC, a U.S. Holder could be subject to additional U.S. federal income taxes on gain recognized with
respect to the bonds, as well as an interest charge on certain taxes treated as having been deferred under the PFIC
rules.
U.S. Federal Income Tax Characterization of the Bonds
For U.S. federal income tax purposes, one of the primary characteristics used to distinguish the treatment of
an instrument as debt from an instrument treated as equity is whether the instrument, according to its terms, involves
an unconditional promise to pay a fixed sum certain on a particular date in the future. The Issuer believes that the
bonds, due to their perpetual term, should be treated as equity for U.S. federal income tax purposes and the
following discussion assumes such treatment. However, no assurance can be given that the IRS will not assert that
the bonds should be treated as indebtedness of the Issuer or in some other manner for U.S. federal income tax
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purposes. If the bonds were treated as indebtedness of the Issuer for U.S. federal income tax purposes, the timing,
amount and character of income, gain and loss recognized by a U.S. Holder could be different. Holders should
consult their own tax advisors regarding the treatment of the Bonds as indebtedness under their particular
circumstances.
Payments of Interest
Subject to the discussion below under “—Passive Foreign Investment Company Considerations,” the gross
amount of any payment under the bonds that is referred to thereunder as “interest,” including any additional amounts
(collectively, “Periodic Payments”), before reduction for any Brazilian taxes withheld therefrom, will be includible
in gross income by a U.S. Holder as dividend income to the extent such Periodic Payments are paid out of the
current or accumulated earnings and profits of our company as determined under U.S. federal income tax principles.
Dividends paid to corporate U.S. Holders will not be eligible for the dividends received deduction generally allowed
to corporate U.S. Holders. Additionally, we currently believe that such dividends will not be eligible for U.S.
federal income taxation at the lower rates available to certain non-corporate U.S. Holders in respect of “qualified
dividend income”. You should consult your own tax advisors regarding the application of this law to your particular
circumstances.
Subject to the discussion below under “—Passive Foreign Investment Company Considerations,” to the
extent, if any, that the amount of any Periodic Payments by the Issuer exceeds the Issuer’s current and accumulated
earnings and profits as determined under U.S. federal income tax principles, such excess will be treated first as a
tax-free return of the U.S. Holder’s adjusted tax basis in the bonds and thereafter as capital gain. Because the Issuer
does not compute earnings and profits under U.S. federal income tax principles, all payments of Periodic Payments
on the bonds generally will be presumed to be taxable dividends for U.S. federal income tax purposes.
Periodic Payments received by a U.S. Holder with respect to the bonds will be treated as foreign source
income, which may be relevant in calculating such U.S. Holder’s foreign tax credit limitation. A U.S. Holder will
be entitled, subject to a number of complex limitations and conditions, to claim a U.S. foreign tax credit in respect of
any Brazilian or other foreign income taxes imposed on Periodic Payments received on the bonds. U.S. Holders
who do not elect to claim a U.S. foreign tax credit may instead claim a deduction in respect of such foreign income
taxes. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of
income. For this purpose, Periodic Payments made by the Issuer generally will constitute “passive category
income,” in the case of most U.S. Holders whose taxable year is the calendar year. U.S. Holders with taxable years
other than the calendar year should consult with their tax advisors in this regard. In certain circumstances, if a U.S.
Holder holds bonds for less than a specified minimum period during which it is not protected from risk of loss, or
such U.S. Holder is obligated to make payments related to the Periodic Payments received on the bonds, then such
U.S. Holder will not be allowed a foreign tax credit for foreign income taxes imposed on Periodic Payments. The
rules governing the foreign tax credit are complex. U.S. Holders should consult their tax advisors regarding the
availability of the foreign tax credit under their particular circumstances.
Sale or Other Taxable Disposition of Bonds
Subject to the discussion below under “—Passive Foreign Investment Company Considerations,” a U.S.
Holder generally will recognize gain or loss on the sale or other taxable disposition of the bonds in an amount equal
to the difference between the amount realized on such sale or exchange and the U.S. Holder’s adjusted tax basis in
the bonds. The initial tax basis of the bonds to a U.S. Holder will be the purchase price determined on the date of
purchase. Subject to the discussion below under “—Passive Foreign Investment Company Considerations,” such
gain or loss will be capital gain or loss and will be long-term gain or loss if the bonds have been held for more than
one year. In the case of certain non-corporate U.S. Holders, the maximum marginal U.S. federal income tax rate
applicable to long-term capital gain will be lower than the maximum marginal U.S. federal income tax rate
applicable to ordinary income. The deductibility of capital losses is subject to limitations under the Code.
Gain or loss, if any, recognized by a U.S. Holder generally will be treated as U.S. source income or loss for
U.S. foreign tax credit purposes. Consequently, a U.S. Holder may not be able to use the foreign tax credit arising
from any Brazilian or other foreign income tax imposed on the disposition of a note unless such credit can be
applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources.
Alternatively, in some circumstances, the U.S. Holder may take a deduction for such foreign income tax if the U.S.
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Holder elects to deduct all foreign income taxes paid or accrued, although in that case, all foreign income taxes paid
or accrued by such U.S. Holder during the tax year will be deductible and such U.S. Holder will not be entitled to
claim a foreign tax credit with respect to such taxes.
Passive Foreign Investment Company Considerations
A non-U.S. corporation will be classified as a “passive foreign investment company,” or a “PFIC,” for U.S.
federal income tax purposes in any taxable year in which, after applying certain look-through rules, either (1) at least
75 percent of its gross income is “passive income” or (2) at least 50 percent of the average value of its gross assets is
attributable to assets that produce “passive income” or are held for the production of “passive income.” Passive
income for this purpose generally includes dividends, interest, royalties, rents and gains from commodities and
securities transactions. The Issuer is a special purpose company whose activities will be limited to providing
financing for the activities of certain related subsidiaries. As such the PFIC determination for the Issuer will depend
in large part on the terms of its inter-company financing arrangements, and the nature of the income and operations
of the related companies that obtain financing from the Issuer. Based upon such inter-company financing
agreements, the Issuer’s current gross assets and gross income, the nature of the Issuer’s business and the Issuer’s
corporate structure, the Issuer likely would be classified as a PFIC for current and foreseeable future taxable years.
The PFIC determination for the Issuer is not entirely clear due to the complexity and application of the relevant rules
and is affected by a number of factors that are subject to change including the business plans of Lupatech and the
operations of Issuer.
For any taxable year in which the Issuer is treated as a PFIC, absent the making of the election described
below, a U.S. Holder would be subject to special rules (and may be subject to increased tax liability and form filing
requirements) with respect to (a) any gain realized on the sale or other disposition of bonds, and (b) any “excess
distribution” made by the Issuer to the U.S. Holder (generally, any distribution during a taxable year in which
distributions to the U.S. Holder on the bonds exceed 125% of the average annual distributions the U.S. Holder
received on the bonds during the preceding three taxable years or, if shorter, the U.S. Holder’s holding period for the
bonds). Under those rules, (a) the gain or excess distribution would be allocated ratably over the U.S. Holder’s
holding period for the bonds, (b) the amount allocated to the taxable year in which the gain or excess distribution is
realized and to taxable years before the first day on which the Issuer became a PFIC would be taxable as ordinary
income, (c) the amount allocated to each prior year in which the Issuer was a PFIC would be subject to U.S. federal
income tax at the highest tax rate in effect for that year and (d) the interest charge generally applicable to
underpayments of U.S. federal income tax would be imposed in respect of the tax attributable to each prior year in
which the Issuer was a PFIC.
For any taxable year in which the Issuer is a PFIC, a U.S. Holder may be able to avoid the “interest charge
regime” described above if the U.S. Holder timely makes an election to treat the Issuer as a “qualified electing
fund,” or a “QEF”. Generally, a QEF election should be made on or before the due date for filing the electing U.S.
Holder’s U.S. federal income tax return for the first taxable year in which the shares are held by such U.S. Holder
and the Issuer is classified as a PFIC. In general, a U.S. Holder must make a QEF election on IRS Form 8621,
attaching a copy of such form to its U.S. federal income tax return for the first taxable year for which it held its
common shares for which the Issuer was classified as a PFIC. The Issuer will use its reasonable commercial efforts
to provide the PFIC annual information statement with respect to the bonds to any shareholder or former shareholder
who requests it.
If a timely QEF election is made in the manner described above, the electing U.S. Holder generally will
avoid the consequences of the Issuer being classified as a PFIC described above but will be required to annually
include in gross income (i) as ordinary income, a pro rata share of our ordinary earnings, and (ii) as long-term
capital gain, a pro rata share of our net capital gain, in either case, whether or not distributed by the Issuer in each
year that the Issuer is classified as a PFIC. Based upon the terms of the bonds, a U.S. Holder’s annual QEF
inclusions typically would be expected to equal the stated coupons of the bonds in amount (although a difference in
timing could arise for certain U.S. Holders). In the event that the Issuer incurs a net loss for a taxable year, such loss
will not be available as a deduction to an electing U.S. Holder, and may not be carried forward or back in computing
the Issuer’s ordinary earnings and net capital gain in other taxable years. In certain cases in which a QEF does not
distribute all of its earnings in a taxable year, electing U.S. Holders may also be permitted to elect to defer the
payment of some or all of their U.S. federal income taxes on the QEF’s undistributed earnings, subject to an interest
charge on the deferred tax amount.
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A U.S. Holder’s adjusted tax basis in the Bonds will be increased by the amount included in the U.S.
Holder’s gross income under the QEF rules described above. Any subsequent distribution in respect of the bonds
generally will not be taxable to the extent of the prior inclusions in gross income under the QEF rules described
above, and interest will reduce the U.S. Holder’s adjusted tax basis in the shares.
Alternatively, it may be possible to make a mark-to-market election with respect to the notes, which may
help mitigate the tax consequences resulting from the Issuer’s likely status as a PFIC. U.S. Holders should consult
their tax advisors regarding the availability of, and consequences of making, the mark-to-market election.
IN MANY CASES, APPLICATION OF THE INTEREST CHARGE REGIME WILL HAVE
SUBSTANTIALLY MORE ONEROUS U.S. FEDERAL INCOME TAX CONSEQUENCES THAN WOULD
RESULT TO A U.S. HOLDER IF A TIMELY QEF ELECTION WERE MADE. ACCORDINGLY, FOR
ANY TAXABLE YEAR IN WHICH THE ISSUER IS TREATED AS A PFIC, U.S. HOLDERS OF THE
BONDS ARE URGED TO CONSULT THEIR TAX ADVISORS AND TO CONSIDER CAREFULLY
WHETHER TO MAKE A QEF ELECTION, AND THE CONSEQUENCES OF NOT MAKING SUCH AN
ELECTION, WITH RESPECT TO AN INVESTMENT IN THE BONDS.
Investment in a Controlled Foreign Corporation
A U.S. Holder considered to own 10 percent or more of voting shares of Issuer could be subject to special
rules that include current income inclusion. Given the special nature of the Issuer, what may constitute voting stock
isn’t entirely clear. U.S. Holders are encouraged to consult their own tax advisors regarding the treatment of the
Issuer under their personal circumstances.
Backup Withholding Tax and Information Reporting Requirements
U.S. backup withholding tax and information reporting requirements may apply to certain payments to
certain non-corporate U.S. Holders. Information reporting generally will apply to the Periodic Payments on the
bonds, and to proceeds from the sale or redemption of bonds made within the United States or by a U.S. payor or
U.S. middleman, to a U.S. Holder of bonds (other than an exempt recipient), a payee that is not a U.S. person that
provides an appropriate certification and certain other persons. A payor will be required to withhold backup
withholding tax from any Periodic Payments on the bonds, or the proceeds from the sale or redemption of bonds
within the United States or by a U.S. payor or U.S. middleman, to a U.S. Holder, (other than an exempt recipient), if
such U.S. Holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or
establish an exemption from, such backup withholding tax requirements. The backup withholding tax rate is
currently 28%. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding
rules from a payment to a U.S. Holder will be credited against the U.S. Holder’s U.S. federal income tax liability, if
any, or refunded, provided that the required information is furnished to the IRS.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF
ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF BONDS. PROSPECTIVE PURCHASERS
OF BONDS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX
CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.
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EUROPEAN UNION DIRECTIVE ON TAXATION OF SAVINGS INCOME
The European Union has adopted a Directive regarding the taxation of savings income (the “EU Tax
Directive”). Countries that are member states of the European Union (“Member States”) are required to provide to
the tax authorities of other Member States details of payments of interest and other similar income paid by a person
to an individual in another Member State, except that Austria, Belgium and Luxembourg will instead impose a
withholding system for a transitional period unless during such period they elect otherwise.
In certain circumstances, the withholding tax provisions of the EU Tax Directive could apply to payments
on notes that are made or received in Austria, Belgium or Luxembourg. It is expected that holders will be able to
take steps to keep payments from being subject to such withholding tax, for example, by using a procedure (or
procedures) to be made available pursuant to the EU Tax Directive (namely, releasing the paying agent of its
professional secrecy duty to the extent permitted by law or by producing an appropriate tax certificate), or by
receiving payments from a paying agent within the European Union but outside Austria, Belgium and Luxembourg,
although we cannot preclude the possibility that withholding tax will eventually be levied in some situations. In any
event, details of payments made on bonds from a Member State will likely have to be reported to tax or other
relevant authorities under the EU Tax Directive or local law, including, for example, to Member States in cases
where recipients are located in the jurisdiction where payments are actually made.
Cayman Islands Taxation Considerations
The following discussion of certain Cayman Islands income tax consequences of an investment in the
bonds is based on the advice of Maples and Calder as to Cayman Islands law. The discussion is a general summary
of present law, which is subject to prospective and retroactive change. It is not intended as tax advice, does not
consider any investor’s particular circumstances, and does not consider tax consequences other than those arising
under Cayman Islands law.
The following is a general summary of Cayman Islands taxation in relation to the bonds.
UNDER EXISTING CAYMAN ISLANDS LAWS:
(i) Payments of interest and principal on the bonds will not be subject to taxation in the Cayman Islands and
no withholding will be required on the payment of interest and principal to any holder of the bonds nor will gains
derived from the disposal of the bonds be subject to Cayman Islands income or corporation tax. The Cayman
Islands currently have no income, corporation or capital gains tax and no estate duty, inheritance tax or gift tax.
(ii) No stamp duty is payable in respect of the issue of the bonds. An instrument of transfer in respect of a
bond is stampable if executed in or brought into the Cayman Islands.
Lupatech Finance has been incorporated under the laws of the Cayman Islands as an exempted company
and, as such, has obtained an undertaking from the Governor in Cabinet of the Cayman Islands in the following
form:
“The Tax Concessions Law
1999 Revision
Undertaking as to Tax Concessions”
In accordance with the provision of Section 6 of The Tax Concession Law (1999 Revision), the Governor
in Cabinet undertakes with:
Lupatech Finance Limited “the Company”
(a) that no law which is hereafter enacted in the Islands imposing any tax to be levied on profits, income,
gains or appreciations shall apply to the Company or its operations; and
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(b) in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature
of estate duty or inheritance tax shall be payable:
(i) on or in respect of the shares, debentures or other obligations of the Company; or
(ii) by way of the withholding in whole or part, of any relevant payment as defined in Section 6(3) of the
Tax Concessions Law (1999 Revision).
These concessions shall be for a period of twenty years from the 3 rd day of July 2007.”
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PLAN OF DISTRIBUTION
Lupatech Finance intends to offer the new bonds through the initial purchasers. Subject to the terms and
conditions contained in a purchase agreement dated June 23, 2008, among Lupatech Finance, the Guarantors and the
initial purchasers, Lupatech Finance has agreed to sell to the initial purchasers, and the initial purchasers have
agreed to purchase from Lupatech Finance, all of the bonds being sold pursuant to the purchase agreement. The
initial purchasers have advised us that they propose initially to offer the bonds at the offering price set forth on the
cover page of this offering circular.
Initial Purchasers
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Principal Amount
Citigroup Global Markets Limited.................................................................................................................................... US$37,500,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................................................................................................................ US$37,500,000
Total................................................................................................................................................................................... US$75,000,000
We have agreed to indemnify the initial purchasers against certain liabilities, including liabilities under the
U.S. Securities Act of 1933, or to contribute to payments the initial purchasers may be required to make in respect of
those liabilities.
The initial purchasers are offering the bonds, subject to prior sale, when, as and if issued to and accepted by
it, subject to approval of legal matters by its U.S. and Brazilian counsel, including the validity of the bonds, and
other conditions contained in the purchase agreement, such as the receipt by the initial purchasers of officers’
certificates and legal opinions. The initial purchasers reserve the right to withdraw, cancel or modify offers to
investors and to reject orders in whole or in part.
No Registration of Bonds
The initial purchasers propose to offer the bonds for resale in transactions not requiring registration under
the Securities Act or applicable state securities laws, including sales pursuant to Regulation S. The initial purchasers
will not offer or sell the bonds except pursuant to offers and sales to non-U.S. persons that occur outside the United
States within the meaning of Regulation S.
Bonds sold pursuant to Regulation S may not be offered or resold in the United States or to U.S. persons
(as defined in Regulation S), except under an exemption from the registration requirements of the Securities Act or
under a registration statement declared effective under the Securities Act.
Each purchaser of the bonds will be deemed to have made acknowledgments, representations and
agreements as described under “Notice to Investors.”
Initial Purchaser’s Representations
In the purchase agreement, each of the initial purchasers has represented, warranted, acknowledged and
agreed that:
• it has not offered or sold and, prior to the expiry of a period of six months from the closing date, will
not offer or sell any bonds included in this offering to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995 or, from July 1, 2005, the Financial
Services and Markets Act 2000, or FSMA;
• it has only communicated and caused to be communicated and will only communicate or cause to be
communicated any invitation or inducement to engage in investment activity (within the meaning of
section 21 of the FSMA) received by it in connection with the issue or sale of any bonds included in
this offering in circumstances in which section 21(1) of the FSMA does not apply to us;

• it has complied and will comply with all applicable provisions of the FSMA with respect to anything
done by it in relation to the bonds included in this offering in, from or otherwise involving the United
Kingdom;
• the offer in The Netherlands of the bonds included in this offering is exclusively limited to persons
who trade or invest in securities in the conduct of a profession or business (which include banks,
stockbrokers, insurance companies, pension funds, other institutional investors and finance companies
and treasury departments of large enterprises);
• the contents of this offering circular have not been reviewed by any regulatory authority in Hong Kong
nor has a copy of it been registered by the Registrar of Companies in Hong Kong. Accordingly, it has
not offered or sold and will not offer or sell bonds in Hong Kong by means of this offering circular or
any other document, other than to persons whose ordinary business involves buying or selling shares or
debentures, whether as principal or agent or in circumstances which do not constitute an offer to the
public within the meaning of the Companies Ordinance (Cap. 32 of the Laws of Hong Kong SAR), and
it has not issued or held for the purpose of issue in Hong Kong or elsewhere and will not issue or hold
for the purpose of issue in Hong Kong this offering circular, any other offering material or any
advertisement, invitation or document relating to the bonds, which is directed at, or the contents of
which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under
the securities laws of Hong Kong) other than with respect to bonds which are or are intended to be
disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning
of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong SAR) and any rules
made thereunder;
• the bonds offered through this offering circular have not been registered under the Securities and
Exchange Law of Japan, and it has not offered or sold and will not offer or sell, directly or indirectly,
the bonds in Japan or to or for the account of any resident of Japan, except (1) pursuant to an
exemption from the registration requirements of the Securities and Exchange Law of Japan and (2) in
compliance with any other applicable requirements of Japanese law;
• this offering circular has not been registered as a prospectus with the Monetary Authority of Singapore
and the bonds are offered in Singapore pursuant to exemptions invoked under Section 274 and/or
Section 275 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA. Accordingly, this
offering circular or any other document or material in connection with the offer or sale, or invitation
for subscription or purchase, of the bonds, may not be circulated or distributed, nor may the bonds be
offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or
indirectly, to the public or any member of the public in Singapore other than (1) to an institutional
investor or other person specified in Section 274 of the SFA, (2) to a sophisticated investor, and in
accordance with the conditions, specified in Section 275 of the SFA or (3) otherwise pursuant to, and
in accordance with the conditions of, any other applicable provision of the SFA; and
• it has not offered or sold, and will not offer or sell any bonds in Brazil, except in circumstances that do
not constitute a public offering or distribution under Brazilian laws and regulations. The bonds have
not been, and will not be, registered with the CVM.
No Sale of Similar Securities
We have agreed, with exceptions, not to sell or transfer any debt securities for 60 days after the date of this
offering circular without first obtaining the written consent of Citigroup Global Markets Limited and Merrill Lynch,
Pierce, Fenner & Smith Incorporated. Specifically, we have agreed not to directly or indirectly (subject to
exceptions):
• offer, pledge, sell, or contract to sell any debt securities;
• sell any option or contract to purchase any debt securities;
• purchase any option or contract to sell any debt securities;
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• grant any option, right or warrant for sale of any debt securities;
• file a registration statement for any debt securities; or
• lend or otherwise dispose of or transfer any debt securities.
This lockup provision applies to debt securities or any securities convertible into or exercisable or
exchangeable for debt securities.
New Issue of Bonds
The initial purchasers have advised us that they presently intend to make a market in the bonds after
completion of this offering. However, they are under no obligation to do so and may discontinue any marketmaking
activities at any time without any notice.
The new bonds will be listed on the Luxembourg Stock Exchange and traded on the Euro MTF market of
the Luxembourg Stock Exchange. The new bonds will be eligible for trading in the PORTAL Market, the National
Association of Securities Dealers’ market for designated securities through an automated quotation and
communication system that facilitates private offerings, resales, trading, clearing and settlement of securities eligible
for resale under Rule 144A. However, neither we nor the initial purchasers can assure you that a liquid or active
public trading market for the bonds will develop. If an active trading market for the bonds does not develop, the
market price and liquidity of the bonds may be adversely affected. If the bonds are traded, they may trade at a
discount from their offering price, depending on prevailing interest rates, the market for similar securities, our
financial performance and other factors. See “Risk Factors—Risks Relating to the Bonds—We cannot assure you
that an active trading market for the bonds will develop.”
Price Stabilization and Short Positions
In connection with the offering, Citigroup Global Markets Limited, or Citigroup, and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, or Merrill Lynch, may engage in transactions that stabilize the market price of the
bonds. These transactions consist of bids or purchases to peg, fix or maintain the price of the bonds. If Citigroup or
Merrill Lynch creates a short position in the bonds in connection with the offering, (i.e., if they sell more bonds than
are listed on the cover page of this offering circular), Citigroup or Merrill Lynch may reduce that short position by
purchasing bonds in the open market. Purchases of a security to stabilize the price or to reduce a short position may
cause the price of the security to be higher than it might be in the absence of such purchases.
The initial purchasers do not make any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the bonds. In addition, Citigroup or Merrill
Lynch does not make any representation that it will engage in these transactions or that these transactions, once
commenced, will not be discontinued without notice.
Other Relationships
The initial purchasers have engaged in, and may in the future engage in, investment banking and other
commercial dealings in the ordinary course of business with us. The initial purchasers have received or will receive
customary fees and commissions for these transactions.
Stamp Taxes
Purchasers of any bonds sold outside the United States may be required to pay stamp taxes and other
charges in accordance with the laws and practices of the country of purchase in addition to the offering price paid by
such purchasers for such bonds.
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FORM OF BONDS
Bonds sold in offshore transactions in reliance on Regulation S (including the new bonds) will be
represented by a permanent global bond or bonds in fully registered form without interest coupons (the “Regulation
S Global Bond”) and will be registered in the name of a nominee of DTC and deposited with a custodian for DTC.
Bonds sold in reliance on Rule 144A (which includes certain existing bonds) are represented by a permanent global
bond or bonds in fully registered form without interest coupons (the “Restricted Global Bond” and, together with the
Regulation S Global Bond, the “global bonds”) and deposited with a custodian for DTC and registered in the name
of a nominee of DTC.
The bonds are subject to certain restrictions on transfer as described in “Notice to Investors.”. Beneficial
interests in the Restricted Global Bond may be transferred to a person who takes delivery in the form of an interest
in the Regulation S Global Bond only upon receipt by the principal paying agent of a written certification from the
transferor (in the form provided in the indenture) to the effect that such transfer is being made in accordance with
Rule 903 or Rule 904 of Regulation S or Rule 144 under the Securities Act (a “Regulation S Global Bond
Certificate”). Any beneficial interest in one of the global bonds that is transferred to a person who takes delivery in
the form of an interest in the other global bond will, upon transfer, cease to be an interest in such global bond and
become an interest in the other global bond and, accordingly, will thereafter be subject to all transfer restrictions and
other procedures applicable to beneficial interests in such other global bond for as long as it remains an interest.
Except in the limited circumstances described under “—Global Bonds,” owners of the beneficial interests
in global bonds will not be entitled to receive physical delivery of individual definitive bonds. The bonds are not
issuable in bearer form.
Global Bonds
Upon the issuance of the Regulation S Global Bond and the Restricted Global Bond, DTC will credit (and
has already credited, with respect to the existing bonds), on its internal system, the respective principal amount of
the individual beneficial interests represented by such global bond to the accounts of persons who have accounts
with DTC. Such accounts initially will be designated by or on behalf of the initial purchasers. Ownership of
beneficial interests in a global bond will be limited to persons who have accounts with DTC (“DTC Participants”) or
persons who hold interests through DTC Participants. Ownership of beneficial interests in the global bonds will be
shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of DTC Participants) and the records of DTC Participants (with respect to
interests of persons other than DTC Participants).
So long as DTC, or its nominee, is the registered owner or holder of a global bond, DTC or such nominee,
as the case may be, will be considered the sole owner or holder of the bonds represented by such global bond for all
purposes under the indenture and the bonds. Unless DTC notifies Lupatech that it is unwilling or unable to continue
as depositary for a global bond, or ceases to be a “clearing agency” registered under the Exchange Act, or any of the
bonds becomes immediately due and payable in accordance with “Description of Bonds—Events of Default,”
owners of beneficial interests in a global bond will not be entitled to have any portions of such global bond
registered in their names, will not receive or be entitled to receive physical delivery of bonds in individual definitive
form and will not be considered the owners or holders of the global bond (or any bonds represented thereby) under
the indenture or the bonds. In addition, no beneficial owner of an interest in a global bond will be able to transfer
that interest except in accordance with DTC’s applicable procedures (in addition to those under the indenture
referred to herein and, if applicable, those of Euroclear and Clearstream Luxembourg).
Investors may hold interests in the Regulation S Global Bond through Euroclear or Clearstream
Luxembourg, if they are participants in such systems. Euroclear and Clearstream Luxembourg will hold interests in
the Regulation S Global Bond on behalf of their account holders through customers’ securities accounts in their
respective names on the books of their respective depositaries, which, in turn, will hold such interests in the
Regulation S Global Bond in customers’ securities accounts in the depositaries’ names on the books of DTC.
Investors may hold their interests in the Restricted Global Bond directly through DTC, if they are DTC Participants,
or indirectly through organizations which are DTC Participants.
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Payments of the principal of and interest on global bonds will be made to DTC or its nominee as the
registered owner thereof. Neither Lupatech nor any initial purchaser will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial ownership interests in the global bonds
or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
Lupatech anticipates that DTC or its nominee, upon receipt of any payment of principal or interest in
respect of a global bond representing any bonds held by its nominee, will immediately credit DTC Participants’
accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of
such global bond as shown on the records of DTC or its nominee. Lupatech also expects that payments by DTC
Participants to owners of beneficial interests in such global bond held through such DTC Participants will be
governed by standing instructions and customary practices, as is now the case with securities held for the accounts
of customers registered in the names of nominees for such customers. Such payments will be the responsibility of
such DTC Participants.
Transfers between DTC Participants will be effected in accordance with DTC’s procedures, and will be
settled in same-day funds. The laws of some jurisdictions require that certain persons take physical delivery of
securities in definitive form. Consequently, the ability to transfer beneficial interests in a global bond to such
persons may be limited. Because DTC can only act on behalf of DTC Participants, who in turn act on behalf of
indirect participants and certain banks, the ability of a person having a beneficial interest in a global bond to pledge
such interest to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of
such interest, may be affected by the lack of a physical individual definitive certificate in respect of such interest.
Transfers between accountholders in Euroclear and Clearstream Luxembourg will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions available to the bonds described above, cross-market
transfers between DTC participants, on the one hand, and directly or indirectly through Euroclear or Clearstream
Luxembourg account holders, on the other hand, will be effected in DTC in accordance with DTC rules on behalf of
Euroclear or Clearstream Luxembourg, as the case may be, by its respective depositary; however, such crossmarket
transactions will require delivery of instructions to Euroclear or Clearstream Luxembourg, as the case may be, by
the counterparty in such system in accordance with its rules and procedures and within its established deadlines.
Euroclear or Clearstream Luxembourg, as the case may be, will, if the transaction meets its settlement requirements,
deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or
receiving interests in the Regulation S Global Bond in DTC, and making or receiving payment in accordance with
normal procedures for same day funds settlement applicable to DTC. Euroclear and Clearstream Luxembourg
account holders may not deliver instructions directly to the depositaries for Euroclear or Clearstream Luxembourg.
Because of time zone differences, the securities account of a Euroclear or Clearstream Luxembourg
account holder purchasing an interest in a global bond from a DTC Participant will be credited during the securities
settlement processing day (which must be a business day for Euroclear or Clearstream Luxembourg, as the case may
be) immediately following the DTC settlement date and such credit of any transactions in interests in a global bond
settled during such processing day will be reported to the relevant Euroclear or Clearstream Luxembourg
accountholder on such day. Cash received in Euroclear or Clearstream Luxembourg as a result of sales of interests in
a global bond by or through a Euroclear or Clearstream Luxembourg account holder to a DTC Participant will be
received for value on the DTC settlement date but will be available in the relevant Euroclear or Clearstream
Luxembourg cash account only as of the business day following settlement in DTC.
DTC has advised that it will take any action permitted to be taken by holder of bonds (including the
presentation of bonds for exchange as described below) only at the direction of one or more DTC Participants to
whose account or accounts with DTC interests in the global bonds are credited and only in respect of such portion of
the aggregate principal amount of the bonds as to which such DTC Participant or DTC Participants has or have
given such direction. However, in the limited circumstances described above, DTC will exchange the global bonds
for individual definitive bonds (in the case of bonds represented by the Restricted Global Bond, bearing a restrictive
legend), which will be distributed to its participants. Holders of indirect interests in the global bonds through DTC
Participants have no direct rights to enforce such interests while the bonds are in global form.
The giving of notices and other communications by DTC to DTC Participants, by DTC Participants to
persons who hold accounts with them and by such persons to holders of beneficial interests in a global bond will be
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governed by arrangements between them, subject to any statutory or regulatory requirements as may exist from time
to time.
DTC has advised as follows: DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the Uniform
Commercial Code and a “Clearing Agency” registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for DTC Participants and to facilitate the clearance and settlement of
securities transactions between DTC Participants through electronic book-entry changes in accounts of DTC
Participants, thereby eliminating the need for physical movement of certificates. DTC Participants include security
brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (“indirect
participants”).
Although DTC, Euroclear and Clearstream Luxembourg have agreed to the foregoing procedures in order
to facilitate transfers of interests in the Regulation S Global Bond and in the Restricted Global Bond among
participants and accountholders of DTC, Clearstream Luxembourg and Euroclear, they are under no obligation to
perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither
Lupatech nor the trustee will have any responsibility for the performance of DTC, Euroclear or Clearstream
Luxembourg or their respective participants, indirect participants or accountholders of their respective obligations
under the rules and procedures governing their operations.
Individual Definitive Bonds
If (i) DTC or any successor to DTC is at any time unwilling or unable to continue as a depositary for the
reasons described in “—Global Bonds” and a successor depositary is not appointed by Lupatech within 90 days or
(ii) any of the bonds has become immediately due and payable in accordance with “Description of Bonds—Events
of Default,” Lupatech will issue individual definitive bonds in registered form in exchange for the Regulation S
Global Bond and the Restricted Global Bond, as the case may be. Upon receipt of such notice from DTC or the
paying agent, as the case may be, Lupatech will use its best efforts to make arrangements with DTC for the
exchange of interests in the global bonds for individual definitive bonds and cause the requested individual
definitive bonds to be executed and delivered to the registrar in sufficient quantities and authenticated by the
registrar for delivery to holders. Persons exchanging interests in a global bond for individual definitive bonds will
be required to provide the registrar with (a) written instruction and other information required by Lupatech and the
registrar to complete, execute and deliver such individual definitive bonds and (b) in the case of an exchange of an
interest in a Restricted Global Bond, certification that such interest is not being transferred or is being transferred
only in compliance with Rule 144A under the Securities Act. In all cases, individual definitive bonds delivered in
exchange for any global bond or beneficial interests therein will be registered in the names, and issued in any
approved denominations, requested by DTC.
In the case of individual definitive bonds issued in exchange for the Restricted Global Bond, such
individual definitive bonds will bear, and be subject to, the legend described in “Notice to Investors” (unless
Lupatech determines otherwise in accordance with applicable law). The holder of a restricted individual definitive
bond may transfer such bond, subject to compliance with the provisions of such legend, as provided in “Description
of Bonds.” Upon the transfer, exchange or replacement of bonds bearing the legend, or upon specific request for
removal of the legend on a bond, Lupatech will deliver only bonds that bear such legend, or will refuse to remove
such legend, as the case may be, unless there is delivered to Lupatech such satisfactory evidence, which may include
an opinion of counsel, as may reasonably be required by Lupatech that neither the legend nor the restrictions on
transfer set forth therein are required to ensure compliance with the provisions of the Securities Act. Before any
individual definitive bond may be transferred to a person who takes delivery in the form of an interest in any global
bond, the transferor will be required to provide the principal paying agent with a Restricted Global Bond Certificate
or a Regulation S Global Bond Certificate, as the case may be.
Individual definitive bonds will not be eligible for clearing and settlement through Euroclear, Clearstream
Luxembourg or DTC.
145

NOTICE TO INVESTORS
The bonds have not been registered, and will not be registered, under the U.S. Securities Act or any other
applicable securities laws, and the bonds may not be offered or sold except pursuant to an effective registration
statement or pursuant to transactions exempt from, or not subject to, registration under the Securities Act.
Accordingly, the new bonds are being offered and sold only outside the United States, to persons other than U.S.
persons, in transactions meeting the requirements of Rule 903 of Regulation S under the Securities Act.
Purchasers’ Representations and Restrictions on Resale and Transfer
Each purchaser of bonds (other than the initial purchasers in connection with the initial issuance and sale of
bonds) and each owner of any beneficial interest therein will be deemed, by its acceptance or purchase thereof, to
have represented and agreed as follows:
(1) It is purchasing the bonds for its own account or an account with respect to which it exercises sole
investment discretion and it and any such account is a non-U.S. person that is outside the United States and is
purchasing the bonds in compliance with Regulation S.
(2) It either: (A) is not and will not be a (i) Plan (which term includes (a) employee benefit plans that are
subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and (b) plans
that are subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), such as individual
retirement accounts), (ii) an entity whose underlying assets are considered “plan assets” within the meaning of
ERISA and 29 C.F.R. § 2510.3-101 or (iii) a foreign, governmental or church plan subject to any federal, state, local
or foreign laws or regulation that is substantially similar to the provisions of Title I of ERISA and Section 4975 of
the Code (“Similar Law”); or (B) its purchase, holding and subsequent disposition of the bonds will not result in a
non-exempt prohibited transaction under ERISA or Section 4975 of the Code, in accordance with one or more
available statutory or administrative exemptions, and are otherwise permissible under all applicable Similar Laws.
(3) It acknowledges that the bonds have not been registered under the Securities Act or with any securities
regulatory authority of any jurisdiction and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except as set forth below.
(4) It understands and agrees that bonds initially offered in the United States to qualified institutional
buyers will be represented by one or more global bonds and that bonds offered outside the United States in reliance
on Regulation S will also be represented by one or more global bonds.
(5) It will not resell or otherwise transfer any of such bonds except (a) to Lupatech, (b) within the United
States to a qualified institutional buyer in a transaction complying with Rule 144A under the Securities Act,
(c) outside the United States in compliance with Rule 903 or 904 under the Securities Act, (d) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act (if available) or (e) pursuant to an
effective registration statement under the Securities Act.
(6) It agrees that it will give to each person to whom it transfers the bonds notice of any restrictions on
transfer of such bonds.
(7) It acknowledges that prior to any proposed transfer of bonds (other than pursuant to an effective
registration statement or in respect of bonds sold or transferred either pursuant to (a) Rule 144A or (b) Regulation S
and listed on the Euro MTF market of the Luxembourg Stock Exchange) the holder of such bonds may be required
to provide certifications relating to the manner of such transfer as provided in the indenture.
(8) It acknowledges that the trustee, registrar or transfer agent for the bonds will not be required to accept
for registration transfer of any bonds acquired by it, except upon presentation of evidence satisfactory to us and the
trustee, registrar or transfer agent that the restrictions set forth herein have been complied with.
(9) It acknowledges that we, the initial purchasers and other persons will rely upon the truth and accuracy
of the foregoing acknowledgements, representations and agreements and agrees that if any of the
acknowledgements, representations and agreements deemed to have been made by its purchase of the bonds are no
146

longer accurate, it will promptly notify us and the initial purchasers. If it is acquiring the bonds as a fiduciary or
agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such
account and it has full power to make the foregoing acknowledgements, representations, and agreements on behalf
of each account.
The following is the form of restrictive legend which will appear on the face of the Rule 144A global bond,
and which will be used to notify transferees of the foregoing restrictions on transfer:
“This Bond has not been registered under the U.S. Securities Act of 1933, as amended (the
“Securities Act”), or any other securities laws. The holder hereof, by purchasing this Bond, agrees that this
Bond or any interest or participation herein may be offered, resold, pledged or otherwise transferred only
(i) to Lupatech S.A., (ii) so long as this Bond is eligible for resale pursuant to Rule 144A under the Securities
Act (“Rule 144A”), to a person who the seller reasonably believes is a qualified institutional buyer (as defined
in Rule 144A) in accordance with Rule 144A, (iii) outside the United States in accordance with Rule 903 or
904 of Regulation S under the Securities Act, (iv) pursuant to an exemption from registration under the
Securities Act afforded by Rule 144 under the Securities Act (if available) or (v) pursuant to an effective
registration statement under the Securities Act, and in each of such cases in accordance with any applicable
securities laws of any state of the United States or other applicable jurisdiction and in accordance with the
transfer restrictions contained in the indenture under which this Bond was issued. The holder hereof, by
purchasing this Bond, represents and agrees that it will notify any purchaser of this Bond from it of the resale
restrictions referred to above.
The foregoing legend may be removed from this Bond on satisfaction of the conditions specified in
the indenture referred to herein.”
The following is the form of restrictive legend which originally appeared on the face of the Regulation S
global bond and which will be used to notify transferees of the foregoing restrictions on transfer:
“This bond has not been registered under the U.S. Securities Act of 1933, as amended (the “Securities
Act”), or any other securities laws. The holder hereof, by purchasing this Bond, agrees that neither this Bond
nor any interest or participation herein may be offered, resold, pledged or otherwise transferred in the
absence of such registration unless such transaction is exempt from, or not subject to, such registration.
The foregoing legend may be removed from this Bond after 40 days beginning on and including the
later of (a) the date on which the Bonds are offered to persons other than distributors (as defined in
Regulation S under the Securities Act) and (b) the original issue date of this Bond.”
For further discussion of the requirements (including the presentation of transfer certificates) under the
indenture to effect exchanges or transfers of interest in global bonds and certificated bonds, see” Form of Bonds.”
147

ERISA AND CERTAIN OTHER CONSIDERATIONS
The following discussion is not intended or written to be used, and cannot be used by any person, for the
purpose of avoiding U.S. federal tax penalties, and was written to support the promotion or marketing of the offering
of the bonds. Each prospective investor should seek advice based on such person’s particular circumstances from an
independent tax advisor.
The U.S. Employee Retirement Income Security Act of 1974, as amended, or ERISA, imposes certain
requirements on employee benefit plans as defined in Section 3(3) of ERISA that are subject to Title I of ERISA and
on entities that are deemed to hold the assets of such plans, or ERISA Plans, and on those persons who are
fiduciaries with respect to ERISA Plans.
Section 406 of ERISA and Section 4975 of the U.S. Internal Revenue Code of 1986, or the Code, as
amended, prohibit certain transactions involving the assets of an ERISA Plan (as well as those plans that are not
subject to ERISA but which are subject to Section 4975 of the Code, such as individual retirement accounts
(together with ERISA Plans, “Plans”)) and certain persons (referred to as “parties in interest” or “disqualified
persons”) having certain relationships to such Plans, unless a statutory or administrative exemption is applicable to
the transaction. A party in interest or disqualified person who engages in a prohibited transaction may be subject to
excise taxes and other penalties and liabilities under ERISA and the Code.
A prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code may
occur if bonds are acquired by a Plan with respect to which Lupatech, the initial purchasers or any of their respective
affiliates is a party in interest or a disqualified person. Certain exemptions (such as “class exemptions” issued by the
United States Department of Labor) from the prohibited transaction provisions of Section 406 of ERISA and
Section 4975 of the Code may be applicable, however, depending in part on the type of Plan fiduciary making the
decision to acquire the bonds and the circumstances under which such decision is made. There can be no assurance
that any class or other exemptions will be available with respect to any particular transaction involving the bonds.
Any Plan fiduciary that proposes to cause a Plan to acquire the bonds should consult with its counsel
regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and
Section 4975 of the Code to such an investment, and to confirm that such purchase and holding will not constitute or
result in a non-exempt prohibited transaction or any other violation of an applicable requirement of ERISA or the
Code.
Governmental plans (as defined in Section 3(32) of ERISA), certain church plans (as defined in
Section 3(33) of ERISA) and certain foreign plans, while not subject to the fiduciary responsibility provisions of
ERISA or the prohibited transaction provisions of ERISA and Section 4975 of the Code, may nevertheless be
subject to other federal, state, local or foreign laws or regulations that are substantially similar to the foregoing
provisions of ERISA and the Code (“Similar Law”). Fiduciaries of any such plans should consult with their counsel
before acquiring the bonds to determine the need for, and the availability of, if necessary, any exemptive relief under
any such laws or regulations.
Each purchaser of bonds or any interest in a bond will be deemed to have represented and agreed that the
purchaser either: (A) is not and will not be a (i) Plan, (ii) an entity whose underlying assets are considered “plan
assets” within the meaning of ERISA and 29 C.F.R. § 2510.3-101 or (iii) a foreign, governmental or church plan
subject to any Similar Law; or (B) the purchaser’s purchase, holding and subsequent disposition of the bonds will
not result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code, in accordance with one
or more available statutory or administrative exemptions, and are otherwise permissible under all applicable Similar
Laws.
148

VALIDITY OF BONDS
The validity of the bonds offered and sold pursuant to this offering and certain other matters under New
York law will be passed upon for us by Shearman & Sterling LLP. Certain matters under New York law will be
passed upon for the initial purchasers by Clifford Chance US LLP.
Certain matters of Brazilian law relating to the bonds will be passed upon for us by Machado, Meyer,
Sendacz e Opice Advogados and for the initial purchasers by Pinheiro Guimarães—Advogados. Certain matters of
Argentine law relating to the bonds will be passed upon for us by Pérez Alati, Grondona, Benites, Arntsen &
Martínez de Hoz (h). Certain matters of Cayman Islands law relating to the bonds will be passed upon for us by
Maples and Calder.
149

INDEPENDENT AUDITORS
Our consolidated financial statements as of and for the years ended December 31, 2005, 2006 and 2007,
included in this offering circular, have been audited by PricewaterhouseCoopers Auditores Independentes, as stated
in their reports appearing herein.
With respect to our unaudited financial information for the three-month period ended March 31, 2008
included in this offering circular, Deloitte Touche Tohmatsu Auditores Independentes reported that they have
applied limited procedures in accordance with CVM Instructions. However, their separate report dated June 4, 2008
(which includes an explanatory mentioning that the interim financial statements for that period have been prepared
in conformity with CVM Instructions and do not include all the changes in accounting practices introduced by Law
No. 11,638/07), appearing herein, states that they did not audit and that they do not express an opinion on that
unaudited financial information. Accordingly, the degree of reliance on their report on such information should be
restricted in light of the limited nature of the review procedures applied.
With respect to our unaudited financial information for the three-month period ended March 31, 2007
included in this offering circular, PricewaterhouseCoopers Auditores Independentes reported that they have applied
limited procedures in accordance with professional standards for review of such information. However, their
separate report dated June 3, 2008, (which includes an explanatory paragraph mentioning that interim for that period
have bee n prepared in comformity with CVM Instructions and do not include aal changes in accountingpractices
introduced by Law No. 11 appearing herein (which includes an explanatory paragraph mentioning that the interim
financial information for that period have been prepared in conformity with CVM Instructions and do not include all
changes in accounting practices introduced by Law No. 11,638/07), states that they did not audit and that they do not
express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on
such information should be restricted in light of the limited nature of the review procedures applied
150

LISTING AND GENERAL INFORMATION
The bonds have been accepted for clearance through DTC, Euroclear and Clearstream Luxembourg. The
CUSIP and ISIN numbers for the bonds are as follows:
151
Regulation S
Global Note
CUSIP............................................................................................................................... G57058AA0
ISIN .................................................................................................................................. USG57058AA01
Common Code.................................................................................................................. 030991281
Copies of our latest audited annual financial statements and unaudited quarterly financial statements may
be obtained during normal business hours at our executive offices, the offices of the trustee and any paying agent,
including the Luxembourg special paying agent and principal paying agent. Copies of our bylaws (estatuto social)
and those of each guarantor, as well as the indenture (including forms of the bonds), will be available during normal
business hours for inspection at our executive offices, the offices of the trustee and any other paying agent, including
the Luxembourg special paying agent and principal paying agent.
Except as disclosed in this offering circular, there has been no material adverse change in our financial
position since June 19, 2007, the date of incorporation of Lupatech Finance.
Except as disclosed in this offering circular, there has been no material adverse change in the financial
position of Lupatech S.A. or any of its subsidiaries since December 31, 2007, the date of the latest audited financial
statements included in this offering circular.
Except as disclosed in this offering circular, neither we nor any of our guarantors have been involved in any
governmental, legal or arbitration proceedings since June 19, 2007, the date of incorporation of Lupatech Finance,
that had or may reasonably be expected to have any material adverse effect on our financial position and results of
operations.
Except as disclosed in this offering circular, neither Lupatech S.A. nor any of its subsidiaries have been
involved in any governmental, legal or arbitration proceedings during the 12-month period immediately preceding
the date of this offering circular that had or may reasonably be expected to have any material adverse effect on our
financial position and results of operations.
Application has been made to list the new bonds on the Official List of the Luxembourg Stock Exchange
and admit the new bonds for trading on the Euro MTF market of the Luxembourg Stock Exchange (Euro MTF).
The new bonds are expected to be eligible for trading in the PORTAL Market at the time of issuance thereof.
The creation and issuance of the bonds were authorized pursuant to written resolutions of Lupatech
Finance’s board of directors, dated June 5, 2008. The execution of the guarantees was authorized by the board of
directors of Lupatech S.A. at its board meeting held on June 23, 2008 and by the quotaholders or shareholders of
each of the other Guarantors at the respective quotaholders’ or shareholders’ meetings held on June 9 and 10, 2008.

Lupatech S.A.
INDEX TO FINANCIAL STATEMENTS
Unaudited interim quarterly information as of and for March 31, 2008
Report of independent accountants on limited review....................................................................................... F-4
Report of independent accountants on limited review....................................................................................... F-5
Balance sheet at March 31, 2008 and December 31, 2007 ................................................................................ F-6
Statement of income for the three-month periods ended March 31, 2008 and 2007 ......................................... F-8
Statement of changes in shareholders’ equity for the three-month periods ended March 31, 2008 and
2007 ............................................................................................................................................................... F-9
Statements of cash flow for the three-month periods ended March 31, 2007 and 2008 .................................... F-10
Notes to the financial statements at March 31, 2008, December 31, 2007 and March 31, 2007....................... F-11
Audited financial statements as of and for December 31, 2007 and 2006
Report of independent auditors.......................................................................................................................... F-36
Balance sheet at December 31, 2007 and 2006 ................................................................................................. F-37
Statement of income for the years ended December 31, 2007 and 2006........................................................... F-39
Statement of changes in shareholders’ equity for the years ended December 31, 2007 and 2006..................... F-40
Statement of changes in financial position for the years ended December 31, 2007 and 2006 ......................... F-41
Notes to financial statements at December 31, 2007 and 2006 ......................................................................... F-43
Audited financial statements as of and for December 31, 2006 and 2005
Report of independent auditors.......................................................................................................................... F-72
Balance sheet at December 31, 2006 and 2005 ................................................................................................. F-73
Statement of income for the years ended December 31, 2006 and 2005........................................................... F-75
Statement of changes in shareholders’ equity for the years ended December 31, 2006 and 2005..................... F-76
Statement of changes in financial position for the years ended December 31, 2006 and 2005 ......................... F-77
Notes to financial statements at December 31, 2006 and 2005 ......................................................................... F-79
Cordoaria São Leopoldo Offshore Ltda.
Carve-out audited financial statements as of and for the three-month period ended March 31, 2007
Report of independent accountants on limited review....................................................................................... F-100
Carve-out balance sheet at March 31, 2007....................................................................................................... F-101
Carve-out statement of income for the three-month period ended March 31, 2007 .......................................... F-102
Notes to carve-out financial information at March 31, 2007............................................................................. F-103
Gasoil
Audited interim quarterly information as of and for June 30, 2007
Report of independent auditors.......................................................................................................................... F-109
Balance sheet at June 30, 2007 .......................................................................................................................... F-110
Statement of income for the six-month periods ended June 30, 2007 ............................................................... F-111
Statement of changes in shareholders’ equity for the six-month period ended June 30, 2007 .......................... F-112
Statement of changes in financial position for the six-month period ended June 30, 2007............................... F-113
Notes to financial statements at June 30, 2007.................................................................................................. F-114
Delta
Unaudited interim quarterly information as of and for September 30, 2007
Report of independent accountants on limited review....................................................................................... F-125
Balance sheet at September 30, 2007 and March 31, 2007 ............................................................................... F-126
Statement of income for the six-month period ended September 30, 2007 ....................................................... F-127
Statement of changes in stockholders’ equity for the six-month period ended September 30, 2007................. F-128
Statements of cash flow for the six-month period ended September 30, 2007.................................................. F-129
F-1

Required information for the six-month period ended September 30, 2007...................................................... F-130
Cost of sales for the six-month period ended September 30, 2007.................................................................... F-131
Property, plant and equipment for the six-month period ended September 30, 2007........................................ F-132
Notes to financial statements at September 30, 2007 ........................................................................................ F-133
Audited financial statements as of and for March 31, 2007
Report of independent accountants on limited review....................................................................................... F-139
Balance sheet at March 31, 2007....................................................................................................................... F-140
Statement of income for the twelve-month period ended March 31, 2007........................................................ F-141
Statement of changes in shareholders’ equity for the twelve-month periods ended March 31, 2007 and
2006 ............................................................................................................................................................... F-142
Statement of cash flows for the twelve-month period ended March 31, 2007................................................... F-143
Required information for the twelve-month period ended March 31, 2007 ...................................................... F-144
Cost of sales for the twelve-month periods ended March 31, 2007 and 2006 ................................................... F-145
Property, plant and equipment for the twelve-month periods ended March 31, 2007 and 2006 ....................... F-146
Assets and liabilities in foreign currencyfor the twelve-month periods ended March 31, 2007 and 2006 ........ F-147
Notes to financial statements for the twelve-month periods ended March 31, 2007 and 2006 ......................... F-148
Lupatech S.A. – Pro-forma
Unaudited pro forma combined statement of operations for the year ended December 31, 2007 ..................... F-154
Notes to the pro forma combined financial information for the year ended December 31, 2007...................... F-155
F-2

Lupatech S.A.
and Subsidiaries
Interim Financial Statements
For the Quarters Ended March 31, 2008 and 2007
F-3

Deloitte Touche Tohmatsu Auditores Independentes
INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
To the Directors and Officers of
Lupatech S.A.
Caxias do Sul - RS
1. We have performed a review of the accompanying interim financial statements of Lupatech S.A. and
subsidiaries, consisting of the individual (Company) and consolidated balance sheets as of March 31, 2008, the
related statements of operations, changes in shareholders’ equity and cash flows for the quarter then ended and
the notes to the interim financial statements, all expressed in Brazilian reais and prepared under the
responsibility of the Company’s management.
2. Our review was conducted in accordance with specific standards established by the Brazilian Institute of
Independent Auditors (IBRACON), together with the Federal Accounting Council (CFC), and consisted
principally of: (a) inquiries of and discussions with certain officials of the Company and its subsidiaries who
have responsibility for accounting, financial and operating matters about the criteria adopted in the preparation
of the interim financial statements, and (b) review of the information and subsequent events that had or might
have had material effects on the financial position and results of operations of the Company and its subsidiaries.
3. Based on our review, we are not aware of any material modifications that should be made to the interim
financial statements referred to in paragraph 1 for them to be in conformity with standards established by the
Brazilian Securities Commission (CVM), specifically applicable to the preparation of interim financial
statements, including CVM Instruction No. 469/08.
4. As mentioned in note 2 (ii), on December 28, 2007, Law No. 11638 was enacted, changing, revoking and
adding new provisions to Law No. 6404/76 (Brazilian Corporate Law). This Law is effective for fiscal years
beginning on or after January 1, 2008 and introduced changes in Brazilian accounting practices. Although this
Law has already become effective, some changes introduced by it are subject to regulation by regulatory
agencies before being applied by companies. Accordingly, during this transition phase, CVM, through
Instruction No. 469/08, has permitted companies not to apply all the provisions of Law No. 11638/07 in the
preparation of the interim financial statements. Thus, the interim financial statements for the quarter ended
March 31, 2008 have been prepared in conformity with CVM specific instructions and do not include all the
changes in accounting practices introduced by Law No. 11638/07.
5. The individual and consolidated balance sheets as of December 31, 2007, presented for comparative purposes,
were audited by other independent auditors whose audit opinion dated February 14, 2008 were unqualified. The
individual and consolidated statements of operations, changes in shareholders’ equity and cash flows for the
quarter ended March 31, 2007, presented for comparative purposes, were reviewed by other independent
auditors the review report dated June 3, 2008, presents an emphasis paragraph of the change of the Brazilian
Corporate Law as indicated on the paragraph 4 above.
6. The accompanying interim financial statements have been translated into English for the convenience of readers
outside Brazil.
Porto Alegre, June 4, 2008.
DELOITTE TOUCHE TOHMATSU Fernando Carrasco
Auditores Independentes Engagement Partner
F-4

(A free translation of the original in Portuguese)
Report of the Independent Accounts
on the Limited Review
To the Board of Directors and Stockholders
Lupatech S.A.
1 We have carried out limited review of the accounting information for the quarter ended March 31, 2007
included in the Quarterly Information - ITR of Lupatech S.A. and subsidiaries (herein referred as “the
Company”) for the quarter ended March 31, 2008. This information is the responsibility of the Company’s
management.
2 Our review was carried out in conformity with specific standards established by the Institute of Independent
Auditors of Brazil - IBRACON in conjunction with the Federal Accounting Council - CFC and mainly
comprised: (a) inquiries of and discussions with management responsible for the accounting, financial and
operating areas of the Company with regard to the main criteria adopted for the preparation of the quarterly
information and (b) a review of the significant information and of the subsequent events which have, or could
have, significant effects on the Company’s financial position and operations.
3 Based on our limited review, we are not aware of any material modifications that should be made to the
quarterly information for the quarter ended March 31, 2007, referred to in paragraph 1 above, in order that such
information be stated in accordance with the rules issued by the Brazilian Securities Commission (CVM)
applicable to the preparation of Quarterly Information, including Instruction 469/08.
4 As mentioned in Note 2.(ii), Law No. 11638 was enacted on December 28, 2007 and is effective as from
January 1, 2008. This law amended, revoked and introduced new provisions to Law No. 6404/76 (Brazilian
Corporate Law) and changed the accounting practices adopted in Brazil. Although the mentioned law is already
effective, the main changes introduced by it depend on regulations to be issued by the regulatory agencies for
them to be implemented by the companies. Accordingly, during this phase of transition, the CVM, through its
Instruction 469/08, did not require the implementation of all the provisions of Law 11638/07 in the preparation
of the Quarterly Information. As a result, the accounting information included in the Quarterly Information was
prepared in accordance with specific CVM instructions and does not contemplate all the changes in accounting
practices introduced by Law 11638/07.
5 Our limited review was conducted for the purpose of issuing a report on the Quarterly Information - ITR
referred to in paragraph 1 above. The statement of cash flows related to the quarter ended March 31, 2007,
which is presented in the Quarterly Information - ITR to provide additional information on the Company, are
not specifically required as an integral part of this information. The statement of cash flows for the quarter
ended March 31, 2007 was subjected to the limited review procedures described in paragraph 2 above and we
are not aware of any material modifications that should be made thereto in order for this statement to be fairly
presented in all material respects in relation to the accounting information for the quarter ended March 31, 2007
included Quarterly Information - ITR taken as a whole.
6 The Quarterly Information (ITR) also includes accounting information as of December 31, 2007. We audited
such information at the time it was prepared, in connection with the audit of the financial statements as of and
for the year then ended, on which we issued an unqualified opinion dated February 14, 2008.
Porto Alegre, 3 de junho de 2008
PricewaterhouseCoopers Carlos Biedermann
Auditores Independentes Contador CRC 1RS029321/O-4
CRC 2SP000160/O-5 “F” RS
F-5

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Balance Sheet at March 31
(unaudited)
(in thousands of reais)
Company Consolidated
Assets Note 3/31/2008 12/31/2007 3/31/2008 12/31/2007
(Unaudited) (Unaudited)
CURRENT ASSETS
Cash and cash equivalents.................... 267 243 170,478 59,111
Temporary cash investments ................ 4 - - 3,123 179,205
Trade accounts receivable .................... 5 15,427 13,886 164,543 120,497
Inventories............................................ 6 13,462 12,800 129,068 126,116
Dividends receivable ............................ 352 352 - -
Recoverable taxes................................. 7 7,606 7,372 37,662 34,441
Interest on capital receivable................ - 877 - -
Deferred income and social
contribution taxes ............................ 12 179 158 179 158
Other receivables.................................. 3,563 2,543 20,436 18,276
Total current assets............................... 40,856 38,231 525,489 537,804
NONCURRENT ASSETS
Long-term assets
Related parties...................................... 11 27,990 15,072 - -
Recoverable taxes................................. 7 2,820 2,763 4,369 4,175
Deferred income tax and social
contribution ..................................... 12 10,270 8,568 12,826 11,130
Other receivables.................................. 310 494 3,115 2,954
Total long-term assets.................................. 41,390 26,897 20,310 18,259
PERMANENT ASSETS
Investments
in subsidiaries.................................. 8 308,036 305,636 343,696 357,640
Other investments ........................... 90 90 1,547 1,937
Property, plant and equipment ............. 9 44,557 42,475 191,905 179,992
Intangible assets ................................... 6,595 5,520 14,389 12,281
Total permanent assets ......................... 359,278 353,721 551,537 551,850
Total noncurrent assets......................... 400,668 380,618 571,847 570,109
Total assets .................................................... 441,524 418,849 1,097,336 1,107,913
F-6

Company Consolidated
Liabilities and Shareholders’ equity Note 3/31/2008 12/31/2007 3/31/2008 12/31/2007
(Unaudited) (Unaudited)
CURRENT LIABILITIES
Trade accounts payable ........................ 5,647 6,523 39,058 45,510
Loans and financing ............................. 10 41,895 11,122 99,794 54,546
Perpetual bonds .................................... - - 7,964 7,968
Payroll .................................................. 2,197 2,212 8,244 8,384
Taxes payable....................................... 1,679 1,576 10,367 10,904
Advances from customers .................... 168 154 30,998 7,451
Profit sharing........................................ 64 19 373 1,358
Payables for acquisition
of investments.................................. 13 524 503 24,352 77,378
Provision for income and
social contribution taxes .................. - - 6,807 14,636
Other payables...................................... 671 705 7,919 9,066
Total current liabilities ......................... 52,845 22,814 235,876 237,201
NONCURRENT LIABILITIES
Long-term liabilities
Loans and financing ............................. 10 11,366 12,447 248,998 249,680
Perpetual bonds .................................... 10 - - 349,820 354,260
Reserve for contingencies .................... 14 - 16 7,497 7,478
Deferred income and social
contribution taxes ............................ 12 87 93 87 93
Payables for acquisition
of investments.................................. 13 - - 1,574 1,594
Related parties 11 105,760 111,097 - -
Other payables...................................... 17,343 14,185 818 863
Total noncurrent liabilities........................ 134,556 137,838 608,794 613,968
SHAREHOLDERS’ EQUITY
Capital .................................................. 15 307,936 307,511 307,936 307,511
Revaluation reserve.............................. 283 302 283 302
Accumulated deficit ............................. (54,096) (49,616) (55,553) (51,069)
Total shareholders’ equity.................... 254,123 258,197 252,666 256,744
Total liabilities and shareholders’ equity ....... 441,524 418,849 1,097,336 1,107,913
The accompanying notes are an integral part of these financial statements.
F-7

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Statements of Income
For the Quarters ended March 31, 2007 and 2008
(unaudited)
(in thousands of reais)
01/01/2008
to
03/31/2008
F-8
Company Consolidated
01/01/2007
to
03/31/2007
01/01/2008
to
03/31/2008
01/01/2007
to
03/31/2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Gross revenue from sales and services.............. 17,980 16,702 169,417 80,228
Sales taxes and returns ..................................... (3,338) (2,849) (29,419) (12,922)
Net revenue from sales and services.................. 14,642 13,853 139,998 67,306
Cost of products and services........................... (13,233) (12,047) (90,637) (40,494)
Gross profit ......................................................... 1,409 1,806 49,361 26,812
Operating income (expenses)
Selling .......................................................... (1,353) (1,387) (11,272) (5,871)
General and administrative .......................... (1,908) (1,271) (8,884) (5,129)
Financial income.......................................... 1,586 10,093 13,596 5,990
Financial expenses ....................................... (4,676) (9,195) (31,691) (12,166)
Equity in subsidiaries................................... 2,152 982 - -
Goodwill amortization ................................. (3,244) (1,084) (11,451) (6,154)
Other operating income (expenses), net....... (171) 104 (104) (37)
Total operating expenses, net (7,614) (1,758) (49,806) (23,367)
Income (loss) from operations ........................... (6,205) 48 (445) 3,445
Nonoperating income (expenses), net............... (22) 22 95 (29)
Income (loss) before income
and social contribution taxes and
profit sharing.................................................. (6,227) 70 (350) 3,416
Provision for income and social
contribution taxes.........................................
Current ......................................................... - (228) (5,662) (3,486)
Deferred ....................................................... 1,728 - 1,723 278
Profit sharing................................................ - - (214) (182)
Net income (loss)................................................. (4,499) (158) (4,503) 26
Earnings (loss) per thousand shares – R$......... (0.09455) (0.00346)
The accompanying notes are an integral part of these financial statements.

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Statements of Changes in Shareholders’ Equity
For the Quarters ended March 31, 2007 and 2008
(unaudited)
(in thousands of reais)
Subscribed
Capital
Unpaid
Capital
Revaluation
reserve
F-9
Legal
reserve
Profit reserves
Unrealized
profit
Accumulated
deficit Total
BALANCES AS OF DECEMBER 31, 2006.............. 227,619 - 402 1,226 17,678 - 246,925
-
Prior year adjustments.................................................. - - - - (782) (782)
Realization of revaluation reserve ............................... - - (25) - - 25 -
Net loss......................................................................... - - - - - (158) (158)
BALANCES AS OF MARCH 31, 2007 (unaudited).. 227,619 - 377 1,226 17,678 (915) 245,985
BALANCES AS OF DECEMBER 31, 2007.............. 307,511 - 302 - - (49,616) 258,197
Capital increase ............................................................ 2,715 (2,290) - - - - 425
Realization of revaluation reserve ............................... - - (19) - - 19 -
Net loss......................................................................... - - - - - (4,499) (4,499)
BALANCES AS OF MARCH 31, 2008 (unaudited).. 310,226 (2,290) 283 - - (54,096) (254,123)
The accompanying notes are an integral part of these financial statements.

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Statements of Cash Flow
For the Quarters ended March 31, 2007 and 2008
(unaudited)
(in thousands of reais)
Cash flows from operating activities
Company Consolidated
01/01/2008 to 01/01/2007 to 01/01/2008 to 01/01/2007 to
03/31/2008 03/31/2007 03/31/2008 03/31/2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net income (loss).................................................................. (4,499) (158) (4,503) 26
Adjustments to reconcile income (loss) to net cash
provided by operating activities
Depreciation and amortization .................................... 1,159 743 5,086 2,579
Cost of property, plant and equipment written off
or sold..................................................................... 22 - 291 -
Cost of investments written off or sold ....................... - - 390 -
Goodwill amortization................................................. 3,244 1,084 11,451 6,154
Equity in subsidiaries .................................................. (2,152) (982) - -
Changes in assets and liabilities
(Increase) decrease in trade accounts receivable ......... (1,541) 283 (44,046) 2,938
Increase in inventories................................................. (662) (1,313) (2,952) (3,322)
Increase in recoverable taxes....................................... (2,014) (1,601) (5,132) (2,779)
(Increase) decrease in other assets............................... 41 (400) (2,321) 1,349
Increase (decrease) in trade accounts payable ............. (876) 518 (6,452) (4,873)
Increase (decrease) in taxes payable............................ 97 (270) (8,372) (1,551)
Increase (decrease) in other payables .......................... 15 170 (31,797) (416)
Net cash provided by (used in) operating activities .............. (7,166) (1,926) (88,357) 105
Cash flows from investing activities
Purchase of property, plant and equipment ................. (3,263) (2,579) (17,290) (12,575)
Purchase of investments .............................................. (334) (107) - (26)
Dividends from subsidiaries........................................ - 774 - -
Adjustments to goodwill ............................................. - - 2,493 -
Intangible assets .......................................................... (1,075) (559) (2,108) (895)
Net cash used in investing activities ..................................... (4,672) (2,471) (16,905) (13,496)
Cash flows from financing activities
Capital contribution..................................................... 425 - 425 -
Borrowings.................................................................. 30,264 2,288 42,014 2,288
Repayment of loans and financing .............................. (572) (13,271) (1,892) (13,621)
Repayment of intercompany loans .............................. (5,337) - - -
Intercompany loans granted ........................................ (12,918) (8,571) - -
Intercompany loans received....................................... - 1,832 - -
Net cash provided by (used in) financing activities .............. 11,862 (17,722) 40,547 (11,333)
Increase (decrease) in cash and cash equivalents............. 24 (22,119) (64,715) (24,724)
At beginning of period ................................................ 243 189,079 238,316 204,266
At end of period .......................................................... 267 166,960 173,601 179,542
F-10

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Notes to the Financial Statements for the Quarters ended March 31, 2007 and 2008
(unaudited)
(in thousands of reais)
1. OPERATIONS
Lupatech S.A. (the “Company”), located in Caxias do Sul, State of Rio Grande do Sul, has 26 units, operates in
three business segments: Oil & Gas, Flow and Metal and has approximately 3,000 employees.
In the Oil & Gas segment, the Company offers high value-added products and services to the oil & gas
industry, such as anchoring cables for deepwater oil rigs, manual and automated valves used for oil prospecting,
production, transportation, refining and the hydrocarbon chain, oil well completion equipment that enable the
production of oil and gas, bore tube liners, and production and lease of offshore equipment and services and
NGV compressors through the brands “MNA”, “CSL Offshore”, “Petroima”, “Esferomatic”, “Gasoil”, “K&S”
and “Aspro”.
In the Flow Segment the Company holds a leading position in the Mercosur in the production and sale of
industrial valves, mainly for the chemical, pharmaceutical, pulp and paper, food, civil construction, and
machinery and equipment industries, through the brands “Valmicro”, “Mipel”, “ValBol” and “Jefferson”.
In the Metal Segment the Company holds a prominent position in the international market and is an expert in
the development and production of parts, complex components, and subassemblies aimed mainly at the world’s
automotive industry through precision investment casting and steel injection processes, where it is a pioneer in
Latina America. The Company also operates in casting highly corrosion-resistant metal alloy parts for the
industrial valves and pumps segments, mainly for oil & gas industry processes.
F-11

Corporate development results from an organic process, through which the Company has expanded its
businesses, both by expanding its installed capacity and opening new business and acquisitions. The table below
shows the dates on which the Company and its subsidiaries started to operate jointly:
Company and subsidiaries Date Method Business line
Microinox 1980 Establishment Microfusion
Valmicro 1984 Establishment Valves
Steelinject 1995 Establishment Metallic powder injection
Metalúrgica Nova Americana 2000 Acquisition Valves
Lupatech North America 2002 Establishment Sales
Carbonox 2005 Acquisition Microfusion
Metalúrgica Ipê 2006 Acquisition Valves
Mipel Sul 2006 Establishment Valves
Itasa 2006 Acquisition Cast products
Worcester de Argentina 2006 Acquisition Valves
Esferomatic 2006 Acquisition Valves
CSL Offshore 2007 Acquisition Ropes
Petroima 2007 Acquisition Machining/services
Gasoil 2007 Acquisition Services to oil companies
Kaestner & Salermo 2007 Acquisition Services to oil companies
Ocean Coating 2007 Acquisition Services to oil companies
Recu 2006 Acquisition Investments
Lupatech Finance 2007 Establishment Investments
Jefferson Sudamericana 2007 Acquisition Valves
Jefferson Solenoid Valves 2007 Acquisition Valves
Valjeff 2007 Acquisition Valves
Jefferson Solenoidbras 2007 Acquisition Valves
Aspro 2007 Acquisition Compressors
Delta 2007 Acquisition Compressors
Compressores Panamericanos 2007 Acquisition Compressors
Luxxon Participações Ltda 2007 Establishment Investments
2. Significant Accounting Practices
(i) Presentation of interim financial statements
The interim financial statements have been prepared in accordance with Brazilian accounting
practices and standards established by the Brazilian Securities Commission (CVM), using criteria
that are consistent with those adopted for the preparation of the financial statements as of
December 31, 2007.
The accompanying consolidated financial statements have been prepared in English for the
convenience of readers outside Brazil and to be included on the offering prospectus of perpetual
bonds of Lupatech Finance Limited.
The preparation of interim financial statements required the use of estimates to record certain
assets, liabilities and other transactions The Company’s and subsidiaries’ interim financial
statements therefore include estimates relating to the useful lives of property, plant and equipment,
necessary reserves for contingencies and provisions for income tax and other. Actual results could
differ from those estimates.
F-12

The significant accounting practices adopted are as follows:
(a) Temporary cash investments
Consist of temporary cash investments abroad and highly-liquid securities indexed to the variation of
the CDI (interbank deposit rate). Temporary cash investments and securities are recorded at their
nominal amounts, translated into Brazilian reais at the exchange rate prevailing at the balance sheet
date, plus income earned through the balance sheet date, when applicable, which does not exceed
market value.
(b) Trade accounts receivable
Stated at the original amounts of invoices, plus exchange variation through the balance sheet date,
when applicable. An allowance for doubtful accounts is recognized in an amount considered sufficient
by Management to cover potential losses on the realization of receivables, when required.
(c) Inventories
Stated at average acquisition and/or production cost, under the total absorption costing method, which
does not exceed replacement costs or realizable values.
(d) Investments
Investments in subsidiaries are accounted for under the equity method, with elimination of unrealized
profits through the balance sheet date with a corresponding entry to operating income. Other
investments are stated at cost, adjusted to fair value, when applicable.
Goodwill paid on business acquisitions is based on expected future earnings, according to appraisal
reports prepared for this purpose. Amortization in calculated based on projected results, according to
expected future earnings, as described in note 8.
(e) Investments in foreign subsidiaries
The accounting practices adopted for the preparation of the financial statements of foreign subsidiaries
were adjusted to conform to Brazilian accounting practices when different, considering the materiality
of the information. The financial statements of foreign subsidiaries were translated from their
functional currencies into Brazilian reais using the exchange rate in effect at the balance sheet date for
assets and liabilities and the average exchange rate in the related month for the statement of operations
balances, and exchange gains (losses) are included in equity in subsidiaries.
(f) Property, plant and equipment
Stated at cost of acquisition or production, plus revaluation of assets carried out in 1994. Depreciation
is calculated under the straight-line method at the rates described in note 9.
(g) Intangible assets
Stated at cost, less amortization calculated under the straight-line method at rates based on the time of
recovery of incurred costs. Intangible assets include costs of development of new products and
software, and acquisition of data processing systems and trademarks and patents.
(h) Loans and financing
Stated at their original amounts plus related charges, and exchange and monetary variations incurred.
F-13

(i) Income and social contribution taxes
Income tax is calculated and recorded at the rate of 15% on annual taxable income plus a 10% surtax,
and social contribution tax is calculated at the rate of 9% on income before income tax, adjusted as per
tax legislation.
Subsidiaries taxed based on deemed income calculate income tax at the rate of 15%, plus a 10% surtax,
and social contribution tax at the rate of 9%, on an estimated net income equivalent to 8% to 32% of
gross sales and services, for income tax and 12% for social contribution tax, pursuant to prevailing tax
rules.
Deferred taxes were recognized considering prevailing rates for income and social contribution taxes
on temporary differences and tax loss carryforwards to the extent their realization is probable.
(j) Results of operations
Income and expenses are recorded on the accrual basis. Cordoaria São Leopoldo Offshore S/A. adopts
the Percentage of Completion or POC method due to the characteristics of its activities and product
sales, which have an average production time higher than the frequency financial statements are
reported (quarterly). Under this method, revenues and related costs are recognized based on the
production stage to avoid misstatements in the interim financial statements.
(l) Profit sharing
Employee and management profit sharing recognized in the Company’s results of operations was
calculated based on the Profit Sharing Plan and the Variable Compensation Plan, pursuant to
prevailing legislation and the limits established in the Company’s bylaws.
(m) Provisions
A provision is recognized in the balance sheet when the Company has a legal or constructive
obligation as a result of a past event and it is probable that an outflow of resources will be required to
settle the obligation. Reserves for contingencies are recognized based on the best estimates of the
involved risk (note 14).
(n) Other receivables and other payables
Other receivables and other payables were classified in current and noncurrent assets and liabilities,
respectively, according to the realization or settlement period, under articles 179 and 180 of Law No.
6404/76.
(o) Statements of cash flows
The Company is presenting individual (Company) and consolidated statements of cash flows, prepared
under the indirect method, in accordance with Accounting Standard and Procedure 20 (NPC 20)
“Statement of Cash Flows” issued by the Brazilian Institute of Independent Auditors (IBRACON).
(ii) Law No. 11638/07
On May 2, 2008, CVM issued Instruction No. 469, which has permitted companies not to apply all
the provisions of Law No. 11638/07 in the preparation of the interim financial statements.
According to the guidelines contained in said Instruction, the Company reports below a
description of the changes that might impact its financial statements at yearend.
Based on studies and assessment made by the Company’s Management on the interim financial
statements as of March 31, 2008, the adoption of the provisions of this new legislation should
result in the following main changes: (a) a new requirement for the presentation of a statement of
value added; (b) reclassification of unamortized goodwill to intangible assets (R$ 111,804 -
F-14

Company and R$ 343,696 - consolidated); (c) derecognition of revaluation balances of property,
plant and equipment (R$ 283 - Company and consolidated).
Considering the discussions and debates in the market, in particular in the accounting profession
entities and associations and regulatory agencies, as well as the regulation of some matters subject
to changes, there may be effects on the Company’s financial statements and disclosures other than
those referred to above.
3. CONSOLIDATED INTERIM FINANCIAL STATEMENTS
The consolidated interim financial statements include the financial statements of Lupatech S.A. and its direct
and indirect subsidiaries, as shown below:
Direct and indirect ownership
interest (%)
03/31/2008 and 12/31/2007
Metalúrgica Nova Americana Ltda. - (Brazil)................................................... 100
Lupatech N.A. LLC – (USA) ............................................................................ 100
Carbonox Fundição de Precisão Ltda. - (Brazil) ............................................... 100
Valmicro Ind. e Com. de Válvulas Ltda. - (Brazil) ........................................... 100
Steelinject Injeção de Aços Ltda. – (Brazil)...................................................... 100
Mipel Ind. e Com. de Válvulas Ltda. – (Brazil) ................................................ 100
Metalúrgica Ipê Ltda. – (Brazil) ........................................................................ 100
Industria Y Tecnologia En Aceros S.A. – (Argentina)...................................... 100
Recu S.A. – (Argentina) .................................................................................... 100
Worcester de Argentina S.A. – (Argentina) ...................................................... 100
Esferomatic S.A. – (Argentina) ......................................................................... 100
Cordoaria São Leopoldo Offshore S/A (*) – (Brazil)........................................ 100
Lupatech Petroima Equip. para Petróleo Ltda (*) – (Brazil) ............................. 100
Gasoil Serviços Ltda(*) – (Brazil)..................................................................... 100
Kaestner & Salermo Comércio e Serviços Ltda (*) – (Brazil) .......................... 100
Ocean Coating Revestimentos Ltda (*) – (Brazil)............................................. 100
Lupatech Finance Limited (**) – (Cayman Islands) ......................................... 100
Jefferson Sudamericana S.A. (*) – (Argentina)................................................. 100
Jefferson Solenoid Valves (*) – (USA)............................................................. 100
Valjeff, S.A. de C.V. (*) – (Mexico)................................................................. 100
Jefferson Solenoidbras Ltda (*) – (Brazil) ........................................................ 100
Aspro do Brasil Sistemas de Compressão p/GNV Ltda (*) – (Brazil) .............. 50
Compressores Panamericanos S.R.L.(*) – (Argentina)..................................... 50
Delta Compresión S.R.L.(*) – ( Argentina) ...................................................... 50
Luxxon Participações Ltda (**) – (Brazil) ........................................................ 50
(*) Companies acquired in 2007.
(**) Companies established in 2007.
The significant accounting practices applied in the preparation of the consolidated interim financial statements
are as follows:
(a) Elimination of intercompany accounts;
(b) Elimination of ownership interests, reserves and retained earnings of subsidiaries;
(c) Elimination of intercompany balances and unrealized profit;
(d) Elimination of taxes on unrealized profit and stated as deferred taxes in the consolidated balance sheet.
F-15

(e) Recording of minority interest in a separate caption in the consolidated financial statements; and
(f) The balances and transactions of jointly-owned subsidiaries Luxxon Participações Ltda, Aspro do Brasil
Sistemas de Compressão p/GNV Ltda., Compressores Panamericanos S.R.L. and Delta Compresión S.R.L. are
consolidated at the ratio of 50%, proportionally to the investor’s ownership interest in the investees’ capital.
4. TEMPORARY CASH INVESTMENTS
Refer mainly to cash invested in investment funds and fixed-income securities to optimize the use of the
Company’s short-term funds.
F-16
Company Consolidated
03/31/2008 12/31/2007 03/31/2008 12/31/2007
Fixed-income securities – US$........................................ - - - 177,982
Fixed-income securities................................................... - - 3,123 1,223
- - 3,123 179,205
The yield rates of fixed-income securities range from 100% to 100.03% of the CDI (interbank deposit rate),
resulting in a weighted average rate of 100.02% of the CDI. Fixed-income securities – US$ yield 4.8% p.a.
5. TRADE ACCOUNTS RECEIVABLE
Company Consolidated
03/31/2008 12/31/2007 03/31/2008 12/31/2007
Domestic market.............................................................. 9,531 8,321 92,629 76,673
Foreign market ................................................................ 5,896 5,565 71,914 43,824
15,427 13,886 164,543 120,497
6. INVENTORIES
Company Consolidated
03/31/2008 12/31/2007 03/31/2008 12/31/2007
Finished products ............................................................ 2,183 1,942 22,471 23,633
Products for resale ........................................................... - - 4,266 5,298
Work in process............................................................... 6,308 5,676 42,814 31,835
Raw and indirect materials .............................................. 4,971 5,182 58,540 64,333
Imports in transit ............................................................. - - 977 1,017
Total ................................................................................ 13,462 12,800 129,068 126,116

7. RECOVERABLE TAXES
F-17
Company Consolidated
03/31/2008 12/31/2007 03/31/2008 12/31/2007
ICMS (state VAT) ........................................................... 1,798 1,776 17,483 16,786
IPI (federal VAT) ............................................................ 2 2 4,398 3,601
PIS (tax on revenue) ........................................................ 420 404 654 560
COFINS (tax on revenue)................................................ 1,943 1,869 3,007 2,583
Prepaid income tax .......................................................... - 171 1,886 2,618
Prepaid social contribution tax ........................................ - 65 634 840
IRRF (withholding income tax)....................................... 166 5,805 1,482 6,612
IRPJ (income tax)............................................................ 6,008 26 7,927 112
CSLL (social contribution tax)........................................ 89 17 893 221
INSS (social security contribution) ................................ - - 92 315
ISS (service tax) .............................................................. - - 148 148
Other ............................................................................... - - 3,427 4,220
10,426 10,135 42,031 38,616
Current............................................................................. 7,606 7,372 37,662 34,441
Noncurrent....................................................................... 2,820 2,763 4,369 4,175

8. Investments
Goodwill Goodwill Goodwill Goodwill Goodwill Goodwill
Lupatech Lupatech
MNA LNA Carbonox Carbonox Valmicro Steel Mipel Met. Ipê Met. Ipê Itasa Itasa Recu Recu Worcester Worcester Cordoaria Cordoaria Oil Tools Finance 03/31/2008 12/31/2007
(a) (a) (a) (b) (b) (a) (a) (a) (a) (c) (a) (d) (a) (d) (a) (f) (a) (g) (a) (a)
Investment Data
Number of Shares
Common shares
(thousand) .............
Capital shares
10,808 20 150 120
(thousand) .............
Ownership interest -
% in capital and
33,500 500 16,000 5,000 6,100 3,100 35,000 20,010 50
voting capital......... 100 100 100 100 100 100 100 5 5 5 100 100 100
Number of shares held
Common shares
(thousand) ............. 10,808 1 8 6
Capital shares
(thousand) ............. 33,500 500 16,000 5,000 6,100 3,100 35,000 20,010 50
Shareholders’ equity
(deficit) ................. 22,932 902 9,558 31,022 6,976 8,645 8,856 5,346 572 48,761 59,406 45,239 (17,343)
Net income (loss)....... (2,156) (7) 16 2,390 24 348 625 154 (11) 2,636 8,087 (4,143) (3,336)
Changes in investments
Initial balance ............ 25,088 920 9,542 5.065 28,632 6,952 8,297 8,231 19,663 260 593 29 63 2,269 3,208 51,319 86,457 49,048 305,636 130,216
Capital increase/
subscription........... 334 334 108,127
Interest acquisition..... 5,889
Change due to
merger ................... 85,529
Equity of subsidiaries/
Provision for losses
on investments ...... (2,156) (18) 16 2,390 24 348 625 8 (1) 130 8,087 (4,143) (3,158) 2,152 (12,863)
Reclassification of
shareholders’
deficit......................... (3,158) (3,158) 13,624
Goodwill amortization . (90) (521) (59) (7) (200) (2.367) (3,244) (23,855)
Dividends and interest
on capital .................. (1,031)
Ending balance .............
22,932 902 9,558 4,975 31,022 6,976 8,645 8,856 19,142 268 534 28 56 2,399 3,008 59,406 84.090 45,239 308,036 305,636
F-18

Consolidated (goodwill)
Goodwill
Carbonox
Goodwill
Met. Ipê
Goodwill
Itasa
Goodwill
Recu
Goodwill
Worcester
Goodwill
Cordoaria
Goodwill
Lupatech
Petroima
Goodwill
Gasoil
F-19
Goodwill
K&S
Goodwill
Jefferson
Sudameri-
cana
Goodwill
Jefferson
Solenoid
Goodwill
Valjeff
Goodwill
Jefferson
Solenoidbras
Goodwill
CompressoresPanamericanos
Goodwill
Delta
Goodwill
Aspro 03/31/2008 12/31/2007
(b) (c) (d) (e) (f) (g) (h) (i) (j) (a) (k) (a) (l) (a) (m) (a) (n) (a) (o) (a) (p) (a) (q)
Change in investments
Initial balance ................... 5,065 19,663 11,849 1,192 65,164 86,457 8,272 59,074 14,414 37,173 2,816 168 682 5,520 38,267 1,864 357,640 128,616
Additions .......................... 279,057
Adjustments due to
changes ........................ (767) (1,726) (2,493)
Goodwill amortization...... (90) (521) (1.185) (78) (4,074) (2,367) (175) (792) (224) (923) (90) (7) (26) (100) (768) (31) (11,451) (50,033)
Ending balance........................... 4,975 19,142 10,664 1,114 61,090 84,090 8,097 58,282 14,190 36,250 2,726 161 656 4,653 35,773 1,833 343,696 357,640
(a) The corporate names of the subsidiaries are as follows: MNA - Metalúrgica Nova Americana Ltda.; LNA - Lupatech N.A. LLC; Carbonox - Carbonox Fundição de Precisão
Ltda.; Valmicro - Valmicro Ind. Com. Válvulas Ltda.; Steelinject - Steelinject Injeção de Aços Ltda.; Mipel - Mipel Ind. Com. Válvulas Ltda.; Met. IPÊ - Metalúrgica Ipê
Ltda.; Itasa - Industria Y Tecnologia En Aceros S.A.; Recu - Recu S.A.; Worcester - Válvulas Worcester de Argentina S.A.; Cordoaria – Cordoaria São Leopoldo Offshore
S/A; Lupatech Oil Tools – Lupatech Oil Tools Indústria de Ferramentas Ltda; Lupatech Petroima – Lupatech Petroima Equipamentos para Petróleo Ltda; Gasoil - Gasoil
Serviços Ltda; K&S - Kaestner & Salermo Comércio e Serviços Ltda; Lupatech Finance – Lupatech Finance Limited; Worcester - Válvulas Worcester de Argentina S.A.;
Jefferson Sudamericana – Jefferson Sudamericana S.A.; Jefferson Solenoid – Jefferson Solenoid Valves; Valjeff – Valjeff S.A. de C.V.; Jefferson Solenoidbras – Jefferson
Solenoidbras Ltda; Compressores Panamericanos – Compressores Panamericanos S.R.L.; Delta – Delta Compresión S.R.L.; Aspro – Aspro do Brasil Sistemas de Compressão
para GNV Ltda.
(b) Goodwill of R$ 6,665 was determined on the acquisition of the investment in Carbonox Fundição de Precisão Ltda, based on expected future earnings. The goodwill
amortized in the first quarter of 2008 is R$ 90. The amortization schedule of the remaining balance is presented in the table after item (q).
(c) Goodwill of R$ 23,428 was determined on the acquisition of the investment in Metalúrgica Ipê Ltda, based on expected future earnings in the amount of R$ 15,193, and the
appreciation of the property, plant and equipment in the amount of R$ 8,235. The goodwill amortized in the first quarter of 2008 is R$ 521. The amortization schedule of the
remaining balance is presented in the table after item (q).
The portion related to the appreciation of the property, plant and equipment will be amortized as the underlying assets of the subsidiary are realized.
(d) Goodwill of R$ 18,958 was determined on the acquisition of the investment in Industria Y Tecnologia en Aceros S.A. - Itasa, part recognized by the Company and part by
subsidiary MNA, based on expected future earnings. The goodwill amortized in the first quarter of 2008 is R$ 1,185. The amortization schedule of the remaining balance is
presented in the table after item (q).
(e) Goodwill of R$ 1,490 was determined on the acquisition of the investment in Recu S.A., recognized by subsidiary MNA, based on expected future earnings. The goodwill
amortized in the first quarter of 2008 is R$ 78. The amortization schedule of the remaining balance is presented in the table after item (q).
(f) Goodwill of R$ 81,454 was determined on the acquisition of the investment in Válvulas Worcester de Argentina S.A., recognized by subsidiary MNA, based on expected
future earnings. The goodwill amortized in the first quarter of 2008 is R$ 4,074. The amortization schedule of the remaining balance is presented in the table after item (q).

(g) Goodwill of R$ 105,000 was determined on the acquisition of the investment in Cordoaria São Leopoldo Offshore S/A, based on expected future earnings. The goodwill
amortized in the first quarter of 2008 is R$ 2,367. The amortization schedule of the remaining balance is presented in the table after item (q).
(h) Goodwill of R$ 8,782 was determined on the acquisition of the investment in Lupatech Petroima Equipamentos para Petróleo Ltda, recognized by subsidiary Lupatech Oil
Tools, based on expected future earnings. The goodwill amortized in the first quarter of 2008 is R$ 175. The amortization schedule of the remaining balance is presented in the
table after item (q).
In the Lupatech Petroima Equipamentos para Petróleo Ltda acquisition transaction, part of the payment laid down in the share purchase agreement, in the amount of R$
25,000, is linked to the compliance with future EBITDA targets.
(i) Goodwill of R$ 63,932 was determined on the acquisition of the investment in Gasoil Serviços Ltda, recognized by subsidiary Lupatech Oil Tools, based on expected future
earnings. The goodwill amortized in the first quarter of 2008 is R$ 792. The amortization schedule of the remaining balance is presented in the table after item (q).
In the Gasoil Serviços Ltda. (Gasoil) acquisition transaction, part of the payment laid down in the share purchase agreement, in the amount of R$ 16,240, is linked to the
compliance with future EBITDA targets.
(j) Goodwill of R$ 14,414 was determined on the acquisition of the investment in Kaestner & Salermo Comércio e Serviços Ltda, recognized by subsidiary Lupatech Oil Tools,
based on expected future earnings. The goodwill amortized in the first quarter of 2008 is R$ 224. The amortization schedule of the remaining balance is presented in the table
after item (q).
In the Kaestner & Salermo Comércio e Serviços Ltda (K&S) acquisition transaction, part of the payment laid down in the share purchase agreement, in the amount of R$
22,396, is linked to the future EBITDA performance.
(k) Goodwill of R$ 37,612 was determined on the acquisition of the investment in Jefferson Sudamericana S/A, recognized by subsidiary Gasoil, based on expected future
earnings. The goodwill amortized in the first quarter of 2008 is R$ 923. The amortization schedule of the remaining balance is presented in the table after item (q).
In the Jefferson Sudamericana S/A acquisition transaction, an additional amount will be paid equivalent to 25% of EBITDA generated in fiscal 2008, 2009 and 2010
exceeding
US$ 4,500,000.
(l) Goodwill of R$ 2,816 was determined on the acquisition of the investment in Solenoid Valves, recognized by subsidiary Gasoil, based on expected future earnings. The
goodwill amortized in the first quarter of 2008 is R$ 90. The amortization schedule of the remaining balance is presented in the table after item (q).
(m) Goodwill of R$ 168 was determined on the acquisition of the investment in Valjeff, S.A. de CV, recognized by subsidiary Gasoil, based on expected future earnings. The
goodwill amortized in the first quarter of 2008 is R$ 7. The amortization schedule of the remaining balance is presented in the table after item (q).
(n) Goodwill of R$ 682 was determined on the acquisition of the investment in Jefferson Solenoidbras Ltda, recognized by subsidiary Gasoil, based on expected future earnings.
The goodwill amortized in the first quarter of 2008 is R$ 26. The amortization schedule of the remaining balance is presented in the table after item (q).
(o) Goodwill of R$ 5,520 was determined on the acquisition of the investment in Compressores Panamericanos S.R.L, recognized by indirect subsidiary Luxxon Participações
Ltda, based on expected future earnings. The goodwill amortized in the first quarter of 2008 is R$ 100. The amortization schedule of the remaining balance is presented in the
table after item (q).
F-20

(p) Goodwill of R$ 38,267 was determined on the acquisition of the investment in Delta Compresión S.R.L., recognized by indirect subsidiary Luxxon Participações Ltda, based
on expected future earnings. The goodwill amortized in the first quarter of 2008 is R$ 768. The amortization schedule of the remaining balance is presented in the table after
item (q).
(q) Goodwill of R$ 1,864 was determined on the acquisition of the investment in Aspro do Brasil Sistemas de Compressão para GNV Ltda, recognized by indirect subsidiary
Luxxon Participações Ltda, based on expected future earnings. The goodwill amortized in the first quarter of 2008 is R$ 31. The amortization schedule of the remaining
balance is presented in the summary table.
In the Delta Compresión S.R.L, Compressores Panamericanos S.R.L and Aspro do Brasil Sistemas de Compressão para GNV Ltda acquisition, an additional amount will be
paid equivalent to 100% of consolidated EBITDA of these companies for 2008 exceeding
US$ 20,000 thousand up to the limit of US$ 23,000 thousand, plus 200% of consolidated EBITDA exceeding US$ 23,000 thousand up to the limit of US$ 25,000 thousand,
and 50% of consolidated EBITDA exceeding US$ 25,000 thousand.
In summary, the amortization schedule of the remaining consolidated goodwill of the Company’s and its subsidiaries is as follows:
Company
Company 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total
Goodwill
amortized in
the quarter
Carbonox ............................................ 269 425 514 600 680 758 831 898 (90)
Metalúrgica Ipê .................................. 1,560 2,230 2,398 2,375 2,595 2,785 1,977 1,887 1,335 19,142 (521)
Itasa..................................................... 178 237 119 534 534 (59)
Recu.................................................... 8 16 16 16 56 56 (7)
Worcester de Argentina ..................... 601 802 802 802 3,007 3,007 (200)
CSL Offshore ..................................... 7,101 7,966 8,618 8,956 9,215 9,482 9,756 10,038 10,328 2,630 84,090 (2,367)
Total.................................................... 9,717 11,676 12,467 12,749 12,490 13,025 12,564 12,823 11,663 2,630 111,804 (3,244)
F-21

Consolidated
Company 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total
Carbonox .......................................... 269 425 514 600 680 758 831 898 4,975 (90)
Metalúrgica Ipê ................................ 1,560 2,230 2,398 2,375 2,595 2,785 1,977 1,887 1,335 19,142 (521)
Itasa................................................... 3,554 4,739 2,371 10,664 (1,185)
Recu.................................................. 220 298 298 1,114 (78)
Worcester de Argentina ................... 12,217 16,291 16,291 16,291 61,090 (4,074)
CSL Offshore ................................... 7,101 7,966 8,618 8,956 9,215 9,482 9,756 10,038 10,328 2,630 84,090 (2,367)
Lupatech Petroima ........................... 521 581 651 730 825 933 1,005 1,081 1,148 622 8,097 (175)
Gasoil................................................ 2,377 3,655 4,436 5,377 6,053 6,715 7,441 8,246 9,139 4,843 58,282 (792)
Kaestner & Salermo ......................... 673 1,010 1,187 1,374 1,589 1,485 1,710 1,888 2,183 1,091 14,190 (224)
Jefferson Sudamericana ................... 2,838 4,441 5,159 6,079 6,914 7,699 3,120 36,250 (923)
Jefferson Solenoid Valves................ 270 449 561 673 773 2,726 (90)
Valjeff .............................................. 20 29 32 37 43 161 (7)
Jefferson Solenoidbras ..................... 79 121 133 153 170 656 (26)
Compressores Panamericanos.......... 300 419 439 470 487 500 514 527 542 4,653 (100)
Delta Compresión............................. 2,305 3,220 3,373 3,492 3,617 3,745 3,847 3,952 4,057 4,165 35,773 (768)
Aspro do Brasil................................. 93 106 104 141 177 198 221 243 265 285 1,833 (31)
Total.................................................. 34,397 45,980 46,565 47,031 33,121 34,287 30,408 28,747 28,982 14,178 343,696 (11,451)
F-22
Goodwill
amortized in
the quarter

9. PROPERTY, PLANT AND EQUIPMENT
Company
Annual
weighted
depreciation
rates - % Cost
F-23
03/31/2008 12/31/2007
Accumulated
depreciation Net Net
Land................................................. 2,822 - 2,822 2,822
Buildings and constructions............. 4 10,034 (3,332) 6,702 6,778
Machinery and equipment................ 10 35,100 (15,319) 19,781 19,642
Molds and dies................................. 20 5,887 (5,007) 880 915
Industrial installations...................... 10 3,496 (1,697) 1,799 1,859
Furniture and fixtures....................... 10 1,462 (607) 855 776
Data processing equipment .............. 20 1,543 (635) 908 932
Vehicles ........................................... 20 279 (191) 88 95
Containers........................................ 50 93 (82) 11 21
Advance for acquisition of
property, plant and equipment..... 1,830 - 1,830 1,318
Property, plant and equipment in
progress....................................... 8,881 - 8,881 7,317
Total................................................. 71,427 (26,870) 44,557 42,475
Consolidated
Annual
weighted
depreciation
rates - % Cost
03/31/2008 12/31/2007
Accumulated
depreciation Net Net
Land................................................. 14,993 - 14,993 19,780
Buildings and constructions............. 4 30,919 (5,144) 25,775 25,947
Machinery and equipment................ 10 137,549 (39,014) 98,535 91,907
Molds and dies................................. 20 13,981 (9,456) 4,525 4,603
Industrial installations...................... 10 8,125 (3,050) 5,075 5,178
Furniture and fixtures....................... 10 5,304 (2,318) 2,986 2,685
Data processing equipment .............. 20 6,669 (2,730) 3,939 3,883
Improvements .................................. 4 3,382 (1,674) 1,708 1,704
Vehicles ........................................... 20 2,720 (1,211) 1,509 1,577
Containers........................................ 50 133 (86) 47 54
Advance for acquisition of
property, plant and equipment..... 5,528 - 5,528 4,425
Property, plant and equipment in
progress....................................... 27,285 - 27,285 18,249
Total................................................. 256,588 (64,683) 191,905 179,992
Property, plant and equipment also include the revaluations made in 1994, as commented in note 2 (i),
conducted by independent experts, whose net residual balance is as follows:
03/31/2008 12/31/2007
Machinery and equipment............................................................................................ 4 5
Industrial installations.................................................................................................. 2 2
Molds and dies............................................................................................................. 277 295
Total............................................................................................................................. 283 302

10. LOANS AND FINANCING AND PERPETUAL BONDS
(a) Loans and financing
Company
Weighted
03/31/2008 12/31/2007
Index Interest rate Current Noncurrent Total Current Noncurrent Total
Local currency
FINEP........................ TJLP 3.5% p.a. 298 - 298 408 - 408
BRDE ........................ TJLP 6.46% p.a. 1,247 744 1,991 1,310 1,021 2,331
BRDE ........................ FIXED 12.95% p.a. 600 1,020 1,620 669 1,074 1,743
FINAME.................... TJLP 6.75% p.a. 107 45 152 139 68 207
Research and
technology
incentive
financing.............. TJLP -3.5% p.p. 902 5,431 6,333 902 5,832 6,734
Banespa - working
capital .................. CDI 0.068% p.m. - - - - - -
Unibanco – Finame ... TJLP 1.5% p a. 310 1,034 1,344 260 1,110 1,370
Itaú – Finame............. TJLP 1.3% p.a. 1,022 3,092 4,114 1,022 3,342 4,364
Santander Secured
Account ............... CDI 1.5% p.a. 6,529 - 6,529 6,412 - 6,412
Unibanco Secured
Account ............... CDI 1.57% p.a. 30,880 - 30,880 - - -
41,895 11,366 53,261 11,122 12,447 23,569
03/31/2008 12/31/2007
Consolidated
Local currency
Index
Weighted
interest rate Current Noncurrent Total Current Nocurrent Total
FINEP TJLP 3.5% p.a. 29 - 297 408 - 408
BRDE TJLP 6.29% p.a. 1,448 1,785 3,233 1,427 2,210 3,637
BRDE Fixed 12.95% p.a. 600 1,020 1,620 669 1,074 1,743
SAFRA Fixed 13.95% p.a. 269 373 642 271 418 689
FINAME TJLP 5.95% p.a. 959 1,314 2,273 952 1,412 2,364
Research and technology incentive financing TJLP -3.5% p.p. 902 5,431 6,333 902 5,832 -
Banco Unibanco TJLP 1.50% p.a. 310 1,034 1,344 260 1,110 1,370
Banco Itaú CDI 1.22% p.a. 7,352 160,000 167,352 2,648 160,000 162,648
Banco Itaú TJLP 1.30% p.a. 1,022 3,092 4,114 1,022 3,342 4,364
Banco Citibank CDI 109.85% 3,264 68,371 71,635 1,028 69,480 70,508
Bahia State Development Agency Fixed 18% p.a. - - - 28 - 28
Banco do Brasil Fixed 13% p.a. 19 34 53 53 38 91
Banco Real Fixed 24.90% p.a. 8 4 12 8 7 15
Banco Sudameris Fixed 30.15% p.a. 13 34 47 13 38 51
Banco Finasa S/A Fixed 18.24% p.a. 32 - 32 45 - 45
Banco Itaú 1.85% a.m. 392 - 392 784 - 784
Bco Merc. Do Brasil 1.72% a.m. 11 - 11 19 - 19
Bco Merc. Do Brasil 1.80% a.m. 348 - 348 697 - 697
Bco Indl.e Coml. CDI 8.70% p.a. 1,345 384 1,729 1,432 761 2,193
Bco HSBC Fixed 45.77% p.a. 28 - 28 39 - 39
Banco Toyota 7.79% p.a. 6 - 6 13 - 13
Unibanco Secured Account CDI 1.57 a.a 40,238 - 40,238 - - -
Santander Secured Account CDI 1.5% p.a. 38,156 - 38,156 39,061 - 39,061
Foreign currency
97,019 242,876 339,895 51,779 245,722 297,501
Banco Itaú Libor 8.75% p.a. 439 330 769 447 447 894
Banco Itaú US$ 5.61% p.a. 109 5,792 5,901 32 3,511 3,543
Banco HSBC Arg. US$ 6.33% p.a. 1,339 - 1,339 1,365 - 1,365
Banco da Patagonia Libor 6.40% p.a. 888 - 888 923 - 923
99,794 248,998 348,792 54,546 249,680 304,226
F-24

Noncurrent portions mature as follows:
Company Consolidated
Maturity 03/31/2008 12/31/2007 03/31/2008 12/31/2007
2009 ................................................................. 2,891 4,348 91,293 -
2010 ................................................................. 3,476 3,582 120,475 122,343
2011 ................................................................. 2,961 3,062 33,615 120,243
2012 ................................................................. 2,026 1,455 3,603 4,615
2013 ................................................................. 12 - 12 2,479
11,366 12,447 248,998 249,680
Loans and financing are collateralized as follows:
Company
Transaction: Guarantee Amount
FINEP (Studies and Projects Financing Entity)........................................................... Properties 1,919
BRDE........................................................................................................................... Financed asset 10,695
FINAME (equipment financing).................................................................................. Financed asset 804
Research and technology incentive financing.............................................................. Bank guarantee 4,328
Banco Unibanco........................................................................................................... Financed asset 1,492
Banco Unibanco........................................................................................................... Surety 6,529
Banco Itaú.................................................................................................................... Financed asset 5,045
Banco Unibanco........................................................................................................... Surety 30,881
Total............................................................................................................................. 61,693
Consolidated
Transaction: Guarantee Amount
FINEP ............................................................................................................. Properties 1,919
BRDE.............................................................................................................. Financed asset 11,944
SAFRA ........................................................................................................... Financed asset 984
FINAME......................................................................................................... Financed asset 3,946
Research and technology incentive financing................................................. Bank guarantee
Shareholders’ collateral
4,329
Banco Itaú.......................................................................................................
F-25
signatures 172,936
Banco Citibank ...............................................................................................
Shareholders’ collateral
signatures 69,480
Banco Unibanco.............................................................................................. Financed asset
Shareholders’ collateral
1,492
Bahia State Development Agency ................................................................. signatures 83
Banco do Brasil............................................................................................... Financed asset 67
Banco Real...................................................................................................... Financed asset 18
Banco Sudameris ............................................................................................ Financed asset 57
Banco Finasa S/A............................................................................................ Financed asset 62
Banco Mercantil do Brasil .............................................................................. Financed asset 1,096
Banco da Patagônia......................................................................................... Working capital 1,026
Bic Banco ....................................................................................................... Working capital 2,600
Banco Toyota.................................................................................................. Financed asset 520
Banco HSBC................................................................................................... Working capital 82
Banco Santander ............................................................................................. Working capital 21,595
Banco Unibanco.............................................................................................. Working capital 40,238
Total................................................................................................................ 334,474
Some financing agreements contain restrictive covenants, which have been complied with as of March 31,
2008.
(b) Perpetual bonds

On July 11, 2007, the offering of senior perpetual bonds yielding 9.875% p.a. was completed through subsidiary
Lupatech Finance Limited (the bonds), totaling US$ 200 million. Interest on perpetual bonds is paid on a
quarterly basis.
The bonds were not registered with the Brazilian Securities Commission or under the U.S. Securities Act of
1933, or the Securities Act. The bonds were offered only to investors qualified under Rule 144A and to non-US
citizens, outside of the United States, except in jurisdictions where such offer or sale is forbidden under
Regulation S. The bonds are listed in the Luxembourg stock exchange.
The proceeds from the offering are being used to fund the Company’s growth plan.
11. RELATED PARTIES
MNA LNA Carbonox Valmicro Mipel Steel Cordoaria Petrofina Gasoil K&S Ocean 03/31/2008 12/31/2007
(a) (a) (a) (a) (a) (a) (a) (a) (a) (a) (a)
Assets
Trade receivables 57 379 287 77 800 719
Loans..................
Interest on capital
35 462 813 12,913 423 12,980 364 27,990 15,072
receivable ...... 877
Dividends
receivable ...... 352 352 352
Total ...................
Liabilities ...........
35 57 379 462 1,165 13,200 423 13,057 354 29,143 17,020
Trade payables ... 30 9 6 45 9
Loans.................. 97,676 8,084 105,760 111,097
Total ................... 97,676 30 9 8,090 105,805 111,106
Product sales ......
Product
139 189 328 1,170
purchases....... 76 11 87 1,723
Financial income
Financial
29 10 305 10 294 11 659 17,342
expenses ........ 2,565 283 2,848 3,168
(a) The corporate names of the subsidiaries are as follows: MNA - Metalúrgica Nova Americana Ltda.; LNA -
Lupatech N.A. LLC; Carbonox - Carbonox Fundição de Precisão Ltda.; Valmicro - Valmicro Ind. Com.
Válvulas Ltda.; Mipel - Mipel Ind. Com. Válvulas Ltda.; Steelinject Injeção de Aços Ltda; Cordoaria –
Cordoaria São Leopoldo Offshore S/A; Petroima – Lupatech Petroima Equipamentos para Petróleo Ltda; Gasoil
- Gasoil Serviços Ltda; K&S - Kaestner & Salermo Comércio e Serviços Ltda; Ocean – Ocean Coating
Revestimentos Ltda.
(b) Intercompany transactions are carried out at usual market conditions and terms. Intercompany receivables and
payables are subject to the rates in effect in the financial market.
F-26

12. INCOME AND SOCIAL CONTRIBUTION TAXES
(a) Deferred income and social contribution taxes
Company Consolidated
03/31/2008 12/31/2007 03/31/2008 12/31/2007
Assets
Reserve for contingencies ............................. 2,003 2,128
Income tax loss carryforwards ..................... 7,641 6,377 8,058 6,642
Social contribution tax loss carryforwards.... 2,808 2,349 2,944 2,518
Deferred income and social contribution
taxes ......................................................... 10,449 8,726 13,005 11,288
Current portion.............................................. 179 158 179 158
Noncurrent portion........................................ 10,270 8,568 12,826 11,130
Liabilities
Revaluation reserve....................................... 87 93 87 93
Deferred income and social contribution
taxes ......................................................... 87 93 87 93
Noncurrent portion........................................ 87 93 87 93
(b) Estimated realization of deferred tax assets
The recovery of tax credits (Company and consolidated) is based on future taxable income
projections for the following years:
Year Company Consolidated
2008 ................................................................................................................. 179 179
2009 ................................................................................................................. 535 1,992
2010 ................................................................................................................. 954 2,053
2011 ................................................................................................................. 1,312 1,312
2012 ................................................................................................................. 1,718 1,718
2013 ................................................................................................................. 1,718 1,718
2014 ................................................................................................................. 1,718 1,718
2015 ................................................................................................................. 1,718 1,718
2016 ................................................................................................................. 597 597
10,449 13,005
Company and consolidated taxes payable will be paid as the revaluation reserve is realized:
Year Company Consolidated
2008 ................................................................................................................. 7 13
2009 and thereafter .......................................................................................... 80 80
87 93
F-27

(c) Reconciliation of income and social contribution tax expense
Company Consolidated
03/31/2008 03/31/2007 03/31/2008 03/31/2007
Income (loss) before taxes and profit
sharing .................................................... (6,227) 70 (350) 3,416
Additions and deductions
Equity in subsidiaries ......................... (2,152) (982)
Employee and management profit
sharing........................................... (214) (182)
Goodwill amortization ....................... 3,244 1,084 11,451 6,154
Tax effect on subsidiaries taxed
based on deemed income (note 2
(j)) ................................................. - - (1,097) (615)
Unrecorded tax credits on
subsidiary’s loss ........................... - - 3,336 -
Other .................................................. 53 498 (1,541) 662
Tax basis (5,082) 670 11,585 9,435
Combined tax rate ............................. 34% 34% 34% 34%
Taxes computed at the combined tax rate..... (1,728) 228 3,939 3,208
Deferred income and social contribution
taxes ........................................................ (1,728) - (1,723) (278)
Current income and social contribution
taxes......................................................... - 228 5,662 3,486
13. PAYABLES FOR ACQUISITION OF INVESTMENTS
In 2005, the Company acquired its subsidiary Carbonox - Fundição de Precisão Ltda. The amounts related to
the cost of acquisition of this subsidiary will be settled in 2008, subject to interest of 6% p.a., plus the IGPM
(general market price index) variation.
In the second quarter of 2006, the subsidiary Metalúrgica Nova Americana Ltda. acquired Indústria y
Tecnologia En Aceros S.A. - Itasa. The sellers of Itasa, current Itasa executives, will receive as variable
compensation an amount equivalent to 30% of the net income for the first year, 20% of net income for the
second year, and 10% of net income for the third year.
In the fourth quarter of 2007, the Company, through its subsidiary Luxxon Participações Ltda, acquired Aspro
do Brasil – Compressores para GNV Ltda, Delta Compresores S.R.L. and Compressores Panamericanos S.R.L.
The outstanding balance payable for the acquisition of Delta was fully settled in April 2008.
The payment schedule of the acquisitions is as follows:
Carbonox Itasa
Delta
acquisition acquisition acquisition Consolidated
Year Amount Amount Amount Amount
2008 .............................................................. 524 1,574 22,254 24,352
2009 .............................................................. - 1,574 - 1,574
524 3,148 22,254 25,926
14. CONTINGENCIES
(a) Contingent liabilities
The Company and its subsidiaries are parties to tax, labor, and civil lawsuits. The reserve for
contingencies was calculated by Management based on information from the Company’s legal
counsel, in an amount considered sufficient to cover probable unfavorable outcomes of the
lawsuits.
F-28
Company
Likelihood of an unfavorable outcome

F-29
Remote Possible Probable
Tax (i) .................................................................................. 12,601 1,320 61
Labor (ii).............................................................................. 174 206 103
Civil (iii) .............................................................................. - 2 -
Total..................................................................................... 12,775 1,528 164
(-) Escrow deposits .............................................................. - - (164)
Total as of March 31, 2008 .................................................. 12,775 1,528 -
Total as of December 31, 2007 ............................................ 12,555 3,020 16
Consolidated
Likelihood of an unfavorable outcome
Remote Possible Probable
Tax (i) .................................................................................. 12,601 5,054 11,457
Labor (ii).............................................................................. 929 2,161 253
Civil (iii) .............................................................................. 232 293 21
Total..................................................................................... 13,762 7,508 11,731
(-) Escrow deposits .............................................................. - - (4,234)
Total as of March 31, 2008 .................................................. 13,762 7,508 7,497
Total as of December 31, 2007 ............................................ 13,542 9,137 7,478
(i) Tax - litigation involving municipal, state and federal taxes, including IRPJ, PIS, COFINS,
INSS, ICMS and IPI. There are lawsuits at all court levels, from lower courts through the higher
courts STJ (Superior Court of Justice) and STF (Federal Supreme Court).
(ii) Labor - several labor claims filed by employees seeking indemnity.
(iii) Civil – comprises civil actions, injunctions, execution actions, etc.
(b) Contingent assets
Company
Likelihood of a favorable outcome
Remote Possible Probable
Tax (i) .................................................................................. 1,958 737 1,225
Civil (ii) ............................................................................... 52 366 -
Total as of March 31, 2008 .................................................. 2,010 1,103 1,225
Total as of December 31, 2007 ............................................ 2,032 1,162 1,971

F-30
Consolidated
Likelihood of a favorable outcome
Remote Possible Probable
Tax (i) .................................................................................. 3,202 878 2,561
Civil (ii) ............................................................................... 7,481 380 -
Total as of March 31, 2008 .................................................. 10,683 1,258 2,561
Total as of December 31, 2007 ............................................ 10,399 1,314 3,307
(i) Tax - litigation involving the claim of credits related to municipal, state and federal taxes.
(ii) Civil - comprises civil actions, injunctions, execution actions, etc.
The Company did not recognize in books contingent gains, as these are only recognized after final
and unappealable decisions or funds are actually received.
15. SHAREHOLDERS’ EQUITY
(a) Capital
Capital is represented only by common shares, all with tag along rights:
03/31/2008 12/31/2007
Common shares.................................................................................................... 47,581,446 47,437,333
Total..................................................................................................................... 47,581,446 47,437,333
Shareholders are entitled to an annual mandatory minimum dividend of 25% of the annual net
income adjusted as per Corporate Law.
Pursuant to the Board of Directors’ meeting minutes, on March 25, 2008 a capital increase was
approved, with the issue of 144,113 new common shares, subscribed and paid up un conformity
with the Stock Options Plan (note 20).
Under the Company’s bylaws, the Board of Directors can increase capital regardless of any
amendment to the bylaws, by up to 127,000,000 common shares.
(b) Revaluation reserve
The revaluation reserve, realized through the depreciation, write-off or sale of the underlying
assets, is transferred to retained earnings when realized, also considering the tax effects of the
provisions recognized.
16. RECONCILIATION OF COMPANY AND CONSOLIDATED SHAREHOLDERS’ EQUITY AND NET
INCOME (LOSS)
Shareholders’ equity Net income (loss)
03/31/2008 12/31/2007 03/31/2008 03/31/2007
Company....................................................... 254,123 258,197 (4,499) (158)
Unrealized profit on subsidiaries .................. (1,457) (1,453) (4) 184
Consolidated ................................................. 252,666 256,744 (4,503) 26

17. INSURANCE (NOT REVIEWED BY INDEPENDENT AUDITORS)
It is the policy of the Company to have a comprehensive business insurance coverage for property, plant and
equipment items and inventories, at amounts considered sufficient to cover the involved risks. The Company
also has civil liability and directors and officers liability insurance.
Insurance Insured amount
- Comprehensive business............................................................................................................ 206,000
- General civil liability................................................................................................................. 5,000
- D&O liability............................................................................................................................. 10,000
18. FINANCIAL INSTRUMENTS
The Company has determined the estimated fair value of its financial instruments using available market
information and appropriate valuation methodologies. However, considerable judgment is required to interpret
market data and to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily
indicative of the amounts that could be realized in a current market exchange. The use of different market
assumptions and/or valuation methodologies may have a material effect on the estimated fair values.
Measurement of the financial instruments and main business risks
The Company’s main financial instruments as of March 31, 2008 are described below, as well as their
valuation/measurement criteria:
(a) Cash, banks and temporary cash investments
Checking accounts and temporary cash investments in banks have amounts similar to their book
balances.
(b) Investments
Consist principally of investments accounted for under the equity method in privately-held
subsidiaries in which the Company has strategic interests. Fair value considerations for shares held
do not apply. Most of the Company’s acquisitions were made in the last two years, indicating that
the carrying amounts approximate their fair value.
(c) Loans and financing
Loans are subject to usual market interest rates, as described in note 10. The estimated fair value
was calculated based on the present value of future cash outflows, using interest rates available to
the Company and the valuation indicates that fair values are similar to the carrying amounts.
Risk factors that could affect the Company’s and its subsidiaries’ business
(a) Interest rate risk
This risk arises from the possibility of the Company incurring losses because of interest rate
fluctuations that increase financial expenses related to loans and financing raised in the market.
The Company continuously monitors the market interest rates in order to evaluate the need for
hedging against the volatility of these rates. Current temporary cash investments are tied to
floating interest rates, reducing the interest rate risks, where the Company is subject only to the
spread between the funding rate and investment yield.
(b) Exchange rate risk
This risk arises from the possibility that the Company may incur losses due to exchange rate
fluctuations that would reduce the nominal amounts billed or increase funds raised in the market.
F-31

As part of the Company’s revenue (approximately 15%) is in euro and US dollars, the main
strategy is to use such revenue as a natural hedge of the Company’s foreign currency-denominated
payables.
As of March 31, 2008, the Company has assets and liabilities denominated in US dollars
amounting to US$ 105,415 thousand and US$ 110,748 thousand, respectively, and assets and
liabilities denominated in euro amounting to € 1,645 thousand and €304 thousand, respectively,
and there is no instrument to hedge this exposure other than the export transactions (in foreign
currency) that minimize possible exchange risks.
(c) Credit risk
The Company’s sales policy is closely associated to the level of credit risk that it is willing to
assume in the ordinary course of its business. To minimize possible default the Company
diversifies its receivables portfolio, selects customers, and monitors sales financing terms by
business segment and individual position limits.
(d) Price risk
In view of Management’s planning for Company’s and subsidiaries’ exports, a possible volatility
in exchange rates may represent price volatility.
19. EXPENSES ON INITIAL PUBLIC OFFERING (IPO)
The Company recorded in the first quarter of 2007 supplementary expenses on the IPO of
R$ 304, charged directly to other operating expenses in the statement of operations.
20. STOCK OPTION PLAN
In order to foster the Company’s expansion and meet the corporate goals set, and allow the Company to attract
and retain high level executives, thus ensuring its good performance and meeting the interests of its
shareholders through a long-term commitment of its management, the Extraordinary Shareholders’ Meeting
held on April 19, 2006 approved the Company’s Stock Option Plan (the “Plan”).
The Board of Directors defined who is eligible for the programs set by the Plan, the number of shares they have
the right to subscribe by exercising their option, and the share payment method.
The Board of Directors’ Meeting held on July 20, 2006 confirmed the other terms and conditions of the Plan,
i.e., share subscription price, maximum option exercise period, restrictions on share transfer, option transfer
rules, and applicable penalties.
On January 2, 2007, the Board of Directors approved the Second Stock Option Program, approved by the
Extraordinary Shareholders’ Meeting held on April 19, 2006.
The programs have the following characteristics:
Number of shares Number of employees Exercise price
1 st Program....................................................... 537,558 29 R$11.10
2 nd Program...................................................... 424,835 30 R$28.32
The option offered under the Plan shall represent each year a maximum of 5% of total Company shares
outstanding on grant date, plus all the other outstanding shares should the share subscription options offered
under the Plan be exercised. Distributed shares shall have the same rights as the existing shares.
Beneficiaries may exercise their Options through payment in cash, or postponing their exercise by one year and
cumulate option exercise payment with the payment of options vested in the following year.
Beneficiaries may defer option exercise payment up to one year. In this case, the vesting price shall be adjusted
based on the IGPM-FGV (general market price index), plus 6% per year, on a pro rata basis through
subscription and/or vesting date.
F-32

Since the Plan’s creation the following share subscriptions and payment for capital increase were made:
Date Number of shares Exercise price Market value
03/25/2008 ....................................................... 144,113 R$2,715 R$7,566
05/09/2007 ....................................................... 104,601 R$1,276 R$4,340
21. EMPLOYEE AND MANAGEMENT PROFIT SHARING
Pursuant to the provisions of Law No. 10101 of December 19, 2000, Management opted for the semiannual
payment of employee profit sharing. Profit sharing amount for 2007 was R$ 54 (Company) and R$ 1,618
(consolidated). In the first quarter of 2008, accrued profit sharing was R$ 214, consolidated (no amount was
accrued by the Company). Employee and Management profit sharing was calculated as established in the Profit
Sharing Plan ratified by the labor union.
* * * * * *
F-33

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F-34

(A free translation of the original in Portuguese)
Lupatech S.A. and
Subsidiaries
Financial Statements
at December 31, 2007 and 2006
and Report of Independent Auditors
F-35

(A free translation of the original in Portuguese).
Report of Independent Auditors
To the Board of Directors and Stockholders
Lupatech S.A.
1 We have audited the accompanying balance sheets of Lupatech S.A. and the consolidated balance sheets of
Lupatech S.A. and its subsidiaries as of December 31, 2007 and 2006, and the related statements of income, of
changes in stockholders’ equity and of changes in financial position of Lupatech S.A., as well as the related
consolidated statements of income and of changes in financial position for the years then ended. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
these financial statements. The audit of the financial statements of the subsidiaries Metalúrgica Ipê Ltda. and
Industria Y Tecnologia En Aceros S.A. as of December 31, 2006 was conducted by other independent auditors.
The investments in these companies are recorded in the financial statements of Lupatech S.A. on the equity
method of accounting and represent investments of R$ 10,980 thousand at December 31, 2006 and equity in
earnings of R$ 2,806 thousand for the year then ended. The financial statements of these subsidiaries, with total
assets of R$ 34,378 thousand at December 31, 2006, are included in the consolidated financial statements. Our
opinion, insofar as it refers to the amounts included for these companies, is based solely on the report of these
other auditors.
2 We conducted our audits in accordance with approved Brazilian auditing standards, which require that we
perform the audit to obtain reasonable assurance about whether the financial statements are fairly presented in
all material respects. Accordingly, our work included, among other procedures: (a) planning our audit taking
into consideration the significance of balances, the volume of transactions and the accounting and internal
control systems of the Company and its subsidiaries, (b) examining, on a test basis, evidence and records
supporting the amounts and disclosures in the financial statements, and (c) assessing the accounting practices
used and significant estimates made by management, as well as the overall financial statement presentation.
3 In our opinion, based on our audits and on the reports of the other auditors, the financial statements described in
paragraph 1 above present fairly, in all material respects, the financial position of Lupatech S.A. and of
Lupatech S.A. and its subsidiaries at December 31, 2007 and 2006, and the results of operations, the changes in
stockholders’ equity and the changes in financial position of Lupatech S.A., as well as the consolidated results
of operations and of changes in financial position for the years then ended, in accordance with accounting
practices adopted in Brazil.
4 Our audits were conducted for the purpose of forming an opinion on the financial statements mentioned in the
first paragraph taken as a whole. The statement of cash flows, presented for the purposes of providing additional
information on the Company and its subsidiaries, is not required as integral part of the financial statements. The
statement of cash flows has been subjected to the auditing procedures described in the second paragraph and in
our opinion are fairly presented, in all material respects, in relation to the financial statements taken as whole.
Porto Alegre, February 14, 2008
PricewaterhouseCoopers Carlos Biedermann
Auditores Independentes Contador CRC 1RS029321/O-4
CRC 2SP000160/O-5 “F” RS
F-36

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Balance Sheet at December 31,
(in thousands of reais)
Parent company Consolidated
Assets 2007 2006 2007 2006
Current assets
Cash and banks............................................ 243 931 59,111 11,519
Marketable securities (Note 4) .................... 188,148 179,205 192,747
Accounts receivable (Note 5) ...................... 13,886 13,268 120,497 61,944
Inventories (Note 6) .................................... 12,800 9,179 126,116 71,175
Dividends receivable (Note 12)................... 352 7,449
Interest on own capital receivable
(Notes 8 and 12) ..................................... 877 1,732
Taxes recoverable (Note 7) ......................... 7,372 3,922 34,441 14,216
Deferred income tax and social
contribution (Note 13) ............................ 158 391 158 391
Other accounts receivable ........................... 2,518 1,746 17,508 4,545
Prepaid expenses ......................................... 25 44 768 172
38,231 226,810 537,804 356,709
Non-current
Long-term receivables
Related parties (Note 12)............................. 15,072 126,423
Taxes recoverable (Note 7) ......................... 2,763 1,729 4,175 2,512
Deferred income tax and social
contribution (Note 13) ............................ 8,568 2,542 11,130 5,647
Other accounts receivable ........................... 494 1,057 2,954 1,099
26,897 131,751 18,259 9,258
Permanent assets
Investments in subsidiaries (Note 8) ........... 305,636 130,216 357,640 128,616
Other investments ....................................... 90 90 1,937 183
Property, plant and equipment, net
(Note 9) .................................................. 44,753 30,873 183,682 71,908
Deferred charges – net................................. 3,242 1,355 8,591 3,221
353,721 162,534 551,850 203,928
Total assets ........................................................... 418,849 521,095 1,107,913 569,895
F-37

Parent company Consolidated
Liabilities and stockholders’ equity 2007 2006 2007 2006
Current liabilities
Suppliers...................................................... 6,523 5,823 45,510 18,933
Loans and financing (Note 10).................... 11,122 8,661 54,546 10,366
Perpetual bonds (Note 10)........................... 7,968
Debentures (Note 11) .................................. 9,795 9,795
Salaries and wages ...................................... 2,212 1,744 8,384 5,044
Taxes and social contributions .................... 1,576 1,160 10,904 4,379
Deferred income tax and social 2,059
contribution (Note 13)................................. 5,825 5,825
Dividends and interest on own capital
payable Advances from customers ......... 154 193 7,451 677
Participation in results................................. 19 627 1,358 3,143
Related parties (Note 12)............................. 111,097 702
Accounts payable for acquisition of
investments (Note 14)............................. 503 1,778 77,378 3,702
Provision for income tax and social
Contribution............................................ 14,636 6,064
Provision for net capital deficiency of
subsidiary (Note 8) ................................. 14,185 561
Other accounts payable ............................... 705 436 9,066 3,123
148,096 37,305 237,201 73,110
Non-current
Long-term liabilities
Loans and financing (Note 10).................... 12,447 9,544 249,680 14,125
Perpetual bonds (Note 10)........................... 354,260
Debentures (Note 11) .................................. 227,000 227,000
Provision for contingencies (Note 15)......... 16 3 7,478 5,168
Taxes and social contributions .................... 192 574 800
Deferred income tax and social
contribution (Note 13) ............................ 93 126 93 126
Accounts payable for acquisition of
investments (Note 14)............................. 1,594 3,847
Other accounts payable ............................... 289
12,556 236,865 613,968 251,066
Stockholders’ equity (Note 16)
Capital ......................................................... 307,511 227,619 307,511 227,619
Revaluation reserve..................................... 302 402 302 402
Legal reserve ............................................... 1,226 1,226
Profit reserve ............................................... 17,678 16,472
Accumulated deficit .................................... (49,616) (51,069)
Total stockholders’ equity........................... 258,197 246,925 256,744 245,719
Total liabilities and stockholders’ equity .............. 418,849 521,095 1,107,913 569,895
F-38

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Statements of Income
For the Years ended December 31,
(in thousands of reais)
Parent company Consolidated
2007 2006 2007 2006
Gross sales and services...................................... 71,544 69,641 427,492 256,343
Taxes on sales .................................................. (9,287) (10,919) (40,517) (32,757)
Net revenue.......................................................... 62,257 58,722 386,975 223,586
Cost of sales and services................................. (56,561) (49,975) (245,576) (132,586)
Gross profit ......................................................... 5,696 8,747 141,399 91,000
Operating income (expenses)
Selling.............................................................. (6,157) (5,402) (31,562) (23,007)
General and administrative .............................. (6,121) (2,473) (25,252) (10,017)
Management fees ............................................. (1,146) (407) (2,168) (1,544)
Financial income.............................................. 27,400 16,739 24,097 15,732
Financial expenses ........................................... (37,187) (14,906) (79,331) (18,658)
Equity in earnings of subsidiaries (Note 8) ...... (12,863) 32,583
Goodwill amortization (Note 8) ....................... (23,855) (1,222) (50,033) (3,473)
Other operating expenses, net .......................... (1,038) (11,029) (8,999) (12,080)
(60,967) 13,883 (173,248) (53,047)
Operating profit.................................................. (55,271) 22,630 (31,849) 37,953
Non-operating income (expenses), net............. 213 (84) 368 305
Profit before social contribution, income tax
and statutory profit sharing .......................... (55,058) 22,546 (31,481) 38,258
Income tax and social contribution (Note 13)
Current ........................................................ (23,779) (13,269)
Deferred ...................................................... 5,826 2,629 7,342 2,575
Employees and director’s profit sharing ............... (54) (649) (1,618) (3,762)
Net income (loss) for the year............................. (49,286) 24,526 (49,536) 23,802
Net income (loss) per thousand shares.................. (1,038,97) 537,55
F-39

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Statements of Changes in Shareholders’ Equity
For the Years ended December 31,
In thousands of reais unless otherwise indicated
Capital
Subscribed Unpaid
F-40
Revaluation
reserve Legal reserve
Revenue
reserve
Accumulated
deficit Total
At January 1, 2006 ..................................................... 58,411 (2,425) 623 1,615 10,731 68,955
Capital increase .......................................................
Legal reserve ...................................................... 1,615 (1,615)
Profit reserve ...................................................... 8,276 (8,276)
Capitalization through reserves.......................... 2,425 (2,425)
Capital contribution............................................ 159,317 159,317
Realization/reversal of revaluation reserve ............ (221) 173 (48)
Net income for the year........................................... 24,526 24,526
Appropriations proposed to the
Stockholders’meeting.........................................
Legal reserve ...................................................... 1,226 (1,226)
Dividends proposed (common shares -
R$127.67 per thousand shares) ..................... (5,825) (5,825)
Appropriation to profit reserve .......................... 17,648 (17,648)
At December 31, 2006 ................................................ 227,619 402 1,226 17,678 246,925
Prior year adjustments (Note 20) ............................ (781) (781)
At December 31, 2006 (adjusted) ............................. 227,619 402 1,226 16,897 246,144
Capital increase .......................................................
Profit reserve ...................................................... 17,669 (17,669)
Legal reserve ...................................................... 1,226 (1,226)
Issuance of shares............................................... 60,997 60,997
Realization/reversal of revaluation reserve ............ (100) 100
Net loss for the year ................................................ (49,286) (49,286)
Income on merger ................................................... 342 342
Offset of losses............................................................. 772 (772)
At December 31, 2007 ................................................ 307,511 302 (49,616) 258,197

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Statements of Changes in Financial Position
For the Years ended December 31,
In thousands of reais unless otherwise indicated
Parent company Consolidated
2007 2006 2007 2006
Financial resources were provided by
Operations........................................................
Net income (loss) for the year.......................... (49,286) 24,526 (49,536) 23,802
Expenses (income) not affecting working
capital..........................................................
Depreciation and amortization ......................... 3,715 3,144 14,477 7,245
Cost of properly, plant and equipment
written-off or sold................................... 292 2,608 1,071 3,193
Cost of investment written-off or sold.........
Equity in the earnings of subsidiaries.......... 12,863 (32,583)
Provision for contingencies......................... 13 3 2,310 2,512
Long-term deferred income tax and social
contribution ............................................ (6,026) (2,253) (5,483) (4,035)
Minority interest.......................................... 94
Prior year adjustments................................. (781) (781)
Amortization of goodwill on investments ........ 23,855 1,222 50,033 3,473
Funds provided by (used in) operations............ (15,355) (3,333) 12,091 36,284
Funds used in operations 15,355 3,333
Subsidiaries:
Dividends and interest on
capital receivable.................................... 1,031 9,487
Stockholders:
Capital increase ........................................... 60,997 159,317 60,997 159,317
Third parties:
Increase in long-term liabilities................... 3,020 229,748
Issue of long-term debentures ..................... 227,000 227,000
Perpetual bonds ........................................... 354,260
Decrease in long-term receivables............... 110,880
Total financial resources provided .................... 175,928 395,804 657,096 422,601
F-41

Parent company Consolidated
2007 2006 2007 2006
Financial resources were used for:
Operations........................................................ 15,355 3,333
Acquisition of investments.......................... 199,545 75,856 409,237 170,208
Acquisition of property, plant and
equipment ............................................... 17,793 10,349 56,767 25,835
Additions to deferred charges...................... 1,981 1,122 5,158 1,696
Increase in long-term receivables................ 409 1,305 671
Reclassification of net capital deficiency of
subsidiary ............................................... 13,624
Decrease in long term liabilities.................. 5,806 1,375
Loans granted to related parties................... 125,826
Payment of debentures ................................ 227,000 227,000
Dividends proposed..................................... 5,825 5,825
Total funds used.................................................. 475,298 228,526 699,467 205,610
Increase (decrease) in working capital.............. (299,370) 167,278 (42,371) 216,991
Changes in working capital
Current assets
At the beginning of the year.................................. 226,810 73,146 356,709 94,906
Initial balance of the subsidiaries purchased in
the year............................................................. 136,458 53,654
At the end of the year............................................ 38,231 226,810 537,804 356,709
(188,579) 153,664 44,637 208,149
Current liabilities
At the beginning of the year.................................. 37,305 50,919 73,110 67,478
Initial balance of the subsidiaries purchased in
the year............................................................. 77,083 14,474
At the end of the year............................................ 148,096 37,305 237,201 73,110
110,791 (13,614) 87,008 (8,842)
Increase (decrease) in working capital.............. (299,370) 167,278 (42,371) 216,991
F-42

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Notes to the Financial Statements for the Years ended December 2006 and 2007
(unaudited)
(in thousands of reais)
1 Operations
Lupatech S.A., a company located in Caxias do Sul, State of Rio Grande do Sul, at Rua Dalton Lahm dos
Reis 201, is made up of 26 units and is divided into three business segments: Oil & Gas, Flow and Metal and has
around 3,000 employees.
In the Oil & Gas Segment, we offer high added-value products and services to the oil and gas industry,
such as cables for deep-water platform anchoring, manual and automated valves to be used in the exploitation,
production, transport and refinery of oil and hydrocarbon chains, equipment for the completion of oil wells, allowing
for the production of oil and gas, drill and production pipe coating, rental of equipment and offshore services and
compressors for NGV by means of the “MNA”, “CSL Offshore”, “Petroima”, “Esferomatic”, “Gasoil”, “K&S” and
“Aspro” brands.
In the Flow Segment, we are Mercosur’s leading company in the production and sale of industrial valves,
particularly to the chemical, pharmaceutical, pulp ad paper, food, civil construction and machinery and equipment
industries by means of the “Valmicro”, “Mipel”, “ValBol” and “Jefferson” brands.
In the Metal Segment, we have a leading position in the international market, specializing in the
development and production of parts, complex parts and subassemblies mainly aimed at the international automotive
industry by means of precision casting and steel injection processes, in which we are pioneers in Latin America. We
also operate in the casting of metallic alloy parts that are highly resistant to corrosion, aimed at the industrial valves
and pumps industry, mainly for application in the processes of the oil and gas industry.
Our corporate development results from the organic process, by means of which we have expanded our
businesses, whether by means of the expansion of the installed capacity or the opening of new businesses, and
acquisitions. The following table shows the dates on which the Company and its subsidiaries started to be
consolidation:
Parent company and
subsidiaries Date Reason for consolidation Business activity
Microinox 1980 Creation Microcast
Valmicro 1984 Creation Valves
Steelinject 1995 Creation Metal Powder Injection
Metalúrgica Nova Americana 2000 Acquisition Valves
Lupatech North America 2002 Creation Sales
Carbonox 2005 Acquisition Microcast
Metalúrgica Ipê 2006 Acquisition Valves
Mipel Sul 2006 Creation Valves
Itasa 2006 Acquisition Cast
Worcester de Argentina 2006 Acquisition Valves
Esferomatic 2006 Acquisition Valves
CSL Offshore 2007 Acquisition Ropes
Lupatech Petroima 2007 Acquisition Machining/services
Gasoil 2007 Acquisition Services to oil companies
Kaestner & Salermo 2007 Acquisition Services to oil companies
Ocean Coating 2007 Acquisition Services to oil companies
Recu 2006 Acquisition Investments
Lupatech Finance 2007 Creation Investments
Jefferson Sudamericana 2007 Acquisition Valves
F-43

Jefferson Solenoid Valves 2007 Acquisition Valves
Valjeff 2007 Acquisition Valves
Jefferson Solenoidbras 2007 Acquisition Valves
Aspro 2007 Acquisition Compressors
Delta 2007 Acquisition Compressors
Compressores Panamericanos 2007 Acquisition Compressors
Luxxon Participações Ltda. 2007 Creation Investments
2 Significant Accounting Practices
The financial statements were approved by the Company’s Board of Directors on February 12, 2008 and
are presented in accordance with accounting practices adopted in Brazil and regulations of the Brazilian Securities
Commission (CVM).
To prepare the financial statements, it is necessary to use estimates to record certain assets, liabilities and
other transactions. Therefore, the financial statements of the Company and its subsidiaries include various estimates
related to the selection of the useful lives of fixed assets, provisions necessary for contingent liabilities, income tax
and other similar liabilities. The actual results may differ from those estimated.
(a) Marketable securities
Marketable securities are stated at cost, plus accrued earnings up to the balance sheet date.
(b) Trade accounts receivable
These are stated at nominal amounts of the invoices, plus foreign exchange variation up to the balance
sheet date, when applicable. The allowance for doubtful accounts is recognized, when necessary, at amounts
considered sufficient by management to cover losses estimated on the realization of these credits.
(c) Inventories
Inventories are stated at average cost of purchase or production, which is lower than the replacement cost
or realizable values.
(d) Investments
Investments in subsidiaries are accounted for on the equity method of accounting with equity income
(losses) recorded as a contra-entry within operating income. Other investments are stated at cost of acquisition, plus
restatement up to December 31, 1995, and, when applicable, adjusted to market value.
(e) Investments abroad
The accounting practices adopted to prepare the financial statements of the subsidiaries abroad, when
different from the accounting practices adopted in Brazil, were taking into consideration the significance of the
information. These statements were translated into local currency according with the Technical Pronouncement
XXV of the Institute of Independent Auditors of Brazil (IBRACON) and the resulting gain (loss) was included as
“Equity in earnings of subsidiaries”.
(f) Property, plant and equipment
Property, plant and equipment are recorded at cost of acquisition or production, plus price-level
adjustments up to December 31, 1995 and were revalued in 1994. Depreciation is calculated using the straight-line
method at the rates mentioned in Note 9.
(g) Deferred charges
Deferred charges are recorded at historical cost, net of amortization, which is calculated based on the
straight-line method at rates that take into consideration the time for the recovery of the costs incurred.
F-44

(h) Loans and financing
These are presented at the amounts of the proceed received plus the corresponding charges, the variation of
the foreign exchange rates and monetary variations incurred.
(i) Revaluation reserve
The revaluation of property, plant and equipment recorded by the Company in 1994 was credited to the
revaluation reserve in stockholders’ equity, net of taxes. As mentioned in item (f) above, the accounting policy with
respect to valuation of property, plant and equipment is original cost.
(j) Income tax and social contribution
The provision for income tax was calculated and recorded, at the rate of 15% of taxable income, plus a
surcharge of 10%, and the social contribution at the rate of 9%, on net income before income taxes , adjusted in
accordance with the criteria established by tax legislation.
The subsidiaries taxed based on the presumed profit basis calculate their income tax at the rate of 15%, plus
a surcharge of 10%, and social contribution at the rate of 9%, on taxable income determined as 8% for income tax
and 12% for social contribution applied to the subsidiaries’ gross revenues, as established in current tax regulations.
Deferred taxes were recognized considering the tax rates in effect for income tax and social contribution on
temporary differences and tax losses, to the extent that their realization is probable.
(l) Statement of income
Income and expenses are recorded on the accrual basis of accounting. The subsidiary Cordoaria São
Leopoldo Off Shore Ltda uses the method known as “Percentage-of-Completion or POC” due to the characteristics
of its business and of its sales, which presents an average production time that is higher than the frequency in which
the financial statements are published (quarterly). According to this criteria, revenues and the related production
costs are recognized based on the stage of production in order to avoid distortions in the presentation of the financial
statements.
(m) Profit sharing
Employees and management profit sharing were based on the Profit Sharing Plans and Variable
Remuneration Plan, as established by current legislation and within the limits determined by the Company’s Bylaws.
(n) Provisions
A provision is recorded in the balance sheet when there is a legal obligation or an obligation that results
from a past event, and it is probable that financial resources will be required to settle the obligations. The provisions
for contingencies are recorded based on the best estimates of the risk involved (Note 15).
(o) Other rights and obligations
Other rights and obligations are classified as current and noncurrent in accordance with the realization or
payment term, under the terms of articles 179 and 180 of Law no. 6,404/76.
(p) Statement of cash flows
The Company is presenting as supplementary information individual and consolidated statement of cash
flows prepared based on the indirect method and in accordance with the Accounting Standards and Procedures
(NPC) 20 - Statement of cash flows, issued by the Institute of Independent Auditors of Brazil (IBRACON).
3 Consolidated Financial Statements
F-45

The consolidated financial statements include the financial statements of Lupatech S.A. and its subsidiaries,
as shown below:
F-46
Interest - %
2007 2006
Metalúrgica Nova Americana Ltda. - (Brazil) ..................................................... 100 100
Lupatech N.A. LLC - (USA) ............................................................................... 100 100
Carbonox Fundição de Precisão Ltda. - (Brazil).................................................. 100 100
Valmicro Ind. e Com. de Válvulas Ltda. - (Brazil).............................................. 100 100
Steelinject Injeção de Aços Ltda. - (Brazil) ......................................................... 100 100
Mipel Ind. e Com. de Válvulas Ltda. - (Brazil) ................................................... 100 100
Metalúrgica Ipê Ltda. - (Brazil) ........................................................................... 100 100
Industria Y Tecnologia En Aceros S.A. - (Argentina) ......................................... 100 100
Recu S.A. - (Argentina) ....................................................................................... 100 100
Worcester de Argentina S.A. - (Argentina).......................................................... 100 100
Esferomatic S.A. - (Argentina) ............................................................................ 100 100
Cordoaria São Leopoldo Off Shore S.A. (*) - (Brazil) ........................................ 100
Lupatech Petroima Equip. para Petróleo Ltda. (*) - (Brazil) ............................... 100
Gasoil Serviços Ltda. (*) - (Brazil)...................................................................... 100
Kaestner & Salermo Comércio e Serviços Ltda. (*) - (Brazil)............................. 100
Ocean Coating Revestimentos Ltda. (*) - (Brazil)............................................... 100
Lupatech Finance Limited (**) - (Cayman Islands)............................................. 100
Jefferson Sudamericana S.A. (*) - (Argentina).................................................... 100
Jefferson Solenoid Valves (*) - (USA) ................................................................ 100
Valjeff, S.A. de C.V. (*) - (Mexico) .................................................................... 100
Jefferson Solenoidbras Ltda. (*) - (Brazil)........................................................... 100
Aspro do Brasil Sistemas de Compressão p/GNV Ltda. (*) - (Brazil)................. 50
Compressores Panamericanos S.R.L.(*) - (Argentina) ........................................ 50
Delta Compresión S.R.L.(*) - (Argentina)........................................................... 50
Luxxon Participações Ltda. (**) - (Brazil) .......................................................... 50
(*) Companies acquired in 2007.
(**) Companies incorporated in 2007.
In the preparation of the consolidated financial statements, the following main practices were adopted:
(a) Intercompany balances were eliminated in consolidation;
(b) Interest in shareholders equity of the subsidiaries were eliminated;
(c) Revenues and expenses, as well as unrealized profits from intercompany transactions, were
eliminated;
(d) Taxes on unrealized profit were eliminated and presented as deferred taxes in the consolidated
balance sheet; and
(e) The amount of minority interest is shown separately in the consolidated financial statements.

4 Marketable Securities
They correspond mainly to resources invested in Investment Funds and fixed-income securities and are
made to optimize the short-term resources of the Company. These investments may also be used as reciprocity upon
contracting credit lines for financing.
Parent company Consolidated
2007 2006 2007 2006
Investment funds................................... - 185,712 - 185,712
Fixed-income securities - US$.............. - - 177,982 -
Fixed-income securities ........................ - 2,436 1,223 7,035
- 188,148 179,205 192,747
The remuneration rates of the financial investments in fixed-income securities range from 100% to
100.03% of the Interbank Deposit Certificate (CDI), resulting in a weighted average of 100.02% of CDI. The
remuneration rate of fixed-income securities - US$ is 4.8% p.a.
5 Trade Accounts Receivable
Parent company Consolidated
2007 2006 2007 2006
Local market ......................................... 8,321 7,619 76,673 50,870
Foreign market...................................... 5,565 5,649 43,824 11,074
13,886 13,268 120,497 61,944
6 Inventories
Inventories are as follows:
Parent company Consolidated
2007 2006 2007 2006
Finished products.................................. 1,942 1,033 23,633 18,504
Goods for resale.................................... - - 5,298 3,659
Work in progress................................... 5,676 6,215 31,835 24,817
Raw material and ancillary materials.... 5,182 1,931 64,333 24,169
Import in transit .................................... 1,017 26
Total...................................................... 12,800 9,179 126,116 71,175
F-47

7 Taxes Recoverable
Taxes recoverable are as follows:
Parent company Consolidated
2007 2006 2007 2006
Value-added Tax on Sales and Services
(ICMS) recoverable.......................... 1,776 1,423 16,786 7,058
Excise Tax (IPI) recoverable................. 2 7 3,601 2,883
Social Integration Program (PIS)
recoverable....................................... 404 207 560 553
Social Contribution on Revenues
(COFINS) recoverable ..................... 1,869 948 2,583 2,544
Corporate Income Tax (IRPJ)
advances........................................... 171 39 2,618 312
Social Contribution on Net Income
(CSLL) advances.............................. 65 9 840 135
Withholding Tax (IRF) recoverable...... 5,805 2,975 6,612 3,020
IRPJ recoverable................................... 26 26 112 62
CSLL recoverable................................. 17 17 221 34
National Institute of Social Security
(INSS) contribution recoverable ...... - - 315 -
Service Tax (ISS) recoverable .............. - - 148 -
Other ..................................................... - - 4,220 127
10,135 5,651 38,616 16,728
Current.................................................. 7,372 3,922 34,441 14,216
Non-current........................................... 2,763 1,729 4,175 2,512
F-48

8 Investments
Investments are as follows:
Parent company
Good
Good
Good
Good Lupat Lupat
will
will
Good
Good
will Lupat
will ech ech
Carbo Carbo Valmi
Met. Met.
will
will Worce Worce ech - Cordo Cordo Oil Financ
MNA LNA nox nox cro Steel Mipel Ipê Ipê Itasa Itasa Recu Recu ster ster MNA -aria aria Tools e 2007 2006
(a) (a) (b) (a) (c) (c) (a) (a) (a) (a) (d) (a) (e) (a) (f) (a) (g) (a) (a) (h) (a) (a)
Information about investments
Number of shares or quotas
Common shares (thousand)................ 10,808 20 50 120
Quotas (thousand) .............................. 33,500 500 16,000 5,000 6,100 3,100 115,000 35,000 20,010 50
Interest (in %) ....................................
Total and voting capital ..................... 100 100 100 100 100 100 100 5 5 5 47.83 100 100 100
Number of shares or quotas held
Common shares (thousand)................ 10,808 1 8 6
Quotas (thousand) .............................. 33,500 500 16,000 5,000 6,100 3,100 55,000 35,000 20,010 50
Proposed dividends and interest on
own capital................................... 1,031
Stockholders’ equity (net capital
deficiency) ................................... 29,295 920 9,541 28,632 6,952 8,297 8,961 5,191 583 46,125 49,048 (14,185)
Income (loss) for the year .................. (21,486) (64) 692 5,828 895 722 1,880 1,533 (74) 10,077 16,319 (1,227) (14,185)
Changes in investments
Opening balance................................. 47,605 8,850 6,065 22,804 6,057 7,575 7,322 22,925 183 830 130,216 26,749
Capital increase/subscription ............. 1,668 56,184 50,275 108,127 50,564
Acquisition of investment.................. 33 74 1,772 4,010 5,889 31,029
Changes resulting from mergers ....... (56,352) 36,881 105,000 85,529
Equity in earnings(losses).................. (21,486) (187) 692 5,828 895 722 909 77 (4) 497 168 14,438 (1,227) (14,185) (12,863) 32,583
Reclassification of net capital
deficiency..................................... (561) 14,185 13,624
Goodwill amortization ....................... (1,000) (3,262) (237) (11) (802) (18,543) (23,855) (1,222)
Dividends and interest on own
capital........................................... (1,031) (1,031) (9,487)
Closing balance.................................. 25,088 920 9,542 5,065 28,632 6,952 8,297 8,231 19,663 260 593 29 63 2,269 3,208 51,319 86,457 49,048 305,636 130,216
Consolidated (Goodwill)
Goodwill
Good
will
Jeffers
Goodwill
Goodwill
Good Good Goodwill Goodwill Goodwill Good Good Jefferson on Good Jefferson Goodwill Good Good
Carbono Goodwill will will Worceste Cordoari Lupatech will will Sudamerica Soleno will Solenoidbra Compressores will will
x Met. Ipê Itasa Recu r
a Petroima Gasoil K&S na
id Valjeff s Panamericanos Delta Aspro Other 2007 2006
(c) (d) (e) (f) (g) (h) (i) (j) (k) (a) (l) (a) (m) (a) (n) (a) (o) (a) (p) (a) (q) (a) (r)
Changes in Investments
Opening balance ..................... 6,065 22,925 16,588 1,490 81,454 94 128,616 3,553
Additions................................. 105,000 8,782 63,932 14,414 37,612 2,816 168 682 5,520 38,267 1,864 279,057 128,536
Goodwill amortization............ (1,000) (3,262) (4,739) (298) (16,290) (18,543 (510) (4,858) ( 439) (94) (50,033) (3,473)
Closing balance........................ 5,065 19,663 11,849 1,192 65,164 86,457 8,272 59,074 14,414 37,173 2,816 168 682 5,520 38,267 1,864 357,640 128,616
F-49

(a) The names of the subsidiaries are as follows: MNA - Metalúrgica Nova Americana Ltda.; LNA - Lupatech
N.A. LLC; Carbonox - Carbonox Fundição de Precisão Ltda.; Valmicro - Valmicro Ind. Com. Válvulas Ltda.;
Steelinject - Steelinject Injeção de Aços Ltda.; Mipel - Mipel Ind. Com. Válvulas Ltda.; Met. IPÊ - Metalúrgica Ipê
Ltda.; Itasa - Industria Y Tecnologia En Aceros S.A.; Recu - Recu S.A.; Worcester - Válvulas Worcester de
Argentina S.A.; Cordoaria - Cordoaria São Leopoldo Off Shore S.A.; Lupatech Oil Tools - Lupatech Oil Tools
Indústria de Ferramentas Ltda.; Lupatech Petroima - Lupatech Petroima Equipamentos para Petróleo Ltda.;
Lupatech-MNA - Lupatech-MNA Investimentos e Participações Ltda.; Gasoil - Gasoil Serviços Ltda.; K&S -
Kaestner & Salermo Comércio e Serviços Ltda.; Lupatech Finance - Lupatech Finance Limited; Worcester -
Válvulas Worcester de Argentina S.A.; Jefferson Sudamericana - Jefferson Sudamericana S.A.; Jefferson Solenoid -
Jefferson Solenoid Valves; Valjeff - Valjeff S.A. de C.V.; Jefferson Solenoidbras - Jefferson Solenoidbras Ltda.;
Compressores Panamericanos - Compressores Panamericanos S.R.L.; Delta - Delta Compresión S.R.L.; Aspro -
Aspro do Brasil Sistemas de Compressão para GNV Ltda.
(b) Capital was increased contributed in the amount of R$ 1,668, reverting the situation of the subsidiary,
which showed a negative equity in the amount of R$ 561, with a provision for losses that was recognized in current
liabilities.
(c) During the process of acquisition of the investment in Carbonox Fundição de Precisão Ltda., goodwill of
R$ 6,665 was determined based on the expectation of generation of future earnings. In 2007 goodwill amortization
amounted to R$ 1,000. The schedule for the amortization of the remaining balance of goodwill is shown in table
following item (r).
(d) During the process of acquisition of the investment in Metalúrgica Ipê Ltda., goodwill of R$ 23,428 was
determined based on the expectation of generation of future earnings in the amount of R$ 15,193 and based on a
higher value of property, plant and equipment in the amount of R$ 8,235. In 2007 goodwill amortization amounted
to R$ 3,262. The schedule for the amortization of the remaining balance of goodwill is shown in table following
item (r). The balance attributed to higher value of property, plant and equipment will be amortized based on the
realization of those assets in the subsidiary.
(e) During the process of acquisition of the investment in Industria Y Tecnologia en Aceros S.A. - Itasa,
goodwill of R$ 18,958 was determined, a portion of which was accounted for in the Company and another portion in
its subsidiary MNA, based on the expectation of generation of future earnings. In 2007 goodwill amortization
amounted to R$ 4,739. The schedule for the amortization of the remaining balance of goodwill is shown in table
following item (r).
(f) During the process of acquisition of the investment in Recu S.A., goodwill of R$ 1,490 was determined and
accounted for in the subsidiary MNA based on the expectation of generation of future earnings. In 2007 goodwill
amortization amounted to R$ 298. The schedule for the amortization of the remaining balance of goodwill is shown
in table following item (r).
(g) During the process of acquisition of the investment in Válvulas Worcester de Argentina S.A., goodwill of
R$ 81,454 was determined and accounted for in the subsidiary MNA based on the expectation of generation of
future earnings. In 2007 goodwill amortization amounted to R$ 16,290. The schedule for the amortization of the
remaining balance of goodwill is shown in table following item (r).
(h) During the process of acquisition of the investment in Cordoaria São Leopoldo Off Shore S.A., goodwill of
R$ 105,000 was determined and accounted for in the subsidiary Lupatech-MNA based on the expectation of
generation of future earnings. In 2007 goodwill amortization amounted to R$ 18,543. The schedule for the
amortization of the remaining balance of goodwill is shown in table following item (r). On November 9, 2007,
pursuant to resolution of the Extraordinary General Meeting, Lupatech-MNA Investimentos e Participações Ltda.
was merged into Lupatech S.A.
(i) During the process of acquisition of the investment in Lupatech Petroima Equipamentos para Petróleo
Ltda., goodwill of R$ 8,782 was determined and accounted for in the subsidiary Lupatech Oil Tools based on the
expectation of generation of future earnings. In 2007 goodwill amortization amounted to R$ 510. The schedule for
the amortization of the remaining balance of goodwill is shown in table following item (r).
F-50

In the operation involving the acquisition of Lupatech Petroima Equipamentos para Petróleo Ltda., a portion of the
payment agreed in the quota purchase agreement in the amount of R$ 25,000 is contingent to the achievement of
future EBITDA targets. The potential future payment of this amount or a portion of it to the sellers will be
considered, in the financial statements, goodwill already realized and directly recorded in the Company’s statement
of income if ultimately made.
(j) During the process of acquisition of the investment in Gasoil Serviços Ltda., goodwill of R$ 63,932 was
determined and accounted for in the subsidiary Lupatech Oil Tools based on the expectation of generation of future
earnings. In 2007 goodwill amortization amounted to R$ 4,858. The schedule for the amortization of the remaining
balance of goodwill is shown in table following item (r).
In the operation involving the acquisition of Gasoil Serviços Ltda. (Gasoil), a portion of the payment agreed in the
quota purchase agreement in the amount of R$ 16,240 is contingent to the achievement of future EBITDA targets.
The potential future payment of this amount, or a portion of it, to the sellers will be considered, in the financial
statements, goodwill already realized and directly recorded in the Company’s statement of income, if ultimately
made.
(k) During the process of acquisition of the investment in Kaestner & Salermo Comércio e Serviços Ltda.,
goodwill of R$ 14,414 was determined and accounted for in the subsidiary Lupatech Oil Tools based on the
expectation of generation of future earnings. The schedule for the amortization of the remaining balance of goodwill
is shown in table following item (r).
In the operation involving the acquisition of Kaestner & Salermo Comércio e Serviços Ltda. (K&S), a portion of the
payment agreed for in the quota purchase agreement in the amount of R$ 22,396 is contingent to the achievement of
future EBITDA targets. The potential future payment of this amount, or a portion of it, to the sellers will be
considered, in the financial statements, goodwill already realized and directly recorded in the Company’s statement
of income, if ultimately made.
(l) During the process of acquisition of the investment in Jefferson Sudamericana S.A., goodwill of R$ 37,612
was determined and accounted for in the subsidiary Gasoil based on the expectation of generation of future earnings.
In 2007 goodwill amortization amounted to R$ 439. The schedule for the amortization of the remaining balance of
goodwill is shown in table following item (r).
In the operation involving the acquisition of Jefferson Sudamericana S.A., an additional payment will be mad
amounting to 25% of the amount of EBITDA that exceeds US$ 4,500,000 per year in each of fiscal years 2008,
2009 and 2010.
(m) During the process of acquisition of the investment in Jefferson Solenoid Valves, goodwill of R$ 2,816 was
determined and accounted for in the subsidiary Gasoil based on the expectation of generation of future earnings. The
schedule for the amortization of the remaining balance of goodwill is shown in table following item (r).
(n) During the process of acquisition of the investment in Valjeff, S.A. de CV, goodwill of R$ 168 was
determined and accounted for in the subsidiary Gasoil based on the expectation of generation of future earnings. The
schedule for the amortization of the remaining balance of goodwill is shown in table following item (r).
(o) During the process of acquisition of the investment in Jefferson Solenoidbras Ltda., goodwill of R$ 682
was determined and accounted for in the subsidiary Gasoil based on the expectation of generation of future earnings.
The schedule for the amortization of the remaining balance of goodwill is shown in table following item (r).
(p) During the process of acquisition of the investment in Compressores Panamericanos S.R.L, goodwill of R$
5,520 was determined and accounted for in the subsidiary Luxxon Participações Ltda. based on the expectation of
generation of future earnings. The schedule for the amortization of the remaining balance of goodwill is shown in
table following item (r).
(q) During the process of acquisition of the investment in Delta Compresión S.R.L., goodwill of R$ 38,267
was determined and accounted for in the subsidiary Luxxon Participações Ltda. based on the expectation of
generation of future earnings. The schedule for the amortization of the remaining balance of goodwill is shown in
table following item (r).
F-51

In the operation involving the acquisition of Delta Compresión S.R.L, Compressores Panamericanos S.R.L and
Aspro do Brasil Sistemas de Compressão para GNV Ltda, an additional payment will be made for 100% of the
EBITDA of these companies for 2008 that exceeds US$ 20,000,000 up to the ceiling of US$ 23,000,000, plus 200%
of the EBITDA that exceeds US$ 23,000,000 up to the ceiling of US$ 25,000,000, plus 50% of the consolidated
EBITDA that exceeds US$ 25,000,000.
(r) During the process of acquisition of the investment in Aspro do Brasil Sistemas de Compressão para GNV
Ltda., goodwill of R$ 1,864 was determined and accounted for in the subsidiary Luxxon Participações Ltda. based
on the expectation of generation of future earnings. The schedule for the amortization of the remaining balance of
goodwill is shown in the summary table.
F-52

In summary, the schedule for amortization of the remaining balance of consolidated goodwill of the Company and its subsidiaries is as follows:
Schedule for the amortization of Goodwill:
Consolidated
Company 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total
F-53
Goodwill
amortize
d in 2007
Carbonox ................................................ 1,266 1,666 2,133 - - 5,065 (1,000)
Metalúrgica Ipê ...................................... 4,546 4,464 4,690 4,462 1,501 19,663 (3,262)
Itasa......................................................... 4,739 4,739 2,371 - - 11,849 (4,739)
Recu........................................................ 298 298 298 298 - 1,192 (298)
Worcester de Argentina.......................... 16,291 16,291 16,291 16,291 - 65,164 (16,290)
CSL Offshore ......................................... 19,446 18,459 17,377 16,212 14,963 86,457 (18,543)
Lupatech Petroima.................................. 839 1,292 1,588 1,785 2,768 8,272 (510)
Gasoil...................................................... 9,415 11,338 13,487 16,058 8,776 59,074 (4,858)
Kaestner & Salermo ............................... 1,793 2,404 3,010 3,704 3,503 14,414 -
Jefferson Sudamericana ......................... 2,096 2,475 2,875 3,388 3,853 4,291 4,759 5,184 5,711 2,541 37,173 (439)
Jefferson Solenoid..................................
Valves..................................................... 360 449 561 673 773 2,816 -
Valjeff..................................................... 27 29 32 37 43 168 -
Jefferson Solenoidbras ........................... 105 121 133 153 170 682 -
Compressores .........................................
Panamericanos........................................ 1,031 1,070 1,111 1,139 1,169 5,520 -
Delta Compresión................................... 7,148 7,422 7,701 7,900 8,096 38,267 -
Aspro do Brasil....................................... 353 302 298 404 507 1,864 -
Other....................................................... (94)
Total........................................................ 72,881 76,512 78,246 77,560 52,441 4,291 4,759 5,184 5,711 2,541 357,640 (50,033)
Parent company
Company 2008 2009 2010 2011 2012 Total
Goodwill
amortized in
2007
Carbonox ................................................................................. 1,266 1,666 2,133 - - 5,065 (1,000)
Metalúrgica Ipê ....................................................................... 4,546 4,464 4,690 4,462 1,501 19,663 (3,262)
Itasa.......................................................................................... 237 237 119 - - 593 (237)
Recu......................................................................................... 15 16 16 16 - 63 (11)
Worcester de Argentina........................................................... 802 802 802 802 - 3,208 (802)
CSL Offshore .......................................................................... 19,446 18,459 17,377 16,212 14,963 86,457 (18,543)
Total......................................................................................... 26,312 25,644 25,137 21,492 16,464 115,049 (23,855)

9 Property, Plant and Equipment
Parent company 2007 2006
Weighed
annual
depreciation
rates - % Cost
F-54
Accumulated
depreciation Net Net
Land...................................................... 2,822 - 2,822 2,822
Buildings and construction ................... 4 10,033 (3,255) 6,778 6,992
Machinery and equipment .................... 10 34,305 (14,663) 19,642 13,135
Molds and matrixes............................... 19.76 5,849 (4,934) 915 1,064
Industrial facilities ................................ 10 3,496 (1,637) 1,859 1,847
Furniture and fixtures............................ 10 1,356 (580) 776 757
Data processing systems and equipment 20 4,558 (1,505) 3,053 2,602
Vehicles ................................................ 20 279 (184) 95 109
Casks..................................................... 50 96 (75) 21 47
Trademarks and patents ........................ 157 - 157 153
Advances for acquisition of property,
plant and equipment......................... 1,318 - 1,318 234
Construction in progress ....................... 7,317 - 7,317 1,111
Total...................................................... 71,586 (26,833) 44,753 30,873
Consolidated 2007 2006
Weighed
annual
depreciation
rates - % Cost
Accumulated
depreciation Net Net
Land...................................................... 19,780 - 19,780 3,569
Buildings and construction ................... 4 30,848 (4,901) 25,947 13,525
Machinery and equipment .................... 10 128,043 (36,136) 91,907 33,802
Molds and matrixes............................... 19.94 13,724 (9,121) 4,603 3,264
Industrial facilities ................................ 10 8,060 (2,882) 5,178 3,183
Furniture and fixtures............................ 10 5,070 (2,385) 2,685 1,574
Data processing systems and equipment 20 11,017 (3,723) 7,294 3,845
Improvements ....................................... 4 3,250 (1,546) 1,704 1,632
Vehicles ................................................ 20 2,690 (1,113) 1,577 869
Casks..................................................... 50 132 (78) 54 54
Trademarks and patents ........................ 317 (38) 279 228
Advances for acquisition of property,
plant and equipment......................... 4,425 - 4,425 3,360
Construction in progress ....................... 18,249 - 18,249 3,003
Total...................................................... 245,605 (61,923) 183,682 71,908

Property, plant and equipment also includes the balance of the revaluation carried out in 1994, as described
in Note 2 (i), by independent appraisers and whose net residual balance is as follows:
F-55
2007 2006
Machinery and equipment ........................................................................................................... 5 12
Industrial facilities ....................................................................................................................... 2 6
Molds and matrixes...................................................................................................................... 295 384
Total............................................................................................................................................. 302 402

10 Loans, Financing and Perpetual Bonds
(a) Loans and financing
Loans and financing were as follows:
Parent company
Description Index
2007 2006
Weighed
interest rates Current Non-current Total Current Non-current Total
Local currency
FINEP............................................... TJLP 3.5% p.a. 408 - 408 445 405 850
BRDE ............................................... TJLP 6.46% p.a. 1,310 1,021 2,331 1,368 2,315 3,683
BRDE ............................................... Fixed 12.95% p.a. 669 1,074 1,743 649 1,546 2,195
FINAME........................................... TJLP 6.53% p.a. 139 68 207 288 206 494
Export financing............................... TJLP 5.5% p.a. - - - 241 241
BNDES - Working capital ............... TJLP 3.5% p.a. - - - 2,883 2,883
Incentive financing of research and
technology................................... TJLP - 3.5% p.p. 902 5,832 6,734 836 5,072 5,908
Banespa - Working capital............... CDI 0.068% p.m. 1,844 1,844
Unibanco –Finame ........................... TJLP 1.5% p.a. 260 1,110 1,370
Itaú – Finame.................................... TJLP 1.3% p.a. 1,022 3,342 4,364
Santander - Guaranteed account ...... CDI 1.5% p.a. 6,412 - 6,412
11,122 12,447 23,569 8,554 9,544 18,098
Foreign currency
Export financing............................... US$ 6.01% p.a. - - - 107 107
Consolidated
Description Index
11,122 12,447 23,569 8,661 9,544 18,205
2007 2006
Weighed
interest rates Current Non-current Total Current Non-current Total
Local currency
FINEP............................................... TJLP 3.5% p.a. 408 - 408 445 404 849
BRDE ............................................... TJLP 6.29% p.a. 1,427 2,210 3,637 1,546 3,593 5,139
BRDE ............................................... Fixed 12.95% p.a. 669 1,074 1,743 650 1,546 2,196
SAFRA ............................................. Fixed 13.95% p.a. 271 418 689 247 634 881
FINAME........................................... TJLP 5.95% p.a. 952 1,412 2,364 932 1,703 2,635
Export financing............................... TJLP 5.5% p.a. - - - 241 - 241
BNDES - Working capital ............... TJLP 3.5% p.a. - - - 2,883 - 2,883
F-56

Incentive financing of research and
technology................................... TJLP - 3.5% p.p. 902 5,832 6,734 836 5,072 5,908
Banespa - Working capital............... CDI 0.068% p.m. - - - 1,844 1,844
Banco Safra ...................................... Fixed 34.28% p.a. - - - 27 25 52
Banco Unibanco ............................... TJLP 1.50% p.a. 260 1,110 1,370 - - -
Banco Itaú......................................... US$ 5.61% p.a. 32 3,511 3,543 - - -
Banco Itaú......................................... CDI 1.22% p.a. 1,028 69,480 70,508 - - -
Banco Itaú......................................... TJLP 1.30% p.a. 1,022 3,342 4,364 120 35 155
Banco Citibank.................................
Agência Desenvolvimento do
109.85%. above
CDII 2,648 160,000 162,648 - - -
Estado da Bahia .......................... Fixed 18% p.a. 28 - 28 - - -
Banco do Brasil ................................ Fixed 13% p.a. 53 38 91 - - -
Banco Real ....................................... Fixed 24.90% p.a. 8 7 15 - - -
Banco Sudameris.............................. Fixed 30.15% p.a. 13 38 51 - - -
Banco Finasa S.A. ............................ Fixed 18.24% p.a. 45 - 45 - - -
Banco Itaú......................................... 1.85% p.m. 784 - 784 - - -
Bco Merc. Do Brasil ........................ 1.72% p.m. 19 - 19 - - -
Bco Merc. Do Brasil ........................ 1.80% p.m. 697 - 697 - - -
Bco Indl.e Coml. .............................. CDI 8.70% p.a. 1,432 761 2,193 - - -
Bco HSBC ........................................ Pre-fixed 45.77% p.a. 39 - 39 - - -
Banco Toyota ................................... 7.79% p.a. 13 - 13 - - -
Santander - Guaranteed account ...... CDI 1.5% p.a. 39,061 - 39,061 - - -
51,811 249,233 301,044 9,771 13,012 22,783
Foreign currency
Export financing............................... US$ 6.01% p.a. 107 - 107
Banco Itáu......................................... Libor 8.75% p.a. 447 447 894 488 1,113 1,601
Banco HSBC Arg............................. US$ 6.33% p.a. 1,365 - 1,365
Banco da Patagonia .......................... Libor 6.40% p.a. 923 - 923
54,546 249,680 304,226 10,366 14,125 24,491
F-57

Maturities of the noncurrent portion of loan and financings are as follows:
Parent company Consolidated
Maturity 2007 2006 2007 2006
2008 ...................................................................... - 3,588 - 5,320
2009 ...................................................................... 4,348 2,737 122,343 4,264
2010 ...................................................................... 3,582 1,799 120,243 2,534
2011 ...................................................................... 3,062 1,217 4,615 1,612
2012 ...................................................................... 1,455 203 2,479 395
Parent company
The guarantees for loans and financing were as follows:
12,447 9,544 249,680 14,125
Operation Guarantee Amount
FINEP.................................................................................................................................. Real estate 1,919
BRDE .................................................................................................................................. Asset financed 10,695
FINAME.............................................................................................................................. Asset financed 804
Incentive financing of research and technology................................................................... Bank guarantee 4,329
Banco Unibanco................................................................................................................... Asset financed 1,492
Banco Itaú............................................................................................................................ Asset financed 5,045
Total..................................................................................................................................... 24,284
Consolidated
Operation Guarantee Amount
FINEP.................................................................................................................................. Real estate 1,919
BRDE .................................................................................................................................. Asset financed 11,945
SAFRA ................................................................................................................................ Asset financed 984
FINAME.............................................................................................................................. Asset financed 3,352
Incentive financing of research and technology................................................................... Bank guarantee 4,329
Banco Itaú............................................................................................................................ Guarantees 170,972
Banco Citibank .................................................................................................................... Guarantees 69,480
Banco Unibanco................................................................................................................... Asset financed 1,492
Agência de Desenvolvimento do Estado da Bahia............................................................... Guarantees 82
Banco do Brasil.................................................................................................................... Asset financed 67
Banco Real........................................................................................................................... Asset financed 18
Banco Sudameris ................................................................................................................. Asset financed 57
Banco Finasa S.A................................................................................................................. Asset financed 62
Banco Mercantil do Brasil ................................................................................................... Asset financed 1,096
Banco da Patagônia.............................................................................................................. Working capital 1,026
Bic Banco ............................................................................................................................ Working capital 2,600
Banco Toyota....................................................................................................................... Asset financed 520
Banco HSBC........................................................................................................................ Working capital 82
Total..................................................................................................................................... 270,083
(b) Perpetual bonds
On July 11, 2007, through its subsidiary Lupatech Finance Limited, was made a issuance of senior
Perpetual Bonds with interest of 9.875% p.a. (the Bonds) for a total amount of US$ 200 million. Interest of the
Perpetual Bonds is payable on a quarterly basis.
F-58

Bonds were not and will not be registered with the Brazilian Securities Commission or under the U.S.
Securities Act of 1933, or the Securities Act. Bonds were offered only to institutional investors qualified under
Rule 144A and to non-American investors outside the United States, except for the jurisdictions where such offering
or sale is forbidden, in accordance with the Regulation S. The Bonds are listed in the Luxemburg Stock Exchange.
11 Debentures
Proceeds from the offering are used to finance the Company’s growth plan.
All outstanding debentures were redeemed on November 14, 2007 in accordance with the resolution of the
Board of Directors of November 8, 2008. The amount was replaced by bank credit lines falling due in
November 2010 with interest based on the CDI rate + 1.22% p.a. for Itaú CCb and of 109.85% of CDI for Citibank.
F-59

12 Related Parties
Transactions and balances with related parties is as follows:
MNA LNA Carbonox Valmicro Mipel Steel Cordoaria Petroima Gasoil K&S Ocean 2007 2006
(a) (a) (a) (a) (a) (a) (a) (a) (a) (a) (a)
Assets
Accounts
receivable ......... 78 525 86 30 719 1,133
Loans ..................... 129 590 6,990 304 6,704 355 15,072 126,423
Interest on own
capital
receivable ......... 877 877 1,732
Dividends
receivable ......... 352 352 7,449
Total....................... 877 129 78 525 590 352 7,076 304 6,734 355 17,020 136,737
Liabilities...............
Payables................ 3 6 9 11
Loans .................... 95,380 15,707 111,087 702
Total....................... 95,380 3 15,713 111,096 713
Sales of products ... 5 89 662 157 214 43 1,170 4,555
Purchases of
products............ 8 1,671 44 1,723 1,584
Financial income ... 15,602 9 98 126 517 353 7 613 17 17,342 2,980
Financial expenses. 2,756 56 356 3,168 113
F-60

(a) The names of the subsidiaries are as follows: MNA - Metalúrgica Nova Americana Ltda.; LNA -
Lupatech N.A. LLC; Carbonox - Carbonox Fundição de Precisão Ltda.; Valmicro - Valmicro Ind. Com. Válvulas
Ltda.; Mipel - Mipel Ind. Com. Válvulas Ltda.; Steel - Steelinject Injeção de Aços Ltda.; Cordoaria - Cordoaria São
Leopoldo Off Shore S.A.; Petroima - Lupatech Petroima Equipamentos para Petróleo Ltda.; Gasoil - Gasoil Serviços
Ltda.; K&S - Kaestner & Salermo Comércio e Serviços Ltda.; Ocean - Ocean Coating Revestimentos Ltda.
(b) Transactions are carried out at price and terms considered usual. Outstanding balances are
remunerated at rates applied in the financial market.
(c) On December 31, 20007, the Company had guarantees and/or sureties in the amount of R$
279,132 granted to Group companies, which are also guaranteed by the respective financed assets.
13 Income tax and Social Contribution
(a) Deferred income tax and social contribution
Parent company Consolidated
2007 2006 2007 2006
Assets
Provision for contingencies................................... 2,128 2,671
Tax loss carryforwards.......................................... 6,377 2,124 6,642 2,388
Social Contribution tax loss carryforwards........... 2,349 809 2,518 979
Deferred income tax and social contribution ........ 8,726 2,933 11,288 6,038
Current portion ..................................................... 158 391 158 391
Noncurrent portion................................................ 8,568 2,542 11,130 5,647
Liabilities
Valuation of inventories........................................ 2,059
Revaluation reserve .............................................. 93 126 93 126
Deferred income tax and social contribution ........ 93 126 93 2,185
Current portion ..................................................... 2,059
Noncurrent portion................................................ 93 126 93 126
(b) Estimate of realization of deferred tax assets
Year
The recovery of tax credits, in the parent company and on a consolidated based, is estimated as follows:
F-61
Parent
company Consolidated
2008 ..................................................................................................................................... 158 158
2009 ..................................................................................................................................... 534 1,852
2010 ..................................................................................................................................... 954 2,198
2011 ..................................................................................................................................... 1,312 1,312
2012 ..................................................................................................................................... 1,718 1,718
2013 ..................................................................................................................................... 1,718 1,718
2014 ..................................................................................................................................... 1,718 1,718
2015 ..................................................................................................................................... 614 614
8,726 11,288

Year
The reversal of deferred tax liabilities is based on the realization of the revaluation reserve:
F-62
Parent
company Consolidated
2008 ..................................................................................................................................... 13 13
2009 onwards....................................................................................................................... 80 80
(c) Reconciliation of the current income tax and social contribution expense
93 93
Parent company Consolidated
2007 2006 2007 2006
Income (loss) before taxes and profit sharing... (55,058) 22,546 (31,481) 38,258
Additions and exclusions
Equity in earning of subsidiaries........................... 12,863 (32,583)
Employees and management profit sharing .......... (54) (649) (1,618) (3,762)
Goodwill amortization .......................................... 23,855 1,222 50,033 3,473
Tax effect on subsidiaries taxed based on
presumed profit (Note 2 (j)) ............................. 15,912 (7,995)
Result of subsidiaries in tax havens ...................... 14,185
Other..................................................................... 1,259 1,732 1,313 1,479
Calculation basis ................................................. (17,135) (7,732) 48,344 31,453
Combined tax rate................................................. 34% 34% 34% 34%
Combined income tax and social contribution rate (5,826) (2,629) 16,437 10,694
Deferred income tax and social contribution.... (5,826) (2,629) (7,342) (2,575)
Current income tax and social contribution..... 23,779 13,269
14 Accounts Payable for Acquisition of Investments
In 2005, the Company acquired the subsidiary Carbonox - Fundição de Precisão Ltda. The balance of the
amounts related to the acquisition of this subsidiary are due in 2008 and are recorded in the parent company. These
amounts bear interest of 6% p.a. plus the General Market Price Index (IGPM) variation.
In the second quarter of 2006, the subsidiary Metalúrgica Nova Americana Ltda. acquired Indústria y
Tecnologia En Aceros S.A. - Itasa. The sellers of Itasa, current company’s officers, will be paid as variable
remuneration an amount equivalent to 30%, 20% and 10% of net income in the first, second and third year,
respectively.
In the fourth quarter of 2007, the Company, through its investee Luxxon Participações Ltda., acquired the
companies Aspro do Brasil - Compressores para GNV Ltda., Delta Compresores S.R.L. and Compressores
Panamericanos S.R.L. The outstanding balance was settled on January 10, 2008.

Year
The schedule for settlement of payables for acquisition is presented in the table below:
Carbonox
Acquisition
Itasa
Acquisition
Aspro
Acquisition
F-63
Amount
Delta
Acquisition
Compressores
Acquisition Consolidated
2008 ................................ 503 1,594 14,795 53,400 7,086 77,378
2009 ................................ 1,594 1,594
15 Contingencies
(a) Contingent liabilities
503 3,188 14,795 53,400 7,086 78,972
The Company, through its legal advisors, is discussing certain tax, labor and civil matters at the judicial
level. The provision for contingencies was calculated by management based on information provided by the
Company’s legal advisors, at an amount sufficient to cover probable losses that may occur due to unfavorable legal
decisions.
Parent company
Probability of loss
Remote Possible Probable
Tax (i) ................................................................................................... 12,399 288 60
Labor (ii)............................................................................................... 83 1,249 94
Civil (iii) ............................................................................................... 73 1,483 -
Total...................................................................................................... 12,555 3,020 154
(-) Judicial deposits............................................................................... (138)
Total at December 31, 2007.................................................................. 12,555 3,020 16
Total at December 31, 2006.................................................................. 12,139 2,183 3
Consolidated
Probability of loss
Remote Possible Probable
Tax (i) ................................................................................................... 12,399 5,701 10,710
Labor (ii)............................................................................................... 837 1,663 813
Civil (iii) ............................................................................................... 306 1,773 21
Total...................................................................................................... 13,542 9,137 11,544
(-) Judicial deposits............................................................................... (4,066)
Total at December 31, 2007.................................................................. 13,542 9,137 7,478
Total at December 31, 2006.................................................................. 12,986 8,738 5,168
(i) Tax - discussions involving municipal, state and federal taxes, including IRPJ, PIS, COFINS,
INSS, ICMS and IPI. There are legal proceedings in all stages, from lower courts to higher courts, Superior Court of
Justice (STJ) and Federal Supreme Court (STF).
(ii) Labor - several labor claims related to suits for damages.
(iii) Civil - civil claims regarding ordinary, provisional and execution claims, among others.

(b) Contingent assets
F-64
Parent company
Probability of success
Remote Possible Probable
Tax (i) ................................................................................................... 2,011 775 1,971
Civil (ii) ................................................................................................ 21 387 -
Total at December 31, 2007.................................................................. 2,032 1,162 1,971
Total at December 31, 2006.................................................................. 2,052 343 1,894
Consolidated
Probability of success
Remote Possible Probable
Tax (i) ................................................................................................... 3,150 913 3,307
Civil (ii) ................................................................................................ 7,249 401 -
Total at December 31, 2007.................................................................. 10,399 1,314 3,307
Total at December 31, 2006.................................................................. 2,216 562 3,206
(i) Tax - discussion involving municipal, state and federal tax credits.
(ii) Civil - civil claims regarding ordinary, provisional and execution claims, among others.
The Company did not record any contingent assets, as they are recorded only after the claims are granted a
final and unappealable decision or the effective receipt of funds.
16 Stockholders’ Equity
(a) Capital
Capital is only comprised of common shares, with 100% tag-along right, as follows:
2007 2006
Common shares ................................................................................................................... 47,437,333 45,625,310
Total..................................................................................................................................... 47,437,333 45,625,310
All stockholders have right to an annual mandatory dividend of not less than 25% of net income for the
year, adjusted in accordance with Brazilian corporate law.
On May 9, 2007, pursuant to resolution of the Board of Directors’ meeting, a capital increase was approved
with the issue of 104,601 new subscribed and paid-up common shares in accordance with the Stock Option Plan.
On November 9, 2007, pursuant to resolution of the Extraordinary General Meeting, a capital increase was
approved with the issue of 1,707,422 common shares.
According to the By-laws, the Board of Directors may increase the capital, without need of changes in the
by-laws, by additional 127,000,000 common shares.

(b) Revaluation reserve
The revaluation reserve, realized based on depreciation, write-offs or sales of the related revalued assets, is
transferred to retained earnings upon realization, also considering the tax effects of the provisions recognized.
17 Reconciliation of Stockholders’ Equity and
Net Income for the Year between
Parent Company and Consolidated
Stockholders’ Equity Net income for the year
2007 2006 2007 2006
Parent company .................................................... 258,197 246,925 (49,286) 24,526
Unrealized profit included in the inventories of
subsidiaries....................................................... (1,453) (1,206) (250) (724)
Consolidated ......................................................... 256,744 245,719 (49,536) 23,802
18 Insurance Coverage
The Company maintains insurance coverage for property, plant and equipment and inventories subject to
risks at amounts considered sufficient to cover the risks involved. It also has insurance coverage for general civil
liability, as well as insurance in favour of the Company’s officers and directors (“D&O”).
Purpose of the insurance Amount insured
- Corporate comprehensive insurance.................................................................................. 206,000
- General civil liability insurance......................................................................................... 5,000
- D&O insurance.................................................................................................................. 10,000
19 Financial Instruments
The Company compared the book value of its assets and liabilities with respect to their market/realizable
values based on information available and valuation methods set forth by management. However, both the
interpretation of market data and the selection of valuation methods require considerable judgment and reasonable
estimates to obtain the most adequate realizable value. Consequently, the estimates presented do not necessarily
indicate the amounts that could be realized in the current market. The use of different market scenarios and/or
methodologies to perform the estimates may have a material effect on the estimated realizable values.
Valuation of financial instruments and main business risks
At December 31, 2007, the main financial asset and liability instruments of the Company and its
subsidiaries, as well as the criteria for their valuation/appraisal, are as follows:
(a) Cash and banks, marketable securities, trade
accounts receivable, other current assets
and trade accounts payable
Current accounts and financial investments with banks have values that are similar to their carrying
amounts. The balances of trade accounts receivable and payable disclosed in the balance sheet are also similar to
their market value.
(b) Investments
These consist mainly of investments in closely-held subsidiaries recorded based on the equity method of
accounting in which the Company has an strategic interest. We understand that analysis with respect to market value
of shares/quotas is not applicable. Most of the Company’s acquisitions were carried out over the past two years,
which indicates that their values approximates their market values.
F-65

(c) Loans and financing
They are subject to interest at usual market rates, as described in Note 10. The estimated market value was
calculated based on the present value of future cash outflows, at interest rates that are available to the Company and
the valuation indicates that the market values are similar to the carrying amounts.
Risk factors that may affect the business of
the Company and of its subsidiaries
(a) Interest rate risk
This risk arises from the possibility that the Company may incur losses due to interest rate fluctuations that
increase financial expenses related to loans and financing raised in the market. The Company continuously monitors
the market interest rates in order to evaluate the possible need for new operations to hedge against the risk of
volatility of these rates. The existing marketable securities are subject to variable interest rates, reducing these
existing risks related to interest rates, and the Company only bears the spread seen between the funding raised and
the investments made.
(b) Exchange rate risk
This risk arises from the possibility that the Company may incur losses due to foreign exchange rate
fluctuations that reduce the nominal invoiced amounts in Reais or increase the amounts in Reais of debts issued.
Considering that part of the Company’s revenue (approximately 15%) is denominated in Euros and US
dollars, the main strategy is to consider this revenue a natural hedge for its liabilities denominated in foreign
currency.
On December 31, 2007, the Company had assets and liabilities denominated in US dollars in the amount of
US$ 17,590 thousand and US$ 81,627 thousand, respectively, in addition to assets and liabilities denominated in
Euros in the amount of € 1,634 thousand and € 497 thousand, respectively, and no instrument had been contracted to
hedge this exposure other than export operations (denominated in foreign currency) that reduce possible foreign
exchange rate risks.
(c) Credit risk
The Company’s sales policy is closely associated with the level of credit risk that it is willing to assume in
the ordinary course of its business. To minimize possible default problems in its accounts receivable, the Company
diversifies its receivables portfolio, selects its customers, and monitors financing terms for sales per business
segment and individual position limits.
(d) Price risk
Taking into consideration management’s planning for exports by the parent company and its subsidiaries,
foreign exchange rate volatility may represent price volatility.
20 Prior-year Adjustments
In the first quarter of 2007, the Company recognized an adjustment to inventories in the amount of R$ 781
as a result of an error in recording unfinished products in inventories in 2006. This adjustment was made directly to
retained earnings, in stockholders’ equity.
21 IPO Expenses
In the first quarter of 2007, the Company recorded additional expenses related to its IPO in the amount of
R$ 304, which were recorded in the statement of income under Other operating expenses.
F-66

22 Stock Option Plan
In order to promote the Company’s expansion and the achieving of established corporate targets, allowing
the Company to obtain and retain the high-quality services of its executives and employees, and to promote the good
performance of the Company and the interests of shareholders in a long term commitment by management, the
Extraordinary General Meeting held on April 19, 2006 approved the Stock Option Plan (Plan).
The Board of Directors defined the people eligible to the programs under the Plan, including the
beneficiaries, the number of shares to which they will be entitled to subscribe, and the terms for the payment for the
shares.
At the meeting of the Board of Directors held on July 20, 2006, the remaining terms and conditions set
forth in the Plan were ratified, that is, the price for the subscription of the shares, the maximum period to exercise
the option, restrictions to the transfer of shares, rules for the transfer of the options and applicable penalties.
On January 2, 2007, the Board of Directors approved the Second Stock Option Grant Program approved at
the Extraordinary General Meeting held on April 19, 2006.
The programs have the following characteristics:
Number of Number of
shares employees Exercise price
1st program....................................................................................... 537,558 29 R$ 11.10
2nd program...................................................................................... 424,835 30 R$ 28.32
The options offered under the plans represent, for each year, five percent (5%) of the total shares of the
Company’s capital existing as of the date the options are granted, plus the existing shares in the event of options
under the plans were exercised.
23 Employees and Management Profit Sharing
In conformity with the provisions of Law 10,101 of December 19, 2000, Management opted to make
semiannual payments of employees’ profit sharing, having paid a portion of it in August 2007 and the remaining
balance is scheduled to be paid in March 2008. The profit sharing amount related to 2007 was R$ 54 (parent
company) and R$ 1,618 (consolidated). Employees and management profit sharing was calculated as established in
the Profit Sharing Program ratified by the appropriate labor union.
24 Subsequent Events
(a) Changes in Brazilian Corporate Law for 2008
Law no. 11,638 was enacted on December 28, 2007, amending the Brazilian Corporate Law in relation to
certain accounting practices, bookkeeping records and the preparation of financial statements, as from the year
ending December 31, 2008.
In view of the extent and complexity of the alterations introduced by the new Law, management is
analyzing its effects on the Company, while monitoring the discussions and debates on the matter, especially
between the accounting professionals and the regulators, which may provide guidance as to various aspects of the
application of the Law.
(b) Creation of a joint venture
On January 28, 2008, Lupatech S.A. reported that it signed a Memorandum of Understanding with the
Neterwala Group aimed at the creation of a joint venture (LUPANET Automotive Ltd.) to explore opportunities to
supply parts in microcast to the automotive chain, combining the excellence of both groups and their related
competitive advantages and expanding the internationalization of Lupatech.
F-67

Headquartered in Mumbai, the Neterwala Group, which operates, among other businesses in India, 3
microcast businesses, has many other joint ventures with western groups and its annual billing amounts to US$ 80
million.
The approximate amount of Lupatech’s investment will be US$ 1 million and a significant part of the
products to be offered, initially in Asia, has already been developed in Brazil together with Microinox at the
Lupatech Research and Development Center.
The supply of microcast material will be responsibility of the units of the Neterwala Group at market prices
and the machining and assembly will be the responsibility of LUPANET, which will be the final supplier of the
products.
For new global sourcing projects, except for the Indian and Brazilian markets, where Lupatech and
Neterwala already operate, LUPANET will be the supplier.
*
F-68

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Supplemental Information
Statement of Cash Flows
Years ended December 31
(unaudited)
(in thousands of reais)
Consolidated 2007 2006
Cash flows from operating activities
Net income (loss) for the period .......................................................................................... (49,536) 23,802
Adjustments to reconcile net income and cash generated by operating activities
Depreciation and amortization ................................................................................... 14,477 7,245
Goodwill amortization................................................................................................ 50,033 3,473
Cost of permanent assets written-off or sold .............................................................. 1,072 3,193
Interest and monetary variation accrued but not paid................................................. (15,772) 9,795
Changes in assets and liabilities:
Increase in accounts receivable .................................................................................. (17,763) (15,765)
Increase in inventories................................................................................................ (864) (8,838)
Increase in taxes recoverable...................................................................................... (13,480) (13,358)
Increase in other assets............................................................................................... (2,518) (2,985)
Decrease in suppliers.................................................................................................. (8,526) 1,322
Increase (decrease) in taxes payable........................................................................... 8,227 (847)
Decrease in other accounts payable............................................................................ (16,832) (2,003)
Net cash generated by (used in) operating activities ....................................................... (51,482) 5,034
Cash flows from investing activities
Purchases of property, plant and equipment ........................................................................ (56,767) (25,835)
Acquisition of investments .................................................................................................. (333,956) (164,437)
Increase in deferred charges................................................................................................. (5,158) (1,696)
Net cash used in investing activities.................................................................................. (395,881) (191,968)
Cash flows from financing activities
Capital contributions............................................................................................................ 60,997 159,317
Perpetual bonds.................................................................................................................... 378,000
Payment of dividends........................................................................................................... (5,825) (12,256)
Loans and financing obtained .............................................................................................. 287,708 9,304
Issue of debentures .............................................................................................................. 227,000
Loans and financing repaid.................................................................................................. (21,058) (29,755)
Debentures repaid ................................................................................................................ (227,000)
Interest on loans................................................................................................................... (7,879) 3,197
Loans to related parties........................................................................................................ (94)
Net cash generated by financing activities ....................................................................... 464,943 356,713
Increase (decrease) in cash and marketable securities ................................................... 17,580 169,779
At the beginning of the year................................................................................................. 204,266 30,644
Net cash of subsidiaries acquired......................................................................................... 16,470 3,843
At the end of the year........................................................................................................... 238,316 204,266
F-69

Parent Company
2007 2006
Cash flows from operating activities
Net income (loss) for the period ..........................................................................................
Adjustments to reconcile income (loss) and available funds generated by the
operating activities
(49,286) 24,526
Depreciation and amortization ................................................................................... 3,715 3,146
Write-off of property, plant and equipment................................................................ 292 2,608
Goodwill amortization................................................................................................ 23,855 1,222
Equity in the results of subsidiaries............................................................................
Changes in assets and liabilities
12,863 (32,583)
Decrease (increase) in trade accounts receivable........................................................ (618) 1,719
Increase in inventories................................................................................................ (3,621) (4,258)
Increase in taxes recoverable...................................................................................... (10,322) (6,543)
Decrease in other assets.............................................................................................. 8,261 11,897
Increase (decrease) in suppliers.................................................................................. 700 (1,628)
Increase in related parties........................................................................................... 104,568 702
Increase (decrease) in taxes payable........................................................................... 191 (1,362)
Increase (decrease) in other accounts payable............................................................ 3,687 (4,055)
Net cash generated by (used in) operating activities ....................................................... 94,285 (4,609)
Cash flows from investing activities
Purchases of property, plant and equipment ........................................................................ (17,763) (10,349)
Acquisition of investments .................................................................................................. (199,545) (54,918)
Dividends of subsidiaries..................................................................................................... 1,031 1,463
Increase in deferred charges................................................................................................. (1,981) (1,085)
Net cash used in investing activities.................................................................................. (218,258) (64,889)
Cash flows from financing activities
Capital contributions............................................................................................................ 60,997 159,317
Payment of dividends........................................................................................................... (5,825) (15,256)
Loans and financing obtained .............................................................................................. 14,305 3,624
Loans and financing repaid.................................................................................................. (7,519) (5,407)
Issue of debentures .............................................................................................................. 227,000
Debentures repaid ................................................................................................................ (227,000)
Interest on loans and financing ............................................................................................ (11,216) (1,841)
Loans granted to related parties ........................................................................................... (47,395) (133,921)
Receipt of loans from related parties ................................................................................... 148,658 7,501
Interest received on loans to related parties ......................................................................... 10,132 594
Net cash generated by (used in) financing activities........................................................ (64,863) 241,611
Increase (decrease) in cash and marketable securities ................................................... (188,836) 172,113
At the beginning of the year................................................................................................. 189,079 16,966
At the end of the year........................................................................................................... 243 189,079
* * *
F-70

(A free translation of the original in Portuguese)
Lupatech S.A. and
Subsidiaries
Financial Statements at
December 31, 2006 and 2005
and Report of Independent Auditors
F-71

(A free translation of the original in Portuguese)
Report of Independent Auditors
To the Board of Directors and Shareholders
Lupatech S.A.
1 We have audited the accompanying balance sheets of Lupatech S.A. and the consolidated balance sheets of
Lupatech S.A. and its subsidiaries as of December 31, 2006 and 2005 and the related statements of income, of
changes in shareholders’ equity and of changes in financial position of Lupatech S.A., as well as the related
consolidated statements of income and of changes in financial position for the years then ended. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
these financial statements. The audits of the financial statements of the subsidiaries Metalúrgica Ipê Ltda. and
Industria Y Tecnologia En Aceros S.A. as of December 2006 (2005—subsidiary Carbonox S.A.—Microfusão
de Aços) were conducted by other independent auditors. In the financial statements of Lupatech S.A., these
investments, which are accounted following the equity method of accounting, represent an investment of R$
10,980 thousand at December 31, 2006 (2005—R$ 7,299 thousand) and their equity in earnings amounts to R$
2,806 thousand for the year ended December 31, 2006 (2005—R$ 3,843 thousand of losses). The financial
statements of these subsidiaries, whose total assets amount to R$ 34,378 thousand at December 31, 2006
(2005—R$ 12,443 thousand), are included in the consolidated financial statements. Our opinion, insofar as it
refers to the amounts included for these companies, is based solely on the reports of these other auditors.
2 We conducted our audits in accordance with approved Brazilian auditing standards, which require that we
perform the audit to obtain reasonable assurance about whether the financial statements are fairly presented in
all material respects. Accordingly, our work included, among other procedures: (a) planning our audit taking
into consideration the significance of balances, the volume of transactions and the accounting and internal
control systems of the Companies, (b) examining, on a test basis, evidence and records supporting the amounts
and disclosures in the financial statements, and (c) assessing the accounting practices used and significant
estimates made by management, as well as evaluating the overall financial statement presentation.
3 In our opinion, based on our audits and on the reports of other independent auditors, the financial statements
referred to in the first paragraph present fairly, in all material respects, the financial position of Lupatech S.A.
and of Lupatech S.A and its subsidiaries as of December 31, 2006 and 2005, and the results of operations, the
changes in shareholders’ equity and the changes in financial position of Lupatech S.A., as well as the
consolidated results of operations and the changes in financial position, for the years then ended, in accordance
with accounting practices adopted in Brazil.
4 Our audits were conducted for the purpose of forming an opinion on the basic financial statements, taken as a
whole. The statement of cash flows is presented for purposes of additional analysis and is not a required part of
the basic financial statements. This information has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, is fairly presented in all material respects in relation
to the financial statements taken as a whole.
Porto Alegre, February 28, 2007
PricewaterhouseCoopers Carlos Biedermann
Auditores Independentes Contador CRC 1RS029321/O-4
CRC 2SP000160/O-5
F-72

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and Subsidiaries
Balance Sheets at December 31
In thousands of reais
Parent company Consolidated
Assets 2006 2005 2006 2005
Current assets
Cash and banks............................................ 931 1,911 11,519 4,744
Marketable securities (Note 4) .................... 188,148 15,055 192,747 25,900
Accounts receivable (Note 5) ...................... 13,268 14,987 61,944 33,362
Inventories (Note 6) .................................... 9,179 14,990 71,175 26,907
Dividends receivable (Notes 8 and 12)........ 7,449 22,953 — —
Taxes recoverable (Note 7) ......................... 3,922 2,321 14,216 2,765
Interest on own capital receivable (Notes 8
and 12).................................................... 1,732 — — —
Deferred income tax and social
contribution (Note 13) ............................ 391 — 391 —
Other accounts receivables.......................... 1,746 769 4,545 1,026
Prepaid expenses ......................................... 44 160 172 202
226,810 73,146 356,709 94,906
Non current
Long-term receivables
Related parties (Note 12)............................. 126,423 597 — —
Taxes recoverable (Note 7) ......................... 1,729 2,334 2,512 2,803
Deferred income tax and social
contribution (Note 13) ............................ 2,542 360 5,647 360
Other accounts receivables.......................... 1,057 43 1,099 95
131,751 3,334 9,258 3,258
Permanent assets
Investments
In subsidiaries (Note 8)........................... 130,216 26,749 128,616 3,553
Other investments................................... 90 90 183 144
Property, plant and equipment—net
(Note 9) .................................................. 30,873 30,744 71,908 49,885
Deferred charges—net................................. 1,355 1,550 3,221 1,550
162,534 59,133 203,928 55,132
Total assets ........................................................... 521,095 135,613 569,895 153,296
The accompanying notes are an integral part of this financial information.
F-73

Parent company Consolidated
Liabilities and stockholders’ equity
Current liabilities
2006 2005 2006 2005
Suppliers...................................................... 5,823 7,451 18,933 11,253
Loans and financing (Note 10).................... 8,661 17,712 10,366 23,488
Debentures (Note 11) .................................. 9,795 9,795
Salaries and wages ...................................... 1,744 2,091 5,044 2,911
Taxes and social contributions .................... 1,160 2,422 4,379 4,669
Dividends and interest on own capital
5,825 15,256 5,825 15,256
payable ...................................................
Advances from customers ........................... 193 983 677 3,025
Participation in results................................. 627 1,307 3,143 2,335
Related parties (Note 12)............................. 702 94
Accounts payable for acquisition of
investments (Note 14).............................
1,778 2,501 3,702 2,501
Provision for income tax and social
contribution ............................................
6,064 347
Deferred income tax and social
contribution (Note 13) ............................
2,059
Provision for net capital deficiency of
561 690
subsidiary (Note 8) .................................
Other accounts payable ............................... 436 506 3,123 1,599
Non current
Long-term liabilities
37,305 50,919 73,110 67,478
Loans and financing (Note 10).................... 9,544 13,912 14,125 14,892
Debentures (Note 11) .................................. 227,000 227,000
Provision for contingencies (Note 15)......... 3 5,168
Taxes and social contributions .................... 192 221 800 937
Deferred income tax and social
126 197 126 197
contribution (Note 13) ............................
Accounts payable for the acquisition of
investments (Note 14).............................
1,409 3,847 1,409
236,865 15,739 251,066 17,435
Minority interest ................................................... (94)
Stockholder’s equity (Note 16)
Capital ......................................................... 227,619 58,411 227,619 58,411
Unpaid capital ............................................. (2,425) (2,425)
Revaluation reserve..................................... 402 623 402 623
Legal reserve ............................................... 1,226 1,226 1,226 1,226
Profit reserve ............................................... 17,678 10,731 16,472 10,253
Total stockholder’s equity........................... 246,925 68,955 245,719 68,477
Total liabilities and stockholders’ equity .............. 521,095 135,613 569,895 153,296
The accompanying notes are an integral part of this financial information.
F-74

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Statements of Income
For the Years ended December 31,
In thousands of reais unless otherwise indicated
Parent company Consolidated
2006 2005 2006 2005
Gross sales and services........................................ 68,179 118,827 250,891 200,735
Taxes on sales ............................................. (9,457) (19,842) (27,305) (27,566)
Net revenues ......................................................... 58,722 98,985 223,586 173,169
Cost of sales and services............................ (49,975) (69,273) (132,586) (100,100)
Gross profit........................................................... 8,747 29,712 91,000 73,069
Operating income (expenses) ......................
Selling..................................................... (5,402) (10,405) (23,007) (19,086)
General and administrative..................... (2,473) (3,896) (10,017) (7,756)
Management fees.................................... (407) (760) (1,544) (1,185)
Financial income .................................... 16,739 4,743 15,732 4,303
Financial expenses.................................. (14,906) (8,076) (18,658) (11,153)
Equity in earnings of subsidiaries
(Note 8).............................................. 32,583 24,060 — —
Goodwill amortization (Note 8).............. (1,222) — (3,473) —
Other operating income (expenses) ........ (11,029) (186) (12,080) (34)
13,883 5,480 (53,047) (34,911)
Operating profit .................................................... 22,630 35,192 37,953 38,158
Non-operating income (expenses), net ........ (84) (1,562) 305 (1,725)
Profit before social contribution, income tax and
statutory profit sharing..................................... 22,546 33,630 38,258 36,433
Income tax and social contribution
(Note 13) ................................................
Current.................................................... — — (13,269) (2,914)
Deferred.................................................. 2,629 188 2,575 188
Employees and directors’ profit sharing...... (649) (1,515) (3,762) (2,874)
Minority interest.......................................... — — — 1,204
Net income for the year ........................................ 24,526 32,303 23,802 32,037
Net income per thousand shares............................ 537.55 177.84 521.68 176.37
The accompanying notes are an integral part of this financial information.
F-75

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Statements of Changes in Shareholders’ Equity
In thousands of reais unless otherwise indicated
Earnings reserve
Revaluation
Retained
Subscribed Capital Unpaid Capital reserve reserve Legal reserve Profit reserve earnings Total
At December 31, 2004........................................ 39,451 (3,017) 97 1,219 1,080 — 9,799 48,629
Capital increase: —
Legal reserve ................................................ 1,080 (1,080) —
Capital reserve with incentives .................... 97 (97) —
Retained earnings......................................... 9,871 (9,871) —
Capital contributions .................................... 7,912 606 8,518
Reversal/ payment of shares ........................ (14) (14)
Realization of revaluation reserve...................... (596) 596 —
Net income for the year...................................... 32,303 32,303
Capital bonuses paid to shareholders .................
Appropriations proposed to the stockholders’
(606) (604)
meeting of: —
Legal reserve ................................................ 1,615 (1,615) —
Interest on own capital .................................
Common shares—R$ 67.19 per
—
thousand shares................................
Preferred shares—R$ 67.19 per
(6,324) (6,324)
thousand shares................................ (5,881) (5,881)
Proposed dividends ................................
Common shares—R$ 40.29 per
—
thousand shares................................
Preferred shares—R$ 44.32 per
(3,792) (3,792)
thousand shares................................ (3,880) (3,880)
Appropriation to profit reserve........................... 10,731 (10,731) —
At December 31, 2005........................................
Capital increase:
58,411 (2,425) — 623 1,615 10,731 — 68,955
Legal reserve ................................................ 1,615 (1,615) —
Profit reserve ................................................ 8,276 (8,276) —
Capitalization through reserves.................... 2,425 (2,425) —
Capital contribution...................................... 159,317 159,317
Realization/ reversal of revaluation reserve....... (221) 173 (48)
Net income for the year......................................
Appropriations proposed to the stockholders’
meeting.........................................................
24,526 24,526
Legal reserve ................................................
Dividends proposed......................................
Common shares—R$ 127.67 per
1,226 (1,226) —
thousand shares................................ (5,825) (5,825)
Appropriation to profit reserve .................... 17,648 (17,648)
At December 31, 2006........................................ 227,619 — — 402 1,226 17,648 — 246,925
The accompanying notes are an integral part of this financial information.
F-76

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Statements of Changes in Financial Position
In thousands of reais unless otherwise indicated
Parent company Consolidated
2006 2005 2006 2005
Financial resources were provided by:
Operations:
Net income for the year ........................................
Expenses (income) not affecting working capital:
24,526 32,303 23,802 32,037
Depreciation and amortization .........................
Cost of property, plant and equipment written-
3,144 4,941 7,245 6,334
off or sold.................................................... 2,608 414 3,193 1,868
Cost of investment written-off or sold ............. 199 199
Equity in earnings of subsidiaries .................... (32,583) (24,060)
Provision for contingencies..............................
Long-term deferred income tax and social
3 2,512
contribution ................................................. (2,253) (4,035)
Minority interests............................................. 94 (36)
Capital losses in subsidiaries............................ 1,149 1,149
Realization of goodwill on investments ........... 1,222 3,473
Funds provided by operations............................... (3,333) 14,946 36,284 41,551
Funds used in operations.......................................
Subsidiaries:
3,333
Dividends and interest on capital receivable ....
Shareholders:
9,487 22,953
Capital increase................................................
Third parties:
159,317 8,504 159,317 8,504
Increase in long-term liabilities........................ 601 2,227
Issue of long-term debentures .......................... 227,000 227,000
Decrease in long-term receivables ................... 2,959
Total financial resources provided........................
Financial resources were used for:
395,804 49,963 422,601 52,282
Operations........................................................ 3,333
Acquisition of investments............................... 75,856 9,418 170,208 2,982
Acquisition of property, plant and equipment.. 10,349 11,303 25,835 20,289
Additions to deferred charges .......................... 1,122 1,120 1,696 1,316
Interest on own capital distributed ................... 12,205 12,205
Increase in long-term receivables..................... 409 671 1,479
Decrease in long term liabilities....................... 5,806 1,375
Dividends proposed.......................................... 5,825 7,672 5,825 7,672
Loans to related parties .................................... 125,826
Bonuses paid to shareholders........................... 606 606
Reclassification of net capital deficiency of
subsidiary .................................................... 690
Total funds used.................................................... 228,526 43,014 205,610 46,549
Increase in working capital ................................... 167,278 6,949 216,991 5,733
The accompanying notes are an integral part of this financial information.
F-77

Parent company Consolidated
2006 2005 2006 2005
Changes in working capital
Current assets
At the beginning of the year............................. 73,146 37,015 94,906 55,366
Initial balance of the subsidiaries purchased in
53,654 3,623
the year........................................................
At the end of the year....................................... 226,810 73,146 356,709 94,906
Current liabilities
153,664 36,131 208,149 35,917
At the beginning of the year............................. 50,919 21,737 67,478 27,631
Initial balance of the subsidiaries purchased in
14,474 9,663
the year........................................................
At the end of the year....................................... 37,305 50,919 73,110 67,478
(13,614) 29,182 (8,842) 30,184
Increase in working capital ................................... 167,278 6,949 216,991 5,733
The accompanying notes are an integral part of this financial information.
F-78

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Notes to the Financial Statements
At December 31, 2006 and 2005
All amounts in thousands of reais unless otherwise indicated
1 Operations
Lupatech S.A., a company based in Caxias do Sul, State of Rio Grande do Sul, located at Rua Dalton Lahm
dos Reis 201, has its own businesses and those of its subsidiaries, which are divided into two segments: the Flow
Segment, comprising the activities related to the manufacturing and sale of valves (Valmicro Indústria e Comércio
de Válvulas Ltda—Valmicro, Metalúrgica Nova Americana Ltda.—MNA, Metalúrgica Ipê Ltda—MIPEL, Mipel
Indústria e Comércio de Válvulas Ltda—MIPEL SUL, Válvulas Worcester de Argentina S.A.—Worcester
Argentina, Esferomatic S.A.—Esferomatic and Lupatech North America LLC—LNA) and the Metal Segment,
which comprises the companies engaged in the manufacturing and sale of cast parts, micro-cast parts or components
made by using the powder metal injection molding process (Microinox, Steelinject Injeção de Aços Ltda—
Steelinject, Carbonox Fundição de Precisão Ltda—Carbonox e Indústria y Tecnologia en Aceros S.A.—Itasa).
In the Flow Segment, we work mainly with industrial valves, serving practically all industries, particularly
the Oil and Gas industry. Our subsidiaries are market leaders in the market niches in which they operate.
Through the Metal Segment we serve mainly the automobile industry by supplying highly complex parts
and sub-assemblies. The Company and its subsidiaries hold an outstanding position in the development of
engineering solutions by using the industrial processes that we master.
Our corporate development has featured a combination of newly opened businesses, acquisitions and
organic growth. The following table shows the dates on which the Company started to work with its subsidiaries:
Parent company and subsidiaries Date How Business Subsegment
Microinox ....................................................... 1980 Creation Micro-cast
Valmicro ......................................................... 1984(*) Creation Valves
Steelinject ....................................................... 1995(*) Creation Powder metal injection
MNA............................................................... 2000 Acquisition Valves
LNA ................................................................ 2002 Creation Commercial
Carbonox......................................................... 2005 Acquisition Micro-cast
Metalúrgica Ipê ............................................... 2006 Acquisition Valves
MIPEL SUL.................................................... 2006 Creation Valves
Itasa................................................................. 2006 Acquisition Casting
Worcester Argentina ....................................... 2006 Acquisition Valves
Esferomatic ..................................................... 2006 Acquisition Valves
(*) Business units since the beginning of the period shown in the table above which, due to a
corporate restructuring, became corporate entities as from 2006.
With the objective of a better strategic and market alignment for the Company businesses, as from
January 1, 2006, the operating activities of Lupatech S.A. were partially split , forming a new company named
Valmicro Indústria e Comércio de Válvulas Ltda., for the manufacture and sale of valves with the trademark
Valmicro, as well as a new company named Steelinject Injeção de Aços Ltda, for the manufacture and sale of steel
injected, as previously mentioned.
Within this strategic view of the Company, the company Veraval Indústria e Comércio de Válvulas Ltda.
was also formed in 2006, the name of which was changed to Mipel Indústria e Comércio de Válvulas Ltda., located
in Veranópolis, RS, for the manufacture and sale of valves with the trademark Mipel, which started its operating
activities in the second quarter of 2006.
F-79

On September 18, 2006, the Company signed an “Agreement for Investment and Other Matters” with
Cordoaria São Leopoldo S.A. (“Cordoaria”) with the purpose of acquiring the Off-Shore business of Cordoaria.
Under the terms of the Agreement, the Company and/or its subsidiaries are expected to make cash payments of R$
50 million and new shares of Lupatech S.A. will be issued in an amount equivalent to R$ 30 million in favour of
Cordoaria. The transaction has not yet been consummated and if an when consummated the business acquired will
be consolidated into our consolidated financial statements. The transaction will not have any effect on the financial
statements presented herewith.
On December 18, 2006 the total capital of Worcester Argentina (and of its subsidiary Esferomatic), was
purchased and it has been consolidated using as opening balances the balance sheet as of November 30, 2006. No
results of operations of Worcester Argentina have been recognized in our consolidated statement of income.
2 Significant Accounting Policies
2007.
These financial statements have been approved by the Executive Board of the Company on February 28,
The financial statements have been prepared and are presented in accordance with accounting practices
adopted in Brazil and the regulations of the Brazilian Securities Commission (CVM).
The preparation of financial statements requires the use of estimates to account for certain assets, liabilities
and other transactions. The financial statements of the Company and its subsidiaries therefore include estimates
relating to the selection of the useful lives of property, plant and equipment, provisions necessary for contingent
liabilities, the determination of provisions for income tax and other similar charges. Actual results may differ from
the estimates.
(a) Marketable securities
Marketable securities are stated at cost plus earnings accrued up to the balance sheet date.
(b) Accounts receivable
These are stated at the nominal values of the invoices plus foreign exchange variations up to the balance
sheet date, when applicable. An allowance for doubtful accounts is recorded, when necessary, at an amount
considered sufficient by management to cover probable losses on the realization of the receivables.
(c) Inventories
Inventories are stated at the average cost of purchase or production, which is lower than replacement cost
or realizable value.
(d) Investments
Investments in subsidiaries are recorded following the equity method of accounting. with income/losses
recorded in a contra-entry within operating income. Other investments are stated at acquisition cost and monetarily
restated up to December 31, 1995, being adjusted to market value, if lower, when applicable.
(e) Investments Abroad
The accounting practices adopted in the preparation of the financial statements of investments abroad,
when they differ from the accounting practices adopted in Brazil, were adjusted. The translation of the
aforementioned financial statements into local currency was made in accordance with Technical Pronouncement
XVIII of the Institute of Independent Auditors of Brazil (IBRACON) and the resulting translation gain (losses) are
included as part of “Equity in earnings of subsidiaries”.
F-80

(f) Property, plant and equipment
Property, plant and equipment are recorded at acquisition or production cost, plus price-level adjustments
up to December 31, 1995 and were revalued in 1994. Depreciation is calculated on the straight-line basis at the rates
mentioned in Note 9.
(g) Deferred charges
Deferred charges are recorded at its historical cost, net of amortization computed on the straight-line basis,
at rates that take into consideration its estimated useful lives. Deferred charges are accounted for only when there is
an increase in the economic benefits related to them.
(h) Loans and financing
Loans and financing are stated at the amounts raised plus the corresponding charges, foreign exchange and
monetary variations.
(i) Revaluation reserve
The revaluation of property, plant and equipment in 1994 was recorded against a revaluation reserve
account in shareholders’ equity, net of the related tax effects. As mentioned in item (f) above, the accounting policy
with respect to valuation of property, plant and equipment is original cost.
(j) Income tax and social contribution
The provision for income tax was calculated and accounted for at the rate of 15% on taxable income plus
the 10% surcharge, and the provision for social contribution at the rate of 9% on profit before income tax, adjusted
in accordance with the criteria established by tax legislation.
The subsidiaries taxed on the presumed profit basis calculate their income tax at the rate of 15% plus the
10% surcharge, and social contribution at the rate of 9%, on taxable income determined as a percentage (8% for
income tax and 12% for social contribution) applied to the subsidiaries’ gross revenues, as established in current tax
regulations.
Deferred taxes were recognized taking into account the effective rates for income tax and social
contribution on temporary differences and on tax losses, to the extent their realization is considered probable.
(k) Statement of income
Revenues and expenses are recognized following the accrual basis of accounting.
(l) Profit sharing
Employees’ and management profit sharing in the Company’s results was calculated based on the “Profit
Sharing Plan” and the “Variable Compensation Plan”, established following current legislation and respecting the
limits established in the Company’s by-laws.
(m) Provisions
A provision is recorded in the balance sheet when there is a legal obligation or an obligation that results
from a past event, and it is probable that financial resources will be required to settle the obligations. The provisions
are recorded based on the best estimates of the risk involved (Note 15).
(n) Other rights and obligations
Other rights and obligations are classified as current and long-term, based on the term of realization or
payment, in accordance with Articles 179 and 180 of Law 6404/76.
F-81

(o) Statement of cash flows
The Company is presenting as supplementary information a consolidated statement of cash flows, prepared
in accordance with the Accounting Standards and Procedures (NPC) 20—Statements of cash flows—issued by
IBRACON.
3 Consolidated Financial Statements
The consolidated financial statements include the financial statements of Lupatech S.A. and those of its
subsidiaries, as described below:
Interest (%)
2006 2005
Metalúrgica Nova Americana Ltda.................................................................................. 100 100
Lupatech N.A. LLC ......................................................................................................... 100 88
Carbonox Fundição de Precisão Ltda. ............................................................................. 100 67.5
Valmicro Ind. e Com. de Válvulas Ltda.(*)..................................................................... 100
Steelinject Injeção de Aços Ltda.(*) ................................................................................ 100
Mipel Ind. e Com. de Válvulas Ltda.(*) .......................................................................... 100
Metalúrgica Ipê Ltda.(**) ................................................................................................ 100
Industria Y Tecnologia En Aceros S.A.(**) .................................................................... 100
Recu S.A.(**) .................................................................................................................. 100
Worcester de Argentina S.A.(**)..................................................................................... 100
Esferomatic S.A.(**) ....................................................................................................... 100
(*) Companies incorporated during 2006.
(**) Companies acquired during 2006
The following main practices were adopted in the preparation of the consolidated financial statements:
(a) Asset and liabilities between consolidated companies were eliminated;
(b) Interest in shareholders equity of the subsidiaries are eliminated;
(c) Revenues and expenses, as well as of unrealized profits originated from intercompany transactions, are
eliminated;
(d) Taxes on unrealized profits are eliminated and presented as deferred taxes in the consolidated balance
sheet; and
(e) Minority interests are separately presented in the consolidated financial statements.
In the consolidated financial statements as of December 31, 2006 the financial statements of subsidiaries
were consolidated using their financial statements as of the following dates:
Date of financial
statements of
subsidiaries used for
consolidation
Metalúrgica Nova Americana Ltda...................................................................................................... 31/12/2006
Lupatech N.A. LLC ............................................................................................................................. 31/12/2006
Carbonox Fundição de Precisão Ltda. ................................................................................................. 31/12/2006
Valmicro Ind. e Com. de Válvulas Ltda. ............................................................................................. 31/12/2006
Steelinject Injeção de Aços Ltda.......................................................................................................... 31/12/2006
Mipel Ind. e Com. de Válvulas Ltda.................................................................................................... 31/12/2006
Metalúrgica Ipê Ltda............................................................................................................................ 31/12/2006
Industria Y Tecnologia En Aceros S.A................................................................................................ 31/12/2006
Recu S.A.............................................................................................................................................. 30/11/2006
Worcester de Argentina S.A. ............................................................................................................... 30/11/2006
Esferomatic S.A................................................................................................................................... 30/11/2006
F-82

4 Marketable Securities
They refer mainly to investments in Investment Funds, the purpose of which is to optimize the manage the
Company’s short-term liquidity. They may also be used as reciprocity in the obtention of credit lines for financing.
Parent Company Consolidated
2006 2005 2006 2005
Investment funds................................................... 185,712 185,712
Debt securities ...................................................... 2,436 15,055 7,035 25,900
188,148 15,055 192,747 25,900
The yield rates of the financial investments in fixed income securities range from 100% to 100.03% of the
Interbank Deposit Certificate (CDI), resulting in a weighted average of 100.02% of CDI. The yield rate of
investment funds in 2006 was 8.57% p.a.
5 Accounts Receivable
Parent Company Consolidated
2006 2005 2006 2005
Local market.................................................. 7,619 9,258 50,870 18,626
Foreign market............................................... 5,649 5,729 11,074 14,736
13,268 14,987 61,944 33,362
6 Inventories
The analysis of inventories is as follows:
Parent Company Consolidated
2006 2005 2006 2005
Finished products........................................... 1,033 2,107 18,504 3,981
Goods for resale............................................. — 1,399 3,659 2,800
Work in process ............................................. 6,215 7,362 24,817 9,716
Raw materials and ancillary materials ........... 1,931 4,077 24,169 10,365
Imports in transit............................................ — 45 26 45
Total............................................................... 9,179 14,990 71,175 26,907
7 Taxes Recoverable
The analysis of taxes recoverable is as follows:
Parent Company Consolidated
2006 2005 2006 2005
Value-added Tax on Sales and Services (ICMS) recoverable.... 1,423 1,597 7,058 2,152
Excise Tax (IPI) recoverable ..................................................... 7 10 2,883 54
Social Integration Program (PIS) recoverable ........................... 207 223 553 241
Social Contribution on Revenues (COFINS) recoverable.......... 948 1,033 2,544 1,236
Corporate Income Tax (IRPJ) to be offset ................................. 39 1,121 312 1,121
Social Contribution on Net Income (CSLL) to be offset ........... 9 413 135 413
IRF recoverable ......................................................................... 2,975 173 3,020 207
IRPJ recoverable........................................................................ 26 46 62 46
CSLL recoverable...................................................................... 17 39 34 37
Other.......................................................................................... — — 127 61
5,651 4,655 16,728 5,568
Short-term portion ..................................................................... 3,922 2,321 14,216 2,765
Long-term portion...................................................................... 1,729 2,334 2,512 2,803
F-83

8 Investments
The analysis of investments is as follows:
Parent Company
Lupatech
Goodwill
Goodwill
Goodwill
MNA NA Carbonox Carbonox Valmicro Steel Mipel Met.IPÊ Met.Ipê Itasa Itasa 2006 2005
(a) (a) (b) (a) (c) (c) (a) (a) (a) (a) (d) (a) (e)
Information about Investments
Total number of shares or quotas
Common shares (thousand).......................... 10,808 20
Quotas (thousand) ........................................
Interest—%
Total and voting
33,500 500 16,000 5,000 6,100 3,100
capital ..................................................
Number of shares or quotas owned by
Lupatech
Common shares
100 100 100 100 100 100 100 5(*)
(thousand)............................................ 10,808 1
Quotas (thousand) ........................................
Proposed dividends and interest on
33,500 500 16,000 5,000 6,100 3,100
capital ..................................................
Shareholders’ equity (net capital
6,723 2,411 353
deficiency)........................................... 47,605 (561) 8,850 22,804 6,057 7,575 15,556 3,658
(-) Revaluation reserve.................................
(=) Adjusted shareholders’
(8,234)
equity................................................... 47,605 (561) 8,850 22,804 6,057 7,575 7,322 3,658
Net income (loss) for the year............................... 20,778 146 (77) 9,644 1,410 (25) 750 2,056
F-84

MNA
Lupatech
NA Carbonox
Goodwill
Carbonox Valmicro Steel Mipel Met.IPÊ
F-85
Goodwill
Met.Ipê Itasa
Goodwill
Itasa 2006 2005
Change in investments .......
Opening balance................. 19,450 — 3,746 3,553 — — — — — — 26,749 17,411
Capital increase/
Subscription........................ 14,100 8,293 15,571 5,000 7,600 50,564
Acquisition of interest ........ 6,572 23,428 80 949 31,029 8,231
Equity in earnings (losses) . 20,778 (77) 9,644 1,410 (25) 750 103 32,583 24,060
Additional goodwill on
investments......................... (3,112) 3,112
Amortization of goodwill... (600) (503) (119) (1,222)
Dividends and interest
on capital ............................ (6,723) (2,411) (353) (9,487) (22,953)
Closing balance .................. 47,605 — 8,850 6,065 22,804 6,057 7,575 7,322 22,925 183 830 130,216 26,749
(*) The remaining 95% are held by MNA

assets:
During 2006, the Company incorporated the following subsidiaries and contributed to them the following
Valmicro Mipel Steelinject
Permanent assets............................................................................ 3,391 2,346
Inventories ..................................................................................... 8,551 1,518
Tax credits ..................................................................................... 2,500 474
Cash ............................................................................................... 1,129 7,600 662
15,571 7,600 5,000
Consolidated
Goodwill Goodwill Goodwill Goodwill Goodwill
Carbonox Met. Ipê Itasa Recu Worcester Other 2006 2005
(c) (d) (e) (f) (g)
Changes in investments
Opening balance.......................... 3,553 3,553
Additions ..................................... 3,112 23,428 18,958 1,490 81,454 94 128,536 3,553
Amortization of goodwill............ (600) (503) (2,370) (3,473)
Closing balance ........................... 6,065 22,925 16,588 1,490 81,454 94 128,616 3,553
(a) The name of the subsidiaries is as follows: MNA—Metalúrgica Nova Americana Ltda.; Lupatech N.A.—
Lupatech N.A. LLC; Carbonox—Carbonox Fundição de Precisão Ltda.; Valmicro—Valmicro Ind. Com.
Válculas Ltda.; Steelinject—Steelinject Injeção de Aços Ltda.; Mipel—Mipel Ind. Com. Válvulas Ltda.;
Met. IPÊ—Metalúrgica Ipê Ltda.; Itasa—Industria Y Tecnologia En Aceros S.A.; Recu—Recu S.A.;
Worcester—Válvulas Worcester de Argentina S.A.
(b) Due to the negative shareholders’ equity and taking into consideration the Company’s responsibility over
such obligations, a provision for losses on this investment was recorded in current liabilities, in the amount
of R$ 561 (R$ 690 in 2005), and the amount of R$ 129, representing the change in the net capital
deficiency, was charged to operating results in the year 2006. Management expects that this situation will
be reverted as result of positive prospects for business in the foreign market.
(c) During the quarter ended March 31, 2006 the subsidiary Carbonox recognized, directly against retained
earnings, prior year adjustments in the amount of R$ 3,112. As those adjustments correspond to
transactions and events occurred in periods before the acquisition of Carbonox by the Company, such
amount was considered as an adjustment to goodwill recognized upon the purchase of Carbonox. Such
goodwill is based on expected future profitability.
In 2006 goodwill amortization amounted to R$ 600. The amortization schedule for the remaining balance
of goodwill is as follows:
R$
2007........................................................................................................................... 1,000
2008........................................................................................................................... 1,266
2009........................................................................................................................... 1,666
2010........................................................................................................................... 2,133
6,065
F-86

(d) In the acquisition of the investment in Metalúrgica Ipê Ltda, goodwill of R$ 23,428 was recorded, based on
the expectation of future profitability in the amount of R$ 15,193 and attributed to appreciation of property,
plant and equipment in the amount of R$ 8,235. In 2006, goodwill in the amount of R$ 503 was amortized.
The amortization schedule for the balance of goodwill attributed to future profitability is presented below:
R$
2007........................................................................................................................... 1,954
2008........................................................................................................................... 3,046
2009........................................................................................................................... 2,964
2010........................................................................................................................... 3,190
2011........................................................................................................................... 3,672
14,826
Goodwill attributed to appreciation of property, plant and equipment is being amortized over the expected
useful live of those assets.
(e) In the acquisition of the investment in Industria Y Tecnologia en Aceros S.A.—Itasa, goodwill of
R$ 18,958 was recognized, partially recorded in the company and partially in its subsidiary MNA, based on
the expectation of future profitability. In 2006, goodwill in the amount of R$ 2,370 was amortized.
Goodwill attributed to appreciation of property, plant and equipment is being amortized over the expected
useful live of those assets.
R$
2007........................................................................................................................... 4,739
2008........................................................................................................................... 4,739
2009........................................................................................................................... 4,739
2010........................................................................................................................... 2,371
16,588
(f) In the process for the acquisition of the investment in Recu S.A., goodwill in the amount of R$ 1,490 was
recorded by the subsidiary MNA, which is based on the expectation of future profitability. Goodwill
attributed to appreciation of property, plant and equipment is being amortized over the expected useful live
of those assets.
R$
2007........................................................................................................................... 298
2008........................................................................................................................... 298
2009........................................................................................................................... 298
2010........................................................................................................................... 298
2011........................................................................................................................... 298
1,490
(g) In the process for the acquisition of the investment in Válvulas Worcester de Argentina S.A., goodwill in
the amount of R$ 81,454 was recorded in the subsidiary MNA, which is based on the expectation of future
profitability. The amortization schedule is as follows
2007...........................................................................................................................
R$
16,290
2008........................................................................................................................... 16,291
2009........................................................................................................................... 16,291
2010........................................................................................................................... 16,291
2011........................................................................................................................... 16,291
81,454
F-87

The amortization schedule for the balance of goodwill resulting from the acquisitions described above is
presented below:
2007...........................................................................................................................
R$
25,919
2008........................................................................................................................... 27,278
2009........................................................................................................................... 27,597
2010........................................................................................................................... 25,922
2011........................................................................................................................... 21,900
128,616
9 Property, Plant and Equipment
Parent Company 2006 2005
Weighted
average
depreciation
rates
% p.a. Cost
F-88
Accumulated
depreciation Net Net
Land.............................................................................. 2,822 — 2,822 1,510
Buildings and constructions.......................................... 4.24 9,936 (2,944) 6,992 6,052
Machinery and equipment ............................................ 9.92 25,794 (12,659) 13,135 15,090
Molds and matrixes....................................................... 11.56 5,757 (4,693) 1,064 1,368
Industrial facilities ........................................................ 8.49 3,289 (1,442) 1,847 710
Furniture and fixtures.................................................... 11.16 1,240 (483) 757 526
Data processing systems and equipment....................... 20 3,382 (780) 2,602 587
Vehicles ........................................................................ 20 280 (171) 109 182
Casks............................................................................. 50 85 (38) 47 16
Trademarks and patents ................................................ 153 — 153 126
Advances for purchases of property, plant and
equipment ............................................................. 234 — 234 705
Construction in progress ............................................... 1,111 — 1,111 3,872
Total.............................................................................. 54,083 (23,210) 30,873 30,744
Consolidated 2006 2005
Weighted
average
depreciation
rates
% p.a. Cost
Accumulated
depreciation Net Net
Land.............................................................................. 3,569 — 3,569 1,642
Buildings and constructions.......................................... 4.27 17,521 (3,996) 13,525 12,421
Machinery and equipment ............................................ 10.46 65,349 (31,547) 33,802 23,567
Molds and matrixes....................................................... 14.40 11,494 (8,230) 3,264 2,515
Industrial facilities ........................................................ 9.71 5,585 (2,402) 3,183 1,378
Furniture and fixtures.................................................... 10.83 3,494 (1,920) 1,574 803
Data processing systems and equipment....................... 20 5,858 (2,013) 3,845 1,080
Improvements ............................................................... 5.20 2,928 (1,296) 1,632 789
Vehicles ........................................................................ 20 1,731 (862) 869 365
Casks............................................................................. 50 92 (38) 54 16
Trademarks and patents ................................................ 228 — 228 154
Advances for purchases of property, plant and
equipment ............................................................. 3,360 — 3,360 752
Construction in progress ............................................... 3,003 — 3,003 4,403
Total.............................................................................. 124,212 (52,304) 71,908 49,885

Property, plant and equipment also include the balance of the revaluation carried out in 1994, as described
in Note 2 (i), which was performed by independent appraisers and whose net residual balance is as follows:
10 Loans and Financing
Parent Company
2006 2005
Machinery and equipment .................................................................... 12 41
Industrial facilities................................................................................ 6 28
Molds and matrixes .............................................................................. 384 554
Total ..................................................................................................... 402 623
The breakdown of loans and financing is as follows:
Weighted
Average
interest rate Current
F-89
2006 2005
Longterm
Total Current
Long-
term Total
Description
Local currency .......................................
Index
FINEP.................................................... TJLP 3.5% p.a. 445 405 850 439 832 1,271
BRDE .................................................... TJLP 6.43% p.a. 1,368 2,315 3,683 1,334 3,609 4,943
BRDE .................................................... Fixed 12.95% p.a. 649 1,546 2,195
FINAME................................................ TJLP 6.20% p.a. 288 206 494 436 483 919
Export financing .................................... TJLP 5.5% p.a. 241 — 241 710 236 946
Direct consumer credit........................... Fixed 24.01% p.a. — — — 25 25
BNDES—Working capital..................... TJLP 3.5% p.a. 2,883 — 2,883 12,549 4,183 16,732
Financing— incentive to research and TJLP–
technology ............................................. 3.5% 836 5,072 5,908 14 4,451 4,465
Banespa—Working capital .................... CDI 0.068% p.m. 1,844 — 1,844 1,852 1,852
8,554 9,544 18,098 17,359 13,794 31,153
Foreign currency....................................
Export financing .................................... US $ 6.01% p.a. 107 — 107 353 118 471
8,661 9,544 18,205 17,712 13,912 31,624
Consolidated
Description Index
Weighted
Average
interest rate Current
2006 2005
Longterm
Total Current
Longterm
Total
Local currency ......................................
FINEP................................................... TJLP 3.5% p.a. 445 404 849 439 832 1,271
BRDE ................................................... TJLP 6.32% p.a. 1,546 3,593 5,139 1,334 3,609 4,943
BRDE ................................................... FIXED 12.95% p.a. 650 1,546 2,196
SAFRA ................................................. FIXED 13.95% p.a. 247 634 881
FINAME............................................... TJLP 5.67% p.a. 932 1,703 2,635 1,259 1,365 2,624
Export financing ................................... TJLP 5.5% p.a. 241 — 241 710 236 946
Direct consumer credit.......................... Fixed 26.05% p.a. — — — 56 7 63
BNDES—Working capital.................... TJLP 3.5% p.a. 2,883 — 2,883 12,549 4,183 16,732
SICREDI—Working capital ................. CDI 0.97% p.m. — — — 273 91 364
Financing—incentive to research and TJLP–
technology ............................................ 3.5% 836 5,072 5,908 14 4,451 4,465
Banespa—Working capital ................... CDI 0.068% p.m. 1,844 — 1,844 4,404 4,404
Banco Safra........................................... Fixed 34.28% p.a. 27 25 52
Banrisul—Working capital ................... Fixed 2.20% p.m. — — — 111 111
Unibanco—Working capital ................. Fixed 26.96% p.a. — — — 1,986 1,986
Banco Itaú............................................. Fixed 37.36% p.a. 120 35 155
Foreign currency...................................
9,771 13,012 22,783 23,135 14,774 37,909

Export financing ................................... US$ 6.01% p.a. 107 — 107 353 118 471
Banco Itáu............................................. Libor 8.75% p.a. 488 1,113 1,601 — — —
10,366 14,125 24,491 23,488 14,892 38,380
Long-term financing falls due as follows:
Parent Company Consolidated
Maturity 2006 2005 2006 2005
2007 ....................................................................................... — 7,430 — 7,998
2008 ....................................................................................... 3,588 2,689 5,320 2,924
2009 ....................................................................................... 2,737 1,861 4,264 1,983
2010 ....................................................................................... 1,799 927 2,534 982
2011 ....................................................................................... 1,217 861 1,612 861
2012 ....................................................................................... 203 144 395 144
9,544 13,912 14,125 14,892
Parent Company
The guarantees for loans and financing were as follows:
Operation: Guarantee Amount
FINEP.................................................................................... Real estate 1,919
BRDE .................................................................................... Asset financed 10,695
FINAME................................................................................ Asset financed 1,132
Export financing .................................................................... Trade notes 958
Financing—incentive to research and technology ................. Bank guarantee 4,329
BNDES.................................................................................. Bank guarantee 15,050
Banespa—Working capital .................................................... Financial investment 1,851
Total....................................................................................... 35,934
Consolidated
Operation: Guarantee Amount
FINEP............................................................................... Real estate 1,919
BRDE ............................................................................... Asset financed 11,945
SAFRA ............................................................................. Asset financed 1,066
FINAME........................................................................... Asset financed 3,644
Export financing ............................................................... Trade notes 958
Financing—incentive to research and technology ............ Bank guarantee 4,329
BNDES............................................................................. Bank guarantee 15,050
Banco Itaú......................................................................... Asset financed 1,960
Banespa—Working capital ............................................... Financial investment 1,851
Total.................................................................................. 42,722
11 Debentures
For the purpose of financing its long-term operations, the Board of Directors, at the Extraordinary General
Meeting held on September 15, 2006, approved the Public Program of Debentures pursuant to the CVM Instruction
no. 400, of December 29, 2003, for a total amount of three hundred million reais (R$ 300,000). Twenty-two
thousand, seven hundred (22,700) debentures were issued for a total amount of R$ 227,000. Debentures are nonconvertible
into shares, unsecured (without guarantee or privilege) and book-entry and registered, with remuneration
at the maximum rate of 105.0% of the accrual of CDI daily average rates (Interbank Deposits). Remuneration shall
be paid semi-annually as from the date of issuance of debentures and up to maturity date.
F-90

The main features of the debentures are the following:
Series First Issuance
Issuance date.................................................................................................................................. 09/01/2006
Maturity date.................................................................................................................................. 09/01/2011
Quantity ......................................................................................................................................... 22,700
Par value per debenture issued (in reais)........................................................................................ 10,000
Total par value (in thousands of reais)........................................................................................... 227,000
12 Related Parties
Transactions and balances with related parties are as follows:
MNA LNA Carbonox Valmicro Mipel Steelinject 2006 2005
Assets
Trade notes receivable ....... 1,133 1,133 2,257
Loans .................................. 125,078 568 777 126,423 597
Interest on own capital
receivable.......................
1,732 1,732
Dividends
receivable.......................
4,685 2,411 353 7,449 22,953
Total............................................. 131,495 1,701 2,411 1,130 136,737 25,807
Liabilities
Trade notes payable............ 11 11 38
Loans .................................. 702 702
Total............................................. 11 702 713 38
Product sales................................ 42 21 3,079 894 519 4,555 7,799
Product purchases........................ 39 449 79 353 664 1,584 9,189
Financial income ......................... 2,944 23 13 2,980 878
Financial expenses....................... 31 82 113
Transactions are carried out at prices and terms considered usual. Outstanding balances are remunerated at
rates applied in the financial market.
The Company, on December 31, 2006, had guarantees in the amount of R$2,448 to Group companies,
which also are guaranteed by the respective financed assets.
13 Income Tax and Social Contribution
(a) Deferred income tax and social contribution
Parent Company Consolidated
2006 2005 2006 2005
Assets
Provision for contingencies............................................. 360 2,671 360
Tax losses ....................................................................... 2,124 2,388
Negative basis of social contribution .............................. 809 979
Deferred income tax and social contribution .................. 2,933 360 6,038 360
Short-term....................................................................... 391 391
Long-term .......................................................................
Liabilities
2,542 360 5,647 360
Valuation of inventories.................................................. 2,059
Revaluation reserve ........................................................ 126 197 126 197
Deferred income tax and social contribution .................. 126 197 2,185 197
Short-term....................................................................... 2,059
Long-term ....................................................................... 126 197 126 197
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(b) Estimate of deferred tax assets realization amounts
Recovery of deferred taxes, in the parent company and on a consolidated basis, is estimated as follows:
Parent Company Consolidated
2007 ................................................................................................. 391 391
2008 ................................................................................................. 1,271 2,824
2009 ................................................................................................. 1,271 2,823
2,933 6,038
The reversal of deferred tax liabilities with respect to revaluation and inventories, both at the parent
company level and on a consolidated basis, is estimated as follows based on the realization of the revaluation reserve
and the inventories:
Parent Company Consolidated
2007 ................................................................................................. 2,059
2008 ................................................................................................. 126 126
126 2,185
(c) Reconciliation of income tax and social contribution expense
Parent Company Consolidated
2006 2005 2006 2005
Income before taxes and interest ................................................. 22,546 33,630 38,258 36,433
Additions and exclusions
Equity in earnings.................................................................. (32,583) (24,060)
Employees and management profit sharing........................... (649) (1,515) (3,762) (2,874)
Interest on own capital paid and/or credited.......................... — (12,205)
Goodwill amortization........................................................... 1,222 3,473 — (12,205)
Tax effect on subsidiaries levied on presumed profit (Note 2 (j)) . — (7,995) — (18,793)
Other ..................................................................................... 1,732 3,597 1,479 5,457
Taxable income ............................................................................ (7,732) (553) 31,453 8,018
Combined tax rate................................................................... 34% 34% 34% 34%
Current income tax and social contribution expense. — (13,269) — (2,914)
Deferred income tax and social contribution ................................. 2,629 188 2,575 188
14 Accounts Payable Related to Acquisition of Investments
As mentioned in Note 8, during 2005 the Company acquired the subsidiary Carbonox—Fundição de
Precisão Ltda. Part of the amounts related to the acquisition cost of this subsidiary are payable in 2007 and are
recorded in the parent company. Such amounts bear 6% interest p.a. plus IGPM (General Market Price Index).
During the second quarter of 2006, the subsidiary Metalúrgica Nova Americana Ltda. acquired Indústria y
Tecnologia En Aceros S.A.—Itasa. The sellers of Itasa, current company’s officers, will be paid as variable
remuneration an amount computed as 30%, 20% or 10% of net income of the business acquired in the first, second
and third year after acquisition, respectively.
The acquisition settlement schedule is as follows:
Year
Carbonox acquisition
Amount
F-92
Itasa acquisition
Amount
Consolidated
Amount
2007............................................. 1,778 1,924 3,702
2008............................................. 1,924 1,924
2009............................................. 1,923 1,923
1,778 5,771 7,549

15 Contingencies
(a) Contingent liabilities
The Company and its subsidiaries, through their attorneys, have been discussing some tax, labor and civil
issues in courts. The provision for contingencies was determined by management based on information from the
Company’s attorneys, in an amount deemed sufficient to cover probable losses.
Parent Company
Probability of loss
Remote Possible Probable
Tax (i) ................................................................................................ 11,916 276 56
Labor (ii)............................................................................................ 155 517 60
Civil (iii) ............................................................................................ 68 1,390 —
12,139 2,183 116
(-) Judicial deposits............................................................................ (113)
Total at December 31, 2006............................................................... 12,139 2,183 3
Total at December 31, 2005............................................................... 10,160 1,413
Information as of December 31, 2005 has been adjusted to allow comparability with the information as of
December 31, 2006.
Consolidated
Probability of Loss
Remote Possible Probable
Tax (i) ................................................................................................ 11,916 6,253 7,225
Labor (ii)............................................................................................ 919 1,095 871
Civil (iii) ............................................................................................ 151 1,390 18
12,986 8,738 8,114
(-)Judicial deposits............................................................................. (2,946)
Total at December 31, 2006............................................................... 12,986 8,738 5,168
Total at December 31, 2005............................................................... 10,441 1,790
Information as of December 31, 2005 has been adjusted to allow comparability with the information as of
December 31, 2006.
(i) Tax—Correspond to issues regarding municipal, state and federal taxes, among which Corporate
Income Tax (IRPJ), Social Integration Program (PIS), Social Contribution on Revenues (COFINS), National
Institute of Social Security (INSS), Value-added Tax on Sales and Services (ICMS) and Excise Tax (IPI). There are
legal proceedings in all phases, from lower courts to higher courts, Higher Court of Justice (STJ) and Higher Federal
Court (STF).
(ii) Labor—several labor claims mostly related to suits for damages.
(iii) Civil—civil claims regarding ordinary, provisional and execution claims among others.
The increase in contingencies for losses classified as possible correspond mainly refer to administrative
processes by INSS of Metalúrgica Nova Americana Ltda
(b) Contingent assets
Parent Company
Probability of gain
Remote Possible Probable
Tax (i) ................................................................................................ 2,052 342 1,893
Civil (iii) ............................................................................................ 2 1
Total at December 31, 2006............................................................... 2,052 344 1,894
Total at December 31, 2005............................................................... 1,745 1,151
F-93

Consolidated
Probability of gain
Remote Possible Probable
Tax (i) ................................................................................................ 2,208 549 3,024
Civil (iii) ............................................................................................ 8 13 182
Total at December 31, 2006............................................................... 2,216 562 3,206
Total at December 31, 2005............................................................... 1,753 1,151
(i) Tax—Matters regarding municipal, state and federal tax credits.
(ii) Civil—civil claims, regarding ordinary, provisional and execution claims among others.
The Company did not record any contingent asset which are recorded only after the claims receive a final
and unappealable decision or once collected.
16 Shareholders’ Equity
(a) Capital
Capital as of December 31, 2006 is only comprised of common shares, with 100% tag-along right, as
follows:
2005 2006
Common shares ......................................................................................................... 45,625,310 94,124,385
Class A preferred shares ............................................................................................ 860,416
Class B preferred shares ............................................................................................ 21,575,000
Class C preferred shares ............................................................................................ 32,722,364
Class D preferred shares ............................................................................................ 17,979,224
Class E preferred shares............................................................................................. 14,383,379
Total........................................................................................................................... 45,625,310 181,644,768
Minimum mandatory dividends corresponding to 25% of the adjusted net income should be distributed to
shareholders on annual basis, in accordance with the Brazilian Corporate Law
During 2006 the following changes took place:
• On March 1, 2006, capital was increased by R$ 9,891, with no issue of new shares, through the capitalization of
R$ 1,615 from legal reserve and R$ 8,276 from profit reserve.
• On March 1, 2006, the Board of Directors authorized a capital increase by R$ 2,425, with the capitalization of
profit reserve, with no issue of new shares.
• On March 1, 2006, capital was increased by R$ 4,268 through the issue of 11,243,455 new shares of which:
5,826,115 common shares, 53,258 class A preferred shares, 1,335,450 class B preferred shares, 2,025,450 class
C preferred shares, 1,112,879 class D preferred shares and 890303 class E preferred shares, all nominative, with
no par value.
• On March 29, 2006, all preferred shares issued by the Company were converted into common shares, in the
proportion of a new common share for each preferred share.
• On March 29, 2006, a reverse split was approved in the proportion of 5 shares for each new share. After the
reverse split, capital comprised 38,577,644 common shares.
• On May 12, 2006, capital was increased by R$ 155,049, through the public offer of 7,047,666 new common
shares, with no par value.
F-94

According to by-laws the Board of Directors may increase capital stock without need of amendment in the
by-laws in up to 127,000,000 additional common shares.
(b) Revaluation reserve
The revaluation reserve is being realized based on depreciation, written-off or disposal of the respective
revaluated assets. Upon realization the amount realized is transferred from revaluation reserve to retained earnings,
net of the related tax effects.
(c) Profits reserve
A reserve was created for the outstanding balance of the retained earnings. The reserve has been made for
the expansion and modernization of operations. The use of such reserve is based on capital budgets approved by
management which needs to be submitted to the approval of the Shareholders’ Meeting.
(d) Proposed dividends
Proposed dividends were calculated as follows:
2006 2005
Net income for the year ............................................................................................. 24,526 32,303
Legal reserve (5% of net income).............................................................................. 1,226 1,615
Calculation basis........................................................................................................ 23,300 30,688
Percentage of minimum mandatory dividends........................................................... 25% 25%
Minimum mandatory 25%......................................................................................... 5,825 7,672
Dividend per common share ...................................................................................... 0.1276 0.04029
Dividend per preferred share ..................................................................................... 0.04432
The dividends proposed were recorded assuming it will be approved by the Ordinary General Meeting of
shareholders.
17 Reconciliation of shareholders’ equity and net income for the year between Parent Company and
Consolidated
Shareholders’
Net income for the
equity
year
2006 2005 2006 2005
Parent Company........................................................................ 246,925 68,955 24,526 32,303
Unrealized profit included in subsidiaries’
inventories.........................................................................
(1,206) (478) (724) (266)
Consolidated ............................................................................. 245,719 68,477 23,802 32,037
18 Insurance Coverage
It is the Company’s policy to maintain insurance coverage for property, plant and equipment and
inventories subject to risks, under the type “Comprehensive Corporate Insurance”, and for amounts deemed as
sufficient to cover the risks involved. The company also has insurance coverage for general civil liability, as well as
insurance in favor of the Company’s officers and directors (“D&O”).
Purpose of the insurance Amount insured R$
—Comprehensive Corporate Insurance .................................................................................................... 96,044
—General civil liability insurance ............................................................................................................ 5,000
—D&O insurance ..................................................................................................................................... 10,000
19 Financial Instruments
The Company has compared the book value of its financial assets and liabilities against estimated
market/realization values, based on information available and valuation methods set forth by the management.
However, interpretation and analysis of market data and the selection of valuation methods require substantial
F-95

judgment and the use of assumptions to estimate the most appropriate estimate of realization value. Consequently,
the estimates presented do not necessarily represent the amounts at which assets and liabilities may be realized in the
current market. The use of different assumptions and/or methods may have a material effect on the estimated
realization amounts
Valuation of financial instruments and main business risks
The Company’s main financial assets and liabilities instruments on December 31, 2006 are, as well as their
valuation method, as follows:
(a) Cash and banks, marketable securities, accounts receivable, other current assets and accounts payable
The realization value balances on current account and financial investments held banks are estimated as
similar amounts to its carrying amounts, as well as those of accounts receivable and accounts payable.
(b) Investments
Investments comprise mainly investments in privately-held companies recorded following the equity
method, in which the Company has strategic interest. We understand that analysis with respect to market value of
shares/quotas held is not applicable. The majority of Company’s acquisitions (representing 79% of the balance of
investments) was consummated in the last two years, which may indicate that their carrying amount approximates
their market value.
(c) Loans and financing
They are subject to interest at usual market rates, as specified in Note 10. The estimated market value was
calculated based on the present value of future cash flows, at interest rates that are available to the Company and the
valuation indicates that the market values are similar to the carrying amounts.
Financial risk factors that may affect the businesses of the Company and of its subsidiaries
(a) Interest rate risk
This risk results from the possibility of the Company incurs losses due to interest rate fluctuations that may
increase financial expenses related to loans and financings. The Company continuously monitors the market interest
rates with the purpose of evaluating the need to enter into transactions to hedge such risk. Existing financial
investments have variable interest rates, reducing (although the risk exists), risks related to interest rates. The
Company is exposed to the gap between its funding and financial investments.
(b) Exchange rate risks
This risk results from the possibility of the Company incurring in losses due to changes in foreign exchange
rates which reduce nominal amounts in reais billed or increase amounts in reais of debt issued.
Considering that part of the Company’s revenues (approximately 34%) is denominated in Euro or in US
Dollar, the main strategy of the Company is to consider such revenues as a natural hedge for its liabilities
denominated in foreign currencies.
On December 31, 2006, the Company had assets and liabilities denominated in US Dollar in the amount of
US$ 3,565 thousand and US$ 3,210 thousand, respectively, and assets and liabilities denominated in Euro in the
amount of €1,553 thousand and €177 thousand, respectively, and no instrument has been contracted to protect from
such an exposure, other than existing exports (denominated in foreign currencies) that reduces eventual foreign
exchange rate risks.
(c) Credit risk
The Company’s sales policy is closely related to the level of credit risk to which it is willing to be exposed
during the ordinary course of business. The diversification of its receivables portfolio, the selection of clients, as
F-96

well as monitoring of sales terms by business segment and individual position limits, are procedures adopted with
the purposes of reducing delinquencies in its accounts receivable.
(d) Price risk
Considering planning for exports by the parent company and its subsidiaries, foreign exchange rate
volatility may cause volatility in selling prices when converted into reais.
20 IPO Expenses
During 2006, the Company recorded expenses related with its IPO in the amount of R$ 8,348, which were
recorded as expense under Other operational expenses.
21 Stock Options Plan
With the purpose of promoting the Company’s expansion and achieving of corporate goals established, and
in order to promote the retention by the Company of its top officers and of selected employees and to promote
alignment of performance of the Company with shareholders’ interests over the long term through commitment by
management, the Extraordinary General Meeting held on April 19, 2006 approved the Stock Option Plan (the
“Plan”).
The Board of Directors have defined eligible persons to the programs included in the Plan, as well as
criteria to establish the amount of shares to which will be entitled to subscribe, the exercise price and the terms for
payment for the shares.
At the Board of Directors meeting held on July 20, 2006, other terms and conditions set forth in the Plan
were ratified, that is, exercise price of the shares, the maximum period to exercise the options, restrictions on
transfer of shares, rules about the transfer of the options and related penalties.
The Plan has the following features:
Number of shares for
which options were issued Number of beneficiaries Exercise price
1st Program................................................... 537,558 29 R$ 11.10
The options are limited to five percent (5%) of the sum of: (i) total shares outstanding as of the date the
options are granted, plus (ii) maximum amount of shares that would be issued if the stock options being granted are
exercised.
22 Employees and Management Profit Sharing
In conformity with the provisions of Law 10101 of December 19, 2000, management selected to make
semi-annual payments of employees’ profit sharing, having paid the first portion in August 2006 and the remaining
balance is scheduled to be paid in March 2007. The profit sharing amount related to 2006 was R$ 649 (Parent
Company) and R$ 3,762 (Consolidated). The employees and management profit sharing was calculated as
established in the “Profit Sharing Plan” approved by the appropriate labor union.
* * *
F-97

(A free translation of the original in Portuguese)
Lupatech S.A.
Lupatech S.A. and subsidiaries
Supplemental Information
Consolidated Statements of Cash Flow
All amounts in thousands of reais unless otherwise indicated
Consolidated
2006 2005
Cash flows from operating activities
Net income for the year ...........................................................................................................
Adjustments to reconcile net income to cash generated by operating
activities
23,802 32,037
Depreciation and amortization ................................................................................. 7,245 6,334
Goodwill amortization ............................................................................................. 3,473
Cost of property, plant and equipment disposed of or sold ...................................... 3,193 1,868
Cost of investment disposed of or sold .................................................................... 199
Capital losses in subsidiaries.................................................................................... 1,149
Minority interest....................................................................................................... (36)
Unpaid interest on debentures..................................................................................
Changes in assets and liabilities:
9,795
Increase in accounts receivable................................................................................ (15,765) (7,756)
Increase in inventories ............................................................................................. (8,838) (5,092)
Increase in taxes recoverable ................................................................................... (13,358) (3,064)
Increase in other assets............................................................................................. (2,985) (608)
Increase in suppliers................................................................................................. 1,322 268
Increase (decrease) in taxes payable ........................................................................ (847) 1,128
Increase (decrease) in other accounts payable.......................................................... (2,003) 14,582
Net cash provided by operating activities ............................................................................
Cash flows from investing activities
5,034 41,009
Purchase of property, plant and equipment.............................................................................. (25,835) (20,289)
Acquisition of investments ...................................................................................................... (164,437) (2,982)
Increase in deferred charges..................................................................................................... (1,696) (1,316)
Net cash used in investing activities......................................................................................
Cash flows from financing activities
(191,968) (24,587)
Capital contribution ................................................................................................................. 159,317 8,504
Dividends paid......................................................................................................................... (12,256) (19,877)
Loans and financing obtained .................................................................................................. 9,304 25,634
Payment of capital bonus to shareholders................................................................................ (604)
Issuance of debentures............................................................................................................. 227,000
Repayment of loans and financing........................................................................................... (26,755) (7,336)
Interest paid on loans ............................................................................................................... 3,197 (2,214)
Repayment of loans from related parties ................................................................................. (94) (13)
Net cash generated by financing activities ........................................................................... 356,713 4,094
Increase in cash and marketable securities.......................................................................... 169,779 20,516
Cash and marketable securities at the beginning of the year.................................................... 30,644 9,931
Cash from subsidiaries acquired during the year ..................................................................... 3,843 197
Cash and marketable securities at the end of the year.............................................................. 204,266 30,644
F-98

(A free translation of the original in Portuguese)
Cordoaria São Leopoldo Off-Shore Ltda.
Carve-out Interim Financial Statements as
of and for the three months ended
March 31, 2007
F-99

Report of Independent Accountants on the Limited Review
To the Board of Directors and Stockholders
Cordoaria São Leopoldo Off-Shore Ltda.
1 We have carried out a limited review of the accompanying carve-out interim balance sheet of Cordoaria São
Leopoldo Off-Shore Ltda. as of March 31, 2007, and the related carve-out interim statement of income for the
period of three months then ended. These carve-out interim financial statements are the responsibility of the
management of Cordoaria São Leopoldo Off-Shore Ltda. Our responsibility is to issue a report on these carveout
interim financial statements.
2 Our review was conducted in accordance with specific standards established by the Institute of Independent
Auditors of Brazil (IBRACON) and mainly comprised the application of analytical review procedures to
financial data and inquiries of personnel responsible for accounting and financial matters about the criteria
applied in the preparation of the carve-out interim financial statements. Because these procedures do not
comprise an audit carried out in accordance with approved Brazilian auditing standards, we do not express an
opinion on these carve-out interim financial statements.
3 Based on our limited review, we are not aware of any material modifications that should be made to the carveout
interim financial statements reviewed by us in order for them to be in conformity with accounting practices
adopted in Brazil.
4 As discussed in Note 2 to the carve-out interim financial statements, the CSL Offshore Business (as defined in
the notes to these carve-out interim financial statements) includes the accounts of the business acquired from
Cordoaria São Leopoldo S.A. The carve-out interim financial statements also include allocations of certain
expenses of Cordoaria São Leopoldo S.A. These allocations may not be reflective of the actual level of costs or
of debt which would have been incurred had the CSL Offshore Business operated as a separate entity from
Cordoaria São Leopoldo S.A.
Porto Alegre, June 15, 2007
PricewaterhouseCoopers
Auditores Independentes
CRC 2SP000160/O-5 “F” RS
Carlos Biedermann
Contador CRC 1RS029321/O-4
F-100

(A free translation of the original in Portuguese)
Cordoaria São Leopoldo Offshore Ltda.
Carve-Out Balance Sheet at March 31
(unadited)
(in thousands of reais)
Assets
Current assets
2007
Accounts receivable......................................................................................................................................... 399
Inventories ....................................................................................................................................................... 7,947
Taxes recoverable ............................................................................................................................................ 5,330
Other accounts receivable ................................................................................................................................
Permanent assets
271
13,947
Property, plant and equipment, net .................................................................................................................. 34,999
Total assets ..................................................................................................................................................................
F-101
48,946
Liabilities and equity
Current liabilities
2007
Suppliers .......................................................................................................................................................... 5,958
Loans and financing......................................................................................................................................... 2,507
Advances from customers................................................................................................................................ 7,520
Provision for income tax and social contribution............................................................................................. 4,076
Other accounts payable .................................................................................................................................... 425
20,486
Equity of CSL Offshore Business................................................................................................................................ 28,460
Total liabilities and equity ........................................................................................................................................... 48,946
The accompanying notes are an integral part of these carve-out financial statements.

(A free translation of the original in Portuguese)
Cordoaria São Leopoldo Offshore Ltda.
Carve-Out Statements of Income
Three months ended March 31
(unadited)
(in thousands of reais)
Gross sales ..............................................................................................................................................................
2007
7,775
Taxes on sales......................................................................................................................................................... —
Net revenues .......................................................................................................................................................... 7,775
Cost of sales............................................................................................................................................................
F-102
(3,596)
Gross profit ........................................................................................................................................................... 4,179
Operating income (expenses)
Selling......................................................................................................................................................... (126)
General and administrative ......................................................................................................................... (164)
Financial expenses ...................................................................................................................................... (523)
(813)
Profit before social contribution and income tax ............................................................................................... 3,366
Income tax and social contribution ......................................................................................................................... (643)
Net income for the period..................................................................................................................................... 2,723
The accompanying notes are an integral part of these carve-out financial statements.

(A free translation of the original in Portuguese)
Cordoaria São Leopoldo Offshore Ltda.
Notes to the Carve-Out Financial Statements at March 31, 2007
(unadited)
(in thousands of reais, unless otherwise stated)
1 Nature of Operations
The interim financial statements represent the oil platform-anchoring rope business (known as the “CSL
Offshore Business”) of Cordoaria São Leopoldo S.A. (“Cordoaria”) on a carved out basis from Cordoaria. Cordoaria
businesses included the development, production and sale of other products in its operations different from those of
the CSL Offshore Business.
With a plant located in São Leopoldo, in the State of Rio Grande do Sul, the Off-Shore Business produces a
new generation of synthetic fiber ropes used for anchoring oil and gas platforms in deep and ultra deep seawaters,
using proprietary technology developed in Brazil.
ropes.
The CSL OffShore Business has a processing capacity in excess of 7,200 tons per year of synthetic fiber
On April 3, 2007, Lupatech S.A. (“Lupatech”) through its subsidiary Lupatech MNA Investimentos e
Participações Ltda. (“Lupatech MNA”) entered into a final agreement with Cordoaria to acquire the CSL Offshore
Business. The transaction was consummated on April 3, 2007. The acquisition was effected through the spin-off
from Cordoaria to Cordoaria São Leopoldo Off-Shore Ltda. (the “Company”) exclusively of the fixed assets
(consisting mainly of the industrial facilities and the equipment necessary for the production of ropes), a nominal
amount of cash as well as the customer relationships of the CSL Offshore Business. All other assets and liabilities
related to the CSL Offshore Business (consisting substantially of trade accounts receivable and payables and other
working capital items) remained with Cordoaria.
Under the terms of the purchase agreement the purchase price for the CSL Offshore Business is payable
through three financial instruments:
(a) a cash payment of R$ 55,000 in cash which was made on the date the transaction was consummated.
(b) issuance of R$ 25,000 of debentures of Lupatech maturing on June 30, 2010. Under the terms of the debentures
additional consideration will be, payable in cash as financial charges on the debentures, based on cumulative
EBITDA (computed as defined in the agreement) of the CSL Offshore Business through June 30, 2010.
Additional consideration will be computed as 50% or 100% of the excess of EBITDA over a specified
threshold. As of the date of this interim financial statements debentures were pending issuance.
(c) Issuance of R$ 60,000 in shares of Lupatech with the quantity of shares determined as R$ 60,000 divided by the
quoted market value of the shares on the date of issuance. As of the date of this interim financial statements
shares of Lupatech MNA for R$ 60,000 were issued to the sellers as consideration. Upon the planned merger of
Lupatech MNA into Lupatech those shares of Lupatech MNA will be exchanged for shares of Lupatech.
Additional consideration will be due to the sellers if the fair market value of the shares issued does not exceed
an established threshold at any time through June 30, 2010. Additional consideration will be limited to a
maximum of R$ 90,000 of which R$ 20,000 can be settled in shares of Lupatech and the remaining must be
settled in cash.
2 Basis of Presentation
The accompanying carve-out interim financial statements reflects the assets, liabilities, revenues and
expenses and changes in equity that were directly applicable to the CSL Offshore Business. For the purpose of these
carve-out interim financial statements certain methods and criteria were used to identify and segregate the assets,
liabilities, revenues and expenses of the CSL Offshore Business as detailed below.
F-103

The CSL Offshore carve-out interim financial statements have been prepared and are presented in
accordance with accounting practices adopted in Brazil, which are based on the provisions of Brazilian Corporate
Law. These interim financial statements have not been prepared for statutory and regulatory purposes and for that
reason they do not present comparative financial information or the statement of changes in financial position.
The assets, liabilities and results of operations of the CSL Offshore Business were carved out from the
financial statements of Cordoaria presenting those specifically related to the CSL Offshore business except for cash
and financings whose use was shared with the other business of Cordoaria.
Management believes the methods and criteria reasonably present the financial position and results of
operations of the CSL Offshore Business. However, these carve-out interim financial statements of financial
position, of income and of change in equity may not be indicative of those that would have been resulted had the
CSL Offshore Business operated as an independent stand-alone entity. Had CSL Offshore Business operated as an
independent stand-alone entity, its results could have differed significantly from those presented herein.
The nature of the CSL Offshore Business is such that is levels of sales and revenue are strongly influenced
by specific orders placed by its customers and as a result the levels of revenue, cost of sales and results of operations
may fluctuate significantly from period to period.
a. Cash and financings
Cordoaria used a centralized approach to cash management and the financing of its operations. These
systems did not track cash balances and borrowings on a business specific basis. While certain of the borrowings are
specifically identifiable, for example, obligations relating to export notes, most of Cordoaria cash and borrowings
were not specifically attributable to any business. Considering that the CSL Offshore Business generated cash from
its operations during the period presented the accompanying carve-out interim financial statements consider that
such cash has been transferred to the centralized cash of Cordoaria and are presented as a reduction of equity. As a
result, no cash balance is presented and no allocation of centralized borrowings has been made.
b. Accounts receivable
The accounts receivable represents the amount outstanding as of March 31, 2007 from the CSL Offshore
Business. No provision for doubtful accounts has been recorded considering that losses on accounts receivables are
not considered probable as of such date.
c. Foreign currency
Monetary assets and liabilities denominated in foreign currencies were converted into reais using the
foreign exchange rate on the balance sheet date. Differences arising from the conversion of foreign currency
amounts have been recognized in the statement of income under “Financial expenses”.
d. Inventories and cost of sales
Inventories are stated at average purchase or production cost, which is lower than market value. Cost of
inventories includes expenses incurred on the purchase, freight and storage of inventories. In the case of finished
products, cost includes the corresponding manufacturing expenses incurred.
e. Recoverable taxes
The amounts were calculated considering the recoverable taxes generated by the CSL Offshore Business
during the year ended December 31, 2006 and the quarter ended March 31, 2007.
f. Property, plant and equipment, net
Property, plant and equipment correspond exclusively to fixed assets of the CSL Offshore Business and are
stated at its estimated market value determined by independent appraisers. Depreciation is calculated on the straightline
basis at the rates listed in Note 6.
F-104

g. Suppliers
Suppliers represent the amounts payable as of March 31, 2007 mainly to suppliers corresponding
exclusively to the CSL Offshore Business.
h. Income taxes and social contribution
The CSL Offshore Business is not a separate taxable entity and has not filed separate tax returns but rather
was included in the tax returns filed by Cordoaria. Income taxes and social contribution have been determined as if
CSL Offshore Business had filed a separate tax return following the “presumed regime”. Cordoaria has used during
the three months ended March 31, 2007 the “presumed regime” to determine income taxes and social contribution.
Under the “presumed regime” taxable income is computed as 8% (for income tax) and 12% (for social contribution)
of gross revenue plus 100% of financial income, if any. The income tax rate (25%) and social contribution rate
(9%) is applied over the amount of taxable income determined.
i. Equity
The CSL Offshore Business did not operate as a separate legal entity. As a result no shares or other
instruments representing equity were outstanding during the period presented. Changes in equity during the period
include net income for the period and the transfers of cash to Cordoaria as described in (a).
j. Revenue recognition
Revenue is recognized when title has been transferred to the customer. Revenue presented under Exports
corresponds mainly to sales to companies domiciled in Brazil for its operations in the Brazilian territorial sea which
are considered as exports for tax purposes.
k. Selling, general and administrative expenses
Selling, general and administrative expenses presented in the carved-out interim financial statements have
been determined as those specifically corresponding to the CSL Offshore Business comprising: (a) selling expenses
are mainly comprised by salaries and other employee related costs for sales representatives and other employees
which were specifically allocated to CSL Offshore Business, as well as direct expenses such as sales commissions,
freight, and third parties fees and expenses, (b) general and administrative expenses consist primarily of salaries and
other employee related costs of the administrative staff and management of the employees of the CSL Offshore
Business, legal and professional fees.
l. Financial expenses
Financial expenses have been calculated using the specific borrowing interest rate for the financings of the
CSL Offshore Business. Financial expenses also include foreign exchange variations.
3 Accounts receivable
4 Inventories
2007
Customers—Domestic..................................................................................................................... —
Customers—Exports........................................................................................................................ 399
399
2007
Raw and replacement materials......................................................................................................... 64
Finished products .............................................................................................................................. 7,883
7,947
F-105

5 Taxes recoverable
Excise Tax (IPI) ................................................................................................................................
2007
1,543
Value-added Tax on Sales and Services (ICMS)............................................................................... 3,628
Social Integration Program (PIS) / Social Contribution on Revenues (COFINS) ............................. 159
Total ................................................................................................................................................. 5,330
6 Property, plant and equipment, net
Annual
depreciation
rates
F-106
Carrying
amount
2007
Accumulated
depreciation Net
Land............................................................................ — 2,633 2,633
Buildings..................................................................... 4% 5,084 (84) 5,000
Machinery and equipments......................................... 10% 31,351 (3,985) 27,366
39,068 (4,069) 34,999
7 Loans and financing
Index Interest rate 2007
Advance on exchange contract ............................................................. US$ TJLP + 1% p.a. 2,507
2,507
8 Provision for income tax and social contribution
Income tax ..........................................................................................................................................................
2007
2,801
Social contribution.............................................................................................................................................. 1,275
Total................................................................................................................................................................... 4,076
9. Changes in equity of the CSL Offshore Business
Equity of CSL Offshore Business at the beginning of the period ...............................
2007
34,073
Net income.................................................................................................................. 2,723
Transfers to Cordoaria ................................................................................................
(8,336)
Equity of CSL Offshore Business at the end of the period .........................................
28,460
* * *

(Convenience translation into English from the original previously issued in Portuguese)
GASOIL SERVIÇOS LTDA.
FINANCIAL STATEMENTS AS OF
JUNE 30, 2007 AND 2006
AND INDEPENDENT AUDITOR’S OPINION
BDO International is a worldwide network of public accounting firms, called Member Firms, acting in 111
countries and 626 offices. Each BDO Member is an independent legal entity in its own country. BDO Trevisan is the
member Firm of the BDO International network since 2004.
F-107

GASOIL SERVIÇOS LTDA.
FINANCIAL STATEMENTS AS OF JUNE 30, 2007 AND 2006
CONTENT
Independent auditor’s opinion
Charter 1 – Balance sheet
Charter 2 – Income statement
Charter 3 – Statement of changes in quotaholders’ equity.
Charter 4 – Statement of changes in financial position
Notes to the financial statements
F-108

INDEPENDENT AUDITOR’S OPINION
To the directors and quotaholders
Gasoil Serviços Ltda.
1 We have reviewed the accompanying balance sheet of Gasoil Serviços Ltda. as of June 30, 2007, and the related
statements of income, changes in quotaholders’ equity and changes in financial position for the period of six
months then ended, prepared under the responsibility of the company’s management. Our responsibility is to
express an opinion on these financial statements.
2 Our review was conducted in accordance with the Brazilian auditing standards and comprised: (a) planning of
the work, considering the relevance of the balances, the volume of transactions, and the accounting systems and
internal accounting controls of the company; (b) verification, on a test basis, of evidence and records supporting
the amounts and accounting information disclosed; and (c) evaluation of the most significant accounting
practices and estimates adopted by management of the Company, as well as the presentation of the financial
statements taken as a whole.
3 In our opinion, the financial statements referred to in paragraph 1 present fairly, in all material respects, the
financial position of Gasoil Serviços Ltda. as of June 30, 2007, and the results of its operations, the changes in
its quotaholders’ equity and the changes in its financial position, for the period of six months then ended,
according to the Brazilian accounting practices.
4 The financial statements of the semester ended June 30, 2006, presented for comparison purposes, were not
reviewed by us neither other independent auditor.
5 The accompanying financial statements have been translated into English for the convenience of readers outside
Brazil.
Rio de Janeiro, August 14, 2007.
Luiz Carlos de Carvalho
Accounting-partner
CRC 1SP197193/O-6 “S” RJ
BDO Trevisan Auditores Independentes
CRC 2SP013439/O-5 “S” RJ
F-109

EXHIBIT I
GASOIL SERVIÇOS LTDA.
BALANCE SHEET AT JUNE 30, 2007 AND DECEMBER 31, 2006
(In reais)
2007 2006 2007 2006
ASSETS (Unaudited) LIABILITIES (Unaudited)
CURRENT CURRENT
Cash and banks.................................................. 8,244 137,491 Loans and financing ......................................... 4,616,149 2,511,504
Accounts receivable .......................................... 401,287 1,774,883 Suppliers........................................................... 1,132,912 560,807
Inventories......................................................... 5,338,373 2,915,898 Salaries payable................................................ 380,297 173,231
Taxes recoverable ............................................. 1,205,676 782,968 Taxes and obligations....................................... 2,051,166 1,003,292
Several advances ............................................... 270,597 2,254,068 Provisions and labor charges............................ 1,074,990 263,001
Prepaid expenses ............................................... 315,648 49,829 Provision for contingencies.............................. 442,216
Total current assets............................................ 7,539,825 7,915,137 Other debts ....................................................... 17,870 52,510
.......................................................................... 9,715,600 4,564,345
NON-CURRENT
NON-CURRENT LONG-TERM LIABILITIES
LONG-TERM RECEIVABLES Loans and financing ......................................... 1,028,457 137,890
Contractual retention......................................... 1,308,324 17,384 Taxes and obligations....................................... 114,737 1,104,300
........................................................................... 1,308,324 17,384 Total non-current.............................................. 1,143,194 1,242,190
QUOTAHOLDER’S EQUITY
PERMANENT Capital stock..................................................... 500,000 500,000
Property, plant and equipment.......................... 11,398,872 8,986,879 Accumulated profits ......................................... 8,888,227 10,612,865
Total non-current............................................... 12,707,196 9,004,263 .......................................................................... 9,388,227 11,112,865
TOTAL ASSETS .............................................. 20,247,021 16,919,400 TOTAL LIABILITIES..................................... 20,247,021 16,919,400
The accompanying notes are an integral part of the financial statements.
F-110

EXHIBIT 2
GASOIL SERVIÇOS LTDA.
INCOME STATEMENT OF THE SEMESTER
ENDED JUNE 30
(In reais)
F-111
2007 2006
Unaudited
GROSS SALES
Services providers ........................................................................................... 23,615,553 8,357,618
Commercialization of products ....................................................................... 1,041,788 2,606,387
24,657,341 10,964,005
SALES DEDUCTION.......................................................................................... (2,468,732) (743,734)
NET SALES ......................................................................................................... 22,188,609 10,220,271
COST OF SALES................................................................................................. (18,576,559) (3,663,672)
GROSS PROFITS ................................................................................................ 3,612,050 6,556,599
OPERATING EXPENSES
Personnel and charges ..................................................................................... (1,964,138) (1,030,107)
Administrative expenses.................................................................................. (1,820,725) (310,145)
Taxes expenses................................................................................................ (358,663) (448,846)
Net financial income........................................................................................ (637,642) (117,451)
(4,781,168) (1,906,549)
OPERATING INCOME ....................................................................................... (1,169,118) 4,650,050
NET NON-OPERATING INCOME .................................................................... 961,460 332,868
INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION ............. (207,658) 4,982,918
CORPORATE INCOME TAX (IRPJ).................................................................. (2,229,183) (788,140)
SOCIAL CONTRIBUTION (CSSL) .................................................................... (810,576) (297,433)
NET (LOSS)/PROFITS FOR THE PERIOD........................................................ (3,247,417) 3,897,345
The accompanying notes are an integral part of the financial statements.

EXHIBIT 3
GASOIL SERVIÇOS LTDA.
STATEMENT OF CHANGES IN QUOTAHOLDERS’ EQUITY
(In reais)
F-112
Capital
stock
Accumulated
profits Total
AT DECEMBER 31, 2005........................................................... 500,000 7,983,080 8,483,080
Net profits for the semester.................................................... 3,897,345 3,897,345
Profits destination:
Distributed dividends............................................................. (1,267,560) (1,267,560)
AT JUNE 31, 2006 (UNAUDITED)............................................ 500,000 10,612,865 11,112,865
Net profits for the semester (unaudited)................................. 4,793,686 4,793,686
Adjustment of previous years ................................................ (2,532,150) (2,532,150)
Profits destination:
Distributed dividends (unaudited).......................................... (350,787) (350,787)
AT DECEMBER 31, 2006........................................................... 500,000 12,523,614 13,023,614
Net loss for the semester ........................................................ (3,247,417) (3,247,417)
Profits destination: .................................................................
Distributed dividends............................................................. (387,970) (387,970)
AT JUNE 30, 2007 ....................................................................... 500,000 8,888,227 9,388,227
The accompanying notes are an integral part of the financial statements.

EXHIBIT 4
GASOIL SERVIÇOS LTDA.
STATEMENTS OF CHANGES IN FINANCIAL POSITION FOR THE SEMESTERS
ENDED JUNE 30
(In reais)
F-113
2007 2006
(Unaudited)
SOURCES OF FUNDS FROM OPERATIONS
Net profits for the period ........................................................................................................
OF THIRD PARTIES:
3,897,345
Increase of the non-current – long-term liabilities ..................................................................
APPLICATION OF FUNDS
141,980
4,039,325
Losses for the period............................................................................................................... 3,247,417
Depreciation............................................................................................................................ (533,558)
Adjusted losses ....................................................................................................................... 2,713,859
Increase of the non-current – contractual retention................................................................. 870,124 17,384
Increase of property, plant and equipment.............................................................................. 760,393 348,913
Decrease of the non-current – long-term liabilities................................................................. 864,596
Distributed dividends.............................................................................................................. 387,970 1,267,560
5,596,942 1,633,857
(DECREASE) INCREASE IN NET WORKING CAPITAL .................................................
CHANGES IN NET WORKING CAPITAL
Current assets
(5,596,942) 2,405,468
At the end of the semester....................................................................................................... 7,539,825 7,915,137
At the beginning of the semester............................................................................................. 12,881,851 5,727,282
Current liabilities
5,342,026 2,187,855
At the end of the semester....................................................................................................... 9,715,600 4,564,345
At the beginning of the semester............................................................................................. 9,460,684 4,781,958
(254,916) (217,613)
(DECREASE) INCREASE IN NET WORKING CAPITAL ................................................. (5,596,942) 2,405,468
The accompanying notes are an integral part of the financial statements.

(Convenience translation into English from the original previously issued in Portuguese)
GASOIL SERVIÇOS LTDA.
NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2007 AND DECEMBER 31, 2006
(in reais)
1 OPERATIONS
Gasoil Serviços Ltda. was set up on March 10, 1999, under the name LMK de Macaé Serviços Ltda. It also
went through the names Gaia Gasoil Serviços Ltda. and LMK de Macaé Ltda., on July 1st, 2000 and May 3, 2003,
respectively.
The company’s activities comprise the preparation of projects, industrialization, fabrication,
commercialization and rendering of services of boiling, piping, welding, painting, assembly, surface treatment,
mechanical and electrical maintenance, general maintenance, hydrostatic test, inspection of piping equipment,
vibration control, milling in general, industrial mountaineering and climbing, all and any jobs with access through
ropes, shallow diving, leasing of equipment in general, services of operation and maintenance of industrial plants of
production and facilities, operation and maintenance of vessels and equipment directly or indirectly related to the
activities of export and of production of oil or natural gas, chemical cleaning, supply of specialized workmanship
(article 997, 11, CC/2003).
2 PRESENTATION OF FINANCIAL STATEMENTS
The financial statements have been prepared based on Brazilian accounting rules, pronounced by the
Federal Accounting Council.
In order to meet the International Accounting Standards, IBRACON – Brazilian Independent Auditors
Institute – issued a pronouncement NPC 27/2005, which establish a new standard and layout to present and release
the financial statements.
In accordance with the mentioned pronouncement, assets must be classified as “Current” and “Noncurrent”
being this last one segregated in long term receivable, investments, fixed assets, intangible assets and deferred
charges. Liabilities must be classified as “Current” and “Noncurrent”.
3 MAIN ACCOUNTING PRACTICES
The financial statements were prepared based on the accounting practices adopted in Brazil as follows:
a) Determination of income
Income is determined on the accrual basis of accounting.
b) Inventories
The inventories were evaluated for the average acquisition cost, which does not exceed the market prices.
c) Other current assets
Other current assets are presented for the realizable net value.
d) Property, plant and equipment
The property, plant and equipment items are stated at cost, net of accumulated depreciation. Depreciation
is calculated on the straight-line method and accounted for as operating expenses, over the useful life of assets.
(Convenience translation into English from the original previously issued in Portuguese)
F-114

GASOIL SERVIÇOS LTDA.
NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2007 AND DECEMBER 31, 2006
(in reais)
f) Current liabilities
These are stated at known or estimated values plus, where usual, the related charges, monetary and
exchange variation up to the balance sheet date.
g) Income statement and social contribution
The provision for income statement was calculated computing the base of 32% for services and of 8% for
sales of merchandise adding the other revenues applying the percentage of 15% over this total. If the total value
exceeds the limit of R$ 60,000, the 10% referring to the additional of the income statement is applicable. The
provision for social contribution was calculated computing the base of 32% for services rendered and of 12% for
sales of merchandise adding the other revenues applying the percentage of 9% over this total.
4 CASH AND BANKS
The available funds are comprised by funds in national currency, deposited with financial institutions
operating in Brazil, as presented below:
F-115
6/30/2007 6/30/2006
(Unaudited)
Banco HSBC Bamerindus....................................................................................... 8,182 8,796
Banco Prosper......................................................................................................... 53
Banco Itau S.A. – Escrow....................................................................................... 9 123,953
Banco do Brasil S.A................................................................................................ 4,073
Banco Mercantil do Brasil S.A. .............................................................................. 669
8,244 137,491
5 ACCOUNTS RECEIVABLE
6/30/2007 6/30/2006
(Unaudited)
Petrobras S.A. ......................................................................................................... 244,572 347,415
Dril Quip do Brasil ................................................................................................. 139,664
Weatherford ............................................................................................................ 880,646
Transocean Brasil Ltda. .......................................................................................... 432,236
V&M do Brasil S.A. ............................................................................................... 65,110
Others...................................................................................................................... 17,051 49,476
401,287 1,774,883
6 INVENTORIES
6/30/2007 6/30/2006
(Unaudited)
Work in process ...................................................................................................... 4,366,403
Raw material........................................................................................................... 465,364 1,196,216
Maintenance and auxiliary material........................................................................ 439,895 1,615,226
Warehouse .............................................................................................................. 66,711 104,456
5,338,373 2,915,898

GASOIL SERVIÇOS LTDA.
NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2007 AND DECEMBER 31, 2006
(in reais)
7 TAXES RECOVERABLE
F-116
6/30/2007 6/30/2006
(Unaudited)
Brazilian National Institute for the Social Security (INSS) recoverable ................. 1,054,150 660,980
Corporate income tax (IRPJ)................................................................................... 15,765 7,840
Service tax (ISS) recoverable.................................................................................. 49,241 68,274
Social contribution on revenues (COFINS) recoverable......................................... 58,403 33,016
Social integration program (PIS) recoverable ......................................................... 11,163 5,567
Others...................................................................................................................... 16,954 7,291
1,205,676 782,968
The National Institute for the Social Security (INSS) recoverable in the amount of R$ 1,054,150
(R$ 660,980 on June 30, 2006) corresponds to the retention of 11% over the value of the workmanship used on the
rendering of services to Petrobras.
8 SEVERAL ADVANCES
6/30/2007 6/30/2006
(Unaudited)
Advances to suppliers ............................................................................................. 244,930 2,114,341
Advances of loans to employees............................................................................. 22,771 77,760
Others...................................................................................................................... 2,896 61,967
270,597 2,254,068
9 PREPAID EXPENSES
6/30/2007 6/30/2006
(Unaudited)
Unexpired insurance premiums .............................................................................. 258,412 12,538
Unexpired transportation vouchers ......................................................................... 57,236 34,431
Others...................................................................................................................... 2,860
315,648 49,829
10 CONTRACTUAL RETENTION
It refers to the accessory guarantee of the performance of the hired services and of the payment of
contractual terminations of the employees, coverage of occasional fines and any other debts with Petrobras, upon the
retention of four percent (4%) at the issuance of the Measurement Report (RM). Its balance at June 30, 2007 was in
the amount of R$ 1,308,324 (R$ 17,384 at June 30, 2006) that will be realized at the end of the employment
agreement with Petrobras.

GASOIL SERVIÇOS LTDA.
NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2007 AND DECEMBER 31, 2006
(in reais)
11 PROPERTY, PLANT AND EQUIPMENT
6/30/2007 6/30/2006
Depreciation rate
per year Cost Depreciation Net Net
(Unaudited)
Land..................................... 244,000 244,000 244,000
Buildings.............................. 4% 2,387,469 243,614 2,143,855 1,851,368
Machines, equipment and tools
............................................. 10% 7,969,473 1,350,140 6,619,333 4,915,222
Facilities............................... 10% 1,117,048 85,800 1,031,248 882,178
Computer equipment............ 20% 468,010 204,574 263,436 620,519
Furniture and fixture ............ 10% 84,513 23,428 61,085 201,396
Vehicles ............................... 20% 115,554 47,181 68,373 171,992
Software............................... 20% 49,856
Import in process ................. 818,625 818,625 43,445
Leasing................................. 111,214 111,214
Trademarks, rights and
patents.................................. 4,233 4,233 4,233
Work in process ................... 33,470 33,470 2,670
13,353,609 1,954,737 11,398,872 8,986,879
12 LOANS AND FINANCING
6/30/2007 6/30/2006
Description Short Term Long Term Short Term Long Term
(Unaudited) (Unaudited)
Banco Itau S.A..................................... 1,568,962 487,424 49,001
Banco Prosper S.A............................... 336,633
BNDES – Banco do Brasil S.A............ 312,827 1,018,840 58,154
Banco do Brasil S.A............................. 100,000
Indústria Romi S.A. ............................. 74,800 448,800 74,800
Banco Mercantil do Brasil S.A. ........... 1,237,119 9,617
Loan agreement
Unibanco – Leasing ............................. 28,176 14,089
Debt balance of checking account........ 985,808 1,488,950
4,616,149 1,028,457 2,511,504 137,890
The loan obtained with Banco Itaú S.A. has interest of 1.85% per month with maturity in June, 2008 and
has as purpose the prepayment of the valued-added taxes (ICMS) in installments.
The loan with Banco Prosper S.A., has interest of 2.58% per month with maturity in August 2008.
The loan obtained with BNDES – Banco do Brasil S.A. has interest of 0.514% per month plus long-term
interest rate (TJLP) with maturity in November 2010 and was contracted for purchase of tensionator ring with a
grace period of six (6) months.
The loan of Indústria Romi S.A. has interest of 4.5% per month plus long-term interest rate (TJLP) with
maturity in August, 2007 and was contracted for the purchase of a mechanical lathe.
The loan obtained with Banco Mercantil do Brasil S.A. has interest of 1.85% per month with maturity on
June 20, 2008 and has working capital as purpose.
F-117

GASOIL SERVIÇOS LTDA.
NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2007 AND DECEMBER 31, 2006
(in reais)
13 SUPPLIERS
6/30/2007 6/30/2006
(Unaudited)
Premier Olfield ..................................................................................................... 263,356
Unibanco AIG Seguros......................................................................................... 103,216
Ogramac Industria e Comércio ............................................................................. 77,246
Dreamworks.......................................................................................................... 76,552
Workstrings Internacional..................................................................................... 55,854
MAS Curvelo........................................................................................................ 55,702
Ticket Serviços ..................................................................................................... 50,926 33,232
Azevedo e Fernandes Com. Emb. Ltda................................................................. 46,781
Acotubo Ind. e Com.............................................................................................. 27,534 87,101
South Jaws Serviços Ltda. .................................................................................... 40,864
Varco do Brasil Equip. Serv. Ltda. ....................................................................... 45,264
Others.................................................................................................................... 452,297 277,794
1,132,912 560,807
14 TAXES AND OBLIGATIONS
F-118
6/30/2007 6/30/2006
(Unaudited)
Corporate income tax (IRPJ) – current ................................................................ 1,081,913 258,341
Social contribution (CSSL) – current................................................................... 457,717 84,339
Corporate income tax (IRPJ) - in installments ..................................................... 172,554 289,482
Social contribution (CSSL) - in installments ....................................................... 84,481 102,315
Value-added tax (ICMS)...................................................................................... 2,102
Social contribution on revenues (COFINS) – current .......................................... 115,151 16,083
Others................................................................................................................... 139,350 250,630
Current................................................................................................................. 2,051,166 1,003,292
Corporate income tax (IRPJ) - in installments ..................................................... 100,657 344,596
Social contribution (CSSL) - in installments ....................................................... 14,080 265,769
Value-added tax (ICMS) - in installments ........................................................... 503,935
Non-current.......................................................................................................... 114,737 1,104,300
Description Total of installments Deadline
Corporate income tax (IRPJ) ........................................................... 18 December, 2008
Social contribution (CSSL).............................................................. 14 August, 2008
15 PROVISIONS AND LABOR CHARGES
6/30/2007 6/30/2006
(Unaudited)
Provision for vacation and social charges.............................................................. 694,212 30,458
Provision for 13 th salary and social charges........................................................... 274,306 117,002
Mandatory Fund for Unemployment Benefit (FGTS) payable .............................. 51,411 27,185
Brazilian National Institute for the Social Security (INSS) payable ...................... 40,043 74,387
Others..................................................................................................................... 15,018 13,969
1,074,990 263,001

GASOIL SERVIÇOS LTDA.
NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2007 AND DECEMBER 31, 2006
(in reais)
16 PROVISIONS FOR CONTINGENCIES
F-119
Labor Tax Civil Total
Probable........................................................................ 150,000 194,000 98,216 442,216
Remote.......................................................................... 12,600 98,216 110,816
162,600 194,000 196,432 553,032
The analysis of the chances of the lawsuits filed by the Company is made exclusively by the lawyers of the
suits, which use the review of jurisprudence (judicial or administrative) for purposes of classification.
17 QUOTAHOLDER’S EQUITY
a) Capital stock
The capital stock at June 30, 2007 is of R$500,000, represented by 500,000 quotas, fully paid in.
The quotas of the company are divided as follows:
Quotaholder’s
Quantity of
quotas
Interest
percentage
Marco Antônio Cahu Lauria ....................................................................... 116,667 23.33%
Jairo Araujo de Freitas ................................................................................ 116,667 23.33%
Aloísio Guimarães Silva Filho.................................................................... 116,666 23.33%
Maria Thereza Barcellos da Costa .............................................................. 100,000 20.00%
Pedro Carlos Storti Vieira........................................................................... 50,000 10.00%
500,000 100.00%
b) Dividends
The company’s corporate charter sets forth that the profits and losses verified at the end of each period will
be divided or borne among the partners in the proportion of the interest equity of each one, and it may, in case of an
unanimous decision, be transferred to the following year.
18 SERVICES PROVIDERS
June 30,
2007 2006
(Unaudited)
Petrobras S.A. ................................................................................................................. 20,383,961 5,778,962
Universal Compression................................................................................................... 2,795,795 1,882,500
Drill-Quip ....................................................................................................................... 306,367
Transocean...................................................................................................................... 432,236
Others.............................................................................................................................. 129,430 263,920
23,615,553 8,357,618

GASOIL SERVIÇOS LTDA.
NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2007 AND DECEMBER 31, 2006
(in reais)
19 SALES DEDUCTIONS
F-120
June 30,
2007 2006
(Unaudited)
Service tax (ISS) ............................................................................................................. 917,899 337,464
Social contribution on revenues (COFINS) .................................................................... 758,642 331,134
Fines of Petrobras ........................................................................................................... 570,472
Social integration program (PIS) .................................................................................... 164,373 71,746
Value-added tax (ICMS)................................................................................................. 49,245
Others.............................................................................................................................. 8,101 3,390
2,468,732 743,734
20 COST OF SALES
June 30,
2007 2006
(Unaudited)
Consumption of raw material.......................................................................................... 244,435 21,230
Professional services – corporate (PJ)............................................................................. 4,169,906 1,636,839
Changes in inventory ...................................................................................................... 5,891,391
Consumption of auxiliary material.................................................................................. 1,498,749 4,969
Wages and salaries.......................................................................................................... 2,382,266 682,012
Social charges ................................................................................................................. 765,224 284,280
Leases ............................................................................................................................. 556,910 243,857
Vacations ........................................................................................................................ 174,015 73,633
Food................................................................................................................................ 347,645 181,501
Labor provisions ............................................................................................................. 150,000
Electric power................................................................................................................. 153,848 146,722
Freights ........................................................................................................................... 248,775 33,553
Lease of Machines .......................................................................................................... 182,264
Labor indemnifications ................................................................................................... 118,284 103,973
Health insurance in group ............................................................................................... 78,783 33,339
Insurances ....................................................................................................................... 10,611
Depreciation.................................................................................................................... 215,974
Others.............................................................................................................................. 1,398,090 207,153
18,576,559 3,663,672
The changes in inventory register the movement of the changes in the account of inventory of purchase of
materials for the line of work in process.

GASOIL SERVIÇOS LTDA.
NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2007 AND DECEMBER 31, 2006
(in reais)
21 PERSONNEL AND CHARGES
F-121
June 30,
2007 2006
(Unaudited)
Wages and salaries.......................................................................................................... 1,173,236 688,795
Social charges ................................................................................................................. 382,814 242,876
Health insurance in group ............................................................................................... 193,598 10,660
Food................................................................................................................................ 90,237 52,317
Transportation vouchers.................................................................................................. 61,415 4,769
Others.............................................................................................................................. 62,838 30,690
1,964,138 1,030,107
22 ADMINISTRATIVE EXPENSES
June 30,
2007 2006
(Unaudited)
Professional services rendered – individual (PF) ............................................................ 41,608 585
Professional services rendered – corporate (PJ).............................................................. 11,113 16,853
Non-deductible expenses ................................................................................................ 181,878 49,979
Depreciation expenses .................................................................................................... 317,584
Contributions and donations ........................................................................................... 150,114
Insurances ....................................................................................................................... 37,981 11,529
Telephone expenses ........................................................................................................ 130,475 105,402
Electric power................................................................................................................. 39,008 1,423
Sundry expenses ............................................................................................................. 677,668 1,072
Provisions for contingencies ........................................................................................... 98,215
Others.............................................................................................................................. 135,081 123,302
1,820,725 310,145
23 NET NON-OPERATING INCOME
June 30,
2007 2006
(Unaudited)
Leases and leasing .......................................................................................................... 1,625,067 332,868
Other write-offs of the permanent assets......................................................................... (663,607)
961,460 332,868
24 INSURANCES COVERAGE (UNAUDITED)
At June 31, 2007, the company had insurance coverage only for the vehicles and machines and equipment,
for the values considered as sufficient by its management, taking into account the risks involved, the system of
protection involved and the nature of the goods. As to its facilities and operations are not covered by any kind of
insurance.

GASOIL SERVIÇOS LTDA.
NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2007 AND DECEMBER 31, 2006
(in reais)
25 CONTINGENT LIABILITIES
The income tax returns filed in the last five years are subject to review by the tax authorities. The taxes and
further contributions are equally subject to review and occasional taxation, varying in each case, the statute of
limitation.
26 SUBSEQUENT EVENT
Lupatech S.A. signed a letter of intent on May 3, 2007, aiming the acquisition of the totality of the stocks
of Gasoil Serviços Ltda. On July 11, 2007, the first installment of acquisition in the amount of eighteen million, two
hundred and seventy thousand reais (R$ 18,270,000) was paid.
* * *
F-122

Delta Compresión S.R.L.
Financial Statements
Fiscal Year Number 19
Beginning April 1 st , 2007
Ending September 30, 2007
F-123

Name:
Headquarter:
Main Activity:
Filing date:
Delta Compresión S.R.L.
Esmeralda 339 - Piso 2do. Cuerpo 2do. - Capital Federal
Manufacturing and commercialization of equipment
of compressors of compressed natural gas.
October 31, 1989
Registration number:
6.403
Fiscal Year Number 19
Beginning April 1 st , 2007
Ending September 30, 2007
COMPOSITION OF CAPITAL STOCK
9,980 stocks of $ 1,000.00 each
Subscribed and Paid in $ 9,980,000.00
F-124

Report on Limited Review
To
Delta Compresion S.R.L.
Esmeralda 339, Piso 2do. Cuerpo 2do.
Ciudad Autônoma de Buenos Aires
As public accountants for Delta Compresion S.R.L., we carried out limited reviews of the accounting
information in the financial statements of Delta Compresion S.R.L., attached herein, as follows:
A. Reviewed financial statements
1. Interim balance sheet as of September 30, 2007;
2. Interim income statement for the six-month period ended September 30, 2007; and
3. Interim changes on shareholders’ equity as of September 30, 2007.
B. Scope of review
We carried out limited reviews in accordance with specific accounting standards applicable to the limited
review of the financial statements related to interim periods of time. Therefore, these proceedings do not include all
proceedings required for a complete auditing review of such financial statements.
C. Report on limited review
Based on our limited review we are not aware of any material modifications that should be made to the
financial statements referred to above in order that such information be stated in accordance with accounting to the
Professional Accounting Rules in force in the Autonomous City of Buenos Aires.
D. Required legal disclaimers
In order to comply with the applicable laws, we advised that:
1. The financial statements derived from accounting records prepared in accordance with the applicable
laws; and
2. As of September 30, 2007, all amounts due to the Sistema Único de Seguridade Social (social security)
in accordance with the accounting records totaled $305,091.62. None of them are eligible and there are no payable
debts to the social security as of this date.
Buenos Aires, June 2, 2008
Dr. Juan C. Fernandez
Public Accountant (UBA)
C.P.C.E.C.A.B.A T 84 F 209
F-125

BALANCE SHEET
At September 30, 2007
ASSETS
CURRENT ASSETS
September 2007
In Pesos
Cash and banks.......................................................................................................... 9,669,606.86
Marketable securities (Note B).................................................................................. 1,002,622.48
Accounts receivable (Note C) ................................................................................... 32,377,955.78
Other accounts receivables (Note D)......................................................................... 23,505,946.82
Inventories (Note E)..................................................................................................
43,903,726.85
TOTAL CURRENT ASSETS.............................................................................
NON CURRENT ASSETS
110,459,858.79
Property, plant and Equipments (Chart 3) .................................................................
13,369,614.93
TOTAL NON CURRENT ASSETS...................................................................
13,369,614.93
TOTAL ASSETS ........................................................................................
123,829,473.72
LIABILITIES
CURRENT LIABILITIES
Accounts payables (Note F) ..................................................................................... 32,957,217.72
Social Charges (Note G)............................................................................................ 2,602,892.92
Taxes payable (Note H)............................................................................................. 1,434,813.54
Loans (Note I) ........................................................................................................... 4,737,588.95
Other accounts payables (Note J) ..............................................................................
13,314,606.84
TOTAL CURRENT LIABILITIES ....................................................................
55,047,119.97
LONG - TERM LIABILITIES
Taxes Payable (Note H) ............................................................................................
TOTAL LONG-TERM LIABILITIES ...............................................................
TOTAL LIABILITIES................................................................................
STOCKHOLDER’S EQUITY............................................................................................
(According to corresponding statement)
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY .....................
The attached Notes and Charts are part of these Financial Statements
F-126
204,335.73
204,335.73
55,251,455.70
68,578,018.02
123,829,473.72

INCOME STATEMENT
For the six month period ended September 30, 2007
Net sales............................................................................................................................
September 2007
In Pesos
92,849,690.66
Cost of sales (Chart 2) ...................................................................................................... (66,859,343.10)
Gross profit.......................................................................................................................
Operating income (expenses) (Chart 1)
25,990,347.56
General and administrative ............................................................................................... (3,595,633.58)
Selling............................................................................................................................... (9,823,230.06)
Services............................................................................................................................. (2,932,812.15)
Financial income............................................................................................................... 1,069,567.47
Other operating income (Note K) .....................................................................................
4,012,930.77
Profit before income tax ................................................................................................... 14,721,170.01
Income tax ........................................................................................................................
(6,939,205.24)
Net income for the period .................................................................................................
7,781,964.77
The attached Notes and Charts are part of these Financial Statements
F-127

STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY
For the six month period ended September 30, 2007
(in Pesos)
CAPITAL LEGAL RESERVE
F-128
RESERVE FOR
FUTURE
CONTINGENCIES RETAINED EARNINGS TOTAL
At March 31, 2007 ............................. 9,980,000.00 1,996,000.00 53,616,869.16 24,203,184.09 89,796,053.25
Proposed dividends and apropriation.
to reserve for future contingencies .... - - 669,184.09 (29,669,184.09) (29,000,000.00)
Net income for the period .................. - - - 7,781,964.77 7,781,964.77
At September 30, 2007....................... 9,980,000.00 1,996,000.00 54,286,053.25 2,315,964.77 68,578,018.02
The attached Notes and Charts are part of these Financial Statements

STATEMENT OF CASH FLOW
For the six month period ended September 30, 2007
F-129
September 2007
In Pesos
CASH VARIATION
Available at the beginning of the period................................................ 11,033,131.79
Available at the end of the period..........................................................
10,672,229.34
Decrease in cash ....................................................................................
(360,902.45)
CAUSES OF CHANGES IN CASH
OPERATIONS
Net income for the period .............................................................. 7,781,964.77
Interest on debts and income tax earned for the period..................
adjustments to net income to compute cash flow from
operations:
7,087,653.72
Depreciation................................................................................... 881,737.35
Provisions recorded........................................................................ 330,953.20
Equity losses in investments .......................................................... (36,797.84)
Cost of property, plant and equipment sold ...................................
Changes in assets and liabilities
378,470.27
Decrease in accounts receivables................................................... 4,443,320.22
(Increase) decrease in other accounts receivables ......................... (1,236,921.56)
Decrease (increase) in inventories................................................. (3,098,064.60)
Increase in accounts payables........................................................ 7,930,177.02
Increase in social charges .............................................................. 1,018,308.94
Decrease in taxes payable.............................................................. (8,058,350.51)
Increase (decrease) in other accounts payables .............................
6,411,195.01
Net cash provided by operating activities..............................................
23,833,645.99
Cash flow from investing activities
Purchase of property, plant and equipment.................................... (2,091,595.52)
Decrease in investments.................................................................
2,484,751.63
Net cash provided in investing activities ...............................................
393,156.11
Cash flow from financing activities
Increase (Decrease) in loans and financing................................... 4,517,881.62
Interests paid ................................................................................. (105,586.17)
Proposed dividends .......................................................................
(29,000,000.00)
Net cash used in financing activities......................................................
(24,587,704.55)
Increase (decrease) in cash and marketable securities...........................
The attached Notes and Charts are part of these Financial Statements
(360,902.45)

REQUIRED INFORMATION ACCORDING TO ART.64 -INC.I- b LAW 19.550
For the six month period ended September 30, 2007
(in pesos)
F-130
CHART 1
Expenses of General and
RUBRO
Manufacturing Administrative Selling Services TOTAL
Salaries .......................................... 5,735,785.95 925,017.00 548,078.79 1,017,849.33 8,226,731.07
Social Charges ............................... 1,020,537.48 175,819.73 104,109.64 181,685.46 1,482,152.31
Indemnifications ............................ 130,385.41 3,377.67 5,726.09 2,540.05 142,029.22
Personnel Insurance ....................... 125,504.81 17,171.54 8,311.46 20,080.92 171,068.73
Motive Power ................................ 112,125.72 - - - 112,125.72
Amortizations of PPE .................... 539,614.30 145,685.97 97,123.99 99,313.09 881,737.35
Insurances ...................................... (673.99) 3,070.24 80,325.18 46,446.44 129,167.87
Certif. and Homologations............. 385,030.62 8,925.10 - 1,030.66 394,986.38
City Fees........................................ 12,390.59 1,144.80 137,053.21 3,120.06 153,708.66
Taxes.............................................. 6,157.10 674,691.34 56,250.01 - 737,098.45
Mant./Repair of Machines ............. 225,625.93 - - 11,529.03 237,154.96
Mant./Repair of Premises .............. 24,859.22 1,111.00 - 9,513.17 35,483.39
Mant./Rep. of Furnit. and Fixt. ...... 2,810.00 17,832.44 - 653.82 21,296.26
Mant./Repair of Vehicles .............. 65,137.48 2,836.81 - 29,417.01 97,391.30
Mant./Repair of Buildings ............. 50,330.98 11,080.50 - 1,475.00 62,886.48
Tools.............................................. 525,954.54 - - 40,086.69 566,041.23
Fuel and Lubricant......................... 40,114.26 639.21 166.20 13,661.03 54,580.70
Papers and Office Supply .............. 62,096.95 75,624.53 1,442.50 29,556.02 168,720.00
Various Materials and Supplies ..... 166,076.45 11,531.80 - 51,848.85 229,457.10
Package.......................................... 110,143.12 - 865,391.75 11,841.99 987,376.86
Freights.......................................... 22,842.20 - 111,448.37 13,238.57 147,529.14
Services of third parties ................. 32,636.43 11,058.65 359,961.22 949,538.07 1,353,194.37
Professional Fees ........................... 43,764.47 434,164.18 386,341.62 12,400.00 876,670.27
Commissions ................................. - - 1,926,076.09 - 1,926,076.09
Courses and training ...................... 17,578.00 23,013.51 2,160.00 13,084.00 55,835.51
Transport and exp. Allowance ....... 176,198.47 175,000.63 283,343.71 251,837.03 886,379.84
Natural Gas.................................... 37,568.84 - - - 37,568.84
Telephone and communication ...... 5.67 153,959.92 1,778.34 35.40 155,779.33
Mail and Telegram......................... 257.30 10,725.92 48,128.49 11,836.87 70,948.58
Non-Financial Bank Expenses....... - 206,846.57 - - 206,846.57
Published Announcements............. 8,531.10 56,310.51 - 3,720.00 68,561.61
Publicity and Promotion ................ - - 364,062.97 - 364,062.97
Subscriptions and Memberships - 35,814.98 8,867.08 - 44,682.06
Travels and Stays........................... - - 99.00 - 99.00
Commercial Support...................... - 8,967.29 161,083.19 - 170,050.48
Other Non-Classified Expenses ..... 4,954.38 69,937.10 6,521.69 1,133.43 82,546.60
Export Expenses ............................ - 114,187.62 4,047,903.18 36,826.66 4,198,917.46
Import Expenses ............................ - 6,498.82 5,130.19 - 11,629.01
Bad Debts ...................................... - - 163,520.28 8,254.20 171,774.48
Personnel Support.......................... 697,436.80 54,734.14 21,698.58 52,446.88 826,316.40
Uniforms........................................ 72,605.80 456.00 - 3,116.60 76,178.40
Support Service.............................. 29,041.52 98,240.61 597.24 3,000.82 130,880.19
Lease.............................................. 199,296.59 60,157.45 20,530.00 695.00 280,679.04
Security services ............................ 234,094.07 - - - 234,094.07
TOTAL ......................................... 10,916,818.56 3,595,633.58 9,823,230.06 2,932,812.15 27,268,494.35
The attached Notes and Charts are part of these Financial Statements

COST OF SALES
(in pesos)
For the six month period ended September 30, 2007
F-131
September 2007
Existing at the beginning of the period...................................................................... 40,805,662.25
Purchases for the period ............................................................................................ 59,040,589.14
Costs according to Chart 1......................................................................................... 10,916,818.56
Existing at the end of the period ................................................................................ (43,903,726.85)
COST OF SALES .................................................................................. 66,859,343.10
The attached Notes and Charts are part of these Financial Statements
CHART 2

Value at
beginning of
the period Increase For Write-off
PROPERTY, PLANT AND EQUIPMENT
For the six month period ended September 30, 2007
(in pesos)
Value at the
end of the
period
F-132
Accumulated
at the
beginning For Write-off
Depreciations
Depreciation
expenses
Accumulated
at the end
CHART 3
NET
POSITION
AT
SEPTEMBER
2007
BUILDINGS ........... 1,179,153.99 300,17378 - 1,479,327.77 29,965.68 - 13,827.86 43,793.54 1,435,534.23
LAND ...................... 782,171.53 - - 782,171.53 - - - - 782,171.53
MACHINERY AND
EQUIPMENT .......... 6,744,291.79 949,022.76 247,068.12 7,446,246.43 1,432,699.54 58,004.95 355,816.53 1,730,511.12 5,715,735.31
INDUSTRIAL
FACILITIES ............ 3,240,448.92 216,959.07 - 3,457,407.99 433,366.55 - 169,969.91 603,336.46 2,854,071.53
FURNITURE AND
FIXTURES .............. 1,776,954.17 230,075.91 - 2,007,030.08 470,144.43 - 92,094.68 562,239.11 1,444,790.97
VEHICLES .............. 1,433,946.13 9,194.70 482,347.93 960,792.90 639,250.83 292,940.83 99,313.09 445,623.09 515,169.81
DATA PROCESSING
SYSTEMS AND
EQUIPMENT .......... 1,236,669.31 386,169.30 - 1,622,838.61 849,981.78 - 150,715.28 1,000,697.06 622,141.55
TOTAL .................... 16,393,635.84 2,091,595.52 729,416.05 17,755,815.31 3,855,408.81 350,945.78 881,737.35 4,386,200.38 13,369,614.93
The attached Notes and Charts are part of these Financial Statements

Notes to the financial statements at September 30, 2007
NOTE A: Accounting standards
A.1. Preparation and presentation of the financial statements
These Financial Statements, are expressed in Argentinean pesos, and were prepared according to the
accounting rules of presentation and evaluation contained in the Technical Resolutions issued by the Argentinean
Federation of Professional Economic Sciences, approved with certain amendments, by the Professional Councils of
Economic Sciences of the Autonomous City of Buenos Aires.
A.2. Recognition of the effects of inflation
In accordance with the professional accounting standards and the requirements of the control authorities,
these financial statements were prepared without reflecting the changes in the purchasing power of the currency
through December 31, 2000. As from January 1, 2002, in accordance with professional accounting standards,
recognition of the effects of inflation has been reestablished, considering that the accounting measurements
originating before December 31, 2001 are stated in currency of that date.
On March 25, 2003, the National Executive Branch issued Decree No. 664 establishing that the financial
statements for years ending as from that date were to be prepared in nominal currency. Consequently, the Company
discontinued the restatement of the financial statements as from March 1, 2003. This criterion is not in line with
current professional accounting standards, which require that the financial statements be restated through
September 30, 2003. The effect of inflation not recognized in these financial statements, however, is not material.
The rate used for purposes of restatement of items in these financial statements was the domestic wholesale
price index published by the National Institute of Statistics and Census.
A.3. Valuation criteria
a. Cash and banks
Cash on hand has been computed at its nominal value.
b. Foreign currency assets and liabilities
period.
c. Inventories
period.
Foreign currency assets and liabilities have been valued at the rates of exchange ruling at the end of the
Inventories were valued at replacement cost at year-end.
The values thus obtained do not exceed their respective estimated recoverable values at the end of the
d. Property, plant and equipment
Fixed assets were valued at restated acquisition cost, following the guidelines indicated in point A.2., net of
accumulated depreciation.
Depreciation was computed by the straight-line method, based on the estimated useful lives of the assets,
using annual rates sufficient to extinguish asset values by the end of their estimated useful lives.
Fixed assets value is less than their economic value to the business at year-end.
F-133

Notes to the financial statements at September 30, 2007 (contd)
e. Indemnifications for dismissal
f. Income tax
The indemnifications for dismissal are registered as income at the moment of its payment.
The Company has recognized the charge for income tax by the deferred tax method, recognizing timing
differences between measurements of accounting and tax assets and liabilities.
To determine deferred assets and liabilities, the tax rate expected to be in effect at the time of reversal or
use has been applied to temporary differences identified, considering the regulations in effect at the date of issue of
the financial statements.
NOTE B: Marketable securities September 2007
In Pesos
Mutual investment fund ....................................................... 1,002,622.48
NOTE C: Accounts receivables September 2007
In Pesos
Current account receivables ................................................. 32,386,209.98
Allowance for doubtful accounts.......................................... (8,254.20)
32,377,955.78
NOTE D: Other accounts receivables September 2007
In Pesos
Reimbursement of exports ................................................... 5,773,062.99
Bonds Decree 379/01 .......................................................... 1,555,147.46
Value-added tax (IVA) receivable ....................................... 8,986,390.28
Convergence factor .............................................................. 530,219.54
Turnover tax credit .............................................................. 388,007.53
Pre-paid insurance ............................................................... 53,002.20
Advances to suppliers .......................................................... 5,337,709.23
Sundry debts ........................................................................ 884,473.92
Provisions for bad debts ......................................................
(2,066.33)
23,505,946.82
NOTE E: Inventories September 2007
In Pesos
Merchandise ........................................................................ 17,032,444.39
Production in progress ......................................................... 4,827,626.98
Raw material ........................................................................
22,043,655.48
43,903,726.85
NOTE F: Accounts payable September 2007
In Pesos
Suppliers............................................................................... 16,635,070.22
Invoices receivable ............................................................... 2,947,861.38
Deferred checks pending collection...................................... 4,744,697.91
Advances to clients...............................................................
8,629,588.21
32,957,217.72
F-134

Notes to the financial statements at September 30, 2007 (contd)
NOTE G: Social Charges September 2007
In Pesos
Salaries and wages................................................................ 958,994.72
Withholdings and contributions............................................ 413,606.45
Statutory bonus and vacation accrual ................................... 979,444.86
Other provisions ................................................................... 215,900.00
O.S.D.E. (health care system)............................................... 16,000.00
Unions .................................................................................. 15,201.74
Life insurance.......................................................................
3,745.15
2,602,892.92
NOTE H: Taxes payable
September 2007
Current
In Pesos
Income tax AFIP*................................................................. 1,134,879.09
Moratorium AFIP* .............................................................. 75,516.55
Safety and health rate .......................................................... 45,269.09
Tax withholdings and collections ........................................ 179,148.81
1,434,813.54
Non-current .........................................................................
Moratorium AFIP* ..............................................................
204,335.73
204,335.73
* Federal Administration of Government Resources – “Administración Federal de Ingresos Públicos”
NOTE I: Loans September 2007
In Pesos
Bank loans ...........................................................................
F-135
4,737,588.95
4,737,588.95
NOTE J: Other accounts payable September 2007
In Pesos
Individual partners’ accounts ............................................... 6,721,006.49
Provision for lawsuits and contingencies ............................. 6,590,100.00
Sundry creditors ..................................................................
3,500.35
13,314,606.84
NOTE K: Other operating income
September 2007
In Pesos
Reimbursements of exports ................................................. 3,514,430.90
Bonds Decree 379/01 .......................................................... 1,681,198.81
Sundry .................................................................................
(1,182,698.94)
4,012,930.77
NOTE L : Change of the date of closing of the accounting year of the company
The shareholders decided to change the date of closing of the accounting year from March 31 of each year to
December 31 of each year. Such decision was taken at a shareholders’ meeting and was registered at Inspección
General de Justicia on November 23, 2007, under No. 10928 in the book 127 of S.R.L.

Notes to the financial statements at September 30, 2007 (contd)
NOTE M: Provisions for contingencies
“Following its conservative approach in relation to potential contingencies, the company decided to create a
provision for the lawsuit filed by Federal Revenue Department related to differences in the determination of income
tax.”
F-136

Delta Compresión S.R.L.
Financial Statements
Fiscal Year Number 18
Beginning April 1 st , 2006
Ending March 31, 2007
F-137

Name:
Headquarter:
Main Activity:
Filing date:
Registration number:
Delta Compresión S.R.L.
Esmeralda 339 - Piso 2do. Cuerpo 2do. - Capital Federal
Manufacturing and commercialization of equipment
of compressors of compressed natural gas.
October 31, 1989
6,403
Fiscal Year Number 18
Beginning April 1 st , 2006
Ending March 31, 2007
COMPOSITION OF CAPITAL STOCK
9,980 stocks of $ 1,000.00 each
Subscribed and Paid in $ 9,980,000.00
F-138

Messrs. Partners
DELTA COMPRESION S.R.L.
Esmeralda 339 - Piso 2do. Cuerpo 2do.
Capital Federal
AUDITOR’S REPORT
As independent Public Accountant, I inform on the review that I have made on the Financial Statements
detailed in the following documents apart:
A. Reviewed Statements
B. Reach of the Audit
1) Balance Sheet at March 31, 2007 and 2006.
2) Income Statement for the years ended March 31, 2007 and 2006.
3) Statement of Changes in Stockholder’s Equity for the years ended March 31, 2007 and 2006.
4) Statement of Cash Flow for the years ended March 31, 2007 and 2006
5) Charts and Notes attached to the above statements.
My exam was made according to the Audit Rules in force, approved by the Professional Council of
Economic Sciences of the Autonomous City of Buenos Aires.
C. Conclusion
In my opinion the financial statements referred to in item A, adequately present the information on the
equity position of Delta Compresión S.R.L at March 31, 2007 and 2006, on its income from operations, on the
changes in its stockholder’s equity and on the cash flow for the year ended on these dates, according to the
Professional Accounting Rules in force in the Autonomous City of Buenos Aires.
D. Information required by the provisions in force
As to comply with the above mentioned provisions I inform that:
Buenos Aires, May 3, 2007.
1) The financial statements referred to in item A, were extracted from the accounting registries
considered in its formal aspects according to the legal rules.
2) At March 31, 2007, the debt payable to the Integrated System of Retirements and Pensions in
the accounting registries reached $223,436.55. On this date there was no due debt.
Dr. Juan Carlos Fernandez
Public Accountant (UBA)
C.P.C.E.C.A.B.A. T 84 F 209
F-139

BALANCE SHEET
at March 31, 2007 and 2006
03.31.07 03.31.06
In pesos In pesos
ASSETS
CURRENT ASSETS
Cash and banks.................................................................. 6,884,050.33 5,298,615.20
Marketable securities (Note B).......................................... 4,149,081.46 6,071,417.53
Accounts Receivable (Note C) .......................................... 36,829,530.20 51,894,682.63
Other Accounts Receivable (Note D)................................ 22,203,724.26 39,972,671.16
Inventories (Note E).......................................................... 40,805,662.25 23,116,626.41
TOTAL CURRENT ASSETS.............................................. 110,872,048.50 126,354,012.93
NON-CURRENT ASSETS
Property, plant and equipment (Chart 3) ........................... 12,538,227.03 8,127,216.29
Permanent Investments (Note F) ....................................... 2,447,953.79 2,637,571.78
TOTAL NON-CURRENT ASSETS ................................... 14,986,180.82 10,764,788.07
TOTAL ASSETS ...................................................................... 125,858,229.32 137,118,801.00
LIABILITIES
CURRENT LIABILITIES
Accounts Payable (Note G)............................................... 25,027,040.70 20,199,683.16
Social Charges (Note H).................................................... 1,584,583.98 1,402,337.89
Taxes Payable (Note I)...................................................... 2,485,245.15 7,285,667.33
Loans (Note J)................................................................... 219,707.33 564,609.88
Other Accounts Payable (Note K)..................................... 6,515,411.83 6,075,725.96
TOTAL CURRENT LIABILITIES.................................... 35,831,988.99 35,528,024.22
LONG TERM LIABILITIES
Taxes Payable (Note I)...................................................... 230,187.08 279,625.81
Loans (Note J) - 219,767.77
TOTAL LONG TERM LIABILITIES............................... 230,187.08 499,393.58
TOTAL LIABILITIES............................................................. 36,062,176.07 36,027,417.80
STOCKHOLDER’S EQUITY................................................. 89,796,053.25 101,091,383.20
(According to corresponding Statement)
TOTAL LIABILITIES AND STOCKHOLDER’S
EQUITY ................................................................................ 125,858,229.32 137,118,801.00
The attached Notes and Charts are part of these Financial Statements.
F-140

INCOME STATEMENT
Referring to the year ended March 31, 2007
compared to the previous year
F-141
03.31.07 03.31.06
In pesos In pesos
NET SALES ............................................................................ 135,525,036.84 126,365,202.97
COST OF SALES (Chart 2)................................................ (76,317,054.42) (71,079,695.02)
GROSS PROFIT.................................................................. 59,207,982.42 55,285,507.95
OPERATING EXPENSES (Chart I)
General and Administrative............................................. (6,326,274.64) (6,019,258.93)
Selling ............................................................................. (12,716,584.47) (9,674,197.63)
Services ........................................................................... (3,524,487.63) (4,036,233.44)
Financial income ............................................................. 1,457,471.72 3,523,605.90
Other operating income (Note L) .................................... 6,864,165.30 8,216,023.64
Income before income tax ............................................... 44,962,272.70 47,295,447.49
Income tax....................................................................... (15,293,088.61) (16,424,719.26)
NET INCOME FOR THE YEAR ......................................... 29,669,184.09 30,870,728.23
The attached Notes and Charts are part of these Financial Statements.

DEFINITIONS
SUBSCRIBED
CAPITAL
STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY
Referring to the years ended March 31, 2007 and 2006
(in pesos)
ADJUSTMENT OF
CAPITAL TOTAL LEGAL RESERVE
F-142
RESERVE FOR
FUTURE
CONTINGENCIES
RETAINED
EARNINGS
TOTAL
STOCKHOLDERS
EQUITY
Balance at March 31,
2005................................. 1,000,000.00 1,441,514.04 2,444,514.04 611,128.51 - 68,665,012.42 71,730,654.97
Distribution of profits
as per minutes of
July 27, 2005................... - - - - - (1,500,000.00) (1,500,000.00)
Income for the period
as per Income
Statement......................... - - - - - 30,870,728.23 30,870,728.23
Balance, at March 31,
2006................................. 1,000,000.00 1,444,514.04 2,144,514.04 611,128.51 - 98,035,740.65 101,091,383.20
Distribution of profits
as per minutes of
October 18, 2006............. - - - - - (48,500,000.00) (48,500,000.00)
Increase of capital as
per minutes of
November 2, 2006 8,980,000.00 (1,444,514.04) 7,535,485.96 - - - 7,535,485.96
Increase of legal
reserve as per
minutes of
November 2, 2006 .......... - - - 1,384.871.49 - (1,384,871.49) -
Constitution of
reserve for future
contingencies as
per minutes of
November 2, 2006 - - - - 53,616,869.16 (53,616,869.16) -
Income for the period
as per Income
Statement ........................ - - - - - 29,669,184.09 29,669,184.09
Balance at March 31,
2007................................. 9,980,000.00 - 9,980,000.00 1,996,000.00 53,616,869.16 24,203,184.09 89,796,053.25
The attached Notes and Charts are part of these Financial Statements.

STATEMENT OF CASH FLOWS
Referring to the year ended March 31, 2007
compared to the previous year
03.31.07 03.31.06
In pesos In pesos
CHANGES IN CASH
Available at the beginning of the year ..................................................... 11,370,032.73 5,325,101.19
Available at the end of the year ............................................................... 11,033,131.79 11,370,032.73
(Decrease) Increase in cash...................................................................... (336,900.94) 6,044,931.54
CAUSES OF CHANGES IN CASH
OPERATIONS
Income for the year ................................................................................... 29,669,184.09 30,870,728.23
Interest on debts and income tax earned for the year ................................ 15,439,897.20 16,587,183.81
Adjustments to net income to compute cash flow from operations:
Depreciation ......................................................................................... 1,801,827.64 811,832.70
Provisions recorded.............................................................................. 48,166.33 65,301.00
Proceeds from investments in controlled companies............................ (304,549.19) (494,167.18)
Write-off of property, plant and equipment to its residual value.......... 33,716.45 277,200.58
Changes in assets and liabilities:
Decrease (Increase) in Accounts Receivable........................................ 15,065,152.43 (940,608.84)
Decrease (Increase) in Other Accounts Receivable.............................. 17,766,880.57 (18,679,382.88)
Increase in Inventories.......................................................................... (17,689,035.84) (6,289,712.74)
Increase in Accounts Payable............................................................... 4,827,357.54 3,466,705.75
lncrease in Social Charges.................................................................... 182,246.09 437,323.72
Decrease in Tares Payable.................................................................... (19,501,248.52) (14,090,628.01)
Decrease in Other Accounts Payable.................................................... (296,414.13) (285,840.77)
Net cash flow from operations....................................................................... 47,043,180.66 11,735,935.37
INVESTING
Acquisition of property, plant and equipment........................................... (6,246,554.83) (4,427,819.34)
Decrease in non-current investments ........................................................ - 537,981.93
Dividends received.................................................................................... 494,167.18 353,130.98
Net cash flow from investing......................................................................... (5,752,387.65) (3,536,706.43)
FINANCING
Decrease in net Financing Debts.............................................................. (564,670.32) (531,963.79)
Interest paid ............................................................................................. (98,509.59) (122,333.61)
Increase in capital .................................................................................... 7,535,485.96 -
Distribution of profits .............................................................................. (48,500,000.00) (1,500,000.00)
Net cash flow from financing ........................................................................ (41,627,693.95) (2,154,297.40)
(Decrease) Increase in cash............................................................................ (336,900.94) 6,044,931.54
The attached Notes and Charts are part of these Financial Statements.
F-143

ENTRY
INFORMATION REQUIRED BY ART.64 -INC.I-b OF LAW 19,550
Referring to the year ended March 31, 2007
compared to the previous year
(in pesos)
Expenses of
Manufacturing
General and
Administrative Selling Services
F-144
TOTAL AT
03.31.07
CHART 1
TOTAL AT
03.31.06
Salaries .................................... 10,152,797.59 1,517,993.65 841,290.48 1,311,444.48 13,823,526.20 11,568,728.27
Social Charges......................... 2,002,539.24 306,886.95 168.816.71 2,730,848.49 2,551,541.43
Indemnifications...................... 383,172.79 39,969.91 5,815.26 437,432.64 196,691.87
Personnel Insurance................. 235,629.57 28,078.46 13,918.63 26,582.96 304,209.62 207,831.09
Motive Power .......................... 175,333.09 - (611.77) 185,465.99 157,788.58
Amortizations of PPE.............. 857,846.35 428,148.41 285,432.28 230,400.60 1,801,827.64 811,832.70
Insurances................................ 25,085.12 15,344.85 155,196.54 21,091.26 216,717.77 248,202.21
Certif. and Homologations...... 501,148.66 5,378.67 24,410.10 5,279.80 536,217.23 258,284.47
City Fees.................................. 24,994.67 209,708.08 - 31,655.68 266,358.43 386,479.48
Taxes........................................ 20,404.02 1,162,702.17 83,192.09 1,181,463.30
Mant./Repair of Machines....... 172,520.94 - - 45,191.43 217,712.37 102,122.62
Mant./Repair of Premises........ 107,581.37 21,465.78 4,166.92 7,531.49 140,745.56 92,139.27
Mant./Rep. of Furnit. and Fixt. 23,099.55 17,253.82 9,884.60 21,782.97 72,020.94 45,808.75
Mant./Repair of Vehicles ........ 66,668.48 19,302.23 3,348.84 58,287.17 147,606.72 161,520.88
Mant./Repair of Buildings....... 92,518.74 24,414.70 - 3,886.00 120,819.44 118,442.35
Tools........................................ 953,198.94 - - 38,278.56 991,677.50 983,609.09
Fuel and Lubricant .................. 63,174.90 3,619.56 1,711.07 54,972.60 123,478.13 143,624.55
Papers and Office Supply........ 134,432.89 118,143.00 18,647.02 17,724.71 288,947.62 237,921.20
Various Material and Supplies 196,408.44 53,074.42 10,166.61 39,108.58 298,758.05 102,687.69
Package.................................... 1,391,138.91 - - 2,221.88 1,393,360.79 720,192.78
Freights.................................... 98,469.05 360.00 499,243.96 18,856.39 616,929.40 385,446.92
Services of third parties........... 78,723.45 13,789.42 909,421.02 900,036.70 1,901,970.59 3,079,435.00
Professional Fees..................... 83,285.71 622,487.57 684,499.12 7,624.91 1,397,897.31 901,571.52
Commissions ........................... - - 2,598,922.58 - 2,598,922.58 1,513,724.34
Courses and training................ 761.09 83,677.28 9,053.82 8,895.00 102,387.19 28,510.49
Transport and exp. allowance . 394,689.60 302,896.28 936,361.51 168,997.72 1,802,945.11 770,088.93
Natural Gas.............................. 19,796.21 5,542.08 - 51.49 25,389.78 4,031.12
Telephone and communication
................................................. 7,876.12 302,779.74 8,810.35 3,073.17 322,539.38 287,397.87
Mail and Telegram .................. 726.88 20,853.33 83,836.04 20,397.10 125,813.35 216,798.88
Non-Financial Bank Expenses - 335,037.62 - - 335,037.62 264,327.84
Published Announcements...... 69,395.75 3,897.62 73,293.37 31,881.96
Publicity and Promotion.......... - - 798,542.86 - 798,542.86 778,116.28
Subscriptions and
Memberships .......................... - 34,398.75 3,921.00 - 38,319.75 80,460.95
Travels and Stays .................... - - 4,720.81 7,581.97 12,302.78 167,791.22
Commercial Support ............... - 9,124.75 91,849.81 - 100,974.56 45,852.82
Other Non-Classified Expenses
................................................. 17,876.64 55,467.13 2,773.65 4,580.41 80,697.83 319,893.58
Export Expenses...................... - 81,253.68 4,383,380.64 82,839.03 4,547,473.35 4,312,060.98
Import Expenses...................... - 1,094.60 1,043.73 - 2,138.33 16,239.46
Bad Debts ................................ - - 2,066.33 - 2,066.33 74,167.95
Personnel Support ................... 1,254,298.95 158,942.15 46,989.72 105,198.09 1,565,428.91 1,362,177.17
Uniforms.................................. 89,375.02 199.20 3,849.78 1,066.76 106,490.76 94,295.75
Support Service ....................... 39,833.22 166,965.32 4,969.75 8,946.74 220,715.03 134,485.04
Lease........................................ 493,523.17 78,730.66 9,020.00 642.90 581,916.73 299,092.01
Security services...................... 461,175.48 1,050.00 753.80 - 462,979.28 461,865.22
TOTAL AT 03.31.07 .............. 20,620,304.85 6,326,274.64 12,716,584.47 3,524,487.63 43,187,651.59
TOTAL AT 03.31.06 .............. 16,176,935.88 6,019,258.93 9,674,197.63 4,036,233.44 35,906,625.88
The attached Notes and Charts are part of these Financial Statements.

COST OF SALES
(in pesos)
FINANCIAL STATEMENTS AT MARCH 31, 2007 AND 2006
F-145
CHART 2
Details TOTAL AT 03.31.07 TOTAL AT 03.31.06
Existing at the beginning of the year ................................................. 23,116,626.41 16,826,913.67
Purchases for the year........................................................................ 73,385,785.41 61,192,471.88
Expenses as per Chart 1..................................................................... 20,620,304.85 16,176, 935.88
Existing at the end of the year............................................................ (40,805,662.25) (23,116,626.41)
COST OF SALES .................................................................... 76,317,054.42 71,079,695.02
The attached Notes and Charts are part of these Financial Statements.

FINANCIAL STATEMENTS AT MARCH 31, 2007 AND 2006
MAIN ACCOUNT
Value at
beginning of
the Year Increases Transfers Decreases
PROPERTY PLANT AND EQUIPMENT
(in pesos)
Value at the
end of the
Year
F-146
Accumulated
at the end of
the Year Transfers for Write-offs for the Year
Accumulated
at the end of
the Year
NET INCOME
AT 03.31.07
NET
INCOME AT
03.31.06
BUILDINGS AND IMPROV. ............... 429,571.23 749,582.76 - - 1,179,153.99 12,359.20 - - 17,606.48 29,965.68 1,149,188.31 417,212.03
LAND...................................................... 782,171.53 - - - 782,171.53 - - - - - 782,171.53 782,171.53
MACHINES AND TOOLS .................... 4,439,501.28 2,340,581.30 - 35,790.79 6,744,291.79 864,682.23 - 4,857.08 572,874.39 1,432,699.54 5,311,592.25 3,574,819.05
INDUSTRIAL INSTRUMENT.............. 1,514,517.12 1,725,931.80 - - 3,240,448.92 166,001.07 - - 267,365.48 433,366.55 2,807,082.37 1,348,516.05
FURNITURE AND FIXTURES ............ 2,099,107.86 672,105.65 (994,259.34) - 1,776,954.17 606,545.52 (293,971.98) - 157,570.89 470,144.43 1,306,809.74 1,492,562.34
VEHICLES ............................................. 1,058,906.56 515,943.35 - 140,903.78 1,433,946.13 546,971.27 - 138,121.04 230,400.60 639,250.83 794,695.30 511,935.29
COMPUTER EQUIPMENT................... - 242,409.97 994,259.34 - 1,236,669.31 - 293,971.98 - 556,009.80 849,981.78 386,687.53 -
TOTALS ................................................. 10,323,775.58 6,246,554.83 - 176,694.57 16,393,635.84 2,196,559.29 - 142,978.12 1,801,827.64 3,855,408.81 12,538,227.03 8,127,216.29
The Attached Notes and Charts are part of these Financial Statements.

ASSETS AND LIABILITIES IN FOREIGN CURRENCY
(in pesos)
FINANCIAL STATEMENTS AT MARCH 31, 2007 AND 2006
TITLES CURRENCY VALUE
ASSETS
F-147
EXCHANGE
IN FORCE
VALUE IN
NATIONAL
CURRENCY
AT 03.31.07
CHART 4
VALUE IN
NATIONAL
CURRENCY
AT 03.31.06
CURRENT ASSETS
Cash and Banks .................................. US$ 1,423,362.15 3.06 4,355,488.18 1,187,339.75
Accounts Receivable .......................... US$ 8,298,697.74 3.06 25,394,015.08 38,326,082.07
Other Accounts Receivable................ US$ 2,824,690.29 3.06 8,643,552.29 420,410.27
TOTAL CURRENT ASSETS ................. 12,546,750.18 38,393,055.55 39,933,832.09
TOTAL ASSETS......................................... 12,546,750.18 38,393,055.55 39,933,832.09
LIABILITIES
CURRENT LIABILITIES
Accounts Payable ............................... US$ 3,846,988.69 3.10 11,925,664.94 805,594.03
TOTAL CURRENT LIABILITIES ........ 3,846,988.69 11,925,664.94 805,594.03
TOTAL LIABILITIES ............................... 3,846,988.69 11,925,664.94 805,594.03
Net position in national currency (active)..... 8,699,761.49 26,467,390.61 39,128,238.06
US$: US dollars
The attached Notes and Charts are part of these Financial Statements.

Notes to the financial statements at March 31, 2006 and 2007
NOTE A: Accounting Standards
The most significant accounting rules used by the Company for the preparation of these Financial
Statements are detailed below.
A.1. Preparation and presentation of Financial Statements
These Financial Statements, are expressed in Argentinian pesos, and were prepared according to the
accounting rules of presentation and evaluation contained in the Technical Resolutions issued by the Argentinean
Federation of Professional Economic Sciences, approved with certain amendments, by the Professional Councils of
Economic Sciences of the Autonomous City of Buenos Aires.
A.2. Recognition of the effects of inflation
In accordance with the professional accounting standards and the requirements of the control authorities,
these financial statements were prepared without reflecting the changes in the purchasing power of the currency
through December 31, 2000. As from January 1, 2002, in accordance with professional accounting standards,
recognition of the effects of inflation has been reestablished, considering that the accounting measurements
originating before December 31, 2001 are stated in currency of that date.
On March 25, 2003, the National Executive Branch issued Decree No. 664 establishing that the financial
statements for years ending as from that date were to be prepared in nominal currency. Consequently, the Company
discontinued the restatement of the financial statements as from March 1, 2003. This criterion is not in line with
current professional accounting standards, which require that the financial statements be restated through
September 30, 2003. The effect of inflation not recognized in these financial statements, however, is not material.
The rate used for purposes of restatement of items in these financial statements was the domestic wholesale
price index published by the National Institute of Statistics and Census.
A.3. Valuation criteria
year.
period.
a. Cash and banks
Cash on hand has been computed at its nominal value.
b. Foreign currency assets and liabilities
Foreign currency assets and liabilities have been valued at the rates of exchange ruling at the end of the
c. Inventories
Inventories were valued at replacement cost at year-end
The values thus obtained do not exceed their respective estimated recoverable values at the end of the
d. Property, plant and equipment
Fixed assets were valued at restated acquisition cost, following the guidelines indicated in point A.2., net of
accumulated depreciation.
F-148

Notes to the financial statements at March 31, 2006 and 2007 (contd)
Depreciation was computed by the straight-line method, based on the estimated useful lives of the assets,
using annual rates sufficient to extinguish asset values by the end of their estimated useful lives.
Fixed assets value is less than their economic value to the business at year-end.
e. Non-current investments
The permanent investment in the affiliated company GNC Bariloche S.A. has been evaluated as per the
proportional net equity method based on the financial statements of December 31, 2006, prepared by it.
There were neither material transactions nor material events that have affected the financial statements of
GNC Bariloche S.A., nor transactions between this company and the Company between December 31, 2006 and
March 31, 2007.
The accounting rules used by the affiliated company for the preparation of its financial statements are the
accounting rules in force.
The permanent investment in Agropecuaria Vinquis S.A., a company that is neither under significant
control nor under significant: influence, has been evaluated at its acquisition cost adjusted according to provisions
mentioned in item A.2.
The values thus obtained, do not exceed their respective recoverable values estimated at the end of the year.
f. Indemnifications for dismissal
The indemnifications for dismissal are registered as income at the moment of its payment.
g. Income tax
The Company has recognized the charge for income tax by the deferred tax method, recognizing timing
differences between measurements of accounting and tax assets and liabilities.
To determine deferred assets and liabilities, the tax rate expected to be in effect at the rime of reversal or
use has been applied to temporary differences identified, considering the regulations in effect at the date of issue of
the financial statements.
NOTE B: Marketable securities
NOTE C: Accounts Receivable
F-149
03.31.07 03.31.06
$ $
Fixed terms............................................................ 2,636,430.75 6,071,417.53
Mutual investment fund ........................................ 1,512,650.71 —
4,149,081.46 6,071,417.53
03.31.07 03.31.06
$ $
Current account receivables .................................. 36,829,530.20 51,894,682.63
36,829,530.20 51,894,682.63

Notes to the financial statements at March 31, 2006 and 2007 (contd)
NOTE D: Other Accounts Receivables
NOTE E: Inventories
03.31.07 03.31.06
$ $
Reimbursement of exports .................................... 3,968,272.60 4,586,925.56
Bonds Decree 3 79/01 ........................................... 2,224,855.51 1,231,135.17
Value-added tax (IVA) receivable......................... 5,346,534.13 2,081,505.42
Convergence factor ............................................... 530,219.54 530,219.54
Turnover tax credit................................................ 200,884.38 45,892.16
Pre-paid insurance................................................. 30,070.88 23,693.97
Advances to suppliers............................................ 5,720,449.16 5,173,916.17
Private accounts of the partners............................. 3,281,608.98 26,087,777.54
Sundry debts.......................................................... 968,196.41 276,906.63
Provisions for bad debts ........................................ (67,367.33) (65,301.00)
22,203,724.26 39,972,671.16
03.31.07 03.31.06
$ $
Merchandise.......................................................... 12,641,141.58 7,600,774.18
Production in progress........................................... 2,929,838.92 2,157,313.09
Raw material ......................................................... 25,234,681.75 13,358,539.14
40,805,662.25 23,116,626.41
NOTE F: Permanent Investments
NOTE G: Accounts Payable
03.31.07 03.31.06
$ $
Agropecuaria Vinquis S.A. ................................... 1,550,830.35 1,550,830.35
GNC Bariloche S.A............................................... 897,123.44 1,086,741.43
2,447,953.79 2,637,571.78
03.31.07 03.31.06
$ $
Suppliers ............................................................... 12,078,346.09 3,697,763.82
Invoices receivable................................................ 3,412,783.91 3,676,447.40
Deferred checks pending of collection .................. 2,434,237.76 2,412,760.32
Advances to clients ............................................... 7,101,672.94 10,412,711.62
25,027,040.70 20,199,683.16
F-150

Notes to the financial statements at March 31, 2006 and 2007 (contd)
NOTE H: Social Charges
NOTE I: Taxes Payable
NOTE J: Loans
03.31.07 03.31.06
$ $
Salaries and wages ................................................ 650,770.36 552,571.00
Withholdings and contributions ............................ 308,967.03 251,9 76.93
Statutory bonus and vacation accrual .................... 589,889.31 562,464.97
O.S.D.E. (health care system) ............................... 17,000.00 18,705.09
Unions................................................................... 12,019.66 13,614.74
Life insurance........................................................ 5,937.62 3,005.16
1,584,583.98 1,402,337.89
03.31.07 03.31.06
$ $
Current Income tax AFFIX* ................................. 2,306,158.71 7,023,186.63
Retention of gains to third parties ......................... 59,805.78 75,635.36
Moratorium AFIP*................................................ 74,014.72 66,137.39
Safety and health rate ............................................ 35,638.90 72,507.42
Gross revenues ...................................................... – 35,216.95
Tax withholdings and collections ......................... 9,627.04 12,983.58
Non-Current .......................................................... 2,485,745.15 7,285,667.33
Moratorium AFIP*................................................ 230,187.08 279,625.81
230,187.08 279,625.81
* Federal Administration of Government Resources –“Administración
Federal de Ingresos Públicos”
03.31.07 03.31.06
$ $
Current Bank loans................................................ 219,707.33 564,609.88
219,707.33 564,609.88
Non-current Bank loans ........................................ – 219,767.77
– 219,767.77
NOTE K: Other Accounts Payable
03.31.07 03.31.06
$ $
Provision for lawsuits and contingencies .............. 6,202,100.00 5,466,000.00
Sundry creditors .................................................... 313,311.83 609,725.96
6,515,411.83 6,075,725.96
F-151

Notes to the financial statements at March 31, 2006 and 2007
NOTE L: Other operating income
03.31.07 03.31.06
$ $
Reimbursements of exports................................... 4,789,030.96 3,366,791.39
Bonds Decree 379,01 ............................................ 3,766,716.09 4,961,515.34
Sundry................................................................... (1,691,581.75) (112,283.09)
6.864,165.30 8,216,023.64
NOTE M: Provisions for contingencies
Following its conservative approach in relation to potential contingencies,
the company decided to create a provision for the lawsuit filed by Federal
Revenue Department related to differences in the determination of income
tax.
F-152

Lupatech S.A.
and Subsidiaries
Pro Forma Combined
Statement of Operations for the
Year Ended December 31, 2007
F-153

Lupatech S.A. and subsidiaries
Pro-forma combined statement of operations for the year ended December 31, 2007
(unadited)
In thousands of reais
Lupatech CSL Offshore Gasoil Delta
(in millions of reais)
Combined Pro forma adjustments
Gross sales and services....................................... 427.5 7.8 24.7 40.8 500.7 - 500.7
Taxes on sales....................................................... (40.5) - (1.9) - (42.4) - (42.4)
Net revenues........................................................ (387.0) 7.8 22.8 40.8 458.3 - 458.3
Cost of sales and services................................... (245.6) (3.6) (18.7) (26.4) (294.3) - (294.3)
Gross profit ......................................................... 141.4 4.2 4.0 14.4 163.9 - 163.9
Operating income (expenses) ............................
Selling ........................................................... (31.6) (0.1) (2.0) (2.4) (36.1) - (36.1)
General and administrative........................... (25.3) (0.2) (1.8) (1.6) (28.9) - (28.9)
Management compensation .......................... (2.1) - - - (2.1) - (2.1)
Financial income........................................... 24.1 - - 0.7 24.8 (11,7) 13.1
Financial expenses........................................ (79.3) (0.5) (0.8) - (80.7) (3.3) (84.0)
Goodwill amortization.................................. (50.0) - - - (50.0) (18.2) (68,2)
Other operating income (expenses).............. (9.0) - 1.1 (1.0) (9.0) - (9.0)
F-154
Pro forma
Combined
(173.2) (0.8) (3.6) (4.4) (182.0) (33.3) (215.3)
Operating profit (loss)........................................ (31.8) 3.4 0.5 10.0 (18.0) (33.3) (51.3)
Non-operating income (expenses), net ................ 0.4 - (0.7) (0.1) (0.4) - (0.4)
Profit (loss) before social contribution,
income tax and statutory profit sharing...... (31.5) 3.4 (0.2) 9.9 (18.4) (33.3) (51.7)
Income tax and social contribution ..................
Current ............................................... (23.8) (0.6) (3.0) (3.7) (31.2) - (31.2)
Deferred.............................................. 7.3 - - - 7.3 4.0 11.3
(16.4) (0.6) (3.0) (3.7) (23.8) 4.0 (19.8)
Employees and directors’ profit sharing (1.6) - - - (1.6) - (1.6)
Net income (loss) for the year............................ (49.5) 2.7 (3.2) 6.2 (43.9) (29.3) (73.2)
Net income (loss) per thousand shares (1,044.24) (1,542.38)

Lupatech S.A. and subsidiaries
Notes to the pro-forma combined statement of operations for the year ended December 31, 2007
(unadited)
In thousands of reais
1 Description of transactions and basis for preparation
of pro forma statement of operations
(a) Description of transactions
The combined pro-forma statement of operations (unaudited) for the year ended December 31, 2007 of
Lupatech S.A. (“Lupatech”) reflect the transactions detailed below.
Purchase of the oil platform-anchoring rope business (known as the “CSL Offshore Business”) of Cordoaria
São Leopoldo S.A. (“Cordoaria”) – On April 3, 2007, Lupatech through its subsidiary Lupatech MNA
Investimentos e Participações Ltda. (“Lupatech MNA”) entered into a final agreement with Cordoaria to
acquire the CSL Offshore Business. The transaction was consummated on April 3, 2007. The acquisition was
effected through the spin-off from Cordoaria to Cordoaria São Leopoldo Off-Shore Ltda. exclusively of the
fixed assets (consisting mainly of the industrial facilities and the equipment necessary for the production of
ropes), a nominal amount of cash as well as the customer relationships of the CSL Offshore Business. All other
assets and liabilities related to the CSL Offshore Business (consisting substantially of trade accounts receivable
and payables and other working capital items) remained with Cordoaria. The results of operations of Cordoaria
are consolidated since April 1, 2007 in the historical statement of operations of Lupatech for the year ended
December 31, 2007.
With a plant located in São Leopoldo, in the State of Rio Grande do Sul, the Off-Shore Business produces a
new generation of synthetic fiber ropes used for anchoring oil and gas platforms in deep and ultra deep
seawaters, using proprietary technology developed in Brazil.
Under the terms of the purchase agreement the purchase price for the CSL Offshore Business is payable through
three financial instruments:
(a) a cash payment of R$ 55 in cash which was made on the date the transaction was consummated.
(b) Issuance of R$ 25 of debentures of Lupatech maturing on June 30, 2010. Under the terms of the
debentures additional consideration will be payable in cash as financial charges on the debentures,
based on cumulative EBITDA (computed as defined in the agreement) of the CSL Offshore Business
through June 30, 2010. Additional consideration will be computed as 50% or 100% of the excess of
EBITDA over a specified threshold. The debentures carry no interest or charges other than the
potential amount payable as additional consideration described above. As of the date of this pro forma
statement of operations debentures were pending issuance. On August 2007 the principal amount of R$
25,000 was early paid to the sellers and the debentures were cancelled. The debentures were being
used by the sellers as collateral with respect to certain pre-acquisition contingencies that were settled
by the sellers and as a result it has been agreed to repay the principal and cancel the debentures.
Lupatech is still committed to pay additional consideration on the same basis as described above.
(c) Issuance of R$ 60 in shares of Lupatech with the quantity of shares determined as R$ 60 divided by the
quoted market value of the shares on the date of issuance. Additional consideration will be due to the
sellers if the fair market value of the shares issued does not exceed an established threshold at any time
through June 30, 2010. Additional consideration will be limited to a maximum of R$ 90 of which R$
20 can be settled in shares of Lupatech and the remaining must be settled in cash.
Purchase of Gasoil Serviços Ltda. (“Gasoil”): Acquisition on July 11, 2007 of 100% of Gasoil. The company
operates in the inspection, manufacture, maintenance and machining of equipment and accessories for the oil
and gas industry like drilling columns, umbilical reels, completion and production, and the design, construction
and assembly of natural gas compression stations. Gasoil is located in Macaé – RJ, Brazil´s main oil and gas
producing region. The results of operations of Gasoil are consolidated since July 1, 2007 in the historical
statement of operations of Lupatech for the year ended December 31, 2007.
F-155

Purchase price was R$ 73.3 and was paid partially on the acquisition date (R$ 18.3) and the remainder amount
was paid August 2007 (R$ 55.0). According to the terms of purchase agreement additional consideration could
be paid based on cumulative EBITDA (computed as defined in the agreement) of the Gasoil business from
July 1, 2007 through June 30, 2010. The additional amount of R$ 16.2 is payable in cash if the accumulated
EBITDA for the period mentioned before reaches at least R$ 53.9. If the amount of EBITDA observed is lower
the additional payment will be reduced on a proportion of 5 times reduction in additional payment per R$1 of
reduction in EBITDA.
Purchase of Delta Compresión S.R.L. (“Delta”) and Compressores Panamericanos S.R.L. (“Compressores”):
Acquisition on December 14, 2007 of 50% of Delta and Compressores with economic risks and benefits
transferred to Lupatech since October 01, 2007, according to the terms of the agreement. The results of
operations of Delta and Compressores are consolidated on a proportional basis since October 1, 2007 in the
historical statement of operations of Lupatech for the year ended December 31, 2007.
With a plant located in Buenos Aires, Argentina, Delta produces refueling stations and the necessary equipment
line for the CNG (Compressed Natural Gas) compression system and equipments for this industry.
Compressores does not have any activity other than being the owner of and landlord for Delta in relation to the
plant and administrative building where it operates. Purchase price was R$ 61.3 and was paid partially on
January 2008 (R$ 37.9) and the remainder on May 2008 (R$ 23.4). There is no contingent consideration.
(b) Basis for the preparation of combined
pro forma statement of operations
The combined pro forma statement of operations is being presented in thousands of reais and reflect the effects
of the acquisitions of the CSL Offshore Business, Gasoil and 50% of Delta and Compressores in our results as if
they had occurred on January 1, 2007.
For that purpose the historical statement of operations of Lupatech has been adjusted to reflect on a pro-forma
basis:
• the results of operations of Cordoaria from January 1, 2007 to March 31, 2007,
• the results of operations of Gasoil from January 1, 2007 to June 30, 2007,
• the combined results of operations of Delta and Compressores from January 1, 2007 to September 30,
2007, and
• the other pro-forma adjustments described herewith.
The combined pro forma statement of operations is being presented only for illustrative purposes and is not
necessarily indicative of the results from operations or the financial position if transactions had occurred on
those dates or any other dates, nor are indicative of future results from operations or financial position.
Lupatech S.A. and subsidiaries
The combined pro forma statement of operations should be read together with the consolidated historic balance
sheet at December 31, 2007 and the historic consolidated statements of operations for the year ended
December 31, 2007 of Lupatech S.A. and subsidiaries.
2 Pro-forma adjustments
The combined pro-forma financial information is based on preliminary assumptions and estimates, which we
believe are reasonable. The combined pro-forma financial information includes the following adjustments:
(A) Goodwill amortization
F-156

Recognition as pro forma adjustments of the amortization of goodwill resulting from the acquisition of interests
in CSL Offshore, Gasoil, Delta and Compressores.
Pro-forma adjustment amounts to R$ 18.2 corresponding to R$ 5.2 for the acquisition of CSL Offshore, R$ 6.4
for the acquisition of Gasoil and R$ 6.6 for the acquisition of Delta and Compressores. For the purposes of the
pro forma statement of operations we estimated amortization following the straight-line method for a total
estimated period of 5 years for all acquisitions. The actual method and actual period of amortization may differ
from the current estimate.
Amortization of goodwill is not tax deductible under Brazilian tax regulations unless goodwill is incorporated
into the books of the acquiree through a corporate transaction, such as a reverse merger of the acquiring entity
into the acquiree. Considering there is no assurance, upon acquisition, that a transaction which would allow
amortization of goodwill to become deductible will ultimately take place, or that current rules for amortization
of goodwill would not change, no income tax effect has been computed for amortization of goodwill.
Subsequent to acquisition and on April 2008, Lupatech Oil Tools (the acquirer, a wholly owned subsidiary of
Lupatech) was merged into Gasoil which allows tax deductibility of amortization of goodwill recorded upon
acquisition of Gasoil as from that date.
Goodwill on acquisition of each of the companies has been determined as follows:
CSL Offshore Gasoil
Delta and
Compressores
Net assets acquired at book value in the books of the
entity acquired 35 9.4 35.1
Percentage acquired 100% 100% 50%
Net assets acquired 35 9.4 17.5
Purchase price:
Payable in cash (1) 80 73.3 61.3
Payable in shares of Lupatech 60 - -
Total purchase price 140 73.3 61.3
Goodwill 105 63.9 43.8
(1) Includes the amount of R$ 25,000 of debentures issued on the acquisition and early paid as described above.
No pro forma adjustment has been recognized with respect to the additional consideration that may become
payable for the acquisition of CSL Offshore and Gasoil as described in Note 1. Such additional consideration,
if any, is contingent on certain future events which as of the date of this pro forma statement of operations were
not resolved.
(B) Financial income
A pro-forma adjustment has been recognized to reflect the reduction in interest income resulting from the
reduction in marketable securities had the acquisition taken place on January 01, 2007. The reduction in
marketable securities would amount to: (i) R$ 55 with respect to the acquisition of CSL Offshore Business,
(ii) R$ 73.3 for the acquisition of Gasoil, and (iii) R$ 61.3 for the acquisition of Delta and Compressores had
these acquisitions taken place also on January 1, 2007. Such pro-forma adjustment has been determined
considering the average yield observed in marketable securities during the period from January 1, 2007 to the
date of each acquisition which was, in average, 11.77% per year.
No pro-forma adjustment has been recognized as interest expense for the debentures considering that the
debentures carry no interest or charges other than the potential amount payable as additional consideration
described above.
(C) Financial expenses – Foreign exchange loss on investments in subsidiaries abroad
F-157

A pro-forma adjustment has been recognized to reflect the foreign exchange loss on the translation of the
investment in Delta and Compressores from Argentinean Pesos into Brazilian reais. The foreign exchange loss
results from: (i) the effect of changes in the exchange rate from January 1, 2007 in the amount of R$ 2.8 and
(ii) the difference between the average exchange rate during the nine months ended September 30, 2007 and the
closing rate as of September 30, 2007 which amounted to R$ 0.5. No income tax effect on these adjustments has
been computed since such loss is not deductible.
(D) Income tax
Corresponds to the income tax effect computed as 34% of the pro-forma adjustment described in (B) above.
During the year ended December 31, 2007 Gasoil has opted to pay income taxes based on the “presumed”
income taxes regime under which income tax is determined based on percentages of revenue irrespective of net
income of the entity either for tax or accounting purposes. Companies may voluntarily choose to be subject to
the “presumed” income taxes regime or to the regular income taxes regime each year as long as total net
revenues does not exceed R$ 48,000 in the prior fiscal year.
Maintenance of the “presumed” income taxes regime in future periods will depend on management decision and
on net revenues not exceeding the threshold indicated. In the pro-forma financial information, the results of
Gasoil for the year ended December 31, 2007 are included based on the “presumed” income taxes regime
actually selected by the Company for such year.
(E) Net income (loss) per thousand shares
Pro-forma net loss per thousand shares has been computed by dividing pro-forma net loss as presented in the
pro-forma combined statement of operations by the quantity of shares outstanding at December 31, 2007
(47,437,333 shares).
3 Other information
(A) Pro forma revenues
Our pro forma net revenues consist of the following by segment for the year ended December 31, 2007:
F-158
Year ended December 31, 2007
Flow segment Metal segment Total
Net revenue (in millions of reais)............................................................................... 374.2 84.1 458.3
Net revenue (as a percentage of total revenue)........................................................... 81.6% 18.4% 100%
Domestic market (in millions of reais)....................................................................... 321.7 55.1 376.8
Domestic market (as a percentage of total revenue)................................................... 86.0% 65.5% 82.2%
Export market (in millions of reais) ........................................................................... 52.5 29.0 81.5
Export market (as a percentage of total revenue) ....................................................... 14.0% 34.5% 17.8%
(B) Pro forma adjusted Ebitda
We present below the calculation of pro forma adjusted EBITDA by segment for the year ended December
31, 2007, which was defined as income before net financial expenses, income tax and social contribution,
depreciation and amortization, non-operating results and non-recurring expenses, calculated based on the pro-forma
statements of income (unaudited).

F-159
Year ended December 31, 2007
Flow segment Metal segment Total
(in millions of reais)
Net revenue..................................................................................................................... 374.2 84.1 458.3
Cost of sales and services............................................................................................... (223.1) (71.3) (294.4)
Gross profit..................................................................................................................... 151.1 12.8 163.9
Selling expenses ............................................................................................................. (28.4) (7.7) (36.1)
General and administrative expenses............................................................................. (24.5) (4.3) (28.8)
Depreciation and amortization ....................................................................................... 11.8 4.4 16.2
Management compensation............................................................................................ (1.7) (0.5) (2.2)
Other operating income (expenses), net......................................................................... 0.5 0.1 0.6
Employee profits sharing ............................................................................................... (1.2) (0.4) (1.6)
Pro forma adjusted EBITDA.......................................................................................... 107.6 4.4 112.0
Depreciation and amortization ....................................................................................... - - (16.2)
Goodwill amortization ................................................................................................... - - (68.2)
Non-recurring expenses ................................................................................................. - - (9.7)
Financial income ............................................................................................................ - - 13.1
Financial expenses.......................................................................................................... - - (84.0)
Non-operating income.................................................................................................... - - (0.4)
Income tax and social contribution ................................................................................ - - (19.9)
Pro forma net loss........................................................................................................... - - (73.2)
* * *

WHERE YOU CAN FIND MORE INFORMATION
PRINCIPAL EXECUTIVE OFFICES OF
Lupatech Finance Limited Lupatech S.A.
R. Dalton Lahm dos Reis, 201
R. Dalton Lahm dos Reis, 201
95112-090 Caxias do Sul—RS
95112-090 Caxias do Sul—RS
Brazil
Brazil
TRUSTEE, PRINCIPAL PAYING AGENT, TRANSFER AGENT, REGISTRAR
The Bank of New York
101 Barclay Street, 4E
New York, NY 10286
LUXEMBOURG SPECIAL PAYING AGENT AND LISTING AGENT
The Bank of New York (Luxembourg) S.A.
Aerogolf Center
1A Hoehenhof
L-1736 Senningerberg
R.C. Luxembourg No. B67.654
Luxembourg
LEGAL ADVISORS
To the Issuer as to United States Law To the Issuer as to Brazilian Law
Shearman & Sterling LLP Machado, Meyer, Sendacz e Opice Advogados
Av. Brigadeiro Faria Lima, 3400, 17° andar
Av. Brigadeiro Faria Lima, 3144—11º andar
04538-132 São Paulo—SP
01451-000 São Paulo—SP
Brazil
Brazil
To the Issuer as to Cayman Islands Law To the Issuer as to Argentine Law
Pérez Alati, Grondona, Benites, Arntsen &
Maples and Calder
Martínez de Hoz (h)
PO Box 309, Ugland House
Suipacha 1111, piso 18
Grand Cayman, KY1-1104
C1008AAW Buenos Aires
Cayman Islands
Argentina
To the Initial Purchasers as to United States Law To the Initial Purchasers as to Brazilian Law
Clifford Chance US LLP
31 West 52nd Pinheiro Guimarães—Advogados
Street
Av. Paulista, 1842, 24º andar
New York, NY 10019
01310-923 São Paulo—SP
USA
Brazil
INDEPENDENT AUDITORS
to Lupatech S.A.
PricewaterhouseCoopers Auditores Independentes
Rua Mostardeiro 800, 9º andar
90430-000 Porto Alegre—RS
Brazil
Deloitte Touche Tohmatsu Auditores Independentes
Avenida Carlos Gomes, 403, 12º andar
90480-003 Porto Alegre—RS
Brazil

US$75,000,000
Lupatech Finance Limited
(an exempted company incorporated under the laws of the Cayman Islands)
9.875% Guaranteed Perpetual Bonds
OFFERING CIRCULAR
Citi
Merrill Lynch & Co.
June 23, 2008