NOTES TO THE FINANCIAL STATEMENTS AS OF

DECEMBER 31, 2008 AND 2007.

(In thousands of Reais)

1. Operations

Elekeiroz (the “Company”), a company controlled by Itausa – Investimentos Itaú S.A., has two industrial units, one in Camaçari, in the state of Bahia, and one in Várzea Paulista, in the state of São Paulo, where it is headquartered. The Company’s activities comprise the production, trading, import and export of chemicals and petrochemicals, including chemicals and petrochemicals produced by third parties, and participation in other companies.

The chemicals production capacity of its industrial units exceeds 700 thousand tons per year, mostly intended for use in industrial activities, especially in the civil construction, clothing, automotive and food industries.

2. Presentation of the financial statements

The financial statements were prepared under the responsibility of the Management, in conformity with accounting practices adopted in Brazil, based on the corporate law, the “CPC” – Accounting Pronouncements Committee´s pronouncements, guidance and interpretations, as well as the “CVM – Comissão de Valores Mobiliários” (Brazilian Securities Commission) standards.

As permitted by CVM Deliberation 565 of December 17, 2008, which approves the CPC Technical Pronouncement 13, the Company and its subsidiary and affiliate are adopting for the first time the provisions of Law 11,638/07 and Provisional Measure 449/08 for the year ended December 31, 2008. As the Management opted for preparing a transition balance sheet as of January 1, 2008, all the adjustments affecting the income were made against retained earnings on the transition date, without retrospective effects on the financial statements as of December 31, 2007.

The following accounting practices have changed in relation to those of the year ended December 31, 2007:

· In compliance with CVM Deliberation 534 of January 29, 2008, which approves the CPC Technical Pronouncement 2, the effects of exchange variation on the subsidiary were recorded in the “Equity Evaluation Adjustments” account, under “Shareholders´ Equity”;

· In compliance with CVM Deliberation 547 of August 13, 2008, which approves the CPC Technical Pronouncement 3, the Statement of Changes in Financial Position was replaced with the Statement of Cash Flows. The Company has been already presenting the latter as additional information.

· In compliance with CVM Deliberation 553 of November 12, 2008, which approves the CPC Technical Pronouncement 4, the Company reclassified as intangible assets the items previously recorded as goodwill, and opted for writing off pre-operating and research expenses that had been capitalized until December 31, 2007. As a consequence, the following additions and amortizations recorded in 2008 were reversed:

Description	Amount
Reclassification as Intangible Assets	23.457
Write off of pre-operating and research expenses to the retained earnings account (net of tax effects)	10.358
Reversal of amortization of preoperating and research expenses, previously recorded as income for the year 2008.	3.003

· In compliance with CVM Deliberation 555, of November 12, 2008, which approves the CPC Technical Pronouncement 7, a fiscal incentive mostly consisting of reduction of Corporate Income Tax – IRPJ in favor of the Company´s branch in Bahia, in the amount of R$ 7.034, was recorded as income for the year against income tax and social contribution expenses, and subsequentely transferred to the revenue reserve. Until December 31, 2007, the fiscal incentive amount was directly recorded as a capital reserve under “Shareholders´ Equity”.

· In compliance with CVM Deliberation nº 557 of November 12, 2008, which approves the CPC Technical Pronouncement 9, publicly-held companies are now required to present a Statement of Value Added as part of the financial statements. The Company has been already presenting the latter as additional information.

· In compliance with CVM Deliberation 564, of December 17, 2008, which approves the CPC Technical Pronouncement 12, the assets components deriving from long-term operations, or from current ones, if these have relevant effects, are valued by the Company´s Management and, where applicable, adjusted to present value, For this purpose, the operation settlement dates and the discount rates that better reflect the Management´s estimated were considered, together with the value of money over time and the specific risks surrounding each element, with the following results:

Assets	Effect on Retained Earnings ( (LA) or Income for the Year (RE)	Adjustment to Present Value
Adjustment to present value of receivables – first-time adoption of Law 11.638/07 – (net of tax effects)	LA	1.437
Adjustment to present value of ICMS on property, plant and equipment - CIAP in the year	RE	363
Adjustment to present value of ICMS Bahia credidtor in the year	RE	12.480

· In compliance with CVM Deliberation 566, of December 17, 2008, which approves the CPC Technical Pronouncement 14, the financial instruments were classified as intended for trading and held to maturity, at market value, in the first case, and at cost-plus-earnings, in the second case.

· Creation of an “Equity Evaluation Adjustments” subgroup, under “Shareholders´ Equity’ containing the counterentries to assets valuations at market value and translation adjustments based on exchange variation of corporate investments abroad:

Description	Amount
Adjustment of Temporary Investments to Market Value	14
Exchange Variation of Investments	369

· The criterion for definition of subsidiaries and affiliates changed through an amendment to art. 248 of Law 11.638/07. As a consequence, the Company´s affiliate that influences the Management is not valued on the equity method, with the evaluation effect – R$ 5 – being recognized as retained earnings.

· The adjustments arising from changes in accounting practices introduced by new legislation can be thus shown:

In millions of R$	2008 – Without effects of Law 11.638	2008 – With effects of Law 11.638
Net Revenue	877,7	877,7
Operating Income (before Financial Income) Equity Pickup/Goodwill Amortization)	111,1	101,8
Operating Income	110,2	100,4
Net Income for the Year	80,2	81,2
Shareholders´ Equity	463,3	441,4
Total Assets	682,5	660,6
EBITDA	138,3	126,2

3. Summary of the Main Accounting Practices

a) Income Determination - Income is determined on the accrual basis. The revenue from

products sold is recognized as income upon transfer to the purchaser of all risks and benefits inherent in the products. A revenue is not recognized if its realization is uncertain. As from January 1, 2008, the provision for income tax is set up net of the portion relating to fiscal incentives.

b) Cash and Cash Equivalents – These comprise movement account balances and investments

in the money market redeemable in up to 90 days, which are stated at cost plus the related earnings up to the balance sheet date, not exceeding market value. The investments in the money market are stated at the amortized cost plus the contracted earnings recognized ratably to the financial statements base dates, at market value.

c) Accounting Estimates – The individual and consolidated financial statements are prepared in

accordance with accounting practices adopted in Brazil, which require judgment on the part of the Management in making and recording accounting estimates. Among the significant assets and liabilities which are the object of these estimates and assumptions are the residual value of property, plant and equipment, the allowance for doubtful accounts, inventories, deferred income tax and social contribution, as well as provisions for tax, labor and civil risks. The settlement of transactions involving these estimates may result in different amounts from those estimated, due to the inaccuracies inherent in their determination. The Company and its subsidiaries review their estimates and assumptions at least on a quarterly basis.

d) Financial Instruments - The financial non-derivative instruments include short-term

investments in the money market; debt and equity instruments; accounts and other receivables; cash and cash equivalents; loans and financing, as well as accounts payable and other payables. The financial, non-derivative instruments are initially recognized at their fair value plus, in the case of instruments not recognized at fair value through income, any transaction costs directly attributable thereto. Subsequently, the financial, non-derivative instruments are valued in accordance with their classification, as follows:

Instruments held to maturity – If the Company intends to, and can, keep its debt instruments up to the maturity date, they are classified as such, and valued at the amortized cost on the effective-interest-rate method, net of any reductions in their recoverable value;

Instruments available for sale – The Company´s investments in equity instruments and certain assets relating to debt instruments are classified as available for sale. After the initial recognition they are valued at fair value, with any fluctuations other than reductions in their recoverable value and differences in foreign currency being recognized as shareholders´ equity, net of tax effects. If an instrument fails to be recognized, the gains or losses accumulated under the shareholders´ equity are reclassified as income.

Financial instruments at fair value through the income – An instrument is classified based on its fair value, through the income, if held for trading, i.e., designated as such upon the initial recognition. The financial instruments are stated at fair value through the income, if the Company manages these investments and decides to sell or purchase them based on their fair value, in accordance with its investment strategy and risk management strategy. After the initial recognition, the attributable transaction costs are recognized as income, as incurred. The financial instruments at fair value through the income are stated at their fair value and the related fluctuations are recognized as income.

Other – The other financial, non derivative instruments are stated at the amortized cost on the actual-interest-rate method, net of any reductions in their recoverable value.

e) Trade Receivables – These refer to receivables from clients, which are reduced to their

probable realizable values by means of an allowance for doubtful accounts, set up in an amount deemed sufficient to cover possible losses on any such accounts.

f) Inventories - Inventories are stated at the average acquisition or production cost, which does

not exceed market value. There are no significant obsolete inventories (Note 7).

g) Investments – The investments in the subsidiary and the affiliate are valued on the equity

method, with counter-entries to these amounts recognized as operating income, except in the case of exchange variations on foreign investments, which are recorded in a specific “Shareholders´ Equity” account for subsequent recognition upon write off or sale of the investment. The other investments are stated at the acquisition cost plus monetary restatement (recognition of the effects of inflation) up to December 31, 1995 and adjusted to market value, where applicable (Note 11).

h) Property, Plant and Equipment and Depreciation – The property, plant and equipment items

are stated at acquisition or construction cost plus monetary restatement up to December 31, 1995, including interest accrued during the construction. Depreciation is calculated on the straight-line method at rates that take into account the useful life of assets. For equipment and facilities directly used in production, depreciation is calculated considering the number of units produced and the economic useful life of assets. (Note 12).

i) Intangibles – These refer to goodwill on acquisition of subsidiaries, which is amortized

in accordance with the projected results of the goodwill-originating businesses (Note 13).

j) Other current and non current assets – These are shown at the realizable value including,

where applicable, the earnings, monetary and exchange gains, or in the case of prepaid expenses, at cost.

k) Liabilities – The liabilities are recognized in the balance sheet, whenever the Company has

a legal obligation or one resulting from past events, the settlement of which may require expenditure of economic resources. Some liabilities involve uncertainties in terms of time and amount, being estimated as incurred and recorded through a provision. The provisions are recorded based on the best estimate of risks involved. The Management is required to use judgment to estimate fiscal, civil and labor obligations, and does so based on their internal and external lawyers. Because in the course of its activities the Company is subject to several processes involving fiscal, civil and labor matters, it sets up provisions for probable losses on these processes, where their outcome can be estimated with reasonable accuracy. These amounts are adjusted in such way that any changes in the circumstances surrounding these processes can be reflected. The actual results may differ from the estimates. The liabilities are updated based on the exchange rates and financial charges contracted, so that they can reflect the amounts incurred up to the balance sheet date. The long-term items are adjusted to present value, if so required (Note 15).

l) Taxation – The sales revenues are subject to taxes and contributions at the following rates:

	Tax Rates
ICMS (State of São Paulo)	18%
ICMS (State of Bahia)	17%
ICMS (other states)	7% or 12%
IPI	0 or 5%
PIS	1.65%
COFINS	7.6%

These charges are shown as sales deductions in the statement of income. The credits arising from non cumulative PIS/COFINS are shown as a reduction of the cost of products sold, also in the statement of income. Income tax is calculated at 15% on taxable income plus a 10% surtax. Currently, tax loss carryforwards are under way. The Social Contribution on Net Income rate is 9% on the income book value, duly adjusted. Also, the offsetting of negative basis is considered. The Company benefits from a partial reduction in Income Tax due on the operating income of its Camaçari – BA production unit, at the rate of 75% until December 31, 2015 (Note 9 a). The deferred Income Tax and Social Contribution are shown under Long-Term Assets and Long-Term Liabilities (Note 9 b).

m) Escrow Deposits, Provision for Taxes and Contributions and Provision for

Contingencies - As required by CVM Deliberation 489/05, escrow deposits are reclassified

to liabilities, thus reducing the correspondent provisions for Taxes and contributions and provisions for Contingencies (note 17).

n) Reduction to the recoverable value of assets – The Company periodically checks for

evidences that the book value of assets cannot be recovered. The recoverable value of an asset is: a) its fair value less costs that would be incurred to sell it, and b) its value of use, whichever is higher. The use value is the equivalent to the (pretax) discounted cash flow arising from continuing use of an asset up to the end of its useful life. Regardless of whether or not any such evidences exist, the recoverability of goodwill on business combination is tested at least once a year. If the residual value of an asset exceeds its recoverable value, the Company recognizes a reduction of the book value of the asset (impairment). The recoverability is analyzed by business unit, which is the smallest possible cash-generating unit for cash flow identification purposes. (Note 17).

o) Loans and financing – Loans and financing are updated based on monetary and exchange

variations, as applicable, plus interest incurred up to the balance sheet date (Note 15).

p) Earnings or losses per share – Earnings or losses per share are calculated based on the

number of shares outstanding at the balance sheet date.

4. Consolidated Financial Statements

The consolidated financial statements were prepared under the basic consolidation principles and in accordance with CVM – Brazilian Securities Commission´s standards. Consolidation includes the elimination of the following:

a) intercompany assets and liabilities;

b) investments, ratably to participation in subsidiaries´ shareholding;

c) revenues and expenses arising from intercompany businesses;

d) unrealized earnings arising from intercompany businesses, if relevant.

The fiscal year of consolidated companies coincide with the parent company´s.

Summary information on the financial statements of the subsidiary:

CASTLETOWN TRADING S.A.	Dec/2008	Dec/2007
ASSETS
Current Assets	1,587	1,208
Total Assets	1,587	1,208
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities	70	53
Shareholders’ Equity	1,517	1,155
Total Liabilities and Shareholders’ Equity	1,587	1,208
STATEMENT OF INCOME
Net Operating Expenses	(7)	(5)
Loss for the Period	(7)	(5)

5. Cash and Cash Equivalents/Investments

	Company		Consolidated
	Dec/2008	Dec/2007	Dec/2008	Dec/2007
Cash	34	25	34	25
Bank Accounts	4.584	1.242	4.587	1.244
Readily Realizable Investments	-	70.632	-	70.632
Held to maturity	2.638	-	2.638	-
Available for sale	69.102	-	69.102	-
Temporary Investments	1.438	1.424	1.438	1.424
Total	77.796	73.323	77.799	73.325
Short-Term	77.796	71.899	77.799	71.901
Long-Term	-	1.424	-	1.424

The investments held to maturity comprise investments in BNB – Banco do Nordeste do Brasil, as a counter-entry to fiscal incentives relating to income tax (deposit for reinvestment).

The investments classified as available for sale basically include post-fixed Bank Deposit Certificates – CDB with CDI-linked earnings. Given the nature of these investments, their book values reflect the redeemable value at the balance sheet date.

Temporary investments comprise Eletrobrás´s shares, which in 2008 were reclassified from non current assets to current assets available for sale.

6. Clients – Trade Receivables

	Company		Consolidated
	Dec/2008	Dec/2007	Dec/2008	Dec/2007
Local Clients	54.312	86.207	54.312	86.207
Foreign Clients	18.220	26.744	18.221	26.745
Advance on ACE – Export Contracts	-	(11.076)	-	(11.076)
Allowance for Doubtful Accounts	(2.194)	(1.603)	(2.194)	(1.603)
Total	70.338	100.272	70.339	100.273

7. Inventories

	Company and Consolidated
	Dec/2008	Dec/2007
Finished Products	44,693	40,211
Raw, Auxiliary and Packaging Materials	71,232	36,214
Miscellaneous Materials	12,737	11,587
Provisions for Losses on Inventories	(2,711)	-
Total	125,951	88,012

8. Tax Credits and Taxes Recoverable

	Company and Consolidated
	Dec/2007	Dec/2006
Taxes Recoverable/To be Offset
Social Contribution on Profits	1.156	209
Income Tax	2.935	491
ICMS to be Offset on Acquisition of Assets	3.042	2.758
(-) Adjustment to present value	(363)	-
Accumulated ICMS Credits - SP	2.503	-
Accumulated ICMS Credits - BA	42.083	42.045
Accumulated ICMS Export Credits - BA	40.903	37.416
(-) Provision for Losses on i ICMS Credits - BA	-	(19.873)
(-) Adjustment to present value	(12.480)	-
Accumulated PIS and COFINS Credits	908	830
Accumulated PIS and COFINS Credits on Acquisition of Assets	1.358	1.526
Other	1.120	215
Total	83.165	65.617
Stated as:
Current Assets	33.555	8.339
Long-Term Assets	49.610	57.278

The Company’s production unit in Bahia has been accumulating tax credits as a result of (i) its exports; (ii) its domestic sales to companies that benefit from taxes deferral and sales in that state ; and (iii) sales to companies outside that state, benefiting from interstate tax rates lower than those applicable to purchases of inputs.

In May 2008, the government of the state of Bahia reduced the tax rate on internal sales of

some chemicals, among which are the main raw materials used by the Company, with what part of the accumulated credits could be taken.

In December 2008, the Company signed a term of agreement with the State Secretariat of Bahia, whereby a schedule for release of accumulated credits was provided, thus enabling the transfer of these credits to third parties. Under this agreement, the provision for losses was reversed and the Company was able to prepare a tentative schedule for realization of ICMS credits. In order to reflect the updated value of these credits, they were brought to present value.

9. Income Tax (IRPJ) and Social Contribution on Net Income (CSLL)

(a) Reconciliation of IRPJ and CSLL Expenses

	Company and Consolidated
IRPJ and CSLL Expense Composition	Dec/2008	Dec/2007
Pretax Income	91.922	92.025
( - ) Tax loss and negative basis carryforwards	(27.577)	(27.608)
Income Tax and Social Contribution at 34%	(21.877)	(21.902)
Permanent add-backs and deductions	(1.995)	(230)
Temporary add-backs and deductions	980	3.470
Interest on equity capital	4.758	5.021
Fiscal incentives	7.458	769
Income Tax and Social Contribution	(10.676)	(12.872)
Current tax	(8.283)	(22.180)
Deferred tax offset	(2.393)	9.308

(b) Deferred Income Tax and Social Contribution Composition

As required under CVM Deliberation No. 273 and CVM Instruction No. 371, the Company has recorded as Long-Term Assets R$ 21,283 of deferred tax assets arising from temporary differences. The consolidated deferred tax credits and liabilities (Income Tax and Social Contribution) as of December 31, 2008 can be summarized as follows:

	Consolidated balance Dec/2008
Temporary Differences comprising:
Allowance for Doubtful Accounts	765
Provision for Labor Contingencies	1,769
Provision for Tax Contingencies	5,226
Adjustment to Present Value – Long-Term Assets	4,857
Amortized Goodwill	600
Other Provisions	8,066
Total	21,283

The deferred taxes on adjustments due to the first-time adoption of Law 11.638 , directly recorded as Shareholders´ Equity were recognized against the same account, as shown below:

Unamortized balance deferred	3.675
Adjustment to present value – Receivables	740

Expected Tax Credit Realization
2009	3,569
2010	5,505
2011	4,360
2012	2,495
2013 onwards	5,354
Total	21,283

The tax credits deriving from R$ 51,742 of tax losses and a negative basis of R$ 18,953 are not recorded as assets. Under the Company´s Long-Term Liabilities are deferred tax liabilities in the amount of R$ 2,895 resulting from capital gain on the credit sale of Taubaté production unit. This capital gain is being taxed as each installment is paid by the purchaser.

10. Receivables

	Company and Consolidated
	Dec/2008	Dec/2007
Accounts Receivable – Asset Sales	15.560	16.015
Accounts Receivable – Assignment of Receivables	8.415	8.122
Other Receivables	907	760
(-) Adjustment to present value	(1.442)	-
Total	23.440	24.897
Short-Term	11.302	8.413
Long-Term	12.138	16.484

11. Investments

Below, the main information on investments valued on the MEP – the equity method and at cost as of December 31:

	Dec/2008	Dec/2007
CASTLETOWN Trading S.A.
Shareholders´ Equity	1.517	1.155
Number of Shares Held (1,000-Share Lot)	7.350	7.350
Participation (%)	100	100
Exchange Variation on the Investment	369	-
Equity Pickupl	(7)	(246)
TCI Trading S.A.
Shareholders´ Equity	5.254	-
Number of Shares Held (1000-Share Lot)	270	-
Participation (%)	9,0	-
Equity Pickup	193	-
Total Investments valued on the MEP	1.990	1.155
Investments valued at cost	6.472	6.327
Total Investments	8.462	7.482

12. Property, Plant and Equipment

		COMPANY AND CONSOLIDATED
		Dec/2008			Dec/2007
	Annual	Restated	Accumulated	Residual	Residual
Property, Plant and Equipment	Depreciation
	Rates	Cost	Depreciation	Value	Value
Land		11.088	-	11.088	11.111
Buildings	4%	55.558	(30.935)	24.623	26.078
Equipment and Facilities (i)	5% a 10%	341.385	(188.504)	152.881	146.068
Construction Work in Progress		38.652	-	38.652	23.564
Computer Hardware and Software	20%	2.919	(2.140)	779	1.469
Furniture and Fixtures	10%	6.241	(4.803)	1.438	1.658
Vehicles	20%	2.395	(1.438)	957	899
Other assets	10% e 20%	21	(12)	9	14
Total		458.259	(227.832)	230.427	210.861

(i) The depreciation of equipment and industrial facilities varies with the volume of production, between 5% and 10% p.a.

13. Intangibles

	Company and Consolidated
	Dec/2008	Dec/2007
Deferred charges	-	14.032
Intangibles	742	-
UNAMORTIZED GOODWILL
Goodwill and Discount on Acquisition of Investments	53.072	53.072
Amortization of Goodwill and Discount	(34.915)	(29.615)
	18.157	23.457
Total	18.899	37.489

The Company´s goodwill arises from the difference between the cost of acquisition and the Shareholders´ Equity held in subsidiaries as of the acquisition date, based on the investee´s expected future profitability and projected income for a 10-year period. After the merger of the subsidiary into the parent company, the goodwill was transferred from the investment account to deferred assets, as required by changes introduced by Law 11.638/07 in the intangibles account.

After the deferred charges group of accounts,was extinguished the Company has analyzed its deferred assets, having found that given the nature of new project expenses they essentially incurred at the research stage, and accordingly cannot be reclassified as intantigles. The projects under way, in turn, mainly Consist of preoperating, restructuring and project expenses, being it impossible to segregate expenses incurred at the research stage from those of the development stage, which are in accordance with the CPC 4 – Intangibles. The Company opted for writing off the preoperating, restructuring and research balances referring to new projects under way on the transition date, having taken them directly to the retained earnings account, as required by MP 449/08. This kind of expenses incurred in the year are recognized as income for the period.

14. Taxes and accounts payable

	Company		Consolidated
	Dec/2008	Dec/2007	Dec/2008	Dec/2007
Taxes Payable	2,523	3,851	2,523	3,851
Charges on Payroll	1,476	1,437	1,476	1,437
Commissions	1,181	1,088	159	308
Provisions	4,448	7,100	4,448	7,100
Other accounts payable	5,843	681	5,914	734
Total	15,471	14,157	14,520	13,430

15. Financial Institutions

Loans taken for funding investments in expansion and modernization of facilities and meeting working capital requirements can be thus described:

					Dec/2008		Dec/2007
Type	Charges %	Guarantees	Amortization	Maturity date	Short-term	Long- term	Short-term	Long- term
POC – BNDES	TJLP (Long-term interest rate + 4.95 p.a.	Promissory Note	Monthly	06/15/2010	884	439	-	-
POC - BNDES	TJLP (Long-term interest rate + 4.00 p.a..	Promissory Note	Monthly	05/15/2009	450	-	1,963	1,761
MODERMAQ – FINAME	10.95 p.a.	Reservation of Title	Monthly	10/15/2010	123	90	104	178
BNDES	TJLP + BASKET OF CURRENCIES + 2.625 p.a.	Surety	Monthly and Half-yearly	01/15/2010	34,847	526	35,858	33,448
BNDES	TJLP + BASKET OF CURRENCIES + 1.65% to 2.15% p.a.	Surety	Monthly and Half-yearly	07/15/2014	1,381	14,238	-	-
IMPORT FINANCING	Libor + 2.00% p.a.	-	Final	12/15/2007	31,661	-	-	-
CÉDULA CRÉDITO INDUSTRIAL – BNB	8.5 p.a.	Reservation of Title	Monthly	12/28/2010	1,983	7,354	1,281	9,349
COMPROR	CDI + 0.09 p.m.	Promissory Note	Self-Payable		-	-	4,071	-
Total Company and Consolidated					71,329	22.647	43,277	44,736

The long-term portion of these loans matures as follows:

	Company and Consolidated
	Dec/2008	Dec/2007
2009	-	36,313
2010	11,515	8,423
2011 onwards	11,132	-
Total	22,647	44,736

In order to finance the continuity of modernization, rationalization and automation programs intended to enable productivity increases and cost reductions, the Company obtained from BNDES (Brazilian development bank) a long term credit line of R$ 116,681. The contract was signed on December 6^th, 2007, with monthly amortization, grace period of 24 months, credit limit of two years and maximum amortization over 96 months.

16. Dividends and Participation

	Company and Consolidated
	Dec/2008	Dec/2007
Interest on Equity Capital	7.789	11.637
Management’s Participation	3.048	2.958
Employees´ Participation	2.274	3.288
Total	13.111	17.883

The Management´s participation is limited to 10% of the net income after income tax and the amount of their fees, as stipulated in the Company´s by-laws. The employees´ participation is linked to results, as agreed with the employees represented by a commission elected for this purpose.

17. Long-Term Taxes Payable and Provision for Contingencies

Under the Company’s Long-Term Liabilities are Taxes Payable referring to 100% of tax payments pending legal decisions, all monetarily restated; and provisions in sufficient amounts to cover losses, initially deemed probable, on tax-related, labor-related and civil suits. Based on their legal counsellors´ opinion, the Management believes that the provisions are sufficient to cover possible losses on unfavorable outcome of these suits, and that the final decisions will not significantly affect the Company´s financial and economic position as of December 31, 2008. The table below shows the amounts of these contingencies, the related provisions and escrow deposits.

(a) Long-Term Taxes Payable

	Company and Consolidated
	Dec/2008	Dec/2007
PIS and COFINS	37.630	33.500
COFINS and Education Allowance	16.097	16.097
(-) Escrow Deposit	(16.097)	(16.097)
IRPJ and CSLL	4.881	6.808
Other	5.620	6.588
(-) Escrow Deposit	(2.395)	(3.752)
Total Long-Term Taxes Payable	64.228	62.993
Total Escrow Deposits	(18.492)	(19.849)
Total Net	45.736	43.144

(b) Provision for Contingencies

	Company and Consolidated
	Dec/2008	Dec/2007
Labor-Related and Civil	10.568	12.401
Tax-Related	17.193	13.810
Total Escrow Deposits	(2.194)	(2.049)
Total Net	25.567	24.162

Long-Term Taxes Payable

The Company has offset credits deriving from a legal action that questioned the constitutionality of the Decree-Laws nos.No. 2445 and No. 2449 of 1988, while keeping this R$ 37,630 offsetting duly provided for and restated, under “Long-Term Liabilities”. This legislation changed PIS determination methods.

Due to the legal measures taken to question the lawfulness of levying the 1% difference in COFINS and Education Allowance rates, up to the end of December 2008 the Company made escrow deposits totaling R$ 16,097, in connection therewith, which deposits are fully provided for under “Long-Term Liabilities”

100% of the Company’s IRPJ and CSLL losses in the amount of R$ 4,881, were carried forward and kept duly provided for and restated under “Long-Term Liabilities”.

Labor-Related and Civil

The Company has recorded provisions in an amount sufficient to cover losses deemed probable on labor-related and civil suits.

18. Capital

a) Capital subscribed and paid up

Capital in the amount of R$ 220,000, subscribed and paid as of December 31, 2008 comprises 31,485,170 book-entry shares without nominal value, of which 14,518,150 are common and 16,967,020 non-voting preferred shares.

b) Characteristics of the Shares

Below, the rights inherent in preferred, non-voting shares:

a) priority over common shares in statutory dividend distribution;

b) right to dividends not lower than those attributed to common shares;

c) participation in capital increase through reserve and profit capitalization;

d) priority over common shares in capital reimbursement without premium, in case of liquidation.

e) in the event of disposal of majority shareholding, inclusion in public offer that ensures unit price of 80% of amount paid per voting share included in the majority group;

f) minimum priority dividend of R$ 2.00 per thousand-share lot on an annual, non-cumulative basis, subject to adjustment in case of split or unification.

19. Dividends and Equity Capital

All shareholders are entitled to statutory, minimum dividends in the equivalent to twenty five percent (25%) of the income for the year, adjusted in accordance with Law 6.404/76 art. 202, I “a” and “b” ; II and III.

The dividends were calculated as follows:

	Dec/2008
Net Income for the Year	81.245
(-) Legal Reserve (5%)	(4.062)
(-) Fiscal Incentive recognized as Income	(7.034)
(=) Basis of Calculation	70.149
Minimum Statutory Dividend (25%)	17.537
Dividends Declared in the Year 2008:	16.994
Dividends Declared in the Year 2009	642
Total Dividends Declared	17.636
Interest on Equity Capital – Year 2008	19.993
Interest on Equity Capital – Year 2009	756
(-) IRRF (Withholding Income Tax)	(3.113)
(=) Net Yield for the Year	17.636

Given the good results attained in the year, the Administrative Council will propose supplementary dividends, with what the total dividends distributed in the form of gross Interest on Equity Capital will be R$ 659,00 per thousand-share lot.

As permitted by pertinent legislation and stipulated in the Company’s by-laws, the Interest on Equity Capital, net of income tax, is being included in statutory dividends.

20. Financial Income

The financial income is thus composed:

	Company		Consolidated
	Dec/2008	Dec/2007	Dec/2008	Dec/2007
Financial Revenues	11.738	10.741	11.738	10.741
Monetary and Exchange Variation – Assets	27.191	9.282	27.191	9.282
Reversal of Adjustment to Present Value	736	-	736	-
Total Financial Revenues	39.665	20.023	39.665	20.023
Financial Expenses	(10.019)	(15.653)	(10.019)	(15.653)
Monetary and Exchange Variation – Liabilities	(25.860)	(13.618)	(25.860)	(13.859)
Total Financial Expenses	(35.879)	(29.271)	(35.879)	(29.512)
Net Financial Income	3.786	(9.248)	3.786	(9.489)

21. Financial Instruments

The realizable value of the Company´s and its subsidiary´s financial assets and liabilities is estimated based on information available in the market and appropriate valuation methodology. Also, judgment was required in interpreting market data capable of producing more adequate estimates of realizable values. As a consequence, the estimates provided do not necessarily reflect amounts actually realizable in current market. The use of various market methodologies may materially affect the estimates.

These instruments are managed according to operating strategies aimed at ensuring liquidity, profitability and security. The control policy consists in continuingly monitoring contracted rates against those ruling in the market. The Company and its subsidiary do not make speculative investments in derivative instruments or any other risk assets.

a) Market value – In compliance with the CPC Technical Pronouncement 14 – Financial Instruments: Recognition, Measurement and Disclosure, the market value of the main financial instruments presented as of December 31, 2008 do not significantly differ from the related accounting records. The table below shows the classification of financial instruments. According to the company´s management there are no financial instruments classified as held to maturity and held for sale:

Cash and Cash Equivalents and Investments – The available cash, shown at its book value, includes cash on hand and in current accounts. The investments in post-fixed CDB, DI Investment Funds and shares are classified as held for trading, the book value of which reflects their market value.

Consolidated

Book