Financial Statements

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2 CNPJ / Financial Statements These reports were publicated in Diario Oficial do Estado de Santa Catarina, Jornal de Santa Catarina and Jornal Valor Econômico on March, 10 th, 2008.

3 Management Report Management Comments Dear Shareholder, Our return to the capital market was a landmark event in 2007 and our consequent capitalization has laid the groundwork for a new era of profitable and sustainable growth. We raised over R$550 million from our public offering in April, approximately R$340 million from the secondary offering and R$210 million from the primary offering, allowing us to exploit our competitive advantages to the full and benefit from existing growth and consolidation opportunities in the Brazilian disposable healthcare product distribution segment. It is worth re-emphasizing our commitment to the highest standards of corporate governance and transparency to our shareholders and the market, which is reflected in our listing on the Novo Mercado trading segment of the Bovespa. The superiority of our business model, which includes call center sales, a national distribution platform and scale to purchase and distribute products in favorable conditions, allows us to offer our clients a portfolio of competitively-priced products, backed by exemplary service. This model and the above mentioned conditions contributed to a ROCE of more than 38% in Our revenues increased in all segments we operate, reaching R$367.7 million, with third-party revenues representing approximately 27% of total and 33% from healthcare sales. This steems from our strategy, which is based on four fronts: (1) expand product portfolio, (2) increase cross selling and raise the average ticket, (3) attract new customers and (4) explore under-penetrated channels. In 2007, we implemented several initiatives aimed at generating future growth. We expanded our call center; acquired an important dentists data-base from the APCD (the São Paulo State Dentists Association); set up direct mail campaigns; expanded our client base by over 21%, providing services to over 50,000 clients; and began important negotiations and partnerships with large supermarket and drugstore chains. Results from our Industrial Adhesives and Plastics operations recorded another year of positive growth, contributing to an increased consolidated income. We closed 2007 sure of having taking initiatives that are vital for the future of the Company and we enter 2008 confident and prepared to overcome the challenges ahead in our profitable and sustainable growth process. In 2008 we aim to accelerate our growth through acquisitions which will allow us to step into the highvalue-added disposable products segment, and at the same time, reduce excess cash position, thereby improving our capital structure. Finally, we would like to thank our clients, employees, suppliers and investors for the dedication and trust that allowed us to expand our leadership in the disposable healthcare products market in Brazil. Antonio Cesar Godoy da Silva CEO Operating Highlights Since April 2004 we have been developing our growth strategy as a distributor, based on expanding our product offering; increasing cross selling to our clients, thereby boosting our average ticket; growing our customer base; and exploring new sales channels, always setting the price strategy to maximize our profitability. Expand Product Portfolio 2,681 EOY Added during 1H07 Currently, we have 87 suppliers and 3,242 items for sale to the healthcare sector and we are continuing to add new items to our portfolio in order to increasingly differentiate our product mix, and to provide greater convenience for our customers. It is worth emphasizing that the great majority of products in our current portfolio are high-volume items with lower value added, constituting the first wave of third-party products, which began in The second wave, which began in 2007, comprises the introduction of new brands of our existing product lines, ensuring greater variety and giving our customers more options to choose from. The third wave, parallel to the second, consists of higher value added items, and will be pursued on two fronts first via acquisitions and second via the establishment of direct partnerships with suppliers. The second and third steps of our strategy increasing cross selling and growing our customer base have different weights according to the sales channel. In the Hospital channel, which includes private and public hospitals and hospital distributors, the main growth driver will be increasing cross selling in private hospitals, which should result in a higher average ticket. For each R$100 we sold in the Hospital channel in 2007, approximately 63% consisted of Cremer manufactured products and 37% of third-party products. We believe there is substantial scope to increase third-party product sales. If we consider the total purchase scope of a typical hospital, a maximum hypothetical purchase mix from our point of view comprises 10% Cremer manufactured products and 90% third-party products. Thus, the increase in the average ticket will be reached by boosting sales of third-party products to customers that today already buy products we manufacture. The following charts show the evolution in the number of customers served, average sales per customer and sales mix in the Hospital channel: Number of Customers Served New Itens 3,011 EOP 1H07 Hospital Channel 231 Added during 2H07 3,242 EOY 2007 Average Sales per Customers (R$ / served Customer) 1 Explore under-penet. Channels Increase cross-selling 3,823 CAGR 5.5% 4,048 4,257 21,227 CAGR 6.1% 21,929 23,880 Grow Customer Base Average Sales to private Hospital Customer. Sales Mix The first step of our strategy consists of expanding our product portfolio, with the main focus on thirdparty products. In 2007 we added 22 new suppliers, 6 of which in 4Q07, and 561 new items to our supply portfolio, 120 in 4Q % 34.8% 36.9% 78.6% 65.2% 63.1% Third-Party Supplier Evolution Manufactured Third-party Source: Company s managerial reports, unaudited EOY Added during EOY Added during EOY 2006 Added during EOY 2007 In the Retail channel, where we serve drugstores, retail distributors, baby-product stores and supermarkets, the main growth driver should result from a combination of more customers served by Cremer, there are estimated more than 55,000 drugstores (1) in Brazil, and the generation of incremental revenues from third-party product sales. In 2007, 19% of revenues in this channel came from third-party products, while 81% came from products manufactured by Cremer. The following charts show the evolution in the number of customers served, average sales per customer, and sales mix in the Retail channel: 1. Source: Drogasil Prospectus (IMS Health) 2

4 Management Report Number of Customers Served 1 14,030 CAGR 2.8% 14,402 14,841 Retail Channel Average Sales per Customer (R$ / served Customer) 2,784 CAGR 9.8% 3,126 3,354 Number of Individual Customers Served 21.72% 50, % 11.21% 41,173 5,295 37,309 33,549 3,565 2,964 2,361 44,819 31,188 34,345 37, Drugstores and Retail Distributors Sales Mix Lastly, in the Dental channel, our sales mix is already approaching what we believe to be the ideal mix of approximately 90% third-party products and 10% Cremer manufactured products. In 2007, 84% of our sales in the Dental channel consisted of third-party products and 16% Cremer manufactured products. In this channel we already have a broad product portfolio. The main growth driver consists of adding new customers to our sales and distribution system. Aiming to further increase the number of customers served by Cremer, we implemented a series of integrated actions in 2007: Increased the number of work stations at our call center by 19 and the number of Dental channel sales attendants by 44; Expanded our distribution capacity for dental products, particularly in Brazil s Northeast region; Enhanced our marketing initiatives, including a direct mail campaign at the end of September 2007 to 170,000 dentists and dental clinics. Participation in the largest dentists congress in Brazil, CIOSP, with more than 35,000 participants. In the short term, these actions will increase our selling expenses, but those should be diluted over time as incremental revenues are generated. In 2007, the number of customers served grew by 60%, underlining the success of our actions. The Dental channel currently accounts for approximately 5% of overall revenues, but has enormous growth potential, especially when we consider Brazil has over 200,000 dentists and we only served 6% of this total. The charts below show the evolution in the number of customers served, average sales per customer and sales mix in the Dental channel: 2005 Dental Channel % 16.1% 92.0% 83.9% Manufactured Numbers of Customers Served 6,572 CAGR 40.2% 7,959 12, % Third-party 81.0% Average Sales per Customer (R$ / served customer) 586 CAGR 15.8% Industrial Adhesives and Plastics The fourth and last step of our growth strategy is to explore under-penetrated market segments. Two examples are the Internet for the dental segment and the supermarket segment for own products. In April 2007 we launched the website which registered 3,248 orders and gross revenues (2) of R$1.1 million in In the supermarket channel, we are expanding our efforts to increase our penetration in large chains with Cremer manufactured line, either through the Cremer brand or through private labels. One example of our initial success was Cremer s commercial partnership with Grupo Pão de Açucar. The implementation of our previously mentioned growth strategy led to the following financial results: gross revenue reached R$367.7 million in 2007, 14.5% higher than in Third-party and manufactured product revenues increased by 29.7% and 9.7%, respectively. This growth was not due to margin reductions, given that manufactured products recorded a gross margin of 38.2%, versus 36.8% in 2006, and the third-party product gross margin stood at 17.8% against 15.5% in In 2007 the Adjusted Gross Profit reached R$93.4 million, a 11.8% increase against The 33.7% gross profit margin added to depreciation and discounts obtained in 2007 was 0.7 p.p. below the 2006 margin due to the faster growth in third-party product revenues and the consequent impact on the sales mix. The following chart compares managerial gross margins plus discounts and depreciation (3) : 2. Unaudited managerial data 3. Unaudited managerial information, excluding effects from plastic manufactured products and from inventories (which impact accounting gross margins). Managerial Gross Margin 36.8% 15.5% 38.2% Manufactured Third Party 4. Unaudited managerial information, excluding effects from plastic manufactured products and from inventories (which impact accounting gross margins).in light of all above factors and due to the recent ramp-up in selling expenses in the call center and distribution areas to accelerate future growth, our adjusted EBITDA before variable compensation totaled R$45.7 million in 2007, 6.3% more than in 2006, while adjusted EBITDA after variable compensation came to R$45.0 million, a 6.1% increase. We expect future incremental revenues and actions to reduce freight costs (e.g., increasing the minimum order levels for clients to be entitled to free delivery), resulting in the dilution of sales expenses as a percentage of net revenues. Adjusted net income totaled R$39.5 million in 2007, 80.3% more than the R$21.9 million recorded in the previous year, with a margin of 14.2%. Lastly, we believe our growth strategy is further validated by our managerial ROCE (Return on Capital Employed) and net operating cash flow generation, which reached 38.7% and R$40.4 million, respectively, in 2007, excluding IPO expenses. The following table shows the ROCE calculation using our effective income tax rate for These amounts are unaudited and merely intended as a managerial measure of the Company's Return on Capital Employed: % Healthcare ROCE using effective income tax rate 2007 (R$ x 1,000) 68.4% Sales Mix % Manufactured 79.4% 20.6% Third-party 84.4% 15.6% The growth in the number of customers served by Cremer across various channels resulted in a client base of 50,114 in 2007, 21.7% higher than in Gross Profit + Financial Discounts (1) 89,310 Sale expenses (38,441) Adm. and General expenses (2) (12,439) EBIT 38,430 Income Taxes paid (3) (336) NOPLAT 38,094 Receivables 57,209 Inventories 27,676 Suppliers (17,946) Salary s and benefits payable (3,328) Taxes payable (4,658) Working Capital (4) 58,953 Fixed Assets 39,406 Capital Employed 98,359 Estimated Gerential ROCE 2007 Annualized 38.7% (1) Year-to-date 2007 (2) Excluding goodwill amortization (3) Income Tax paid by Plásticos Cremer S.A. (4) Excluding Cash If we had used a marginal income tax rate of 24%, our ROCE would have been 29.7%. 3

5 Management Report Financial Results: Revenues The following table shows our gross revenues by segment evolution: Variation Variation Gross Revenues (R$ x 1,000) 1Q06 2Q06 3Q06 4Q Q07 2Q07 3Q07 4Q x Q06 x 4Q07 3 rd party Products 16,562 17,593 21,551 20,899 76,605 22,774 23,683 25,801 27,107 99, % 29.7% Manufactured Healthcare Products (1) 43,759 44,251 47,897 47, ,975 46,974 49,796 50,372 51, , % 9.5% Total Disposable Healthcare Products 60,321 61,844 69,448 67, ,580 69,748 73,479 76,173 78, , % 15.7% Industrial Adhesives (2) 11,257 11,806 13,590 13,359 50,012 13,297 14,806 16,032 14,186 58, % 6.2% Plastics (3) 2,787 2,949 2,974 2,826 11,536 2,653 3,392 3,000 2,301 11, % -18.6% Total Adhesives + Plastics 14,044 14,755 16,564 16,185 61,548 15,950 18,198 19,032 16,487 69, % 1.9% Total Manufactured Healthcare Products (1+2+3) 57,803 59,006 64,461 63, ,523 62,924 67,994 69,404 68, , % 7.5% Total Gross Revenues 74,365 76,599 86,012 84, ,128 85,698 91,677 95,205 95, , % 13.0% gross revenues in 2007 grew by 14.5%, from R$321.1 million in 2006 to R$367.7 million. Third-party product margins increased and revenues underwent accelerated growth, rising by 29.7% over 2006 to R$99.4 million. Manufactured product revenues posted growth of 9.7% in 2007, reaching R$268.3 million. Third-party products: Cross selling and the introduction of new items throughout 2007 drove revenue growth. We continued to increase cross selling efforts, expand our product line and grow our customer base. We established 6 new partnerships with suppliers in 4Q07 and added 120 items to the portfolio. Manufactured healthcare products: Manufactured healthcare product sales grew by 8.6% over Growth was below expectations, especially in the retail channel, where we believe there is substantial growth potential. In 4Q07, we implemented a change in the organizational structure by hiring a national manager of large retail accounts aiming at reversing this scenario in Industrial adhesives: Revenues from industrial adhesives continued to grow, mainly driven by the introduction of new items throughout 2006 and 2007 and our aggressive sales policy in masking and BOPP tapes (packaging tapes), which complement our mix. Plastics: Plásticos Cremer recorded 2007 revenues of R$11.3 million, 1.7% down on In this segment, we prioritized more profitable customers, resulting in EBITDA growth of 40%, from R$1.2 million in 2006 to R$1.7 million in Net operating revenues: Net Operating Revenues increased 14.2% in 2007, to R$277.1 million, from R$242.6 million in Variation Variation Net Operating Revenues (R$ x 1,000) 1Q06 2Q06 3Q06 4Q Q07 2Q07 3Q07 4Q x Q06 x 4Q07 3 rd party Products 12,788 13,671 16,457 16,064 58,980 17,407 18,176 19,708 20,554 75, % 28.0% Manufactured Healthcare Products (1) 33,142 33,303 35,949 35, ,512 35,206 37,553 37,830 38, , % 9.7% Total Disposable Healthcare Products 45,930 46,974 52,406 51, ,492 52,613 55,729 57,538 59, , % 15.4% Industrial Adhesives (2) 8,530 8,929 10,225 9,964 37,648 10,028 11,107 11,992 10,857 43, % 9.0% Plastics (3) 2,052 2,183 2,154 2,098 8,487 1,937 2,418 2,192 1,634 8, % -22.1% Total Adhesives + Plastics 10,582 11,112 12,379 12,062 46,135 11,965 13,525 14,184 12,491 52, % 3.6% Total Manufactured Products (1+2+3) 43,724 44,415 48,328 47, ,647 47,171 51,078 52,014 51, , % 8.1% Total Net Operating Revenues 56,512 58,086 64,785 63, ,627 64,578 69,254 71,722 71, , % 13.2% Cost of goods sold: The cost of goods sold grew by 14.9%, from R$180.7 million in 2006 to R$207.6 million in As a percentage of net revenues, COGS edged up from 74.5% to 74.9% in the same period. The following table gives a breakdown of COGS for the periods in question, as well as the variation in each COGS component and its percentage of total net revenues: Variation Variation Cost of Goods Sold (R$ x 1.000) 1Q06 2Q06 3Q06 4Q Q07 2Q07 3Q07 4Q x Q06 x 4Q07 3 rd party Products cost 13,543 15,149 17,924 17,614 64,230 18,893 19,672 21,545 22,439 82, % 27.4% Manufactured products cost 27,350 28,190 30,171 30, ,471 28,938 31,848 31,859 32, , % 5.3% Personnel 6,389 6,818 7,003 7,571 27,781 7,032 7,856 7,985 8,863 31, % 17.1% Other Raw Material 6,369 6,714 7,704 8,146 28,933 7,484 8,645 8,496 7,962 32, % -2.3% 3 rd party services and packaging 3,640 3,767 4,204 4,132 15,743 4,199 4,424 4,663 4,765 18, % 15.3% Cotton 3,284 3,610 4,187 3,875 14,956 4,052 4,339 4,319 4,250 16, % 9.7% Other 2,701 2,732 3,034 3,043 11,510 2,771 3,012 3,019 3,110 11, % 2.2% Electricity 2,634 2,571 2,436 2,509 10,150 2,184 2,551 2,459 2,487 9, % -0.9% Depreciation 2,333 1,978 1,603 1,484 7,398 1,216 1, , % -36.0% Total Cost of Goods Sold 40,893 43,339 48,095 48, ,701 47,831 51,520 53,404 54, , % 13.3% Cost of Goods Sold / Net Revenues Variation Variation (% of Net Revenues) 1Q06 2Q06 3Q06 4Q Q07 2Q07 3Q07 4Q x Q06 x 4Q07 3 rd party Products cost 24.0% 26.1% 27.7% 27.9% 26.5% 29.3% 28.4% 30.0% 31.4% 29.8% 3.3 p.p. 3.5 p.p. Manufactured products cost 48.4% 48.5% 46.6% 48.6% 48.0% 44.8% 46.0% 44.4% 45.3% 45.1% -2.9 p.p p.p. Personnel 11.3% 11.7% 10.8% 12.0% 11.5% 10.9% 11.3% 11.1% 12.4% 11.5% 0 p.p. 0.4 p.p. Other Raw Material 11.3% 11.6% 11.9% 12.9% 11.9% 11.6% 12.5% 11.8% 11.1% 11.8% -0.1 p.p p.p. 3 rd party services and packaging 6.4% 6.5% 6.5% 6.5% 6.5% 6.5% 6.4% 6.5% 6.7% 6.5% 0 p.p. 0.2 p.p. Cotton 5.8% 6.2% 6.5% 6.1% 6.2% 6.3% 6.3% 6.0% 5.9% 6.1% -0.1 p.p p.p. Other 4.8% 4.7% 4.7% 4.8% 4.7% 4.3% 4.3% 4.2% 4.3% 4.3% -0.4 p.p p.p. Electricity 4.7% 4.4% 3.8% 4.0% 4.2% 3.4% 3.7% 3.4% 3.5% 3.5% -0.7 p.p p.p. Depreciation 4.1% 3.4% 2.5% 2.3% 3.0% 1.9% 1.5% 1.3% 1.3% 1.5% -1.5 p.p. -1 p.p. Total Cost of Goods Sold 72.4% 74.6% 74.2% 76.5% 74.5% 74.1% 74.4% 74.5% 76.6% 74.9% 0.4 p.p. 0.1 p.p. The increase in COGS for third-party products was driven mainly by increased healthcare product distribution revenues and the addition of new products to our portfolio. As a percentage of total net revenues, thirdparty COGS rose from 26.5% in 2006 to 29.8% in As a managerial measure, discounts obtained from the prepayment of goods from certain suppliers are considered in our Gross Margin, despite being booked in BRGAAP under financial revenues in line with the prevailing legislation. Adjusted for these discounts in 2006 and 2007, third-party COGS totaled R$62,774 million in 2007 (22.7% of total net revenues) and R$49,969 million in 2006 (20.6% of total net revenues). Personnel costs rose 14.2%, mainly due to wage increases under the collective bargaining agreements in 2006 and 2007 and the expansion of the workforce, although they remained unchanged as a percentage of net revenues. We closed the year with 2,266 employees, 232 more than in 2006 in the textile, adhesive and plastic production areas. Other raw material, third-party service, packaging and cotton costs increased in absolute terms, but remained virtually stable as a percentage of net revenues. Depreciation expenses have been falling steadily in recent quarters due to the end of the depreciation schedule on some of our manufacturing equipment. Gross Profit: Driven by the factors above, 2007 gross profit grew by 12.3%, from R$61.9 million in 2006 to R$69.5 million. For managerial purposes, we also measure gross profit after excluding the non-cash impact of depreciation and adding financial discounts obtained from the prepayment of invoices from the purchase of goods from certain suppliers, which are booked under financial revenues. Adopting this criteria, 2007 gross profit came to R$93.4 million (33.7% of net revenues), 11.8% up on the R$83.6 million (34.4% of net revenues) recorded in The decline in the adjusted gross margin resulted from the higher share of third-party products in the sales mix. Gross Profit + Financial Discounts Variation Variation + Depreciation (R$ x 1.000) 1Q06 2Q06 3Q06 4Q Q07 2Q07 3Q07 4Q x Q06 x 4Q07 Gross Profit 15,619 14,747 16,690 14,870 61,926 16,747 17,734 18,318 16,736 69, % 12.5% (+) Financial Discounts 2,666 3,356 4,174 4,065 14,261 4,529 4,687 5,080 5,479 19, % 34.8% (+) Depreciation 2,333 1,978 1,603 1,484 7,398 1,216 1, , % -36.0% Gross Profit + Financial Discounts + Depreciation 20,618 20,081 22,467 20,419 83,585 22,492 23,442 24,316 23,165 93, % 13.4% % of Net Revenue 36.5% 34.6% 34.7% 32.3% 34.4% 34.8% 33.8% 33.9% 32.4% 33.7% -0.7 p.p. 0.1 p.p. For managerial purposes, we also measure the profitability of our products by eliminating the non-cash impact of depreciation on gross profit and adding financial discounts obtained from the prepayment of goods, which we consider financial income for purposes of the preparation of our financial statements in accordance with Brazilian GAAP. Inclusion of this income better represents our gross profit since we understand that the income is part of our business cycle and is recurring to the extent that suppliers continue to offer us significant discounts upon the prepayment of accounts payable. Gross profit adjusted for depreciation and discounts is not a measure of financial performance according to Brazilian GAAP, and should not be considered individually or as an alternative to net income as a measure of operating performance, or as an alternative to operating cash flows, or as a measure of liquidity. Operating Revenues (Expenses): Selling and administrative expenses rose from R$59.6 million in 2006 to R$67.0 million in 2007, driven mainly by higher selling expenses, as follows: Selling expenses: Selling expenses climbed by 20.1% from R$32.0 million (13.2% of net revenues) in 2006, to R$38.4 million in 2007 (13.9% of net revenues). We expanded our sales and distribution platform in 3Q07, hiring new call center personnel to accelerate future growth, especially in the dental channel, where we believe margins and growth potential are attractive. We also accelerated our marketing initiatives, including sending direct mail to approximately 170 thousand dentists. We expect a dilution of selling expenses as a percentage of revenues as new members of our sales team become more productive and generate incremental revenues. In 2007, 112 employees were hired to work in the call center, including operators and back office workers. Administrative expenses: Administrative expenses increased by 3.4% compared to 2006, reaching R$28.6 million (R$16.1 million of which representing goodwill amortization). As a percentage of net revenues, however, administrative expenses fell by 1.1 p.p. over 2006, despite additional costs from the IPO and the appointment of our board of directors, as well as expenses related to newly created investor relations department. Financial Result:The financial result was positive by R$13.9 million in 2007, 601.3% higher than in 2006, primarily due to the investment of the IPO proceeds and the increasing cash flow from operations. Operating Result: We posted an operating loss of R$6.7 million, due to R$23.9 million IPO expenses incurred in the second quarter. If we exclude these expenses, we would have recorded an annual operating income of R$17.1 million, 154% higher than in Income Tax and Social Contribution Tax on Net Income: Deferred income and social contribution taxes totaled R$2.3 million in 2007 and R$0.3 million was the amount provisioned. Income tax and social contribution payments were due to the profit obtained 4

6 Management Report by the subsidiary Plásticos Cremer SA. Net Income (Loss): The Company posted a 2007 net loss of R$4.6 million. Adjusted Net Income: Adjusted net income is equivalent to net income plus the non-cash goodwill amortization from the acquisition of Cremer in April 2004, excluding the non-recurring expenses related to the IPO, the non-recurring financial expenses related to the pre-payment of debt with ABN Amro and deferred income taxes. Adjusted net income totaled R$39.5 million in 2007, 80.3% higher than in 2006, accompanied by an adjusted net margin of 14.2%, against 9.0% in Variation Variation Adjusted Net Income (R$ x 1.000) 1Q06 2Q06 3Q06 4Q Q07 2Q07 3Q07 4Q x Q06 x 4Q07 Net Income ,919 1,212 4,182 1,928-16,786 6,358 3,873-4, % 219.6% Goodwil Amortization 4,033 4,034 4,033 4,034 16,134 4,033 4,034 4,033 4,034 16,134 0,0% 0.0% IPO related expenses , , , % % ABN Financial Expenses , , % 0.0% Deferred Income Tax ,320 3,145 2,160-3, % 0.0% Adjusted Net Income 5,053 3,983 7,117 5,748 21,901 6,370 9,524 13,515 10,067 39, % 75.1% % of Net Revenue 8.9% 6.9% 11.0% 9.1% 9.0% 9.9% 13.8% 18.8% 14.1% 14.2% 5.2 p.p. 5 p.p. In order to calculate adjusted net income, we add goodwill amortization to net income or net loss plus non-recurring expenses related to the IPO and the pre-payment fees of the ABN Amro debt. We believe that this adjusted net income better represents our results, to the extent that goodwill is not related to our core business but to our change of control in April 2004, while the non-recurring expenses, due to their nature, will not recur. Our quarterly Adjusted Net Income also excludes provisions for the annual profit-sharing program. Adjusted Net Income is not a measure of financial performance according to Brazilian GAAP, and should not be considered individually or as an alternative to net income as a measure of operating performance, or as an alternative to operating cash flow, or as a measure of liquidity. Adjusted EBITDA: Adjusted EBITDA before variable compensation totaled R$45.7 million, 6.3% higher than in Adjusted EBITDA after variable compensation amounted to R$45.0 million in 2007, 6.1% higher than in As mentioned above, in 3Q07 we expanded our marketing initiatives and our call center platform, adding and training new personnel to accelerate future growth, especially in the dental channel. We believe these expenses will decline as a percentage of net revenues as incremental revenues are generated in the following quarters. Variation Variation Adjusted EBITDA Conciliation (R$ x 1.000) 1Q06 2Q06 3Q06 4Q Q07 2Q07 3Q07 4Q x Q06 x 4Q07 Net Income ,919 1,212 4,182 1,928-16,786 6,358 3,873-4, % 219.6% (+) income tax and social contribution , , ,498 3,327 2,231-1, % 163.7% (+) Net Financial expenses ,799-1,975-1,123 2,477-7,998-7,207-13, % 300.6% (+) Depreciation and amortization 6,960 6,562 6,174 6,046 25,742 5,734 5,514 5,404 5,470 22, % -9.5% (+) Discounts from early payments 2,666 3,356 4,174 4,066 14,262 4,529 4,688 5,080 5,478 19, % 34.7% (+) Other % 798.0% EBITDA 11,545 8,785 13,837 10,422 44,589 12,051-12,605 12,317 10,303 22, % -1.1% (+) Non operating income % (+) Other operating expenses (income) ,145-1,577-1,146-2, , , % -76.1% Adjusted EBITDA after Variable Compensation 10,640 10,054 12,446 9,276 42,416 11,814 11,213 11,999 9,996 45, % 7.8% % of Net Revenue 18.8% 17.3% 19.2% 14.7% 17.5% 18.3% 16.2% 16.7% 14.0% 16.2% -1.2 p.p p.p. Adjusted EBITDA before Variable Compensation 43,016 45, % % of Net Revenue 17.7% 16.5% -1.2 p.p. The inclusion of EBITDA and Adjusted EBITDA information is intended to present a measure of our operational performance. Our EBITDA means earnings before interest, income tax and social contribution, depreciation and amortization, and includes financial discounts from the prepayment of accounts payable of certain purchased goods, which we consider financial income for purposes of preparation of our financial statements in accordance with Brazilian GAAP. Inclusion of this income better represents our EBITDA since we understand that the income is part of our business cycle and is recurring to the extent that suppliers continue to offer us significant discounts upon the prepayment of accounts payable. Adjusted EBITDA excludes non-recurring expenses and revenues and items not belonging to our core business. Quarterly EBITDA and Adjusted EBITDA do not include provisions for the annual profit sharing program. Neither EBITDA nor Adjusted EBITDA is a measure of financial performance according to Brazilian GAAP, and should not be considered individually or as an alternative to net income as a measure of operating performance, or as an alternative to operating cash flows, or as a measure of liquidity. Indebtedness: The company did not hold a net debt position at the close of We held a net cash position of R$159.2 million, taking into account our bank debt, short and long-term taxes payable, cash position and financial investments. The Company has no significant foreign-exchange exposure. Capital Expenditure: The Company invested R$8.3 million in fixed assets in 2007, mainly for upgrading and expanding IT resources, expanding the call center and refurbishing and acquiring machinery for our production units. Cash Flow: Net cash flow from operating activities totaled R$16.6 million in 2007, or R$40.4 million if we exclude the IPO expenses, 129.2% higher than in We have been able to finance our growth while also generating cash. Financial and Operating Cycles-Average Inventory Turnover Period: The average inventory turnover period in the final quarter of 2007 recorded a decline over the same period in 2006, as a result of increased sales of third-party products. In comparison with the 3Q07, however, the inventory turnover period increased due to two reasons. Firstly, we usually take advantage of market opportunities in December to undertake purchases at more attractive prices, using our cash position to build up inventories to cover collective vacations at our suppliers. Secondly, we increased our cotton inventory by around R$2.5 million, in conformity with the Federal Government Loan (EGF), which is a low-interest loan backed by physical cotton stocks. Average purchase Payment (days) Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 Logistics: The Company has 13 Distribution Centers in different states (11 for healthcare products and 2 for industrial adhesives), and is the only company in the segment with nationwide coverage. In 2007 we expanded two DC s (in Rio Grande do Sul and Minas Gerais) and further expansions are already planned. As a result, we will be able to ensure fast and reliable deliveries to our clients. The map below shows the locations of our Distribution Centers. Average Inventory Turnover (days) Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 Average Receivable Collection Period: The average receivable collection period improved in 4Q07. As we mentioned in our previous release, this improvement was expected since the 3Q07 closed on a weekend, slightly increasing the average receivable collection period. Average Receivable Collection (days) Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 Average Purchase Payment Period: The average payment period for purchases improved significantly in 4Q07 (approximately 4 days), returning to historical levels. Cremer S.A. closed 2007 with 2,151 employees (21.3% more than in 2006) allocated to the textile and adhesive plants, the call center and administrative area (in Blumenau/SC) and the Distribution Centers in different states. In addition, the wholly-owned subsidiary Plásticos Cremer S.A. has 115 employees, totalling a consolidated workforce of 2,266 people, 19.6% up on Turnover: Our average monthly turnover at Cremer S.A. was 3.3%, 1.1p.p. over The number at Plásticos Cremer was 3.2%, 1.0p.p. over Payroll: The 2007 payroll, including wages, taxes and employee benefits and bonus payments totaled R$48.3 million versus R$40.1 million in Benefits: All Cremer s employees have access to a PGBL-type (flexible premium-deferred annuity plan) sponsored by the Company and established by Real Vida e Previdência S.A. Other benefits include transportation vouchers, meal tickets and childcare assistance, a health care plan, life insurance, a dental plan and reduced-cost medicines, plus agreements with language schools, universities and bookstores. Education: Our employees have the following education levels: primary education completed 33%, secondary education completed 51%, university degrees 15%; post-graduate courses and degrees 1%. Training: In 2007, the Company invested R$78,000 in our employees training and qualification programs. Productivity: In 2007, the productivity per employee ratio increased 6.2% in the textile area after adjustments for product mix variations, 10% in the adhesive area and 20.5% in the wholly-owned subsidiary Plásticos Cremer. 5

7 Management Report Statement of Added Value Years ended on december 31, 2007 and 2006 Revenues Sales of goods and services (-) devolutions 363, ,681 Reversal of the provision for doubtful accounts Non-Operating Revenues , ,066 Inputs Acquired From Third Parties Consumed raw materials 82,795 77,245 Cost of services and goods sold 105,664 82,172 Material, energy, third-party services and other 83,631 58, , ,169 Gross Added-Value 92,006 99,897 Retentions Depreciation and amortization 22,032 25,634 Net Added-Value Produced 69,974 74,263 Added-Value Received In Transfer Financial Revenues 31,699 17,477 Total Added-Value To Distribute 101,673 91,740 Added-Value Distribution 101,673 91,740 Personnel and charges 41,223 34,733 Taxes, rates and contributions 47,861 38,590 Interest and rentals 17,216 14,235 Interest on own capital and dividends 2,870 Retained profit (losses) (4,627) 1,312 Capital Market: We held our IPO on April 30, 2007, raising more than R$550 million. Since then, our share price (CREM3) has declined by 5.7%, closing the year at R$ In 4Q07, daily number of trades and volume reached 67 and R$3.7 million respectively. We have a very broad shareholder base, with our largest shareholder holding around 5.5% of our capital. Our free float is approximately 96%. Volume of negotiaded shares (x1.000) /may 30/may 14/jun 29/jun 14/jul 30/apr 29/jul 13/aug 28/aug Volume Cremer 27/oct 11/nov 26/nov 11/dec 26/dec 12/sep 27/sep 12/oct Cremer Subsidiaries and Associated Companies: On December 31, 2007 the Company s subsidiaries were Plásticos Cremer S.A., Cremer International, Ltd., (both wholly-owned) and Transportes Hasse Comércio e Representações Ltda., of which it owns a 99.99% stake. Plásticos Cremer S.A. is the only operational subsidiary. CVM Instruction 381/03: Pursuant to Subsections I to IV of Article 2 of CVM Instruction 381/03, the Company hereby declares that its independent auditors did not provide any services that were not related to auditing the Company s financial statements. Price per share Balance Sheet as of December 31, 2007 and 2006 (In thousands of Brazilian reais - R$) Parent Company Assets Note Currents Assets Cash and Cash equivalents 4 182,933 18, ,159 18,328 Clients 5 45,013 38,530 45,982 39,775 Inventories 7 27,230 26,212 27,676 26,591 Recoverable Taxes 6 4,865 1,778 5,025 1,889 Deferred Taxes 9 4,018 1,449 4,156 1,671 Others Accounts Receivable 1,973 2,033 2,046 1,464 Prepaid Expenses Total Currents Assets 266,504 88, ,519 90,056 Non-current Assets Long-Term Assets Deferred Taxes 9 41,174 41,320 41,838 42,030 Recoverable Taxes Affiliated Company Others Accounts 10 2,105 2,664 2,106 2,665 43,982 44,498 44,675 45,214 Permanent assets Investments 11 7,132 6, Property, Plant and Equipments 12 37,154 34,850 39,406 36,963 Deferred Charges 13 32,692 48,636 32,692 48,636 Total Non-current Assets 120, , , ,813 Total Assets 387, , , ,869 Parent Company Liabilities And Shareholders' Equity Note Currents Liabilities Trade accounts payable 15 17,616 14,911 17,946 15,307 Loans and Financing 14 4,287 6,074 4,287 6,074 Payroll and related charges 7,412 6,175 7,755 6,591 Taxes payable 16 4,570 4,233 4,658 4,331 Profits sharing payable - 2,870-2,870 Provisions 2,420 1,393 2,493 1,446 Other payable Total Currents Liabilities 36,653 35,984 37,554 37,025 Non-Current Liabilities Loans and financing 14 7,428 50,269 7,428 50,269 Negotiated Taxes 16 10,031 12,529 10,031 12,529 Intercompany loans 8 6,788 6, Reserve for contingencies 17 3,692 4,259 7,407 7,846 Other payable 20 1, ,060 Total non-current liabilities 27,959 74,507 24,886 71,704 Shareholder's Equity Capital ,626 70, ,626 70,000 Tax Incentives Capital Reserves 192,020 41, ,020 41,307 Accumulated deficit (4,627) - (4,627) - Total shareholders' equity 322, , , ,140 Total Liabilities and Shareholders' Equity 387, , , ,869 The accompanying notes are an integral part of these financial statements Statements of Changes In Shareholders' Equity for the years ended December 31, 2007 and 2006 (In thousands of Brazilian reais - R$) Capital Reserves Retained earnings Tax Goodwill Treasury (accumulated Note Capital Incentives Reserve shares deficit) Total Balances as of December 31, , ,482 (62,175) (1,312) 110,828 Treasury shares 18.a (62,175) 62,175 - Income for the year 4,182 4,182 Proposed dividends (2,870) (2,870) Balances as of December 31, , , ,140 Increase in capital stocks 18.d 64, , ,339 Loss for the year (4,627) (4,627) Balances as of December 31, , ,020 - (4,627) 322,852 The accompanying notes are an integral part of these financial statements 6

8 Statements Of Operations For the years ended December 31, 2007 and 2006 (In thousands of Brazilian reais - R$) Company Gross Sales Note Domestic Market 348, , , ,548 Foreign market 7,604 8,192 7,966 8, , , , ,128 Taxes, returns and discounts (87,457) (75,345) (90,595) (78,501) Net Sales 269, , , ,627 Cost of Sales (201,901) (174,474) (207,581) (180,701) Gross Profit 67,140 59,642 69,535 61,926 Operating Income (Expenses) Selling (37,766) (30,940) (38,441) (32,008) Administrative (10,577) (9,377) (10,917) (9,706) Management fees 25 (1,521) (1,795) (1,522) (1,796) Goodwill amortization (16,134) (16,134) (16,134) (16,134) Other operating expenses 20 (23,384) 2,274 (23,117) 2,480 Equity in subsidiaries 11 1, Provision for unsecured liabilities (87,907) (55,073) (90,131) (57,164) Income (Loss) From Operations Before Financial ( Expenses) Income (20,767) 4,569 (20,596) 4,762 Financial income 19 31,345 17,194 31,371 17,259 Financial expenses (17,979) (15,543) (17,723) (15,440) Exchange variation assets Exchange variation liabilities (125) (62) (125) (62) 13,578 1,802 13,851 1,975 Income (Loss) From Operations (7,189) 6,371 (6,745) 6,737 Revenues (Expenses) Non-Operating Income 139 (321) 161 (307) Income (Loss) Before Tax/Holding (7,050) 6,050 (6,584) 6,430 Provision for income tax and social contribution 9.b - (318) (336) (636) Deferred income tax 9.b 2,423 (1,550) 2,293 (1,612) Income (Loss) For The Period (4,627) 4,182 (4,627) 4,182 Earnings (Loss) Per Thousand Shares (137,39) 195,66 The accompanying notes are an integral part of these financial statements Statements Of Changes In Financial Position For the years ended December 31, 2007 and 2006 (In thousands of Brazilian reais - R$) Company Sources of Funds Note From Operations: Net income (loss) (4,627) 4,182 (4,627) 4,182 Items not affecting working capital: Depreciation and amortization 21,714 25,321 22,032 25,634 Deferred tax credits 9.b (2,423) 1,550 (2,293) 1,612 Recognition of reserve for contingencies 17 (620) (1,720) (908) (1,726) Equity in subsidiaries 11 (1,382) (858) - - Reversal of provision for subsidiaries' shareholders' deficit 11 (93) (41) - - Net book value of permanent assets written off Monetary variation on long-term items 12,417 1,520 12,836 2,561 Total provided by (used in) operations 25,061 30,519 27,115 32,829 From shareholders: Capital subscription 18.d 64,626-64,626 - Previous year adjustment 18.d 150, ,713 - From third parties: Loans 11, , Others increase in long-term liabilities Other write-offs-non-current assets Received dividends Interest on own capital - associated companies Loans from associated companies - 1, Transfer of receivables for current assets 2,900-2,816 - Total Shareholders' and third parties 230,110 2, , Total Sources 255,171 33, ,727 33,530 Uses of Funds Additions to property, plant and equipment 7,866 4,291 8,323 4,528 In the deferred Proposed dividends - 2,870-2,870 Increase in long-term assets - 1,494 1,477 Decrease in long-term liabilities Transfer of loans for the current liabilities account 65,246-65,246 - Others transfer of liabilities for the current liabilities account 4,096 3,346 4,096 4,463 Total Uses of funds 77,842 12,235 78,793 13,572 Increase In Working Capital 177,329 21, ,934 19,958 Variation Of Current Assets At end of year: Current assets 266,504 88, ,519 90,056 Current liabilities 36,653 35,984 37,554 37, ,851 52, ,965 53,031 At beginning of year 52,522 31,455 53,031 33,073 Increase In Working Capital 177,329 21, ,934 19,958 The accompanying notes are an integral part of these financial statements Explanatory Notes To The Financial Statements for the years closed on December 31, 2007 and 2006 (Amounts expressed in thousands of reais, except when otherwise stated) 1. Operations: The corporate purposes of Cremer S.A. ( Cremer or Company ) are the exploration of the industry and trade of textile (fabric and non-fabric), surgical and hospital products, surgical and industrial pads, cosmetics, toiletry and personal care items, as well as export and import of related products. On March 8, 2007, the Company and the shareholder Cremer Holdings, LLC filed a request at CVM for a primary and secondary public offering CVM Proceeding no. 2007/1886. The offering was held in the non-organized over-the-counter market, in Brazil, pursuant to CVM Rule no. 400/03 and also with efforts of placement abroad, based on registry exemptions set forth in the U.S. Securities Act of The offering was not carried out at the Securities and Exchange Commission or at any other agency or regulatory body of any country s capital markets except Brazil. In the Primary Offering, 12,000,000 registered common shares were released, and in the Secondary Offering 17,020,348 registered common shares were offered, all of which owned by Cremer Holdings, LLC. On April 26 the price of the Company s shares was determined at R$17.50 per share. On April 27, following the subscription of shares relative to the Primary Offering, the capital increase of the Company was authorized by 12,000,000 shares, equivalent to R$63,000. In addition, 305,090 shares were issued in the second quarter, representing an amount equivalent to R$1,626, to meet the Stock Option Plan carried out by the management. Hence, the Company s capital is now R$134,626, represented by 33,678,512 registered common shares. The amount of R$150,713 was accounted for at premium on the subscription of shares. Since April 30, 2007, the Company s shares are traded on the Novo Mercado (New Market) segment of the São Paulo Stock Exchange (Bovespa) under stock symbol CREM3. 2. Presentation Of The Financial Statements: The financial statements were prepared and are presented in compliance with the Brazilian accounting practices, and the rules issued by the Brazilian Securities and Exchange Commission (CVM). Financial Statements: This information was prepared in accordance with the consolidation principles provided for in the Brazilian accounting practices and rules issued by the Brazilian Securities and Exchange Commission (CVM). The interest of the parent company in the shareholders equity of subsidiaries was not included, as well as assets and liabilities balances, revenues, costs and expenses arising from intercompany transactions. The consolidated financial statements include the financial statements of the parent company Cremer S.A. and of its Subsidiaries, which are presented in Note 11. The financial statements of the subsidiaries was prepared in accordance with the accounting practices adopted by the parent company and the period closing date for all companies included in the consolidation is December 31, 2007 and Main Accounting Practices: (a) Financial investments: These refer to fixed income short-term investments, with redemption maturities of less than ninety days and yield rate pegged to CDI, recorded at acquisition value plus income accrued until the balance sheet date, as detailed in Note 4. (b) Allowance for doubtful accounts: This is composed of an amount deemed sufficient to cover possible losses in realization of receivables, according to the criteria described in Note 5. (c) Inventories: Inventories are evaluated at average acquisition or production cost, lower than the replacement cost and the net realizable value. Imported inventories in transit are recognized on the date the supplier forwards the products to the Company. The breakdown of main accounts under this item is described in Note 6. (d) Related Parties (assets and liabilities): Loan operations include financial charges incurred until the balance sheet date and are described in Note 8. (e) Current and deferred income tax and social contribution: Current income tax and social contribution are calculated based on effective rates of income tax and social contribution on net income, taking into account tax loss carryforwards and negative basis of social contribution, limited to 30% of taxable income based on accounting records. Deferred income tax and social contribution derive from tax losses, negative basis of social contribution and temporary differences. Such credits take into account the future expectation of generating taxable income and are calculated based on current prevailing rates pursuant to tax legislation, as described in Note 9. (f) Investments: Investments in subsidiaries are assessed by the equity accounting method, except for the investments in the subsidiary Transportes Hasse Com.Repres.Ltda (Note 11), which are assessed at acquisition cost, net of provision to adjust them to the realizable value, when applicable. (g) Property, plant and equipment: This is recorded at the acquisition or construction cost, net of depreciation, calculated by the straight-line method according to the rates described in Note 12. When applicable, the interest used to finance the construction of property, plant and equipment is capitalized. (h) Deferred charges: These mainly refer to the amount of goodwill recorded in the parent company s net assets incorporated, which has been amortized on the straight-line method for 5 years. The amortization value is recorded as administrative expenses, as described in Note 13. (i) Current and long-term liabilities: These are stated at known or determinable amounts, plus corresponding financial charges, monetary and exchange variation incurred until the balance sheet dates, when applicable. (j) Loans and financing: These are recorded at original amounts of funding, monetarily restated at indexes agreed upon with creditors, plus interest appropriated until the balance sheet dates, as described in Note 14. (k) Provision for contingencies: Provision for contingencies is recorded at an amount deemed sufficient by the Management, seconded by its legal counsel, to cover probable losses, being restated until the balance sheet dates, observing the nature of each contingency and based on the opinion of the Company s legal counsel. The grounds and nature of provision for contingencies are described in Note 17. (l) Use of estimates: The elaboration of the financial statements requires that Management uses estimates and adopts premises, at its best discretion, which affect the presented amounts regarding certain assets, liabilities and other transactions, such as the determination of the depreciation rates of property, plant and equipment, amortization of the deferred and provisions needed for contingent liabilities, among others. (m) Determination of net income: Net income is determined on an accrual basis, including earnings, charges and exchange variation at official rates, levied on current and long-term assets and liabilities, and also, when applicable, including the effects of asset adjustments to the realizable value. 7

9 Explanatory Notes To The Financial Statements for the years closed on December 31, 2007 and 2006 (Amounts expressed in thousands of reais, except when otherwise stated) 4. Cash And Cash Equivalents:The Company has current account deposits and financial investments in short-term funds, with an average yield of 101% of CDI interest rate. Cash and Banks 9,172 5,699 9,398 5,850 Financial investments 173,761 12, ,761 12,478 Cash and Cash Equivalents 182,933 18, ,159 18, Trade Accounts Receivable Accounts receivable Domestic market 45,560 38,688 46,658 40,174 Accounts receivable Foreign market 1,158 1,255 1,197 1,309 46,718 39,943 47,855 41,483 Advance from export contract - ACE - (380) - (380) Allowance for doubtful accounts (1,705) (1,033) (1,873) (1,328) 45,013 38,530 45,982 39,775 The accounts receivable balance by maturity is as follows: Falling due 41,593 35,072 42,433 36,146 Until 30 days 2,119 2,578 2,198 2,670 From 31 to 60 days From 61 to 90 days From 91 to 180 days Over 180 days 1,705 1,033 1,873 1,320 Total accounts receivable 46,718 39,943 47,855 41,483 Allowance for doubtful accounts is recorded based on the individual analysis of significant past-due amounts. 6. Inventories Products for resale 7,621 7,564 7,621 7,564 Finished products 4,417 4,377 4,611 4,538 Products under development 4,161 4,266 4,219 4,338 Raw material 6,986 6,697 7,169 6,837 Packing material 1, , Imports in progress 1,464 1,200 1,464 1,200 Other materials 1,530 1,175 1,530 1,175 27,230 26,212 27,676 26, Recoverable Taxes ICMS (VAT Tax) 1,915 1,312 1,997 1,345 Income tax and social contribution 3, , IPI (Excise Tax) Pis/Cofins ,558 2,280 5,756 2,408 Current 4,865 1,778 5,025 1,889 Long-term Transactions With Related Parties 12/31/ /31/2006 Assets: Current assets: Trade accounts receivable - Plásticos Cremer S.A Other credits - Dividend receivable - Plásticos Cremer S.A Long-term assets: Loan - Cremer International Ltd Provision for unsecured liability - Cremer International Ltd. (535) (628) Liabilities: Long-term - Loan Plásticos Cremer S.A. 6,788 6,389 Result: Sales - Plásticos Cremer S.A ,796 Purchases - Plásticos Cremer S.A. 1,654 1,611 Financial expenses Cremer International (95) (41) Financial expenses Plásticos Cremer S.A. (719) (658) The loan agreement with Plásticos Cremer S.A. is restated at the average quotation of the CDI-CETIP interest rate, with undetermined maturity date. The loan agreement with Cremer International Ltd. is restated at the US dollar variation, plus annual interest of 6%, with maturity date on June 30, Income Tax And Social Contribution a) Deferred taxes Deferred income tax and social contribution assets were set up taking into account the effective rates on December 31, 2007, and are composed as follows: Deferred income tax assets On tax losses 29,265 27,627 29,651 28,337 On temporary differences 3,357 3,213 3,546 3,383 32,622 30,840 33,197 31,720 Deferred social contribution assets On negative basis 11,361 10,990 11,520 10,981 On temporary differences 1, ,277 1,000 12,570 11,929 12,797 11,981 45,192 42,769 45,994 43,701 Current installment 4,018 1,449 4,156 1,671 Non-current installment 41,174 41,320 41,838 42,030 The recording of tax credits is supported by the business plan of the Company and of its subsidiary Plásticos Cremer S.A., according to which the Company and its subsidiary will assess taxable income in future years, in amounts deemed sufficient by the management for the realization of these amounts. According to the business plan, these credits will be realized until On an annual basis, the Company s management reassesses the effective result of this business plan for the generation of taxable income and, consequently, it reassesses the expectation of realization of these recorded taxable credits. In compliance with CVM Resolution no. 273/98 and CVM Rule no. 371/02, the Management, based on its result projections, estimates that the tax credits recorded will be fully realized as follows: ,018 4, ,405 4, ,902 7, ,677 7, ,489 8, ,127 8, ,574 5,627 45,192 45,994 b) Income tax and social contribution on income Reconciliation of income tax and social contribution on income: Income (loss) before taxes (7,050) 6,050 (6,584) 6,430 Basic rate 34% 34% 34% 34% Basic rate revenue (expenses) 2,397 (2,057) 2,239 (2,186) Tax effect of permanent additions (exclusions): Equity pick-up Other (311) (103) (282) (62) Income tax and social contribution revenue (expenses) 2,423 (1,868) 1,957 (2,248) Current income tax and social contribution - (318) (336) (636) Deferred income tax and social contribution 2,423 (1,550) 2,293 (1,612) 10. Other Accounts Receivable Long-Term The chart below shows the breakdown of the main amounts composing the balance of other long-term accounts receivable. Receivable writs of payment (*) 1,577 1,678 1,577 1,678 Accounts receivable sale of permanent assets Other ,105 2,664 2,106 2,665 (*) Writ of payment to be received in 10 annual installments, restated until December 31, 2007, from which R$175 were recorded as current assets in 2007, as per explanatory note Investments In Subsidiaries The transactions performed in the accounts during the period may be represented as follows: 12/31/ /31/2006 Plásticos Cremer S.A. Cremer International Ltd. Transportes Hasse Ltda. Total Total Shareholders equity (unsecured liabilities) 7,132 (535) (17) Income for the year 1,382 (16) (11) Capital interest - % % % 99.99% Balance at the beginning of the year 6, ,141 5,933 Equity pick-up 1, , Dividends (650) Interest on own capital (391) - - (391) - Investment by equity pick-up 7, ,132 6,141 Balance at the beginning of the year - (628) - (628) (669) Reversal of provision for unsecured liabilities Provision for unsecured liabilities - (535) - (535) (628) The investment in the subsidiary Transportes Hasse Ltda. is evaluated at acquisition cost, net of provision for adjustment to the realizable value. The company has been idle since In December, 2007, Plásticos Cremer S.A. paid R$391, 28% of its net income, as interest on own capital, referring to year Property, Plant And Equipment Annual depreciation Restated Accumulated rates cost depreciation Net Land and improvements - 10,139-10,139 10,185 10,520 10,569 Buildings 4% 28,592 (15,590) 13,002 14,064 13,369 14,443 Facilities 20% 49,135 (44,694) 4,441 4,147 4,525 4,172 Machinery and accessories 20% 105,927 (100,641) 5,286 4,675 6,157 5,580 Furniture and fixtures 10% 5,155 (4,161) ,433 1,203 Vehicles 20% 672 (502) Construction in progress - 3,122-3, , ,742 (165,588) 37,154 34,850 39,406 36,963 Property and assets owned by the Company are used as collateral in judicial proceedings (seizure or judicial mortgage) at a book value of R$17,129. 8

10 Explanatory Notes To The Financial Statements for the years closed on December 31, 2007 and 2006 (Amounts expressed in thousands of reais, except when otherwise stated) 13. Deferred Charges and 12/31/ /31/2006 Goodwill on the acquisition of equity interest 80,670 80,670 Product research and development 15 - Studies and projects Accumulated amortization (48,495) (32,268) 32,692 48,636 The goodwill was generated in CremerPar when it acquired the Company s majority interest. Its economic basis is the Company s future profitability, amortized on the straight-line method within 5 years, or writtenoff in the event the conditions on which such a future profitability was based are not confirmed, permanently. 14. Loans And Financing and Charges Guarantees 12/31/ /31/2006 Amount Type Current: In local currency EGF - Unibanco 8.75% p.a. - Cotton 1,476 1,049 EGF ABN Amro 8.75% p.a. - Cotton 1,213 2,062 FINAME Banco do Brasil 11.8% p.a. - Machinery and trade notes PROCOMP-Votorantim 5.3% p.a.+tjlp - Promissory note 1,483 - CCB ABN Amro Real 19.68% p.a. - Trade notes - 2,848 Total current 4,287 6,074 Non-current: CCB - ABN Amro Real 19.68% p.a. 16,000 Trade notes - 50,000 FINAME Banco do Brasil 11.8% p.a. - Machinery and trade notes PROCOMP-Votorantim 5.3% p.a.+tjlp 11,257 Promissory note 7,236 - Total non-current 7,428 50,269 Total 11,715 56,343 CCB - Banking Credit Certificate EGF - Loan from the Federal Government CDC - Consumer Direct Credit PROCOMP - Competitiveness Program for Industrial Sector Companies FINAME - Special Agency for Industrial Financing On July 13, 2005, we issued a banking credit certificate in the benefit of Banco ABN Amro Real, in the total amount of R$50,000, with maturity date on February 22, 2010, and bearing interest at 19.68% p.a., daily capitalized and paid in March and September of every year. The banking credit certificate had accelerated payment clauses, including the change of the Company s share control. With the change of the Company s share control that took place on April 30, 2007, we have settled, in advance, the loan in the amount of R$58,357 in May On March 1, 2007, we contracted a financing with Banco Votorantim S.A., by means of the execution of a fixed credit agreement related to BNDES onlending supported by Programa BNDES Automático (Automatic BNDES Program) Competitiveness Program for Industrial Sector Companies/PROCOMP. The financing amounts to R$8,659. The payment schedule provides for grace period of 18 months for the amount of principal, which will be paid in monthly installments after this period. Interest will be paid on a quarterly basis in June 2007 and on a monthly basis after the grace period of principal, jointly with the installments of principal. The final maturity shall be in March The financial charges negotiated are Long-Term Interest Rate/TJLP, plus interest of 5.3% p.a.the financing is guaranteed by a promissory note issued by the Company, in the amount of R$11,257. Since we refer to financing of BNDES onlending, we undertake, in the fixed credit agreement, to comply with, where applicable, the Resolutions Applicable to the BNDES Agreements, approved by Resolution BNDES 665/1987, as amended, the content of which is available at the BNDES website. The agreement also has early maturity clauses, which may be declared by BNDES or Banco Votorantim S.A. in events such as: (a) in the following events as provided for in articles 133 and 1,425 of the Brazilian Civil Code: (a1) Article 333. (i) In the case of bankruptcy of the debtor, or composition with creditors; (ii) should the assets, mortgaged or pledged, be seized in execution by another creditor; (iii) should the debt guarantees, personal or secured guarantees, cease or become insufficient, and the debtor, summoned, refuse to reinforce them; (a2) Article The debt is deemed overdue: (i) should assets given as security deteriorate or depreciate, thus reducing guarantee, and the debtor, summoned, does not reinforce it or replace it; (ii) should the debtor face insolvency or bankruptcy; (iii) should installments are not promptly paid, whenever the payment is established that way. In this case, the later receipt of the overdue installment implies waiver by the creditor to his/her right of immediate execution; (iv) should the assets given as guarantee be extinguished and not replaced; (v) should the assets given as guarantee be expropriated, event in which the portion of the price necessary for the full payment to the creditor shall be deposited. (b) verification of any false declaration, information or document which has been signed, provided or delivered, respectively, by the Company; (c) protest of any bill not justified for more than 30 days, or the Company starts protection from creditors, or the Company s bankruptcy being required or declared; (d) changes or transfer of control of the Company s voting capital, as well as its incorporation, merger or spin-off, or substantial change in the Company s economic-financial condition, as determined by Banco Votorantim; (e) interruption of the Company s activities; (f) use of loans with purpose different from that provided for in the agreement; and (g) the Company fails to comply with any of the clauses or conditions provided for in the agreement. Regarding item (d) above, in April 2007 there was a change of share control as a result of the Company s Public Offering and the right to declare the early maturity of the debt will not be exercised by Banco Votorantim. 15. Suppliers The Company has acquired domestic and imported products to be processed or resold, whose balances payable to suppliers arising from these purchases are as follows: Products for resale 5,537 3,857 5,537 3,857 Raw material domestic 2,736 2,769 2,889 3,067 Imported material 1,555 1,166 1,621 1,166 Packages 1,725 1,388 1,636 1,430 General material - maintenance 2,066 2,053 2,165 2,174 Transportation 1,561 1,177 1,566 1,185 Electricity 1,130 1,149 1,195 1,235 Other 1,306 1,352 1,337 1,193 17,616 14,911 17,946 15,307 Main products acquired, which are essential to our businesses, are the following: cotton, certain chemical products, packages and various products for resale (more than 3,000 products, such as needles, syringes, catheters, probes, DME, masks, blood pressure meters, disposable diapers, aprons, collectors, and others). These raw materials and products are acquired from various suppliers by means of distributed purchases. 16. Taxes And Contributions Payable Short-term: Taxes paid in installments: Special installments - PAES 2,253 2,292 2,253 2,292 Extra installment - PAEX ,253 2,636 2,253 2,636 Current taxes: State 1,274 1,161 1,274 1,167 Federal 1, , ,317 1,597 2,405 1,695 Total current 4,570 4,233 4,658 4,331 Long-term: Taxes payment in installments: Special installments PAES 10,031 12,529 10,031 12,529 Total non-current 10,031 12,529 10,031 12,529 Total 14,601 16,762 14,689 16,860 SPECIAL INSTALLMENTS PAES: and Federal Social Security Taxes Contributions Total Principal 8,373 3,906 12,279 Fine 2, ,023 Interest rates 2,921 1,226 4,147 Total tax debits included in PAES 13,849 5,600 19,449 Inclusion of the Tax Recovery Program (Refis) balance 2,737-2,737 Reduction of 50% in fines (1,277) (234) (1,511) debits 15,309 5,366 20,675 Payments until 12/31/07 (8,999) (2,920) (11,919) Interest rate based on TJLP until 12/31/07 1,932 1,596 3,528 Total payable 8,242 4,042 12,284 Balance payable - current 1, ,253 Balance payable - long-term 6,724 3,307 10,031 The Company has adhered to the special installments for federal and social security taxes (PAES), as authorized by Law 10,684. The payment is being made in 120 monthly installments monetarily restated based on TJLP, starting in July The Company did not offer assets as collateral for such liabilities. The present value of such liability, restated based on the current market rate (based on CDI) totals approximately R$7,250. The debit balance was recorded based on the original value plus interest applicable to the transaction (TJLP), and no adjustment for reduction based on the calculated present value by using current interest rate was recorded. 17. Contingencies The Company and its subsidiaries are parties in civil, labor and tax lawsuits, and tax administrative proceedings. Based on its counsels and legal consultants opinion, the Management believes that the balance of provision for contingencies is sufficient to cover probable losses. The balance of provisions is restated by the following criteria: tax contingencies are restated by the SELIC rate variation in the period; civil contingencies are restated by the IGP-M (General Market Price Index) variation in the period; and labor contingencies are restated by a proper index, provided by the Labor Court. Entry of balance of provision for contingencies: Parent company 12/31/2006 Deposits Provisions Write-offs Charges 12/31/2007 Tax 3, (1,056) 250 2,503 Labor 1, (383) 194 1,103 Civil 1, ,693 (-) Court deposits (2,059) (548) (2,607) Total 4,259 (548) 819 (1,439) 601 3,692 12/31/2006 Deposits Reversals Write-offs Charges 12/31/2007 Tax 7, (1,542) 657 6,342 Labor 1, (400) 205 1,190 Civil 1, ,693 (-) Court deposits (2,268) (550) (2,818) Total 7,846 (550) 1,034 (1,942) 1,019 7,407 9

11 Explanatory Notes To The Financial Statements for the years closed on December 31, 2007 and 2006 (Amounts expressed in thousands of reais, except when otherwise stated) Tax contingencies: Accrued contingencies are comprised as follows: Tax: Social security charges (INSS) (a) 701 1, ,688 Electric energy emergency charges (b) 1,802 1,621 1,906 1,718 IPI zero rate (c) - - 3,614 3,213 PIS Social integration program (d) Court deposits (2,324) (1,860) (2,535) (2,069) Total 179 1,449 3,807 5,036 (a) Refers to the collection, by the National Institute of Social Security (INSS), of social security contributions on Insalubrity and risk premiums paid by the Company to former employees. Although they are classified as possible losses, the Company had been recording a provision for this purpose. In February 2007, the Interlocutory Appeal brought by INSS was rejected against decision which denied its Review Appeal to the Higher Labor Court. Before this decision, the Company has decided to reverse that provision. (b) Refers to the suit filed by the Company and the subsidiary Plásticos Cremer with a view to discharge them from the payment of the emergency capacity charge, emergency electric energy acquisition charge and free energy acquired in MAE charge, and from the ancillary charges thereon. A preliminary injunction was granted, authorizing the Company and its subsidiary to deposit such amounts in court. The face amount of the court deposit on behalf of Cremer S.A. is R$1,621 and of Plásticos Cremer S.A. is R$97. The Lower and Higher Courts rendered unfavorable decision to the Company. Appeal to the Superior Court of Justice and Extraordinary Appeal were filed, which are awaiting decision. (c) Refers to IPI credits on raw material used in product manufacturing. Plásticos Cremer S.A. requests the recognition of the right to the credit arising from the acquisition of levied intermediary products and packaging material, destined to product manufacturing with levy of IPI zero rate. The amounts are accrued because the offset has already been performed. The Company obtained a partially favorable decision at the Higher Court. The Federal Government lodged Extraordinary Appeal, which is awaiting decision.(d) Refers to PIS Semestralidade. Plásticos Cremer S.A. filed a writ of mandamus to recognize the right to determine PIS in the period from January 1989 to September 1995, at the rate of 0.75%, levied only on sales, excluding other revenues, adopting sales of the sixth month prior to the occurrence of the taxable event as calculation basis, without monetary restatement; offset the amounts unduly paid as PIS with PIS and COFINS installments coming due; and apply monetary restatement to the credit. The decision of the Supreme Court of Justice was partially favorable to the Company. Before this fact, the Company has decided to maintain provisions recorded for the amounts that are still object of discussion in the administrative scope. Labor contingencies The Company and its subsidiaries are the defendants in seventy-five (75) labor claims, brought by employees, former employees and third-parties. The claims refer to severance pay, additional payments, overtime, salary parity, FGTS monetary restatement, indemnification for moral and property damages and amounts due in view of the subsidiary liability. The Company has court deposits referring to labor contingencies, in the amounts of R$283 on 12/31/2007 and R$199 on 12/31/2006 parent company and consolidated. Civil contingencies and 12/31/ /31/2006 Several lawsuits 2,693 1,975 The Company and its subsidiary are respondents in fifty-one (51) civil claims, under the scope of Common Law and Special Civil Courts. Most claims are brought by clients, aiming the indemnification for moral and property damages alleged. The Company is a respondent in two civil actions, brought by former sales representatives, aiming the collection of supposed amounts related to differences in commissions, indemnification for alleged breach of exclusive rights and other amounts related to sales agency. One of the actions is under temporary execution. The Company opposed Stays of Execution and the proceeding is awaiting decision. The other action is under prejudgment phase. The motion was granted partial relief and appeals brought by the parties were partially granted. The company filed appeal to the Superior Court of Justice, the continuance of which was accepted, and the adverse party filed Appeal to the Superior Court of Justice and Extraordinary Appeal, the continuance of which was rejected. Contrary to the decision which denied the continuance of its appeals, the adverse party filed Interlocutory Appeals and petitions for clarification, both withheld by the Supreme Court of Justice. The Company is currently waiting for the compliance with the remittance of the court records to the original Court for a new judgment of the petitions for clarification filed by the Company. On March 29, 2006, a decision favorable to the Company and to Plásticos Cremer S.A. was made final and unappealable. Such decision has been rendered for the lawsuit regarding the extension of the PIS and COFINS calculation basis (Law 9,718/98). A credit in the amount of R$891 was recognized for Cremer and a credit in the amount of R$198 was recognized for Plásticos Cremer, both recorded in the recoverable taxes account, as credit of other operating income in the result of the period, as presented in explanatory note 20. In July 2006, a decision favorable to the Company was made final and unappealable. Such decision has been rendered for the lawsuit regarding fees and charges for the licensing of imports. The writ of payment in the amount of R$1,631 was recognized, and recorded in the account of long-term receivables writs of payment, as credit of other operating income in the result of the period, as presented in explanatory note 20. The R$1,752 balance (R$1,577 recorded in long-term assets and R$175 in current assets), restated by the Selic rate variation up to December 31, 2007, as presented in explanatory note 10. Possible Loss accounting provisions for the contingencies assessed as possible losses by the Company s legal advisors were not recorded. These contingencies are distributed among the tax, civil and labor areas, amounting to R$17,226 on December 31, 2007 (R$16,409 in 2006). 18. Capital Stock a) Capital stock: During year 2005, the Company has resolved on the acquisition, for permanence in Treasury, of 48,626,578 shares of its own issue. The total amount of acquisition reached R$62,175. Part of the funds used for this acquisition has been obtained through loan operations in the amount of R$50,000. The objective of the shares buyback was the partial devolution of the capital invested by the controlling shareholder. On March 29, 2006, the Annual and Extraordinary General Meeting approved these shares write-off as a counterentry to the balance of the capital reserve account. On December 31, 2007, the Company s capital stock is R$134,626 (R$70,000 in 2006), represented by 33,678,512 (21,373,422 in 2006) registered common shares. The book value on December 31, 2007 was R$9.59 per share (R$5.25 per share on December 31, 2006). b) Dividend distribution policy: In accordance with the Company s Bylaws, shareholders are entitled to receive as dividends, in each year, the mandatory minimum percentage of 35% on net income, adjusted pursuant to Brazilian Corporate Law. The Bylaws provide the Company with the right to prepare semi-annual and interim balance sheets and, based thereon, to distribute dividends upon the approval of the Board of Directors. c) Authorized Capital: According to Article 6 of the Bylaws, the Company is authorized to increase its capital stock, regardless of statutory amendment, in up to eighteen million (18,000,000) non-par registered, book-entry shares. In 2Q07, we increased our capital with the issuance of 12,305,090 stocks, 12,000,000 of which were used to launch the Public Offering, and 305,090 were exercised by the management in the stock option plan. The remaining balance of the Company s shares for new issuances on December 31, 2007 is five million, six hundred and ninety-four thousand, nine hundred and ten (5,694,910) non-par, registered, book-entry, common shares. Within this limit, the Company may, upon the authorization of the Board of Directors and regardless of amendment to bylaws, increase its capital stock. The Board of Directors is responsible for determining the number, price and period for the payment and further conditions related to the issuance of shares. d) Capitalized Resources The Company has raised funds in the amount of R$215,339, out of which R$210,000 through the issue of shares in the Global Public Offering that took place in April 2007 and R$5,339 arising from the exercise of the call option plan by the Company s Management and Board of Directors. R$64,626 were destined for Capital and R$150,713 for Capital Reserve (Share Premium). 19. Financial Income It mainly represents financial discounts arising from prepayments of trade notes in the purchase of certain products and interest on financial investment, as shown below: Discounts obtained 18,639 15,752 18,639 15,752 Interest on investments 12,395 1,355 12,395 1,355 Other ,345 17,194 31,371 17, Other Operating Income (Expenses) The Company and its subsidiaries have incurred in certain expenses, as shown below: Expenses with the IPO (*) (13,734) - (13,734) - Cremer Investment Units (10,131) - (10,131) - Expenses with the CVM registration process - (1,585) - (1,585) Success in the lawsuit regarding the extension of the PIS and COFINS calculation basis (note 17) ,089 Writ of payment credit (note 17) - 1,631-1,631 Reversal of the provision for contingencies (note17) 620 1, ,726 Other expenses (139) (383) (160) (381) (23,384) 2,274 (23,117) 2,480 (*) The amount of the coordination commission, incentives and placement of shares at the Public Offering was R$11,677, and the other amounts were allocated to the payment of the legal counsel, auditors and others. 21. Private Pension Plan The Company and the subsidiary, Plásticos Cremer S.A., on October 1, 2005, executed an agreement to adhere to PGBL (Unrestricted Benefits Generating Plan), instituted by Real Vida e Previdência S.A. This is a defined-contribution supplementary private pension plan, which allows the adhesion of all the Company s employees. This plan is funded by means of contributions made by the Company and the plan participants. Real Vida e Previdência S.A. is responsible for potential actuarial risks. The cost of contributions transferred from private pension plan institutions in year 2007 was R$52 (R$87 in 2006). 22. Long-Term Incentive Executive Plan The Company had a Long-term Incentive Executive Plan, by means of which it issued an equity instrument called Investments Unit (Unit), which granted their titleholders a monetary right based on the appreciation of a lot of 100 shares issued by the Company. The Investment Unit did not grant its titleholder the condition as shareholder or any other right or benefit inherent to such condition. The Investment Units were exclusively issued to beneficiaries, and they could be transferred only to the Company itself by means of redemption, pursuant to the Investment Unit Plan. Redemption was allowed only in the following events: (i) disposal of the Company s control; (ii) resignation or remove from office of officer appointed pursuant to bylaws, observing the grace period for redemption, which provides for the release of 25% of the opening balance of Investment Units each year; or (iii) decease. The Long-term Incentive Executive Plan was limited to10,690 Units. All the Units have been granted between the years 2005 and 2007, and they were redeemed in May 2007, in view of the change in the Company s control, derived from the conclusion of the Public Offering related to CVM Proceeding 2007/1886, as per Note 1. Based on the Price per Share of R$17.50, estimated based on the central point of sales price level in the Public Offering, each Investment Unit was redeemed at the amount of R$1,042, and the total amount of redemption of Investment Units issued was R$10,956. Considering the Investment Units Redemption Value, and the already existing provision of R$590 in 2006, an expense of R$10,366 (R$235 of monetary variation and R$10,131 as other operating expenses) was recognized in The two officers appointed pursuant to Bylaws reinvested in the Company, 50% of this value, net of income tax on capital gain earned in the redemption of its Investment Units, by means of exercise of stock option of the Special Program provided for in the Stock Option Plan (note 26), after the settlement of the Global Public Offering on May 3, 2007 and at the Price per Share determined in the Offering, which was R$17.50 per share. After the redemption of the Investment Units, the Long-term Incentive Executive Plan was extinguished. 23. Financial Instruments The Company and its subsidiaries carried out, until December 31, 2007, operations having characteristics of financial instruments pursuant to CVM Rule 235/95, properly recorded at market value. The Company adopted the following methods and assumptions when calculating the fair value of its financial instruments: Cash and cash equivalents Amounts are recorded at market value, taking into account their period for redemption and yield rates. Loans and financing Amounts were determined using the fixed interest rates with creditors, which reflect the market value, taking into account the conditions and nature of these operations. 10

12 Explanatory Notes To The Financial Statements for the years closed on December 31, 2007 and 2006 (Amounts expressed in thousands of reais, except when otherwise stated) a) Exchange exposure: The Company and its subsidiaries do not operate with derivative financial instruments for purposes of speculation nor have hedging operations for its assets and liabilities against exchange variation, deriving from financing agreements and operating activities. Exchange exposure is as follows: Accounts receivable 1,158 1,255 1,197 1,309 Advance for export contract ACE - (380) - (380) Loan agreement with Cremer International Ltd Provision for unsecured liabilities (535) (628) - - Suppliers (1,555) (1,166) (1,621) (1,166) Net exposure (387) (279) (424) (237) b) Credit risk: The Company s client portfolio is very distributed. In 2007, we sold more than 50 thousand to individual clients and our major clients represented 1.55% of total revenues (41 thousand clients and 1.9% of total revenues in 2006). The Company manages risk by means of a strict procedure of credit granting, also periodically recording allowance for doubtful accounts, where applicable. 24. Insurance Coverage Unaudited The Company and its subsidiaries adopt a conservative policy as to the contracting of insurance for coverage of sundry claims. Insurance coverage is determined according to the nature of risks, deemed as sufficient for covering eventual losses from claims. On December 31, 2007, coverage is as follows: Assets, liabilities or covered interests Type Amount insured Plants, offices and distribution centers Damage to buildings, facilities, machinery and equipment 67,515 Plants, offices and distribution centers Theft 50 Loss of profit Loss of income arising from accidents 26,562 Civil liability Physical involuntary damage to persons and/or property damage caused to third parties 12, Management Fees The expenses with management fees including charges totaled R$1,521 in 2007 (R$1,795 in 2006). The Annual General Meeting held on March 13, 2007, approved, for the referred year, the management s global compensation of at most R$4, Stock Option Plan The Company has a Stock Option Plan comprising a maximum of 1,950,000 stock options. Options are granted within distinctive programs, called Special Program and Annual Programs. Three Annual Programs are foreseen, one in 2007, another in 2008 and the last one in Within these Annual Programs, 1,350,000 options will be granted. The other 600,000 options were reserved for the Special Program. In the second quarter of 2007, the Special Program and the Annual Program for 2007 were implemented. Out of the 600,000 options reserved for the Special Program, 341,840 were granted. The others were extinguished. All options granted under the Special Program were exercised in May The exercise price was the same determined for the Offering of the Company s Shares (Offering no. 2007/1886), in the amount of R$17.50 ( IPO Price ). All options were granted to directors appointed pursuant to the bylaws and to members of the Board of Directors. Under the 2007 Annual Program, 450,000 shares were granted to directors appointed pursuant to the bylaws, board members and employees of the Company. The exercise price of the options of the 2007 Annual Program is also the IPO Price. The beneficiaries of the 2007 Annual Program may exercise their options within seven years as from the respective granting. The grace period will be four years, with gradual releases of 33%, 33% and 34% as of the second reference date. Out of the total 1,950,000 options, therefore, 491,840 were already granted, 305,090 were exercised; and 444,910 were cancelled without granting; 300,000 were granted and are still within the grace period; and there are 900,000 outstanding options, to be granted in the 2008 and 2009 Annual Program. According to these Programs, the Beneficiaries, grace periods and exercise terms will be the same as those of the 2007 Annual Program. The exercise price for the 2008 and 2009 Annual Programs, however, will correspond to the weighted average per trading volume of the closing prices of shares at BOVESPA, on the 90 trading floors previous to the date of approval of each annual program. The Plan provides for specific rules to exercise options in case of death or permanent disability of the Beneficiary, and in case of discharge by decision of the Company or the Beneficiary. At the beginning of 2008, with the exit of the Investor Relations, New Businesses and Financial Officer, all the call options granted to him as part of 2007 annual program were extinguished (150,000 call options). Considering the full exercise of the 300 thousand options already granted, all at the exercise price of R$17.50, effects in the share book value and percentage of decrease in shareholders interest on December 31, 2007, are as follows: Shareholders equity on 12/31/2007 (in thousands of R$) 322,852 Number of shares on 12/31/2007 thousand 33,679 Share book value on 12/31/2007 R$ 9.59 Shareholders equity on 12/31/2007 considering the full exercise of options (in R$ thousand) 328,102 Number of shares on 12/31/2007, considering the full exercise of options thousand 33,979 Share book value on 12/31/2007, considering the full exercise of options R$ 9.66 Percentage of decrease in the current shareholders interest, considering the full exercise of options 0.88% 27. Authorization For The Conclusion Of The Financial Statements On February 06, 2008, the Company s Management authorized the conclusion of these financial statements, including the subsequent events occurred until that date, which might have effects on these financial statements. 28. Amendment To The Brazilian Corporate Legislation On December 28, 2007, the Law no. 11,638/07 was enacted, amending, repealing and introducing new provisions to the Corporation Law, primordially in relation to chapter XV, on accounting matters. The concerned Law will come into force as from January 1st, 2008 and was enacted with the main objective of updating the Brazilian corporate legislation to make possible the process of matching the accounting practices adopted in Brazil to the ones presented in the international accounting rules and enabling the issue of new accounting rules and procedures by the Securities and Exchange Commission of Brazil CVM, compliant with the international accounting standards. Some changes are supposed to be adopted as from the beginning of next year, while the other ones depend on normatization by the regulatory bodies. The main changes that might affect the Company are summarized below: Replacement of Changes in the Financial Position for the Statement of Cash Flow. Inclusion of the Statement of Added-Value; Creation of the possibility of bookkeeping of the transactions to comply with the tax legislation and subsequent adjustments for the adaptation of the accounting practices. Creation of two new subgroups of accounts: (i) intangible and (ii) Equity Evaluation Adjustments to shareholders equity, to enable the record of certain assets evaluations at market price, mainly financial instruments; record of exchange variation on foreign corporate investments evaluated by the equity accounting method (up to December 31, 2007, the aforementioned exchange variation was recorded in the result of the period); assets and liabilities adjustments at market value, due to the merger and incorporation between unrelated parties, linked to the effective transfer of control. Obligatoriness of periodic analysis, by the company, of the capacity of recovering the amounts recorded as property, plant and equipment, intangible and deferred. Introduction of the concept of adjustment at present value for the long-term assets and liabilities operations and for the relevant short-term ones. Elimination of the relevance parameter for the adjustment of investments in associated companies and subsidiaries by the equity accounting method and replacement of the parameter of 20% of the investee s capital stock for 20% of the investee s voting capital. Repeal of items c) and d) of paragraph 1, of article 182 of Law 6404/76, which allowed the record of (i) premium received in the issue of debentures and (ii) donations and subsidies for direct investments as capital reserves in the shareholders equity account, meaning that donations and subsidies for investment shall start to be recorded in the result of the period. In order to prevent their distribution as dividends, donations and subsidies will be reserved, after passing by the result, to the tax incentive reserve. Obligatoriness of the record, in the shareholders equity, of the rights whose object are physical assets destined for the maintenance of the Company s activities, including the ones arising from operations that transfer their benefits, risks and control to the Company. Considering that these changes have been recently enacted, and that some of them still depend on normatization by the regulatory bodies before being adopted, the Company s Management has not already been able to evaluate all the effects that such changes might have to its financial statement and future periods results. 29. Statements Of Cash Flows Note Net income (loss) for the period (4,627) 4,182 (4,627) 4,182 Adjustments to reconcile net income (loss) and net cash from operating activities: Depreciation and amortization 21,714 25,321 22,032 25,634 Sale of permanent assets (112) 268 (112) 266 Allowance for doubtful accounts Equity accounting result 11 (1,382) (858) - - Reversal of provision for unsecured liabilities 11 (93) (41) - - Set up (reversal) of provision for contingencies (620) (1,720) (908) (1,726) Financial charges and monetary variations 12,417 11,397 12,836 11,321 Deferred income tax and social contribution 9.b (2,423) (1,550) (2,293) 1,612 Increase in trade accounts receivable (7,155) (4,759) (6,752) (4,084) Increase in inventories (1,018) (10,735) (1,085) (10,793) Increase in other credits from current assets (3,325) (917) (4,507) (945) Increase in long-term assets 368 (1,796) 347 (1,646) Increase in suppliers 2,705 2,630 2,639 2,601 Decrease in tax liabilities (2,161) (7,966) (2,171) (8,007) Increase (decrease) in labor liabilities 1,237 (12) 1,164 (49) Employee profit sharing program - (2,260) - (2,385) Increase (decrease) in other accounts payable (543) 1,328 (531) 1,356 Net cash generated from operating activities 15,654 15,998 16,577 17,645 Cash Flows From Financing Activities Capital increase 215, ,339 - New loans 11,317 3,479 11,317 3,479 Payment of loans (67,113) (12,473) (67,113) (12,473) Increase of loan with associated companies - 1, Payment of dividends (2,870) - (2,870) - Net cash from (used in) financing activities 156,673 (7,563) 156,673 (8,994) Cash Flows From Investing Activities Acquisition of property, plant and equipment (7,866) (4,291) (8,323) (4,528) Acquisition of deferred assets (283) (234) (283) (234) Interest on own capital - associated companies Sale value of property, plant and equipment Net cash used in investing activities (7,571) (4,228) (8,419) (4,462) Increase In Cash and Cash Equivalents 164,756 4, ,831 4,189 Changes In Cash And Cash Equivalents Opening balance of cash and cash equivalents 18,177 13,970 18,328 14,139 Closing balance of cash and cash equivalents 182,933 18, ,159 18,328 Increase In Cash And Cash Equivalents 164,756 4, ,831 4,189 Supplementary information: Payment of interest on loans and financing 13,956 11,370 13,956 11,370 Payment of income tax and social contribution

13 Luiz Serafim Spinola Santos Chairman Board of Directors José Eduardo Bandeira de Mello Vice-Chairman Antonio Cesar Godoy da Silva Marcelo Di Lorenzo Wallim Cruz de Vasconcellos Junior Stefano Bridelli Antonio Cesar Godoy da Silva CEO Board of Executive Officers Accountant Ricardo Palazzo de Almeida Barros Financial, New Businesses and Investor Relations Officer Ivo Stolf CRCSC /O-8 Report of Independent Auditors To The Shareholders and Management of Cremer S.A. Blumenau - SC 1. We examined the balance sheets of CREMER S.A. ( Company ), parent company and consolidated, drawn up at December 31, 2007 and 2006, and the respective statements of income, of changes in shareholders equity (parent company) and of changes in financial position corresponding to the years ended on that dates, prepared under the responsibility of its Management. Our responsibility is to express an opinion about these financial statements. 2. Our examination was conducted pursuant to the Brazilian audit rules, comprising: (a) the work planning, taking into account the relevance of balances, volume of transactions and the accounting and internal control systems of the Company and; (b) the verification, based on tests, of the evidences and records supporting the accounting amounts and information disclosed; and (c) the assessment of the most representative accounting practices and estimates adopted by the Management of the Company and its subsidiaries, as well as of the financial statements presentation as a whole. 3. In our opinion, the financial statements referred to in paragraph 1 adequately represent, in all relevant aspects, the equity and financial position of CREMER S.A., parent company and consolidated, on December 31, 2007 and 2006, the result of its operations, the changes in shareholders equity (parent company) and the changes in its financial position corresponding to the years ended on that dates, in compliance with the accounting practices adopted in Brazil. 4. Our exams were conducted with the objective of issuing an opinion on the basic financial statements referred to in paragraph one, taken as a whole. The statements of cash flow (parent company and consolidated), presented in explanatory note no. 29 to offer supplementary information on the Company and its subsidiaries, are not required as an integral part of the basic financial statements, prepared in compliance with the accounting practices adopted in Brazil. The statements of cash flow were subjected to the same audit procedures described in paragraph 2 above and, in our opinion, these supplementary statements are adequately presented, in all relevant aspects, in relation to the basic financial statements for the years ended on December 31, 2007 and 2006, taken as a whole. Joinville, February 04, 2008 Deloitte Touche Tohmatsu Auditores Independentes CRC nº 2 SP /O-8 S -SC Cosme dos Santos Sócio - CRC RJ /O8 S-SC 12

14 Rua Iguaçu, 291/363 Blumenau - SC Tel.: (47) Luz Publicidade