4. Consolidated Numbers. 6. Messages from the Management. 8. Corporate Governance. 26. Growth Strategies

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1 2007 Annual Report

2 2. Alpargatas 4. Consolidated Numbers 6. Messages from the Management 8. Corporate Governance 13. Brands 26. Growth Strategies 34. Sustainability 36. Economic Responsibility 46. Social Responsibility 54. Environmental Responsibility 56. Corporate Information

3 2007 Annual Report Alpargatas commemorates a host of achievements in Alpargatas celebrated 100 years of existence with robust financial performance and the unflagging admiration and respect of all its stakeholders. The Company laid the pillars that will underpin its sustainable development. It acquired companies in Brazil and Argentina and set up new operations aimed at driving overseas sales. Invested in research and development, innovation, technology and productivity, areas that are essential to leverage competitive advantage. And, above all, Alpargatas developed the talent of its work force, driven by the conviction that people are a successful corporation s most important asset. All of these factors are key and will ensure that Alpargatas consolidates its position as the leading company in the Brazilian footwear and sportswear market. Through its acquisition of the Companhia Brasileira de Sandálias S.A., owner of the Dupé brand, Alpargatas increased its share in the domestic sandal market, further consolidating its segment leadership. The acquisition of Alpargatas S.A.I.C. in Argentina also represented a strategic move, enabling the Company to assume leadership of the Latin American sportswear market. The inauguration of Alpargatas subsidiary in the United States will increase Havaianas sales and margins in the North American market. Its subsidiary in Chile will help drive business expansion in the South American sportswear market, starting with the Mizuno brand in the running category. Alpargatas drive and capacity to grow both in Brazil and worldwide is enabled by the integration of its activities in the economic, social and environmental spheres, resulting in sustainable development through which it creates value for the whole of society.

4 Alpargatas 2 Alpargatas is one of the major footwear, sporting goods and industrial textiles companies in the country. Its product portfolio includes Havianas, a product revered nationwide and which, together with the Dupé brand, leads the Brazilian sandal market. Topper, Rainha, Mizuno and Timberland together account for 10% of the sports footwear market. Locomotiva is the leading brand in cotton tarpaulins for cargo transportation, with a 96% market share. These brands are run by four business units Sandals, Sporting Goods, Industrial Textiles and Retail, which generated gross sales of R$ 1.6 billion in 2007, from the sale of 184 million pairs of footwear, four million items of sportswear and accessories and 16 million square meters of industrial fabric. Alpargatas exports reached 80 countries and grew 28% in dollars during the year, resulting in a net income of R$ 199 million with investment grant. Alpargatas is an international branded company. It has 17 footwear and textile plants in Brazil, Argentina and Uruguay and subsidiaries in the United States and Chile, with a total of 18,255 direct employees in these countries. It also has a significant shareholding in Tavex Algodonera, the world leader in the manufacture and commercialization of denim fabrics. Alpargatas shares have been traded on the São Paulo Stock Exchange since 1913, and it is currently part of a select group of Brazilian companies enjoying a differentiated level of corporate governance. There are approximately five thousand shareholders, with the controlling interest belonging to Camargo Corrêa S.A., the holding company of one of the largest private business groups in Brazil. Alpargatas received numerous awards and acknowledgements for its performance in 2007, including: Best Company in the Apparel and Textile Sector, from Exame magazine s Maiores e Melhores. Best Company in the Textile, Leather and Apparel Sector from the Valor 1000 ranking published by the newspaper Valor Econômico. Best Company in the Textile, Leather, Footwear and Apparel Sector, from Balanço Anual magazine, published by the newspaper Gazeta Mercantil. Best Company in the Apparel Industry Sector, from the magazine Financial Officer. Most Admired Company in Brazil in the Sporting Goods Category, from the Carta Capital / TNS InterScience survey in the magazine Carta Capital. Most Admired Company in the Footwear, Leather and Accessories Category, from the newspaper Diário do Comércio, Indústria & Serviços. Havaianas was elected the Best Intangible Asset in the Brazilian Brands Category by DOM Strategy Partners and Grupo Padrão. Alpargatas Vision is to be a global company of desired brands in sporting goods, footwear and industrial textiles. Its Mission is to develop and commercialize innovative, world class and profitable products of high perceived value and quality and to create value for shareholders, employees, suppliers and customers through socially and environmentally responsible operations.

5 Exports 80 countries Production 8-10 pairs of sandals per second 50 thousand pairs of sports footwear per day Brazil São Paulo Head Office Manaus Synthetic Fabrics Natal Sports Footwear Santa Rita Sports Footwear Campina Grande Havaianas Sandals Carpina Dupé Sandals Pouso Alegre Coverings and Tarpaulins São Leopoldo R&D Center Argentina 3 Buenos Aires Head Office Florencio Varela Footwear and Textiles Corrientes Textiles Saenz Peña Textiles Tucuman Footwear Catamarca Footwear and Textiles San Luis Footwear Santa Rosa Footwear Uruguay Dolores Footwear Chile Santiago Subsidiary United States New York Subsidiary

6 Consolidated Numbers 4 Financial R$ million pro forma (see page 40) Gross sales , , , , ,090.9 Net sales , , ,289.6 Gross profit EBITDA Net income with investment grant Gross margin 37.8% 41.5% 45.1% 46.3% 44.4% 40.4% EBITDA margin 11.8% 11.6% 18.8% 23.3% 16.7% 15.8% Net margin with investment grant 10.7% 10.6% 15.1% 10.1% 9.3% Cash Debt Net cash (debt) (50.0) (62.1) Stockholders equity Operations Sales volumes: Footwear (million of pairs) Apparel and accessories (million units) Industrial fabrics (million of m 2 ) Capital Market Dividends (R$ million) Payout 35% 39% 35% 42% 41% Market capitalization (R$ million) , , ,611.1 Market capitalization as multiple of EBITDA 4.1x 6.1x 6.3x 7.8x 12.1x Social Number of employees São Paulo Alpargatas S.A. 9,966 10,950 11,400 12,850 12,623 Alpargatas S.A.I.C. 4,719 Companhia Brasileira de Sandálias S.A. 913

7 Gross Sales R$ million Gross Margin % 2,090.9 EBITDA R$ million EBITDA Margin % , , , , pro forma (pg. 40) pro forma (pg. 40) Net Income with Investment Grant R$ million Net Margin % Market Capitalization R$ million 2, , , Distribution of Added Value R$ million Employees Government Profit Reserves Shareholders Capital Financiers 23% 7% 3% 29% 38% Sales Volume of Footwear million pairs pro forma (pg. 40) 2007

8 Messages from the Management 2 To effectively achieve the Alpargatas vision of being a branded company with a global reach, the Board of Directors has promoted growth strategies that will enable Alpargatas to consolidate its position as the biggest footwear and sporting goods Organization in the Brazilian market. This objective is based on its capacity to generate brands and consumer goods with high market leadership potential in Brazil, Latin America and on other continents. We are clear about how to achieve this. First, we must focus on the Company s two main businesses: Sandals and Sporting Goods. Then we need to concentrate on harnessing our internal competencies in Retail to make this business even bigger for Alpargatas. Our future vision for Sandals is to ensure that the Havaianas brand continues to spread Brazilianness worldwide, to be a source of pride for Brazilians and to create value over time. We are working on three fronts to achieve this objective: consolidating our position in the Brazilian market through acquisitions and growth in our existing sales channels; the effective international expansion of the Company s export model, leveraging sales and margins in the main world markets; and line extension, with the gradual introduction of innovative products, supported by the strength and identity built up by Havaianas over 45 years. In Sporting Goods, we have already embarked on the challenge of competing with strong global brands. The conclusion of our negotiations to acquire Alpargatas Argentina, currently awaiting anti-trust approval, will permit the fusion of the Brazilian and Argentinean Topper brands, which will make the new brand South American market leader. Topper will be present in multiple sports categories and will act as anchor for other businesses in the sporting goods segment, first in Latin America and later, worldwide. Another growth driver will be the reinforcement of the Retail as a business in Brazil and Argentina. We intend to expand in the operation of exclusive stores as a supplementary sales channel and as a means of reinforcing the image of our brands. We also plan to exploit opportunities in managing lifestyle brands such as Timberland, which should benefit from higher economic growth and increased consumption in the region. Alpargatas will have to grow and improve to achieve these objectives, especially in operational processes and human resources management. Another challenge will be the development of new competencies in branding, communication, innovation and international trade. These will be our priorities as we internationalize our operations and adopt an increasingly sustainable growth model. We are convinced that sustainability is key for us to fulfill our strategy. This is an issue that is increasingly governing consumer choices, both in Brazil and abroad. For this reason, we are aligning our activities with this increased awareness on the part of society through the construction of an internal culture geared towards sustainability. We believe that this is the only way to grow and to create long-term value for our shareholders, employees, customers, consumers and society as a whole. Marcelo Araujo Chairman of the Board of Directors

9 Upon completing 100 years of existence in 2007, Alpargatas consolidated the basis needed to make it the biggest Brazilian footwear manufacturer and an international branded company. We invested in numerous areas, acquiring companies in Brazil and Argentina, opening new subsidiaries, training people, expanding production capacity and pursuing synergies that resulted in gains in scale and higher productivity in our operations, complemented by the implementation of an integrated management system. São Paulo Alpargatas sold 184 million pairs of footwear during the year, a 5.3% volume increase compared with Gross sales were R$ 1.6 billion. Ebitda (earnings before interest, taxes, depreciation and amortization) was R$ million and net income totaled R$ 199 million, with investment grant. Shareholders received dividends of R$ 47.5 million. Including the 2007 figures for Alpargatas Argentina and the Companhia Brasileira de Sandálias, the consolidated sales for the group of companies controlled by Alpargatas totaled R$ 2.1 billion with Ebitda of R$ million. Just as important as these numbers were our other achievements during the year, stemming from a strategic plan designed to drive a new cycle of growth both in Brazil and abroad: acquisition of 100% of Companhia Brasileira de Sandálias S.A., owner of the Dupé brand, increasing our market share and complementing our sandal portfolio; acquisition of a 60% shareholding in Alpargatas S.A.I.C. Argentina, a key move towards our expansion in Sporting Goods in Latin America; The opening of a subsidiary in the United States, through which we will increase our participation in the Havaianas sandals market in North America, with our own operational and logistics framework; the opening of a subsidiary in Chile, as a platform for growing Mizuno in South America. All of these achievements have had a positive effect on our business and our financial performance and are backed up by a number of others measures implemented to strengthen the Company internally. In human resources management, we introduced the Alpargatas Integrated Management System, a program designed to manage and leverage the development of our team, strengthening the Organization for this phase of growth. We optimized our administrative processes with the migration of transactional activities to the Camargo Corrêa Shared Services Center and by moving our headquarters to the Centro Empresarial Camargo Corrêa. In January, a new integrated management system was implemented with the SAP AFS (Apparel Footwear Solution) module. The system s operational complexity affected operations, resulting in a temporary setback in commercial performance. We are, however, convinced that this tool is essential for our expansion and for our international growth. In the manufacturing area there were two major projects during the year: in October we concluded the expansion of the Havaianas plant, which now has an annual production capacity of 212 million pairs, and we concentrated production of sporting goods in the Brazilian Northeast region, mainly in the state of Paraíba, resulting in cost reductions, increased productivity and a more streamlined logistics network. With the ongoing consolidation of the concept of sustainability in the Alpargatas culture, we implanted water and energy consumption reduction measures in our plants and increased the reuse of waste materials. In 2008, we will begin work on transforming our plants into green units, with a pilot project in the Santa Rita footwear plant in Paraíba. Our capacity for innovation was a constant throughout all these initiatives. The same may be said about our numerous product launches during the year, an important element in brand performance. In total, we launched 509 new models of sandals and sports footwear, particularly worthy of note being the Eco line models. In order to keep up this pace, we invested in identifying and applying innovation platforms and in research and development at our R&D center in Rio Grande do Sul. To commemorate all of these advances and Alpargatas 100th anniversary, we organized shows of Brazilian music in São Paulo and in the regions in which our plants are located. We start 2008 optimistically, bolstered by the conviction that we are building an innovative Alpargatas that is much admired and respected and more than capable of attracting and retaining the talents we need to effect the transformations imposed by the modern world. A Company that inspires projects that improve people s quality of life, through respect for the environment and adherence to the principles of sustainability in all its activities. A Company that inspires trust and makes people want to be part of it. 3 Márcio Utsch Chief Executive Officer

10 Corporate Governance 4 The Alpargatas management model incorporates differentiated corporate governance standards based on the principles of transparency, equality, accountability and social responsibility. Its shares have been negotiated on Bovespa s Differentiated Corporate Governance Share Index since it was listed at Level 1 in General Shareholders Meeting Alpargatas holds an annual General Shareholders Meeting to deliberate on specific items, such as the presentation of accounts by management and the examination, discussion and approval of financial statements. The meeting also deliberates on the application of net income and the distribution of dividends, in addition to electing the members of the Board of Directors and the Board of Auditors. Extraordinary meetings are held when it is necessary to approve items outside the competence of the General Shareholders Meeting. Board of Directors The Board of Directors consists of six members, four of whom represent the controlling shareholder. Two are independent and are elected by the minority holders of common and preferred shares. The Board is responsible for monitoring the execution of established policy, for defining the Organization s long-term strategy and for selecting the executive officers, in addition to deciding on issues of relevance to the businesses and operations. Members serve a threeyear term of office and may be re-elected. The Board holds at least six ordinary meetings per year and extraordinary meetings when necessary. The remuneration of the directors is determined by the General Shareholders Meeting. Marcelo Pereira Malta de Araujo Chairman Carlos Pires Oliveira Dias Flavia Buarque de Almeida José Édison Barros Franco Oscar de Paula Bernardes Neto Silvio Tini de Araújo

11 Board of Auditors Consisting of five members, three nominated by the controlling shareholder and two by the minority shareholders, the Board of Auditors is responsible for deliberating on the management report and the financial statements. The mandate is for one year with the possibility of re-election by the annual General Shareholders Meeting, which also determines members remuneration. Adalgiso Fragoso de Faria Carlos Alberto Nunes Fernando Dias Gomes Jorge Michel Lepeltier José Ferraz Ferreira Filho Executive Officers The executive officers are responsible for running the businesses and for ensuring that the Company pursues its established objectives and executes the deliberations of the Board of Directors. There are nine executive officers. The three statutory executives are chosen by the Board of Directors and exercise a one-year mandate that it renewable. The executives meet at least once every two weeks to oversee business activities. Márcio Luiz Simões Utsch Chief Executive Officer Antonio Carlos Boscatto Auditing Carla Schmitzberger Sandals Cícero Lopes de Barros Júnior Industrial Textiles Francisco S. M. Cespede Chief Financial Officer Gumercindo C. de A. Moraes Neto Sporting Goods José Eduardo Carmagnani Operations Márcia C. L. do Nascimento Costa Human Resources Rogério Bastos Shimizu Retail Committees The Audit and Finance Committees consist of members of the Board of Directors and some executive officers. The Audit Committee is responsible for implementing and monitoring adherence to appropriate internal controls and for managing risks with the objective of protecting Alpargatas assets. The Finance Committee monitors, evaluates and provides guidance in the management of the Company s financial affairs. The Ethics; Quality; Environmental, Health and Safety (EHS) and Remuneration Committees are made up exclusively of executive officers. The Ethics Committee is responsible for ensuring integrity, honesty and transparency in the application of internal policy and compliance with legislation. The Environmental, Health and Safety Committee oversees the application of the Company s Quality and EHS policies and identifies development opportunities in these areas. The Remuneration Committee is responsible for salary surveys, job evaluations, benefits and incentive plans for employees. Policies Alpargatas has a Code of Business Ethics and Conduct that sets forth the standards of business and personal behavior expected from employees, given that ethics in business behavior and personal relations is a permanent value. The Company also have an Information Disclosure Policy applicable to all persons having access to relevant information. This establishes rules for the confidentiality of information and the periods in which Alpargatas shares should not be traded. Independent Auditing The rules established for hiring external auditors ensure that they are not subject to conflicts of interest, nor loss of objectivity or independence in their relationship with Alpargatas. In 2007, the services rendered by Deloitte Touche Tohmatsu were exclusively related to the auditing of accounts. No complementary or consulting services were contracted with this company. 5

12 Corporate Governance Structure Board of Directors Board of Auditors Internal Auditing CEO Sandals Sporting Goods Retail Industrial Textiles CFO Human Resources Operations 10 Legal Structure Camargo Corrêa S.A. 43.3% of total capital 66.9% of common shares 19.2% of preferred shares São Paulo Alpargatas S.A. 60.0% 100.0% 100.0% 100.0% 100.0% 20.5% Alpargatas S.A.I.C. Companhia Brasileira de Sandálias S.A. Alpargatas USA, Inc. Alpargatas Chile Limitada Amapoly Ind. Com. Ltda. Tavex Algodonera S.A. Spasaprev Sociedade de Previdência Privada Instituto Alpargatas

13 Camargo Corrêa Group The Camargo Corrêa Group is one of the largest privately owned business conglomerates in Brazil, with activities spanning 19 countries. Camargo Corrêa has 55 thousand direct employees and had gross sales of around R$ 12 billion in Camargo Corrêa s connection with Alpargatas dates back to 1982 when it acquired a minority shareholding in the Company. In 1997, Camargo Corrêa took part in the shareholder agreement which led to the restructuring of Alpargatas and the beginning of a new phase. As part of its strategy aimed at growth in the industrial sector, in December 2002, the group consolidated its controlling position, which on December 31 st 2007 represented 66.9% of Alpargata s common shares and 43.3% of its total capital. Alpargatas is part of the Camargo Corrêa Footwear, Textiles and Steel Division, which includes Tavex Algodonera, the largest denim textile manufacturer in the world, as well as Usiminas, the largest producer of flat steels in Brazil. Alpargatas controls 20.5% of Tavex. The other four Camargo Corrêa group divisions are: Engineering and Construction, which includes Camargo Corrêa Comércio e Construções, the original group company responsible for some of the most important infrastructure works ever undertaken in the country, such as the Tucuruí hydroelectric power generation station, the Rio-Niterói bridge and the Guarulhos/Cumbica International airport in São Paulo. The Cement division, active in Brazil (Cauê), Argentina (Loma Negra) and other South American countries. Concessions, the division consisting of the group s holdings in the utility CPFL Energia, in the highway concession operation Companhia de Concessões Rodoviárias (CCR) and in the recently created A-Port, a port and airport infrastructure provider. The Property Development, Environment and Corporate division consists of Camargo Corrêa Desenvolvimento Imobiliário, with a strong presence in the residential and commercial real estate development market, and the environmental services company CAVO Serviços de Meio Ambiente. The group also has a significant capital holding in Itaúsa, which controls one of the major financial conglomerates in the country. The Camargo Corrêa Group is guided by the following values, which stem from its background and its practices: Respect for people and for the environment Relations with shareholders, employees, customers, suppliers, governments, local communities and the environment will be conducted fairly, correctly and respectfuly. Responsibility The group will behave with integrity, complying with all applicable laws. All group companies will respect diversity in accordance with universal standards of peaceful human co-existence, with no discrimination based on race, gender, beliefs, religion, job or function. Transparency Group companies will systematically provide access to clear and extensive information about its activities, achievements, policies and performance. Focus on results The group will continually seek to maximize its performance to ensure its continuity, its investments, return for shareholders and suitable working conditions for its people. Quality and innovation The group will guarantee the quality of its services and products and invest continually in developing its people and its companies. 11

14 Sandals als Sporting Goods Industrial Textiles Retail

15 B9i0 r: b/3$5*$7$6- %5$1'6 +$9( %((1 $ 3$57 2) &21680(56- /,9(6 )25 $ 655 <($564 Havaianas $1' Dupé $5( /29(' %< c5$=,/,$16 $1' )25(,*1(56 $/,.(1 +(/3,1* 3(23/( 5(/$; $1' 0$.,1* 7+(0 )((/ *22',1 7+(,5 020(176 2) /(,685(4 Topper1 Rainha1 Mizuno $1' Timberland $5( 9,%5$17 %5$1'6,1 7+( :25/' 2) '5,9,1* 683(5,25 3(5)250$1&(,1 &203(7,7,216 $1' *$0(64 Locomotiva $''6 9$/8(,1,1180(5$%/( :25. 3/$&(64 Meggashop 0$.(6 0,//,216 2) 6+233(56 +$33<4 z+,6 &$3$&,7< 72 )8/),// 7+( '(6,5(6 2) ',))(5(17 * ) &21680( *+ 21*2,1* 352'8&7,1129$7,21,6 :+$7 '5,9(6 b/3$5*$7$6-68&&(66 c5 $=,/ $1' :25/':,'(4



18 2007 was a promising year for Havaianas, both in results and in the international market. The number of pairs sold in the period was up 7% on 2006, totaling 173 million. In September, the Company broke its own monthly sales record topping the 17 million unit mark. Revenues grew by 17.7% and exports, to 80 different countries, also grew by 17% accounting for 12% of total sales. 3< These results were achieved with a bold new policy for positioning and adding value to the brand on a variety of fronts. The 2007/2008 collection comprised 79 models, 30 of which were exclusively for export. The men s range was a great success, especially Havaianas Wave, which boasts an anatomic design and injected rubber soles. The women s Havaianas Slim and Slim Season lines, launched in new colors with thinner metallic straps, also continued to sell extremely well. Products with an environmental focus gained importance in the Havaianas portfolio, with the expansion of the IPÊ (Institute of Ecological Research) range. Marketing during the year focused on the overseas market, with greater participation in events and trade fairs, both in Europe and the USA, where Havaianas made a big impact at the New York Fashion Week as well as at the Oscar Ceremony. French distributors set up exclusive Havaianas stores in the Gallerie Lafayette in Paris and in Saint Tropez, Marseille and Cannes.

19 In this overseas offensive, the main thrust in 2007 was the opening of a subsidiary in the United States, followed by the launch of the first advertising campaign in the country. The campaign consisted of advertisements in major fashion and lifestyle magazines, the exhibition of four enormous graffiti panels by international artists on buildings in Soho, New York, and the release of three films on the Internet. Brand tracking revealed increased brand awareness, preference and intent to purchase Havaianas among North American customers. In 2008, the international expansion process will be developed further with the opening of a European subsidiary located in Spain. This will be responsible for direct operations in the Spanish market and also in France, Italy, England and Portugal. 3; The focus in 2008 will be on extending the Havaianas brand, launching new products besides socks. Overseas operations will be further extended as a result of the acquisition of the Dupé brand, which complements sandals portfolio. The Dupé product line consists of 74 models and is sold all over Brazil. The best seller is the gel range which is exported to 32 countries.



22 Topper has the qualities that will make Alpargatas a sportswear market leader in Latin America. In Brazil, the brand is the leader in the soccer segment (outdoor and indoor) due to its strong sports marketing positioning and the incorporation of differentiated antiimpact technology such as the Dynatech Visible system. In 2007, Topper launched 63 models. The highlights were the Anatomic performance line of footwear, accessories, bags and clothing; Scorpion, Maverick and Fusion soccer shoes for the premium segment; and the special edition HS Seleção Pró ball, signed by the Topper-sponsored futsal player Neto. AH Developed by Alpargatas, this system represents high-end antiimpact and stability technological innovation and is incorporated in various types of soccer shoes. The sole dissipates and at the same time stabilizes the impact of each step, a feature of overriding importance in a sport that requires very diverse movements from the athlete. The technology has enabled Topper to expand its share in top-end sales outlets specialized in added value products. Topper sponsors the Brazilian Futsal Confederation and the São Paulo Football Federation, driving the visibility of the brand among millions of supporters, who see it on the players and referees uniforms and the official balls. Based on its leadership in the soccer segment, Topper will move into other sports in Brazil, such as tennis, volleyball and basketball. This strategy will be backed up by the acquisition of Alpargatas Argentina. In Argentina the brand is leader in the sporting goods market with a share of over 33%. It is present in the soccer, volleyball, basketball, rugby, golf and lifestyle segments. With the consolidation of the Brazilian and Argentinean operations, it will be possible to replicate the brand s success throughout Latin America, making it market leader in multiple sportswear categories. To do this, Topper has strategically located factories in both countries, with enough installed capacity to guarantee growth and additional outsourced production capacity available in Asia.

23 fi y0wi Rainha is the first Brazilian sporting goods brand, launched in It was top of mind in the sneakers category for ten years running due to its continued ability to surprise consumers. Rainha was instrumental in disseminating the idea that sports equal well-being and pleasure. The brand is about quality of life, escaping from the routine and adventure. Rainha seeks to ensure performance and comfort through ongoing investment in research and technology. In 2007, Rainha applied its technological innovations to the majority of its 40 new products. An example is the Energy System, developed jointly by the Alpargatas R&D Center, the Bio-Energy Laboratory of the University of South Africa and the Instituto Brasileiro de Tecnologia. With its striking design, the footwear is made of lighter materials and offers greater impact absorption, greater impulse and higher resistance. The best sellers in the line were the Fusion and System Electric models. Another success was the environmentally friendly Organic System T-Shirt range, manufactured using organic cotton and natural dyes. These products attracted considerable press attention with spontaneous media coverage in the magazine Veja and the newspaper Folha de S. Paulo. bygb02 Performance is key for Mizuno, the market leader in running shoes with a growth strategy focused on investments in innovation and sports marketing. The lines commercialized in the Brazilian market combine imported models with others made in the country in a marketing strategy that concentrates on Wave technology, recognized as the most advanced available in running shoes. The 2007 Mizuno footwear, clothing and accessory collection included the Solarun jacket, which comes with an MP3 player that runs on solar energy, and the Breath Thermo apparel range, made from thermally insulated intelligent fabric. Other highlights were Runcycle T-Shirts, made from a blend of cotton and recycled PET fabric, as well as the Wave Universe range, which reinforces the brand s strong position in the running segment. The Premium Tech and New Run T-Shirt ranges, made from 100% polyamide and incorporating Ice Touch technology for improved comfort, were launched worldwide during the year. Alpargatas contract with Mizuno International was renewed and its license expanded to permit the Company to commercialize the brand in other countries in South America. This will be supervised by the team in the Chilean subsidiary. A total of 57 models were launched in y/n79.i0r Timberland is the world leader in the outdoor footwear segment. Its strategy is aimed at expanding the concept and use of the brand through greater product segmentation with the introduction of ranges of casual footwear, apparel, accessories, as well as children s products. The 2007 Timberland collection included products with youthful, urban and modern designs in the casual footwear range. This collection incorporated innovations in the outdoor sports footwear range, including a model with an internal fastening system using steel wires to better adjust to the foot. Other highlights among the 112 products launched by the brand in 2007 were the Cadion range of boots and sandals for hiking, trekking and climbing with carbon rubber soles offering better grip and the Earthkeepers collection of sweatshirts, T-Shirts and baseball caps made from natural recycled fabrics. To improve brand visibility, Timberland participated in the 9 th Adventure Sports Fair, the biggest sport, tourism and adventure fair in Latin America. A3

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