ALTRI, S.G.P.S., S.A. (OPEN CAPITAL COMPANY)

Transcription

1 December 31, 2007 Altri, S.G.P.S., S.A. (Open capital Company) ALTRI, S.G.P.S., S.A. (OPEN CAPITAL COMPANY) Directors Report Consolidated Accounts Rua General Norton de Matos, Porto Capital Social: 25,641,459

2 DIRECTOR S REPORT INDEX INTRODUCTION 3 MACROECONOMIC BACKGROUND 5 STOCK EXCHANGE EVOLUTION 8 GROUP S ACTIVITY 11 FINANCIAL REVIEW OUTLOOK 21 PROPOSAL OF THE BOARD OF DIRECTORS FOR APPROPRIATION OF THE NON CONSOLIDATED NET PROFIT FOR THE YEAR 22 CORPORATE GOVERNANCE 23 LEGAL MATTERS 41 DECLARATION OF RESPONSABILITY 42 CLOSING REMARKS 43 2 Annual Report 07 2

3 DIRECTOR S REPORT To the Shareholders Pursuant to the legal requirements, the Board of Directors of Altri, S.G.P.S., S.A. (Open Capital Company) hereby presents its Director s Report for the year INTRODUCTION Incorporated as of March 2005, Altri, S.G.P.S., S.A. has nowadays a strong position in domestic Pulp and in the Steel and Warehousing markets. The latest years were highlighted by several acquisitions that allowed Altri to reinforce its market position. the year 2005 has highlighted by the acquisition of 95% of the share capital of Celtejo Empresa de Celulose do Tejo, S.A., reinforced during the first semester of 2006 and the first semester of 2007, by the acquisition of an additional 4.45% and 0,13%, respectively, of the same company representing an investment over 40 million euro; in January 2006 the Group invested 7.5 million euro in the acquisition of 50% of the share capital of EDP Bioeléctrica, a strategic and high potential investment focused on biomass power production; in August 2006 the Group acquired 100% of the voting rights of Celbi Celulose da Beira Industrial, S.A. to Stora Enso, a transaction amounting to approximately 430 million euro; in December 2006, the Group settled an agreement and support from the Portuguese State to Celbi s capacity increase project. Total investment over 320 million euro; in March 2007 was inaugurated RódãoPower biomass power plant with a production capacity of 13Mwh electric energy; in October 2007, the Group settled an agreement and support from the Portuguese State to Celtejo s modernization and new bleaching line in order to increase the company s mill s value added. Total investment of 73 million euro; 3 Annual Report 07 3

4 DIRECTOR S REPORT in December 2007 the Group has 78 millions forest hectares under management; in the steels sector (F. Ramada Group) in 2007 occurred a reorganization of the Group reinforcing its position in Benelux and Spanish markets; In the sequence of the latest changes in the Group companies, Altri s structure as of 31 December 2007 is as follows: 4 Annual Report 07 4

5 DIRECTOR S REPORT MACROECONOMIC BACKGROUND International background 2007 was a year of sustained growth in the Global economy, (5.6% outside the Euro Zone), supported mainly in the outgrowth of emerging economies, and not so much in the development of the most advanced ones, whose activity noted a general slowing. One of the countries that most impelled this expansion was China, with a growth rate of 11.4%, counteracting more depressive situations such as the one in the U.S.. Japan, on the other hand, continued its growth based in its exports (bringing concerns in relation to the valorisation of Iene towards the Dollar). During the first half of 2007, the international economic background was highlighted by the maintenance of 2006 trends, characterized by a solid development of economic activities and world trade, in a frame of globally favourable conditions to the expansion of financial markets. However, during the summer of 2007, these conditions inverted with the continued deterioration of real estate markets in the US (commonly know as the sub-prime crisis) generating an abrupt perception of risk in the international financial markets. This crisis in the North American real estate sector generated a contraction in international financial markets, leading the US Federal Reserve to cutback on the master interest rates. However, this measure could only be used so far, given the strong inflation pressure that could lead to an even more adverse economic situation. The European Central Bank (ECB), in its turn, interrupted the policy of sustained growth of interest rates in the main refinancing operations ( refi rate), maintaining this rate in around 4%, the same as in March However, its posture towards the future evolution of this financial indicator appears to be aggressive, taking into consideration its primary goal the control of inflation in the Euro Zone. The Euro Zone, in its turn, appears to be in a sustained growth and, for the first time since 2001, grew more than the North American economy (2.7% against 2.2% in this latter), being this expansion characterized by the diversification of activities. The uprising of European exports reflects the intensification of international trade, even if the valuation of Euro towards the Dollar leads this area to lose competitiveness in trade relations with the exterior and, as such, a fall in exports is predicted. Inflation in Euro Zone was around 2.1% in 2007, and focused in specific areas such as Food and Fuel. 5 Annual Report 07 5

6 DIRECTOR S REPORT In what relates to exchange rate, the trends noted in 2006 remained the same, with an appreciation of the effective nominal tax rate of the Euro, resulting in gains against the Dollar, Iene, Sterling Pound and Suisse Franc. This valorisation of the European currency led to some concerns as to the loss of competitiveness of exports in the Euro Zone and the diminishing of this economic indicator in a nearby future was also highlighted by a certain degree of instability in the stock markets, particularly during the second half of the year. The main stock exchange markets presented a mixed performance, with some indexes presenting expressive gains (namely the Lisbon stock exchange main index, PSI 20, that grew approximately 16%), while others accumulated losses in the period (as the FTSE 100, that lost approximately 4%). National background During the year 2007, the economy recovered based on the acceleration of business growth and the significant expansion of exports of goods and services. The increase in the Gross Domestic Product (GDP) in Portugal amounted to 1.9%, mainly led by the growth in Gross Formation of Fixed Capital and exports. Families consumption presented an estimated growth of approximately 1.2%, motivated by the adverse factors in the labour markets and the aggravation of taxation that conducted to a reduction in the families available income. This economic recovery, however, rivals with the continuous deterioration of the labour market. Unemployment rates continued to grow, reaching 8.2% in 2007 (in accordance with OECD), at the same time that the creation of jobs remained at a very low level. Despite the convergence of Portugal to the growth levels of the Euro area, its performance is still unsatisfactory, when compared with comparable per capita income economies. The Consumer Prices Index recorded an average variation of 2.5%, representing a decrease of 0.6 percentage points towards the preceding year. The classes of expenses included in the calculation of this index that point out more strongly are Alcohol and Tobacco, Healthcare and Education. The Harmonized Consumer Prices Index, which promotes the comparison with the remaining Euro Zone countries, recorded an increase of 2.4% facing Future prospects Outside the Euro Zone The OECD predicts, for the US, a slowing in the economic growth in 2008 to 2%, returning to 2.2% in This risk of long term relenting is also derived by the turbulence recorded in the financial markets, which might put at stake the normal economic growth. 6 Annual Report 07 6

7 DIRECTOR S REPORT Japan should also grow less than in preceding years, recording rates around 1.8% and 1.9% in 2008 and 2009, respectively. Regarding the emergent Asian countries, its growth is expected to remain at high levels, strongly supported by demand. Euro Zone Economic growth should slow down in the Euro Zone, passing from 2.7% in 2007 to 2.2% in 2008 and 2.1% in 2009, in accordance with the European Commission predictions. The same entity also estimates the creation of 8 million new jobs in the European Union between 2008 and 2009, which, in the event of happening, would lead to an unemployment rate of 7.1% in the Euro Zone, a very low rate towards preceding years. As to inflation, the occurrence of new increases in Oil prices or Food products may lead to inflation pressures. Portugal Projections relating to the economic performance for the period point out to the continuance of the economic recovery already felt in 2007, with GDP growth rates of 2% in 2008 and 2.3% in It is expected that internal demand may contribute to this growth of GDP, especially with the recovery in investment (both public and private). On the other turn, private consumption should maintain a low profile as a result of the increase of the cost of debt and the stagnation of labour market. The European Commission estimates for Portugal an unemployment rate of 8% and 7.7% in the next two years, which reveals the continued deterioration of labour market conditions. It is expected that inflation, measured by the Harmonized Consumer Prices Index, may be around 2%, namely 2.4% in 2008 and 2% in the following year. 7 Annual Report 07 7

8 DIRECTOR S REPORT STOCK EXCHANGE EVOLUTION (Note: in order to enable a better comparison of the stock fluctuations, the PSI 20 index has been considered as being equal in value to the opening price of the shares in question.) In general, the national capital market activity during the year was very dynamic explained on one hand for resumption of economy which enhances the flourishing of company s development. On the other hand the M&A operations around PSI-20 also powered the economy s growth. PSI-20 valued up 15% compared with the beginning of the year, bearing points. The shares of the Altri continue with the significant growth already demonstrated since 2005, the year of its incorporation, showing the confidence placed in Group by investors, and continuing to reward the dynamics of their activities in the recent past, with the acquisition of share capital of Celtejo Group in the second semester of 2005 and Celulose Beira Industrial (CELBI) in August Stock Exchange Evolution 8,0 7,0 6,0 5,0 4,0 3,0 Altri PSI 20 2,0 1,0 0,0 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Altri s share price grew more than 30% during the year 2007, and closed bearing at 5.33 euro per share with a market capitalisation amounting to, approximately, 547 million euro. Were traded during the year 2007 approximately million securities of the Company, volume extremely relevant if we take into consideration that their capital is composed of about 103 million shares. During 2007, 207,5 million shares of Altri were transacted in the stock market, an amount extremely relevant considering the fact that the share capital of the Company is composed by 103 million titles. 8 Annual Report 07 8

9 DIRECTOR S REPORT The main events that distinguished the stock evolution during 2007 may be described chronologically as follows: On January 5, 2007 Altri announced that in 2006 recorded an absolute record of production in all its industrial units (Celbi, Celtejo, Caima and CPK) having exceeded the 609 thousand tons, representing a average growth of 5% over the year It was also announced that in the near future the company foresee to increase its production capacity in their units with particular emphasis in Celtejo and in Celbi. The Altri reach an estimated production capacity of 195 thousand tons in Celtejo and 550 thousand tons in Celbi, representing a growth of 69% of all the productive capacity of these two units; Through the communication made in March 7, 2007 the Group announced its performance for the year 2006 with the net profit including minority interests was approximately 21.1 million euro (this performance includes only 4 months of Celbi s activity since its acquisition date on August 2006). The consolidated operating income amounted to 296 million euro and the operating cash flow (operating results + depreciation) was about 63 million euro. The consolidated net profit attributable to shareholders of the parent company in financial year 2006 was 20.8 million euro. The operating income of the 4th quarter of 2006 reached 98.5 million euro, the operating profit was 16.7 million euro and the EBITDA of 22.5 million euro, although these figures have been adversely affected by the planned stops on the factories of Celbi and Caima. Altri's shares closed bearing 5.78 euro per share; On March 16, 2007 through the communication to the CMVM Altri informed that João Manuel Matos Borges de Oliveira and Carlos Manuel Matos Borges de Oliveira sold, out of stock exchange, shares of Altri - SGPS, SA held by each, individual corresponding to 2.23% of the voting rights and equal percentage of share capital. It was further reported that each of these directors owns 50% of the share capital of Caderno Azul, SGPS, SA that at this same date acquired, out of stock exchange, shares of Altri SGPS, SA corresponding to 4.47% of the capital and voting rights of Altri; On April 2, it was communicated to CMVM that, as approved by the General Shareholders meeting, Altri would pay a dividend of 0.05 euro per share 9 Annual Report 07 9

10 DIRECTOR S REPORT regarding 2006, from the day 18 of the same month. At that time the shares closed at 5.75 euro per share; On May 9, 2007 were communicated to the market the results of Altri for the first quarter of Compared with the last quarter of 2006, the only period comparable with the current period, there is a growth on the activity of the Altri s Group, namely an increase in operating income (8%), and with regard to operating results with a positive variation of 27% over the comparable period. In the first quarter of 2007, the Altri Group reached consolidated operating income of 106 million euro and a consolidated net profit of approximately 11 million euro. The operational cash flow (operating results + depreciation) was approximately 28 million euro. At that time the shares of Altri SGPS, S.A. closed bearing 6.55 euro per share; On June 6, 2007, was communicated to the market that JP Morgan Chase & Co. in its name and in the name of its shareholding, has ceased to hold a qualifying participation in the share capital of Altri SGPS, SA. This resulted from the sell, by its subsidiary JP Morgan Asset Management (UK) Limited acting in its capacity as manager of investment discretionary funds, 738,108 ordinary shares of the company on June 4, After this sale, the total number of shares held by JP Morgan Chase & Co. decreased to 1,966,113 representing 1.91% of the share capital of Altri; Through communication made on September 5, 2007, the Group announced its performance for the first semester of 2007 with the net profit including minority interests of approximately 19.3 million euro. The consolidated operating income amounted was up than 213 million euro. The operating cash flow (operating results + depreciation) was 53.5 million euro. The operating income of the second quarter of 2007 reached 107 million euro, the operating profit was 18 million euro and the operating cash flow was 25 million euro; and On November 7, 2007, were communicated to the market the results of Altri for the 3rd quarter of The consolidated operating income of Altri Group reached around 102 million euro which represents a growth of 3% compared to the 4th quarter of The operating cash flow amounted to about 27 million euro and registered a growth of 18% compared with the 4th quarter of These results produced a consolidated net profit greater than 9 million euro (+9% compared with the 4th quarter of 2006). 10 Annual Report 07 10

11 DIRECTOR S REPORT GROUP S ACTIVITY With its genesis in the reorganization process of Cofina with the purpose of setting into a separate holding the industrial operations, Altri currently holds the investments in the paper, pulp, steel and storage systems. Pulp and Paper Celbi Pulp and Paper Steel and Warehousing Systems F. Ramada Steel and Warehousing Systems Caima Pulp and Paper National companies Steel Celtejo Pulp and Paper National companies Warehousing Systems EDP Bioeléctrica Energy production International companies Warehousing Systems A. Paper and Pulp The Group currently operates in this sector through Celulose do Caima, S.G.P.S., S.A., which, in its turn, holds participations in: Caima Indústria de Celulose (Constância), producer and distributor of paper pulp; Celbi Celulose da Beira Industrial, S.A. (Figueira da Foz), producer and distributor of paper pulp; Celtejo Empresa de Celulose do Tejo, S.A. (Vila Velha de Ródão) - producer and distributor of raw kraft pulps; CPK Companhia Produtora de Papel Kraftsack, S.A. (Vila Velha de Ródão), producer and distributor of kraftsack paper; Silvicaima - Sociedade Silvícola do Caima, S.A. (Constância) - owner and manager of the Group s forestry resources; Caima Energia - Empresa de Gestão e Exploração de Energia, S.A. (Constância) e Ródão Power, S.A. (Vila Velha de Ródão), provide its associated companies with its electric and thermal energy needs. 11 Annual Report 07 11

12 DIRECTOR S REPORT Moreover, in order to fulfil its energetic needs and expand its activity in a strategic sector, the Group detains a participation of 50% of the share-capital of EDP Bioeléctrica. During 2007 the international market of pulp had a strong demand for cellulose pulp whose price is referenced in the international market in U.S. dollar. Increased of prices occurred motivated either by strong demand, either to annul the effects caused by systematic devaluation of U.S. currency. Worldwide, global stocks were at exceptionally low levels. The average price of pulp BEKP during 2007 was around 703 USD/Ton, representing a growth of 10% over the average price recorded in 2006 (638 USD/ton). Converting to euro, it was found that the average price of BEKP was 513 EUR/ton, representing a growth of about 1% against the average price of 509 EUR/ton, registered in In terms of production costs, the year 2007 was marked by a trend of increase in the price of major inputs, including wood and chemicals derived from oil. 12 Annual Report 07 12

13 DIRECTOR S REPORT Euro 530,00 525,00 520,00 515,00 510,00 505,00 500,00 495,00 490,00 Evolution of the pulp prices in the international market Amounts per ton US$ 780,00 760,00 740,00 720,00 700,00 680,00 660,00 640,00 BHPK Pix (Euro) BHPK Pix (US$) 485,00 Jan- 07 Feb- 07 Mar- 07 Apr- 07 May- 07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 Nov- 07 Dec ,00 Altri Group recorded in 2007 an absolute record of production in all its industrial units, Celbi, Celtejo, Caima and CPK, amounting to 639 thousand tons, representing an average growth of 5% over the year In the performance of industrial units, focus on the growth recorded in Celbi from 6.8% to 325 thousand tons of pulp produced against the 304 thousand tons in And also for CPK which produces paper kraftsack, with an increase of production of 8.1% to 62.9 thousand tons. CELBI GROUP Celbi unit acquired during August 2006, reached during 2007 sales of thousand tons of pulp, representing a growth of 4% over the previous year. Regarding the production of pulp this amounted to 325 thousand tons, 6.8% above the production of the previous year. CAIMA GROUP In 2007, the sales volume was thousand tons of pulp which represents a growth of 3% compared with sales recorded in The Iberian Peninsula and the other European Countries of European Union remained as the main markets. During 2007 Caima Group produced tons of pulp, volume 2.2% above the previous year and that configures an optimal exploitation of the production capacity of the factory. Silvicaima still has an important role in the supply of the group companies making possible to achieve, together with supplies from outside, confortable wood stocks at the end of The exchanges of wood with other companies in the sector, reached in the end of December around 35,000 m 3 resulting in reductions of their transportation costs. 13 Annual Report 07 13

14 DIRECTOR S REPORT CELTEJO GROUP The sales volume in 2007 amounted to thousand tons of Kraft pulp raw and 61.6 tons of paper Kraftsack, representing a decrease and increase, respectively, of almost 6% and 4% compared with the same period the previous year. The production of raw Kraft pulp in the year was tons, 1% higher than the production of On paper Kraftsack the production was 62.7 tons, 8.2% above the occurred in In the near future the Group foresee increase its production capacity in their units, with particular emphasis on Celtejo and Celbi. Altri estimated that in 2010 will reach a total production capacity of 910 thousand tons of pulp, which puts the company among the 10 largest in the world in the area of eucalyptus pulp. During 2007 production facilities in the sector of pulp and paper continued to scrupulously comply with environmental legislation, particularly regarding the parameters of liquid and gaseous emissions as well as the management and exploitation of solid waste. 14 Annual Report 07 14

15 DIRECTOR S REPORT B. Steel and Warehousing Systems Altri holds all the voting rights of F. Ramada Group, through which it operates in the Steel and Warehousing systems market. F. Ramada F.Ramada Estruturas 100% 100% Universal Afir 10% BPS 100% 90% F.Ramada II Imobiliária Storax UK 100% 98% F.Ramada Serviços Gestão 2% 100% Storax Benelux In addition to these two business segments, F. Ramada also operates in special steel for moulds, saws and tools market. F. Ramada Group is currently composed by 8 companies, three being located in other European Union countries (United Kingdom, Belgium and France), thus reflecting the Group s objectives of consolidation of its European distribution network. The Group also maintains partnerships with Spanish entities for the same purpose, thus rationalising the Iberian warehousing systems distribution network. Regarding the sector of Warehousing Systems, during 2007 there was a growth of sales in international markets through the expansion of European sales force via distributors. Were also done businesses in over 50 countries on the five continents. The drop in the level of activity in the UK market was offset by the entry of new markets such as Germany, Poland and Morocco as well as the growth of sales in Portugal, Spain, France and Benelux. The current portfolio of orders, particularly in the business of storage (automatic storage and high-density to the cold) allows the group to face the year 2008 with optimism. For the Steels Sector 2007 was positive for industrial activity in the European Union which has generated a beneficial effect on industrial activity in Portugal. However the structural problems of the Portuguese economy prevented a positive development. In this context is 15 Annual Report 07 15

16 DIRECTOR S REPORT important to highlight the reduction recorded in the price of steel in the European market in the second semester of 2007 with impacts on the Group. 220 Steel Prices evolution in the European Market Constant Prices of 1997 (Amounts in Euro/Ton) Jul-03 Nov-03 Mar-04 Jul-04 Nov-04 Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov Steel prices evolution (per type) in the European market Constant prices 1997 (Amounts in Euro/Ton) Jul/03 Oct/03 Jan/04 Apr/04 Jul/04 Oct/04 Jan/05 Apr/05 Jul/05 Oct/05 Jan/06 Apr/06 Jul/06 Oct/06 Jan/07 Apr/07 Jul/07 Oct/07 Hot Rolled Coil Hot Rolled Plate Cold Rolled Coil HD Galv. Coil Wire Rod (mesh) Structural Sections & Beams Rebar Steel Prices evolution in the World Market Constant Prices of 1997 (Amounts is US$/Ton) Jul/03 Oct/03 Jan/04 Apr/04 Jul/04 Oct/04 Jan/05 Apr/05 Jul/05 Oct/05 Jan/06 Apr/06 Jul/06 Oct/06 Jan/07 Apr/07 Jul/07 Oct/07 16 Annual Report 07 16

17 DIRECTOR S REPORT Despite the price reduction in the European market developments in international markets were positive, maintaining the upward trend begun in earlier periods. As a result of the international activity growth, the delivery time of steel is extended, forcing the group to temporarily reinforce their stocks. The business has grown in a good level which achieves the objectives. 17 Annual Report 07 17

18 DIRECTOR S REPORT FINANCIAL REVIEW Altri, SGPS, S.A. The consolidated financial information of Altri for the year 2007 and its comparison with the same period of 2006, prepared in accordance with the recognition and measurement principles defined by the International Financial Reporting Standards as adopted by the European Union reflected the activity of the financial year 2007 Celbi/Caima/Celtejo Group and Ramada Group. Taking into consideration the changes in the consolidation perimeter of the Group during 2006, the comparability of consolidated data presented is affected by the fact that the performance of the year 2006 covers 4 months of Celbi s activity, because its acquisition occurred only in August Therefore, the key data and consolidated activity Group indicators can be summarised as follows: (amounts in thousand euro) Dec-07 Dec-06 % IFRS IFRS 07/06 Balance sheet Net Assets 1,056, , % n.a. Shareholder s funds 118,276 85, % n.a. Gross remunerated debt 783, , % n.a. Cash and cash equivalents ( b ) 136,330 25, % n.a. Net remunerated debt 646, , % n.a. Statement of profit and loss Dec-07 Dec-2006 c) % Dec-06 (d) Operating income 419, , % 399,111 Operating profit (EBIT) 75,778 43, % 63,740 Net financial income (33,462) (17,001) -96.8% n.a. Net consolid. profit attib. to the parent company s shareholders 35,194 20, % n.a. Minority interests % n.a. Net consolidated profit for the period 35,256 21, % n.a. Ratios Dec-07 Dec-2006 c) % Dec-06 (d) Net profit / Operating income 8.4% 7.1% n.a. n.a. EBITDA ( a ) 102,315 63, % 90,955 Shareholder s funds / Net Assets 11.2% 11.1% n.a. n.a. Return on Equity 29.8% 24.2% n.a. n.a. ( a ) EBITDA = Operating profit + Amortisation ( b ) Including the value of investments recorded at fair value through profit and loss ( c ) Including only 4 months of activity of Celbi, given the date of its acquisition ( d ) Considering 12 months of Celbi's operation in 2006 In 2007, the Altri Group consolidated operating income reached around 419 million euro, which represents a growth of 42% compared with the figures recorded in 2006 and 5% compared to proforma considering 12 months of activity of Celbi. EBITDA amounted to around 102 million euro and registered a growth of 62% over the year 2006 and of 12% compared to proforma EBITDA. Thus, the consolidated net result of 2007 was more than 35 million euro, and grew about 67% against that recorded in the The total investment (CAPEX) achieved during 2007 was 107 million euro. The Group's net nominal debt of Altri on December 31, 2007 amounted to approximately 647 million euro. It is noted that at the end of 2007 Altri had under management approximately 78 thousand hectares of forest in Portugal which represents an increase of about 3 thousand 18 Annual Report 07 18

19 DIRECTOR S REPORT hectares of forest under total management, which at the end of 2006 was about of 75 thousand hectares. The level of return on equity (ROE) was close to 30%, a growth higher than 5 percentual points compared to In order to provide the market and the shareholders with information for better analyse the Group s performance on both pulp and paper and steel sectors, it is presented the financial and operational information about those groups. Celbi / Caima / Celtejo Group As mentioned above, taking into consideration the changes in the consolidation perimeter of the Group during 2006, the comparability of consolidated presented data is affected by the fact that the performance of the year 2006 covers 4 months of Celbi s activity of, because its acquisition occurred only in August (amounts in thousand euro) IFRS IFRS % Balance sheet Dec-07 Dec-06 07/06 Net Assets 900, ,183 35% n.a. n.a. Shareholder s funds 126,868 80,184 58% n.a. n.a. Gross remunerated debt 627, ,645 24% n.a. n.a. Cash and cash equivalents ( b ) 72,573 15, % n.a. n.a. Net remunerated debt 554, ,860 13% n.a. n.a. Statement of profit and loss Dec-07 Dez-2006 c) % Dez-06 (d) % 07/06 (d) Operating income 312, ,274 59% 299,850 4% Sales and services rendered 317, ,690 69% 291,040 9% Operating profit (EBIT) 67,345 33,804 99% 53,882 25% Net consolid. profit attib. to the parent company s shareholders 31,735 19,317 64% n.a. n.a. Ratios Dec-07 Dez-2006 c) % Dez-06 (d) % 07/06 (d) Net profit / Operating income 10.2% 9.8% 4% n.a. n.a. EBITDA (a) 91,626 51,053 79% 78,848 16% EBITDA margin 28.9% 27.2% n.a. n.a. n.a. Shareholder s funds / Net Assets 14.1% 12.0% 17% n.a. n.a. Return on Equity 25.0% 24.1% 4% n.a. n.a. (a) EBITDA = Operating Results + Depreciation (b) Including the value of investments recorded at fair value through profit and loss (c) Including only 4 months of activity of Celbi, given the date of its acquisition (d) Considering 12 months of Celbi s operation in 2006 In 2007, the Celbi / Caima / Celtejo Group operating income reached around 312 million euro which represents a growth of 59% compared with the figures recorded in 2006 and 4% compared to proforma considering 12 months of Celbi s activity. EBITDA amounted to about 92 million euro, and registered a growth of 79% over 2006 and 16% compared to proforma EBITDA that considers 12 months of activity of Celbi. The operating result reached 67 million euro, an increase of 99% compared with 2006 and by 25% compared to the proforma information. The EBITDA margin recorded in the year 2007 was around 29%, while the previous year had been encrypted in 27%, showing a growth of more than 2 percentage points. In 2007, total production of Altri s pulp unit (Celbi/Caima/Celtejo) was around 576 thousand tons, representing a growth of about 5% of the total production registered in the same period of Annual Report 07 19

20 DIRECTOR S REPORT During 2007 the international market of pulp has a strong demand for cellulose pulp, whose price is referenced in the international market in U.S. dollar and increases in prices motivated either by strong demand, either to annul the effects caused by systematic devaluation of U.S. currency. Worldwide, the global stocks are at exceptionally low levels. The average price of pulp BEKP during 2007 was around USD 703 USD/ton, representing a growth of 10% over the average price recorded in 2006 (638 USD/ton). Converting to euro, it was found that the average price of BEKP was EUR 513/ton, represents a growth of about 1% against the average price of 509 EUR/ton, registered in In terms of production costs, the year 2007 was marked by a trend of increase in the price of major inputs, including wood and chemicals derived from oil. F. Ramada Group (amounts in thousand euro) IFRS IFRS % Dec-07 Dec-06 Balance sheet Net Assets 223,219 97, % Shareholder s funds 37,389 34,287 9% Gross remunerated debt 116,397 33, % Cash and cash equivalents ( b ) 63,677 6, % Net remunerated debt 52,721 27,082 95% Statement of profit and loss Dec-07 Dec-06 % Operating income 109, ,971 6% Operating profit (EBIT) 10,752 11,157-4% Net consolid. profit attib. to the parent company s shareholders 6,995 7,639-8% Ratios Dec-07 Dec-06 % Net profit / Operating income 6.4% 7.3% -13% EBITDA (a) 12,701 13,103-3% Shareholder s funds / Net Assets 16.7% 35.0% -52% Return on Equity 18.7% 22.3% -16% (a) (b) EBITDA = Operating profit + Depreciation Including the amount of investments recorded at fair value through profit and loss The consolidated operating income of the Ramada Group amounted to around 110 million euro, an increase of 6% compared with the same period of The operating result fell 4% to around 11 million euro, while EBITDA was around 13 million euro (-3%) during the year The main reason for the EBITDA performance is due to a reduction in gross margin, driven by the increase in the price of steel in the international market and that has led to increases in "Cost of goods sold and material consumed. 20 Annual Report 07 20

21 DIRECTOR S REPORT 2008 OUTLOOK The year 2008 is seen by Altri Group with optimism taking into consideration the exponential growth recorded since its incorporation date, March 2005, and the recent investments. During 2007 was decided the sale of Ródão Power Energia e Biomassa do Ródão, S.A., which the Board estimates that will happen during In the segment of the Pulp and Paper, the contraction in the production of paper combined with an increase in the supply of pulp may have negative effects on the evolution of the price, on the other hand the cost pressure of wood and of the exchange rate exert strong pressure to the contrary. It is expected to sustain the prices of pulp. Additionally, should also contribute positively to Group s performance, although not necessarily already in 2008 and the investment in industrial units of Celbi and Celtejo, allowing to achieve in 2010 a total production capacity of 910 thousand tons of pulp. In the segment of Steels the implementation of new projects and investments directed connected to the production and development of new products, improvement in activity and quality to achieve its objectives. At the Warehousing systems, the policy of continuous investment, in addition to reduce costs and increasing productivity, allows the Group to be optimistic about the objectives of sales growth and expectable profitability for On 16 April 2008, Altri S.G.P.S., S.A. (ALTRI) Board of Directors approved a demerger project (spin off) for the company. Under the terms of the said project, the planned reorganization views the splitting of ALTRI's two business units that manage equity holdings in the pulp and paper sector and in the steel and storage systems sector. This reorganization is part of a focusing and business transparency strategy, aiming at giving greater visibility to each area and increasing market perception of value. As provided in the spin off project, which will be submitted to approval and deliberation by ALTRI shareholders in a General Meeting convened for the purpose, the realization of this goal will involve ALTRI's demerger simple demerger as provided in Paragraph 1-a), article 118º of the Commercial Companies Code, and the setting up of a new company from the business unit active in the management of equity holdings in the steel and storage systems sector. The management of the pulp and paper business unit will remain at ALTRI, and shares corresponding to its share capital will remain listed on EUROLIST BY EURONEXT, the official market managed by EURONEXT LISBON Sociedade Gestora de Mercados Regulamentados, S.A. Application will be made to list the shares corresponding to the share capital of the new company on this market. 21 Annual Report 07 21

22 DIRECTOR S REPORT PROPOSAL OF THE BOARD OF DIRECTORS FOR APPROPRIATION OF THE NON CONSOLIDATED NET PROFIT FOR THE YEAR Altri, S.G.P.S., S.A., as holding company for the Group, achieved a non-consolidated net profit of 2,059, Euro which, in accordance with the applicable legislation and the Company s articles of association, the Board of Directors proposes to the Shareholders General Meeting to be appropriated as follows: Legal Reserve 102, Distribution of dividends 1,956, ,059, ========== Additionally, the Board proposes a distribution of 3,171, euro for Free Reserves so that in total this application corresponds to the distribution of a dividend of 0.05 euro per share (total number of shares 102,565,836). 22 Annual Report 07 22

23 DIRECTOR S REPORT CORPORATE GOVERNANCE In compliance with the guidelines included in Stock Exchange Directive (Regulamento da CMVM) 7/2001 with the changes introduced by Regulations 11/2003 and 10/2005 this section serves to summarise the fundamental aspects of the management of the Company as regards the Board of Directors, considering the need for transparency with respect to this matter and the need for information for the investors and others to which the information is addressed. This section is organised in accordance with the instructions included in the Attachment to the above mentioned regulation, it being the Board of Directors belief that the majority of the items included in the Stock Exchange Recommendations for Governance of Listed Companies have been complied with. Regarding this matter, it is to highlight the fact that, following the changes introduced to the Commercial Companies Code by Decree-Law 76-A/2006, the Shareholders General Meeting held 29 March 2007 approved a partial change to the Company s articles of association, transforming the oversight structure from the Sole Statutory Auditor regime to a Statutory Audit Board and Statutory Auditor. Thus, were elected until the term of the current mandate (2005/2007) the following members: Statutory Audit Board Dr. João da Silva Natária President Dr. Manuel Tiago Alves Baldaque de Marinho Fernandes - Member Dra. Cristina Isabel Linhares Fernandes Member Dr. Joaquim Augusto Soares da Silva Substitute Statutory Auditor Deloitte & Associados, SROC S.A., represented by Dr. António Manuel Martins Amaral 0. Statement of compliance Altri, S.G.P.S., S.A. complies with the majority of recommendations of the Securities Market Commission (Comissão do Mercado de Valores Mobiliários CMVM) relating to Corporate Governance, except for the following (in accordance with the numeration set in the attachment of the directive): Recommendation I-2: Although there are no formal internal control committees with the function of assessing corporate structure and governance, the Board of Directors believes that such functions, in the case of the Company, can be carried out by its Board of Directors and, in the case of its subsidiaries, it is carried out by their management control departments. 23 Annual Report 07 23

24 DIRECTOR S REPORT The Company s Board of Directors is directly responsible for assessing corporate structure and governance and is constantly debating this matter. Recommendation III-2: Altri, S.G.P.S., S.A. does not include an organic unity dedicated specifically to internal audit. This task is developed by the management control department, and supervised by the Financial Management, who prepares and provides the Board of Directors with month reports for the several participated companies. Recommendation IV: The Board of Directors currently in functions does not include any members that can be considered independent under the provisions of Regulation 11/2003. Recommendation IV-5: In this section Altri, S.G.P.S., S.A. discloses information relating the fixed and variable remuneration of its Board of Directors and believes that disclosure of the individual remuneration of each director does not provide relevant information for the shareholders. 24 Annual Report 07 24

25 DIRECTOR S REPORT I. Disclosure of Information 1. Corporate Bodies and definition of responsibilities Corporate Bodies The corporate bodies of Altri, S.G.P.S., S.A. are: The Shareholders General Assembly, made up of all the shareholders with voting rights, who are responsible for approving changes in the articles of association, making a general assessment of the Management and monitoring the Company, approving the Directors Report and financial statements for the year, electing the members of the corporate bodies of its competence and, in general, considering all the matters submitted to it by the Board of Directors; The Board of Directors, elected by the Shareholder s General Assembly, currently made up of 5 members who are responsible for carrying out all the management functions to implement the operations inherent in its corporate objectives, acting in the best interests of the Company, its shareholders and employees. On December 31, 2007, this corporate body was composed of the following members: Paulo Jorge dos Santos Fernandes President João Manuel Matos Borges de Oliveira Member Pedro Macedo Pinto de Mendonça Member Domingos José Vieira de Matos Member Carlos Manuel Matos Borges de Oliveira Member Statutory Audit Board, appointed by the General Assembly, composed of three members and one or two alternates, responsible for the surveillance of the society and the appointment of the Statutory Auditor. On December 31, 2007 this corporate body was composed by the following members: Dr. João da Silva Natária President Dr. Manuel Tiago Alves Baldaque de Marinho Fernandes Member Dra. Cristina Isabel Linhares Fernandes Member Dr. Joaquim Augusto Soares da Silva Substitute The Statutory Auditor, who is responsible for the examination of Company s financial statements. On December 31, 2007 this function was performed for Deloitte & Associados, SROC S.A. 25 Annual Report 07 25

26 DIRECTOR S REPORT Main areas of responsibility of the members of the Board of Directors The Board of Directors, elected by the Shareholders General Assembly develops its tasks on a collective basis with the functions of management and coordination of the Group companies and is currently made up of a president and four members, all with executive functions. The distribution of branches between the several members of the Board of Directors may be presented as follows: Generically, Altri SGPS directors focus their activities in managing the Group s participation and defining its strategic development. The daily management of each operating company is a responsibility of its Board of Directors, which includes some of Altri s directors but also some other members with defined jurisdictions. Given the present structure, the functional organisation chart of the Group is as follows: 2. Committees existing in the Company In accordance with the Company s articles of association, the members of the corporate bodies will be entitled to the remunerations that are decided by a committee, composed by three shareholders, one of which will be the president and will have a quality vote, all elected by the General Shareholder s meeting. The shareholders remuneration might be fixed or partially represent a percentage that can never exceed five per cent of the net profits for the year.however, this committee is not currently appointed and the Company s directors are not rewarded directly by Altri. There are no other committees predicted for the society. 26 Annual Report 07 26

27 DIRECTOR S REPORT 3. Description of the risk control system implemented by the Company The Board of Directors consider that the group is exposed to the normal risks associated with its operations, namely in its operating units. Therefore, the main risks considered by the Group are: Credit Risk, Interest Rate Risk, Exchange rate Risk and Commodities Price variability Risk. Credit Risk Like any activity involving a commercial component, the Group s exposure to credit risk is attributable mainly to the accounts receivable resulting from the Group s operating activity. The first approach is performed through the daily management of the credit rating attributed to each credit prior to its acceptance and additionally through the adequacy of the granted payment periods. Credit risk evaluation is done in a regular basis, by analysing the current economic conjuncture conditions, in particular the credit situation of each company and, when necessary, adopting the corrective measures. Interest Rate Risk Considering the Group s debt, possible variations on the interest rate may have an unwanted impact on the results. Therefore, the Group adopts a balanced position between the cost of the debt and its exposure to the interest rate variability. When the reasonable risk is exceeded, the Group engages interest rate swaps in order to reduce its exposure to risk and to restrict the potential volatility of results. Exchange Rate Risk Due to the great volume of transactions with non resident entities and with different currencies, exchange rate instability might have a relevant impact on the Group s performance. Therefore, whenever the Group considers necessary to reduce the volatility of its results, the position is covered by contracting derivative instruments. Commodities Price variability Risk Since the Group s activity involves two sectors with commodity transactions, (paper pulp and steel), it is particularly exposed to price fluctuation. The Group celebrates agreements to cover its positions, in order to reduce the volatility of the earnings. 4. Evolution of the share price of Altri on Euronext Lisbon In addition to the analysis made previously on the evolution of prices of Altri capital shares, following is detailed the review of the most significant variations taking into account relevant factors such as the announcement of results, payment of dividends or the issuance of shares or other securities occurring throughout the year. 27 Annual Report 07 27

28 DIRECTOR S REPORT Stock Exchange Rate Mar 2 Abr 9 Mai 5 Set 7 Nov Jan/07 Feb/07 Mar/07 Apr/07 May/07 Jun/07 Jul/07 Aug/07 Sep/07 Oct/07 Nov/07 Dec/07 Altri Through the communication made in March 7, 2007 the Group announced its performance for the year 2006 with the net profit including minority interests was approximately 21.1 million euro (this performance includes only 4 months of Celbi s activity since its acquisition date on August 2006). The consolidated operating income amounted to 296 million euro and the operating cash flow (operating results + depreciation) was about 63 million euro. The consolidated net profit attributable to shareholders of the parent company in financial year 2006 was 20.8 million euro. The operating income of the 4th quarter of 2006 reached 98.5 million euro, the operating profit was 16.7 million euro and the EBITDA of 22.5 million euro, although these figures have been adversely affected by the planned stops on the factories of Celbi and Caima. Altri's shares closed bearing 5.78 euro per share; On April 2, it was communicated to CMVM that, as approved by the General Shareholders meeting, Altri would pay a dividend of 0.05 euro per share regarding 2006, from the day 18 of the same month. At that time the shares closed at 5.75 euro per share; On May 9, 2007 were communicated to the market the results of Altri for the first quarter of Compared with the last quarter of 2006, the only period comparable with the current period, there is a growth on the activity of the Altri s Group, namely an increase in operating income (8%), and with regard to operating results with a positive variation of 27% over the comparable period. In the first quarter of 2007, the Altri Group reached consolidated operating income of 106 million euro and a consolidated net profit of approximately 11 million euro. The operational cash flow (operating results + depreciation) was approximately 28 million euro. At that time the shares of Altri SGPS, S.A. closed bearing 6.55 euro per share; Through communication made on September 5, 2007, the Group announced its performance for the first semester of 2007 with the net profit including minority interests of approximately 19.3 million euro. The consolidated operating income amounted was up than 213 million euro. The operating cash flow (operating results + depreciation) was 53.5 million euro. The operating income of the second quarter of 2007 reached 107 million euro, the operating profit was 18 million euro and the operating cash flow was 25 million euro; and 28 Annual Report 07 28

29 DIRECTOR S REPORT On November 7, 2007, were communicated to the market the results of Altri for the 3rd quarter of The consolidated operating income of Altri Group reached around 102 million euro which represents a growth of 3% compared to the 4th quarter of The operating cash flow amounted to about 27 million euro and registered a growth of 18% compared with the 4th quarter of These results produced a consolidated net profit greater than 9 million euro (+9% compared with the 4th quarter of 2006). 5. Dividend policy Incorporate during 2005, Altri does not have relevant historical data regarding dividend distribution. However, in accordance with the policy set by the Board of Directors, the dividends proposed for distribution should be in such a manner that offers the shareholders the adequate compensation for their investment, at the same time that sustains the Group s needs regarding its continuous growth and investment. Concerning the year 2005, distributed dividends amounted to 2,564,146 Euro, corresponding to a dividend of 0.05 Euro per share, and a total of 51,282,918 shares. Concerning the year 2006, distributed dividends amounted to 5,128,292 Euro, corresponding to a dividend of 0.05 Euro per share, and a total of 102,565,836 shares. Concerning the year 2007, the board proposes a distribution of dividends equal to the previous year, that means, 0.05 Euro per share, corresponding to a total dividend distribution of 5,128,292 Euros 6. Share distribution and share option plans Altri, S.G.P.S., S.A. does not have any share distribution or share options plans for members of its corporate boards or employees. 7. Transaction carried out between the Company and members of its corporate boards During 2007 no transactions were carried out between the Company and the members of its corporate boards (Board of Directors, Statutory Audit Board and Statutory Auditor), holders of qualified participations or subsidiaries of the Group that were not performed under normal market conditions for similar transactions, and were always performed under the Company s normal course of business of managing its investments Annual Report 07 29

30 DIRECTOR S REPORT Investor support office The Company has established a representative for the relations with the market Alfredo Luís Portocarrero Pinto Teixeira, secretary to the Board of Directors. Contacts for investors to obtain information are as follows: Rua do General Norton de Matos, 68 r/c Porto Porto Phone: (+351) Fax: (+351) [email protected] Whenever necessary the representative for the relations with the market ensures that all the relevant information regarding significant occurrences, relevant facts, disclosure of quarterly results and replies to possible requests, by investors or the public in general, for clarification of publicly available financial information, is provided. Additionally, Altri provides financial information relating to its non consolidated and consolidated operations, as well as that of its affiliated companies, through its official internet page ( This site is also used by the Company to provide information on press releases, as well as any relevant facts occurring in the life of the Company. This page also includes the Company s statements of account. 9. Remuneration Committee As mentioned before, it is not currently in function the Remuneration Committee predicted in the Company s articles of association, due to the fact that the members of the Board of Directors are not rewarded directly by Altri, S.G.P.S., S.A., but directly by the subsidiary companies where they also perform duties. 10. Fees paid to the auditors Fees paid to the Group s auditors and other entities belonging to the same network by the Company and its subsidiaries amounted to, approximately, 595 thousand Euro, distributed as follows: Statutory audit 39.3% Other assurance services 20.5% Tax consultancy services 32.6% Other services 7.6% 30 Annual Report 07 30

31 DIRECTOR S REPORT In requesting projects, before awarding the services, the Board of Directors ensures that services are not contracted that, under the terms of European Commission Recommendation C (2002) 1873 of 16 May 2002, can put in question the independence of the auditors and their respective network. In addition, independence is usually safeguarded by the fact that the other services are rendered by different professionals from those performing financial audit services. II. Voting rights and shareholders representation Prior to each Shareholder s General Meeting, in compliance with the legally required periods of notice, Altri publishes extensively the dates on which meetings are to take place, complementing this with inclusion of the notice calling the meeting in the institutional site ( The Shareholders General Meeting is made up of all the shareholders with the right to vote, with one vote for each share. Shareholders may vote if they hold at least one share registered or deposited in their name in the centralised securities system. Registration and deposit referred to earlier must be shown to have been made at least five days before the date of the Shareholders General Meeting. The vote by mail can be made on the following terms: The vote by correspondence should be exercised through written declaration, with the signature duly recognised (by public notary, attorney or solicitor) accompanied by a document to support the shares registration on behalf of the shareholder and respective immobilization until the term of the day of the Shareholders General Meeting; If a declaration intends to exercise the voting by mail and the supporting document of the quality of shareholder must be delivered to the Company s headquarters until 5h00 p.m. of the fifth working day before the day assigned for the meeting, with identification of the sender, addressed to the President of the Shareholders General Assembly; There should be a statement of votes for each point of the Order of the Day for which is allowed to vote by mail and each declaration of vote should be sent in sealed envelope which can only be opened by the President of the Shareholders General Assembly at the moment of votes counting. So each envelope should indicate in its exterior the point of the Order of the Day that it respects to; The votes by correspondence will be valid as negative votes in relation to the proposals of deliberation presented after the emission of the vote; The presence in the General Assembly of the shareholder or his representative will be understood as withdrawal of their vote by correspondence. 31 Annual Report 07 31

32 DIRECTOR S REPORT There is no specific memo for voting by correspondence. At this time, there is no provision for voting by electronic means. Individual persons who are shareholders with the right to vote may be represented by another shareholder, spouse, ascendant or descendant, or any member of the Board of Directors. Legal entities which are shareholders of the Company are represented by the person designated for that purpose. Such representation must be communicated to the President of the Board of the Shareholders General Meeting, by letter delivered to the Company s head office up to 5h00 p.m. on the fifth day preceding that of the Shareholders General Meeting. Shareholders that do not have a sufficient number of shares to vote may do so by grouping together so as to have the number of shares needed to vote, only one of the members of the group being designated to represent the group at the Shareholders General Meeting. 32 Annual Report 07 32

33 DIRECTOR S REPORT III. Corporate rules Code of Conduct and Internal Regulations As Altri is an open capital company, its Management and employees pay great attention to compliance with the duties of confidentiality in relations with third parties, safeguarding Altri s position in situations of conflict of interest. Altri s Board of Directors has approved internal regulations, which define that the members of the Administration are forbidden from trading shares and securities convertible to shares of Altri, S.G.P.S., SA or securities that confer rights to them: a. During the period from the 15 th day preceding the end of each quarter or year and public disclosure, by whatever means, of the corresponding results; b. During the period from the time the competent bodies of Altri, S.G.P.S., S.A. decide to propose the issuance of shares or securities convertible to shares of the Company or that confer rights to them to the corresponding public announcement thereof, by whatever means. Whenever there is an operation in progress over the capital of Altri, S.G.P.S., S.A. for which a prospectus is published, the foregoing clauses are not applicable, from the date of publication of the prospectus up to the end of the period for subscribing for the shares or securities covered by the operation for which the prospectus was published. In terms of internal control, Altri Group operating companies have management control bodies, which perform work at all levels of the subsidiary companies and prepare monthly reports for each Board of Directors, in addition to the work performed in the various companies by the Statutory Auditor and external auditors under the provisions of the law. There are no specific conditions that limit the exercise of voting rights by the Company s shareholders, or any para-social agreements that the Company is aware of. 33 Annual Report 07 33

34 DIRECTOR S REPORT IV. Management Boards 1. The Board of Directors In accordance with Altri s articles of association, the Board of Directors is made up of three, five, seven or nine members, shareholders or not, elected by the Shareholders General Meeting for a three year term. The current Board of Directors is made up of five members, their functions being as follows: Paulo Jorge dos Santos Fernandes João Manuel Matos Borges de Oliveira Pedro Macedo Pinto de Mendonça Domingos José Vieira de Matos Carlos Manuel Matos Borges de Oliveira President Member Member Member Member All the current members of the Board of Directors of Altri, SGPS, S.A. have executive functions. Altri s Board members cannot be considered to be independent, as they are all members of the Board of Directors of Cofihold, S.G.P.S., S.A., which holds around 20% of the capital of Altri, and exercises dominant influence over it. The present members of the Board of Directors have been nominated for the period 2005/2007 trough the deed of demerger that led to the incorporation of Altri, which took place in February 14, This was the first nomination of the Board members. As of 31 December 2007, the Board members owned Altri s shares as follows: Name Shares held Paulo Jorge dos Santos Fernandes 3,085,746 Pedro Macedo Pinto de Mendonça 852,500 Domingos José Vieira de Matos 3,469,716 João Manuel Matos Borges de Oliveira (a) Carlos Manuel Matos Borges de Oliveira (a) } 4,580,000 (a) 4,580,000 shares represent the total shares of Altri SGPS, SA owned by Caderno Azul - SGPS SA, which the administrators João Manuel Matos Borges de Oliveira and Carlos Manuel Matos Borges de Oliveira are shareholders. 34 Annual Report 07 34

35 DIRECTOR S REPORT The professional qualification of the present members of the Board of Directors, its professional activity and the detail of other companies where they also carry out management functions are as follows: Paulo Jorge dos Santos Fernandes Was one of the founders of Cofina (company that led to the creation of Altri, by spin-off), and has been involved in the Group s management since its incorporation. Graduated from Porto University with a degree in Electronic Engineering, also has an MBA from the University of Lisbon. Develops his activity in the media and industrial operations, as well as in the strategic definition of the Group. In addition to the Companies which currently exercises functions of administration, his professional experience includes: 1982/1984: Assistant Director of Production of CORTAL 1986/1989: General Director of CORTAL 1989/1994: President of the Board of CORTAL 1995: Administrator of CRISAL CRISTAIS DE ALCOBAÇA, SA 1997: Administrator of the Group Vista Alegre, SA 1997: Chairman of the Board of ATLANTIS - Cristais de Alcobaça, SA 2000/2001: Administrator of SIC 2001: Administrator of V.A.A. Throughout his career, also played roles in several associations: 1989/1994: President of FEMB (Fédération Européene de Mobilier de Bureau) for Portugal; 1989/1990: President of the General Assembly Assoc. Industr. Águeda 1991/1993: Member of the Advisory Board Assoc. Ind. Portuense The other companies where he carries out management functions as of 31 December 2007, are as follows: Altri, S.G.P.S., S.A. Caima Indústria de Celulose, S.A. Celbi Celulose da Beira Industrial, S.A. Celtejo Empresa de Celulose do Tejo, S.A. Celulose do Caima, S.G.P.S., S.A. Cofihold, S.G.P.S., S.A. (a) Cofina Media, S.G.P.S., S.A. (a) CPK Companhia Produtora de Papel Kraftsack, S.A. Edisport Soc. de Publicações, S.A. (a) F. Ramada Participações, S.G.P.S., S.A. (a) F. Ramada Produção e Comercialização de Estruturas Metálicas de Armazenagem, S.A. F. Ramada II Imobiliária, S.A. F. Ramada Serviços de Gestão, Lda. F. Ramada, Aços e Indústrias, S.A. Invescaima, S.G.P.S., S.A. Mediafin S.G.P.S., S.A. (a) Presselivre Imprensa Livre, S.A. (a) 35 Annual Report 07 35

36 DIRECTOR S REPORT Prestimo Prestígio Imobiliário, S.A. (a) Ródão Power, S.A. Sociedade Imobiliária Porto Seguro Investimentos Imobiliários, S.A. (a) (a) Companies that, as of December 31, 2007 cannot be considered to be part of Altri, S.G.P.S., S.A. Group João Manuel Matos Borges de Oliveira Was one of the founders of Cofina (company that led to the creation of Altri, by spin-off), and has been involved in the Group s management since its incorporation. Graduated from the Porto University with a degree in Chemical Engineering, holds a post-graduate in European Studies from Católica University in Lisbon, and an MBA from INSEAD. Develops his activity in the media and industrial operations, as well as in the strategic definition of the Group. In addition to the Companies which currently exercises functions of administration, his professional experience includes: 1982/1983: Assistant Director of Production of Cortal 1984/1985: Production Director of Cortal 1987/1989: Marketing Director of Cortal 1989/1994: General Director of Cortal 1989/1995: Vice President of the Board of Cortal 1989/1994: Administrator of Seldex 1996/2000: Non-executive Director of Atlantis, SA 1997/2000: Non-executive Director of Vista Alegre, SA 1998/1999: Administrator of Efacec Capital, SGPS, SA The other companies where he carries out management functions as of 31 December 2007, are as follows: Altri, S.G.P.S., S.A. Caima Indústria de Celulose, S.A. Celbi Celulose da Beira Industrial, S.A. Celtejo Empresa de Celulose do Tejo, S.A. Celulose do Caima, S.G.P.S., S.A. Cofihold, S.G.P.S., S.A. (a) Cofina Media, S.G.P.S., S.A. (a) Edisport Soc. de Publicações, S.A. (a) F. Ramada Participações, S.G.P.S., S.A. (a) F. Ramada Produção e Comercialização de Estruturas Metálicas de Armazenagem, S.A. F. Ramada II Imobiliária, S.A. F. Ramada Serviços de Gestão, Lda. F. Ramada, Aços e Indústrias, S.A. Invescaima, S.G.P.S., S.A. Jardins de França Empreendimentos Imobiliários, S.A. (a) Presselivre Imprensa Livre, S.A. (a) Prestimo Prestígio Imobiliário, S.A. (a) Universal Afir Aços, Máquinas e Ferramentas, S.A. (a) Companies that, as of December 31, 2007 cannot be considered to be part of Altri, S.G.P.S., S.A. Group 36 Annual Report 07 36

37 DIRECTOR S REPORT Pedro Macedo Pinto de Mendonça Attended the Faculty of Medicine in Porto for two years, and holds a degree in Mechanics from the École Superiore de L Etat in Brussels. He is shareholder of the Company since its incorporation and has been administrator since that date. In addition to the Companies which currently exercises functions of administration, his professional experience includes: 1959: Director of Supply of Empresa de Metalurgia Artística Lisboa 1965: Production Director of Empresa de Metalurgia Artística Lisboa 1970: Administrator and sales responsible of Seldex 1986: Founding Partner of Euroeel 1986/1990: Administrator of Euroeel 1986: Chairman of the Board of Seldex 1989: Administrator of Cortal The other companies which perform functions of administration as of 31 December 2007 are: Altri, S.G.P.S., S.A. Caima Indústria de Celulose, S.A. Celbi Celulose da Beira Industrial, S.A. Celtejo Empresa de Celulose do Tejo, S.A. Celulose do Caima, S.G.P.S., S.A. Cofihold, S.G.P.S., S.A. (a) F. Ramada Participações, S.G.P.S., S.A. (a) F. Ramada Produção e Comercialização de Estruturas Metálicas de Armazenagem, S.A. F. Ramada II Imobiliária, S.A. F. Ramada Serviços de Gestão, Lda. F. Ramada, Aços e Indústrias, S.A. Prestimo Prestígio Imobiliário, S.A. (a) (a) Companies that, as of December 31, 2007, cannot be considered to be part of Altri, S.G.P.S., S.A. Group Domingos José Vieira de Matos Holds a degree in Economics from the Faculty of Economy of the University of Porto. Initiated his carrier in management in He is shareholder of the Company since its incorporation and has been administrator since that date. In addition to the Companies which currently exercise functions of administration, his professional experience includes: 1978/1994: Administrator of CORTAL, SA 1983: Founding Partner of PROMEDE Produtos Médicos, SA 1998/2000: Administrator of ELECTRO CERÂMICAS, SA The other companies where he carries out management functions as of 31 December 2007 are as follows: Altri, S.G.P.S., S.A. Caima Indústria de Celulose, S.A. Celbi Celulose da Beira Industrial, S.A. Celulose do Caima, S.G.P.S., S.A. 37 Annual Report 07 37

38 DIRECTOR S REPORT Cofihold, S.G.P.S., S.A. (a) F. Ramada Participações, S.G.P.S., S.A. (a) F. Ramada Produção e Comercialização de Estruturas Metálicas de Armazenagem, S.A. F. Ramada II Imobiliária, S.A. F. Ramada Serviços de Gestão, Lda. F. Ramada, Aços e Indústrias, S.A. Jardins de França Empreendimentos Imobiliários, S.A. (a) Prestimo Prestígio Imobiliário, S.A. (a) Silvicaima Sociedade Silvícola Caima, S.A. Universal Afir Aços, Máquinas e Ferramentas, S.A. (a) Companies that, as of December 31, 2007 cannot be considered to be part of Altri, S.G.P.S., S.A. Group Carlos Manuel Matos Borges de Oliveira Holds a degree in Economics from the Faculty of Economy of the University of Porto. Initiated his carrier as commercial director in He is shareholder of the Company since its incorporation and has been administrator since that date. In addition to the Companies which currently exercises functions of administration, his professional experience includes: 1991/1995: Responsible for the delegation of Aveiro Lusoleasing, SA The other companies where he carries out management functions as of 31 December 2007, are as follows: Altri, S.G.P.S., S.A. Cofihold, S.G.P.S., S.A. (a) F. Ramada Participações, S.G.P.S., S.A. (a) F. Ramada Produção e Comercialização de Estruturas Metálicas de Armazenagem, S.A. F. Ramada II Imobiliária, S.A. F. Ramada Serviços de Gestão, Lda. F. Ramada, Aços e Indústrias, S.A. Prestimo Prestígio Imobiliário, S.A. (a) Silvicaima Sociedade Silvícola Caima, S.A. Universal Afir Aços, Máquinas e Ferramentas, S.A. (a) Companies that, as of December 31, 2007 cannot be considered to be part of Altri, S.G.P.S., S.A. Group 38 Annual Report 07 38

39 DIRECTOR S REPORT 2. Executive Committee There is no Executive Committee with management powers. Management decisions are made by the Board of Directors in the normal course of its functions, and so such a committee is considered to be unnecessary for the Company to function well and to protect investors interests. 3. Control exercised by the Board of Directors The Board of Directors has broad powers to manage and represent the Company and carry out all operations relating to its corporate objects, namely: Acquire, sell and encumber moveable assets, namely vehicles and, within the legal limits, immovable assets; Acquire participations in other companies; Sell participations in other companies; Rent moveable and immovable assets from and to third parties; Issue mandates and powers of attorney for specific acts or categories of acts, defining the extent of the mandates; Actively and passively represent the Company in law and otherwise, propose and have legal actions followed, confess and desist from legal actions, as well as to commit themselves to arbitrators. There is no limit to the maximum number of functions that the directors can accumulate in administrative organs of other companies. The members of Altri s Board of Directors endeavour to be part of the administration of the more significant group companies, so as to enable their activities to be more closely accompanied. The Board of Directors meets regularly its decisions only being valid if a majority of its members is present. In 2007 the Board of Directors met 12 times, the corresponding minutes of the meetings being recorded in the Board of Directors Meetings Minute Book. For Boards Meetings of participated companies in which directors are also part of Altri, they occur with the frequency required for the proper monitoring of its operations. 4. Remuneration policy The members of the Board of Directors receive no remuneration from the Company, being remunerated directly by the other Altri Group companies in which they exercise administration functions. Remuneration of the members of the Board of Directors is not directly dependent upon the evolution of the price of the Company s shares. 39 Annual Report 07 39

40 DIRECTOR S REPORT There is no defined policy regarding compensation to attribute to the Board members in case of dismissal or early release of contract. 5. Remuneration of the members of the Board of Directors Remuneration during the year 2007 of the members of Altri s Board of Directors for the exercise of their functions in Group companies was as follows: Fixed remuneration 850,820 Variable remuneration 1,150, ,000,820 ====== The variable remuneration arises from the performance of the group companies, and the criteria for its attribution are previously defined. There are no: Plans or incentive systems related to stock option plans for the members of the Board of Directors; Indemnities paid or due to ex-board members in relation to the suspension of duties during the year; Complementary pension regimes or early retirement for the Board members; Non monetary benefits considered as payment. 6. Policy of communication of irregularities Taking into consideration the proximity of the members of the Board of Directors in relation to the current activities of the several group companies and its workers, there is no formal model of communication of internal irregularities. Each time any irregularity is detected, it is promptly communicated to the Board members that make sure that the adequate and fair procedure is adopted to deal with the mentioned issue. 40 Annual Report 07 40

41 DIRECTOR S REPORT LEGAL MATTERS Treasury stock Pursuant to the requirements of article 66 of the Commercial Company s Code (Código das Sociedades Comerciais), the Directors inform that as of December 31, 2007 Altri had no treasury stock and did not acquire or sell any treasury stock during the period. Shares held by Altri s corporate boards Pursuant to the requirements of article 447 of the Commercial Company s Code, the Directors inform that, as of December 31, 2007, held the following shares: Paulo Jorge dos Santos Fernandes 3,085,746 Pedro Macedo Pinto de Mendonça 852,500 Domingos José Vieira de Matos 3,469,716 João Manuel Matos Borges de Oliveira (a) Carlos Manuel Matos Borges de Oliveira (a) 4,580,000 (a) 4,580,000 shares represent the total shares of Altri SGPS, SA owned by Caderno Azul - SGPS SA, which the administrators João Manuel Matos Borges de Oliveira and Carlos Manuel Matos Borges de Oliveira are shareholders. As of December 31, 2007, the Statutory Auditor, the members of the Statutory Audit Board and of the Shareholders General Assembly held no shares of the Company. Participation in the Company s capital Pursuant to the requirements of articles 16 and 20 of the Stock Exchange Code (Código de Valores Mobiliários) and article 448 of the Commercial Company s Code, the Directors inform that, in accordance with the notifications received, the companies and/or individuals that hold qualified participations exceeding 2%, 5%, 10%, 20%, 33% and 50% of the voting rights, are as follows: Exceeding 2% of the voting rights Shares held at Direct % of the voting rights Caderno Azul, SGPS, S.A. (a) 4,580, % Domingos José Vieira de Matos 3,469, % Paulo Jorge dos Santos Fernandes 3,085, % Millennium BCP Gestão de Fundos de Investimento, S.A. 2,745, % (a) - 4,580,000 shares represent the total shares of Altri SGPS, SA owned by Caderno Azul - SGPS SA, which the administrators João Manuel Matos Borges de Oliveira and Carlos Manuel Matos Borges de Oliveira are shareholders. 41 Annual Report 07 41

42 DIRECTOR S REPORT Exceeding 5% of the voting rights Shares held at Direct % of the voting rights UBS AG, Zurique 10,234, % Ana Rebelo Mendonça Fernandes 6,369, % Bestinver Gestión, SGIIC, S.A. 5,184, % Exceeding 20% of the voting rights Shares held at Direct % of the voting rights Cofihold, S.G.P.S., S.A. i) directly 21,000, % ii) indirectly, through its directors Paulo Jorge dos Santos Fernandes 3.01% Domingos José Vieira de Matos 3.38% Pedro Macedo Pinto de Mendonça 0.83% João Manuel Matos Borges de Oliveira (a) 4.47% Carlos Manuel Matos Borges de Oliveira (a) (a) 4.47% corresponds to the total held by the company Caderno Azul - SGPS SA, which the administrators João Manuel Matos Borges de Oliveira and Carlos Manuel Matos Borges de Oliveira are shareholders. Altri was not informed of any participation exceeding 33% of the voting rights. DECLARATION OF RESPONSABILITY The members of the Board of Directors of Altri, S.G.P.S., S.A. declare that they assume responsibility for this information and affirm that the items included herein are true and that, to the best of their knowledge, there are no omissions. As required by article 21 of Decree-Law 411/91 of 17 October, the Board of Directors informs that there are no overdue debts to the State, namely with respect to Social Security. 42 Annual Report 07 42

43 DIRECTOR S REPORT CLOSING REMARKS The Board of Directors concludes by expressing a vote of thanks to the Personnel of the Altri Group for their dedication and effort, and also wishes to express its thanks to the other Corporate Boards and to the Financial Institutions that co-operated with the Group. Porto, 18 th April 2008 The Board of Directors: Paulo Jorge dos Santos Fernandes Presidente João Manuel Matos Borges de Oliveira Pedro Macedo Pinto de Mendonça Domingos José Vieira de Matos Carlos Manuel Matos Borges de Oliveira 43 Annual Report 07 43

44 Statement Under the terms of Article 245, paragraph 1, c) of the Securities Code The signatories individually declare that, to their knowledge, the Management Report, the Individual Financial Statements prepared in accordance with generally accepted accounting principles in Portugal and the Consolidated Financial Statements prepared meeting the standards of the applicable International Financial Reporting Standards as adopted by the European Union, and other accounting documents required by law or regulation, giving a truthful (fairly) and appropriate image, in all material respects, of the assets and liabilities, financial position and the consolidated and individual results of Altri, SGPS, S.A. ( Altri ) and that the Management Report faithfully describes the business evolution and position of Altri and of the companies included in the consolidation perimeter and contains a description of the major risks and uncertainties that they face. Porto, 18 April 2008 Paulo Jorge dos Santos Fernandes President of the Board of Directors João Manuel Matos Borges de Oliveira Member of the Board of Directors Pedro Macedo Pinto de Mendonça Member of the Board of Directors Domingos José Vieira de Matos Member of the Board of Directors Carlos Manuel Matos Borges de Oliveira Member of the Board of Directors

45 ALTRI, SGPS, S.A. CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2007 AND 2006 (Translation of financial statements originally issued in Portuguese Note 42) ASSETS Notes NON CURRENT ASSETS: Biological assets Tangible assets Goodwill Intangible assets Investments in associated companies Investments available for sale Other non current assets Deferred tax assets Total non current assets CURRENT ASSETS: Inventories Customers Other debtors State and other public entities Other current assets Derivatives Investments recorded at fair value through profit and loss Cash and cash equivalents Assets classified as held for sale Total current assets Total assets SHAREHOLDERS' FUNDS AND LIABILITIES SHAREHOLDERS' FUNDS: Share capital Legal reserve Other reserves Consolidated net profit Total shareholders' funds attributable to the parent company's shareholders Minority interests Total Shareholders' funds LIABILITIES: NON CURRENT LIABILITIES: Bank loans Other loans Other non current creditors Other non current liabilities Deferred tax liabilities Provisions Total non current liabilities CURRENT LIABILITIES: Bank loans Other loans - short term Suppliers Other current creditors State and other public entities Other current liabilities Derivatives Liabilities associated with assets classified as held for sale Total current liabilities Total shareholders' funds and liabilities The accompanying notes form an integral part of the consolidated financial statements. The Board of Directors

46 ALTRI, SGPS, S.A. CONSOLIDATED STATEMENTS OF PROFIT AND LOSS BY NATURE FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006 (Translation of financial statements originally issued in Portuguese Note 42) Notes Operating income Sales Services rendered Other operating income Total operating income Operating expenses Cost of sales External supplies and services Payroll expenses Amortisation and depreciation 6 e Provisions and impairment losses Other operating expenses Total operating expenses Operating profit Profits related with assets classified as held for sale Gains and losses in associated companies 34 ( ) Gains and losses in other investments ( ) Financial expenses 34 ( ) ( ) Financial income Profit before income tax Income tax 10 ( ) ( ) Net profit Attributable to: Parent company's shareholders Minority interests Earnings per share: Basic 35 0,34 0,24 Diluted 35 0,34 0,24 The accompanying notes form an integral part of the consolidated financial statements. The Board of Directors

47 ALTRI, S.G.P.S., S.A. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' FUNDS FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006 (Translation of financial statements originally issued in Portuguese Note 42) Notes Share capital Legal reserve Attributable to the parent company's shareholders Other reserves Hedging Conversion reserves reserves Other Net profit Total Minority interests Total shareholders' funds Balance as of 1 January ( ) Appropriation of the consolidated net profit of 2005: Transfer to legal reserves and retained earnings ( ) Distributed dividends ( ) ( ) - ( ) Change in reserves: Conversion reserves Hedging reserves - - ( ) ( ) - ( ) Others - - (18.515) Acquisition of additional share capital of Celtejo - Empresa de Celulose do Tejo, S.A ( ) ( ) Net consolidated profit for the year ended 31 December Balance as of 31 December ( ) ( ) Balance as of 1 January ( ) ( ) Appropriation of the consolidated net profit of 2006: Transfer to legal reserves and retained earnings ( ) Distributed dividends ( ) ( ) - ( ) Change in reserves: Conversion reserves ( ) - - ( ) - ( ) Hedging reserves Others (5.297) - (5.297) - (5.297) Acquisition of additional share capital of Celtejo - Empresa de Celulose do Tejo, S.A (78.195) (78.195) Resultado líquido consolidado do year ended 31 December Balance as of 31 December ( ) ( ) The accompanying notes form an integral part of the consolidated financial statements. The Board of Directors

48 ALTRI, SGPS, S.A. CONSOLIDATED CASH-FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 AND 2006 (Translation of financial statements originally issued in Portuguese Note 42) Notes Operating activities: Collections from customers Payments to suppliers ( ) ( ) Payments to personnel ( ) ( ) Other collections/payments relating to operating activities ( ) ( ) Income tax ( ) Cash flow from operating activities (1) Investment activities: Collections relating to: Investments Tangible assets Investment subsidies Interest and similar income Payments relating to: Investments 1 ( ) ( ) Intangible assets ( ) ( ) Tangible assets ( ) ( ) Loans granted ( ) ( ) Biological assets ( ) ( ) ( ) ( ) Cash flow from investment activities (2) ( ) ( ) Financing activities: Collections relating to: Loans obtained Payments relating to: Lease contracts ( ) ( ) Interest and similar costs ( ) ( ) Distributed dividends ( ) ( ) Loans obtained ( ) ( ) ( ) ( ) Cash flow from financing activities (3) Cash and cash equivalents at the beginning of the period Effect of change in the companies consolidated Variation of cash and cash equivalents: (1)+(2)+(3) Cash and cash equivalents at the end of the period The accompanying notes form an integral part of the consolidated financial statements. The Board of Directors

49 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 1. PAYMENTS/COLLECTIONS RELATING TO INVESTMENTS During the year ended 31 December 2007 the payments/collections relating to investments were as follows: Acquisitions Transaction Amount amount paid / collected Investments available for sale 1,633,982 1,633,982 Socasca Recolha e Comércio de Recicláveis, S.A. 4,930,945 4,470,945 EDP Produção Bioeléctrica, S.A. 3,875,000 3,875,000 Celtejo Empresa de Celulose do Tejo, S.A. 53,383 53, ,493,310 10,033,310 ========= ========= Sales Investments recorded at fair value through profit and loss 3,270,539 3,270,539 Investments available for sale 350, , ,620,539 3,620,539 ======== ======== Cash and cash equivalents acquired during the year ended 31 December 2007, through the acquisition of Socasca Recolha e Comércio de Recicláveis, S.A. amounted to 103,678 Euro. 2. BREAKDOWN OF CASH AND ITS EQUIVALENTS Cash and its equivalents presented in the consolidated statement of cash flows and the reconciliation between that amount and the amounts shown in the balance sheet as of those dates, are as follows: Cash 671, ,606 Bank deposits repayable on demand 134,377,876 22,419, ,049,790 22,652,129 Bank overdrafts (9,535,277 ) (8,720,850 ) 125,514,513 13,931,279

50 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 1. INTRODUCTORY NOTE Altri, SGPS, S.A. ( Altri or Company ) was incorporated as of 1 March 2005, has its head-office located at Rua General Norton de Matos, 68, r/c Porto, Portugal and its shares are listed in the Lisbon Euronext Stock Exchange. Its main activity is the management of investments. Altri was incorporated as a result of the reorganization process of Cofina, SGPS, S.A., through the demerger of the investment previously held by this Group in Celulose do Caima, SGPS, S.A., under a simple demerger predicted in item 1, a), article 118, of the Commercial Companies Code (Código das Sociedades Comerciais). The relevant date for the production of juridical and accounting effects of this operation was 1 March Altri s shares were attributed to the shareholders of Cofina, SGPS, S.A., in accordance to the ratio of one share of Altri, SGPS, S.A. for each share of Cofina, SGPS, S.A. previously owned, and admitted to the official stock market, directed by Euronext Lisbon, in 1 March Altri is the parent company of a group of companies listed in Note 4 known as Altri Group, and its main activity is the management of investments mainly in the industrial sector. The Group focus its operations in the following sectors: a) production of pulp and paper through the Celbi, Celtejo and Caima Groups; b) commercialisation of steel and storage systems through the F. Ramada Group. The consolidated financial statements of Altri Group are presented in Euro, being this currency the one the Group uses in its operations, and so considered the functional currency. The operations of the foreign entities that do not use Euro as its functional currency are included in the financial statements in accordance with the principles established in Note 2.2 d). 2. BASIS OF PRESENTATION AND MAIN ACCOUNTING POLICIES The basis of presentation and main accounting policies adopted in the preparation of the accompanying consolidated financial statements are as follows: 2.1 BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared based on a going concern basis and based on the accounting records of the companies included in the consolidation (Note 4) adjusted to reflect the recognition and measurement principles of International Financial Reporting Standards ( IFRS previously designated International Accounting Standards IAS ) issued by the International Accounting Standards Board ( IASB ) in force as of 1 January 2007 as adopted by the European Union. Interim financial statements are presented in accordance with the rules imposed by CMVM ( Comissão do Mercado de Valores Mobiliários ). During 2007 the Group adopted for the first time IFRS 7 - "Financial Instruments: Disclosures" and consequential amendments to IAS 1-"Presentation of Financial Statements", which are effective for years beginning on or after 1 January The impact of the adoption of this standard was to expand the disclosures provided in these financial statements regarding the financial instruments used by the Group. Additionally and on 1 January 2007, the following interpretations became effect: (i) IFRIC 7 - "Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies"; (ii) IFRIC 8 - "Scope IFRS 2"; (iii) IFRIC 9 - "Reassessment of Embedded Derivatives"; (iv) IFRIC 10 - "Interim Financial Reporting and Impairment; and (v) IFRIC 11 - "IFRS 2: Group and Treasury Share Transactions". The adoption of these Interpretations has not led to any material changes in the Group's financial statements as at 31 December

51 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) At the date of these financial statements, the following Standards and Interpretations were in issue but not yet effective, and therefore have not been applied in these financial statements. For the majority of these the endorsement process by the European Union have not yet been completed: - Amendments to IAS 1 - "Presentation of Financial Statements: a revised presentation" - (effective 1 January 2009); - Amendments to IAS 23 - "Borrowing Costs" - (effective 1 January 2009); - Revised IFRS 3 "Business Combinations" - (effective 1 July 2009); - IFRS 8 - " Operating Segments" - (effective 1 January 2009); - IFRIC 12 - "Service Concession Arrangements" - (effective 1 January 2008); - IFRIC 13 - "Customer Loyalty Programmes" - (effective 1 July 2008); - IFRIC 14 - "IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction"- (effective 1 January 2008); At 31 December 2007, the above Standards and Interpretations were in issue but not yet effective, and therefore the Group decided not to early adopt. The application of these changes will not produce material changes in the future financial statements of the entity with the exception of changes in segment disclosures required by IFRS 8, and the revision of IFRS 3 which will result in significant changes to goodwill computation. These consolidated financial statements were prepared according to the historic cost, with the exception of some financial instruments recorded at fair value. The accounting policies used in the preparation of the consolidated financial statements are consistent with those used in the preparation of the financial statements for the period ended 31 December CONSOLIDATION POLICIES The consolidation policies adopted by the Group in the preparation of the consolidated financial statements are as follows: a) Investments in group companies Investments in companies in which the Group owns, directly or indirectly, more than 50% of the voting rights at the Shareholders General Meeting and is able to control the financial and operating policies so as to benefit from its activities (definition of control normally used by the Group), are included in the consolidated financial statements by the full consolidation method. Equity and net profit attributable to minority shareholders are shown separately, under the caption Minority interests, in the consolidated balance sheet and in the consolidated statement of profit and loss. Companies included in the consolidated financial statements by the full consolidation method are listed in Note 4.1. When losses attributable to the minority interests exceed the minority interest in the equity of the subsidiary, the excess and any further losses attributable to the minority interests are charged against the majority interests except to the extent that the minority shareholders have a binding obligation and are able to cover such losses. If the subsidiary subsequently reports profits, such profits are allocated to the majority interests until the minority s share of losses previously absorbed by the Group has been recovered. Under concentration processes, occurred after the transition date to International Financial Reporting Standards as adopted by the European Union (1 January 2004) the assets and liabilities of each subsidiary are measured at their fair value at the date of acquisition according to IFRS 3 - Business Combinations. Any excess on the cost of acquisition over the fair value of the identifiable net assets and liabilities acquired is recognised as goodwill. Any excess of the fair value of the identifiable net assets and liabilities acquired over its cost is recognised as income in the profit and loss statement of the period of acquisition, after reassessment of the estimated fair value. Minority interests are presented according to their share in the fair value of the identifiable assets and liabilities of the acquired subsidiaries. The results of subsidiaries acquired or disposed during the period are included in the consolidated statement of profit and loss from the effective date of acquisition or up to the effective date of disposal, respectively

52 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) Adjustments to the financial statements of Group companies are performed, whenever necessary, in order to adapt its accounting policies to those used by the Group. All intercompany transactions, balances and distributed dividends are eliminated during the consolidation process. Whenever the Group has, in substance, control over other entities created for a specific purpose ( Special Purpose Entities ), even if no share capital interest is directly held in those entities, these are consolidated by the full consolidation method. b) Investments in associated companies Investments in associated companies (companies where the Group has significant influence but has no control over the financial and operating decisions - usually corresponding to holdings between 20% and 50% in a company s share capital) are accounted for in accordance with the equity method. According to the equity method, the investments in associated companies are initially recorded at acquisition cost, which is adjusted proportionally to the Group s corresponding share capital, as at the acquisition date or as at the date of the first adoption of the equity method. On a yearly basis, investments are adjusted in accordance with the Group s participation in the associated company s net income. Additionally, the dividends of the subsidiary are recorded as a reduction in the investment s book value and the Group s proportion in the changes occurred in the associated company s equity are recorded as a change in the Group s equity. Any excess of the cost of acquisition over the Group s share in the fair value of the identifiable net assets acquired is recognised as goodwill, which is included in the caption Investments in associated companies. If that difference is negative it is recorded as a gain in the caption Gains and losses in associated companies after reassessment of the fair value of the identifiable assets and liabilities acquired. An evaluation of investments held in associated companies is performed whenever there are signs of impairment in those investments. Impairment losses are recorded in the statement of profit and loss for the period. When those losses recorded in previous periods vanish, they are reverted in the statement of profit and losses for the period. When the Group s share of losses of the associated company exceeds the investment s book value, the investment is recorded at nil value, except to the extent of the Group s commitments to the associate. In such case, the Group records a provision to cover those commitments. Unrealised gains arising from transactions with associated companies are eliminated to the extent of the group s interest in the associate against the investment held. Unrealised losses are eliminated but only to the extent that there is no evidence of impairment of the asset transferred. Investments in associated companies are listed in Note 4.2. c) Goodwill In concentration processes, the difference between the acquisition cost of the investment in group and associated companies and the fair value of the identifiable assets and liabilities of those companies as at the date of acquisition is recorded, when positive, in the balance sheet captions Goodwill and Investments in associated companies, respectively. The excess of the cost of acquisition of investments in foreign companies over the fair value of their identifiable assets and liabilities as at the date of acquisition is calculated using the local currency of each of those companies. Translation to the Group s currency (Euro) is made using the exchange rate as at the balance sheet date. Exchange rate differences arising from this translation are recorded under the equity caption Conversion reserves. Goodwill transferred through the demerger process (Introductory Note) arising from acquisitions made prior to the date of transition to IFRS (1 January 2004) is stated using the carrying amounts in accordance with generally accepted accounting principles in Portugal and was subject to impairment tests. The impact of these adjustments was recorded in the caption Other reserves, in accordance with IFRS 1. Goodwill arising from the acquisition of foreign companies was recalculated retrospectively using the local currency of each subsidiary

53 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) Goodwill is not amortised, but is subject to impairment tests on an annual basis. Impairment losses identified in the period are recorded in the statement of profit and loss under the caption Provisions and impairment losses, and may not be reversed. The differences between the acquisition cost of group companies and the fair value of the identifiable assets and liabilities of those companies at the date of acquisition, if negative, are recorded, at the date of acquisition and after reassessment of the fair value of the identifiable assets and liabilities acquired, as gains in the profit and loss statement. The Group tests on an annual basis the impairment of goodwill. The recoverable amount of the cashgenerating unities is computed based on the value of use. This computation implies the use of assumptions based on estimates of future events which may occur differently from expected. d) Translation of financial statements of foreign companies Assets and liabilities in the financial statements of foreign entities are translated to Euro using the exchange rates in force at the balance sheet date. Profit and loss and cash flows are converted to Euro using the average exchange rate for the period. The exchange rate differences originated are recorded in equity captions. Goodwill and adjustments to the fair value arising from the acquisition of foreign subsidiaries are recorded as assets and liabilities of those companies and translated to Euro at the balance sheet date exchange rate. Whenever a foreign company is sold, the accumulated exchange rate differences are recorded in the statement of profit and losses as a gain or loss associated with the sale. Exchange rates used in the translation of foreign group and associated companies included in the consolidated financial statements are as follows: Sterling Pound End of the period Average of the Period MAIN ACCOUNTING POLICIES The main accounting policies used in the preparation of the consolidated financial statements are as follows: a) Intangible assets Intangible assets are recorded at cost, net of depreciation and accumulated impairment losses. Intangible assets are only recognised if it is likely that future economic benefits will flow to the Group, are controlled by the Group and if its cost can be reliably measured. Development costs are recognised as an intangible asset if the Group has proven technical feasibility and ability to finish the development and to sell/use such assets and it is likely that those assets will generate future economic benefits. Development costs which do not fulfil these conditions are recorded as an expense in the period in which they are incurred. Internal costs related with maintenance and development of software are recorded as expenses in the statement of profit and loss for the period in which they are incurred, except when these costs are directly attributable to projects for which the existence of future economic benefits is likely. Being this the case, they are capitalized as intangible assets. Amortisation is calculated on a straight line basis, as from the date the asset is first used, over its expected useful life (usually 3 to 5 years)

54 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) b) Tangible assets Tangible assets acquired until 1 January 2004 (IFRS transition date) and transferred to Altri Group through the demerger (Introductory Note), are recorded at deemed cost, which corresponds to its acquisition cost, or its acquisition cost revalued in accordance with generally accepted accounting principles in Portugal until that date, net of accumulated amortisation and accumulated impairment losses. Tangible assets acquired after that date are recorded at acquisition cost, net of depreciation and accumulated impairment losses. Depreciation is calculated on a straight line basis, as from the date the asset is first used, over the expected useful life for each group of assets. The depreciation rates used correspond to the following estimated useful lives: Years Land and natural resources 20 to 50 Buildings and other constructions 10 to 50 Plant and machinery 2 to 15 Vehicles 2 to 10 Tools 4 to 14 Office equipment 2 to 10 Other tangible assets 3 to 10 Maintenance and repair costs related to tangible assets which do not increase the useful life or result in significant benefits or improvements in tangible fixed assets are recorded as expenses in the period they are incurred. Tangible assets in progress correspond to fixed assets still in construction and are stated at acquisition cost, net of impairment losses. These assets are depreciated from the date they are concluded or ready to be used. Gains or losses arising from the sale or disposal of tangible assets are calculated as the difference between the selling price and the asset s net book value as at the date of its sale/disposal, and are recorded in the statement of profit and loss under the captions Other operating income or Other operating expenses, respectively. c) Lease contracts Classifying a lease as financial or as operational depends on the substance of the transaction rather than the form of the contract. Lease contracts are classified as (i) a finance lease if the risks and rewards incidental to ownership lie with the lessee and (ii) as an operating lease if the risks and rewards incidental to ownership do not lie with the lessee. Tangible fixed assets acquired under financial lease contracts and the corresponding liabilities are recorded in accordance with the financial method. Under this method, the cost of the fixed assets and the corresponding liability are reflected in the balance sheet. In addition, interests included in the lease instalments and depreciation of the fixed assets, calculated as explained in Note 2.3.b), are recorded in the statement of profit and loss of the period to which they apply. The operational lease instalments on assets acquired under long-term rental contracts are recognized in full as expenses in the period to which they refer to

55 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) d) Subsidies Subsidies for personnel training programmes or production support are recorded in the statement of profit and loss caption Other operating income when attributed, independently of when they are received. Non-repayable subsidies obtained to finance investment in tangible fixed assets are recorded as Other non current liabilities and Other current liabilities corresponding to the instalments repayable in the long and short term, respectively. These subsidies are recognised in the statement of profit and loss in accordance with the depreciation of the related tangible fixed assets. e) Impairment of assets, except for Goodwill Assets are assessed for impairment at each balance sheet date and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in the statement of profit and loss under the caption Provisions and impairment losses. The recoverable amount is the higher of an asset s net selling price and its value of use. The net selling price is the amount obtainable from the sale of an asset in an arm s length transaction less the costs of the disposal. The value of use is the present value of estimated future cash flows expected to arise from the continued use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if not possible, for the cash-generating unit to which the asset belongs. Reversal of impairment losses recognised in prior years is recorded when the Group concludes that the impairment losses previously recognised for the asset no longer exist or has decreased. The reversal is recorded in the statement of profit and loss as Other operating income. However, the increased carrying amount of an asset due to a reversal of an impairment loss is recognised to the extent it does not exceed the carrying amount that would have been determined (net of depreciation and amortisation) had no impairment loss been recognised for that asset in prior years. f) Borrowing costs Borrowing costs are recognised as expense in the statement of profit and loss for the period in which they are incurred, in an accrual basis. g) Inventories Raw, subsidiary and consumable materials are stated at acquisition average cost, deducted from quantity discounts granted by suppliers, which is lower than its market value. Finished and intermediate goods, sub-products and work in progress are stated at production cost, which includes the cost of raw materials, direct labour and production overheads, which is lower than market value. Therefore, harvested wood owned by the Group is valued at production cost, which includes the costs incurred with the cutting, gathering and transport of harvested wood, as well as the accumulated cost of plantations, maintenance and administrative expenses in proportion to the harvested area. When necessary the Group companies record impairment losses to reduce inventories to its net realisable or market value. h) Biological assets Plantations owned by the Group are classified in the caption Biological assets. Costs incurred with the acquisition of plantations and plantations made, and costs incurred with its development, conservation and maintenance are included in this caption. The cost of wood is transferred to production cost when the wood is harvested. The cost of wood harvested is determined based on the specific cost of each plantation attributed to each harvesting, which also includes the costs incurred on each plantation since the last harvesting. The Group records, as costs of the period, the accumulated cost of plantations, maintenance and administrative expenses in proportion to the area harvested during the period

56 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) The Board of Directors decided not to record the biological assets at their its value for considering that, bearing in mind the type of assets being evaluated, the computation depends on assumptions which might not be accurately determined and consequently the fair value might not be reliably measured. However, the Board of Directors believes, based in some indicators, that the acquisition cost of the biological assets is close to its fair value. i) Provisions Provisions are recognised when, and only when, the Group has an obligation (legal or constructive) arising from a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of that obligation. Provisions are reviewed and adjusted at each balance sheet date to reflect the best estimate as of that date. Restructuring provisions are recorded by the Group whenever a formal and detailed restructuring plan exists and has been communicated to the involved parties. j) Pension complements Some Group companies have assumed commitments to provide pension complements to employees retiring due to age or disability. To cover these liabilities there have been created autonomous pension funds, which annual charges, computed in accordance with actuarial analysis, are recorded in the statement of profit and loss in accordance with IAS 19 Employee benefits. These liabilities were calculated under the Projected unit credit method under the actuarial and financial assumptions deemed to be the most adequate (Note 28). k) Financial instruments i) Investments Investments held by the Group are divided into the following categories: Investments held to maturity, are classified as non-current assets unless they mature within 12 months of the balance sheet date. The investments classified as held to maturity are non-derivative assets with defined or determinable payment dates, have defined maturity and the Group has the intention and ability to maintain them until the maturity date. Investments measured at fair value through profit and loss are classified as current assets. The purpose of these investments is to obtain short term profits. Investments available for sale are all the other investments that are not classified as held to maturity or measured at fair value through profit and loss, being classified as non current assets. Investments are initially measured at cost, which is the fair value of the price paid, including transaction costs if related with held to maturity and available for sale investments. Investments available for sale and investments measured at fair value through profit and loss are subsequently measured at fair value by reference to the market value at the balance sheet date without any deduction for transaction costs which may be incurred until its sale. Investments in equity instruments which are not listed on a stock exchange market and whose fair value cannot be reliably measured are stated at cost net of impairment losses. Investments held to maturity are recorded at amortised cost, using the effective interest method. Gains or losses arising from a change in the fair value of available for sale investments are recognised under the equity caption Fair value reserve included in caption Other reserves, until the investment is sold or disposed, or until it is determined to be impaired, at which time the cumulative loss previously recognised in equity is transferred to profit and loss account for the period. All purchases and sales of investments are recorded on its trade date, independently of the liquidation date

57 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) ii) Accounts receivable Receivables are stated at nominal value less impairment losses so that those receivables reflect its net realisable value. Impairment is recognised if there is objective and measurable evidence that, as a result of one or more events that occurred, the balance will not be fully received. Therefore, each group company takes into consideration market information which shows the client default in their responsibilities, as well as historic information on outstanding debts not received. Recognized Impairment losses equals to the difference between the nominal value of the receivable balance and the correspondent present value of future estimated discounted cash-flows at the initial effective interest rate; when the payment is expected to occur in a period less than a year, the rate is considered null. iii) Loans Loans are recorded as liabilities at nominal value, net of up-front fees and commissions directly related to the issuance of those instruments. Financial expenses are calculated based on the effective interest rate and are recorded in the statement of profit and loss on an accrual basis. The portion of the effective interest charge relating to up-front fees and commissions, if not paid in the period, is added to the book value of the loan. Assets and liabilities are compensated and presented for its net amount as long as there is the right for compulsory fulfilment of compensation and the Board of Directors intends to realise them on a net basis or realise the asset and simultaneously settle the liability. iv) Accounts payable Non interest bearing accounts payable are stated at nominal value. v) Derivatives Altri uses hedge derivatives for the management and hedging of its financial risks. Derivatives classified as cash flow hedge instruments are used by the Group mainly to hedge interest rate fluctuation and to fix pulp price. The index, the computation conventions, the interest rate hedging instruments are similar to the ones established for the underlying loans and therefore are qualified as perfect hedging. The derivatives most used by the Group are the price indexations of pulp using future contracts. The Group s criteria for classifying a derivative instrument as a cash flow hedge instrument are: - the hedge transaction is expected to be highly effective in offsetting changes in cash flows attributable to the hedged risk; - the effectiveness of the hedge can be reliably measured; - there is adequate documentation of the hedging relationships at the inception of the hedge; - the forecasted transaction that is being hedged is highly probable. The cash flow hedge instruments related to interest rate and exchange rate are recorded at its fair value. Changes in the fair value of these instruments are recorded in assets or liabilities, against the corresponding entry under the equity caption Hedging reserves, and transferred to the statement of profit and loss when the operation subjected to hedging affects the net profit. The determination of the fair value of these financial instruments is made with informatic systems of derivative instruments valuation and had, on its basis the actualization, for the balance sheet date, of the future fix and variable leg cash flows of the derivative instrument

58 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) Hedge accounting of derivative instruments is discontinued when the instrument matures or is sold. Whenever a derivative instrument can no longer be qualified as a hedging instrument, the fair value differences recorded and deferred in equity under the caption Hedging reserves are transferred to profit and loss of the period or to the carrying amount of the asset that resulted from the hedged forecast transaction. Subsequent changes in fair value are recorded in the income statement. When embedded derivatives exist, they are accounted for as separate derivatives when the risks and the characteristics are not closely related to economic risks and characteristics of the host contract and when these are not stated at fair value with gains and losses not realizable are recorded in the profit and loss statement. When derivative instruments, although specifically contracted to hedge financial risks, do not fulfil the requirements listed above to be classified and accounted as hedge instruments, the changes in fair value are directly recorded in the profit and loss statement, as financial results. vi) Financial liabilities and Equity instruments Financial liabilities and equity instruments are classified and accounted for based upon its contractual substance. Equity instruments are those that represent a residual interest upon the Group s net assets and are recorded by the amount received, net of costs incurred with its issuance. vii) Own shares Own shares are recorded at acquisition cost as a deduction to equity captions. Gains or losses on its sale are recorded in the equity caption Other reserves. viii) Discounted bills and accounts receivable transferred to factoring companies Only when the assets cash flows contractual right has expired or when the risks and benefits inherent to those assets property are transferred to a third entity the Group derecognise the financial assets of its financial statements. If the Group retains substantially the risks and benefits inherent to the property of such assets, the Group continues to recognize them in its financial statements, by recording in the caption Loans the monetary counterparty for the conceded assets. In consequence, the costumers balances formed by non outstanding discounted bills and accounts receivable transferred to factoring companies as of the balance sheet date, with exception of the nonappealing factoring operations are recognized in the Group s financial statements until the moment of its collection. ix) Cash and cash equivalents Cash and cash equivalents include cash on hand, cash at banks on demand and term deposits and other treasury applications which reach maturity within less than three months and may be mobilized without significant risk of change in value. For purposes of the consolidated statement of cash flows, Cash and cash equivalents caption also includes bank overdrafts, which are included in the balance sheet caption Bank loans. x) Assets classified as held for sale The assets and liabilities are classified as held for sale, when their realization is made not by its use but by its sale. The Group classifies assets and liabilities in this caption when exists a high probability of its sale becomes effective and the assets and liabilities are available for immediate sale. The Board of Directors is committed in the sale of the assets and liabilities recorded in this caption, and is their understanding that this sale will be completed in the next twelve months. The assets classified as held for sale are valued at the lower of its accounting value at the date of the sale decision and its fair value deducted of their selling costs

59 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) l) Contingent assets and liabilities Contingent assets are possible assets arising from past events and whose existence will be confirmed, or not, by uncertain future events not controlled by the Company. Contingent assets are not recorded in the consolidated financial statements but only disclosed when the existence of future economic benefits is likely. Contingent liabilities are defined by the Company as (i) possible obligations that arise from past events and which existence will be confirmed, or not, by one or more occurrences of uncertain future events not controlled by the Company, or (ii) present obligations that arise from past events but that are not recorded because it is unlikely that an outflow of resources occurs to settle the obligation or the obligation amount can not be reliably measured. Contingent liabilities are not recorded in the consolidated financial statements, being disclosed, unless the probability of a cash outflow is remote, in which case no disclosure is made. m) Income tax Income tax for the period is determined based on the taxable results of the companies included in the consolidation and takes into consideration deferred taxation. Current income tax is determined based on the taxable results of the companies included in the consolidation, in accordance with tax regulations in force at the location of the head office of each Group company, considering the annual estimated income tax rate. For some of the companies included in the consolidation of Altri Group by the full consolidation method, the income tax is determined in accordance with article 63 of the Corporate Income Tax Code (Código do Imposto sobre o Rendimento das Pessoas Colectivas), under the special regime of taxation of groups of companies. Deferred taxes are computed using the balance sheet liability method and reflect the timing differences between the amount of assets and liabilities for accounting purposes and the correspondent amounts for tax purposes. Deferred taxes are computed using the tax rate that is expected to be in force at the time these temporary differences are reversed. Deferred tax assets are only recorded when there is reasonable expectation that sufficient taxable profits will arise in the future to allow such deferred tax assets to be used. At the end of each period the company reviews its recorded and unrecorded deferred tax assets which are reduced whenever its realisation ceases to be likely, or recorded if it is likely that taxable profits will be generated in the future to enable its recovery. Deferred tax assets and liabilities are recorded in the statement of profit and loss, except if they relate to items directly recorded in equity. In these cases the corresponding deferred tax is recorded in equity captions. n) Income recognition and accruals basis Revenue arising from the sale of goods is recognised in the consolidated income statement when (i) the risks and benefits have been transferred to the buyer, (ii) the company retains neither continued management involvement in a degree usually associated with ownership nor effective control over the goods sold, (iii) the amount of the revenue can be measured reasonably, (iv) it is likely that the economic benefits associated with the transaction will flow to the Company, and (v) the costs incurred or to be incurred related with the transaction can be reliably measured. Sales are recorded net of taxes, discounts and other expenses arising from the sale, and are measured at the fair value of the amount received or receivable. The companies included in F. Ramada Group record the income associated with the storage systems activity in accordance with the method of finished work. As so, the production costs of the work in progress

60 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) are recorded as deferred costs in the caption Other current assets and Inventory, and the anticipated invoicing is recorded as deferred income in the caption Other current liabilities. Dividends are recognised as income in the period its distribution is approved. All other income and expenses are recognised in the period to which they relate, independently of when the amounts are received or paid. Differences between the amounts received and paid and the corresponding income and expenses are recorded in the captions Other current assets, Other current liabilities, Other non current assets and Other non current liabilities. When the actual amount of income or expenses is yet unknown, these are recorded based on the best estimate of the Board of Directors of the Group companies. o) Balances and transactions expressed in foreign currencies All assets and liabilities expressed in foreign currencies were translated to Euro using the exchange rates in force on the balance sheet date. Favourable and unfavourable exchange differences arising from changes in the exchange rates between those prevailing on the dates of the transactions and those in force on the dates of payment, collection or as of the balance sheet date are recorded in the consolidated statement of profit and loss, except the ones related to non monetary values which fair value variation be directly recorded in equity. p) Subsequent events Post balance sheet date events that provide additional information about conditions that existed at the balance sheet date (adjusting events), are reflected in the consolidated financial statements. Post balance sheet date events that provide information about conditions that have only arise after the balance sheet date are considered non adjusting events and are disclosed in the notes to the financial statements, if material. q) Segment information In each period, the Company identifies the most adequate segment division taking into consideration the business areas in which the Group is present. Information regarding the business segments identified is included in Note 36. r) Judgement and estimates The most significant accounting estimates reflected in the consolidated income statements include: a) Useful lives of the tangible and intangible assets; b) Impairment analysis of goodwill and of other tangible and intangible assets; c) Recognition of impairment on assets, namely inventory and account receivables, and provisions; d) Pension Fund responsabilities calculation; e) Fair value of Derivative Financial Instruments. Estimates used are based on the best information available during the preparation of consolidated financial statements and are based on best knowledge of past and present events. Although future events are neither controlled by the Group nor foreseeable, some could occur and have impact on the estimates. Changes to the estimates used by the management that occur after the date of these consolidated financial statements, will be recognised in net income, in accordance with IAS 8, using a prospective methodology. 2.4 FINANCIAL RISK MANAGEMENT Altri s Group is exposed essentially to the : (i) market risk; (ii) liquidity risk and (iii) credit risk. The main objective of the Board of Directors, on what risk management concerns, is to reduce these risks to a level considered acceptable for the development of the Group activities. The guiding lines of the risk management policy are defined by Altri s Board of Directors, which determines the acceptable risk limits. The operational concretization of the risk management policy is made by the Board of Directors and by the management of each participated company

61 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) a) Market risk At this level of market risk, a particular importance is given to interest rate risk, exchange rate risk and variability of the commodities price risk. The Group uses derivative instruments on the management of their market risks which is exposed as a way of ensure its hedging and does not use derivative instruments with the objective of negotiation or speculation. i) Interest rate risk The exposure of the Group to interest rate results of the long term loans constituted, mainly, by debt indexed to Euribor. The Group objective is to limit the cash-flows and results volatility according to its operational activity through the utilization of an adequate combination of fix and variable tax debt. The Group policy allows the use of interest rate derivatives in order to obtain a reduction of the exposure to Euribor variations and not to speculative transactions. Most derivative instruments used by the Group in interest rate management are defined as cash-flow hedging instruments as these configure perfect hedging relations. The index, the computation conventions, the interest rate hedging instruments are similar to the ones established for the underlying loans. Nevertheless, there are some derivative instruments which, although have been contracted with the hedging interest risk objective, do not match with the requirements above defined for the hedging instruments classification. ii) Exchange rates risk The Group is exposed to exchange rates risk in transactions related with the finished goods sales in international markets with different currency from Euro. Whenever The Board of Directors considers necessary to reduce the volatility of their results to the variability of exchange rates the exposition is managed trough forwards programs. Additionally the Group possesses a financial participation which the functional currency is different from Euro (Storax Racking Systems, which functional currency is the Sterling Pound). The assets and liabilities recorded in Sterling Pounds are as follow: Assets 7,964,327 6,764,263 Liabilities (5,044,871) (3,921,230) 2,919,456 2,843,033 As of 31 December 2007 the balances expresses in USD are as follow: Account Receivables 15,113,769 3,932,800 Account Payables 24,717 41,263 15,138,486 3,974,063 The Board of Directors considers that eventual changes in exchange rates do not have a significant effect in the consolidated financial statements. iii) Variability risk on commodities price By developing its activity in two commodities transactional industries (paper pulp and steel), the Group is particularly exposed to its price fluctuations, with the correspondent impacts in their results. However, in order to manage this risk, paper pulp price fluctuations hedging contracts were celebrated by the adequate amounts by the foreseen operations, reducing the volatility of its results

62 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) b) Liquidity risk The purpose of liquidity risk management is to ensure, at all times, that the Group has the financial capacity to fulfil its commitments as they become due and to carry on its business activities and strategy trough an adequate financing maturities management. The Group prosecutes an active refinancing policy distinguished by the maintenance of high free and immediate available resources to face short term necessities and the extension or sustenance of the debt maturity in accordance with the predicted cash flows and the Balance leverage capability. The liquidity analysis for financial instruments is disclosed next to the respective note to each financial liabilities class. c) Credit risk The Group is exposed to the credit risk in its current operational activity. This risk is controlled trough a collecting information system of financial and qualitative information provided by recognized entities that supply information of risks, which allow the assessment of the clients viability in the fulfilment of their obligations in order to reduce the credit concession risk. The amounts presented in the balance sheet are net of accumulated impairment losses to doubtful debts which were estimated by the Group; as a result these assets are presented at fair value. The risk credit is limited by the risk concentration management and a strict selection of counterparts as well as the contracting of credit insurances to specialized institutions which ensure a significant part of the conceded credit in result of the activity developed by the Group. 3. CHANGES IN ACCOUNTING POLICIES AND CORRECTION OF MISTAKES During the period there were no changes in accounting policies and were identified no material mistakes related to previous periods

63 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 4. INVESTMENTS 4.1 INVESTMENTS IN GROUP COMPANIES The companies included in the consolidated financial statements by the full consolidation method, its headquarters, percentage participation held and main activity as of 31 December 2007 and 2006, are as follows: Company Head Office Percentage Held Activity Parent-Company: Altri, SGPS, S.A. Porto Investment management Caima / Celtejo / Celbi Group Celulose do Caima, SGPS, S.A. Lisbon 100% 100% Investment management Caima Indústria de Celulose, S.A. Lisbon 100% 100% Production and commercialisation of pulp Silvicaima Sociedade Silvícola do Caima, S.A. Lisbon 100% 100% Sylvan exploration Caima Energia Empresa de Gestão e Exploração de Energia, S.A. Lisbon 100% 100% Production of energy Invescaima Investimentos e Participações, SGPS, S.A. Lisbon 100% 100% Investment management Inflora Sociedade de Investimentos Florestais, S.A. Lisbon 100% 100% Sylvan exploration Socasca Recolha e Comércio de Recicláveis, S.A. (a) Águeda 100% - Commercialisation of recycled products Celtejo Empresa de Celulose do Tejo, S.A. Vila Velha de Ródão 99.58% 99.45% Production and commercialisation of pulp CPK Companhia Produtora de Papel Kraftsack, S.A. Vila Velha de Ródão 99.58% 99.45% Production and commercialisation of paper Ródão Power, S.A. - Energia e Biomassa do Ródão, S.A. (b) Vila Velha de Ródão % Production of energy Altri - Energias Renováveis, SGPS, S.A. (c) Lisbon 100% - Investment management Sosapel Sociedade Comercial de Sacos de Papel, Lda. Vila Velha de Ródão 79.66% 79.56% Commercialisation of pulp Celbi Celulose da Beira Industrial, S.A. Figueira da Foz 100% 100% Production and commercialisation of pulp Celbinave Tráfego e Estiva SGPS, Unipessoal, Lda. Figueira da Foz 100% 100% Freightage of ships Viveiros do Furadouro Unipessoal, Lda. Óbidos 100% 100% Production of plants in nurseries and services related with forests and landscapes Altri, Participaciones Y Trading, S.L. Madrid, Spain 100% 100% Investment management Altri Sales, S.A. (d) Nyon, Switzerland 100% - Commercialisation of pulp Ramada Group F. Ramada Aços e Indústrias, S.A. Ovar 100% 100% Steel commercialisation F. Ramada Produção e Comercialização de Estruturas Metálicas de Armazenagem, S.A. Ovar 100% 100% Production and commercialisation of storage systems F. Ramada II, Imobiliária, S.A. Ovar 100% 100% Real Estate F. Ramada, Serviços de Gestão, Lda. Ovar 100% 100% Administration and management services Universal Afir - Aços, Máquinas e Ferramentas, S.A. Porto 100% 100% Steel commercialisation BPS Equipements, S.A. Paris, France 100% 100% Commercialisation of storage systems Storax Racking Systems, Ltd. Bromsgrove, United Kingdom 100% 100% Commercialisation of storage systems Storax Benelux Belgium 100% 100% Commercialisation of storage systems (a) company acquired in 2007; (b) company which assets and liabilities were classified, in 2007, as held for sale; (c) company created during the second semester of 2007, initially with the designation Melhor Razão, SGPS, S.A. ; (d) company created during the second semester of All the above companies were included in the consolidated financial statements in accordance with the full consolidation method, as established in Note 2.2.a)

64 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 4.2 INVESTMENTS IN ASSOCIATED COMPANIES The associated companies, percentage of capital held and main activity as of 31 December 2007 and 2006 are as follows: Company Percentage Held Activity EDP Produção Bioeléctrica, S.A. 50% 50% Production of energy Operfoz Operadores do Porto da Figueira da Foz, Lda % 33.33% Port's Operations These associated companies were included in the consolidated financial statements in accordance with the equity method, as explained in Note 2.2b). The book value, share capital and net profit for the year ended on 31 December 2007 for these associated companies were as follows: Company Book Value (a) Asset Equity Net Profit EDP Produção Bioeléctrica, S.A. 11,252,658 49,320,057 7,167,174 (853,999) Operfoz Operadores do Porto da Figueira da Foz, Lda. 228,660 1,964, ,558 46,418 (a) includes conceded instalements. 11,481,318 The accounting policies used by theses associated companies do not differ significantly from those used by the Altri s Group, fact that led to no accounting policies harmonization. 4.3 INVESTIMENTS AVAILABLE FOR SALE As of 31 December 2007 and 2006 the investments available for sale and their book value as of that date, were as follows: Company Book value Buildings 793, ,715 Others 199, , ,454 1,315,954 Accumulated impairment losses in investments (Note 20) (110,882) (110,882) Net book value 882,572 1,205, INVESTMENTS RECORDED AT FAIR VALUE TROUGH PROFIT AND LOSSES The amount included in the caption Investments recorded at fair value through profit and loss as of 31 December 2007 and 2006 refers to shares of companies listed in stock exchange markets and is recorded in accordance with its market value as of that date. 4.5 ASSETS CLASSIFIED AS HELD FOR SALE The assets and liabilities held for sale refers to assets and liabilities of Ródão Power Energia e Biomassa do Ródão, S.A. (net of operations between the group), company which will be disposed during

65 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) The detail of assets and liabilities held for sale as of 31 December 2007 are as follow: Tangible fixed assets 19,176,545 Intangible fixed assets 6,107 Inventories 194,722 Clients 1,522,097 Other receivables 1,449,465 Other current assets 98 Activos classificados como detidos para venda 22,349,034 Suppliers (2,443,139) Group companies (Note 12) (21,640,843) Other payables (183,047) Other current liabilities (179,693) Passivos associados a activos detidos para venda (24,446,722) Activos líquidos de passivos detidos para venda (2,097,688) During the year ended 31 December 2007 the net profit of Ródão Power - Energia e Biomassa do Ródão, S.A. amounted to Euro. 5. CHANGES IN THE GROUP COMPANIES In November 2007 Altri SGPS, S.A. trough its participated company Invescaima Investimentos e Participações, SGPS, S.A. acquired 100% of the share capital and voting rights of the company Socasca Recolha e Comércio de Recicláveis, S.A. ( Socasca ) which main activity consists on the gathering and commerce of recyclable materials. As this acquisition took place in the end of 2007, Socasca integrated the consolidation perimeter of Altri, SGPS, S.A., with effects on 31 December The fair value of the net assets acquired as well as the Goodwill generated with this acquisition are as follow: Fair value as of the acquisiton date Assets Current 1,240,950 Non current 3,562,410 4,803,360 Liabilities Current 1,451,703 Non current 2,068,351 3,520,054 Net assets 1,283,306 Goodwill (Note 7) 3,647,639 Acquisition cost 4,930,945 Considering the nature of the assets and liabilities of Socasca, Altri considers that, as of 31 December 2007, the book value do not differs significantly from its fair value. Nevertheless during 2008, will took place a new analysis of this situation, and if the fair value of the assets and liabilities differ significantly from its accounting fair value a new goodwill calculation will be made

66 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) As result of this acquisition an amount of 4,470,945 Euro was already paid remaining 460,000 Euro to be paid. The cash-flows generated in this operation can be detailed as follow: Acquisition cost already paid 4,470,945 Cash and cash equivalents in the acquired subsidiary (103,678) 4,367,267 The price of acquisition of Socasca still depends on correction that will be determined by the obtaining of an exploration licence, the financial performance of this company until 2009 and the effective collection of a subsidy of investment. It s estimated that this correction will be, approximately 1,500,000 Euro maximum. If this operation had been reported with effects on 1 January 2007, the operational income of Altri Group in 2007 would have an increase of approximately, 2,900,000 Euro and the operational result would have an increase of, approximately, 200,000 Euro. Additionally, during the year ended 31 December 2007, trough the classification of assets as held for sale, Ródão Power Energia e Biomassa do Ródão, S.A. was no longer consolidated by the full consolidation method (Note 4.5). In August 2006, in the consequence of a public process of acquisition, Altri, S.G.P.S., S.A., through its subsidiary Altri Participaciones y Trading, S.L., acquired 99.96% of the share capital and 100% of the voting rights of the company Celulose Beira Industrial (Celbi), S.A., whose main activity is the production and commercialisation of pulp. Since this acquisition occurred in August 2006, the consolidated financial statements of Altri only include four months of operations of Celbi. The computation of the fair value of net assets acquired and of the goodwill generated in the acquisition are as follows: Book Fair value Fair value as of value adjustments the acquisition date Assets Current 75,094,730 75,094,730 Non current 130,387,852 10,950, ,337, ,482, ,432,582 Liabilities Current 29,549,067 29,549,067 Non current 8,899,412 8,899,412 38,448,479 38,448,479 Net assets 167,034, ,984,103 Goodwill (Note 7) 252,580,488 Acquisition cost 430,564,591 The acquisition has already been fully paid. The cash-flow generated by the transaction is as follows: Acquisition cost 430,564,591 Cash and cash equivalents in the acquired subsidiary (6,384,554) 424,180,

67 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) The amount paid in the acquisition of this company includes: expectations of synergies, growth of the activity and evolution on the pulp market. These benefits were not recognised separately from the goodwill, since the future economic benefits can not be measured in a reliable manner; and a volume of operations and business relations with customers. However, these assets are not easily measured and recognised separately from the goodwill, since they can not be separated from the Group, sold or transferred, as a whole or individually. The acquisition cost of Celbi is still subject to adjustments related with the working capital computed as of the acquisition date and depending on the effective collection of a subsidy granted for the on going investment. It is expected these adjustments not to exceed the approximate amount of 3,000,000 Euro. Had Altri s consolidated financial statements incorporated Celbi s activity during the full year of 2006, the consolidated operating income would amount to, approximately, 400,000,000 Euro and operating net profit would amount to, approximately, 64,000,000 Euro. The Board of Directors believes that this financial information is an adequate indicator of the Group s performance on an annual basis and that it can be used for future comparisons. With the exception of the lands owned by the company, the Board of Directors decided not to adjust the fair value of any other fixed assets since it considers that, being mainly used in the production and given its specific nature, namely the machinery and equipment, the final computation of the fair value in accordance with the depreciated replacement cost would be similar to the book value as of the acquisition date. Therefore, the fair value adjustments in the acquisition correspond, mainly, to the fair value adjustments of the lands where the forests are located. Additionally, during the year ended in 31 December 2007 the Group acquired an additional 0.13% of the share capital of the Celtejo Group, amounting to 53,383 Euro, which was fully paid

68 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 6. TANGIBLE ASSETS During the years ended 31 December 2007 and 2006, the movement occurred in tangible fixed assets and the corresponding accumulated depreciation, was as follows: Gross assets Buildings and other Plant and Advances on account of Land constructions machinery Vehicles Tools Office equipment Other tangible assets Work in progress fixed assets Total Opening Balance 84,349, ,840, ,562,062 6,571,971 4,243,701 13,946,774 10,255,158 25,727,723 2,082, ,579,797 Changes in the Group (14,127,570) (1,444,250) (15,571,820) - decreases (Note 4.5) - - Changes in the Group - increases (Note 5) 1,168,332 1,651, , ,920 4,861, ,744 24,824 46,166 7,552 - Additions 5,261, ,511 2,261, , , , ,694 92,902, ,924,899 6,894,606 Disposals (338,735) (318,823) (5,972,843) (542,987) (17,146) (878,548) (178,094) - (8,247,176) - Transfers and write-offs 44, ,389 5,419,427-47,599 75,465 (290,804) (6,501,130) - (531,386) Closing balance 90,049, ,550, ,921,277 7,351,968 4,420,896 13,834,867 10,055,506 98,297,789 7,532, ,015,979 Accumulated depreciation Land Buildings and other constructions Plant and machinery Vehicles Tools Office equipment Other tangible assets Total Opening Balance 5,225,597 85,357, ,063,138 5,519,493 4,076,506 12,563,535 8,681, ,487,025 Changes in the Group - (Note 5) - 181, , ,837 15,635 24,499 3,226 1,299,255 Additions 263,736 3,102,091 20,930, , , , ,256 26,236,727 Disposals (34,208) (141,681) (5,633,841) (524,241) (17,146) (924,266) (183,272) (7,458,655) Transfers and write-offs - 3,736 (201,657) - 27,718 71,584 (201,077) (299,696) Closing balance 5,455,125 88,503, ,838,444 5,821,660 4,221,193 12,477,510 8,947, ,264,656 84,594,663 24,047,723 96,082,833 1,530, ,703 1,357,357 1,108,016 98,297,789 7,532, ,751, Gross assets Buildings and other Plant and Advances on account of Land constructions machinery Vehicles Tools Office equipment Other tangible assets Work in progress fixed assets Total Opening Balance 31,908,613 44,378, ,149,290 5,090, ,765 7,482,928 2,373,368 7,267, , ,967,141 Changes in the Group - (Note 5) 52,841,570 66,082, ,308,653 1,927,561 3,243,162 5,722,800 7,411,548 13,328, , ,262,698 Additions 100, ,041 6,426, ,196 80, ,162 1,461,877 27,814,341 1,647,413 39,133,076 Disposals (501,731) (209,211) (76,375) (886,648) (1,847) (51,908) (1,042,498) (3,544) (2,773,762) - Transfers - 198,165 22,753,902 19,260 3,792 50,863 (22,679,925) (9,356) and write-offs - (355,413) Closing balance 84,349, ,840, ,562,062 6,571,971 4,243,701 13,946,774 10,255,158 25,727,723 2,082, ,579,797 Accumulated depreciation Land Buildings and other constructions Plant and machinery Vehicles Tools Office equipment Other tangible assets Total Opening Balance - 27,882, ,043,334 4,107, ,263 6,501,463 1,821, ,223,057 Changes in the Group - (Note 5) 5,038,956 55,114, ,268,674 1,926,969 3,117,261 5,157,892 6,923, ,547,817 Additions 203,598 2,509,126 13,857, ,998 93,898 1,096,097 1,038,093 19,159,205 Disposals (16,957) (108,421) (98,900) (876,241) (1,916) (67,968) (1,086,197) (2,256,600) Transfers and write-offs - (39,927) (7,365) - - (123,949) (15,213) (186,454) Closing balance 5,225,597 85,357, ,063,138 5,519,493 4,076,506 12,563,535 8,681, ,487,025 79,123,688 25,483, ,498,924 1,052, ,195 1,383,239 1,573,801 25,727,723 2,082, ,092,772 The most significant values included in the caption Work in progress as of 31 December 2007 and 2006 refer to the following projects: Project to expand capacity 49,449,537 - Bleaching line 37,204,728 7,856,719 Peeling line - Woods Park 6,299,171 2,235,130 Pressing machine and electric filter for boiler 1,712,729 - Biomass boiler and turbo generator - 11,828,663 Other projects 3,631,623 3,807,211 Total 98,297,789 25,727,723 As of 31 December 2007 two major projects are in progress: the setting up of a pulp bleaching line in Celtejo Empresa de Celulose do Tejo, S.A. and the increase in the production capacity of Celbi Celulose da Beira Industrial, S.A., projects with the estimated conclusion in 2009 (Note 28)

69 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 7. GOODWILL During the years ended 31 December 2007 and 2006, the movement occurred in goodwill and the corresponding impairment losses, was as follows: Opening Balance as of ,875,965 Increases (Note 5) 3,647,639 Closing Balance as of ,523,604 Opening Balance as of ,339,391 Increases (Note 5) 252,580,488 Decreases (43,914) Closing Balance as of ,875,965 The increases recorded in the year ended 31 December 2007 refer to the acquisition of Sócasca, Recolha e Comércio de Recicláveis, S.A. (Note 5). The increases recorded in the year ended 31 December 2006 refer to the acquisition of Celbi Celulose da Beira Industrial, S.A. (Note 5). Goodwill is not amortised. Impairment tests to Goodwill are made on an annual basis and whenever an event or a change in circumstances that reveals the amount which the related asset is recorded could not be recoverable. Whenever the amount which the asset is recorded is superior to its recoverable amount an impairment loss is recognized. The recoverable amount is the highest between the net sale price and the value of use. During the years ended 31 December 2007 and 2006, there weren t recorded or reverted any impairment losses. During 2007, in order to assess de existence or not, of impairment on the main value of the Goodwill (252,580,488 Euro (Note 5)) which resulted from the acquisition of Celbi Celulose da Beira Industrial, S.A. during 2006, Altri compared the values of the estimated financial performance for 2007 from the evaluation of this company made by a financial entity by the time of acquisition by Group Altri, with the real Celbi values in Once the real finance performance of Celbi Celulose da Beira Industrial, S.A. for the year 2007 was superior to the estimated in that evaluation, the Altri s Board of Directors concluded by t he inexistence of Goodwill impairment at that level. The mentioned evaluation was projected on the basis on the discounted cash flows and a Celbi s business plan of 9 years

70 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 8. INTANGIBLE ASSETS During the years ended in 31 December 2007 and 2006, the movement in intangible assets, as well as in the corresponding accumulated depreciation, was as follows: Installation expenses Development expenses Gross assets Industrial property and other rights Software Intangible assets in progress Total Opening balance 57,555 3,521,114 93, , ,791 4,133,207 Changes in the Group (11,537) - (4,500) - (77,844) (93,881) Additions - 54, , , ,536 Disposals Transfers and write-offs - 10,500 - (13,551) (10,500) (13,551) Closing balance 46,018 3,586,299 88, , ,922 4,718,311 Installation expenses Development expenses Accumulated depreciation Industrial property and other rights Software Work in progress Total Opening balance 8,097 3,205,558 71, ,506 3,465,309 Changes in the Group (4,209) - (375) - (4,584) Additions - 222,587 9,994 68, ,895 Disposals Transfers and write-offs (10,930) (10,930) Closing balance 3,888 3,428,145 80, ,890 3,750,690 42, ,154 8, , , ,621 Installation expenses Development expenses Gross assets Industrial property and other rights Software Intangible assets in progress Total Opening balance 3,888 2,270,273 88, ,662 24,150 2,652,846 Changes in the Group (Note 5) 42,130 1,138, ,180,364 Additions 11, ,607 4,500 2, , ,172 Disposals (37,525) - (37,525) Transfers and write-offs (13,650) (13,650) Closing balance 57,555 3,521,114 93, , ,791 4,133,207 Installation expenses Development expenses Accumulated depreciation Industrial property and other rights Software Work in progress Total Opening balance 3,888 1,927,811 60, ,185 2,170,663 Changes in the Group (Note 5) , ,000,256 Additions 49, ,519 70, ,437 Transfers and write-offs (45,515) 60,335 (60,335) 1,468 (44,047) Closing balance 8,097 3,205,558 71, ,506 3,465,309 49, ,556 22,225 49, , ,

71 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 9. BIOLOGICAL ASSETS AND INVENTORIES As of 31 December 2007 and 2006, the amount recorded in the caption Biological assets relates to the plantations and related charges held by the Group and can be detailed as follows: Biological assets 62,219,275 55,895,935 Accumulated impairement losses in biological assets (Note 17) (461,924) (571,164) 61,757,351 55,324,771 As of 31 December 2007 and 2006 the caption Inventories was made up as follows: Raw, subsidiary and consumable materials 30,621,230 23,048,898 Sub-products and others 54,773 56,799 Work in progress 6,187,993 7,634,884 Finished and intermediate goods 19,363,928 15,282,907 Merchandise 17,911,343 13,255,297 74,139,267 59,278,785 Accumulated impairment losses (Note 20) (3,903,797) (3,870,053) 70,235,470 55,408,732 The cost of sales for the period ended 31 December 2007 amounted to 154,777,850 Euro and was computed as follows: Merchandise Raw, subsidiary and consumable materials Sub-products and others Finished and intermediate goods Work in progress Biological assets Total Opening balance 13,255,297 23,048,898 56,799 15,282,907 7,634,884 55,895, ,174,720 Purchases 21,145, ,839, ,985,011 Inventory adjustment (81,545) (51,730) 5 54,557 (282,390) (48,257) (409,360) Changes in the Group (Note 5) - 340, , ,021 Closing balance (17,911,343) (30,621,230) (54,773) (19,363,928) (6,187,993) (62,219,275) (136,358,542) 16,407, ,555,752 2,031 (4,026,464) 1,210,499 (6,371,597) 154,777,850 The cost of sales for the year ended 31 December 2006 amounted to 108,431,532 Euro and was computed as follows: Merchandise Raw, subsidiary and consumable materials Sub-products and others Finished and intermediate goods Work in progress Biological assets Total Opening balance 11,951,691 13,865,583 52,691 13,198,408 5,238,282 21,962,003 66,268,658 Changes in the Group (Note 5) 54,968 9,724,451-9,653,650 1,830,648 32,833,533 54,097,250 Purchases 17,377,020 85,774, ,151,045 Inventory adjustment 146,909 (270,224) 1,079 (1,702) 209,884 3,353 89,299 Closing balance (13,255,297) (23,048,898) (56,799) (15,282,907) (7,634,884) (55,895,935) (115,174,720) 16,275,291 86,044,937 (3,029) 7,567,449 (356,070) (1,097,046) 108,431,

72 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 10. CURRENT AND DEFERRED TAXES In accordance with current legislation, tax returns are subject to review and correction by the tax authorities during a four-year period (ten years for Social Security, until 2000, inclusive, and five years after 2001), except when there has been tax losses, there have been granted tax benefits, or tax inspections or claims are in progress, in which cases the periods may be extended or suspended. Therefore, the tax returns of Altri and its subsidiary and associated companies for the years 2004 to 2007 are still subject to review. The Board of Directors of Altri believes that any potential corrections resulting from reviews/inspections of these tax returns by the tax authorities will not have a significant effect on the accompanying consolidated financial statements. The movements occurred in deferred tax assets and liabilities in the years ended in 31 December 2007 and 2006 were as follows: Deferred tax assets Deferred tax liabilities Opening balance as of 1 January ,992,788 1,167,417 Effect on the profit and loss statement: Increases/(Decreases) in tax losses carried forward (673,747) - Increases/(Decreases) in provisions not accepted for tax purposes 279,159 - Reinvested capital gains - 56,520 Harmonization of depreciation rates 682,533 - Annulement of gains and transactions between group companies 2,489,552 - Other effects 225,334 (158,700) Effect on shareholders' funds: Fair values of derivatives (Note 26) (69,889) 818,814 Closing balance as of 31 December ,925,730 1,884, Deferred tax assets Deferred tax liabilities Opening balance as of 1 January ,931,984 1,009,067 Changes in the Group (Note 5) 3,876, ,397 Effect on the profit and loss statement: Increases/(Decreases) in tax losses carried forward (666,611) - Increases/(Decreases) in provisions not accepted for tax purposes (1,924,057) - Reinvested capital gains - (70,206) Harmonization of depreciation rates 733,267 - Temporary differences between book and fiscal value 37,249 (79,232) Other effects 117,124 44,822 Effects of change in income tax rate (336,824) (37,769) Effect on shareholders' funds: Fair values of derivatives (Note 26) 1,243,029 - Effects of change in income tax rate (18,515) (16,662) Closing balance as of 31 December ,992,788 1,167,

73 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) As of 31 December 2007 and 2006 the detail of deferred tax assets and liabilities, in accordance with the timing differences that originated them, were as follows: Deferred tax assets Deferred tax liabilities Deferred tax assets Deferred tax liabilities Provision and impairment losses not accepted for tax purposes 5,062,438-4,783,279 - Tax losses carried forward 27, ,557 - Fair value of derivatives 1,154, ,814 1,224,514 - Depreciations not accepted for tax purposes - 212, ,686 Revaluation of depreciable tangible assets - 244, ,469 Write-off of tangible assets 306, ,949 - Write-off of intangible assets 50,821-51,617 - Pension fund 1,085, ,934 - Harmonization of accounting principles 1,389, ,603 - Reinvested capital gains - 88,294-31,774 Write-off of accrued costs - 82,501-85,026 Annulement of gains and transactions between group companies 2,489, Other 358, , , ,462 11,925,730 1,884,051 8,992,788 1,167,417 As a result of the issuance of the new Lei das Finanças Locais (local finance law) which changes the local income tax rate, and that is applicable since 1 January 2007, the Group, during the year ended 31 December 2006, changed the tax rate used in the calculation of the deferred tax assets and liabilities from 27.5% to 26.5%, with the exception of deferred tax assets related with tax losses carried forward where the new rate amounts to 25%. Income taxes recorded in the profit and loss statement for the years ended 31 December 2007 and 2006 can be detailed as follows: Current income tax 10,164,243 3,655,048 Deferred income tax (3,105,011) 1,897,467 7,059,232 5,552,515 The reconciliation of the Net Profit before Income Tax to the Income Tax is as follow: Net Profit before Income Tax 42,315,267 26,661,328 Income tax rate (including the maximum tax and Municipal Income Tax) 26.50% 27.50% 11,213,546 7,331,865 Other costs not accepted for tax purposes 263,761 1,032,148 Insufficiency/(Excess) of income tax estimate (183,635) (43,482) Difference between tax and accounting gains and losses (376,530) (3,281,341) Actualization of wood explorations costs (1,277,641) (1,130,431) Tax losses utilization that didn't originated deferred tax assets (2,228,907) (898,954) Effect of the existence of a different tax rate from the above 3,144,075 2,207,151 Tax benefits (2,641,321) (226,867) Effect of the change of the tax rate for the computation of deferred taxes - 336,824 Other effects 854,116 (225,602) Income tax 7,059,232 5,552,

74 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 11. COSTUMERS As of 31 December 2007 and 2006 this caption can be detailed as follows: Costumers, current accounts 92,417,253 84,972,168 Costumers, notes receivables 3,811,654 3,272,071 Costumers, doubtful debts 8,462,009 8,421, ,690,916 96,666,215 Accumulated impairment losses (Note 20) (16,097,788) (15,284,897) 88,593,128 81,381,318 The Group s exposure to credit risk is attributable mainly to the accounts receivable resulting from the Group s operating activity. The amounts recorded in the balance sheet are presented net of accumulated impairment losses for doubtful accounts that were estimated by the Group, in accordance with its experience and based on the economical environment evaluation. The Board of Directors believes that the recorded net amounts are close to its fair value; once these accounts receivable do not pay interests and the discount effect is immaterial. As of 31 December 2007 and 2006, the age of costumer s balances can be analysed as follow: Not due 73,438,865 67,114,519 Due with no impairment losses recorded 0-30 days 10,074,460 10,867, days 2,316,410 1,784, days 93, ,989 Due with impairment losses recorded 12,484,001 12,983, days 2,630, , days 40, , days - 171,751 2,670,262 1,282,964 Total 88,593,128 81,381,318 The Group contracted credit insurances to cover the recoverability risk from these accounts receivables as follow: With credit insurance 43,630,996 40,869,165 Without credit insurance 61,059,920 55,797, ,690,916 96,666,215 The Group does not charge any interests as long as defined pay terms (in average 60 days) are respected. Once that period ends, interests are charged in accordance with the contract and the applicable law to each particular situation, which only occurs in extreme situations

75 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 12. OTHER DEBTORS As of 31 December 2007 and 2006 this caption can be detailed as follows: Advances to suppliers 198, ,846 Other debtors 31,212,628 7,559,009 Accumulated impairment losses (Note 20) (3,196,386) (3,185,346) 28,215,022 4,590,509 As of 31 December 2007, the caption Other debtors includes an amount of 21,640,843 Euro, related to an account receivable from Ródão Power - Energia e Biomassa do Ródão, S.A. (Nota 4.5). As of 31 December 2006, the caption Other debtors includes, mainly, accounts receivable related with the sales of tangible assets in prior years and accounts receivable for which impairment losses have been recorded. As of 31 December 2007 and 2006, the age of the balances in Other Debtors can be analysed as follow: Not due 26,106,116 2,560,570 Due with no impairment losses recorded 0-30 days 22,295 4, days 147,027 62,224 > 90 days 1,939,584 1,962,878 2,108,906 2,029,939 Due with impairment losses recorded > 360 days ,215,022 4,590,509 The not due balances do not present any sign of impairment, the net accounting value of these assets is considered as being close to its fair value

76 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 13. STATE AND PUBLIC SECTOR As of 31 December 2007 and 2006 this caption can be detailed as follows: Debtor balances Corporate income tax 3,125,285 5,065,302 Advanced payments 6,126,147 - Retentions 802,058 - Value added tax 19,293,564 11,430,425 Other taxes 15, ,298 29,362,081 16,599,025 Creditor balances Corporate income tax (9,929,396) (8,495,795) Value added tax (2,354,413) (1,444,353) Retentions (1,459,645) (976,095) Social Security contributions (962,426) (934,113) Other taxes (75,984) (142,541) (14,781,864) (11,992,897) 14. OTHER CURRENT ASSETS As of 31 December 2007 and 2006 this caption can be detailed as follows: Accrued income: Amounts to be invoiced Others Deferred costs: Rents paid in advance Transportation costs paid in advance Insurances paid in advance , , ,525 34,034 2,559,856 3,066, , , ,217 65, ,416 76,746 Other external supplies and services paid in advance Others 651, ,838 4,877,667 4,207, CASH AND CASH EQUIVALENTS As of 31 December 2007 and 2006 the caption Cash and cash equivalents can be detailed as follows: Cash 671, ,606 Bank deposits on demand 134,377,876 22,419, ,049,790 22,652,

77 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 16. OTHER NON CURRENT ASSETS As of 31 December 2007 and 2006 the caption Other non current assets can be detailed as follows: Gross Value Accumulated Impairment Losses Net Values Gross Value Accumulated Impairment Losses Net Values Rents paid in advance 117, , , ,463 Accounts receivable from commercial activity and other debtors 1,104,512 1,104,512-1,104,512 1,104,512-1,222,279 1,104, ,767 1,449,975 1,104, ,463 The accounts receivables form commercial activity and other debtors resulted from transactions with entities who revealed incapacity to pay their debts. The value is fully covered by impairment losses (Note 20). As of 31 December 2007 and 2006, the age of these values can be analysed as follow: Not due 117, ,463 Due with impairment losses recorded days days - - > 360 days 1,104,512 1,104,512 1,104,512 1,104,512 1,222,279 1,449, SHARE CAPITAL AND RESERVES Share Capital As of 31 December 2007 and 2006 the company s fully subscribed and paid up capital consisted of 102,565,836 shares with a nominal value of 25 cents of a Euro each. As of 31 December 2007 and 2006 the following entities held more than 20% of the subscribed share capital: - Cofihold, SGPS, S.A. Legal reserves As of 31 December 2007, the Company presented the amount of 1,527,560 Euro (182,597 Euro as of 31 December 2006) of legal reserves, which can not be distributed to share holders unless the Company closes, although these reserves can be used to absorb losses after all other reserves are over, or incorporated in share capital

78 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) Other Reserves Hedging reserves (931,402) (3,396,295) Conversion reserves (373,328) (141,249) Other reserves 56,943,872 42,578,635 55,639,142 39,041,091 The caption Hedging reserves reflects the fair value of the derivative financial instruments classified as cashflows hedging in the effective hedging component, net of the tax effect (Note 26). The Conversion reserves reflect the exchange variations occurred in the migration of the associated companies in currencies different from Euro and can not be distributed or used to absorb losses. 18. MINORITY INTERESTS The amounts of this caption during the years ended 31 December 2007 and 2006 are as follow: Opening balance 290,356 1,778,485 Part acquired to minorities (78,195) (1,753,153) Net Profit attributable to minority interests 62, ,024 Closing balance 274, , BANK LOANS AND OTHER LOANS As of 31 December 2007 and 2006, the captions Bank loans and Other loans can be detailed as follows: Nominal Value Book Value Current Non current Total Current Non current Total Bank loans 70,470, ,055, ,526,199 70,470, ,729, ,199, 659 Bank overdrafts 9,535,277-9,535,277 9,535,277-9,535, 277 Bank loans 80,005, ,055, ,061,476 80,005, ,729, ,734, 936 Commercial paper 131,000, ,000, ,402, ,402,691 Bonds - 321,500, ,500, ,393, ,393, 671 Factoring 1,438,136-1,438,136 1,438,137-1,438, 137 Other loans 3,151,732 11,887,137 15,038,869 3,151,732 11,887,137 15,038, 869 Other loans 135,589, ,387, ,977, ,992, ,280, ,273, ,595, ,443, ,038, ,998, ,010, ,008, Nominal Value Book Value Current Non current Total Current Non current Total Bank loans 22,705, ,333, ,038,495 22,705, ,886, ,591, 264 Bank overdrafts 8,720,850-8,720,850 8,720,850-8,720, 850 Bank loans 31,426, ,333, ,759,345 31,426, ,886, ,312, 114 Commercial paper 53,000,000-53,000,000 52,849,208-52,849, 208 Bonds - 21,500,000 21,500,000-21,031,927 21,031, 927 Factoring 3,562,694-3,562,694 3,562,695-3,562, 695 Other loans 952,883 14,317,409 15,270, ,883 14,317,409 15,270, 292 Other loans 57,515,577 35,817,409 93,332,986 57,364,786 35,349,336 92,714, ,941, ,150, ,092,331 88,790, ,235, ,026, 236 These loans bear market interest rates with spreads between 0.1% and 1.75%

79 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) Bank Loans In August 2006, the subsidiary Altri, S.L. signed a loan agreement with a bank syndicate amounting to 400,000,000 Euro with the purpose of buying 99.96% of the share capital corresponding to 100% of the voting rights of Celbi. In 2007 this loan suffered an extraordinary amortization of 250,000,000 Euro. Interests are payable half-yearly at the end of the period and capital will be repaid in 5 successive half-yearly instalments, beginning in August In July 2005 Invescaima, SGPS, S.A. signed a loan agreement with Caixa Geral de Depósitos (CGD) and Caixa Banco de Investimento (CBI) amounting to 30,000,000 Euro with interest payable half-yearly and capital being repaid in 10 successive, equal half-yearly instalments, beginning in January During 2007 an amortization of 6,000,000 Euro was realized. During 2007 F Ramada II, Imobiliária, S.A. signed two loans agreements with Banco Espírito Santo amounting to 70,000,000 Euro. As of 31 December 2007 existed contracted bank overdrafts amounting to 55,700,000 Euro (47,200,000 Euro as of 31 December 2006) from which were being used 17,877,770 Euro (6,349,995 Euro as of 31 December 2006), classified in the caption Bank Loans. Other Loans In August 2005 Celulose do Caima, SGPS, S.A. issued a bond loan amounting to 21,500,000 Euro repayable in 6 years which has associated some covenants related with the accomplishment of financial ratios. Celbi Celulose da Beira Industrial, S.A. issued, in February 2007, a bond loan amounting to 300,000,000 Euro repayable in 8 years until Interests are payable half-yearly at the end of the period since the subscription date at a rate equal to Euribor 6 months plus a spread. The Group has renewable commercial paper programs in the maximum amount of 264,750,000 Euro as of 31 December 2007 (84,750,000 Euro as of 31 December 2006), with collocation guarantees subscribed by the several companies, which are repayable in short term. As of 31 December 2007 the amount in use amounted to 131,000,000 Euro (53,000,000 Euro as of 31 December 2006). The expenses incurred with the issuance of loans are deducted to its nominal value and deferred and recognized as interest expenses during the period of the loan (Note 34). In February 2005, the application of the subsidiary Celtejo to the financial benefits granted by the Programa Operacional da Economia POE (Operating Economics Program) to finance the expansion and modernization of the industrial unity was approved. The main purpose of this project is to increase the production capacity and establish a better market differentiation of the pine and eucalyptus pulp. This represents an investment of, approximately, 49,464,000 Euro. The financial grant is made up as follows: (i) a repayable benefit up to 14,919,000 Euro; (ii) a success fee similar to a non-repayable benefit with a maximum amount of 14,919,000 Euro that will be deducted to the repayable benefit mentioned in (i); and (iii) a non-repayable grant related with personnel training programs. The success fee depends on the accomplishment of the contract, which will be evaluated in the years ending in 31 December 2007, 2009 and The repayable financial benefit granted will be reimbursed in 8 successive, equal half-yearly instalments, beginning 30 months after the first payment (17 August 2005), and the first is due in February

80 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) In the years ended 31 December 2007 and 2006 the Group sensitivity to the change of the interest rate index of more or less 1 percentual point, measured as variation on Financial Profit, not considering the hedging effects of the derivative financial instruments (Note 26), may be analysed as follow: Interests (Note 34) 35,933,846 14,278,217 Positive variation of 1 p.p. in the interest rate applied to the total debt (8,264,454) (4,401,432) Negative variation of 1 p.p. in the interest rate applied to the total debt 8,264,454 4,401,

81 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) The bank loans and other loans reimbursement plan as well as the associated interests is as follow: >2012 Total Bank loans Capital 70,470,240 10,877,146 9,107,045 19,494, ,577, ,526,199 Interests (b) 16,791,139 12,223,502 11,423,027 11,020,993 16,111,272 67,569,933 Bank overdrafts Capital 9,535, ,535,277 Interests (b) 515, ,572 Commercial paper Capital 131,000, ,000,000 Interests (b) 6,690, ,690,170 Bond loans Capital ,500, ,000, ,500,000 Interests (b) 18,026,505 17,512,105 17,245,260 17,454,235 65,322, ,560,105 Factoring Capital 1,438, ,438,136 Interests (b) 74, , 884 Other loans Capital 3,151,732 4,198,333 3,721,894 3,245, ,460 15,038,869 Interests (b) Total Capital 215,595,385 15,075,479 12,828,939 44,239, ,298, ,038,481 Interests 42,098,270 29,735,607 28,668,287 28,475,228 81,433, ,410, ,693,655 44,811,086 41,497,226 72,715, ,731, ,449, (a) >2011 Total Bank loans Capital 22,705,162 10,666,667 37,666,667 35,999, ,000, ,038,495 Interests (b) 26,493,691 26,710,790 25,377,243 22,782,480 52,814, ,178,244 Bank overdrafts Capital 8,720, ,720,850 Interests (b) 440, ,229 Commercial paper Capital 53,000, ,000,000 Interests (b) 2,569, ,569,440 Bond loans Capital ,500,000 21,500,000 Interests (b) 1,300,320 1,377,505 1,343,105 1,325,260 1,339,235 6,685,425 Factoring Capital 3,562, ,562,694 Interests (b) 172, ,719 Other loans Capital 952,883 3,151,732 4,198,333 3,721,894 3,245,450 15,270,292 Interests (b) Total Capital 88,941,589 13,818,399 41,865,000 39,721, ,745, ,092,331 Interests 30,976,399 28,088,295 26,720,348 24,107,740 54,153, ,046, ,917,988 41,906,694 68,585,348 63,829, ,898, ,138,388 (a) The value of 2007 correspond to the effective interest rate verified during the year; (b) Considering the available information related to the interest rates evolution and the capital amortisation in the end of each year

82 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 20. ACCUMULATED PROVISIONS AND IMPAIRMENT LOSSES The movements occurred in provisions and impairment losses for the years ended 31 December 2007 and 2006 can be detailed as follows: Impairment losses in inventories and biological assets (Note 9) Provisions Impairment losses in accounts receivable (a) (Notes 11, 12 and 16) Impairment losses in investments (Note 4.3) Total Opening balance 4,270,534 19,574,755 4,441, ,882 28,397,388 Increases 863,247 1,493,385 70,356-2,426,988 Decreases (Note 32) (163,617) (691,349) (109,240) - (964,206) Utilizations (152,707) (3,331) - - (156,038) Write-offs - 25,226 (36,612) - (11,386) Closing balance 4,817,457 20,398,686 4,365, ,882 29,692,746 (a) - including provisions for accounts receivable recorded as non current assets, amounting to 1,104,512 Euro (Note 16) Impairment losses in inventories and biological assets (Note 9) Provisions Impairment losses in accounts receivable (a) (Notes 11, 12 and 16) Impairment losses in investments (Note 4.3) Total Opening balance 150,637 13,790,650 1,780,070 2,924,803 18,646,160 Changes in the Group (Note 5) 5,174,409 3,032,923 2,822,819-11,030,151 Increases 315,916 3,271,430-24,996 3,612,342 Decreases (Note 32) (1,368,932) (353,705) (13,450) (107,961) (1,844,048) Utilizations - (166,543) (148,222) (2,730,956) (3,045,721) Write-offs (1,496) (1,496) Closing balance 4,270,534 19,574,755 4,441, ,882 28,397,388 (a) - including provisions for accounts receivable recorded as non current assets, amounting to 1,104,512 Euro (Note 16). With the exception of impairment losses in investments (Note 34), the increases in impairment losses occurred in the year ended 31 December 2007 and 2006 were recorded against the caption Provisions and impairment losses of the profit and loss statement. The amount recorded in the caption Provisions as of 31 December 2007 and 2006 corresponds to the Board of Directors best estimate to cover possible losses arising from legal actions in progress. 21. OTHER NON CURRENT CREDITORS As of 31 December 2007 and 2006 this caption is made up as follows: Parpública, SGPS, S.A. - 25,000,000 Fixed assets' suppliers (Note 29.2) 349, , ,073 25,298,862 The amount payable to Parpública, SGPS, S.A. is related with the acquisition of Celtejo Group, in 2005, and is repayable until January 2008 bearing interest at market rates (Note 24). 22. OTHER NON CURRENT LIABILITIES As of 31 December 2007 the caption Other non current liabilities refers to the medium and long term instalments of investment subsidies

83 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 23. SUPPLIERS As of 31 December 2007 and 2006 this caption is made up as follows: Payables days days >180 days Suppliers, current account 36,853,719 33,651,464 2,180,179 1,022,076 Suppliers, invoices in conference 6,435,766 6,435, ,289,485 40,087,230 2,180,179 1,022,076 Payables days days >180 days Suppliers, current account 31,771,210 30,621, , ,281 Suppliers, invoices in conference 5,287,101 5,287, ,058,311 35,909, , ,281 As of 31 December 2007 and 2006 the caption Suppliers refers to account payables from the normal activities of the Group. The Board of Directors understands that the book value of these debts is close to its fair value. 24. OTHER CURRENT CREDITORS As of 31 December 2007 and 2006 the caption Other current creditors can be detailed as follows: Payables days days >180 days Fixed assets suppliers 20,258,471 19,748,941 68, ,346 Advances on account of sales 1,133,071 1,133, Other debts 31,890,041 30,782, , ,962 53,281,583 51,664, , ,308 Payables days days >180 days Fixed assets suppliers 15,790,657 14,613,361-1,177,296 Advances on account of sales 1,513,725 1,513, Other debts 6,033,271 5,086,471 13, ,726 23,337,653 21,213,557 13,074 2,111,022 The caption Other Debts includes, as of 31 December 2007, 25,000,000 Euro payable to Parpública, SGPS, S.A. which, in accordance with the current contractual conditions, will be paid in 2008 (Note 21)

84 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 25. OTHER CURRENT LIABILITIES As of 31 December 2007 and 2006 the caption Other current liabilities can be detailed as follows: Accrued expenses: Amounts payable to employees 5,380,134 5,138,146 Interest payable 11,741,922 9,402,521 Pension Fund (Nota 28) 5,443,290 4,175,259 Costs related with sales 853, ,073 Others 4,782,718 3,410,104 Current deferred income: Investment subsidies 1,507,343 1,737,305 Amounts to be invoiced (Note 2.3 n) 9,088,374 2,053,302 Others 606,505 87,828 39,403,914 26,817, DERIVATIVE FINANCIAL INSTRUMENTS Interest rate derivatives In order to reduce the exposition to the interest rates volatility, the Group signed interest rates swap contracts and an interest rate collar. These contracts were evaluated by its fair value as of 31 December 2007 and 2006, and the correspondent amount has been recognized under the caption Derivatives. As of 31 December 2007 and 2006 there were established derivatives contracts which total amounts are as follow: Fair value Type Notional value Interest Expiration date Interest rate swap (a) 4,000,000 Pays fixed interest rate and receives Euribor 3M ,808 - Interest rate swap e collar (b) 155,000,000 Pays fixed interest rate and receives Euribor 6M ,089,863 (2,003,248) 3,748,671 (2,003,248) (a) Although these contracts were signed with the purpose of risk hedging (and not speculation), these contracts do not fulfil every necessary requirements so they can be classified as hedging (Note 2.3k) v), and therefore, the variation of its fair value was recorded in the Statements of Profit and Losses in the caption Gains in derivative instruments (Note 34). (b) In accordance with the accounting policies adopted, these derivatives fulfil every requirement to be designed as interest rate hedging instruments (Note 2.3k) v). The fair value of the Group s contracted derivatives is determined by the respective counterparts (financial institutions with who were signed such contracts). The derivative evaluation model, used by the counterparts is based on the Discounted Cash Flows Method, i.e., using the Swaps Par Rates, listed in the interbank market and available on the Reuters and Bloomberg, for the applicable periods where the forward rates and the discount factors used to discount the fixed cash flows (fix leg) and the variable cash-flows (variable leg) are computed. The sum of these two components results on the Net Present Value of the future cash flows or on the fair value of the derivatives

85 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) The increase/decrease of 1 p.p. on the interest rate indexes verified during 2007 and estimated for the period of these derivatives duration would result in a increase/decrease of the financial results of the year ended 31 December 2007 of 2,977,140 Euro/2,836,090 Euro and of the equity s caption Hedging reserves of 8,010,358 Euro/11,242,612 Euro before considering the tax effects. Paper pulp price hedging derivatives In order to reduce its exposure to volatility of paper pulp price volatility, the Group signed paper pulp price hedging derivatives, which were evaluated according to its fair value as of 31 December 2007 and 2006; the correspondent amount was recognized under the caption Derivatives. As of 31 December 2007 and 2006 there were established the following paper pulp derivative contracts which total amounts are as follow: Hedging Quantity Maturity Fair Value Fair Value ,000 ton/month 31/12/2008 (4,183,446) (3,327,260) The Derivative fair value valuation of the paper pulp price hedging, contracted by the Group was executed by the respective counterparts (financial institutions with which were signed such contracts). The derivative evaluation model, used by these counterparts is based on the Discounted Cash Flows Method, i.e., it s calculated the difference between the estimated paper pulp quotation (PIX) and the fixed price for the relevant periods, which is, afterwards, discounted to the evaluation date. In accordance with the adopted accounting policies, these paper pulp derivatives fulfil with the requirements to be classified as hedging instruments; so the variation on its fair value was recorded in the equity s caption Hedging reserves. The increase/decrease of 5% on the paper pulp price indexes (PIX) during the year ended 31 December 2007 and estimated for the period of these derivatives duration would result in a decrease/increase of the operational result of the year ended 31 December 2007 of 1,847,214 Euro and an decrease/increase on the equity s caption Hedging reserves of 1,932,825 Euro before considering the tax effects. The movement occurred in the fair value of the financial instruments during the periods ended 31 December 2007 and 2006 can be detailed as follow: 2007 Pulp price hedging derivatives Interest rates derivatives Total Opening balance (3,327,260) (2,003,248) (5,330,508) Derivatives Fair value variation (856,186) 5,751,919 4,895,733 Closing balance (4,183,446) 3,748,671 (434,775) 2006 Pulp price hedging derivatives Interest rates derivatives Total Opening balance Derivatives Fair value variation (3,327,260) (2,003,248) (5,330,508) Closing balance (3,327,260) (2,003,248) (5,330,508)

86 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) The periods gains and losses associated to the fair value variation, during 2007, of the hedging instruments in the non matured part (as described in IAS 39), in the amount of 3,353,596 Euro were directly recorded under equity s captions net of the respective deferred tax liabilities, in the amount of 888,703 Euro (Note 10). The periods gains and losses associated to the fair value variation, during 2007, of the hedging instruments in the matured part and of the instruments which although had been contracted with a hedging purpose, do not gather the requirements to be classified as so, in the total amount of 1,524,137 Euro were recorded directly in the Statement of Profit and Losses for the year 31 December GUARANTEES PROVIDED TO THIRD PARTIES As of 31 December 2007 and 2006 the Group companies had provided bank guarantees as follows: API 6,291,290 6,291,290 DGCI 215,744 1,636,762 Others 961,747 1,176,075 7,468,781 9,104, FINANCIAL COMMITMENTS NOT INCLUDED IN THE CONSOLIDATED BALANCE SHEET a) Pension Fund Some of the group companies have assumed commitments related with retirement pensions not included in the consolidated balance sheet. The Caima and Silvicaima Pension Funds, managed by BPI Pensões - Sociedade Gestora de Fundos de Pensões, S.A. was created by a public deed held 31 December 1987, and aims to provide the employees who (i) at its normal retirement age or (ii) at the end of its contract with the company have completed at least 10 years of continuous service and 57 years old, with a monthly pension complement based on their average gross salary for the two years preceding the date of their retirement, beginning in the usual year of retirement. Following a decision of Caima s Board of Directors and after obtaining approval from Instituto de Seguros de Portugal (the Portuguese insurance institute), the Caima and Silvicaima Pension Fund was divided into two independent funds in December Under the set of laws of the Social Benefits Regulation, the employees of the permanent board of Celtejo and CPK with at least five years of continuous service, are entitled to a monthly pension complement after their retirement or if they become disabled. This complement is defined according with a formula that takes into consideration the net monthly salary applicable to the employee as of the retirement date and the number of years of continuous service, in a maximum of 30 years, also guarantying survival pensions to the employees spouses and direct descendants. To cover those responsibilities there is an autonomous pension fund named Tejo Pension Fund. Celbi grants to its workers, with non-defined term labour contract, which retire while working for Celbi, a set of benefits in accordance with the company s Rules for Pension Funds, published in the Republic Journal ( Diário da República ) number 221-III serie, dated 21 September In accordance with those rules, the Company grants the following benefits: i) Retirement by age limit: the participants that retire in the normal timing will be entitled to an annual pension, equal to 11.5% of the pensionable annual salary;

87 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) ii) Retirement due to disability: Plan A If the participant retires himself permanently due to disability by the normal regime of social security, or is accepted as so by the medical services of the company and the management entity, the Fund secures the payment of a pension calculated in accordance with the following formulas: Pension 1: 1. With less than 10 years of service 50% of the annual pensionable salary; 2. With 10 or more years of service 80% of the annual pensionable salary. The amount of the annual pension is deducted to the annual pension computed as described above. Pension 2: The participants will be entitled to an amount equal to one fifth of the monthly salary earned at the retirement date by each year of service. Pension 3: If the disability happens when the participant is more than 55 years old, to the amount referred to in Pension 2 is added 50% of the annual pensionable salary. Plan B - If the participant retires himself permanently due to disability by the normal regime of social security, or is accepted as so by the medical services of the company and the management entity, the Fund secures the payment of an annual pension equal to 11.5% of the pensionable annual salary. Only the participants working for the company when the present change took place can benefit from Plan A. In relation to these workers and in relation to plans A and B the most favourable will be applicable. To the other participants is applicable the Plan B. This regime applies to all Celbi s workers. In accordance with the latest actuarial valuation prepared by the funds managers, the present value of the past service liabilities with retired and current employees as of 31 December 2007 and 2006 as well as the funds patrimonial situation were as follows: Caima Indústria Silvicaima Celtejo CPK Celbi Total Present value of past services liabilities 3,434, ,148 15,855,597 2,370,686 6,954,702 28,897,177 Pension Funds patrimonial situation 3,134, ,816 13,171,810 1,732,373 8,668,184 27,136, Caima Indústria Silvicaima Celtejo CPK Celbi Total Present value of past services liabilities 3,266, ,435 14,898,572 2,177,205 7,192,653 27,796,855 Pension Funds patrimonial situation 3,055, ,582 13,158,163 1,676,753 8,661,038 26,981,

88 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) The detail of the amounts recorded in the Statement of Profit and Losses under the caption Payroll expenses related with the benefit Pension plans defined in the year ended 31 December 2007 and 2006 is as follow: Current services cost (652,709) (449,392) Interest on obligation (1,370,776) (1,076,647) Actuarial gains/(losses) (139,118) 162,150 Return on plan assets 1,067, ,178 (1,095,360) (608,711) The movement in the present value of responsibilities for past services during the years ended 31 December 2007 and 2006 is as follow: Responsibilities in the beginning of the year 27,796,855 19,854,522 Celbi's entrance in the Group (Note 5) - 7,192,653 Benefits paid by the Pension Funds (1,062,281) (614,209) Current service cost 652, ,392 Interest costs 1,370,776 1,076,647 Actuarial gains/(losses) 139,118 (162,150) Responsibilities in the end of the year 28,897,177 27,796,855 The movement verified on Pension Funds patrimonial situation during the years ended 31 December 2007 and 2006 is as follow: Pension funds value at the beginnig of the year 26,981,862 18,089,133 Celbi's entrance in the Group (Note 5) - 8,661,038 Contributions 150,000 90,722 Paid pensions (1,062,281) (614,209) Return on plan assets 1,067, ,178 Pension funds value at the end of the year 27,136,824 26,981,862 To cover differences between the present value of past services liabilities and the funds patrimonial situation, the Group has recorded under the caption Other current liabilities accrued expenses (Note 25) the amount needed to cover those differences, when positive. Those liabilities, except for Celbi, were determined using the Projected Unit Credit method, the TV 73/77 mortality tables and the EKV-80 handicap tables. In addition to the technical parameters referred to above, for Caima and Silvicaima, the valuation was performed assuming real long term profitability of 2.5% when compared with salary increases and 3.75% regarding pension increase. In the calculation of Celtejo and CPK s liabilities it was assumed a real long term profitability of 5.25% when compared with salary increases of 3.00% and 2.00% regarding pension increase. For Celbi, those liabilities were determined using the Projected Unit Credit method, the GKF95 mortality tables and the SR 2001 handicap tables. In addition to the technical parameters referred to above, the valuation was performed assuming real long term profitability of 4% until the age of retirement and a rate of 3% after that that age and a salary increase of 2.5%

89 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) b) Other commitments As of 31 December 2007, the contractual obligations for the acquisitions of fixed assets assumed by the Group companies amounted to, approximately, 380,000,000 Euro (36,830,000 Euro as of 31 December 2006) (Note 6). As of 31 December 2007, the estimated value for assumed responsibilities with the acquisition of raw materials, evaluated at the average market price of stand wood, amounts to, approximately, 17,200,000 Euro (7,300,000 Euro as of 31 December 2006). 29. LEASE CONTRACTS 29.1 OPERATIONAL LEASES As of 31 December 2007 it was recognized in the Statement of Profit and Losses of the year an amount of, proximately, 3,900,000 Euro of operational leases paid rents, essentially, related with explored lands by the Group. Additionally, at the balance sheet date the Group held as lessee, operational lease contracts, which minimal lease payments present the following maturity: Year ,575, ,279, ,404, and nexts 7,764,039 14,023, FINANCIAL LEASES As of 31 December 2007, the responsibilities reflected in the Balance Sheet related to financial leases had the following maturity: Year , , and nexts 81,954 Mid-long term total (Note 21) 349, (short term) 473, , RELATED PARTIES The participated companies of the Group realize between them and at market prices, transactions that classifies as transactions with related parties. In the consolidation procedures the transactions between the companies included in consolidation by the full consolidation method are eliminated, once the consolidated financial statements present the owner and its subsidiaries information as one single company

90 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) As of 31 December 2007 and 2006 the balances and transactions with related parties are as follow: Sales and services rendered Purchases and services obtained Interest income Interest expense Transactions Parent company ,384 - Group companies (a) 134,057,182 75,892, ,622,918 70,630,594 6,380,618 2,901,792 5,068,600 2,470,915 Associated companies (b) 584, ,963 12,196 15, , ,370 Other related parties (c) ,006,422 5,798, , , ,641,536 76,444, ,641,536 76,444,189 6,380,618 2,901,792 6,380,618 2,901,792 Fixed assets acquisitions Fixed assets disposals Fixed Assets Transactions Parent company Group companies (a) 28,064,729 10,250,000 30,414,729 10,250,000 Associated companies (b) Other related parties (c) 2,350, ,414,729 10,250,000 30,414,729 10,250,000 Loans Accounts receivable Accounts payable Obtained Granted Balances Parent company 191, ,786-3,000, Group companies (a) 164,699,435 76,881, ,988,000 65,249,769 94,146,357 53,360, ,766,262 60,035,201 Associated companies (b) 51,683 41, ,619,905 6,675, Other related parties (c) - - 1,212,210 11,673, ,942,996 76,923, ,942,996 76,923, ,766,262 60,035, ,766,262 60,035,201 (a) All entities consolidated by the full consolidation method (Note 4.1.) (b) All entities consolidated by the equity method (Note 4.2.) (c) It was considered as related partie Ródão Power Empresa e Biomassa do Ródão, S.A. (Note 4.5) Besides the companies included in consolidation (Note 4), entities considered as related parties as of 31 December 2007 can be detailed as follow: Cofihold, S.G.P.S., S.A. (Note 17) Cofina, SGPS, S.A. Cofina B.V. F. Ramada Participações, SGPS, S.A. Cofina Media, SGPS, S.A. Presselivre Imprensa Livre, S.A. Edisport Sociedade de Publicações, S.A. Edirevistas Sociedade Editorial, S.A. Medianfin, SGPS, S.A. Metronews Publicações S.A. Grafedisport Impressão e Artes Gráficas, S.A. VASP Sociedade de Transportes e Distribuições, S.A. Destak Brasil Editora de Publicações, S.A. Destak Brasil Empreendimentos e Participações, S.A. O Sol é Essencial, S.A. 31. KEY MANAGEMENT COMPENSATIONS The compensations attributed to key managers, the Board of Directors in Altri s case due to its governance model, during the years ended 31 December 2007 and 2006 amounted to 2,000,820 Euro and 1,735,400 Euro, respectively. The remunerations attributed to key managers can be detailed as follow: Fixed remunerations 850, ,000 Variable remunerations 1,150, ,400 2,000,820 1,735,

91 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 32. OTHER OPERATIONAL INCOME The detail of other operational income in 2007 and 2006 are as follow: Gains in fixed assets disposals 3,742,644 2,475,893 Supplementary income 2,179, ,860 Exploration/Investment subsidies 987, ,700 Impairment losses reversals (Note 20) 964,206 1,844,048 Own work capitalised 347, ,349 Compensations received 302, ,892 Other income 1,326,185 2,993,365 9,849,716 9,844,107 The caption Supplementary income includes other income not directly related with main activities of the Group, namely, rubbish paper sales and others. 33. OTHER OPERATIONAL EXPENSES The detail of other operational expenses in 2007 and 2006 are as follow: Gains in commodities derivative contracts (Note 26) 4,364,159 2,198,522 Taxes 1,398,013 1,302,981 Donations 186, ,995 Doubtful debts written-off 51, ,991 Other expenses 1,803, ,953 7,803,786 4,722, NET FINANCIAL PROFIT Consolidated net financial profit for the years ended 31 December 2007 and 2006 is made up as follows: Gains and losses in other investments: Gains in investments measured at fair value trough Profit and Losses 972, ,127 Provisions for financial investments (Note 20) - (24,996) Losses in investments measured at fair value trough Profit and Losses (353,470) (3,503,583) 619,059 (2,765,452) Financial expenses: Interest (Note 19) (35,933,846) (14,278,217) Exchange losses (903,964) (363,433) Losses in derivatives (Note 26) - (709,699) Other financial expenses (2,248,023) (1,341,062) (39,085,833) (16,692,411) Financial income: Interest 4,127,497 1,675,369 Exchange gains 269, ,506 Gains in derivative instruments (Note 26) 658,808 - Other financial income 189, ,486 5,245,717 2,172,

92 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) The caption Other financial expenses includes, mainly, expenses with the loans settlement, which are recognized in the Statement of Profit and Losses trough the period of life of those loans (Note 19). The caption Gains and losses in associated companies correspond, mainly, to the appropriation of the Group quote of the results in the investments in associated companies. 35. EARNING PER SHARE Earning per share for the years ended 31 December 2007 and 2006 were determined taking into consideration the following amounts: Net profit considered for the computation of basic and diluted earning 35,193,702 20,843,789 Weighted average number of shares used to compute the diluted and basic earning per share (a) 102,565,836 85,143,694 Earnings per share Basic Diluted (a) the weighted average number of shares used for the computation of the earnings per share considers the impact of the stock split of the share capital (Note16), approved in the Shareholders General Meeting dated 31 March 2006, which had effects as from 5 May As of 1 January 2006 the share capital was composed by 51,282,918 shares with a nominal value of 0.50 Euro each and as of 5 May the number of shares increased to 102,565,836 with a nominal value of 0.25 Euro each. As of 31 December 2007 and 2006 there are no diluted effects of the circulation shares number. 36. SEGMENT INFORMATION In accordance with the origin and nature of the income generated by the Group, the main segments identified are as follows: - Steel - Pulp and paper - Holding

93 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) The contribution of the main business segments to the consolidated financial statements as of 31 December 2007 and 2006, are as follows: Steel Pulp and paper Holding Eliminations and consolidation adjustments Consolidated Net operating income 109,986, ,112,124 - (2,762,729) 419,335,684 Net operating income betwen segments 1,785, ,139 - (2,762,728) - Amortisation and depreciation 1,948,457 24,281,273 7, ,479 26,537,622 Operating cash-flow (EBITDA) (a) 12,700,650 91,626,185 (225,870) (1,785,590) 102,315,375 Operating profit (EBIT) 10,752,193 67,344,912 (233,283) (2,086,069) 75,777,753 Fixed and financial assets (b) 7,986, ,239, ,516,772 (81,136,712) 598,606,438 Biological assets 4,274,855 61,670,290 - (4,187,794) 61,757,351 Inventories 77,860,970 36,672,109 - (44,297,609) 70,235,470 Other assets 133,096, ,422,343 1,615,176 (63,614,308) 325,519,402 Total assets 223,218, ,004, ,131,948 (193,236,423) 1,056,118,661 Accounts payable 185,440, ,123,732 43,169,620 (64,412,198) 873,321,376 Other liabilities 389,145 64,012, ,136 64,520,928 Total liabilities 185,829, ,136,379 43,169,620 (64,293,062) 937,842, Steel Pulp and paper Holding Eliminations and consolidation adjustments Consolidated Net operating income 103,970, ,273,762 - (4,708,949) 295,535,422 Net operating income beetwen segments - 4,708,948 - (4,708,948) - Amortisation and depreciation 1,945,981 17,249,402 1, ,479 19,497,642 Operating cash-flow (EBITDA) (a) 13,103,356 51,053,460 (240,338) (756,374) 63,160,104 Operating profit (EBIT) 11,157,375 33,804,058 (242,118) (1,056,853) 43,662,462 Fixed and financial assets (b) 18,594, ,273, ,473,485 (113,748,512) 521,592,321 Biological assets - 51,401,145-3,923,626 55,324,771 Inventories 32,082,279 28,006,453 - (4,680,000) 55,408,732 Other assets 47,311,712 96,502,007 3,275,871 (5,491,307) 141,598,283 Total assets 97,988, ,182, ,749,356 (119,996,193) 773,924,107 Accounts payable 59,200, ,499,013 41,705,810 (5,691,747) 648,713,959 Other liabilities 4,500,306 34,499,163 12, ,759 39,210,856 Total liabilities 63,701, ,998,176 41,718,438 (5,492,988) 687,924,815 (a) - Operating income + depreciation (b) - Including Goodwill Sales and services rendered in 2007 and in 2006 by the Group were as follows: Domestic market 117,300,937 89,415,788 Foreign market 292,185, ,275, ,485, ,691,

94 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) 37. NUMBER OF PERSONNEL During the years ended 31 December 2007 and 2006, the average number of employees of the companies included in the consolidated financial statements by the full consolidation method was of 1,246 and 1,251, respectively. 38. DIVIDENDS In accordance with the decision taken in the General Shareholders Meeting held in 29 March 2007, the Company distributed dividends amounting to 5,128,292 Euro related to dividends (2,564,146 Euro equally distributed in 2006). These dividends were only distributed to the Company s ordinary shares. Regarding 2007, the Board of Directors purpose, in their annual report, that the Altri SGPS, SA net profit was applied as follow: Legal reserve 102,963 Distributtion of dividends 1,956,297 2,059,260 Additionally, the Board of Directors, purpose the distribution of 3,171, Euro from Other reserves; so this application results in a total dividend distribution of 0.05 Euro per share (in a total of 102,565,836 shares). 39. ENVIRONMENTAL INFORMATION Following the Kyoto Protocol, the European Union committed herself to reduce the emission of greenhouse gases. Therefore, it has issued a Directive that predicts the commercialisation of carbon dioxide emission licenses. This directive was transposed to the Portuguese legislation and became mandatory since 1 January 2005, namely, for the pulp and paper industry. Following the ministerial dispatch number 686-E/2005 ( Despacho conjunto ) dated 13 September 2005, the Portuguese government distributed to the companies the carbon dioxide emission licenses. The Group companies received a free license for the emission of 103,586 tons of carbon dioxide in If the Group exceeds that amount it will have to buy in the market the remaining licenses. The distribution of the carbon dioxide emission licenses is made in the beginning of the following year, being the emission amounts presented subject to a certification made by an independent entity. Bearing in mind that these licenses refer to the three year period , in accordance with the data of the carbon dioxide emission in 2005 and 2006 and with the estimates for the year 2007, the Group does not expect this new legislation to carry significant additional costs. As of 31 December 2007 the Group has not recorded any liability concerning environmental issues, nor has disclosed any environmental contingency, since the Board of Directors believes that, as of that date, no obligations and responsibilities arising from past events have occurred that lead to significant costs to the Group. 40. SUBSEQUENT EVENTS In January and February 2008 Celbi Celulose da Beira Industrial, S.A. issued two bond loans, in the amount of 50,000,000 and 25,000,000 Euro, respectively. Those bond loans have a period of 10 years and maturity in On 16 April 2008, Altri S.G.P.S., S.A. (ALTRI) Board of Directors approved a demerger project (spin off) for the company. Under the terms of the said project, the planned reorganization views the splitting of ALTRI's two business units that manage equity holdings in the pulp and paper sector and in the steel and storage systems sector

95 ALTRI, S.G.P.S., S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 (Translation of notes originally issued in Portuguese Note 42) This reorganization is part of a focusing and business transparency strategy, aiming at giving greater visibility to each area and increasing market perception of value. As provided in the spin off project, which will be submitted to approval and deliberation by ALTRI shareholders in a General Meeting convened for the purpose, the realization of this goal will involve ALTRI's demerger simple demerger as provided in Paragraph 1-a), article 118º of the Commercial Companies Code, and the setting up of a new company from the business unit active in the management of equity holdings in the steel and storage systems sector. The management of the pulp and paper business unit will remain at ALTRI, and shares corresponding to its share capital will remain listed on EUROLIST BY EURONEXT, the official market managed by EURONEXT LISBON Sociedade Gestora de Mercados Regulamentados, S.A. Application will be made to list the shares corresponding to the share capital of the new company on this market. 41. FINANCIAL STATEMENTS APPROVAL The financial statements were approved by the Board of Directors and authorized for issuance in 18 April The final approval depends on the agreement of the General Shareholders Meeting. 42. EXPLANATION ADDED FOR TRANSLATION These consolidated financial statements are a translation of financial statements originally issued in Portuguese in accordance with International Financial Reporting Standards (IFRS/IAS), some of which may not conform or be required by generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails

96 STATUTORY AUDIT AND AUDITOR S REPORT CONSOLIDATED FINANCIAL STATEMENTS (Translation of a report originally issued in Portuguese Note 42) Introduction 1. In compliance with the applicable legislation, we hereby present our Statutory Audit and Auditors Report on the consolidated financial information contained in the Board of Directors Report and the consolidated financial statements of Altri, S.G.P.S., S.A. ( Company ) and subsidiaries for year ended 31 December 2007, which comprise the consolidated balance sheet, that reflects a total of 1,056,118,661 Euro and shareholders equity of 118,276,357 Euro, including net profit attributable to the Company s Equity Holders of 35,193,702 Euro, the consolidated statements of profit and loss, cash flows and changes in equity for the year then ended and the corresponding notes. Responsibilities 2. The Company s Board of Directors is responsible for: (i) the preparation of consolidated financial statements that present a true and fair view of the financial position of the companies included in the consolidation, the consolidated results of their operations and their consolidated cash flows; (ii) the preparation of historical financial information in accordance with International Financial Reporting Standards as adopted by the European Union and that is complete, true, timely, clear, objective and licit, as required by the Securities Market Code ( Código dos Valores Mobiliários ); (iii) the adoption adequate accounting policies and criteria and the maintenance of appropriate systems of internal control; and (iv) informing any significant facts that have influenced the operations, financial position or results of operations of the companies included in the consolidation. 3. Our responsibility is to examine the financial information contained in the accounting documents referred to above, including verifying that, in all material aspects, the information is complete, true, timely, clear, objective and licit, as required by the Portuguese Securities Market Code, and to issue a professional and independent report based on our work.

97 Page 2 of 2 Scope 4. Our examination was performed in accordance with the Auditing Standards ( Normas Técnicas e as Directrizes de Revisão/Auditoria ) issued by the Portuguese Institute of Statutory Auditors ( Ordem dos Revisores Oficiais de Contas ), which require that the examination be planned and performed with the objective of obtaining reasonable assurance about whether the consolidated financial statements are free of material misstatement. An examination includes verifying, on a sample basis, evidence supporting the amounts and disclosures in the financial statements and assessing the significant estimates, based on judgements and criteria defined by the Company s Board of Directors, used in their preparation. An examination also includes verifying the consolidation procedures used and the application of the equity method, and that the financial statements of the companies included in the consolidation have been appropriately examined, assessing the adequacy of the accounting principles used, their uniform application and their disclosure, taking into consideration the circumstances, verifying the applicability of the going concern concept, verifying the adequacy of the overall presentation of the consolidated financial statements, and assessing if, in all material aspects, the consolidated financial information is complete, true, timely, clear, objective and licit. An examination also includes verifying that the consolidated financial information included in the consolidated Directors Report is consistent with the consolidated financial statements. We believe that our examination provides a reasonable basis for expressing our opinion. Opinion 5. In our opinion, the consolidated financial statements referred to in paragraph 1 above present fairly, in all material aspects, the consolidated financial position of Altri, S.G.P.S., S.A. and subsidiaries as of 31 December 2007, the consolidated results of its operations and its consolidated cash flows for the year then ended, in conformity with International Financial Reporting Standards as adopted by the European Union and the financial information contained therein is, in terms of the definitions included in the auditing standards referred to in paragraph 4 above, complete, true, timely, clear, objective and licit. Porto, 18 April 2008 DELOITTE & ASSOCIADOS, SROC S.A. Represented by António Manuel Martins Amaral

98 REPORT AND OPINION OF THE STATUTORY AUDIT BOARD CONSOLIDATED FINANCIAL STATEMENTS (Translation of a report originally issued in Portuguese Note 42) To the Shareholders of Altri, SGPS, S.A. In compliance with the applicable legislation and our mandate, we hereby submit our Report and Opinion, which covers the Management Report and consolidated Financial Statements of Altri, SGPS, S.A. ( Company ) for the year ended 31 December 2007, which are the responsibility of the Company s Board of Directors. During the year under analysis, the Statutory Audit Board accompanied the operations of the Company and its affiliates, the timely writing up of accounting records, compliance with statutory and legal requirements and the effectiveness of the risk management and internal control systems, having held meetings with the periodicity and length considered appropriate and having always obtained, from the Board of Directors and personnel of the Company and its affiliates, all the information and explanations required. As part of its duties, the Statutory Audit Board examined the consolidated balance sheet as of 31 December 2007, the consolidated statements of profit and loss by nature, cash flow, and changes in shareholders funds for the year then ended, and the corresponding notes. Additionally, the Statutory Audit Board examined the Report of the Board of Directors for the year 2007, and fulfilled its duties concerning the review of the qualifications, independence and work of the Statutory Auditor, and reviewed the Statutory Audit and Auditors Report and was in agreement with its content. Considering the above, in the opinion of the Statutory Audit Board, the Management Report and the consolidated Financial Statements are in accordance with accounting, legal and statutory requirements and consequently should be approved by the Shareholders General Meeting. We wish to thank the Company s Board of Directors and the departments of the Company and its affiliates involved for the assistance provided to us. Porto, 18 April 2008 The Statutory Audit Board João da Silva Natária President of the Statutory Audit Board Manuel Tiago Alves Baldaque de Marinho Fernandes Member of the Statutory Audit Board Cristina Isabel Linhares Fernandes Member of the Statutory Audit Board