Iochpe-Maxion - Annual Report 2006

Annu

al Re

port

Contents

Fast Read : Summary 03

Iochpe-Maxion : Corporate Profile 10

Highlights 13

Key Indicators 16

Opening Message 18

Strategy 19

Markets 21

Subsidiary and Joint Venture 25

Production Process 28

Competitive Edge 35

Cash Flow and Value Added Statement 37

Financial Performance 39

Liquidity and Debt 46

Risk Management 47

Our Stock as an Investment 49

Corporate Governance 52

Outlook 60

Corporate Information 61

p.�Annual Report 2006

01.Fast Read:Summary

Iochpe-Maxion: ProfileIochpe-Maxion S.A. is the largest

Brazilian manufacturer of commercial vehicle wheels and frames, and railway freight cars and railway castings, with a high market share in these segments. A publicly-held company since 1984, its control is shared between Companhia Iochpe and BNDESPar. With administrative headquarters in São Paulo, the Company operates through two controlled companies that have six manufacturing plants and, together, directly employ more than 6,000 people. Iochpe-Maxion’s products are sold in over 40 countries across the world.

ShareholdersVoting

Shares %

Non-voting

Shares %

Total

Shares %

Companhia Iochpe (*) 74.6 0.4 26.1

BNDES Participações S.A. – BNDESPar (**) 21.8 27.6 25.6

Other 3.6 72.0 48.3

Total 100.0 100.0 100.0

(*) Including the direct and indirect interest of shareholders of Companhia Iochpe in Iochpe-Maxion.

(**) Including the interest of Fundo de Participação Social – FPS, a government social contribution fund.

Companhia Iochpe and BNDESPar have their Iochpe-Maxion common shares linked to a shareholders’ agreement.

Shareholder Structure – Controlling Shareholders – 12.31.2006

This summary was prepared to provide a broad, fast and concise overview of Iochpe-Maxion’s 2006 Annual Report. Further details on the performance for the period are available in the complete version.

Net Operating Revenue by Company – 2006

(%)

59Wheel and Frames Division

34Amsted Maxion

7Automotive

Components Division

66Maxion SistemasAutomotivos


Fast Read: Summary

Maxion Sistemas Automotivos Ltda.This subsidiary has two divisions:

Wheel and Frames Division This division manufactures steel

wheels for trucks, buses and agricultural machinery, in addition to complete frames, side rails and cross-members for trucks, buses and light commercial vehicles, as well as structural stamped parts for passenger cars. Its industrial facilities are located in the cities of Cruzeiro, in the state of São Paulo, and Resende, in the state of Rio de Janeiro.

Automotive Component DivisionThis division operates in the

segment of auto parts for passenger cars, specializing in sets of structural welded stamped parts, handbrake levers, pedal sets, latches and locks, besides cylinders and keys. Its manufacturing plant is located in the city of Contagem, in the state of Minas Gerais.

Amsted Maxion Fundição e Equipamentos Ferroviários S.A.

This joint venture with Amsted Industries manufactures railway freight cars, industrial and railway castings, in addition to railway wheels. Its manufacturing plants are located in the cities of Cruzeiro, Osasco and Hortolândia, all located in the state of São Paulo.

Iochpe-Maxion: Profile (cont’d)


Fast Read: Summary

Economic and Financial Performance

In 2006, consolidated net operating revenue totaled R$1,248 million, a 17% decrease compared to the previous year. Ebitda amounted to R$163 million – a 21% reduction – while net income totaled R$58 million (earnings per share of R$1.085), a 20% decrease in comparison to R$72 million (earnings per share of R$1.355), obtained in 2005. Our main indicators are as follows:

47

2433

119

96

2005 200620032002 2004

Exports – US$ million

156

6989

163

205

2005 200620032002 2004

Ebitda – R$ million

14.116.8

13.1 13.013.7

2005 200620032002 2004

Ebitda margin – % net revenue

51

(24) (5)

5872

2005 200620032002 2004

Net Result – R$ million

4.6

-5.9 -0.8

4.64.8

2005 200620032002 2004

Net Margin – % net revenue

0.6

1.51.3

0.80.6

2005 200620032002 2004

Net Debt/Ebitda Ratio – Ratio

1,099

411

676

1,248

1,494

2005 200620032002 2004

Net Operating Revenue – R$ million

p.6Annual Report 2006

Fast Read: Summary

StrategyThe Company’s strategic

planning is based on combining growth with financial discipline, the constant enhancement of its business portfolio and the maintenance of its operating margins. The main guidelines of this strategy are:

* Production capacity growth in line with domestic demand expansion;

* Increase exports, primarily of commercial vehicle wheels and industrial and railway castings;

* New products and markets, such as manufacturing commercial vehicle

wheels in China and moving into the segment of sets of structural welded stamped parts for passenger cars;

* New businesses presenting synergies with current activities.

Our Markets in 2006

Domestic Market Our main customers in the

automotive segment are the Brazilian automakers. The table below breaks down automakers’ production and export of vehicles for the periods shown, expressed in thousand of units.

SegmentProduction Export

2006 2005 Change (%) 2006 2005 Change (%)

Passenger cars 2,090.1 2,009.5 4.0 637.2 684.3 (6.9)

Light commercial vehicles 376.8 365.6 3.0 152.7 155.6 (1.8)

Trucks 105.6 117.9 (10.4) 38.6 38.3 0.9

Buses 33.9 35.2 (3.9) 16.2 18.9 (14.6)

Total vehicles 2,606.3 2,528.3 3.1 844.7 897.1 (5.8)

Agricultural machinery 46.1 52.9 (12.9) 22.4 30.7 (26.9)

Source: Anfavea.

In the railway segment, the domestic market for freight cars experienced a substantial retraction.

The following table breaks down the domestic demand in the railway segment for the periods shown:

Sales 2006 2005 Change (%)

Freight cars (units) 3,605 7,270 (50.4)

Railway wheels (units)* 55,594 48,231 15.3

Railway castings (tonnes)* 3,270 5,100 (35.9)

Source: Amsted Maxion estimates.

* Only replacement market. Does not include railway wheels and castings used in the assembly of new freight cars.


Fast Read: Summary

Our Markets in 2006 (cont’d)

ExportsIochpe-Maxion’s exports

increased over 2006, amounting to US$119 million, a 24% growth in Dollars (11% in Reais) compared to 2005, accounting for 21% of consolidated net operating revenue in 2006 (15% in 2005).

Competitive EdgeIochpe-Maxion has competitive

advantages that help it achieve results. Among them we highlight the following:

* Financial discipline in capital expenditures;

* Brand recognition;* Long-term relationships;* Market leadership;* Focus on market segments with

growth potential;* Partnerships and technology;* Cost competitiveness;* Quality/Certifications; and* Qualified and experienced

management.

Risk ManagementIochpe-Maxion periodically

monitors the most relevant risk factors. The main risks evaluated are the following ones:

Financial risks: debt to Ebitda ratio, Average bank debt maturity, foreign exchange exposure, payroll and net sales ratio, and economic scenario.

Commercial risks: competition and price pressure, and customer concentration.

Share Performance

41626 47

3,456

443

2005 200620032002 2004

Daily Traded Volume – R$ thousand/day

233 5

134

18

2005 200620032002 2004

Daily Number of Trades – Trades/day

MPYK3 IBR-X

MPYK4 IBR-X

1,192

100332

1,2401,038

2005 200620032002 2004

Preferred Shares Price (MYPK4 x IBR-X)

2002 = 100

178 231317 431

1,298

100 323

1,9242,014

2005 200620032002 2004

Common Shares Price (MYPK3 x IBR-X)

2002 = 100

178 231 317 431


Fast Read: Summary

Governance and TransparencyIochpe-Maxion’s corporate

governance standards are aimed at addressing and strengthening its commitment to transparency, equal treatment of shareholders, accountability to all shareholders and corporate responsibility. The Company:• joined the São Paulo Stock Exchange’s

(Bovespa) Level 1 of Corporate Governance in November 2005;

• is included in Bovespa’s Corporate Sustainability Index (ISE);

• introduced its Code of Ethics, a document that sets forth its principles of conduct in its relations with customers, employees, suppliers, creditors and shareholders, among other stakeholders;

• installed the Audit and the Variable Compensation Committees to advise the Board of Directors;

• implemented procedures allowing employees to make anonymous and confidential comments related to accounting and control issues (Whistleblowing Policy);

• has a Board of Directors with eight members, two of which are independent;

• updated its investor relations site (www.iochpe-maxion.com.br), including several innovations, such as information on corporate governance, strategy, social responsibility and markets, more detailed financial sections and analysts’ coverage, in addition to the annual and social reports, presentations, conference calls and news.


Fast Read: Summary

SustainabilityIochpe-Maxion believes the

principles of corporate citizenship constitute a key element for its long-term sustainability. This understanding breaks down into a series of events, beginning with initiatives capable of fomenting the development of the cities where our industrial plants are located. Iochpe Maxion also shows its commitment to sustainability by setting forth a constructive dialog with employees and the community, and by adopting production procedures that align operating efficiency with respect for the environment. The Company supports the dissemination of social solutions through its contribution to Fundação Iochpe, which develops initiatives that use education to improve the quality of life and reduce inequality.

OutlookFrom the macroeconomic point of

view, inflation control, moderate growth and interest rate reduction should be the key factors in 2007.

Regarding the commercial vehicle segment, the best performance of the agricultural industry as a whole – as a result of better weather conditions and the recovery of agricultural commodities prices in the international market – should contribute to the expansion of the domestic demand for trucks and agricultural machinery. On the other hand, exports from automakers may suffer a retraction in 2007, due to the constant appreciation of the Real, which, in turn, may result that the Brazilian vehicle production may not keep up with the potential domestic demand growth. As far as the international market, the global demand will keep expanding, especially from Asian and East European countries, which will allow our direct exports to continue growing.

In 2007, a decrease is expected in the domestic demand for railway equipment by major Brazilian operators, due to specific adjustments in each of them, while a potential recovery is expected as from 2008. In contrast to that, international demand for industrial and railway castings, including railway wheels, remains strong, which allows for the minimization of the effects arising from the domestic market decline.


02.Iochpe-Maxion: Corporate Profile

Leading domestic manufacturer of commercial vehicle wheels and frames, and railway freight cars and railway castings.

In 2006, consolidated net operating revenue amounted to R$1,248 million, Ebitda totaled R$163 million, and net income reached R$58 million.

Iochpe-Maxion origins can be traced back to 1918, when the Iochpe Group began its activities in the state of Rio Grande do Sul, initially in the timber industry. Over the years, the Company’s strategy was based on business diversification. However, as from the 1990s, it decided to specialize in the auto parts and railway equipment industries.

The Company is currently the largest Brazilian manufacturer of commercial vehicle wheels and frames, and railway freight cars and railway castings. With administrative headquarters located in São Paulo, it operates through two controlled companies, generating more than 6,000 direct jobs in six manufacturing plants located in the states of São Paulo, Minas Gerais and Rio de Janeiro.

In 2006, consolidated net operating revenue amounted to R$1,248 million, a 17% decrease compared to the previous year. Ebitda totaled R$163 million – a 21% reduction – while net income amounted to R$58 million (earnings per share of R$1.085), a 20% retraction compared to a net income totaling R$72 million (earnings per share of R$1.355), which was obtained in 2005.

Iochpe-Maxion’s growth strategy is based on constantly enhancing its business portfolio, expanding its production capacity, increasing its exports, moving into new markets and product segments that have synergies with its current activities.

Maxion Sistemas Automotivos Ltda.This subsidiary operates through

two divisions:

• Wheel and Frames Division This division manufactures steel

wheels for trucks, buses and agricultural machinery, in addition to complete frames, side rails and cross-members for trucks, buses and light commercial vehicles, as well as stamped parts for passenger cars. At the end of 2006, it maintained the leadership in the domestic market for wheels and frames, with market shares of approximately 57% and 66%, respectively. With almost 84 thousand square meters, its manufacturing facilities are located in the cities of Cruzeiro, in the state of São Paulo, and Resende, in the state of Rio de Janeiro. The division generates approximately 3.5 thousand direct jobs and, in 2006, accounted for 59% of the Company’s consolidated net operating revenue.

Net Operating Revenue by Company – 2006

(%)

59Wheel and Frames Division

34Amsted Maxion

7Automotive

Components Division

66Maxion SistemasAutomotivos


• Automotive Component Division This division operates in the

segment of auto parts for passenger cars, specializing in sets of structural welded stamped parts, handbrake levers, pedal sets, latches and locks, besides cylinders and keys. Located in the city of Contagem, in the state of Minas Gerais, it has approximately 650 employees. In 2006, it accounted for 7% of the Company’s consolidated net operating revenue.

Amsted Maxion Fundição e Equipamentos Ferroviários S.A.

Amsted Maxion is a joint venture between Iochpe-Maxion and Amsted Industries, an American corporation and one of the world’s leaders in the development and use of technology in the railway castings industry. It manufactures railway freight cars, railway wheels, and industrial and railway castings. In 2006, it led its segment, with a market share of approximately 81%, in the

domestic railway car market, and of 80%, in the railway castings market. Its manufacturing plants, located in the cities of Cruzeiro, Osasco and Hortolândia, in the state of São Paulo, have approximately 3.5 thousand employees. In 2006, Amsted-Maxion accounted for 34% of the Company’s consolidated net operating revenue.

Global ReachThe products manufactured by

Iochpe-Maxion’s controlled companies are sold to over 40 countries across the globe. The United States, Latin America, Africa, Middle East, Europe, Canada and Mexico are the Company’s key markets. In 2006, exports totaled US$119 million, equivalent to approximately 21% of consolidated net operating revenue. This performance represented a 24% growth in Dollars (11% in Reais) compared to 2005, when sales abroad amounted to US$96 million.

Iochpe-Maxion: Corporate Profile


Iochpe-Maxion has been a publicly-traded company since 1984. Its control is shared between Companhia Iochpe and BNDESPar, both of which are represented in its Board of Directors. Between January and December 2006, the Company’s voting shares increased

19.4%, while its non-voting shares decreased 4.5%. At year-end 2006, market capitalization amounted to R$874 million.

Corporate Structure 12.31.06

Iochpe-Maxion S.A.

Maxion Camponentes

Estruturais Ltda.

Amsted Maxion Fun. e Equip.

Ferroviários S.A.Iochpe Holding LC

Newbridge Strategic Partners

Maxion Sistemas Automotivos Ltda.

Maxion Structural Componentes USA,

Inc.

Remon Resende Montadora Ltda.

Wheels and Frame Division

AutomotiveComponents

Division

15.8%

100.0% 50.0% 100.0% 100.0%

84.2% 100.0%

33.3%

Operating Activities

Iochpe-Maxion: Corporate Profile

ShareholdersVoting

Shares %

Non-voting

Shares %

Total

Shares %

Companhia Iochpe (*) 74.6 0.4 26.1

BNDES Participações S.A. – BNDESPar (**) 21.8 27.6 25.6

Other 3.6 72.0 48.3

Total 100.0 100.0 100.0

(*) Including the direct and indirect interest of shareholders of Companhia Iochpe in Iochpe-Maxion.

(**) Including the interest of Fundo de Participação Social – FPS, a government social contribution fund.

Companhia Iochpe and BNDESPar have their Iochpe-Maxion common shares linked to a shareholders’ agreement.

Shareholder Structure – Controlling Shareholders – 12.31.2006

Stock Market

Some figures were rounded in order to simplify the chart.

p.1�Annual Report 2006

0�.Highlights

228

87

137

219

289

2005 200620032002 2004

Gross Profit – (R$ million)

47

2433

119

96

2005 200620032002 2004

Exports – (US$ million)

1,099

411

676

1,2481,494

2005 200620032002 2004

Net Operating Revenue – (R$ million)

20.721.1

20.2

17.6

19.3

2005 200620032002 2004

Gross Margin – % net revenue

127

3658

136

178

2005 200620032002 2004

Operating Income before Financial

Expenses – Ebit (R$ million)

11.5

8.9

8.5

10.9

11.9

2005 200620032002 2004

Ebit Margin – % net revenue


Highlights

156

6989

163

205

2005 200620032002 2004

Ebitda – (R$ milli0n)

14.1

16.8

13.1 13.013.7

2005 200620032002 2004

Ebitda Margin – % net revenue

102106115

132125

2005 200620032002 2004

Net Banking Debt – (R$ million)

0.6

1.51.3

0.80.6

2005 200620032002 2004

Net Debt/Ebitda Ratio – Ratio

51

(24) (5)

5872

2005 200620032002 2004

Net Result – R$ million


Highlights

Exports by destination – 2006 – %

Exports by product – 2006 – %

626

241

397

731809

2005 200620032002 2004

Net Operating Revenue – Wheels and

Chassis (R$ million)

150

110 1149092

2005 200620032002 2004

Net Operating Revenue – Automotive

Components (R$ million)

646

120

328

854

1,185

2005 200620032002 2004

Net Operating Revenue – Railway

Equipment (R$ million)

54USA

20South America

7Canada/Mexico

9Europe

10Africa/Middle East/Asia

37Wheels

4Railway Freight Cars

49Industrial

and Railway Castings

10Frames


0�.Key Indicators

Key Indicators 2002 2003 2004 2005 2006

Revenue (R$ million)

Net Operating Revenue 411 676 1,099 1,494 1,248

Domestic Market 337 575 955 1,263 990

Foreign Market 75 101 144 231 258

Net Operating Revenue from

Railway Equipment 120 328 646 1,185 854

Wheels 114 192 301 346 323

Frames 127 205 325 463 407

Automotive Components 110 114 150 92 90

Result (R$ million)

Gross Profit 87 137 228 289 219

Operating Income before Financial Expenses – Ebit 36 58 127 178 136

Result of Operation (18) 19 94 141 115

Ebitda 69 89 156 205 163

Net Result (24) (5) 51 72 58

Margins (%)

Gross Margin 21.1% 20.2% 20.7% 19.3% 17.6%

Ebit margin 8.9% 8.5% 11.5% 11.9% 10.9%

Operation Margin (4.4%) 2.9% 8.6% 9.4% 9.2%

Ebitda margin 16.8% 13.2% 14.2% 13.7% 13.0%

Net Margin (5.9%) (0.8%) 4.6% 4.8% 4.6%

Indebtedness and Liquidity (R$ million)

Gross Banking Debt 134 131 176 177 221

Net Banking Debt 106 115 102 125 132

Cash and Investments 28 16 74 52 88

Total Assets 399 431 631 675 694

Shareholders’ Equity 157 152 186 230 265

Net Debt/Ebitda (x) 1.5 1.3 0.6 0.6 0.8

Capital Expenditures 37 41 54 84 68


Key Indicators

Key Indicators 2002 2003 2004 2005 2006

Shares

Earnings per share (R$/share) – adjusted for 2005 reverse split of shares (0.45) (0.10) 0.95 1.36 1.09

Market Capitalization (R$ million) 61 201 744 901 874

Traded Shares Volume (R$ thousand/day) 26 47 416 443 3,456

Dividends (R$ million) - - 16 28 23

Dividends per Non-voting Share (R$ per non-voting share – adjusted for reserve split of shares) - - 0.28 0.55 0.44

Additional Data

Consolidated number of Employees 3,349 4,267 6,069 6,310 5,870

Revenue per Employee (R$ thousand/employee) 123 158 181 237 213

Exports (US$ million) 24 33 47 96 119

Taxes, Fees and Contributions (R$ million) 59 71 150 101 121

Salaries, Benefits and Social Charges (R$ million) 66 105 165 193 213

Volume of Products Sold

Railroad Wheels (thousands of units) 935 1,173 1,468 1,486 1,532

Railway Wheels (thousands of units) 30 27 25 19 48

Railway Freight Cars (units) 294 2,028 4,225 6,455 3,007

Castings (thousand tonnes) 10 13 24 49 67


0�. Opening Message

In 2006, net income amounted to R$58 million, as a result of the demand reduction in the Company’s key markets.

Adequate management of the drop in demand of key markets and pursuit of growth opportunities.

New commercial vehicle wheels factory in China.

At year-end 2006, Iochpe-Maxion recorded a R$58 million net income, which, despite being equivalent to a 20% reduction compared to the previous year, represents the Company’s ability to adapt to a period of retraction in key markets, primarily railway cars, trucks and agricultural machinery.

As a result, the Company sought to address this issue adequately by, on the one hand, managing the drop in demand – by mitigating its impact on results – and, on the other hand, pursuing growth opportunities in other areas.

Amsted Maxion, for instance, (i) minimized the domestic demand retraction by substantially expanding its exports of castings – especially to the United States – (ii) concentrated the assembly of railway cars in its plant in Hortolândia; (iii) and adjusted the number of employees to the new demand level.

In the Wheel and Frames Division, which also focused on increasing its foreign sales, one of the highlights was the decision of diversifying geographically its manufacturing plants, by opening a commercial vehicle wheel factory in China. With investments of approximately US$15 million, the first phase of the new factory should be completed in the beginning of 2008, with operations scheduled to begin in the same year.

In 2007, as a result of a common initiative of the Wheel and Frames Division and the Automotive Components Division, the Company will begin to supply sets of structural welded stamped parts for Fiat’s new passenger car model, paving the way for similar businesses in the segment of structural parts for passenger cars.

Another highlight in 2006 was the conclusion of a secondary offering of non-voting shares issued by Iochpe-Maxion, resulting in higher free float and in increased volume of trades and liquidity, conditions that are paving the way for Iochpe-Maxion to attract new institutional investors.

For 2007, our planning is focused on: (i) expanding our production capacity, especially in the Wheels and Frames Division, including the project of manufacturing commercial vehicle wheels in China; (ii) starting-up the production of sets of structural welded stamped parts for passenger cars; (iii) continuous increasing of our exports, especially at Amsted-Maxion; and (iv) expanding our product and service lines, always aimed at obtaining synergies with existing businesses.

Dan IoschpeChief Executive Officer


06.Strategy

Our strategic plan is based on combining growth with financial discipline, constantly enhancing our business portfolio and maintaining operating margins.

Growth-related guidelines: production capacity increase, expansion of exports, new products and markets, and new businesses that have synergies with current activities.

Iochpe-Maxion remains committed to a strategic plan based on promoting growth with financial discipline, constantly enhancing its business portfolio, and maintaining operating margins.

The main guidelines of this strategic vision are:

• Production capacity increase: A Iochpe-Maxion will continue expanding its manufacturing plants and increasing its production capacity in order to adjust itself to demand growth. It will also continue to update products and production processes so as to assist its customers in a complete and differentiated way, strengthening its leading position in the domestic market and increasing its presence in the international area.

54

37 41

68

84

2005 200620032002 2004

Capital Expenditures – R$ million


Strategy

• Expansion of exports: Iochpe-Maxion intends to expand its activities in the international market, primarily through commercial vehicle wheels, and industrial and railway castings. Accordingly, it intends to decrease its exposure to risks related to demand shifts in the domestic market.

• New products and markets: Iochpe-Maxion’s goal is to continue expanding its product lines, by moving into market niches that have synergies with its current product portfolio or with its customer portfolio, such as the project of sets of structural welded stamped parts for passenger cars. In addition, it will continue developing new markets for its current products, such as the project for manufacturing commercial vehicle wheels in China for export to neighbouring countries.

• New businesses: the Company is constantly evaluating growth opportunities through acquisitions that have synergies with its current business or customer portfolios.

A strategic move towards China Presence in China means higher competitiveness. On one hand, it

represents the alliance of differentiated costs of the Chinese economy - cost of equipment, raw material, labor, logistics and taxation – to the recognized excellence of products with the Maxion brand. On the other hand, it means the possibility of continuing to increase the production capacity, taking advantage of the opportunities of a region with growing demand. A new experience that will make way for expansion in other countries that, as China, combine competitive cost and large growth potential.

47

2433

119

96

2005 200620032002 2004

Exports – US$ million


0�.Markets

Influenced by the retraction in the agricultural segment, demand in the Company’s key markets decreased in 2006.

Domestic Market

In 2006, Iochpe-Maxion’s key markets were unable to repeat the good performance of 2005, when its growth was much higher than the expansion of the Brazilian economy as a whole.

Overall, demand decreased primarily due to income reduction in the agricultural sector, which had a direct impact on the demand for agricultural machinery and trucks.

Net Operating Revenue by Segment in

2006 – (%)

Brazilian Production of Commercial

Vehicles(*) – thousand units

20042002 2003 20062005

562572524

381323

(*) Trucks, buses, light commercial vehicles and agriculture

machinery.

30Trucks

9Buses

7Passenger cars6

Agricultural Machinery

4 Light Commercial

Vehicles

23Railway

Operators

21Exports

56Automakers operating in Brazil


Markets

SegmentProduction Export

2006 2005 Change (%) 2006 2005 Change (%)

Passenger cars 2,090.1 2,009.5 4.0 637.2 684.3 (6.9)

Light commercial vehicles 376.8 365.6 3.0 152.7 155.6 (1.8)

Trucks 105.6 117.9 (10.4) 38.6 38.3 0.9

Buses 33.9 35.2 (3.9) 16.2 18.9 (14.6)

Total vehicles 2,606.3 2,528.3 3.1 844.7 897.1 (5.8)

Agricultural machinery 46.1 52.9 (12.9) 22.4 30.7 (26.9)

Source: Anfavea.

Domestic Market (cont’d)The domestic market increase in

the segment of buses, light commercial vehicles and passenger cars was largely offset by the decline in automakers’ exports. In other words, the domestic market growth did not fully translate into production increase. Despite being positively influenced by the election year, bus production had a 4% decrease. On the other hand, the markets for

cars and light commercial vehicles had a substantial growth, resulting in a production increase of 4% and 3%, respectively. This expansion is explained to a great degree by the drop in interest rates and the credit facilities offered to end consumers. The table below breaks down Brazilian production and export of vehicles and agricultural machinery for the periods shown:

Trucks, a heavy market Why does the truck market deserve to be highlighted in Iochpe-Maxion’s

Annual Report? The answer is simple and direct: because the demand for wheels and chassis, Iochpe-Maxion’s largest segment, mostly arises from the Brazilian production of trucks, followed by buses, light commercial vehicles and agricultural machines. Due to the company’s high market share, a production growth of these vehicles will represent growth also for Iochpe-Maxion.


Markets

Sales 2006 2005 Change (%)

Freight cars (units) 3,605 7,270 (50.4)

Railway wheels (units)* 55,594 48,231 15.3

Railway castings (tonnes)* 3,270 5,100 (35.9)

Source: Amsted Maxion estimates.

* Only replacement market. Does not include railway wheels and castings used in the assembly of new freight cars.

Domestic Market (cont’d)In 2006, the domestic market for

railway cars experienced a substantial decline when compared to the volumes presented in 2005. The following table breaks down the domestic demand in the Company’s railway segment for the periods shown:

5,642

294

2,459 3,605

7,270

2005 200620032002 2004

Brazilian Market of Railway Freight Cars

units

Reduction: demand in the railway car market was not as strong as in 2005.


Focus on exports to tackle the slowdown in domestic market demand.

In 2006, foreign sales amounted to US$119 million – a result 24% higher in Dollars when compared to 2005.

ExportsAs part of its strategy to reduce

its reliance on the domestic market, Iochpe-Maxion sought to give a special focus to exports. The Company’s exports increased during 2006 and, at year-end, amounted to US$119 million, a 24% growth in Dollars (11% in Reais) compared to 2005, accounting for 21% of consolidated net operating revenue (15% in 2005). In the comparison between 2005 and 2004, the Company’s exports had already presented a growth in Dollars higher than 100%. In 2006, castings and railway wheels accounted for the highest growth among exports, reaching more than 50% growth, equivalent to close to 49% of consolidated exports. Commercial vehicle wheels, in its turn, accounted for 37% of the exports portfolio, 10% originated in the frames segment and 4% in the freight railcars segment. The United States, Latin America, Africa, Middle East, Europe, Canada and Mexico are the key destinations for Iochpe-Maxion’s products.

Markets

Exports by Destination – 2006 – (%)

54USA

20South America

7Canada/Mexico

9Europe

10Africa/Middle East/Asia


0�.Subsidiary and Joint Venture

Growing exports in the Wheels and Frames Division: US$56 million, 25% increase in Dollars (11% in Reais) compared to 2005.

Maxion Sistemas Automotivos Maxion Sistemas Automotivos

operates through two divisions: Wheel and Frames Division and Automotive Components Division:

Wheel and Frames DivisionIn 2006, Maxion Sistemas

Automotivos’s Wheel and Frames Division recorded a 10% decline in its net operating revenue, compared to 2005, amounting to R$731 million, equivalent to 59% of Iochpe-Maxion’s consolidated net operating revenue in the period (54% in 2005).

The Company felt the retraction of the domestic production of trucks and agricultural machinery.

The effects of this decline were partially offset by the exports of commercial vehicle wheels and frames, which had a combined 25% growth in Dollars (11% in Reais), amounting to US$56 million and accounting for 17% of the Division’s revenue (13% in 2005). The United States remain the key destination for the Company’s exports.

The frames segment – which includes side rails, cross-members, stamped parts and complete frames – accounted for 56% of the Division’s net operating revenue (57% in 2005) or R$407 million, maintaining a leading position in the domestic market, with a market share of approximately 66%.

Net operating revenue for the wheels segment – wheels for agricultural, commercial and off-road vehicles – amounted to R$323 million, or 44% of the Division’s net operating revenue (43% in 2005), a 7% decrease compared to the previous year, maintaining the leading position in the domestic market, with a market share of approximately 57%.

In 2006, the Wheel and Frames Division continued investing in technology as a tool for the enhancement of the production process, improvement of quality, and increase of production capacity and the competitiveness of its products. In this area, one innovation was the introduction of an Italian equipment – known as “Leonardo” – that inspects one-by-one each tubeless tire wheel manufactured in the automated production lines, ensuring the quality of the process and of the product.

Revenue Wheels and Frames Division

(R$ million)

626

241

397

731809

2005 200620032002 2004


Subsidiary And Joint Venture

The commercial vehicle wheel manufacturing plant in China should start operating in 2008.

Despite a 2% revenue decrease, the margins of the Automotive Components Division were much closer to those the Company believes to be adequate.

Partnership with the Wheel and Frames Division: sets of structural welded stamped parts for Fiat’s new vehicle.

Wheel and Frames Division (cont’d)From the operating and strategic

viewpoint, an important development of 2006 was Iochpe-Maxion’s decision to install a new commercial vehicle wheel manufacturing plant in China. With an investment estimated in US$15 million, the first phase of the new plant should be completed by the beginning of 2008. The entire production of 600,000 wheels/year will be exported to markets geographically close to China. After the ramp-up period, the new plant should generate additional net revenue of approximately US$30 million/year.

Also at the end of 2006, the Division began to export side rails and stamped parts for the military vehicle Humvee, manufactured by US automaker AM General, based on a long-term contract that should generate approximately US$9 million per year.

One of the main projects for 2007 is the production of sets of structural stamped parts for Fiat’s new passenger car scheduled to be launched in Brazil in the first half of the year. A result of the partnership with the Automotive Components Division, this deal should generate additional annual revenue of approximately R$40 million, after the ramp-up period.

Automotive Components DivisionThe Automotive Components

Division ended 2006 with net operating revenue amounting to R$90 million, a 2% decrease in comparison to 2005, accounting for a 7% share in Iochpe-Maxion’s consolidated net operating revenue (6% in the previous year). The reduction in net operating revenue was also due to the effect of the sale of assets related to the window raiser mechanism business, which accounted for 11% of the Division’s net operating revenue in 2005, as the domestic production of passenger cars increased 4% in 2006, benefiting the Division’s businesses.

In 2006, the Division managed to add relevant orders to its portfolio and increase the relationship with Brazil’s biggest automakers. In partnership with the Wheel and Frames Division, the Automotive Components Division will be the supplier of structural welded stamped parts for Fiat’s new car, the launching of which is scheduled for 2007.


Subsidiary And Joint Venture

Amsted Maxion Fundição eEquipamentos Ferroviários S.A.

Amsted Maxion, a joint venture between Iochpe-Maxion and Amsted Industries, recorded in 2006 net operating revenue amounting to R$854 million, representing a 28% drop, compared to the R$1,185 million level reached in 2005.

Maintenance of its leading position in the railway equipment domestic market in 2006.

Exports totaled US$125 million, a 23% growth in Dollars (11% in Reais).

AAR (Association of American Railroads) Certification: guarantee of quality, potential expansion of customer portfolio.

Despite the revenue decline, the Company maintained in 2006 its leading position in its market segments, accounting for 81% of the domestic market for railway freight cars, 80% of the domestic market for railway castings, and 46% of the domestic market for industrial castings.

In order to remain the leading name in its industry, Amsted Maxion kept investing in 2006. The railway wheel production capacity was increased and it was implemented the electronic control in its furnaces, which resulted in better quality and higher productivity.

From the strategic viewpoint, one of the key advances was the certification from AAR (Association of American Railroads) for the railway wheels, ensuring the quality of products and processes based on high standards. The AAR certification, as one of the world’s most important and recognized certifications, provides potential of customer portfolio expansion, especially in the United States, the most relevant market on a global scale.

With the expected decrease in domestic demand for railway freight cars in 2007, the Company adjusted its production structure to the new level, concentrating the assembly of railway cars in its plant in Hortolândia and reducing the number of employees in all of its plants.

The share in consolidated net operating revenue also declined, from 40% in 2005 to 34% in the last year. This performance is directly related to the substantial reduction in the domestic market for railway freight cars.

It is also worth to mention that the market drop experienced by Amsted-Maxion in 2006 was partially offset by the expansion in sales of industrial and railway castings, especially abroad, and particularly to the US market. In the comparison between 2006 and 2005, Amsted-Maxion’s exports increased 23% in Dollars (11% in Reais), from US$102 million in 2005 – equivalent to 21% of the Company’s net operating revenue in that year – to US$125 million in 2006, equivalent to 32% of its net operating revenue.

646

120

328

854

1,185

2005 200620032002 2004

Revenue Amsted Maxion – (R$ million)


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10.Competitive Edge

Financial discipline in its investments: adequate return, without compromising the capital structure.

Presence in segments with growth potential.

Brand recognition: competitiveness, quality, punctuality and reliability attributes.

The safe net of financial discipline For Iochpe-Maxion, financial discipline is translated into the constant

generation of growth and investment projects that show an adequate return. This vision is even more important when taking into account the segment in which the company operates and the general context of the economy, sometimes influenced by high fluctuations. Financial discipline is a way to focus on sustainable business growth.

Over the years, Iochpe-Maxion has developed important competitive advantages that help to achieve better results, creating value perceived by the market and by all those who, directly or indirectly, participate in its daily operations.

Among the competitive advantages, we can highlight the following ones:

• Financial discipline in its investments: Iochpe-Maxion carefully analyzes new investment projects, prioritizing opportunities that provide adequate return, without compromising its capital structure. As an essential part of the Company’s culture, this concept is also the starting point for creating ideas, projects and solutions.

• Brand recognition: Maxion is a leading name in its market segments, a brand that the market associates with attributes, such as competitiveness, quality, punctuality and reliability.

• Long-term relationship: Iochpe-Maxion values long-term commercial relationships. In practical terms, this principle is reflected in the involvement and interaction the Company maintains with almost its entire customer portfolio, both in Brazil and abroad.

• Leadership: Iochpe-Maxion is a leader in the segments that account for the most of its net operating revenue, such as wheels and frames for commercial vehicles, railway freight cars and railway castings. Its recognized leadership position enables the Company to achieve economies of scale, which is always a relevant competitive advantage.

• Focus on market segments with growth potential: Iochpe-Maxion operates in market segments whose growth potential is higher than that of Brazil’s GDP due to highway and railway expansion and enhancement projects, in addition to the need for renewing of their respective fleets.


Competitive Edge

• Partnerships and technology: Iochpe-Maxion has established partnerships with worldwide technology leaders in key segments of its various industries. An example of this differential is its partnership, through Amsted-Maxion, with Amsted Industries, the main US manufacturer of railway castings and worldwide leader in the development of technologies and products for the railway industry. Through this partnership, the Company has access not only to new production techniques, but also to differentiated projects and markets. Amsted-Maxion has a complete digital mapping of Brazil’s railway grid, a feature that enables it to perform virtual simulations that result in efficiency and safety gains, optimization of costs, and reduction in the lead time for developing new projects.

• Competitive cost: the focus on technology and the priority given to structuring modern and updated manufacturing plants enables Iochpe-Maxion to promptly address domestic market demands, in addition to promoting exports efficiently and competitively. Competitive production costs are also the result of vertical integration in some areas and specialization in some key processes and use of certain raw materials, such as steel. Production techniques and the use of updated equipment provide the Company with flexibility to offer its customers different production processes that meet specific needs, timely and at competitive costs.

• Quality: the quality of the products and processes used are recognized internationally and certifications are granted by renowned governmental bodies and independent organizations. The Company is a certified supplier of major automakers and railway operators. Such a differential can be an opportunity for addressing new demands in both the domestic and international markets.

• Main certifications:- Wheels and Frames Division of Maxion

Sistemas Automotivos: ISO/TS 16949, ISO 14001 and OHSAS 18000, certified by Bureau Veritas Quality International (BQVI);

- Automotive Components Division of Maxion Sistemas Automotivos: ISO / TS 16949, certified by Bureau Veritas Quality International (BQVI);

- Amsted Maxion: ISO 9001 certified by Lloyd’s Register and AAR (Association of American Railroads) M1003 certified by IQC Inc.

• Qualification: Iochpe-Maxion’s management team has broad experience in its market segments, which has contributed to the growth of the Company’s key performance parameters over the last years. In 2006, it invested R$2,3 million in qualification and training initiatives.

Focus on technology, modern and updated manufacturing plants.

Recognized products and processes and internationally certified.


11.Cash Flow and Value Added Statement

Statements of Cash Flows - Indirect Method Years ended December 31, 2006 and 2005 (In thousands of Reais)

Consolidated

2006 2005

Cash flows from operating activities

Net income for the year 57,780 72,131

Adjustments to reconcile net income to cash and cash equivalents generated by operating activities

Depreciation and amortization 26,292 27,119

Deferred taxes from current and non-current assets 5,761 5,382

Residual cost of property, plant and equipment written-off 483 784

Provision for contingencies 10,407 8,834

Reversal of Cofins provision (8,609) -

Variations in assets and liabilities

Decrease (increase) in accounts receivable 31,236 (27,865)

Reduction in inventories 19,737 9,448

Reduction in suppliers (19,957) (1,748)

(Increase) decrease in other accounts receivable, taxes recoverable and other accounts (3,982) 3,460

(Decrease) increase in other accounts payable, provisions and other accounts (29,312) (28,294)

(Reduction) increase in income tax and social contribution (994) (8,264)

Net cash and cash equivalents generated by operating activities 88,842 60,987

Cash flows from investing activities

Acquisition of property, plant and equipment (67,751) (84,011)

Acquisition of deferred assets (117) -

Net cash and cash equivalents invested in investing activities (67,868) (84,011)

Cash flows from financing activities

Loans taken out 275,506 305,241

Payment of loans/debentures (231,880) (289,928)

Interest paid for loans/debentures - -

Payment of dividends (28,385) (14,253)

Net cash and cash equivalents originated by (invested in) financing activities 15,241 1,060

Statement of increase (decrease) in cash and cash equivalents 36,215 (21,964)

At the beginning of the year 51,962 73,926

At the end of the year 88,177 51,962

Increase (decrease) in cash and cash equivalents 36,215 (21,964)


Cash Flow and Value Added Statement

Value Added Statement Years ended December 31, 2006 and 2005 (In thousands of Reais)

Consolidated

2006 2005 Income (expenses)

Sales of products and services provided 1,601,863 1,814,386

Reversal (allowance) for doubtful accounts and contingencies 11,563 (1,328)

Non-operating income (22,158) (20,272)

1,591,268 1,792,786

Inputs acquired from third parties (including ICMS and IPI)

Raw materials consumed 890,668 1,066,512

Costs of products sold and services provided 122,661 148,599

Materials, energy, third-party services and other 133,972 142,407

1,147,301 1,357,518

Gross value added 443,967 435,268

Retentions

Depreciation and amortization (26,292) (27,119)

(Reduced) net value added produced (consumed) by the Company and its subsidiaries 417,675 408,149

Value added received in transfer

Financial income 6,914 3,616

6,914 3,616

Total value added to distribute 424,589 411,765

Value added distribution

Employees

Personnel and social charges 200,728 177,543

Employees’ profit sharing 11,842 15,425

Taxes

Federal 99,100 118,747

State 21,331 (17,955)

Municipal 369 277

Financing entities

Interest 28,307 40,734

Rentals 5,119 4,854

Interest on own capital and dividends 22,789 28,442

Legal reserve 2,890 3,607

Investment and working capital statutory reserve 32,114 40,091

424,589 411,765


12.Financial Performance

Net Operating Revenue Breakdown

Net operating revenue by company, division and segment – in R$ million, except change

2006 2005 Change 06/05 (%)

Market Market Market

Domestic Export Total Domestic Export Total Domestic Export Total

Maxion Sistemas Automotivos

Wheel and Frames Division 610 121 731 701 108 809 (13.0) 11.4 (9.7)

Frames/side rails/stamped parts 382 26 408 440 23 463 (13.2) 13.0 (11.9)

Commercial vehicle, agricultural machinery and off-road wheels 228 95 323 261 85 346 (12.6) 11.8 (6.6)

Automotive Components Division 89 1 90 91 1 92 (2.6) 66.7 (2.2)

Amsted Maxion Fund. e Equip. Ferrov. 583 271 854 940 245 1,185 (38.0) 10.7 (28.0)

Railway freight cars/boogies 453 22 475 841 66 907 (46.1) (66.7) (47.6)

Railway wheels 36 31 67 11 13 24 227.3 138.5 179.2

Railway/industrial/truck castings 94 218 312 88 166 254 6.8 31.3 22.8

(-) Consolidation adjustments (291) (136) (427) (470) (122) (592)

Iochpe-Maxion – consolidated 990 257 1,247 1,263 231 1,494 (21.6) 11.2 (16.5)

Net operating revenue breakdown by sector – in R$ million, except change

Sector 2006 2005 Change 06/05 (%)

Automakers located in Brazil 700 793 (11.7)

- buses, trucks, light commercial vehicles and agricultural machinery 611 702 (13.0)

- passenger cars 89 91 (2.1)

Brazilian railway operators 291 470 (38.0)

Exports 257 231 11.2

Iochpe-Maxion – consolidated 1,248 1,494 (16.5)

Volume of goods sold

Units sold 2006 2005 Change 06/05 (%)

Commercial vehicle wheels (thousands of units) 1,532 1,486 3.1

Railway wheels1 (units) 47,915 18,663 156.7

Railway freight cars (units) 3,007 6,455 (53.4)

Castings1 (tonnes) 66,995 49,128 36.4

1Only replacement market, does not include railway wheels and castings used in the assembly of new railway cars.


Financial Performance

Domestic market share

Company2006 2005

Domestic Market Domestic MarketMaxion Sistemas Automotivos

Frames/side rails/stamped parts 66% 67%

Commercial vehicle, agricultural machinery and off-road wheels 57% 57%

Amsted Maxion Fund. e Equip. Ferrov.

Railway freight cars 81% 84%

Railway wheels 46% 16%

Railway castings 80% 80%

Industrial castings 46% 42%

Performance characterized by the drop of key markets: net income amounted to R$58 million, a 20% decrease, and EBITDA reached R$163 million, a 21% reduction.

Net Operating RevenueConsolidated net operating

revenue amounted to R$1,248 million in 2006, a 17% decrease in comparison to the same period of the previous year. This performance was the result of the retraction in the domestic production of commercial vehicles, and the substantial decrease in the domestic demand for railway freight cars, whose effect was minimized by the growth in the exports of commercial vehicle wheels, and railway castings and wheels.

Costs of Goods SoldCost of goods sold, which

represented 82.4% of consolidated net operating revenue, amounted to R$1,028 million in 2006, a 15% drop compared to R$1,205 million, recorded in 2005, which, in turn, was equivalent to 80.7% of consolidated net operating revenue in that year. Cost of goods sold was negatively affected by the costs for adjusting the structure, by the smaller dilution of indirect manufacturing costs, and by the impact of wage raises arising from union collective agreements in the fourth quarter of 2005 and 2006.

The table below depicts the main items share on the cost of products sold, for the periods shown.

Net Operating Revenue Breakdown (cont’d)

Comparing 2006 and 2005 Results

2006 2005

Raw materials and inputs 65% 78%

Wages 22% 16%

Depreciation, amortization and maintenance costs 13% 6%



Gross ProfitGross profit amounted to

R$219 million in 2006, or 17.6% of net operating revenue, a 24% decrease compared to the previous year, when gross profit totaled R$289 million, or 19.3% of net operating revenue. This reduction in the gross margin arises from the effects described in the section Cost of Goods Sold and also from the reduction of the margin in exports, due to the appreciation of the real against the US dollar (the average exchange rate was R$2.167 in 2006, compared to R$2.410 in the same period of 2005).

Operating ExpensesOperating expenses amounted

to R$83 million in 2006, a 25% reduction compared to 2005, when operating expenses totaled R$111

Earnings Before Interest and Taxes (Ebit)

Ebit amounted to R$136 million in 2006, equivalent to 10.9% of consolidated net operating revenue, compared to

Operating Expenses


million. Operating expenses accounted for 6.6% of net operating revenue in 2006, compared to 7.4% in 2005. The main factors for this performance were the favorable legal decisions in tax litigation of the holding company that contested the application base of PIS and Cofins taxes, generating R$13 million, the constitution of provision for tax contingencies in the amount of R$7 million, and lower expenses with freight, commissions and royalties, due to the reduction of net operating revenue.

The following chart table presents the main items comprising operating expenses in the periods shown:

2006 2005

Freight 30% 29%

Wages 24% 23%

Commissions 9% 12%

Royalties 6% 5%

Other 31% 31%

R$178 million in 2005, or 11.9% of consolidated net operating revenue (see details under the sections “Gross Profit” and “Operating Expenses”).


Net Financial ExpensesNet financial expenses amounted

to R$21 million in 2006, compared to R$37 million in 2005. This reduction was due to the effect of the appreciation of the real – which reduced these expenses in R$5 million (a R$3 million decrease in 2005) – and to the lower average cost of debt in comparison to 2005.

Non-Operating ResultIn 2006, non-operating result

was a negative R$22 million (1.8% of net operating revenue), as a result of expenses and provisions arising from discontinued businesses, compared to a negative result of R$20 million in 2005 (1.4% of net operating revenue).

Income Tax and Social ContributionIncome tax and social

contribution amounted to R$35 million in 2006 (R$48 million in 2005), compared to earnings before income tax totaling R$93 million (R$120 million in 2005).

Net IncomeNet income amounted to R$58

million in 2006 (R$1.085 per share), a 20% decline in comparison to net income totaling R$72 million in 2005 (R$1.355 per share).

EbitdaThe following table presents

the evolution of Ebitda for the periods shown, in R$ million:

2006 2005 Change (%)

Net income before minority interest 57.8 72.2 (19.9)

Income tax and social contribution 35.0 48.0 (27.1)

Non-operating result 22.2 20.3 9.3

Net financial expenses 21.4 37.1 (42.4)

Depreciation and amortization 26.3 27.1 (3.0)

Ebitda 162.7 204.7 (20.5)


In 2006, Ebitda presented a 21% decrease compared to the amount obtained in 2005, totaling R$163 million. Ebitda accounted for 13.0% of consolidated net operating revenue, a performance lower than the 13.7% of 2005 (the sections “Gross Profit” and “Operating Expenses” explain the reasons for this change).

InvestmentsExpenditures with investment

activities totaled R$68 million in 2006 (R$84 million in 2005), which were allocated to the purchase of machinery, equipment and facilities for updating and expanding the productive capacity.




Consolidated Net Operating Revenue

Consolidated net operating revenue totaled R$1,494 million in 2005, a 36% increase over the R$1,099 million showed during the previous year. This performance was the result of rising exports of railway equipment and industrial castings, higher domestic demand for railway equipments, and greater Brazilian production of commercial vehicles, driven mainly by automakers’ exports.

Expansion of railway equipment and industrial casting exports, growth of domestic railway equipment market and commercial vehicle production: net income amounted to R$72 million, a 42% growth.

Gross ProfitIn 2005, gross profit totaled

R$289 million, a 27% increase over the same period in 2004, when gross profit was R$228 million. The gross margin amounted to 19.3% in 2005, against 20.7% in 2004. This decrease is

Cost of Goods SoldIn 2005, the cost of goods

sold was R$1,205 million (80.7% of consolidated net operating revenue), a 38% increase over the R$871 million recorded during the previous year (79.3% of consolidated net operating revenue). The main driver behind this growth was the increase in the volume of wheels, chassis, freight cars and railway equipment sold, and the corresponding increase in the amount of raw materials consumed.

The table below depicts the main items share on the cost of products sold, for the periods shown.

Cost of Goods Sold

Comparing 2005 and 2004 Results

2005 2004

Raw materials and inputs 78% 74%

Wages 16% 20%

Depreciation, amortization and maintenance expenses 6% 6%

mainly the result of decreased margins in exports, caused by the appreciation of the local currency (R$) against the US dollar. Whereas in 2004 the average exchange rate was R$2.92 to US$1.00, in 2005 this figure was R$2.43 to US$1.00.



Operating ExpensesIn 2005, operating expenses

totaled R$111 million, an increase of 10% over 2004, when operating expenses totaled R$101 million. Operating expenses represented 7.4% of net operating revenue in 2005, against 9.2% the previous year. The decrease in the ratio between operating expenses and net operating revenue is attributable mainly to the absorption of sales growth by the fixed expenses. The rise in operating expenses value results from the growth in sales, increasing the sales expenses, and from wage increases following union collective agreements.

The table below depicts the main items comprising operating expenses for the periods shown.

Net Financial ExpensesIn 2005, net financial expenses

totaled R$37 million, a 14% increase over 2004, when net financial expenses were

Other operating expenses amounted to R$2 million in 2005, compared to the R$7 million recorded in 2004. In both years this item consisted mainly of additional provisions for tax litigation.

Earnings Before Interest and Taxes (Ebit)

In 2005, Ebit totaled R$178 million (11.9% of consolidated net operating revenue), compared with R$127 million in the previous year (11.5% of consolidated net operating revenue). Please see explanations for this growth in the “Gross profit” and “Operating expenses” sections.

Operating Expenses

Comparing 2005 and 2004 Results (cont’d)

2005 2004

Freight 29% 29%

Wages 23% 21%

Commissions 12% 7%

Royalties 5% 5%

Other 31% 38%

R$33 million. This increase is the result of higher net bank debt, which went from R$102 million in December 2004 to R$125 million in December 2005.


Non-Operating ResultNon-operating result was

negative in the amount of R$20 million in 2005, against a negative amount of R$20.6 million in 2004.

Income Tax and Social ContributionIn 2005, income tax and social

contribution amounted to R$48 million, a 112% increase over 2004, when these taxes totaled R$23 million. Income tax and social contribution in 2004 were reduced by R$14 million, following the constitution of deferred income tax


and the use of tax losses resulting from corporate restructuring during the third quarter of that year.

Net EarningsIn 2005, net earnings amounted

to R$72 million, an increase of 42% over the R$51 million showed in 2004.

EbitdaThe table below depicts the

Ebitda breakdown for the periods shown, in R$ million.

2005 2004 Change (%)

Net profit (loss) 72.1 50.8 42

Income tax and social contribution 48.0 22.7 111

Non-operating result 20.3 20.6 (1)

Net financial expenses 37.1 32.6 14

Depreciation and amortization 27.1 26.7 2

Goodwill amortization - 2.0 -

Ebitda 204.7 155.5 32

In 2005, Ebitda totaled R$205 million, an increase of 32% over the R$156 million recorded the previous year. The Ebitda margin was 13.7% in 2005, less than the 14.2% recorded in 2004. The main reason for this drop was the decrease in export profitability, as explained in the “Gross profit” section above.

Capital ExpendituresCapital expenditures reached

R$84 million in 2005, against R$54 million in 2004. These funds were used mainly for acquisition of machinery, equipment, and facilities, designed to upgrade and expand production capacity. It also included the acquisition of the property and industrial facilities at the Hortolândia railway freight car assembly plant, which had been leased previously.

Comparing 2005 and 2004 Results (cont’d)


1�.Liquidity and Debt

At the end of 2006, consolidated net bank debt amounted to R$132 million. Consolidated net bank debt to Ebitda ratio was 0.8x.

At the end of December 2006, consolidated cash and marketable securities amounted to R$88 million, all recorded in short term. Dollar-denominated cash and marketable securities represented approximately 3% of the total cash and marketable securities on that date.

On the same date, consolidated gross bank debt amounted to R$221 million, of which R$126 million were recorded in short term and R$95 million in long term. The main denominations of this debt are: TJLP (long-term interest rate), which accounted for 74% of total gross amount; the US dollar at 24%; and IGP-M (wholesale inflation index) at 2%.

Consolidated net bank debt amounted to R$132 million at the end of 2006 (R$184 million in September 2006 and R$125 million in December 2005). Consolidated net bank debt to Ebitda ratio over the last 12 months was 0.8x in December 2006, which was higher than the 0.6x ratio in December 2005.

Consolidated net bank debt position at the end of 2005 was reduced in R$33 million, as a result of the inflow of customers’ advances related to railway freight car sales agreements to be delivered in the subsequent year, whereas at the end of 2006 there were no advances.

0.6

1.5

1.3

0.8

2005 200620032002 2004

Net Debt/Ebitda (x)

Ratio

0.6


1�.Risk Management

Iochpe-Maxion prepares periodic and detailed reports with metrics on key risk factors.

Risk management involves two aspects: financial risks and commercial risks.

Iochpe-Maxion prepares periodic and detailed reports with metrics on key risk factors, so as to manage risks effectively and mitigate potential impacts on its production, operating and financial structures. In 2005, this work was systematized and consolidated based on diagnostics prepared by one of the country’s most important consulting companies. This report is a benchmark for the Board of Directors to carry out any adjustments to manage the business within pre-established risk parameters.

Financial Risks• Debt level: Iochpe-Maxion tracks its

debt level on a monthly basis. It sets forth parameters to face and mitigate risks during market stress situations and, at the same time, to adjust the amount of debt (financial debt) to its cash flow generation (Ebitda).

• Average maturity of bank debt: the Company tracks the average maturity of its bank debt on a monthly basis. To mitigate risks and the impact on its financial structure, it establishes parameters for its bank debt maturity profile, always seeking an adequate ratio between cost of debt and maturities.

• Foreign exchange exposure: Iochpe-Maxion seeks to reduce its exposure to foreign exchange risks as the majority of its transactions are carried out in Reais. Debt denominated in foreign currency is backed by exports. To do so, the Company applies a ceiling for its dollar-denominated debt, equivalent to six months of the balance between exports and imports. This detailed tracking is done on a monthly basis.

• Payroll and net operating revenue ratio: The increase of costs arising from wage rises – especially those related to union collective agreements – are hard to pass to the final price of the products sold. To address this issue, Iochpe-Maxion tracks payroll to net operating revenue ratio on a monthly basis and, at the same time, takes action to raise productivity. This initiative includes:– Management tools;– Incentive programs rewarding

employees for suggesting improvements;

– Enhancement of processes and elimination of production bottlenecks;

– Investments in automation;– Absorption of fixed costs and

economies of scale gains through volume production growth.


Financial Risks (cont’d)• Economic scenario: demand for

products manufactured by Iochpe-Maxion is also dependent on the general perception of Brazil’s economic environment. GDP changes affect the transportation industry, having a direct impact on railway equipment and wheels and frames for trucks and light commercial vehicles, as well as on the pace at which passenger cars, light commercial vehicle and bus fleets are upgraded.

Commercial Risks• Competition and price pressure:

a policy of continuous capital expenditure is aimed at keeping the Company technologically updated and in line with market demand, as well as manufacturing better quality products, with higher efficiency and at adequate costs. This practice, always revised and renewed, has been successful in addressing the challenge of helping Iochpe-Maxion in a highly competitive environment, preserving its capacity to expand its businesses and face competitive pressure.

• Portfolio concentration: Iochpe-Maxion has implemented efforts aimed at diversifying its export portfolio, seeking business opportunities in new markets and minimizing the impact of any volume reduction caused by any change in major customers’ demand. This is done by means of a permanent strategic planning aimed at identifying opportunities that may be exploited in the event of a sudden termination of relevant business contracts, therefore preserving the Company’s financial and operating parameters.

Risk Management


1�.Our Stock as an Investment

The Company’s preferred shares closed 2006 at R$18.15, a 5% decrease.

Secondary offering: average daily volume traded increased by more than seven times over 2005.

Higher liquidity of our shares Companies whose shares have higher liquidity tend to be more

attractive to investors, which usually are more comfortable with securities offering the possibility of trading in larger volumes at any time. This is noticed, particularly, in relation to institutional investors, that trade large volumes and that, not rarely, show restrictions to shares of companies with low liquidity. To attract the attention of these investors, on the other hand, means a greater attention to our shares, conducting to a better evaluation.

On March 7, 2006, a secondary offering of non-voting shares issued by Iochpe-Maxion, offered by BNDESPar, FPS and Fundo Sinergia, was concluded, amounting to R$340 million, or 17,672,924 non-voting shares (33.1% of the total shares and 50.8% of the non-voting shares), which were sold to 7,577 purchasers. As a result, there was a strong growth in the number of outstanding shares, held by non-controlling shareholders, and in the liquidity of Iochpe-Maxion’s non-voting shares.

Iochpe-Maxion’s non-voting shares (MYPK4) closed 2006 at R$18.15, recording over the year a total decrease of 5%. Its voting shares (MYPK3) closed the year at R$15.50, appreciating 19%. At the end of 2006, Iochpe-Maxion’s market capitalization totaled R$874 million, its book value per share was R$4.98, and the price to net income per share ratio stood at 16.7.

In 2006, Iochpe-Maxion continued to be an important presence on Bovespa’s daily tradings. The average daily trading volume of its shares amounted to R$3,456 thousand (R$443 thousand in 2005), and the average daily number of trades was 134 (against 18 in 2005).

Management proposed to the Annual General Meeting of Shareholders the distribution of dividends in the amount of R$22.8 million – R$0.401607176 per voting share and R$0.441767894 per non-voting share – which is equivalent to a yield of 2.6% and 2.4%, respectively, based on share prices at the end of 2006. According to the Iochpe-Maxion’s Bylaws, the calculation basis for the dividends is equivalent to 37% of its net income (less any potential accumulated losses from previous years), with each non-voting share receiving an additional 10% when compared to each voting share.


Our Stock as an Investment

16.1

22.8

28.0

2005 200620032002 2004

Declared Dividends – (R$ million)

41626 47

3,456

443

2005 200620032002 2004

Daily Traded Volume – R$ thousand/day

233 5

134

18

2005 200620032002 2004

Number of Daily Trades – Trades/day

744

61201

874901

2005 200620032002 2004

Market Capitalization – R$ million

1,298

100 323

1,9242,014

2005 200620032002 2004

Common Shares Price (MYPK3 x IBR-X)

2002 = 100

178 231 317 431

MPYK3 IBR-X

1,192

100332

1,2401,038

2005 200620032002 2004

Preferred Shares Price (MYPK4 x IBR-X)

2002 = 100

178 231317 431

MPYK4 IBR-X

0.28

0.40

0.50

2005 200620032002 2004

Dividends per Common Share

R$ per common share

0.44

0.55

2005 200620032002 2004

Dividends per Preferred Share

R$ per preferred share

0.31


Our Stock as an Investment

14.716.7

12.5

2005 200620032002 2004

Price/Earnings Ratio – ratio

475

33

132

364

496

2005 200620032002 2004

Price/Book Ratio – %

5.4

2.4

3.5

6.1

5.0

2005 200620032002 2004

Enterprise Value (*) x Ebitda – Index

(*) Company Value = Market Cap + Net Banking Debt


16.Corporate Governance

Iochpe-Maxion adopts corporate governance parameters in line with the best Brazilian and international practices.

The corporate governance parameters adopted by Iochpe-Maxion are in line with the best Brazilian and international practices, which implies the use of clear guidelines of conduct, based on higher standards than those required by law and/or market regulating bodies. These initiatives are aimed at addressing and strengthening the Company’s commitment to transparency, equal treatment of shareholders, accountability to all shareholders, and corporate responsibility.

As part of its commitment to transparent and equal treatment of market participants in general – and its shareholders in particular – in November 2005, Iochpe-Maxion joined Bovespa’s Level 1 of Corporate Governance, a important step in the level of requirements related to transparency and the maintenance of minimum liquidity levels.

Another important example of the commitment to corporate governance principles was the selection of the Company’s securities (MYPK4-PN) to be included in Bovespa’s

Corporate Sustainability Index (ISE, in Portuguese). In order to be included in the portfolio that comprises ISE, the selected companies must be socially responsible, sustainable and profitable, able to create value for the shareholders in the long term, as a result to their capacity of facing economic, social and environmental risks.

The following initiatives adopted by Iochpe-Maxion are also part of its commitment to good governance rules:• Code of Ethics, a document that

sets forth the Company’s principles of conduct for its relationship with customers, investors, shareholders, the market and competitors, among other stakeholders;

• Audit and Variable Compensation Committees to advise the Company’s Board of Directors;

• Procedure allowing employees to make comments related to accounting and control issues. By means of this instrument, any person can submit – confidentially and/or anonymously – suggestions, criticisms and complaints directly to the Company’s Board of Directors Audit Committee.


Corporate Governance

The investor relations site was totally updated in 2006.

Recognition: Apimec’s silver seal and IR Magazine award.

Disclosure PolicyIochpe-Maxion adopts a

Disclosure Policy for any information that may impact the price or affect its securities or investors’ decision of buying, selling or maintaining the Company’s shares. By means of this practice, it seeks to ensure reliability, immediate access and equal disclosure of the data available, therefore building an increasingly transparent and participative relationship with the market.

Over the years, the Company’s Investor Relations website (www.iochpe-maxion.com.br) has turned out to be one of the most important and effective tools of this commitment. The website was completely updated in 2006, and now includes new information in the areas of corporate governance, strategy and social responsibility, as well as more detailed financial sections and analysts’ coverage, in addition to the annual and social reports, presentations, conference calls and news. The website also received a new editorial and visual treatment, so as to make browsing more pleasant and fast, and accessing information simpler and more direct.

In 2006, approximately 700 direct interactions with investors took place, through eight conference meetings, at the request of banks and brokerage firms, in Brazil and abroad; four conference calls to discuss quarterly results and other matters; in addition to one meeting with representatives of the Association of Investment Professionals and Capital Markets’ Analysts (Apimec). Organized for the seventh year in a row, thanks to the meeting Iochpe-Maxion received Apimec’s “Silver Seal”, an assiduity award.

In recognition for its efforts in favor of transparency, the Company was runner-up in the 2006 issue of the award for the best investor relations program for small caps in Brazil, organized by IR Magazine.


Board of DirectorsAccording to the rules set forth

and included in Iochpe-Maxion’s Bylaws, the Board of Directors consists of up to nine members. Each member is elected for an one-year renewable term. In 2006, the Board of Directors had eight members and two of its seats were occupied by Independent Directors.

The Board of Directors is the Company’s decision-making body, responsible for setting forth policies and overall business guidelines, in addition to its long-term strategy. It regularly meets on a monthly basis or when summoned by its Chairman or by two members acting together.

Current members of Iochpe-Maxion’s Board of Directors are:

Members

Ivoncy Brochmann IoschpeChairman of the Board,

appointed by Companhia Iochpe, he is 66 years old and holds a degree in Economics from the Federal University of Rio Grande do Sul. He was a member and the former Chairman of the Industrial Studies and Development Institute (IEDI), in addition to being a member of the Business and Trade Development Council of Brazil’s Foreign Relations Ministry. He has been a member of Iochpe-Maxion’s Board of Directors since 1984.


Caio Marcio de Ávila Martins PinhãoA member appointed by

BNDESPar, he is 50 years old and holds a Mining Technology Engineering degree from the Federal University of Rio de Janeiro (UFRJ) and a Master’s degree in Energy Planning from Coppe/UFRJ. He has been at BNDES since 1993 and is currently the Manager of the Planning Area Priority Department. He has been a member of Iochpe-Maxion since 2003.

Daniel IoschpeA member appointed by

Companhia Iochpe, he is 68 years old and holds a degree in Engineering from the Federal University of Rio Grande do Sul (UFRGS). He has been a member of Iochpe-Maxion’s Board of Directors since 1984.

Mauro KnijnikOne of the Independent

members, he is 66 years old and holds a degree in Economics from the Federal University of Rio Grande do Sul (UFRGS). He previously held the following offices: Finance Secretary of the State of Rio Grande do Sul; Chairman of the Board of Directors of Banco do Estado do Rio Grande do Sul (BANRISUL); Chairman of the Board of Financial Coordination of the State of Rio Grande do Sul; and Vice-President of Iochpe-Maxion S.A. He has been a member of Iochpe-Maxion’s Board of Directors since 1984.

The Board of Directors is the Company’s decision-making body, responsible for its policies and overall business guidelines, including its long-term strategy.


Iboty Brochmann IoschpeAppointed by Companhia Iochpe,

he is 57 years old and holds a degree in Economics from the Federal University of Rio Grande do Sul. He has been a member of Iochpe-Maxion’s Board of Directors since 1984.

Jorge Eduardo Martins MoraesAppointed by BNDESPar, he is

51 years old and holds an Engineering degree from the Federal University of Rio de Janeiro and an MBA from Coppead/UFRJ. He has been at BNDESPar since 1982 and currently manages the Following Department of the Capital Markets Area. From January 2004 through May 2005 he was an Economics Advisor for Brazil’s Ministry of Planning, Budget and Management, working in its Public-Private Partnership Unit. He was a member of the Board of Directors of several companies, in addition to being a member of Iochpe Maxion’s Board of Directors between August 2000 and April 2003.

Mauro Litwin IochpeAppointed by Companhia Iochpe,

he is 57 years old and holds a degree in Business Administration from the Catholic University of Porto Alegre (PUC-RS). He has been a member of Iochpe-Maxion’s Board of Directors since 1992.


The Executive Board is in charge of the Company’s daily operations and for carrying out the Board of Directors’ decisions.

Nildemar SecchesOne of the Independent

Directors, he is 57 years old and holds a degree in Mechanical Engineering from the University of São Paulo, in addition to a masters degree in Finance from the Catholic University of Rio de Janeiro (PUC-RJ) and a PhD degree in Economics from Unicamp, in the state of São Paulo. He has been the CEO of Perdigão Group since 1995 and is currently the Chairman of the Board of Directors of Weg. He has also been a member of Ultrapar’s Board of Directors since 2002. He has been a member of Iochpe-Maxion’s Board of Directors since 2004.

Executive BoardIt consists of four members,

each of whom is elected for a one-year renewable term. Executive Directors are in charge of Iochpe-Maxion’s daily operations and for carrying out the strategies set forth by the Board of Directors. Its decisions are taken by a majority vote of those present and, if needed, the CEO has the casting vote. The members of the Executive Board do not sit on the Board of Directors.

The current members of the Executive Board are:

Board of Directors (cont’d)



Dan IoschpeHe is 41 years old and was

awarded a bachelor’s degree from the Federal University of Rio Grande do Sul, in 1986, and has a certificate from Escola Superior de Propaganda e Marketing (ESPM), in the state of São Paulo, in 1988. He holds an MBA degree from Amos Tuck School of Dartmouth College (USA), obtained in 1991. He joined Companhia Iochpe in 1986 and held various positions until June 1996, when he left the Company to become the President of AGCO in Brazil. He came back to Iochpe-Maxion in January 1998, when he became its CEO. He has been a member of the Board of Directors at Profarma Distribuidora de Produtos Farmacêuticos since 2006.

Oscar Antônio Fontoura BeckerHe is 54 years old and holds a

Business Administration degree from Faculdade São Judas Tadeu. He joined the Company in 1983 and, from 1989 to 1994, he was the CEO of Iochpe Seguradora. He has been the CFO and Investor Relations Director of Iochpe-Maxion since 1994.

The main responsibilities of the Audit

Board include reviewing the Company’s

financial statements and informing

shareholders about their respective

opinions.

Armando Ulbricht JúniorHe is 60 years old and holds

a degree in Mechanical Engineering from the University of São Paulo (USP). He worked at Engesa – Engenheiros Associados S.A. between 1975 and 1985. He joined the Company in 1986 and has been Director Superintendent of the Wheel and Frames Division at Maxion Sistemas Automotivos since 1990.

Marcos LucheseHe is 47 years old and holds a

Mechanical Engineering degree from the Catholic University of Rio Grande do Sul (PUC-RS). He joined the Company in 1981 as a trainee. Since 1997 he has been the Director Superintendent of Maxion Sistemas Automotivos’s Automotive Components Division.

In addition to these members of the Executive Board, it is important to mention the Director Superintendent of Amsted-Maxion, the joint venture between Iochpe-Maxion and Amsted Industries, a US company:

• José Antônio Rodrigues is 56 years

old and has a Mechanical Engineering degree from Unesp – Universidade Estadual Paulista. He has certificates in “Business Management” from Kellog Northwestern University (USA), and in “Strategic Business Management” from Insead (France).

Board of Directors (cont’d)



Audit BoardThe Audit Board is a permanent

body, independent from both the Company’s management and the independent auditors appointed by the Board of Directors. It consists of three members appointed for a one-year term. Two are appointed by the controlling shareholders and one by the non-voting, non-controlling shareholders, all of which approved by the Annual General Shareholders Meeting. The main responsibilities of the Audit Board include reviewing the Company’s financial statements and informing shareholders about their respective opinions.

The members of Iochpe-Maxion’s Audit Board are:

Ademar Rui BratzHe is 59 years old and holds a

Business Administration degree from the Federal University of Rio Grande do Sul and an MBA from Syracuse University (USA). In addition to being a member of Iochpe-Maxion’s Audit Board, he is also a consultant at Olvebra Industrial S/A.

Isabel S. Ramos KemmelmeierAppointed by the minority

shareholders, she is 32 years old and holds a degree in Engineering from the Catholic University of Rio de Janeiro, with an MBA in Finance from IBMEC. Since 1996, she has been the Head of the Analysis Area for Opportunity Asset Management.

Maurício DiácoliHe is 46 years old and holds

a degree in Accounting from FMU-USP, with certificates in Finance and Accounting. He is specialized in local and international accounting (US Gaap). He has over 15 years of experience at an international auditing and consulting firm.


Advisory CommitteesWith a view to enhance its

corporate governance standards and increase its commitment to the market’s best practices, as from 2005, Iochpe-Maxion’s Board of Directors established two Advisory Committees.

Audit CommitteeThis committee consists of three

members appointed by the Board of Directors each to serve a one-year term. At least one of its members must also be a member of the Board. The main responsibilities of the Audit Committee are:

• Review and recommend to the Board of Directors companies that can be hired as independent auditors.

• Provide opinions on the appointment or change of the chief internal auditor or the general accountant.

• Evaluate the results of independent auditor reports, including any reservations, as applicable.

• Review quarterly financial statements.

• Review internal procedures and controls.

• Evaluate warning systems for actual or potential risks, as well as the Company’s risk management policy.

• Evaluate policies and practices to ensure the integrity of financial statements.

• Evaluate any suggested changes related to accounting principles and practices.

• Evaluate the performance of the internal and external financial and audit teams.


Currently, the Audit Committee has the following members:• Mauro Knijnik, Board Member of

Iochpe-Maxion .• Mauro Litwin Iochpe, Board Member

of Iochpe-Maxion.• Pedro Ozires Predeus, 62 years old,

is an accountant and a Partner at PricewaterhouseCoopers, where he has worked for 30 years.

Variable Compensation Committee This committee consists of three

members appointed by the Board of Directors each to serve an one-year term. According to its Bylaws, it is not necessary for its members to be also members of Iochpe-Maxion’s Board of Directors.

This Committee is in charge of the following issues:• Review and recommend to the Board

of Directors the salary, bonus, stock options, and any other benefits for Iochpe-Maxion’s executives.

• Periodically review and recommend necessary changes to the executive compensation programs and policies to adjust them to market practices and expected performance.

• Periodically review and evaluate changes to the Company’s stock option plan and provide recommendations to the Board of Directors.

The Audit and Variable Compensation

Committees were implemented to

enhance the Company’s governance

standards.



Current members of the Variable Compensation Committee are:• Caio Marcio de Ávila Martins

Pinhão, Board Member of Iochpe-Maxion.

• Nildemar Secches, Board Member of Iochpe-Maxion.

Independent AuditorsIn compliance with Instruction no.

381 of Brazil’s Securities and Exchange Commission (CVM), we hereby inform that during fiscal year 2006, Iochpe-Maxion and its subsidiaries hired services unrelated to the independent

audit in the amount of R$484 thousand, equivalent to 125% of the amount of fees paid for the independent audit services, related to its participation in courses and tax-related advisory services on the Brazilian legislation. After consulting its independent auditors, Iochpe-Maxion concluded that these services did not affect their independency and objectivity, due to the definition of the purpose and procedures performed. Iochpe-Maxion complies with the regulations that set forth restrictions to services that can be provided by independent auditors.

Advisory Committees (cont’d)


1�.Outlook

Agricultural segment should have a positive impact on domestic market of trucks and agricultural machinery.

Export of railway castings and wheels and speed-up the introduction of new products and services: strategy to face new decline in the demand for railway cars.

A recovery of the domestic demand is expected for 2007, due to the drop in interest rates, moderate growth of the GDP and better conditions for agriculture, as a result of the increase in the prices of agricultural commodities in the international market.

However, automakers’ exports should experience a decrease in 2007, due to the constant appreciation of the real. As a result, the Brazilian production of vehicles will not grow as much as the domestic demand.

Maxion Sistemas Automotivos’s expansion will rely on new projects already approved, on the expansion of its exports, and the continuous attention to its cost structure, based on

a strict financial discipline and constant search for new growth opportunities. In addition, it will face the challenge of implementing its commercial vehicle wheels manufacturing plant in China, a very important project for the Company’s strategic horizon.

The railway freight cars market points to a new retraction in the domestic demand for 2007, while recovery is already expected for 2008. Accordingly, Amsted Maxion will follow its strategy of growing exports of railway castings and wheels, as well as industrial castings, in order to mitigate the impact of the retraction in the railway car segment.


1�.Corporate Information

Investor RelationsIochpe-Maxion S.A.Rua Luigi Galvani, 146 – 13º andar04575-020 – São Paulo, SP – BrasilTel.: 55 (11) 5508-3800 Fax: 55 (11) 5506-7353Oscar A. F. Becker e-mail: [email protected]: www.iochpe-maxion.com.br

Shareholder Service and Book-Entry SharesBanco Bradesco S.A.Departamento de Ações e CustódiaCidade de Deus – Prédio Amarelo – 2º andar06029-900 – Osasco, SP – BrasilAll branches of Banco Bradesco S.A. are prepared to assist Iochpe-Maxion’s shareholders.site: www.bradescocustodia.com.br

Depositary Bank of Level 1 ADRs – Ticker Symbol: IOCJY101 Braclay Street – 22nd WestNew York, NY 10286United States of Americasite: www.adrbny.com

Trading on the Stock ExchangeIochpe-Maxion’s shares are traded on all Brazilian Stock Exchanges. However, most of them are traded on the São Paulo Stock Exchange, Bovespa (ticker symbols: MYPK3 – voting shares, and MYPK4 – non-voting shares).

Board of DirectorsIvoncy Brochmann Ioschpe – Chairman Caio Marcio de Ávila Martins Pinhão – DirectorDaniel Ioschpe – Director Iboty Brochmann Ioschpe – DirectorJorge Eduardo Martins Moraes – DirectorMauro Litwin Iochpe – DirectorNildemar Secches – DirectorMauro Knijnik – Director

Audit BoardAdemar Rui BratzIsabel S. Ramos KemmelmeierMaurício Diácoli

Executive OfficersDan Ioschpe – Chief Executive Officer Oscar A. F. Becker – Chief Financial Officer and Investor Relations Director Armando Ulbricht Jr. – Executive Director Marcos Luchese – Executive Director

Director Superintendents – Subsidiary and Joint VentureAmsted Maxion Fundição and Equipamentos Ferroviários S.A. – José Antônio Correia Rodrigues

Maxion Sistemas Automotivos Ltda. • Wheel and Frames Division –

Armando Ulbricht Jr.• Automotive Components Division

– Marcos Luchese


Corporate Information

Advisory Committees

Audit CommitteeMauro KnijnikMauro Litwin IochpePedro Ozires Predeus Variable Compensation CommitteeCaio Marcio de Ávila Martins PinhãoNildemar Secches

Independent AuditorsKPMG Auditores IndependentesCRC 2SP014428/O-6

Addresses

Iochpe-Maxion S.A.Rua Luigi Galvani, 146 – 13º andar04575-020 – São Paulo – SP – BrasilTel.: 55 (11) 5508-3800Fax: 55 (11) 5506-7353e-mail: [email protected]: www.iochpe-maxion.com.br

Amsted Maxion Fundição e Equipamentos Ferroviários S.A.Rua Dr. Othon Barcellos, 7712730-010 – Cruzeiro – SP – BrasilTel.: 55 (12) 3184-1000Fax: 55 (12) 3144-4018e-mail: [email protected]: www.amsted-maxion.com.br

Maxion Sistemas Automotivos Ltda. Maxion Sistemas Automotivos – Wheel and Frames DivisionRua Dr. Othon Barcellos, 8312730-900 – Cruzeiro – SP – BrasilTel.: 55 (12) 3184-1000Fax: 55 (12) 3144-0403e-mail: [email protected]: www.maxioncr.com.br

Maxion Sistemas Automotivos – Automotive Components DivisionRua Haeckel Ben Hur Salvador, 10032010-120 – Contagem – MG – BrasilTel.: (31) 2191-1500 – Fax: (31) 2191-1690e-mail: [email protected]: www.maxion.ind.br

Documents

Iochpe-Maxion - Annual Report 2006