WEG 2009 Annual Report

Motors | Automation | Energy | Transmission & Distribution | Coatings

Annual Report 2009

Transforming energy into solutions

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Index Relatório da Administração.......................................................................03

Management Report....................................................................................08

Notes to the Financial Statements........................................................... 14

Special Review Report Unqualified Opnion...............................................................30

Social Report 2009 and 2008.............................................. 31

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Anual Report 2009

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Management Report We submit to our shareholders’ examination the Consolidated Financial Statements of Grupo WEG and WEG S.A. related to the fiscal year ended on December 31, 2009. The financial statements were prepared pursuant to the provisions of the Brazilian Corporation Law and the rules set forth by the Brazilian Securities and Exchange Commission (CVM).

Economic Scenario The world economic scenario was marked by a deceleration that affected all market segments and virtually all regions of the globe. Although the impact of the economic slowdown was different on each segment, the world recession was one of the most significant and serious economic moments in recent decades, calling for a rapid and decisive intervention of the governments of the most economically developed countries. As a means to halt the crisis and ensure some dynamism, strong stimulus measures were taken, both expansionary fiscal and monetary policies that favored increased liquidity.

The results of these measures became noticeable in the second half of the year, with the reduction in the rhythm of deceleration and, in the case of the so-called emerging economies, like Brazil’s, the beginning of a growth rebound.

Within the Brazilian economic context, we saw that: g The stability of GDP in 2009 was achieved through the decisive intervention of the federal government, which was able to reverse the poor performance in the first two quarters, promoting an increase in consumption. The rapid exchange adjustment, caused by the global crisis, however, was reversed and the Brazilian currency started to appreciate again in relation to almost all other major currencies; g The industrial sector was severely affected by the deceleration in growth. According to the Brazilian Institute

of Geography and Statistics (IBGE), in 2009 the Brazilian industrial production fell by 7.4% in relation to 2008. The production of capital goods, very much dependent on the rhythm of productive investments, fell even more, posting a 17.4% drop over the previous year; g More specifically, the Brazilian Electric and Electronic Industry Association (ABINEE) estimates that Brazil’s electronics and appliance industry posted a year-on-year decrease of 9% in its revenue. In the segments where WEG concentrates its operations, the data from ABINEE indicate a drop in Industrial Automation (-17%), Industrial Equipment (-12%) and Energy Generation, Transmission and Distribution (-12%) in relation to the previous year.

We believe that the main reasons why the growth in demand for our products remains strong, although they have not been so significant within the 2009 scenario, are: g Growing demand for more energy efficient industrial equipment (electric motors and associated equipment) resulting from industrial companies’ constant search for productivity and operating cost reduction; g Growing concern about the environmental impacts of traditional means of electricity generation, making the use of renewable energy sources viable, including small hydroelectric power plants and thermoelectric plants run on biomass.

Economic-Financial Aspects Gross Operating Revenues In 2009 Consolidated Gross Operating Revenues (GOR) totaled R$5,110.6 million, a drop of 6.6% year on year.

However, each one of our business areas posted different revenue performances, as revenue growth was observed in the Equipment for Energy Generation, Transmission and Distribution and Paints & Varnishes areas, while the Industrial Electronic Equipment and Appliances and Motors for Domestic Use areas posted a decrease in revenue. We would like to point out the following aspects in each one of these areas: g Industrial Electronic Equipment and Appliances – posted a decrease in GOR of 18% in relation to 2008, as a reflection of the reduction in the rhythm of world industrial production and the consequent reduction in investments in the expansion of production capacity. We would like to point out that in this business area, we are more exposed to foreign markets due to our strong presence in developed economies in North America and Europe, which were very impacted by the world recession. g Equipment for Energy Generation, Transmission and Distribution (GTD) – this business area posted a growth of

15% in revenues in relation to the previous year. This good performance is still the result of a buoyant market observed until the end of 2008, which allowed us to accumulate in the portfolio a significant volume of orders that was fulfilled in 2009. The sales performance, measured by the number of new orders, posted a drop and is expected to follow an upward trend until the end of the year. g Motors for Domestic Use – the annual decrease of 8% in revenues posted by this business area is the result of very distinct moments observed during the year. As usually happens to short-cycle products, this area was quickly impacted by the economic instability, with a pronounced activity slowdown in the beginning of the year. Similarly, the recovery in this activity, especially after the government took tax reduction measures that stimulated growth in consumption, was fast and strong. Therefore, we ended 2009 with a more accelerated rhythm compared to the production and sales peak in the previous year. g Paints & Varnishes – the 6% growth year on year shows, once again, the stability and diversification of the markets in which this business area operates.

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Economic-Financial Aspects Domestic Market Gross Operating Revenues in the domestic market reached R$3,371.6 million, accounting for 66% of our Total Gross Operating Revenues and decreasing 5.6% over the previous year, a reflection of the economic slowdown and, consequently, the demand for capital goods.

We remain leaders in the Brazilian electric motor market with outstanding positions in all operating areas in the domestic market. Our operations aim to continuously expand and increase the technological content of our product and service line, according to our strategy of providing complete and integrated industrial solutions.

Foreign Market Gross Operating Revenues from our operations in the foreign market reached R$1,739.0 million, accounting for 34% of Total Gross Operating Revenues. The year-on-year comparison, when measured in Brazilian reais, shows a reduction of 8.5%.

When measured in US dollars, foreign market Gross Revenues amounted to US$877.3 million, compared to the US$1,028.6 million recorded in the previous year.

Over the years we have expanded our operations to the various world markets and today we are a company that operates globally, distributing our products to over 100 countries across five continents, with direct operation in more than 20 of the main world markets. We have industrial operations in Brazil, Argentina, Mexico, Portugal and China and in mid-2010 we will start manufacturing high-voltage electric motors and generators in India. In 2009 we started manufacturing power transformers in Mexico, expanding our production line to beyond electric motors, which remains our core product.

Our strategy consists of diversification by operating in many geographic regions, which allows us to maintain solid growth rates in the foreign market, minimizing the effects from changes in the economic performance of each country or region. In 2009 the protection provided by this strategy was neutralized, since the economic slowdown affected all markets at the same time.

Still, we believe that there are opportunities for growth in the various world markets and we hope to return to our level of revenue and result growth in the future.

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Anual Report 2009

Cost of Goods Sold Cost of Goods Sold (COGS) reached R$2,858.1 million in 2009, a 2.6% drop year on year, accounting for 68% of Net Operating Revenues. The gross margin decreased by 3 percentage points compared to the previous year. Likewise the performance of sales and revenues, the cost-performance analysis must consider two moments: 1. In the first half-year, the effects were negative, with a reduction in the volumes produced as a reflection of a lower world demand for capital goods, causing: g an increase in the transformation cost due to lower dilution of fixed costs; g difficulties in passing through increases in average costs of the main raw materials during the second half of 2008, especially steel and copper; g the relative change in the mix of products sold, increasing the presence of products of lower added value and the consequent negative effects on the margin; g higher pressure over sales prices, especially abroad, as a result of increased competition.

2. Our response to the adverse market conditions was quick and sought to rapidly recover WEG’s competitiveness by taking the following measures to improve efficiency of: g costs and expenses control; g increase in operational efficiency and search for improved processes; g rescheduling of investments in production capacity expansion and modernization.

The first results from these efforts became noticeable as of the third quarter of the year, with the recovery of gross margin assisted by the increased stability of raw material costs and greater productivity.

Selling, General and Administrative Expenses Consolidated Selling, General and Administrative Expenses totaled R$634.4 million, accounting for 15.1% of Net Operating Revenues in 2009, with a decrease of 2.8% over the R$652.4 million recorded in 2008. The aforementioned measures to recover WEG’s competitiveness also enabled a good performance of the control of operating expenses.

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EBITDA As a result of the previously discussed impacts, EBITDA, calculated according to the methodology set forth by CVM in Circular Letter 01/07, reached R$837.4 million, decreasing 18.4% over the result recorded in 2008. EBITDA margin was 19.9%, 2.9 percentage points below the EBITDA margin of the previous year.

Financial Revenues and Expenses Financial Revenues totaled R$383.5 million (R$464.1 million in 2008) and Financial Expenses amounted to R$272.1 million (R$505.9 million in 2008). Consequently, the Financial Result was a positive R$111.3 million (negative R$41.8 million in 2008). These amounts do not consider interest on shareholders’ equity, shareholder remuneration classified as a financial expense for tax purposes.

The reduction in the exposure to foreign currency debt, resulting both from the natural drop in business in the foreign markets and the management’s decision, caused the foreign exchange volatility, especially in the first half-year, to have less significant impacts on the financial result. This reduced exposure made both financial expenses and revenues decrease in absolute and relative terms.

Other Operating Revenues/Expenses The “other operating revenues/expenses” account mainly includes amounts provisioned during the year with the WEG Quality and Productivity Program (PWQP) for employee profit sharing. In 2009 this amount stood at R$76.6 million, compared to R$86.2 million in 2008.

Net Income As a result of the previously mentioned impacts, Net Income for the Year reached R$548.4 million, 2.1% lower than the R$560.4 million recorded in 2008, representing a 25.2% return on shareholders’ equity in 2009.

capitalization Uma das características fundamentais de nosso modelo de negócios é a de sempre manter políticas de financiamento conservadoras, que nos permitam manter recursos e fontes de liquidez suficientes para aproveitar as oportunidades de investimento para manter nosso padrão de crescimento sem aumento da exposição aos riscos financeiros.

Esta adequação do financiamento inclui a utilização de fontes de financiamento de curto prazo em moeda estrangeira para financiamento das operações de comércio exterior, aproveitando a proteção (hedge) natural e mantendo monitoramento constante da exposição financeira ao câmbio. Por outro lado, nosso endividamento de longo prazo é concentrado em moeda nacional, utilizando amplamente as fontes de financiamentos de bancos de desenvolvimento.

Os recursos em caixa são aplicados em bancos de primeira linha e majoritariamente em moeda nacional.

Em 31 de dezembro de 2009 as disponibilidades e aplicações financeiras, todas classificadas como de curto prazo, totalizavam R$ 2.127,1 milhões. A dívida financeira bruta totalizava R$ 1.872,5 milhões, sendo que:

As operações de curto prazo totalizavam R$ 895,9 milhões (48% do total), representadas por operações vinculadas às atividades operacionais (trade finance) em moeda estrangeira e pela parcela de curto prazo dos empréstimos contraídos junto ao BNDES e demais agências de fomento, majoritariamente em moeda nacional. g As operações de longo prazo totalizavam R$ 976,6 milhões (52% do total), representadas principalmente por financiamentos junto ao BNDES e outras agências de fomento, majoritariamente em moeda nacional, e pela parcela de longo prazo do financiamento de capital de giro das subsidiárias no exterior, nas respectivas moedas de cada país.

No final de 2009 a posição líquida de caixa registrava R$ 254,6 milhões, mostrando reversão da posição de dívida líquida de R$ 311,7 milhões em dezembro de 2008. Esta mudança da posição líquida foi possibilitada principalmente pela diminuição do investimento em capital de giro ao longo do ano, resultante do ganho de eficiência operacional proporcionada pelo novo sistema de informações e também como reflexo natural da diminuição do ritmo de crescimento das operações. g

Net Debt December 2009

December 2008

Cash and cash equivalents and financial investments

2.127.117

1.849.478

Debt

1.872.533

2.161.216

- Short-term

895.885

1.314.098

- Long-term

976.648

847.118

Net Cash (Debt)

254.584

(311.738)

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Investments Investments in Fixed Assets to expand production capacity reached R$226.3 million in 2009, 72% of which was allocated to industrial parks and other facilities located in Brazil and the remaining to plants and other subsidiaries abroad.

Given the scenario of lower demand that we endured in 2009, the investment program was managed as to prevent the increase in the idle production capacity. Due to the nature of the equipment and facilities we use in our productive process, we have great flexibility to manage the investment program according to the demand actually seen, accelerating or decelerating investments. When we optimize capacity occupation, we maximize return on invested capital.

Investments in Research and Development (R&D) Our efforts in research and development include expenditures focused on the development of new products, continuous improvement of already available products, product and system application and adaptation engineering and improvement of our industrial processes. In 2009 these expenditures added up to R$82.8 million, accounting for 2.0% of Net Operating Revenues. In 2008 investments in R&D amounted to R$88.8 million, accounting for 2.0% of Net Operating Revenues.

dividends The Management will propose to the Annual General Meeting the allocation, as remuneration to shareholders on the 2009 results, of R$300.0 million as payment of dividends and interest on stockholders’ equity, corresponding to nearly R$0.4847 per share before taxes. This amount accounts for 54.7% of the Net Income before statutory adjustments.

Below we list the dividends shareholders were entitled to on the respective dates. Beginning on August 12, 2009, we made the remuneration payments to shareholders declared during the first half of the year: g On March 23, as interest on stockholders’ equity (JCP), in the gross amount of R$32.7 million, or R$0.045 (net) per common share; g On June 16, as interest on stockholders’ equity (JCP), in the gross amount of R$29.1 million, or R$0.040 (net) per common share; g On July 23, as “Interim Dividends” related to the first half of 2009, in the amount of R$71.0 million, or R$0.115 per common share.

Dividends related to the second half of 2009, as described below according to their declaration date, will be paid as of March 10, 2010: g On September 17, as interest on stockholders’ equity (JCP), in the gross amount of R$29.1 million, or R$0.040 (net) per common share; g On December 14, as interest on stockholders’ equity (JCP), in the gross amount of R$10.9 million, or R$0.015 (net) per common share; g On February 23, 2010, as supplementary dividends related to the income for the 2009 fiscal year, in the total amount of R$127.3 million or R$0.205 per common share.

The Management will propose to the Annual General Meeting to be called that the Net Income, less the legal reserve and dividends, be allocated to the reserve to finance the capital budget.

Net Income, Dividends and Payout (%) 52,0% 44,2%

45,5%

53,7%

54,7%

575,0

560,4

548,4

502,8 374,8

6

165,5

228,8

298,8

301,1

300,0

2005

2006

2007

2008

2009

Dividends

Net Income

Anual Report 2009

Payout

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Highlights New Industrial Park in Linhares (ES) On August 13, we published a Material Fact informing that we were negotiating with the governments of the state of Espírito Santo and of the city of Linhares the implementation of a new plant. The conclusion of these negotiations was informed on August 21, with the confirmation of the construction of a new industrial park to expand our electric motor manufacturing activities.

For the construction of the future industrial park, WEG adopted a modular concept, which allows the gradual and continuous increase of the production capacity, meeting the expansion needs of the Company during several years. The first of these production modules in Linhares is scheduled to go online in 2011. This modular concept is used by WEG in its other plants in Brazil and abroad.

Planta WEG Linhares

Merger of Trafo Equipamentos Elétricos S.A. The merger of shares issued by TRAFO into WEG was approved at the Extraordinary General Meetings held on December 28, 2009 both at WEG S.A. and at the subsidiary Trafo Equipamentos Elétricos S.A. With the merger, TRAFO became a wholly-owned subsidiary of WEG, which, in its turn, became the holder of all shares directly or indirectly issued by TRAFO, and continued to hold all rights and obligations assumed by it before the approval of the merger. The shareholders of TRAFO, on their turn, became holders of WEG shares, according to the approved exchange ratio.

Subsequently, on December 30, 2009, the merger of Trafo Equipamentos Elétricos S.A. into subsidiary WEG Equipamentos Elétricos S.A. was approved.

Outlook Our strategic planning establishes two growth strategies: expansion into new markets and diversification of the product line in markets where we already operate. We hope that in 2010 the global macroeconomic conditions are more favorable for a rebound in revenue growth through a process of gradual improvement in the performance of the various segments and markets.

We continue seeking to strengthen our position as a supplier

Investments Fixed assets (plant expansion/modernization) Current assets (working capital) Total Investments

of industrial electronic equipment and appliance solutions and of systems specific to energy in the domestic market. At the same time, we will continue to increase in all world markets our market share in industrial electronic equipment and appliances and increase energy and automation equipment businesses.

Our capital budget for 2010 estimates the following investment:

Amount (in millions of R$) 260,0 132,2 392,2

These investments are financed through the use of the Capital Budget Reserve and funds to be raised with financial institutions in Brazil, mainly from BNDES lines.

Jaraguá do Sul (SC), February 2010.

The Management

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Financial Statements Consolitadet Balance Sheet in December 31, 2009 and 2008 Assets

Figures in R$ Thousands

PARENT COMPANY CONSOLIDADED

2009 2008 2009 2008

CURRENT ASSETS 352,518 241,482 3,973,158 4,386,420

CASH AND BANKS 14 98 30,948 71,198 FINANCIAL INVESTMENTS (NOTE 05) 90,975 88,405 2,096,169 1,778,280 CREDITS (NOTE 06) - - 910,136 1,110,905 INVENTORIES (NOTE 07) - - 758,116 1,106,585 DIVIDENDS / INTEREST ON EQUITY 252,439 144,556 - RECOVERABLE TAXES (NOTE 08) 9,090 8,423 97,122 176,383 OTHER CREDITS - - 80,667 143,069

NON-CURRENT ASSETS 2,181,716 2,106,057 1,400,449 1,386,354

LONG-TERM ASSETS 23,630 44,631 193,814 197,616 CREDITS WITH RELATED PARTIES (NOTE 09) 22,970 18,086 - COURT DEPOSITS (NOTE 15.e) 131 19,744 30,739 52,152 DEFERRED TAXES (NOTE 10) 529 6,801 101,739 79,240 RECOVERABLE TAXES (NOTE 08) - - 44,499 57,043 OTHER - - 16,837 9,181

INVESTMENTS IN DIRECT/INDIRECT ASSOCIATED COMPANIES (NOTE 11.1 AND 11.2) 2,156,944 2,060,141 13,456 12,242 OTHER INVESTMENTS (NOTE 12) - - 2,585 1,100 PROPERTY, PLANT AND EQUIPMENT (NOTE 12) 1,142 1,285 1,061,734 1,047,333 INTANGIBLE ASSETS - - 128,860 128,063

TOTAL ASSETS 2,534,234 2,347,539 5,373,607 5,772,774

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Financial Statements Consolitadet Balance Sheet in December 31, 2009 and 2008 LIABILITIES

Figures in R$ Thousands

PARENT COMPANY

2009 2008

CURRENT LIABILITIES 168,488 146,083

SUPPLIERS - - TAXES, FEES AND CONTRIBUTIONS (NOTE 14) - - LOANS AND FINANCING 4,795 7,140 INCOME TAX AND SOCIAL CONTRIBUTION - - DIVIDENDS PAYABLE 163,118 138,038 ADVANCE FROM CUSTOMERS - - PROFIT SHARING - - OTHER LIABILITIES 575 905

NON-CURRENT LIABILITIES 2,959 22,876

LONG-TERM LIABILITIES (NOTE 14) - - SOCIAL AND TAX LIABILITIES - - LOANS AND FINANCING (NOTE 09) 1,746 2,967 DEBTS WITH RELATED PARTIES (NOTE 15) 1,213 19,909 PROVISION FOR CONTINGENCIES (NOTE 10) - - OTHER LIABILITIES - -

INTEREST OF NON-CONTROLLING SHAREHOLDERS - -

SHAREHOLDERS’ EQUITY 2,362,787 2,178,580

PAID-IN CAPITAL 1,812,294 1,360,500 REVALUATION RESERVES 48,866 6,071 ADJUSTMENT TO ASSET VALUATION (31,885) 89,829 PROFIT RESERVES 533,512 722,180

TOTAL LIABILITIES 2,534,234 2,347,539

CONSOLIDADED 2009 2008 1,825,846

2,520,871

188,779 895,885 108,770 56,561 164,134 254,864 54,088 102,765

318,029 1,314,098 116,506 30,103 140,167 465,506 50,046 86,416

1,160,757

1,030,982

976,648 54,500 - 99,434 6,470 23,705

847,118 31,208 125,417 7,505 19,734

24,217

42,341

2,362,787

2,178,580

1,812,294 48,866 (31,885) 533,512

1,360,500 6,071 89,829 722,180

5,373,607

5,772,774

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Financial Statements Consolidated statement of income Ended in december 31st 2009 and 2008

Figures in R$ Thousands

PARENT COMPANY CONSOLIDADED

2009 2008 2009 2008

GROSS REVENUE FROM SALES AND/OR SERVICES - - 5,110,596 5,471,192 DOMESTIC MARKET - - 3,371,627 3,570,130 EXTERNAL MARKET - - 1,738,969 1,901,062

GROSS REVENUE DEDUCTIONS - - (899,976) (969,151)

NET REVENUE FROM SALES AND/OR SERVICES - - 4,210,620 4,502,041 DOMESTIC MARKET - - 2,526,430 2,659,554 EXTERNAL MARKET - - 1,684,190 1,842,487

COST OF GOODS AND/OR SERVICES SOLD - - (2,858,055) (2,933,931)

GROSS INCOME - - 1,352,565 1,568,110

OPERATING EXPENSES/REVENUES 17,931 (3,074) (625,688) (807,995) STATUTORY COMPENSATION (1,447) (2,052) (13,840) (13,343) GENERAL AND ADMINISTRATIVE EXPENSES (1,388) (1,605) (212,231) (235,833) SELLING EXPENSES - - (408,318) (403,220) FINANCIAL EXPENSES (691) (312) (272,149) (505,920) INTEREST ON EQUITY (LIABILITIES) (101,726) (113,353) (102,618) (113,810) FINANCIAL REVENUES (2,603) 4,997 383,468 464,131 INTEREST ON EQUITY (ASSETS) 125,786 109,251 -

OTHER FINANCIAL REVENUES / EXPENSES (NOTE 19) (901) (102) (102,177) (89,165) EQUITY PICK UP (NOTE 11.1) 562,523 559,531 6,449 3,237

INCOME BEFORE TAXES/INTEREST 579,553 556,355 631,149 674,187 STATUTORY INTEREST/CONTRIBUTIONS (781) (1,885) (4,639) (8,310) SOCIAL CONTRIBUTION (NOTE 18) (1,626) 386 (43,350) (50,088) INCOME TAX (NOTE 18) (4,694) 1,444 (127,729) (156,205) REVERSAL OF INTEREST ON EQUITY (24,060) 4,101 102,618 113,810

NONCONTROLLING INTEREST - - (9,657) (12,993)

INCOME/LOSS FOR THE PERIOD 548,392 560,401 548,392 560,401 NUMBER OF SHARES EX-TREASURY (UNITS) 620,905 617,627 EARNINGS PER SHARE (REAIS) 0.88 0.91 EQUITY VALUE PER SHARE (REAIS) 3.81 3.53

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Financial Statements Statements of changes in shareholdres Equity from december 31st 2009 and 2008

Em Milhares de Reais REVALUATION PROFIT

RESERVES RESERVES

Goodwill In Direct

in the Companies Incorpo- Assets Reserve TOTAL SHARECAPITAL ration of Revalua- LEGAL for Capital RETAINED ACCUMULATED HOLDERS’

tion STOCK Shares Reserve Budget EARNINGS/ LOSSES EQUITY

OPENING BALANCE IN JANUARY 1ST, 2008 1,360,500 - 6,754 28,749 433,171 - - 1,829,174

DIVIDEND REVERSAL - - - - - - 287 287 REALIZATION OF REVALUATION RESERVE - - (683) - - - 683 ADJUSTMENT TO ASSET VALUATION - - - - - 89,829 - 89,829 INCOME/LOSS FOR THE PERIOD - - - - - - 560,401 560,401 PROPOSED ASSIGNMENTS:

LEGAL RESERVE (NOTE 16) - - - 28,020 - - (28,020) DIVIDENDS (NOTE 16) - - - - - - (187,758) (187,758) INTEREST ON EQUITY (NOTE 16) - - - - - - (113,353) (113,353) RESERVE FOR CAPITAL BUDGET (NOTE 16) - - - - 232,240 - (232,240)

OPENING BALANCE IN DECEMBER 31ST, 2008 1,360,500 - 6,071 56,769 665,411 89,829 - 2,178,580

DIVIDEND REVERSAL - - - - - - 343 343 CAPITAL INCREASE 451,794 - (56,769) (382,731) - - 12,294 GOODWILL IN THE INCORPORATION OF SHARES - 44,931 - - - - - 44,931 REALIZATION OF REVALUATION RESERVE - - (2,136) - - - 2,136 ADJUSTMENT TO ASSET VALUATION - - - - - (121,714) - (121,714) INCOME/LOSS FOR THE PERIOD - - - - - - 548,392 548,392

PROPOSED ASSIGNMENTS:

LEGAL RESERVE (NOTE 16) - - - 27,420 - - (27,420) DIVIDENDS (NOTE 16) - - - - - - (198,312) (198,312) INTEREST ON EQUITY (NOTE 16) - - - - - - (101,727) (101,727) RESERVE FOR CAPITAL BUDGET (NOTE 16) - - - - 223,412 - (223,412)

OPENING BALANCE IN DECEMBER 31ST, 2009 1,812,294 44,931 3,935 27,420 506,092 (31,885) - 2,362,787

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Financial Statements Statements of cash flow from december 31st 2009 and 2008

Figures in R$ Thousands

PARENT COMPANY CONSOLIDADED

2009 2008 2009 2008

OPERATING ACTIVITIES Net income before taxes (IR/CS) 579,553 556,355 631,149 674,187 Depreciation and amortization 144 144 195,888 206,081 Equity pick-up (562,523) (559,531) (6,449) (3,237) Provisions: Profit sharing - - 76,640 86,246 Interests on equity (24,060) 4,101 102,618 113,810 Other 633 (429) 12,973 8,705

Increase/Reduction in accounts receivable 18,752 (19,848) 396,687 (553,390) Increase/Reduction in accounts payable (23,418) (17,331) (384,135) 158,677 Increase/Reduction in inventories - - 350,557 (401,932) Income and social contribution taxes paid (48) (314) (152,945) (274,461) Profit sharing paid - - (72,251) (95,485)

Net cash from operating activities (10,967) (36,853) 1,150,732 (80,799)

INVESTMENT ACTIVITIES Investments (54,265) 7,266 - (4,868) Property, plant and equipment - - (226,248) (457,168) Intangible assets - - (40,762) (5,930) Permanent assets write-off - - 7,997 1,245 Dividends/Interest on equity received 270,932 334,131 - Accumulated conversion adjustment - - (121,714) 89,829

Net cash invested in investments activities 216,667 341,397 (380,727) (376,892)

FINANCING ACTIVITIES Capital Increase with shares issue 57,224 - 57,224 Working capital financing - - (445,286) 126,567 Long-term financing - - 156,602 302,909 Payment of dividends/interest on equity (260,438) (297,792) (260,906) (297,279)

Net cash invested in financing activities (203,214) (297,792) (492,366) 132,197

Increase (Reduction) in cash and cash equivalents 2,486 6,752 277,639 (325,494)

Cash Balance: Cash and equivalents balance at the beginning of the period 88,503 81,751 1,849,478 2,174,972 Cash and equivalents balance at the end of the period 90,989 88,503 2,127,117 1,849,478

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Financial Statements Consolidated statement of value added from december 31st 2009 and 2008

Figures in R$ Thousands

PARENT COMPANY CONSOLIDADED

2009 2008 2009 2008

1- REVENUES - 100 4,998,755 5,059,686 1.1. Sale of goods, products and services - - 4,991,101 5,048,864 1.2. Other revenues - 100 2,821 9,034 1.3. Provision/Reversal of Doubtful accounts - - 4,833 1,788 2 - INPUTS ACQUIRED FROM THIRD-PARTIES (1,505) (1,013) (2,790,561) (2,784,790) 2.2. Cost of good s and services sold (604) (799) (2,762,203) (2,768,285) 2.2.Loss/recovery of assets (901) (214) (28,358) (16,505) 3 - GROSS VALUE-ADDED (1-2) (1,505) (913) 2,208,194 2,274,896 4 - DEPRECIATION, AMORTIZATION AND DEPLETION 144 144 195,888 206,081 5 - NET VALUE ADDED PRODUCED (4-3) (1,649) (1,057) 2,012,306 2,068,815 6 - VALUE ADDED RECEIVED AS TRANSFER 685,706 673,779 389,917 467,368 6.1. Equity pick-up 562,523 559,531 6,449 3,237 6.2. Financial revenues 123,183 114,248 383,468 464,131 7 - TOTAL VALUE ADDED TO DISTRIBUTE (5+6) 684,057 672,722 2,402,223 2,536,183 8 - VALUE ADDED DISTRIBUTION 684,057 672,722 2,402,223 2,536,183 8.1. Personnel 2,544 4,098 789,704 743,157 8.1.1 Direct compensation 2,486 4,044 659,984 633,746 8.1.2 Benefits 27 5 91,357 74,261 8.1.3 Workers severance fund (FGTS) 31 49 38,363 35,150 8.2 Taxes, fees and contributions 6,644 (1,339) 770,899 722,156 8.2.1 Federal 6,643 (1,340) 677,058 631,316 8.2.2 State - - 88,852 84,720 8.2.3 Municipal 1 1 4,989 6,120 8.3 Third-party‘s capital remuneration 126,477 109,562 293,228 510,469 8.3.1 Interest 126,477 109,562 279,216 505,920 8.3.2 Rentals - - 14,012 4,549 8.3.3 Other - - - 8.4 Equity remuneration 548,392 560,401 548,392 560,401 8.4.1 Interest on equity 101,727 113,353 101,727 113,353 8.4.2 Dividends 198,312 187,758 198,312 187,758 8.4.3 Retained earnings/accumulated losses in the year 248,353 259,290 248,353 259,290

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01. OPERATIONS

WEG S.A. is a publicly-held company, headquartered in the city of Jaraguá do Sul, state of Santa Catarina, Brazil, a holding company comprising WEG Group, and has as corporate purpose the production, industrialization, trade, import and export of industrial, electromechanical and electronic systems, rotating electrical machines, machinery and equipment in general, equipment for the production, distribution and conversion of electric power, electrical supplies, programmable controllers, machine parts and components, devices and equipment in general, hydraulic turbines of all kinds and capacities, resins in general, paint supplies, vegetable and chemical substances and products destined to industry and science, through industrial parks located in Brazil, Argentina, Mexico, Portugal and China.

02. PRESENTATION OF THE FINANCIAL STATEMENTS The Financial Statements of the Company and its subsidiaries (parent company and consolidated) are presented in thousands of reais, except when otherwise indicated, including the explanatory notes, and are prepared pursuant to the accounting practices adopted in Brazil, which include the accounting practices established by the Brazilian Corporate Legislation – Laws 6,404, 9,457, 10,303 and 11,638 of December 15, 1976, May 5, 1997 and November 1, 2001, and December 28, 2007 respectively, and supplementary provisions from the Brazilian Securities and Exchange Commission (CVM).

The process for preparing the Financial Statements involves the utilization of estimates. The determination of these estimates took into account experiences from past and current events, assumptions related to future events, and other objective and subjective factors. Some of the material items subject to such estimates and assumptions are the selection of the useful life of property, plant and equipment and its recovery in operations, credit risk analysis to determine the allowance for doubtful accounts, measurement of financial instruments fair value, commitments to post-employment benefits, maintenance of the deferred Income Tax on tax losses and negative basis for Social Contribution, as well as the analysis of other risks to determine other provisions, including the provision for contingencies resulting from administrative and judicial and other assets and liabilities as of the balance sheet date.

The settlement of the transactions involving these estimates might cause the amounts to differ from those recorded in the financial statements, due to inaccuracies inherent to the estimate process. The Company revises its estimates and assumptions on a quarterly basis.

Monetary assets and liabilities denominated in foreign currencies were converted into reais based on the exchange rate on the closing date of the balance sheet, and the differences resulting from currency conversion were recognized in the statement of income.

The exchange variations of investments in subsidiaries overseas, whose assets and liabilities were converted into reais based on the exchange rate as of the closing date of the balance sheet, and whose results were translated based on the period’s average rate and are recognized in a specific Shareholders’ Equity account.

Other permanent investments are recorded at the acquisition cost net of the provision for devaluation, when applicable.

The authorization to complete the preparation of these financial statements occurred at the board of executive officers’ meeting held on February 4, 2010.

03. MAIN ACCOUNTING PRACTICES

a) Determination of Net Income. Revenues and expenses are stated by the accrual basis of accounting. Revenues from product sales are recognized in the result when all risks and benefits inherent to the product are transferred to the buyer and it is probable that the economic benefits will be generated in favor of the Company and the service revenue is recognized in the income in view of its realization. b) Cash, Banks and Financial Investments. These include the balances in checking accounts and financial investments (Note 05), recorded at cost accrued of income earned up to December 31, 2009, according to rates agreed upon with financial institutions. c) Trade Accounts Receivable. These are stated at realization and present values, and the amounts receivable from international customers are restated based on exchange rates effective at the end of each period. The provision for customer credit losses was calculated based on the analysis of credit risks, which takes into account the history of losses, and it is sufficient to cover losses on amounts receivable (Note 06). d) Inventories. Stated at the average acquisition or production cost, not exceeding their market value, considering the present value when applicable, or the manufacturing cost. Provisions for low turnover or obsolete inventories are recorded when considered necessary by the Management. Imports in progress are stated at the accumulated cost of each import (Note 07).

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e) Other Current and Non-Current Assets. These are stated at cost or realization value, including, when applicable, income earned, monetary and exchange variations incurred, as well as adjustment at present value. f) Property, Plant and Equipment. These are evaluated at acquisition and/or construction cost, less the respective depreciation, except plots of land, which are not depreciated. The depreciation is calculated by the straight-line method and takes into account the economic useful life of the assets (Note 12). The property, plant and equipment are net of ICMS, PIS and COFINS and its value recorded in recoverable taxes, with amortization as set forth by law. The Company annually measures the recoverable value through its usage value method (Future Cash Flows), not calculating until December 31, 2009, any impairment. Expenses with maintenance or repairs, which do not materially increase the useful life of assets, are recorded as expenses when incurred. g) Intangible Assets. These are evaluated at acquisition cost, less amortization and possible provision to adjust them to their probable realization values, when needed. Intangible assets are usually amortized taking into account the estimated term when generating future economic benefits, considering they have a defined useful life. Goodwill from the acquisitions of investments which have as economic base the future profitability was amortized on a straight-line basis for a 5-year term up to December 31, 2008. As of January 1, 2009 they were no longer amortized, and are only submitted to an annual impairment test (Note 13).

h) Investments. Investments in subsidiaries and associated companies (Note 11) are evaluated by the equity pick-up method. For subsidiaries abroad, ones’ assets and liabilities are translated from their functional currency into reais, using the exchange rates on the closing dates of the balance sheets and income is determined by the average monthly rates for the years.

Capital gains/losses deriving from the exchange variation on investments in subsidiaries abroad are recorded in the Shareholders’ Equity.

The Company’s interest on figures from income for the period and increases or reductions in the equity in the earnings of subsidiaries is recorded in the operating income.

Other investments are recognized at acquisition cost deduced from provision for devaluation, when applicable. i) Income Tax and Social Contribution. Determined by Actual Profit, pursuant to the prevailing legislation (Note 18). Deferred Income Tax and Social Contribution were calculated under CVM Rule 371/02 (Note 10). The Company chose the Transition Tax Regime “RTT”, established by Law 11,941/09, for corporate income tax, social contribution, PIS and COFINS taxes, for the 2008/2009 biennium, said taxes are still calculated in compliance with accounting methods and criteria set forth by Law 6,404/76, effective on December 31, 2007. j) Other Current and Non-Current Liabilities. Stated at known or calculable values, plus, when applicable, the corresponding financial charges on a daily pro rata basis, and the incurred monetary and exchange variations, as well as adjustment at present value. k) Conversion of Foreign Currency Balances. The criterion for the conversion of the asset and liability balances of foreign exchange operations, except for investments, consists of the conversion to domestic currency (R$) at the exchange rate effective on the closing date of the financial statements. Gains and losses from the restatement of these assets and liabilities verified between the exchange rate effective on the transaction date and the closures of the periods are recognized as financial revenues or expenses in the income. l) Interest on equity. For corporate purposes, interest on equity is stated as allocation of results directly to shareholders’ equity. For tax purposes, it was considered a financial expense, reducing the calculation basis of Income Tax and Social Contribution. m) Related Parties. Purchase and sale transactions of inputs and products are made under conditions and terms similar to transactions with unrelated third parties (Note 09). n) Adjustment to Present Value. Assets and liabilities resulting from long-term operations, or short-term ones when material, were adjusted at present value based on discount rates that reflected the best market evaluations. Adjustment to present value was calculated on a pro rata die basis, as of the beginning of each transaction. Reversals of monetary assets and liabilities adjustments were recorded as financial revenues or expenses. o) Statement of Cash Flows. An integral part of the financial statements, prepared using the indirect method, in compliance with rules and proceedings of CVM Resolution 547/08 (CPC 03).

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p) Statement of Value Added. An integral part of the financial statements, prepared in compliance with the rules and proceedings of CVM Resolution 557/08 (CPC 09). q) Subsidy and Government Assistances. Government subsidies as monetary contribution are recognized on systematic bases during the period in operating results. Tax reductions are recognized in a write-down account of taxes and expenses.

Non-monetary assets (lands) from government subsidies are recorded at the fair value (Note 22). r) Pension Plan. The actuarial commitments with the benefits from pension and retirement plans are provisioned, as per procedures provided for in CVM Resolution 371/2000, based on actuarial calculations, annually prepared by independent actuaries, in accordance with the projected credit unit method, net of the assets which guarantee the plan and the corresponding costs recognized during the employees’ labor period. The “projected credit unit” method considers each period of service as a generator of an additional unit of benefit, which are accumulated for computing a final liability. In addition, other actuarial assumptions are used, such as the estimates of evolution in costs with medical assistance, biological and economical hypothesis, as well as historical data of incurred costs and contribution from employees (Note 17). s) New Accounting Pronouncements. In 2009, the Brazilian Securities and Exchange Commission (CVM) resolved 26 new accounting pronouncements, which were issued by the Accounting Pronouncement Committee (CPC), to be applied on the Financial Statements for the periods to be ended as of January 1, 2010, and their disclosure in comparison with the 2009 on the same basis.

Effects on the presentation of the 2010 financial statements, the interim balance sheet of January 1, 2009 and the financial statements for the comparison year of 2009, will be calculated and recorded by the Company.

The Management is evaluating the possible impacts of these new rules. The main pronouncements that may impact the Company’s financial statements are the following: - CPC 17 Construction Agreements - CPC 22 Information by Segment - CPC 26 Presentation of the Financial Statements - CPC 27 Property, Plant and Equipment - CPC 30 Revenues - CPC 36 Consolidated Statements - CPC 37 First-time Adoption of IFRSs

04. CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements were prepared in compliance with the consolidation practices and applicable legal provisions. Therefore, account balances, revenues and expenses and non-realized profit among companies were eliminated.

05. FINANCIAL INVESTMENTS PARENT COMPANY 2009 2008

In domestic currency 90,975 88,405 - Bank Deposit Certificate (CDB) 90,975 88,405

In foreign currency - - - International Deposit Certificates - - - Other - - TOTAL 90,975 88,405

CONSOLIDADE 2009 2009 2,024,651 2,024,651

1,579,415 1,579,415

71,518 70,285 1,233 2,096,169

198,865 195,471 3,394 1,778,280

Domestic Investments: On December 31, 2009, CDBs are being remunerated at rates of 100.0% to 106.5% of CDI (100.0% to 106.7% on December 31, 2008).

Investments Overseas: - In Euros with interest rates from 1.38% to 3.50% p.a. in bank deposit certificates issued by financial institutions overseas in the original amount of EUR24,159, whose balance on December 31, 2009 was R$60,882.

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- In U.S. dollar plus interest between 0.05% and 1.00% p.a., in deposit certificates issued by financial institutions overseas in the original amount of US$5,433, the balance of which was R$9,403 on December 31, 2009; In all cases, they are cash investments.

06. TRADE ACCOUNTS RECEIVABLE

CONSOLIDATED 2008

2009

Domestic market Foreign market Adjustment to Present Value Provision with Credit Losses from Customers TOTAL Effective Credit Losses from Customers in the Period Trade bills due Overdue trade bills: In up to 30 days Over 30 days

557,559 373,335 (6,839) (13,919) 910,136 1,063 776,568 75,144 79,182

486,142 634,707 (9,944) 1,110,905 2,334 702,680 193,640 224,529

07. INVENTORIES

CONSOLIDATED

Domestic market Finished Products Products under Production Raw materials and Other Imports in Progress Allowance for Losses

Foreign market Finished Products Products under Production Raw materials and Other Provision for Losses

TOTAL

2009

2008

529,837 144,790 195,308 184,707 15,456 (10,424)

820,283 248,518 236,230 291,800 48,500 (4,765)

228,279 167,117 15,133 51,229 (5,200)

286,302 224,138 21,450 53,661 (12,947)

758,116

1,106,585

08. RECOVERABLE TAXES

PARENT COMPANY 2009 2008

ICMS Sales Tax on acquisitions of property, plant and equipment VAT (Subsidiaries Overseas) PIS/COFINS on acquisitions of property, plant and equipment PIS/COFINS on Financial Income Tax on Industrialized Products - IPI ICMS Sales Tax Withholding Income Tax Corporate income tax and Social Contribution to offset Other TOTAL Short-Term Long-Term

- - - - - - 6,226 2,864 - 9,090 9,090 -

CONSOLIDADE 2009 2008

- - - - - - 4,749 3,674 - 8,423 8,423 -

38,674 27,723 33,015 - 4,906 8,262 6,358 12,749 9,934 141,621 97,122 44,499

46,186 43,132 38,665 11,725 20,982 19,336 36,138 5,700 11,562 233,426 176,383 57,043

Credits will be realized by the Company and its subsidiaries, by means of refund and/or taxes and contributions carryforwards.

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09. RELATED PARTIES

Commercial transactions of purchase and sale of products, raw materials and service contracting, as well as financial loan transactions, funding among the Group companies and Management compensation were carried out as follows:

PARENT COMPANY CONSOLIDATED

2009 2008 2009 2008

EQUITY ACCOUNTS Non-current Assets Management of Financial Resources 22,970 18,086 - - WEG Indústrias S.A. 22,970 16,883 - - WEG Exportadora S.A. - 1,203 - Non-current Liabilities Management of Financial Resources 1,746 2,967 - - WEG Equipamentos Elétricos S.A. 1,746 2,967 - Management agreements - - 3,413 2,546 INCOME ACCOUNTS Management Compensation: Fees 1,447 2,052 13,840 - Board of Directors 1,077 1,444 1,723 - Board of Executive Officers 370 608 12,117

13,343 1,603 11,740

Additional information: a) Commercial Operations Input and product purchase and sale transactions are carried out under the same conditions with unrelated third parties, prevailing cash sale. b) Management of Financial Resources (i) Financial and commercial operations among Group companies are recorded at a book account, complying with requirements of the Group agreement; (ii) Credit/debit agreements entered into with Managers are recorded at a book account and remunerated between 95% and 100% of CDI variation.

c) Service Provision and Other Covenants (i) WEG Equipamentos Elétricos S.A. entered into a service agreement with WEG Indústrias S.A related to management consulting services. The reimbursement is made through the Service Invoice. (ii) WEG Equipamentos Elétricos S.A. entered into a “Guarantees and Other Covenants” agreement with Hidráulica Industrial S.A Ind. e Com – HISA, with the purpose of WEG being the guarantor in loan operations and in the issue of guarantee to customers (Performance Bond, surety bond, etc.). d) Sureties and Guarantees (i) WEG S.A. granted sureties and guarantees to subsidiaries overseas, in the amount of US$112.5 million (US$147.7 million on December 31, 2008). (ii) A WEG Equipamentos Elétricos S.A. granted sureties and guarantees to subsidiaries abroad, in the amount of US$10.2 million on December 31, 2009 (US$9.4 million on December 31, 2008). (iii) A WEG Equipamentos Elétricos S.A. granted sureties and guarantees to subsidiaries in Brazil, in the amount of US$38.7 million (US$30.9 million on December 31, 2008). e) Management Compensation The Weg Group Management is comprised by 13 board members and 24 executive officers.

On December 31, 2009, the members of the Board of Director’s received compensation in the amount of R$1,723 and the Board of Executive Officers, in the amount of R$12,117, for the services rendered, corresponding to the total amount of R$13,840.

As long as the net income is, at least, 16% on shareholders’ equity, it is expected interest from 1.0% up to 2.5% of the net income to be distributed to the management. Both Board Members and Executive Officers receive additional corporate benefits such as: dental and medical assistance, life insurance, supplementary social security benefits, among others.

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10. DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION Deferred Income Tax and Social Contribution credits were ascertained in conformity with IBRACON pronouncement, approved

by CVM Rule 371/02, and are based on tax losses and temporary differences, related to fiscal, labor, and civil contingencies, and provisions for losses.

Tax credits recorded on temporary differences will be realized to the extent of the realization of the provisions which served as its base, and are fully accounted for under long-term receivables. Management believes tax losses will be offset within the next three years.

NON-CURRENT ASSETS - Provisions - Labor/Civil Contingencies - Fiscal Contingencies - Tax Losses

NON-CURRENT LIABILITIES - Accelerated Depreciation with Incentive Law 11,196/05 - Goodwill Amortization Law 11,941/09 - Revaluation Reserve

PARENT COMPANY 2009 2008 529 52 - 412 65

- - - -

6,801 74 - 6,727 -

- - - -

CONSOLIDATED 2009 2008 101,739 66,879 16,143 13,745 4,972

79,240 49,299 10,743 16,526 2,672

6,470 5,109 771 590

7,505 7,505 -

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notes to the financial statements from december 31st 2009 and 2008 11. INVESTMENTS IN SUBSIDIARIES AND AFFILIATED COMPANY 11.1 SUBSIDIARIES Adjusted Shareholders’ Equity

Net Income for the year

Interest in Capital Stock (%) Direct

Equity Accounting

Indirect

2009

2008

Book Value of Investment 2009

2008

WEG Equips. Elétricos S.A. 2,025,995 532,899 99.95 - 547,010(*) 445,572 2,025,064 1,449,602 WEG Exportadora S.A. - - - - - 90,844 - 482,180 WEG Indústrias S.A. 125,587 14,935 99.95 - 14,848 21,041 125,524 116,001 WEG Amazônia S.A. 11,488 3,155 0.02 99.97 1 - 3 2 WEG Linhares Equips. Elétricos Ltda 50 - 1.00 99.00 - - 1 WEG Administradora de Bens Ltda 4,480 - - 100.00 - - - WEG Logística Ltda.

100 - - 100.00 - - - Hidráulica Industrial S.A. Ind. Com. - HISA 33,306 7,495 - 51.00 - - - WEG Chile S.A. 13,199 4,712 8.00 92.00 377 224 1,056 747 WEG Colômbia Ltda.

4,905 1,437 1.00 99.00 17 - 49 WEG Equipamientos Electricos S.A. 29,216 6,614 10.44 89.55 1,368 1,339 3,050 7,200 WEG Indústrias Venezuela C.A. 10,403 (2,324) - 99.99 - - - WEG México S.A. de C.V. 50,124 1,219 0.01 99.99 - - 1 WEG Transformadores México S.A. de CV 23,301 1,360 - 70.00 - - - WEG Electric Corp.

48,462 6,663 0.79 99.21 69 78 461 530 WEG Service Corp.

58 46 - 100.00 - - - WEG Overseas S.A. 74 (1,554) 100.00 - (1,554) 9 73 2,174 WEG Benelux S.A. 36,754 642 - 100.00 - - - WEG France S.A.S (179) (1,818) - 100.00 - - - WEG Germany GmbH 26,977 2,456 - 100.00 - - - WEG Ibéria S.L. 429,467 20,415 - 100.00 - - - WEG Electric Motors (UK) Ltd. 6,350 1,408 - 100.00 - - - WEG Itália S.R.L 7,460 2,734 0.07 99.93 2 - 5 5 WEGeuro Ind. Electricas S.A. 28,554 6,824 5.74 94.26 381 414 1,639 1,679 WEG Scandinávia AB 3,243 146 - 100.00 - - - WEG Austrália PTY 12,101 1,375 - 100.00 - - - WEG Electric (Índia) Private Limited 360 76 4.99 94.99 4 10 18 21 WEG Electric Motors Japan CO Ltd. 629 (54) - 100.00 - - - WEG Nantong Electric Motors Manufacturing 23,205 (19,369) - 100.00 - - - WEG Singapore PTE LTD (154) (28) - 100.00 - - - Nantong Testing Station 376 15 - 70.00 - - - WEG Germany NN (330) 58 - 100.00 - - - WEG Middle East FZE 376 358 - 100.00 - - - WEG Industries (Índia) Private Limited 34,376 (1,394) - 99.99 - - - TOTAL 562,523 559,531 2,156,944 2,060,141 (*)Equity adjusted at unrealized income.

11.2 AFFILIATED COMPANY VOLTRAN S.A. de C.V.

44,855

19,918

-

30.00

-

-

13,456

12,242

11.3 OTHER -

20

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-

-

-

2,585

1,100

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11.4. CORPORATE RESTRUCTURE (i) WEG Exportadora S.A. On January 12, 2009, WEG Equipamentos Elétricos S.A. carried out the merger of WEG Exportadora S.A., aiming at improving the synergy in the activities among the WEG Group companies, as well as reducing costs. (ii) WEG Automação S.A. and WEG Itajaí Equipamentos Elétricos Ltda.

On August 1, 2009, WEG Equipamentos Elétricos S.A. carried out the merger of the companies WEG Automação S.A. and Weg Itajaí Equipamentos Elétricos Ltda., aiming at reducing operating costs and expenses, mainly the ones deriving from the implementation of the ERP (SAP System), which allows a better integration and synergy of the activities related to the production process and the flow of materials, as well as the reinforcement in the sale of industrial solutions, in which are involved products from the merged companies, making negotiations easier and generating a greater competitiveness. (iii) Trafo Equipamentos Elétricos S.A. – Share Merger On December 28, 2009, WEG S.A. merged the total common and preferred shares issued by Trafo Equipamentos Elétricos S.A. (“TRAFO”), except for those indirectly held by the Company, transforming TRAFO into a wholly-owned subsidiary.

The merger of shares gave the right to withdraw to dissenting shareholders which were the holders of the Company’s shares on the date the Call Notice of the Extraordinary General Meeting was issued. The right of withdraw can be exercised in thirty days as from the date the Minutes of said Meeting is published. Both Call Notice and the Minutes of this Meeting were published, respectively, on December 10, 2009 and December 29, 2009.

On December 30, 2009, WEG Equipamentos Elétricos S.A. carried out the merger of Trafo Equipamentos Elétricos S.A., aiming at converging the available funds, reaching synergy gains and simplifying the current structure, thus reducing operating, administrative and financial costs.

12. PROPERTY, PLANT AND EQUIPMENT

Land and Constructions Equipment and Facilities Furniture and Fixtures Hardware/Software Vehicles Construction in Progress Reforestation Other Subtotal Accrued Depreciations/Depletions Total

Annual Depreciatio PARENT COMPANY CONSOLIDATED n Rate (%) 2009 2008 2009 2008 00 to 04 10 to 30 10 to 30 20 to 30 20 to 30 - - - - - -

4,320 270 - - - - - - 4,590 (3,448) 1,142

4,320 270 - - - - - - 4,590 (3,305) 1,285

466,695 1,459,953 40,364 50,443 8,708 36,025 11,889 41,282 2,115,359 (1,053,625) 1,061,734

377,337 1,308,702 38,229 50,975 8,731 184,546 10,723 18,138 1,997,381 (950,048) 1,047,333

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a) Summary of the changes in property, plant, and equipment:

2009

Balance at the beginning of the year (net) Acquisitions Transfer to intangible assets Write-offs Depreciation and Depletion Effect of foreign exchange on property, plant, and equipment (subsidiaries overseas) Balance at the end of the year (net)

CONSOLIDATED 2008

1.047.333 226.248 - (7.997) (158.735) (45.115) 1.061.734

745.599 457.168 (25.321) (1.245) (158.423) 29.555 1.047.333

b) Values offered in guarantee - property, plant and equipment were offered as guarantee of loans, financings, and tax and labor claims in the amount of R$16,265 - consolidated on December 31, 2009 (R$15,389 on December 31, 2008). c) Fully depreciated assets in use in Brazil - the gross book value of the fully depreciated assets in use is R$660,324consolidated on December 31, 2009 (R$577,365 on December 31, 2008).

13. INTANGIBLE ASSETS - CONSOLIDATED

Amortization Accumulated Specification No. of Years Cost Amortization 2009

Projects: - Development of products and processes 5 69,505 56,747 12,758 - Information Technology 5 79,415 49,245 30,170 Goodwill in Acquisition of Subsidiaries 5 86,226 20,726 65,500 Software License 5 44,238 32,744 11,494 Other 5 24,612 15,674 8,938 Total 303,996 175,136 128,860

2008

26,659 45,987 33,020 17,646 4,751 128,063

The amortization schedule is as follows: 2010 2011 2012 2013 2014/2015 TOTAL

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24,724 21,150 11,286 2,051 4,149 63,360

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14. FINANCINGS AND LOANS - CONSOLIDATED As of December 31, 2009, financings raised in foreign currency include the Exchange Agreements Advances (ACC’s) in the amount of R$229.6 million, and BNDES-FINEM in basket of currencies in the amount of R$7.2 million in the short term and R$ R$2.9 million in the long-term and BNDES-FINEM in dollars in the amount of R$1.1 million in the short-term and R$12.0 million in the long term.

Financings applied for by subsidiaries overseas allocated to working capital are in dollars and/or in the currency of each country, in the amount of R$166.6 million in the short term (R$264.5 in on December 31, 2008) and R$70.4 million in the longterm (R$81.0 million on December 31, 2008), equivalent to US$136.2 million (US$147.8 million on December 31, 2008).

Financings are secured by sureties and fiduciary disposal.

MODALITY

ANNUAL CHARGES

2009

2008

IN BRAZIL SHORT TERM Working Capital (ACCs) 1.8% to 4.9% interest p.a.(+) Exchange Variation Working Capital TJLP (+) 1.0% a 5.0% p.a.

Working Capital Currency basket (+) 0.8% a 2.5% p.a.

Non Deliverable Forwards (NDF) Exchange Variation Property, Plant and Equipment IGPM (+) 1.0% p.a.

Working Capital 4.5% to 5.3% interest p.a.

Property, Plant and Equipment TJLP (+) 1.2% a 5.0% p.a.

Working Capital Dollar (+) 1.4% p.a.

LONG TERM Working Capital TJLP (+) 1.0% a 5.0% p.a.

Property, Plant and Equipment IGPM (+) 1.0% p.a.

Property, Plant and Equipment UFIR (+) 1.0% a 4.0% p.a.

Working Capital Currency basket (+) 0.8% a 2.5% p.a.

Working Capital 4.5% to 5.3% interest p.a.

Property, Plant and Equipment TJLP (+) 1.2% a 5.0% p.a.

Working Capital Dollar (+) 1.4% p.a.

ABROAD SHORT TERM Working Capital EURIBOR (+) 0.3% to 3.4% p.a.

Working Capital LIBOR (+) 2.1% to 3.3% p.a.

Working Capital 4.8% to 11.7% interest p.a.

LONG TERM Working Capital 5.0% to11.7% interest p.a.

TOTAL SHORT TERM TOTAL LONG TERM

1,635,509 729,256 229,577 479,431 7,242 - - 6,932 5,015 1,059

1,815,666 1,049,590 619,497 390,434 12,653 16,884 9,267 23 832 -

906,253 483,569 - 22,832 2,906 365,002 19,921 12,023

766,076 615,765 52,004 1,293 13,610 62,940 20,464 -

237,024 166,629 45,818 45,513 75,298

345,550 264,508 68,177 72,767 123,564

70,395 70,395

81,042 81,042

895,885 976,648

1,314,098 847,118

MATURITY OF LONG-TERM FINANCINGS AND LOANS

MATURITY 2009 2008 2010 - 2011 213,890 2012 457,843 2013 136,338 2014 104,083 2015 onwards 64,494 TOTAL 976,648

345,996 172,676 124,338 92,927 69,924 41,257 847,118

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notes to the financial statements from december 31st 2009 and 2008

15. PROVISIONS FOR CONTINGENCIES The Company and its subsidiaries are parties to administrative and legal proceedings, arising from the normal course of operations, involving tax, labor and civil issues. The respective provisions were recorded for the proceedings whose possibility of loss was evaluated as probable and, in some specific cases, as possible, based on the expected value at risk estimated by the Company’s legal advisors. Management estimates the recorded provision for contingencies is sufficient to cover possible losses with judicial proceedings in progress, as follows:

PARENT COMPANY

2009 2008 a) Tax: 1,213 19,909 - Corporate Tax and Social Contribution (a.1) - 119 - INSS (a.2) - - - PIS/COFINS - 19,495 - Other 1,213 295

b) Labor - -

c) Civil - -

d) Other - -

TOTAL 1,213 19,909

e) Restricted Court Deposits 131 19,744 - Tax 131 19,744 - Other - -

CONSOLIDATED 2009 2008 33,253 65,619 5,745 14,151 19,986 13,569 - 19,929 7,522 17,970 12,796

8,362

51,358

47,256

2,027

4,180

99,434

125,417

20,944 16,842 4,102

42,079 39,546 2,533

a) Tax Contingencies (a.1) The Company, based on the court orders that authorized the use of the court deposit related to the IPC difference (51.82%) of January 1989 – Summer Plan, partially reverted the amount of R$4,351. The decision is favorable up to the index limit of 35.58%. (a.2) Refers to contributions owed to Social Security whose judicial discussions refer to social security pertinent charges on private pension, profit sharing, education allowance and others.

The Company carried out tax provision write-offs in the amount of R$45,573, due to the adhesion to the payment in installments set forth by Law 11,941/09 (Note 23). b) Labor Contingencies The Company and its subsidiaries are parties to labor claims involving especially discussions about health hazard, risks, and others.

Based on the payment history and on the legal advisors’ opinion, the provision of R$12,796 on December 31, 2009 (R$8,362 on December 31, 2008) is deemed sufficient to cover probable losses. c) Civil Contingencies They correspond especially to civil proceedings, including moral and esthetic damages, occupational diseases, and damages arising from occupational accidents. Based on the legal advisors’ opinion, Management recorded a provision of R$51,358 on December 31, 2009 (R$47.256 on December 31, 2008), which is deemed sufficient to cover probable losses.

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Notas explicativas às demonstrações financeiras Em 31 de dezembro de 2009 (Valores em Milhares de Reais)

d) Restricted Court Deposits

Income and social contribution taxes on Summer Plan Income and social contribution taxes on Refis negative goodwill PIS/Cofins on interest on equity - Other 131 TOTAL RESTRICTED DEPOSITS 131 - Non-restricted court deposits - TOTAL COURT DEPOSITS 131

PARENT COMPANY 2009 2008 - - 19,481 144 19,744 - 19,744

- 119 - 7,749 20,944 9,795 30,739

CONSOLIDATED 2009 2008 13,195 - 19,481 5,348 42,079 10,073 52,152

13,195 4,055

Os depósitos judiciais não vinculados às contingências estão no aguardo de alvará de levantamento.

16. SHAREHOLDERS’ EQUITY

a) Capital Stock At the Extraordinary and Annual General Meeting held on April 6, 2009, the Company’s capital stock increase from R$1,360,500 to R$1,800,000 was approved, not changing the number of shares, using the following reserves: - Legal Reserve R$56,769 - Capital Budget Reserve R$382,731 At the Extraordinary General Meeting held on December 28, 2009, it was approved the Company’s capital stock increase from R$1,800,000 to R$1,812,294 upon the issue of 3,278,300 non-par, book-entry common shares, and the recording of a goodwill reserve in the incorporation of shares amounting to R$44,931.

As of December 31, 2009, the Company’s capital stock consists of 620,905,029 non-par registered book-entry voting common shares. b) Dividends and Interest on equity The Bylaws provide for the distribution of at least 25% of the adjusted Net Income and the Company proposes the following:

2009 2008 NET INCOME FOR THE YEAR ( -) Legal Reserve

DIVIDENDS CALCULATION BASIS 1st Half Dividends (R$ 0.115/share in 2009 and R$ 0.163/share in 2008) 1st Half Interest on equity (R$ 0.085/share in 2009 and R$ 0.077/share in 2008) (Withholding Tax R$ 9,264 in 2009 and R$ 8,392 in 2008) 2nd Half Dividends (R$ 0.205/share in 2009 and R$ 0.141/share in 2008) 2nd Half Interest on equity (R$ 0.055/share in 2009 and R$ 0.079/share in 2008) (Withholding Tax R$ 5,995 in 2009 and R$ 8,610 in 2008) Total Dividends/Interest on equity for the year

548,392 27,420 520,972 71,027 61,763

560,401 28,020 532,381 100,673 55,950

127,285 39,964

87,085 57,403

300,039

301,111

c) Recording of Reserves - Legal Reserve – recorded in the amount of R$27,420 equivalent to 5% of the Net Income for the Year in compliance with the 20% limit of the capital stock; - Profit Retention – corresponds to the remaining value of the Net Income for the Year R$220,933, plus the balance of retained earnings R$2,479 (resulting from the revaluation reserve realization and reversal of previous years dividends) which are allocated to the capital budget reserve, to the 2010 investment plan.

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notes to the financial statements from december 31st 2009 and 2008

17. PRIVATE PENSION PLAN

The Company and its subsidiaries sponsor WEG Seguridade Social – Private Pension Plan, which has the main purpose of supplementing retirement benefits granted by the official social security system.

The Plan, managed by WEG Seguridade Social, comprises the benefits of monthly income, sickness allowance additional, disability retirement additional, disability benefit, death annuity, death benefit, proportional deferred benefit and selfsponsorship. On December 31, 2009, there were 16,208 participants (18,308 on December 31, 2008).

The Company and its subsidiaries conducted contributions in the amount of R$13,836 in 2009 (R$13,496 in 2008).

Based on actuarial calculations carried out by independent actuaries, according to the proceedings set forth by CVM Resolution 371/2000, no material net actuarial liabilities were recorded.

18. PROVISION FOR INCOME TAX AND SOCIAL CONTRIBUTION The parent company and subsidiaries in Brazil calculate the Income Tax and Social Contribution at the Actual Profit. The provision for Income Tax was recorded with a 15% rate, plus an additional 10%; and the provision for Social Contribution, with a 9% rate, in accordance with the prevailing legislation. Taxes of companies overseas are recorded in accordance with the legislation of each country.

Reconciliation of Income Tax and Social Contribution:

PARENT COMPANY CONSOLIDATE

2009 2008 2009 2008

Income before taxes and profit sharing 579,553 556,355 631,149 674,187 Nominal rate 34%

Income Tax and Social Contribution calculated at nominal rate (197,048)

Adjustments for effective Income Tax and Social Contribution ascertainment:

Result from investments in subsidiaries Difference of rates on results abroad Tax incentives Permanent exclusions (additions) Tax losses Reversal of Corporate Tax and Social Contribution in the previous years Other adjustments

Income Tax and Social Contribution in the result Current tax Deferred tax

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34%

34%

34%

(214,591)

(229,224)

(189,160)

191,258 - - - 65 24 (619)

(6,320)

190,241 - - - - - 749

1,830

2,649 (8,764) 19,973 2,355 3,102 3,701 20,496

2,874 (5,341) 22,430 (526) 781 232 2,481

(171,079)

(206,293)

(48) (6,272)

22 1,808

(194,275) 23,196

(221,465) 15,172

www.weg.net

notes to the financial statements from december 31st 2009 and 2008

19 - OTHER OPERATING REVENUES/EXPENSES - CONSOLIDATED

The amounts recorded are related to the interest in profit sharing, tax debits from the debit payment and payment in installment program – Law 11,941/09, reversal/(provision) of tax lawsuits and other, as follows:

2009

2008

OTHER OPERATING REVENUES - Other

OTHER OPERATING EXPENSES - Employee profit sharing - Profit sharing – subsidiaries overseas - Tax Debits - Law 11,941/09 - Reversal/Provision Semiannual PIS Law 07/70 - Reversal/(Provision) of Tax Lawsuits - Goodwill amortization - Tax incentives of Rouanet Law - Other TOTAL NET

12,388 12,388

15,936 15,936

(114,565) (71,913) (4,727) (26,237) - 5,906 - (2,099) (15,495) (102,177)

(105,101) (80,885) (5,361) 10,349 (2,614) (9,457) (2,652) (14,481) (89,165)

20 - INSURANCE COVERAGE The Company adopts the policy of contracting insurance coverage for assets subject to risks by amounts deemed sufficient to cover possible claims, considering the nature of its activity. The risk assumptions adopted, given their nature, are not part of the scope of audit and consequently they were not examined by our independent auditors. On December 31, 2009, the insurance coverage for operational risks was comprised of R$70,000 for material damages, R$20,000 for profit loss and R$10,000 for civil liability.

21 - FINANCIAL INSTRUMENTS - CONSOLIDATED

The Company and its subsidiaries carried out an evaluation of their financial instruments in compliance with CVM Resolution 566 (CPC 14) and CVM Rule 475, both as from December 17, 2008.

We highlight that on December 31, 2009, the Company has no outstanding operations involving derivative financial instruments. On said date, it has the following balances related to the existing financial instruments:

DESCRIÇÃO

Cash and Banks

CONSOLIDATED Book Value Market Value 2009 2008 2009 2008

30,948

71,198

30,948

71,198

Financial Investments: - In Domestic Currency - In Foreign Currency

2,024,651 71,518

1,579,415 198,865

2,024,651 71,518

1,579,415 198,865

Financings and Loans :

- In Domestic Currency - In Foreign Currency - Derivative Instrument (NDF)

1,382,702 1,153,023 489,831 991,309 - 16,884

1,382,702 489,831 -

1,153,023 991,309 16,884

Financial Investments are described as follows:

a) Cash and Banks

These are presented at their market value, which is equivalent to their book value.

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notes to the financial statements from december 31st 2009 and 2008 b) Financial Investments (Note 05) São classificadas como destinadas à negociação. O valor de mercado está refletido nos valores registrados nos balanços patrimoniais.

c) Loans and Financing (Note 14) The main purpose of this financial instrument is to generate funds to finance the Company’s expansion programs and occasionally meet the needs of its cash flows in the short term.

- Domestic currency loans and financing – they are classified as financial liabilities not measured to fair value, and are accounted for by their values restated according to contracted rates. The market values of these loans are equivalent to their book values, as they are financial instruments with exclusive characteristics coming from specific financing sources.

- Foreign currency loans and financing – financing contracted to support working capital of commercial operations in Brazil and in subsidiaries overseas and restated according to contracted rates.

Risk factors of financial instruments are basically related to: (i) Financial Risks Foreign Currency Risks In order to mitigate foreign exchange risks, the Company exports in several currencies, and it also monitors the financial exposure, seeking to balance its financial assets and liabilities within the limits established by Management.

As defined by the Company’s Board of Directors, the short-term cash flow protection must be limited to the equivalent to 3 months of revenues in foreign currencies.

The Company’s exports amounted to US$561.6 million up to December 31, 2009), representing natural hedge (US$675.7 million up to December 31, 2008).

Debt Charges Risks These risks results from the possibility of subsidiaries incurring in losses due to fluctuations in interest rates or other debt indexes that increase financial expenses related to loans and financing obtained in the market, or decrease financial revenue related to subsidiaries’ financial investments. The Company continuously monitors market interest rates in order to evaluate the possible need to protect itself against volatility risk of these rates. (ii) Operating Risks Credit risk It arises from the possibility that the Company’s subsidiaries do not receive values resulting from sales operations or from credits with financial institutions generated by financial investments. In order to mitigate the risk deriving from sales operations, the Company’s subsidiaries adopt as a practice the analysis of their customers’ equity and financial position, define a credit limit and permanently follow-up on their outstanding balance. As for the financial investments, the Company and its subsidiaries do not carry out investments in institutions unless they present low credit risk. Moreover, each institution has a maximum limit of investment balance, established by Management.

22 - SUBSIDY AND GOVERNMENT ASSISTANCE The Company, through its subsidiaries, was granted the following subsidies: a) Tax Reduction The Company, through its subsidiary WEG Amazônia S.A., obtained, on December 31, 2009, the following tax incentives: (i) Incentive credit of ICMS of 90.25% in the amount of R$2,040 recognized in the income for the year. (ii) Reduction of 75% in the Corporate Income Tax in the amount of R$235, recognized in the income for the year.

b) Non-monetary assets The Company, through its subsidiary WEG Linhares Equipamentos Elétricos Ltda., obtained the governmental subsidy of a land of 400.6 thousand square feet, located at Sítio Mercedes, Rio Quartel district, at the municipality of Linhares, State of Espírito Santo, evaluated in R$1,241.

Said subsidy is recorded under non-current liabilities and shall be recognized under operating income, in accordance with the realization of depreciation on improvements to be carried out.

In return for the governmental subsidy, the Company undertakes to: a) create a thousand direct employments, as per the project implementation schedule; b) promote the training and qualification of skilled labor, and do it mainly with local workers; c) promote a sustainable development, committed to a healthy environment, including the working environment; d) develop social projects, complying with the company’s social purpose; e) use the inputs and raw material from the region.

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23 - ADEHSION TO THE DEBIT PAYMENT AND DEBIT PAYMENT IN INSTALLMENTS - LAW 11,941/09 The Company and its subsidiaries adhered, on November 30, 2009, to the program brought by Law 11,941 as of May 27, 2009, aiming at using the reductions in fines, interest and legal charges provided for by Law, under the following conditions:

a) Taxes Included in the Debits paid in Installments: Tax Principal Fine Interest Total Debit amortization (Payment)

DARF Judiciary Dep. Paid in installment IRPJ 2.116 - 1.544 3.660 - 3.660 CSLL 762 - 556 1.318 - 1.318 PIS 3.532 - 544 4.076 - 4.076 COFINS 16.271 - 2.506 18.777 - 18.777 IPI 18.560 160 5.973 24.693 21.719 - 2.875 Other 8.694 133 4.795 13.622 7.561 - 6.160 Total 49.935 293 15.918 66.146 29.280 27.831 9.035

b) Considering the provisioned contingencies in the financial statements as of September 30, 2009, plus fine and interest levied on debits and deduction of the benefit amount of deferred charges, was accounted for as additional expense, net of Corporate Tax and Social Contribution in the amount of R$11,247. c) The Company opted for the payment in cash in the amount of R$57,111 and the balance sheet of R$9,035 shall be carried out by the alternative payment in 30 monthly installments, monthly restated by the SELIC rate. d) The alternative payment in installments program does not provide for the presentation of guarantees.

FINANCIAL STATEMENTS PUBLICATION

g Correio do Povo - from Jaraguá do Sul/SC g Valor Econômico - from São Paulo/SP g Diário Oficial do Estado de Santa Catarina

BOARD OF DIRETORS Décio da Silva - Presidente Gerd Edgar Baumer - Vice-Presidente Ana Teresa do Amaral Meirelles Martin Werninghaus Miriam Voigt Schwartz Moacyr Rogério Sens Nildemar Secches

FISCAL COUNCIL Eunildo Lázaro Rebelo Ilário Bruch Ivan Farias de Castro

EXECUTIVE BOARD Harry Schmelzer Junior - Diretor Presidente Sérgio Luiz Silva Schwartz - Diretor Vice-Presidente Alidor Lueders - Diretor de Relações com Investidores Roberto Bauer - Diretor da Área Internacional Jaime Richter - Diretor de Recursos Humanos Antônio Cesar da Silva - Diretor de Marketing Carlos Diether Prinz - Diretor - Transmissão e Distribuição Siegfried Kreutzfeld - Diretor - Motores Sinésio Tenfen - Diretor - Energia Umberto Gobbato - Diretor - Automação

ACCOUNTANT Wilson José Watzko TC-CRC/SC 16555/O-4 CPF 352.366.129-34

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Special review report – Unqualified opinion To the Shareholders, Board of Directors, and Executive Officers of WEG S/A Jaraguá do Sul - SC

1. We have examined the balance sheets of WEG S.A. (parent company and consolidated) as of December 31, 2009 and 2008, and the respective statement of income, statements of changes in shareholders’ equity, of cash flows, and value added corresponding to the years ended on said dates, prepared under the responsibility of its Management. Our responsibility is to express an opinion on these financial statements. The financial statements of certain subsidiaries and associated companies, whose investments represented R$381,629 thousand on December 31, 2009 (R$519,867 thousand on December 31, 2008) and generated earnings in subsidiaries’ equity of R$6,914 thousand (R$42,944 thousand on December 31, 2008) during the year ended on that date, were examined by other independent auditors, which issued unqualified review reports. In our opinion, concerning the amount of these investments and the earnings in the subsidiaries’ equity generated by them, it is based on the review report of these other auditors.

2. Our reviews were conducted in compliance with the auditing rules applicable in Brazil and comprise: a) the planning of the works, taking in consideration the relevance of the balances, the volume of transactions and the accounting and internal control systems of the Company and its subsidiaries; b) the verification, based on tests, of the evidences and records that support the accounting figures and information disclosed; and c) the evaluation of the most representative accounting practices and estimates adopted by the Management of the Company and its subsidiaries, as well as of the presentation of the financial statements taken as a whole.

3. In our opinion, based on our reviews, and on the report on other independent auditors’ reviews, as mentioned in paragraph 1, the financial statements referred to above adequately represent, in all relevant aspects, the equity and financial position of WEG S/A on December 31, 2009 and 2008, the result of its operations, the changes in shareholders’ equity its cash flows, and the value added in operations related to the year ended on said dates, pursuant to the accounting practices adopted in Brazil.

Blumenau, February 5, 2010

ERNST & YOUNG Auditores Independentes S.S. CRC-2-SP 015.199/O-6 F-SC Marcos Antonio Quintanilha Accountant CRC-1-SP 132.776/O-3-T-SC

Fiscal council’s opinion The Fiscal Council of WEG SA, performing its statutory duties reviewing the Management Report, the Financial Statements of the fiscal year ended in 12/31/2009 and, the Management´s opinion to the allocation of the net profit, based on examinations performed and considering the explanations provided by Company’s management, the representative of external audit and, in addition, on the opinion of the external independent auditors, ERNST & YOUNG – Auditores Independentes, without qualifications, dated 05/02/2010, believes that the previously mentioned documents are prepared to be discussed and voted at the Annual General Meeting.

Jaraguá do Sul (SC) February 23, 2010.

Ilário Bruch Eunildo Lázaro Rebelo

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Social Report 2009 and 2008 - Brazil Consolidated (Figures are expressed in thousands of Reais, except for employees figures) 1- 1- Basis of Calculation 1.1 - Gross Operating Revenues 1.2 - Net Operating Revenues 1.3 - Net Operating Income 1.4 - Gross Payroll 2 - Internal Social Indicators 2.1 - Meals 2.2 - Compulsory Social Charges 2.3 - Profit Sharing 2.4 - Private Pension Plan 2.5 - Health and Dental Assistance 2.6 - Education 2.7 - Other Benefits TOTAL 3 - External Social Indicators 3.1 - Taxes 3.2 - Contributions to Society 3.2.1 - Education and Culture 3.2.2 - Sports and Leisure 3.2.3 - Philantropy TOTAL 4 - Environmental Indicators Environmental Investments

2009 21,876 282,070 80,938 13,836 14,811 5,804 10,949 430,284 2009 572,203 7,689 1,862 436 5,391 579,892 2009 4,062

% of Gross Payroll 2.87 37.03 10.63 1.82 1.94 0.76 1.44 56.49 % of Gross Payroll 75.12 1.01 0.24 0.06 0.71 76.13 % of Gross Payroll 0.53

2009 5,110,596 4,210,620 631,149 761,751 % of Net Revenues 3.47 44.69 12.82 2.19 2.35 0.92 1.73 68.17 % of Net Revenues 90.66 1.22 0.30 0.07 0.85 91.88 % of Net Revenues 0.64

With regard to setting “annual goals” to reduce waste generation, ( ) does not set gols ( ) meets from 51 to 75% consumption in general in production/operation and increase the effectiveness with which natural resources are used, the company: ( ) meets from 0 to 50% ( X ) meets from 76 to 100% 5 - Employee Indicators 5.1 - Number of employees at the end of the period 5.2 - Number of admissions during the period 5.3 - Number of layoffs during the period 5.4 - Number of women working at the end of period 5.5 - % of management positions held by women 5.6 - Number of outsourced employees 5.7 - Number of interns 5.8 - Number of employees aged 45+ at the end of period 5.9 - Number of afro-descendants employees at the end of period 5.10 - % of management positions held by afro-descendants 6 - Material information about the company’s corporate citizenship practices Total number of work-related accidents Social and environmental projects developed by the company were defined by: Safety and health standards at the workplace were defined by: With regard to the freedom of association, the right to collective bargaining and the internal representation of workers, the company:

( ) Board

( ) Board and ( ) all employees Management ( ) does not get involved

The private pension scheme includes:

( ) Board

The profit sharing scheme includes:

( ) Board

When selecting suppliers, the same ethical and social and environmental responsibility standards adopted by the company: With regard to employees’ participation in voluntary work programs, the company Total value added to be distributed Distribution of Value Added (DVA)

( ) Board and Management

( ) are not considered ( ) does not get involved

( X ) follows ILO norms

28,267 260,724 95,915 13,625 13,438 10,307 11,553 433,829 2008 629,617 8,255 3,174 236 4,845 637,872 2008 20,115

( ) does not set gols ( ) meets from 51 to 75% ( ) meets from 0 to 50% ( X ) meets from 76 to 100% 2008 19,504 4,541 2,586 3,797 10 1,059 122 1,772 2,261 10

2009

2008

1.116

-

( X ) all employees

( ) Board

( ) Board and Management

( X ) all ( ) Board and employees Management +Cipa

( ) all employees)

( ) encourages and follows ILO

( X ) all employees) ( X ) all employees ( X ) are demanded ( ) organizes and ( X ) supports encourages

Im 2008:

% of Gross Payroll 4.47 41.27 15.18 2.16 2.13 1.63 1.83 68.67 % of Gross Payroll 99.66 1.31 0.50 0.04 0.77 100.97 % of Gross Payroll 3.18

2008

2009 17,444 1,954 4,014 3,489 4 361 26 1,564 1,936 8

( ) Board and management ( ) Board and management ( ) are suggested

30% Employees 22% Shareholders

2008 5,471,192 4,502,041 674,187 631,786 % of Net Revenues 4.19 38.67 14.23 2.02 1.99 1.53 1.71 64.35 % of Net Revenues 93.39 1.23 0.47 0.04 0.72 94.62 % of Net Revenues 2.98

R$ 2.402.223

( ) does not get involved ( ) Board ( ) Board ( ) are not considered ( ) does not get involved

( X ) follows ILO norms ( ) Board and management ( ) Board and management ( ) are suggested ( X ) supports

(X) all employees (X) all employees +Cipa ( ) encourages and follows ILO ( X ) todos(as) empregados(as) ( X ) todos(as) empregados(as) ( X ) are demanded ( ) organizes and encourages

Im 2007:

28% Government 32% Government 20% third parties 27% Shareholders

R$ 2.536.183

30% Employees 11% Third Parties

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WEG Equipamentos Elétricos S.A. Jaraguá do Sul - SC Fone (47) 3276-4000 - Fax (47) 3276-4020 São Paulo - SP Fone (11) 5053-2300 - Fax (11) 5052-4212 motores@weg.net www.weg.net