----

| Report of independent auditors                                                 |   | 1      |
|--------------------------------------------------------------------------------|--------|--------|
|                                                                           |   |   |
| Consolidated balance sheets                                                    |   | 2      |
| Consolidated statements of income                                              |   | 4      |
| Consolidated statements of shareholders’ equity and comprehensive income |   | 5      |
| Consolidated statements of cash flows                                          |   | 6      |
| Notes to consolidated financial statements                                     |   | 7      |

----

----

|                                                                                                      |   | December 31, |    |
|-----------------------------------------------------------------------------------------------------------|--------|-------------------|---------|
|                                                                                                      |   | 2010              |    |   | 2009 |   |
| Assets                                                                                                    |   |              |    |   |   |   |
| Current assets:                                                                                           |   |              |    |   |   |   |
| Cash and cash equivalents                                                                                 |   | $                 | 4,083   |   |   | $ | 1,246 |   |
| Accounts receivable, less allowance for doubtful accounts of $828 and $468 in 2010 and 2009, respectively |   |              | 26,557  |   |   |   | 21,427 |   |
| Inventories, net                                                                                          |   |              | 46,576  |   |   |   | 25,952 |   |
| Taxes recoverable                                                                                         |   |              | 3,248   |   |   |   | 3,945 |   |
| Accounts receivable from related parties                                                                  |   |              | 40      |   |   |   | 40 |   |
| Prepaid expenses and other                                                                                |   |              | 1,034   |   |   |   | 822 |   |
| Deferred income taxes                                                                                     |   |              | 2,711   |   |   |   | 1,941 |   |
| Total current assets                                                                                      |   |              | 84,249  |   |   |   | 55,373 |   |
|                                                                                                      |   |              |    |   |   |   |   |   |
| Property, plant and equipment, net                                                                        |   |              | 30,963  |   |   |   | 27,592 |   |
| Other assets:                                                                                             |   |              |    |   |   |   |   |   |
| Deferred income taxes                                                                                     |   |              | 3,095   |   |   |   | 2,525 |   |
| Other                                                                                                     |   |              | 309     |   |   |   | 216 |   |
| Total assets                                                                                              |   | $                 | 118,616 |   |   | $ | 85,706 |   |

----

|                                                                                                                              |   | December 31, |    |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|
|                                                                                                                              |   | 2010              |    |   | 2009 |   |
| Liabilities and shareholders’ equity                                                                                        |   |              |    |   |   |   |
| Current liabilities:                                                                                                              |   |              |    |   |   |   |
| Current portion of long-term debt                                                                                                 |   | $                 | 11,755  |   |   | $ | 8,923 |   |
| Accounts payable                                                                                                                  |   |              | 14,713  |   |   |   | 8,226 |   |
| Wages and salaries                                                                                                                |   |              | 5,247   |   |   |   | 4,648 |   |
| Taxes payable                                                                                                                     |   |              | 1,336   |   |   |   | 898 |   |
| Due to related parties                                                                                                            |   |              | -       |   |   |   | 8 |   |
| Dividends payable                                                                                                                 |   |              | 9,483   |   |   |   | 3,181 |   |
| Employee profit sharing and management bonuses                                                                                    |   |              | -       |   |   |   | 2,603 |   |
| Warranty reserve                                                                                                                  |   |              | 714     |   |   |   | 598 |   |
| Commissions payable                                                                                                               |   |              | 1,234   |   |   |   | 859 |   |
| Accrued expenses and other                                                                                                        |   |              | 684     |   |   |   | 362 |   |
| Total current liabilities                                                                                                         |   |              | 45,166  |   |   |   | 30,306 |   |
|                                                                                                                              |   |              |    |   |   |   |   |   |
| Long-term liabilities:                                                                                                            |   |              |    |   |   |   |   |   |
| Long-term debt, net of current portion                                                                                            |   |              | 7,667   |   |   |   | 2,565 |   |
| Provision for contingencies                                                                                                       |   |              | 6,295   |   |   |   | 3,701 |   |
| Total long-term liabilities                                                                                                       |   |              | 13,962  |   |   |   | 6,266 |   |
|                                                                                                                              |   |              |    |   |   |   |   |   |
| Commitments and contingencies                                                                                                     |   |              | -       |   |   |   | - |   |
|                                                                                                                              |   |              |    |   |   |   |   |   |
| Shareholders’ equity:                                                                                                       |   |              |    |   |   |   |   |   |
| Capital, $ 0.427 and 0.369, per value, 45,000,000 common shares authorized and issued at December 31, 2010 and 2009, respectively |   |              | 19,229  |   |   |   | 16,610 |   |
| Retained earnings                                                                                                                 |   |              | 29,184  |   |   |   | 24,258 |   |
| Accumulated other comprehensive income                                                                                            |   |              | 11,075  |   |   |   | 8,266 |   |
| Total shareholders’ equity                                                                                                  |   |              | 59,488  |   |   |   | 49,134 |   |
| Total liabilities and shareholders’ equity                                                                                  |   | $                 | 118,616 |   |   | $ | 85,706 |   |

----

|                                                 |   | For the years ended December 31, |    |
|------------------------------------------------------|--------|-----------------------------------------------------------|---------|
|                                                 |   | 2010                                                      |    |   | 2009 |   |   | 2008 |   |
| Net sales                                            |   | $                                                         | 182,946 |   |   | $ | 140,690 |   |   | $ | 174,305 |   |
|                                                 |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Costs and expenses:                                  |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Cost of goods sold and services rendered             |   |                                                      | 93,683  |   |   |   | 69,291 |   |   |   | 80,924 |   |
| Product design and engineering expenses              |   |                                                      | 10,013  |   |   |   | 8,861 |   |   |   | 9,405 |   |
| Selling, general and administrative                  |   |                                                      | 54,956  |   |   |   | 45,636 |   |   |   | 51,698 |   |
|                                                 |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Operating income                                     |   |                                                      | 24,294  |   |   |   | 16,902 |   |   |   | 32,276 |   |
|                                                 |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Realized and unrealized currency exchange gains, net |   |                                                      | (2,941  | ) |   |   | (508 | ) |   |   | (348 | ) |
| Financial expense, net                               |   |                                                      | 3,732   |   |   |   | 1,787 |   |   |   | 836 |   |
|                                                 |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Income before income taxes                           |   |                                                      | 23,503  |   |   |   | 15,623 |   |   |   | 31,788 |   |
|                                                 |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Income taxes                                         |   |                                                      | 4,438   |   |   |   | 1,032 |   |   |   | 6,829 |   |
|                                                 |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Net income                                           |   | $                                                         | 19,065  |   |   | $ | 14,591 |   |   | $ | 24,959 |   |

----

|                                       |   |                       |       |   |                |   |   | Retained earnings   |   |   |                       |   |   |                                            |   |
|--------------------------------------------|--------|----------------------------|------------|--------|---------------------|--------|--------|--------------------------|--------|--------|----------------------------|--------|--------|-------------------------------------------------|--------|
|                                       |   |  Number ofshares |       |   |   Capital |   |   |   Appropriated |   |   |   Unappropriated |   |   | Accumulated other comprehensiveincome |   |   | Totalshareholders’equity |   |
| Balance, December 31, 2007                 |   |                       | 45,000,000 |   |                | $      | 7,887  |                     |   | $      | 4,993                      |   |   | $                                               | 10,079 |   |   | $ | 9,254 |   |   | $ | 32,213 |   |
|                                       |   |                       |       |   |                |   |   |                     |   |   |                       |   |   |                                            |   |   |   |   |   |   |   |   |   |   |
| Capitalization of tax incentive reserve    |   |                       | -          |   |                |   | 4,815  |                     |   |   | (4,815                     | )      |   |                                            | -      |   |   |   | - |   |   |   | - |   |
| Dividends                                  |   |                       | -          |   |                |   | -      |                     |   |   | -                          |   |   |                                            | (6,685 | ) |   |   | - |   |   |   | (6,685 | ) |
| Net income                                 |   |                       | -          |   |                |   | -      |                     |   |   | -                          |   |   |                                            | 24,959 |   |   |   | - |   |   |   | 24,959 |   |
| Transfer to appropriated retained earnings |   |                       | -          |   |                |   | -      |                     |   |   | 4,466                      |   |   |                                            | (4,466 | ) |   |   | - |   |   |   | - |   |
| Dividends payable                          |   |                       | -          |   |                |   | -      |                     |   |   | -                          |   |   |                                            | (3,902 | ) |   |   | - |   |   |   | (3,902 | ) |
| Other comprehensive income:                |   |                       |       |   |                |   |   |                     |   |   |                       |   |   |                                            |   |   |   |   |   |   |   |   |   |   |
| Currency translation adjustments           |   |                       | -          |   |                |   | -      |                     |   |   | -                          |   |   |                                            | -      |   |   |   | (12,083 | ) |   |   | (12,083 | ) |
|                                       |   |                       |       |   |                |   |   |                     |   |   |                       |   |   |                                            |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2008                 |   |                       | 45,000,000 |   |                |   | 12,702 |                     |   |   | 4,644                      |   |   |                                            | 19,985 |   |   |   | (2,829 | ) |   |   | 34,502 |   |
|                                       |   |                       |       |   |                |   |   |                     |   |   |                       |   |   |                                            |   |   |   |   |   |   |   |   |   |   |
| Capitalization of tax incentive reserve    |   |                       | -          |   |                |   | 3,908  |                     |   |   | (3,908                     | )      |   |                                            | -      |   |   |   | - |   |   |   | - |   |
| Dividends                                  |   |                       | -          |   |                |   | -      |                     |   |   | -                          |   |   |                                            | (7,873 | ) |   |   | - |   |   |   | (7,873 | ) |
| Net income                                 |   |                       | -          |   |                |   | -      |                     |   |   | -                          |   |   |                                            | 14,591 |   |   |   | - |   |   |   | 14,591 |   |
| Transfer to appropriated retained earnings |   |                       | -          |   |                |   | -      |                     |   |   | 3,540                      |   |   |                                            | (3,540 | ) |   |   | - |   |   |   | - |   |
| Dividends payable                          |   |                       | -          |   |                |   | -      |                     |   |   | -                          |   |   |                                            | (3,181 | ) |   |   | - |   |   |   | (3,181 | ) |
| Other comprehensive income:                |   |                       |       |   |                |   |   |                     |   |   |                       |   |   |                                            |   |   |   |   |   |   |   |   |   |   |
| Currency translation adjustments           |   |                       | -          |   |                |   | -      |                     |   |   | -                          |   |   |                                            | -      |   |   |   | 11,095 |   |   |   | 11,095 |   |
|                                       |   |                       |       |   |                |   |   |                     |   |   |                       |   |   |                                            |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009                 |   |                       | 45,000,000 |   |                |   | 16,610 |                     |   |   | 4,276                      |   |   |                                            | 19,982 |   |   |   | 8,266 |   |   |   | 49,134 |   |
|                                       |   |                       |       |   |                |   |   |                     |   |   |                       |   |   |                                            |   |   |   |   |   |   |   |   |   |   |
| Capitalization of tax incentive reserve    |   |                       | -          |   |                |   | 2,619  |                     |   |   | (2,619                     | )      |   |                                            | -      |   |   |   | - |   |   |   | - |   |
| Dividends                                  |   |                       | -          |   |                |   | -      |                     |   |   | -                          |   |   |                                            | (7,697 | ) |   |   | - |   |   |   | (7,697 | ) |
| Net income                                 |   |                       | -          |   |                |   | -      |                     |   |   | -                          |   |   |                                            | 19,065 |   |   |   | - |   |   |   | 19,065 |   |
| Transfer to appropriated retained earnings |   |                       | -          |   |                |   | -      |                     |   |   | 4,265                      |   |   |                                            | (4,265 | ) |   |   | - |   |   |   | - |   |
| Dividends payable                          |   |                       | -          |   |                |   | -      |                     |   |   | -                          |   |   |                                            | (3,823 | ) |   |   | - |   |   |   | (3,823 | ) |
| Other comprehensive income:                |   |                       |       |   |                |   |   |                     |   |   |                       |   |   |                                            |   |   |   |   |   |   |   |   |   |   |
| Currency translation adjustments           |   |                       | -          |   |                |   | -      |                     |   |   | -                          |   |   |                                            | -      |   |   |   | 2,809 |   |   |   | 2,809 |   |
|                                       |   |                       |       |   |                |   |   |                     |   |   |                       |   |   |                                            |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2010                 |   |                       | 45,000,000 |   |                | $      | 19,229 |                     |   | $      | 5,922                      |   |   | $                                               | 23,262 |   |   | $ | 11,075 |   |   | $ | 59,488 |   |

----

|                                                                             |   | For the years ended December 31, |    |
|----------------------------------------------------------------------------------|--------|-----------------------------------------------------------|---------|
|                                                                             |   | 2010                                                      |    |   | 2009 |   |   | 2008 |   |
| OPERATING ACTIVITIES:                                                            |   |                                                      |    |   |   |   |   |   |   |
| Net income                                                                       |   | $                                                         | 19,065  |   |   | $ | 14,591 |   |   | $ | 24,959 |   |
| Adjustments to reconcile net income to net cash provided by operating activities |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Exchange losses and interest expenses                                            |   |                                                      | 791     |   |   |   | 1,143 |   |   |   | 878 |   |
| Depreciation                                                                     |   |                                                      | 6,667   |   |   |   | 5,523 |   |   |   | 4,193 |   |
| Deferred income taxes                                                            |   |                                                      | (1,093  | ) |   |   | (867 | ) |   |   | (339 | ) |
| Changes in operating assets and liabilities                                      |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Accounts receivable, net                                                         |   |                                                      | (3,996  | ) |   |   | (4,237 | ) |   |   | (4,163 | ) |
| Inventories, net                                                                 |   |                                                      | (18,664 | ) |   |   | 2,168 |   |   |   | (7,560 | ) |
| Prepaid expenses and other current assets                                        |   |                                                      | 674     |   |   |   | (2,501 | ) |   |   | (67 | ) |
| Other assets                                                                     |   |                                                      | (80     | ) |   |   | (157 | ) |   |   | 77 |   |
| Accounts payable                                                                 |   |                                                      | 6,270   |   |   |   | 2,406 |   |   |   | 511 |   |
| Wages and salaries                                                               |   |                                                      | 374     |   |   |   | 427 |   |   |   | 754 |   |
| Employee profit sharing and management bonuses                                   |   |                                                      | (2,610  | ) |   |   | (118 | ) |   |   | 488 |   |
| Commissions payable                                                              |   |                                                      | 323     |   |   |   | 232 |   |   |   | (519 | ) |
| Warranty reserve                                                                 |   |                                                      | 85      |   |   |   | (86 | ) |   |   | (233 | ) |
| Provision for contingencies                                                      |   |                                                      | 2,328   |   |   |   | 360 |   |   |   | (199 | ) |
| Accrued expenses and others                                                      |   |                                                      | 676     |   |   |   | (351 | ) |   |   | (646 | ) |
| Net cash provided by operating activities                                        |   |                                                      | 10,810  |   |   |   | 18,533 |   |   |   | 18,134 |   |
| INVESTING ACTIVITIES:                                                            |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Capital expenditures                                                             |   |                                                      | (8,781  | ) |   |   | (8,185 | ) |   |   | (11,625 | ) |
| Proceeds from disposals of property, plant and equipment                         |   |                                                      | 72      |   |   |   | (28 | ) |   |   | 165 |   |
| Net cash provided by investing activities                                        |   |                                                      | (8,709  | ) |   |   | (8,213 | ) |   |   | (11,460 | ) |
| FINANCING ACTIVITIES:                                                            |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Borrowings                                                                       |   |                                                      | 5,921   |   |   |   | 1,107 |   |   |   | 11,666 |   |
| Repayments                                                                       |   |                                                      | -       |   |   |   | (3,410 | ) |   |   | (1,464 | ) |
| Decrease in amounts due to related parties                                       |   |                                                      | (8      | ) |   |   | - |   |   |   | - |   |
| Dividends paid                                                                   |   |                                                      | (5,346  | ) |   |   | (13,882 | ) |   |   | (16,514 | ) |
| Net cash provided (used) by financing activities                                 |   |                                                      | 567     |   |   |   | (16,185 | ) |   |   | (6,312 | ) |
|                                                                             |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Effect of exchange rate changes on cash and cash equivalents                     |   |                                                      | 169     |   |   |   | 1,433 |   |   |   | (1,808 | ) |
|                                                                             |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Net change in cash and cash equivalents                                          |   |                                                      | 2,837   |   |   |   | (4,432 | ) |   |   | (1,446 | ) |
|                                                                             |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at beginning of years                                  |   |                                                      | 1,246   |   |   |   | 5,678 |   |   |   | 7,124 |   |
|                                                                             |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at end of years                                        |   | $                                                         | 4,083   |   |   | $ | 1,246 |   |   | $ | 5,678 |   |
|                                                                             |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Supplemental disclosure of cash flow information:                                |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Cash paid for interest                                                           |   | $                                                         | 894     |   |   | $ | 1,289 |   |   | $ | 425 |   |
| Cash paid for income taxes                                                       |   | $                                                         | 5,148   |   |   | $ | 4,554 |   |   | $ | 7,014 |   |

----

| 1. | Organization and nature of business |
|----|-------------------------------------|

|   | · | Exemption of IPI (Federal Value-added tax, “VAT”) on products; |
|--------|--------|----------------------------------------------------------------------------|

|   | · | Suspension of import duties on imports of capital assets and reduction of 88% on the current tax rate applied to foreign consumable inputs; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Refund of 55% of the ICMS (State VAT) charged on such product lines as antennas, alarms, remote control for alarms, wires and cables; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Refund of 90.25% of the ICMS charged on assembled electronic circuit plates; |
|--------|--------|------------------------------------------------------------------------------|

|   | · | Refund of 55%, with 45% additional refund, reviewed by State Government each three years, totaling 100% of the ICMS charged on other items of the Company’s product lines; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 75% income tax reduction for the amount calculated on sales of products manufactured at the Manaus plant, under appropriate tax incentives. Such tax reduction is valid until 2012, when the benefit may be reduced. The income tax incentive amount cannot be distributed to shareholders, but remains as a tax incentive reserve invested in the Company itself or used for capital increase. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 1. | Organization and nature of business (Continued) |
|----|-------------------------------------------------|

| 2. | Summary of significant accounting policies |
|----|--------------------------------------------|

|   | a) | Basis of presentation |
|--------|----|-----------------------|

|   | b) | Cash and cash equivalents |
|--------|----|---------------------------|

----

| 2. | Summary of significant accounting policies (Continued) |
|----|--------------------------------------------------------|

|   | c) | Accounts receivable, allowance for doubtful accounts and concentration of credit risk |
|--------|----|---------------------------------------------------------------------------------------|

|   | d) | Inventories |
|--------|----|-------------|

|                                        |   | 2010   |   |   | 2009   |   |
|---------------------------------------------|--------|--------|--------|--------|--------|--------|
| Raw materials                               |   | $      | 23,571 |   |   | $      | 11,955 |   |
| Inventory in transit                        |   |   | 7,086  |   |   |   | 3,556 |   |
| Work-in-progress                            |   |   | 4,326  |   |   |   | 3,221 |   |
| Finished goods                              |   |   | 12,407 |   |   |   | 7,822 |   |
| Total inventories                           |   |   | 47,390 |   |   |   | 26,554 |   |
| Less: provision for slow-moving inventories |   |   | (814   | )      |   |   | (602 | ) |
| Inventories, net                            |   | $      | 46,576 |   |   | $      | 25,952 |   |

----

| 2. | Summary of significant accounting policies (Continued) |
|----|--------------------------------------------------------|

|   | e) | Property, plant and equipment |
|--------|----|-------------------------------|

|                                |   | 2010   |    |   | 2009   |   |
|-------------------------------------|--------|--------|---------|--------|--------|--------|
| Land and improvements               |   | $      | 886     |   |   | $      | 847 |   |
| Buildings and improvements          |   |   | 10,352  |   |   |   | 8,304 |   |
| Machinery and equipment             |   |   | 11,123  |   |   |   | 10,549 |   |
| Computer equipment and software     |   |   | 8,238   |   |   |   | 7,053 |   |
| Office furniture and fixtures       |   |   | 2,112   |   |   |   | 1,852 |   |
| Tooling                             |   |   | 10,703  |   |   |   | 8,913 |   |
| Vehicles                            |   |   | 2,377   |   |   |   | 2,254 |   |
| Tracking devices                    |   |   | 11,725  |   |   |   | 6,525 |   |
| Other                               |   |   | 2,586   |   |   |   | 2,528 |   |
| Total property, plant and equipment |   |   | 60,102  |   |   |   | 48,825 |   |
| Less: accumulated depreciation      |   |   | (29,139 | )      |   |   | (21,233 | ) |
| Property, plant and equipment, net  |   | $      | 30,963  |   |   | $      | 27,592 |   |

| Buildings and improvements      | 25 years   |
|---------------------------------|------------|
| Machinery and equipment         | 10 years   |
| Computer equipment and software | 5 years    |
| Office furniture and fixtures   | 10 years   |
| Tooling                         | 3-10 years |
| Vehicles                        | 5 years    |
| Tracking devices                | 5 years    |

----

| 2. | Summary of significant accounting policies (Continued) |
|----|--------------------------------------------------------|

|   | e) | Property, plant and equipment (Continued) |
|--------|----|-------------------------------------------|

|   | f) | Impairment of assets |
|--------|----|----------------------|

|   | g) | Income taxes |
|--------|----|--------------|

----

| 2. | Summary of significant accounting policies (Continued) |
|----|--------------------------------------------------------|

|                                                   |   | 2010   |   |   | 2009   |   |
|--------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Warranty reserves at beginning of year                 |   | $      | 598    |   |   | $      | 515 |   |
| Payments made                                          |   |   | (574   | )      |   |   | (646 | ) |
| Costs recognized for warranties issued during the year |   |   | 684    |   |   |   | 550 |   |
| Changes in estimates for preexisting warranties        |   |   | 6      |   |   |   | 179 |   |
| Warranty reserve at end of year                        |   | $      | 714    |   |   | $      | 598 |   |

----

| 2. | Summary of significant accounting policies (Continued) |
|----|--------------------------------------------------------|

|                             |   | For the Years Ended December 31, |   |
|----------------------------------|--------|-----------------------------------------------------------|--------|
|                             |   | 2010                                                      |   |   | 2009 |   |   | 2008 |   |
| Net income                       |   | $                                                         | 19,065 |   |   | $ | 14,591 |   |   | $ | 24,959 |   |
| Other comprehensive income:      |   |                                                      |   |   |   |   |   |   |   |   |   |   |
| Currency translation adjustments |   |                                                      | 2,809  |   |   |   | 11,095 |   |   |   | (12,083 | ) |
| Comprehensive income             |   | $                                                         | 21,874 |   |   | $ | 25,686 |   |   | $ | 12,876 |   |

----

| 2. | Summary of significant accounting policies (Continued) |
|----|--------------------------------------------------------|

----

| 2. | Summary of significant accounting policies (Continued) |
|----|--------------------------------------------------------|

----

| 2. | Summary of significant accounting policies (Continued) |
|----|--------------------------------------------------------|

| 3. | Long-term debt |
|----|----------------|

|  Type                                                          |   |  Index 2010                           |   |                                     |   | Finalmaturity |   | 2010   |         |   | 2009   |   |
|---------------------------------------------------------------------|--------|--------------------------------------------|--------|------------------------------------------|--------|---------------|--------|--------|--------------|--------|--------|--------|
| Working capital loans:                                              |   |                                       |   |                                     |   |          |   |   |         |   |   |   |
| National Bank for Economic and Social Development (BNDES) financing |   | Long-term Interest Rate (TJLP) + 3,8% p.y. |   | Long-term Interest Rate(TJLP) + 3% p.y.  |   |  2011    |   |   |   2,467 |   |   |   |   9,443 |   |
| Exportation Financing – BNDES                                 |   | Fixed interest rate of 4,5% p.y.           |   | -                                        |   |  2013    |   |   | 9,697        |   |   |   | - |   |
| Import financing (Finimp)                                           |   | Libor + 3.78% p.y. + Dollar exchange rate  |   | Libor + 3.75% p.y. + Dollarexchange rate |   |  2011    |   |   | 985          |   |   |   | 291 |   |
| Itau Bank                                                           |   | CDI + interests of 3.3% p.y.               |   | CDI + interests of 3.3% p.y.             |   |  2010    |   |   | -            |   |   |   | 1,152 |   |
| Alfa Bank                                                           |   | Annually interest from 12,82% to 13,22%    |   | -                                        |   |  2010    |   |   | 6,002        |   |   |   | - |   |
| Capital lease obligations                                           |   | Monthly interest from 1.22 to 1.52% p.m.   |   | Monthly interest from 1.06%to 1.65% p.m. |   |  2013    |   |   | 271          |   |   |   | 602 |   |
|                                                                |   |                                       |   |                                     |   |          |   |   | 19,422       |   |   |   | 11,488 |   |
| Noncurrent                                                          |   |                                       |   |                                     |   |          |   |   | (7,667       | )      |   |   | (2,565 | ) |
| Current                                                             |   |                                       |   |                                     |   |          |   | $      | 11,755       |   |   | $      | 8,923 |   |

----

| 4. | Capital lease obligations |
|----|---------------------------|

| 2011                                       |   | $      | 255    |   |
|--------------------------------------------|--------|--------|--------|--------|
| 2012                                       |   |   | 72     |   |
| 2013                                       |   |   | 18     |   |
|                                       |   |   | 345    |   |
|                                       |   |   |   |   |
| Imputed interest amount                    |   |   | (74    | )      |
| Present value of lease payments            |   |   | 271    |   |
| (-) Amount recorded in current liabilities |   |   | (199   | )      |
| (=) Amount due in the long term            |   | $      | 72     |   |

| 5. | Advertising costs |
|----|-------------------|

| 6. | Income taxes |
|----|--------------|

----

| 6. | Income taxes (Continued) |
|----|--------------------------|

|                               |   | For the years ended December 31, |   |
|------------------------------------|--------|-----------------------------------------------------------|--------|
|                               |   | 2010                                                      |   |   | 2009 |   |   | 2008 |   |
| Income (loss) before income taxes: |   |                                                      |   |   |   |   |   |   |   |
| Brazilian                          |   | $                                                         | 24,121 |   |   | $ | 16,190 |   |   | $ | 31,026 |   |
| Other foreign                      |   |                                                      | (618   | ) |   |   | (567 | ) |   |   | 762 |   |
|                               |   | $                                                         | 23,503 |   |   | $ | 15,623 |   |   | $ | 31,788 |   |
|                               |   |                                                      |   |   |   |   |   |   |   |   |   |   |
| Income tax expense (credit)        |   |                                                      |   |   |   |   |   |   |   |   |   |   |
| Current:                           |   |                                                      |   |   |   |   |   |   |   |   |   |   |
| Brazilian federal                  |   | $                                                         | 5,790  |   |   | $ | 1,963 |   |   | $ | 7,013 |   |
| Other foreign                      |   |                                                      | (73    | ) |   |   | (111 | ) |   |   | 309 |   |
|                               |   |                                                      | 5,717  |   |   |   | 1,852 |   |   |   | 7,322 |   |
| Deferred:                          |   |                                                      |   |   |   |   |   |   |   |   |   |   |
| Brazilian federal                  |   | $                                                         | (1,279 | ) |   |   | (820 | ) |   |   | (493 | ) |
|                               |   | $                                                         | 4,438  |   |   | $ | 1,032 |   |   | $ | 6,829 |   |

|                                       |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|--------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                       |   |   |   |   |   |   |   |   |   |
| Brazilian federal income tax rate          |   |   | 34.0   | %      |   |   | 34.0   | %      |   |   | 34.0 | % |
| Earnings of foreign branch                 |   |   | 0.6    | %      |   |   | 0.5    | %      |   |   | 0.2 | % |
| Manaus free-tax zone income tax incentives |   |   | (13.4  | )%     |   |   | (16.1  | )%     |   |   | (14.1 | )% |
| Other tax incentives (*)                   |   |   | (3.9   | )%     |   |   | (13.8  | )%     |   |   | - |   |
| Other                                      |   |   | 1.6    | %      |   |   | 2.0    | %      |   |   | 1.4 | % |
| Effective income tax rate                  |   |   | 18.9   | %      |   |   | 6.6    | %      |   |   | 21.5 | % |

|   | (*) | Refers to tax incentive calculated based on Law no 11196/05 on research and development expenses. The total amount of the tax incentives used during the fiscal year of 2010, amounting $965, refers to expenses incurred in 2010 ($2,150 in 2009, of which $990 refers to expenses incurred in 2009 and $1,160 refers to expense incurred in 2008). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 6. | Income taxes (Continued) |
|----|--------------------------|

|                                                           |   | 2010   |   |   | 2009   |   |
|----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                           |   |   |   |   |   |   |
| Inventory reserves and provision for losses on other assets    |   | $      | 277    |   |   | $      | 204 |   |
| Provision for product warranties                               |   |   | 243    |   |   |   | 203 |   |
| Provision for contingency losses                               |   |   | 2,140  |   |   |   | 1,285 |   |
| Product design and development costs deferred for tax purposes |   |   | 1,187  |   |   |   | 1,211 |   |
| Deferred revenues subject to current taxation                  |   |   | 585    |   |   |   | 474 |   |
| Depreciation rate differences                                  |   |   | 956    |   |   |   | 684 |   |
| Other nondeductible reserve                                    |   |   | 418    |   |   |   | 405 |   |
| Net deferred income tax assets                                 |   |   | 5,806  |   |   |   | 4,466 |   |
| Less: Current assets                                           |   |   | (2,711 | )      |   |   | (1,941 | ) |
| Non-current assets                                             |   | $      | 3,095  |   |   | $      | 2,525 |   |

| 7. | Commitments and contingencies |
|----|-------------------------------|

|                                   |   | 2010   |   |   | 2009   |   |
|----------------------------------------|--------|--------|--------|--------|--------|--------|
| PIS and COFINS on commissions expenses |   | $      | 6,127  |   |   | $      | 3,604 |   |
| Labor claims                           |   |   | 168    |   |   |   | 97 |   |
| Total                                  |   | $      | 6,295  |   |   | $      | 3,701 |   |

----

| 8. | Related party transactions |
|----|----------------------------|

|                  |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|-----------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Period transactions   |   |   |   |   |   |   |   |   |   |
| Commissions/royalties |   | $      | 125    |   |   | $      | 193    |   |   | $ | 238 |   |

|                |   | 2010   |   |   | 2009   |   |
|---------------------|--------|--------|--------|--------|--------|--------|
| Balances            |   |   |   |   |   |   |
| Accounts receivable |   | $      | 40     |   |   | $      | 40 |   |
| Accounts payable    |   | $      | -      |   |   | $      | 8 |   |

| 9. | Shareholders’ equity |
|----|----------------------------|

|                                       |   | % of shares |   |
|--------------------------------------------|--------|-----------------------|--------|
| Stoneridge, Inc.                           |   |                  | 25.56  | % |
| Alphabet do Brasil Ltda.                   |   |                  | 24.44  | % |
| Sérgio de Cerqueira Leite             |   |                  | 16.67  | % |
| Potamotryngi Participações Ltda. |   |                  | 16.67  | % |
| Marcos Ferretti                            |   |                  | 8.33   | % |
| Brienzer Participações Ltda.     |   |                  | 8.33   | % |
|                                       |   |                  | 100.00 | % |

----

| 9. | Shareholders’ equity (Continued) |
|----|----------------------------------------|

----

| 9. | Shareholders’ equity (Continued) |
|----|----------------------------------------|

| Dividends payable as of December 31, 2009                                     |   | $      | 3,181  |   |
|-------------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                          |   |   |   |   |
| Additional dividends proposed by the April, 2010 Shareholders’ Assembly |   |   | 7,697  |   |
| Dividends paid during 2010                                                    |   |   | (5,346 | )      |
| Minimum statutory dividend proposed as of December 31, 2010                   |   |   | 3,823  |   |
| Currency translation adjustment                                               |   |   | 128    |   |
|                                                                          |   |   |   |   |
| Dividends payable as of December 31, 2010                                     |   | $      | 9,483  |   |

| 10. | Risk management and financial instruments |
|-----|-------------------------------------------|

----

| 10. | Risk management and financial instruments (Continued) |
|-----|-------------------------------------------------------|

|                                                                |   | 2010   |   |   | 2009   |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Assets – substantially related to Argentinean pesos           |   |   |   |   |   |   |
| Trade receivables                                                   |   | $      | 4,415  |   |   | $      | 3,130 |   |
| Trade receivables from related party                                |   |   | 40     |   |   |   | 40 |   |
| Liabilities- substantially related to the American dollars and Euro |   |   |   |   |   |   |   |   |
| Debt                                                                |   |   | (985   | )      |   |   | (291 | ) |
| Trade accounts payable                                              |   |   | (5,382 | )      |   |   | (3,499 | ) |
| Royalties payable                                                   |   |   | -      |   |   |   | (39 | ) |
|                                                                |   | $      | (1,912 | )      |   | $      | (659 | ) |

|   | · | Level 1 |
|--------|--------|---------|

|   | · | Level 2 |
|--------|--------|---------|

----

| 10. | Risk management and financial instruments (Continued) |
|-----|-------------------------------------------------------|

|   | · | Level 3 |
|--------|--------|---------|

|                      |   | At December 31, 2010 |   |
|---------------------------|--------|-------------------------------------|--------|
|                      |   | Carryingamount                      |   |   | Fairvalue |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
| Assets                    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents |   |                                | 4,083  |   |   |   | 4,083 |   |   |   | 4,083 |   |   |   | - |   |   |   | - |   |
| Accounts receivable       |   |                                | 26,557 |   |   |   | 26,557 |   |   |   | - |   |   |   | 26,557 |   |   |   | - |   |
| Liabilities               |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts payable          |   |                                | 14,713 |   |   |   | 14,713 |   |   |   | - |   |   |   | 14,713 |   |   |   | - |   |
| Long-term debt            |   |                                | 19,422 |   |   |   | 19,422 |   |   |   | - |   |   |   | 19,422 |   |   |   | - |   |

|                |   | At December 31, 2009 |   |
|---------------------|--------|-------------------------------------|--------|
|                |   | Carryingamount                      |   |   | Fairvalue |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|                |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets              |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash equivalents    |   |                                | 1,246  |   |   |   | 1,246 |   |   |   | 1,246 |   |   |   | - |   |   |   | - |   |
| Accounts receivable |   |                                | 25,952 |   |   |   | 25,952 |   |   |   | - |   |   |   | 25,952 |   |   |   | - |   |
| Liabilities         |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts payable    |   |                                | 8,226  |   |   |   | 8,226 |   |   |   | - |   |   |   | 8,226 |   |   |   | - |   |
| Long-term debt      |   |                                | 11,488 |   |   |   | 11,488 |   |   |   | - |   |   |   | 11,488 |   |   |   | - |   |

----

| 10. | Risk management and financial instruments (Continued) |
|-----|-------------------------------------------------------|

| 11. | Share-based payment |
|-----|---------------------|

----