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4 MANAGEMENT REPORT 2Q13 SCENARIO AND MARKETS After the year got underway at a faster rhythm than normal, the second quarter continued to show a good level of growth for the Company. However, the economy has begun to show signs that the current economic model has finally run its course, with GDP growth projections for the year being revised downwards from around 3.0% to about 2.3%. Even with the significant deterioration in expectations, we continue to be optimistic about our operational segments. The Wood Division showed a 3.4% increase in the level of volume shipped, compared to the same period a year earlier. For the year-to-date, shipments are up 2.5%, is below the pace of the market due to an anticipation of price increase in the first quarter, and loss of market share in the period. This lower shipment volume in the first half is to do with advance price increase, which took place in the first quarter, with a consequent loss in market share during the period. Comparatively, the domestic panel market, according to figures from ABIPA (Brazilian Panel Industry Association), experienced an increase in shipment volume of approximately 5.6%. In this period, the IPI tax rate on furniture remained stable, at 2.5%, being raised to 3.0% from July 1, This measure announced also applied to panels. The Deca Division s segment of the construction sector has performed excellently, well above the average for the sector as a whole. The ABRAMAT index, which measures the sales performance of the construction sector in the domestic market, showed an annual increase of 3,7%, while Deca s net revenue, in the domestic market, was up 21.3% in the same period (or 10.3%, if we were to exclude the net revenue from the recent acquisitions realised - Mipel and Thermosystem). A combination of a better mix of products shipped, and the additional sales of the recently acquired operations, contributed to this performance. In the domestic scenario, expectations for an increase in interest rates by Central Bank are in the process of being realised. The monetary authority began to raise the basic interest rate in April, from the level of 7.25% of the time, to the current rate of 8.5%, with prospects for further increases, principally with the aim of containing inflationary pressure, seeing that inflation has been systematically testing the upper limit of the inflation band, at 6.5%. This scenario has contributed to justifying lower growth expectations for the economy this year. There has been an additional ingredient in the period, coming from the United States, with the announcement by the US Federal Reserve that it would be reducing stimulus measures, known as Quantitative Easing. This move provoked substantial volatility in the equity and currency markets, with investors shifting back towards dollar-based investments. Thus, the foreign exchange market was very volatile in the quarter, with the Brazilian Real depreciating by around 10% against the US Dollar, dropping from R$2.018/1US$ to R$2.2150/1US$. This occurred principally as a consequence of the appreciation of the US dollar against the currencies of emerging markets and commodity producers. Continuing on the international scenario, the possible removal of stimulus measures from the American economy is a consequence of the recovery starting to be seen in that economy. Meanwhile, the performance of the Chinese economy, which is slowing down, has contributed to a weakening in the foreign trade balances of commodity exporting countries, such as Brazil. While countries in the Eurozone continue to encounter difficulty in finding a path to growth that does not involve major short-term sacrifices. 1

5 STRATEGIC MANAGEMENT In the first half of 2013, Duratex invested R$ million, equivalent to 52.0% of its recurring EBITDA for the period, in previously announced expansion projects, as well as the acquisition of Thermosystem, with payment of 70% of the agreed value, which was consolidated in the Duratex figures in the first quarter. As part of our strategy, the Company will continue exploring the possible acquisition opportunities, without abandoning the focus on organic expansion of its operations. R$660 million of investment is planned for 2013, to be spent on maintaining and sustaining the Company s production plants and forestry base, as well as the conclusion of ongoing investments, as follows: Wood Division: New MDF plant at the Itapetininga unit SP, with operational start-up planned for July of 2013, with an effective production capacity of 520,000 m³ a year. Debottlenecking production of MDP capacity in the Taquari unit - RS which will add 230,000 m³ annual capacity from August Deca Division: Completion of capacity increase at the Jundiaí unit - SP, from 17.0 million to 18.2 million items/year of metal bathroom fittings, and Completion of investment at the Queimados unit - RJ, with an annual capacity of 2.4 million pieces/year, corresponding to an increase of 25% in total vitreous chinaware production capacity, with operational start-up planned for the 2Q13. Recall that these expansions are in stage of ramp-up and should help raise the indicator of Return on Equity (ROE) to the extent that industrial occupancy rates will be increasing. CONSOLIDATED FINANCIAL SUMMARY (in IFRS and R$ 000) DESTAQUES Volume shipped: Deca ( 000 pieces) Volume shipped: Panels (m 3 ) Consolidated net revenue Gross profit Gross margin EBITDA according to EBITDA Margin Adjusted from no cash events Extraordinary events Recurring Adjusted EBITDA Recurring Adjusted EBITDA margin Net Income Recurring Net Income Recurring Net Margin INDICATORS 2

6 Current liquidity Net indebtedness Net indebtedness/ EBITDA UDM Average Net equity SHARES Basic Net earnings per share Closing share price Net Equity per share Shares held in Treasury Market value (1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization): a measure of operational performance pursuant to CVM Instruction 527/12. See complete re-conciliation details of this indicator on page 7 of this report. (2) EBITDA adjusted for non-cash events arising from the variation in the fair value of biological assets, and combination of businesses, principally. (3) EBITDA adjusted for non-cash events and disregarding extraordinary items, as follows: 1Q13 (+) R$42,318 thousand referring to the reversion of a surplus in the defined benefit, closed pension plan of Fundação Itaúsa, (-) R$16,306 thousand in provisions referring to the restructuring of operation of Deca Piazza - Argentina, (-) R$1,728 thousand in exchange rate variation on the reclassification of the restructure ng chargesof the Argentinian operation and (-) R$2,279 thousandreferring to other adjustments. (4) Current ratio: Current Assets, divided by Current Liabilities. Indicates the availability in R$ to cover each R$ of short-term obligations. (5) Net indebtedness: Total Debt ( ) Cash. (6) Leverage calculated on the EBITDA of the last 12 months, adjusted for events accounting and not cash, but considering events of an extraordinary nature. (7) ROE (Return-on-Equity): measure of performance arrived at by dividing Net Earnings in the period, annualized in the quarter by, average Shareholders Equity. (8) Net earnings per share is calculated by dividing the earnings attributed to the Company's shareholders by the average weighted quantity of ordinary shares in issue during the year, excluding ordinary shares held in treasury. (9) Market Capitalization was calculated based on the share price at the end of the period, multiplied by the number of shares (605,059,489 shares for 2Q13), net of shares held in treasury. Note that the number of shares has been adjusted for periods prior to April 2013, due to a stock dividend occurred that month. OPERATIONS Wood Division! " # $ % # % # " %! " # $ # % & 3

7 %! " & # ' " ( ) " # ' " '& '# ( ) # $ * +, - * *. / / / / / & '0 1, - 0 2, ' # $ * +, - * *. / / / / / * +,, -! -., / 0,, * , 3-34 / 0,, Operating profit before financial results Depreciation, amortization and depletion Depletion tranche of biological assets 5 &" % # &" % # Variation in fair value of biological assets Employee benefits 36, / Recurring Adjusted 3 4 Recurring Adjusted /6 / 6 7 /6 7 / 6 /6 7 (¹) 1Q13 (+)R$18,060 thousand refers to the reversion of the surplus in the defined benefit closed pension plan of Fundação Itaúsa and (-) R$ 2,278 thousand referring to other adjustments; Despite the fact that the Brazilian economy is looking less favourable in the wake of high interest rates and a weaker exchange rate, with a high degree of volatility, the performance of the panel sector has been consistent, reflecting favourable employment conditions and the availability of satisfactory financing terms being offered by the retail furniture segment. Against this background, the Wood Division continues to show a solid performance. Panel shipments in the first half of the year were up by 2.5% compared to the same period in During the quarter, shipment volumes showed an increase of 5.5%, compared to the same immediately preceding period, being up 3.4% compared to 2Q12. The adjustment in the pricing base, implemented in January, seasonally an unfavourable period, resulted in a loss in market share, but a recovery in operational margins, with net unit revenue rising by 15.4% in the first half compared to the same period a year earlier, being up 14.2% compared to 2Q12, in addition to showing an improvement in sales mix, with an increase in the level of coated panels shipped in the period. The growth in volumes and prices was reflected in the Division s net revenue in the first half, which showed an increase of 18.3% compared to the first half of 2012, being up 18.1% in the quarter, compared to the same period in The performance of Duratex s shipments was below that of the panels industry as a whole, as a consequence of the adjustment to the pricing base mentioned earlier. 4

8 Finally, the adjusted recurring operational results, as measured by EBITDA, amounted to R$427.7 million in the first half, a convincing annual increase of 37.5%, with a margin of 36.4%, 5.3 percentage points higher than in In the quarter EBITDA totalled R$223.5 million, with EBITDA margin of 36.0%, and a nominal quarterly increase of 9.4%, being up 28.4% compared with the same period in At the beginning of July 2013, the first sheet of MDF was pressed at the new unit in Itapetininga/SP, which has an annual production capacity of 520,000 m 3. Furthermore, the project to remove the bottleneck in the production capacity of the MDP unit in Taquari/RS, is in its final completion phase. With the consolidation of these investments, it should be possible to capture market share and improve the Division's rates of return. The result of Tablemac was recognised under equity income result in Duratex's results. At the end of the quarter, Duratex's stake in the Colombian company amounted to 37%. As a way of creating a closer relationship with its customers and the market, in addition to publicising the launch of its new products, the Wood Division participated at important events, namely: Mostra Black (an annual event which displays the conceptual and creative content of the best professionals in architecture, decoration and landscape gardening, in various states in Brazil) and Casa Cor (the largest architectural and decoration event in the Americas, and the second largest in the world) in the cities of Goiás, Santa Catarina, Rio Grande do Sul and São Paulo. During the first half of 2013, 63 new panel patterns were launched (38 in the second quarter alone), among these being: 8 Duraplac patterns, 30 Durafloor patterns and 8 Madeplac products. Divisão Deca Deca Division +2. ) 0 ', - * *. 8', 5 #! & ) % 8 "! 9 &$ &! : &$ * ) % 8 "!! " # $ / # % & %! " & # ' " ( ) " # ' " Net unit revenue # $ * +* 0, - * *. / / / / / Unit cash cost # $ per piece shipped / / / / / * +,, -! -., / 0,, General and administrative expenses Operating profit before financial results Depreciation and amortization 5 &" % #

9 5 &" % # Employee benefits Extraordinary event Recurring Adjusted 3 4 Recurring Adjusted / 6 / 6 7 /6 7 / 6 / 6 7 (¹) 1Q 13: net effect of the reversion of the surplus in the defined benefit pension plan for employees of Duratex, and the recognition of losses related to restructuring activities in Argentina. The Deca Division reported an increase of 13.6% in volume shipped in the first half, amounting to 13.9 million pieces in the period. In the quarter, compared to the same period a year earlier, there was an increase of 18.3% in shipment levels. Disregarding the volumes from the recently acquired companies, shipment levels would have been up 3.0% and 5.1%, respectively, compared to the same half and quarter a year earlier. The Division s net revenue showed an increase of 21.2%, which if we were to exclude the units recently acquired, Mipel and Thermosystem, would be 10.3%. This performance is above the sector average, as measured by the ABRAMAT indicator, as showed annual evolution of 3,7%. Operational performance was affected by the greater increase in the unit cash cost as a proportion of net unit revenue, following the consolidation of operations with lower margins Mipel and Thermosystem. While there was an annual increase in net unit revenue of 6.7%, there was a rise in unit cost of 7.8%. Adjusted recurring EBITDA showed an increase of 12.9% on the year, with EBITDA margin of 22.7%. For the quarter, EBITDA totalled R$77.8 million, with a margin of 21.9% and a nominal increase of 23.1%, compared to the same period in This performance reflects the strength of the Deca brand name, and the success of the geographical diversification of the Division s plants, begun in 2008, bringing the company even closer to its consumers, as well as the acquisitions carried out in 2012 and the beginning of These acquisitions, Mipel and Thermosystem, have contributed to the greater differentiation of the Deca Division, adding new products to its sales mix. As a way of strengthening its presence in the market, the Deca participated at various events during the quarter, of particular note being: the Hospital Trade Fair, which provides solutions for hospital environments, and Mostra Black, an annual event which displays the conceptual and creative content of the best professionals in architecture, decoration and landscape gardening, in various states in Brazil. In addition to this, Deca also sponsored the interior design event, Casa Cor, in São Paulo and in Bolivia, where new trends in vitreous chinaware and metal bathroom fittings were put on display, as well as an event held at the Casa Brasileira Museum, the first exhibition of Bi-annual Ibero-Americana Design in Brazil. This trade fair, which takes place every two years in Madrid (Spain), has the objective of providing the Brazilian public with a panorama of recent evolution and design in the region. VALUE ADDED Value Added, in the first half, totaled R$1,062.9 million, 22.9% higher than in the previous year. Of this total, R$369.1 million, equivalent to 15.6% of the revenues obtained and 34.7% of the total Value-Added, went to Federal, State and Municipal governments in the form of taxes and contributions. Distribuição do Valor Adicionado no 2T2013 (gráfico pizza) Remuneration for Labor: 29.7% 6

10 Remuneration for Government: 34.7% Remuneration for Financing: 9.3% Remuneration for Shareholders: 26.3% DIVIDENDS / INTEREST ON OWN CAPITAL Shareholders are statutorily guaranteed a minimum obligatory dividend of 30% of adjusted net earnings. A provision was booked for dividends in the gross amount of R$95,184,000, in the form of interest-on-equity, to be distributed from August 15, As a consequence, the total gross unit remuneration will be R$0.1576, an increase of approximately 50% compared to the remuneration distributed in the same period a year earlier CAPITAL MARKETS AND CORPORATE GOVERNANCE In April 2013, there was 10% bonus share, raising the number of shares from 550,054,081 to 605,059,489. At the end of 2Q13, Duratex had a market value equivalent to R$ 7,741.7 million, based on the closing price per share of R$ In the first quarter trades were recorded in Duratex s shares on the spot market on BM&FBovespa, with 129,2 million shares changing hands, representing a trading volume equivalent to R$1,837.0 million, or an average daily trading volume of R$29.3 million. This level of liquidity ensured the continuing presence of the company's shares in the Ibovespa portfolio (Bovespa Index), which is composed of approximately 60 shares, the most important inclusion criteria for which is share liquidity. Duratex's shares became part of the Dow Jones Sustainability World Index DJSWI, version 2012/2013. For the Company s inclusion in this index, 34 criteria were evaluated, from Environmental, Economic and Social aspects. In the evaluation process, the company obtained an absolute score of 79, positioning it among the best 10% with an overall score of 93% and the best score in the sector in 5 criteria, of which we draw particular attention to Crisis and Risk Management, Stakeholder Engagement and International Production Standards. Duratex was the first company in Latin America, in the Construction Materials sector, to be included in the index. In addition, Duratex s shares are included in the BM&FBovespa ISE (Corporate Sustainability Index). Having a presence on the index lists since the 2008/2009 version. This index is composed of 51 shares of companies that are outstanding in terms of the application of the international concept of Triple Bottom Line sustainability, which evaluates social, environmental and economic-financial aspects in an integrated manner, incorporated into practices related to corporate governance, business characteristics, product nature, as well as climate change. Duratex was notified, in July that it was the winner, for the second year running, of the ABRASCA awards (Brazilian Listed Company Association) in the category of Industry Highlight 2013 Paper, Pulp and Wood, as having the best case of value creation between 2009 and The ABRASCA prize is granted to companies that have shown the highest level of value creation over the last three years, showing sustainability of results and excellence in the control of risks, transparency, and socio-environmental action. To this end, the following parameters were considered: the value of the Company's share price, the quality of its corporate governance, the Company's relationship with investors, risk management, environmental policy and social action. Ernst & Young Terco was the auditing company responsible for the verification of the criteria being judged. 7

11 Duratex s shares are also listed on the BM&FBovespa Novo Mercado, a differentiated segment of the market which includes those companies which have shown themselves to be exceptional by voluntarily adopting the highest standards of corporate governance. In this segment of the market, the company is committed to accepting rulings by the BM&FBovespa Novo Mercado arbitration chamber in the resolution of any and every dispute which may arise between the company, its shareholders and its managers. In addition to the prerequisites of the Novo Mercado, the company also has a differentiated dividend policy, which involves the distribution of 30% of adjusted net earnings, while committing itself to one third of its board members being independent, as well as adhering to the Abrasca code for self-regulation and good practices. Shareholding structure as at the end of June 2013 (pie chart) Itaúsa and Families: 40,0% Ligna and Family: 20,0% Pension funds: 0,1% Foreign investors: 29,5% Others:10,3% Treasury: 0,1% SOCIAL AND ENVIRONMENTAL RESPONSIBILITY At the end of the period, the Company had 11,834 employees, who received remuneration of R$95.2 million in the quarter. The increase in the workforce, of approximately 1000 employees, refers to the incorporation of staff from the companies recently acquired, Mipel and Thermosystem, besides the hiring following the opening of new production units. (amounts in R$ 000) 2Q13 1Q13 % 2Q12 % EMPLOYEES (quantity) 11,834 11,630 1,.8% 10, % Remuneration 95,197 87, % 84, % Obligatory legal charges 54,059 46, % 48, % Differentiated benefits 19,641 18, % 16, % In the first semester, the Company spent R$14.2 million on environmental initiatives, of particular note being the treatment of effluents, the collection of residues, and the maintenance of its forestry areas. This amount corresponds to an increase of 10.9% compared to investment of this nature carried out in the same period in During the first half of the year, the following projects were concluded, that received funding in 2012 and 2030: (i) Restoration of the railway station and the installation of the Botucatu Railway History Museum, which aims to transform the old railway station of Botucatu into a heritage of equipment and a tribute to reminders of the past, as well as the identity and practice of citizenship, tourism and environmental initiatives; (ii) A Step Forward for Education, which benefits needy children and adolescents from the community of Paraisópolis with the practice of football and supporting activities, and integration with the community; (iii) The Campos do Jordão Social Tennis School, which provides children and adolescents in the public school network with the opportunity of participating in sporting activity with the aim of promoting their development, facilitating socioeducational inclusion, and promoting health and quality of life, among other projects. 8

12 In the first half of 2013, additional funds were allocated to ongoing projects and support was provided for new cultural and sporting projects for 2013 and 2014, with investments totalling approximately R$ 3.9 million, of which the most notable are: (i) the "Community Library", which involves the installation of five libraries in municipal schools and community centres in Agudos-SP, Jundiaí-SP, Lençóis Paulista-SP, São Leopoldo-RS and Veríssimo-MG; (ii) Public Open-Air Gymnasiums and Bicycle banks in Public Spaces, which involves the installation, in 2013 and 2014, of structured spaces in squares and other public locations, destined for the practice of oriented physical activities, and bicycle banks, with the aim of encouraging cyclism as a sporting event, and other activities. AUDITORES INDEPENDENTES In accordance with CVM Instruction 381, dated January 14, 2003, and the Circular Letter CVM/SNC/SEP nº 02/2006 of December 28, 2006, Duratex and its subsidiaries that they did not contract other services that are not related to the audit company, PricewaterhouseCoopers, responsible for the external audit of the Company for the period ended June 30, The Company's policy for procuring services from our independent auditors that are not related to external audits is based on internationally accepted principles that preserve the independence of auditors and mean that: (a) the auditor should not audit their own work, (b) The auditor should not provide management functions within the client, and (c) the auditor must not promote the interests of the client. ACKNOWLEDGMENTS We are deeply grateful for all the support received from our shareholders, the dedication and commitment of our employees, the partnerships we have with our suppliers and the confidence placed in us by our clients and consumers. The Management 9

13 #$%&''"()*+, -%./ %(.%01()$2$-$%%&-%/$)"3 456 '' '7!!!" 3.:#)%.*)2%()632$$%.)0%(.2:$(1(.%0(.4$#1#) !!!!!!!" # "! $!% &''! (!!" )! *!"+!", '%" (!! +!" # '%" "!!! *'! "! *!' (!!" # "! ) '! *!"+!" #!!. +!" #!!. +!" *'! $. "! (! (!.!!!! )!'!%''. ' / - -! $" '!! *!! *!!!!%! !!%2. ;#(/%$(<#%<0;#(/:0*$) 2:-%$.+, -%./!!.+.$00(.1(.$)) " "!!!!!!!!!!!!. '%!!'!!.!.

14 "#$$%&' (" ) " "*+,(""#(")%-. $/0$10$21232%40 (A free translation of the original in Portuguese) 5 -.!! " #$%$&$ ' ( $ )$$& '! * $ #!! + &!!, &!! -./ $ #!!!!!!!!!! '! 0$ 0$ $% '!!! $% '!!!!!!!!!! &' "6"6*7, 1 / 2 $$&! &' (8" $4 5 7/& &$ $

15 '% ())*+, -"# $%& %,%./, $% %($%&*0 12 )34)54)5*64 Periods ended June 30 (In thousands of reais) STATEMENT OF COMPREHENSIVE INCOME (A free translation of the original in Portuguese) PARENT COMPANY CONSOLIDATED 279, , , ,648 Other components of comprehensive income Participation in the comprehensive income (loss) of subsidiaries 1,533 (3,462) 1,533 (3,462) 281, , , ,186 Attributable to:!"# $%& 281, , , ,908 "..,/, The accompanying notes are an integral part of this interim financial information

16 Duratex S.A - Listed company STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY National Register of Corporate Taxpayers - (CNPJ) No / (In thousands of Reais) (A free translation of the original in Portuguese) BALANCES AS AT DECEMBER 31, ,550,000 (7,823) 307,932 89,721 1,355, ,823 (23,032) - 3,689,209 3,601 3,692,810 COMPREHENSIVE INCOME FOR THE YEAR Net Income for the year , , ,711 Participation in the comprehensive income of subsidiaries , ,696-4,696 - TOTAL COMPREHENSIVE INCOME FOR THE YEAR , , , ,407 Share options granted , ,052-7,052 Sales of treasury shares 12,931 (1,998) 10,933 10,933 Adjustment of debentures convertible into shares , ,904-1,904 Capital increase Interest on capital complement (682) (682) - (682) Realization of revaluation reserve (6,389) , APPROPRIATION OF NET INCOME - - Allocated to the legal reserve , (22,963) Interest on capital 1st half-year 19 d (62,032) (62,032) (62,032) Interest on capital 2nd half-year 19 d (89,963) (89,963) (89,963) Dividends 2nd half-year 19 d (638) (638) - (638) Proposed additional dividend 19 d , (4,863) Appropriation to tax incentives (Article Law no /76) , (9,902) Appropriation to reserves , (273,286) - (432) (432) BALANCES AS AT DECEMBER 31, ,550,246 (7,823) 314,984 83,332 1,665, ,423 (10,101) - 4,019,981 3,624 4,023,605 The accompanying notes are an integral part of this interim financial information

17 Duratex S.A - Listed company STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY National Register of Corporate Taxpayers - (CNPJ) No / (In thousands of Reais) (A free translation of the original in Portuguese) BALANCES AS AT DECEMBER 31, ,550,246 (7,823) 314,984 83,332 1,665, ,423 (10,101) - 4,019,981 3,624 4,023,605 COMPREHENSIVE INCOME FOR THE PERIOD Net Income for the period , , ,653 Participation in the comprehensive income of subsidiaries , ,533-1,533 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD , , , ,186 Share options granted , ,095-4,095 Acquisition of treasury shares (11,929) - (11,929) - (11,929) Sales of treasury shares , ,626-6,626 Capital increase Capital increase using revenue reserves 155, (155,025) Interest on capital complement (5,833) (5,833) - (5,833) Realization of revaluation reserve (4,042) , APPROPRIATION OF NET INCOME Allocated to the legal reserve , (13,981) Interest on capital 1st half-year (95,184) (95,184) - (95,184) Appropriation to reserves , (174,754) BALANCES AS AT JUNE 30, ,705,272 (7,823) 319,079 79,290 1,693, ,956 (15,653) - 4,198,918 3,649 4,202,567 The accompanying notes are an integral part of this interim financial information

18 OPERATING ACTIVITIES: (A free translation of the original in Portuguese) NET INCOME FOR THE PERIOD 279, , , ,648 ITEMS NOT AFFECTING CASH: Duratex S.A. - Listed company National Register of Corporate Taxpayers - (CNPJ) No / STATEMENT OF CASH FLOWS Depreciation, amortization and depletion 122, , , ,184 Variations in the fair value of biological assets - - (76,903) (69,336) Interest, foreign exchange and monetary variations, net 64,848 74,866 79,136 84,147 Equity in the results of investees (48,586) (64,889) (594) - Provisions, disposal of assets (3,856) 3,850 19,132 (407) INVESTMENTS IN WORKING CAPITAL: (Increase)/Decrease in Assets Trade accounts receivable (60,442) (73,398) (81,693) (75,841) Inventory (44,435) (5,715) (54,296) 627 Other assets (59,614) 39 (66,060) (2,714) Increase (Decrease) in Liabilities Suppliers (39,581) 27,660 (43,018) 20,226 Personnel liabilities 7,801 9,462 11,781 9,660 Accounts payable (752) 1,921 19,250 46,767 Taxes and contributions 90,536 35, ,646 44,544 Other liabilities 17,127 (9,508) (12,708) (9,629) Cash provided by operations 325, , , ,876 Income tax and social contribution paid (61,111) (31,713) (83,724) (45,274) Interest paid (71,068) (70,730) (73,370) (71,881) CASH PROVIDED BY OPERATING ACTIVITIES 193, , , ,721 INVESTMENT ACTIVITIES: Investments in biological, fixed and intangible assets (189,200) (266,757) (267,771) (327,524) Acquisition of subsidiary (56,402) (118,200) (33,855) - Dividends received from subsidiary - 124, Capital increase in subsidiaries (18) CASH USED IN INVESTMENT ACTIVITIES (245,620) (260,500) (301,626) (327,524) FINANCING ACTIVITIES: Financing 327,921 95, , ,339 Debentures (6,304) 101,371 (6,304) 101,371 Amortization of financing (436,721) (130,729) (441,713) (131,277) Interest on capital/dividends (96,339) (60,455) (96,339) (68,588) Loans from subsidiaries (10,771) Treasury shares and others (5,301) - (5,301) - CASH USED IN FINANCING ACTIVITIES (227,515) 5,491 (202,301) 61,845 Exchange variations on cash and cash equivalents INCREASE (DECREASE) IN CASH FOR THE PERIOD (279,923) (57,280) (196,645) 81,851 OPENING BALANCE 617, ,071 1,032, ,159 FINAL BALANCE 337, , , ,010

19 !" #$##! " #$$% #% #$$% #% % & '( # # & '( $$ ) *#+,* '( $ $ $ ('" )" $$ $ $ -##+./( 0 ( ** $ + (! $ $ $ ) ##+ * 1 2#+ (- 32 & '!, $ - 2 & #* Duratex S.A. - Listed company National Register of Corporate Taxpayers - (CNPJ) No / STATEMENT OF VALUE ADDED #*7 ) 38((! 7! -.%! '6' +5194: +5; )! #% $ $. /" (0! $ $ $ #*4 ' & ( ('(* $ 3##+ *(' '* + #

20 Note 1 Operations NOTES TO THE INTERIM FINANCIAL INFORMATION AS AT JUNE 30, 2013 a) General information (All amounts in Brazilian Reais (thousands), unless otherwise indicated) Duratex S.A. (the Company) is a publicly-traded corporation headquartered in the city of São Paulo - SP, Brazil. Its controlling shareholders are Itaúsa - Investimentos Itaú S.A., which has significant operations in the financial and industrial sectors, and Companhia Ligna de Investimentos, which operates principally in the retail market, the distribution of civil construction and woodworking materials, and in property construction and rental. The main activities of Duratex and its subsidiaries (collectively the Group) comprise the manufacture of wood panels (through its Wood Division), vitreous chinaware, sanitary ceramics, metal products and showers (the Deca Division). Duratex presently has fifteen industrial plants in Brazil and one in Argentina, and maintains branches in the main Brazilian cities. Duratex also has commercial subsidiaries in the United States and Europe. The Wood Division operates five industrial plants in Brazil, responsible for the production of hardboard, medium density particle (MDP) panels, medium, high and super density fiberboard (MDF, HDF and SDF) panels, Durafloor laminate flooring and components for the furniture industry, as well as one industrial resin production plant. The Deca Division operates ten industrial plants in Brazil, responsible for the production of sanitary ceramic and metal products under the trademarks Deca, Hydra, Belize, Elizabeth, Thermosystem and Deca Piazza (in Argentina). b) Approval of the Interim financial information The Condensed Interim Financial Information of Duratex S.A. and subsidiaries (Parent company and Consolidated) was approved by the Board of Directors of Duratex S.A. on July 22, Note 2 Basis of preparation and significant accounting practices The Condensed Interim Financial Information has been prepared in accordance with pronouncement no Interim Financial Reporting, issued by the Brazilian Accounting Pronouncements Committee (CPC) as well as in accordance with International Accounting Standard (IAS) no Interim Financial Reporting, issued by the International Accounting Standards Board (IASB). The Condensed Interim Financial Information is being presented according to the applicable standards of the Brazilian Securities Commission (CVM). As described in CVM Circular Letter CVM/SNC/SEP 03/2011, the Company has opted to present the explanatory notes in this Condensed Interim Financial Information in a summarized manner when the information is the same as that presented in the annual financial statements. Thus this Condensed Interim Financial Information should be read together with the annual financial statements for the year ended December 31, Accounting policies The accounting policies adopted for the preparation of the Condensed Interim Financial Information are the same as those used to prepare the annual financial statements for The following accounting practice is particularly relevant to this Condensed Interim Financial Information: Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

21 Consolidation of the Condensed Interim Financial Information The consolidated condensed interim financial information includes the companies: Duratex S.A. and its direct subsidiaries: Duraflora S.A., Estrela do Sul Participações Ltda., Duratex Empreendimentos Ltda., Duratex Comercial Exportadora S.A., Thermosystem Indústria Eletro Eletrônica Ltda., Bale Comércio de Produtos para Construção S.A., Mykonos Administração e Participações Ltda., and its indirect subsidiaries: Duratex North America Inc., Duratex Europe NV., Duratex Belgium NV., TCI Trading S.A., and Deca Piazza S.A. In view of the fact that Tablemac S.A. is not controlled by any company of the Duratex Group, its net income was recognized using the equity method. Note 3 Critical accounting judgments and estimates During the preparation of the Condensed Interim Financial Information, accounting judgments, estimates and assumptions are utilized to record the amounts of certain assets, liabilities and other transactions. The estimates and accounting judgments adopted by management were based on the information available on the date when the financial information was prepared, based on experience of past events and forecasts of future events. The Condensed Interim Financial Information includes several estimates, including the useful lives of property, plant and equipment items, the realization of deferred tax credits, the allowance for doubtful accounts, inventory losses, the evaluation of the fair value of biological assets, and provisions for contingencies and impairment losses. The following are the main estimates and assumptions that involve a substantial risk of requiring adjustments to the book values of assets and liabilities: a) Risk of variations in the fair value of biological assets The Company used several estimates to value its forestry reserves in accordance with the methodology established by CPC 29/IAS 41. These estimates were based on market references, and are subject to changes which could impact the Company's financial statements. Specifically, a 5% reduction in standing wood prices would result in a reduction in the fair value of biological assets by about R$ 36,713, net of tax effects. If the discount rate used were to be increased by 0.5%, this would result in a reduction in the fair value of biological assets of about R$ 7,954, net of tax effects. b) Estimated impairment of goodwill The Company and its subsidiaries test the possible impairment of goodwill on an annual basis. The balance could be impacted by changes in the economic or market scenario without, however, creating a significant effect on stockholders equity. c) Pension plan benefits The current value of assets related to pension plans depends on a number of factors, which are determined using actuarial calculations. These calculations involve a series of assumptions. Among the assumptions used to determine these values are the discount rate and current market conditions. Any changes in these assumptions will affect the corresponding book values. Note 4 Financial risk management 4.1 Financial risk factors Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

22 The Company and its subsidiaries are exposed to market risk in relation to fluctuations in interest, and also to exchange rates and credit risk. Thus, risk management is based on the policies approved by the Board of Directors, and is monitored by the Audit and Risk Committee. The Company and its subsidiaries have procedures to manage these situations and can use hedging instruments to reduce the impact of risks. These procedures include monitoring the level of exposure to each market risk, in addition to establishing decision-making levels. All hedging transactions entered into by the Group are intended to protect its debts and investments. The Group does not utilize leveraged financial derivatives. (a) Market risk (I) Exchange rate risk: Exchange rate risk arises from the risk of a reduction in the value of the Group's assets or an increase in its liabilities due to changes in exchange rates. The Group has a risk policy that establishes the maximum amount in foreign currency that may be exposed to exchange rate variations. In line with the risk management procedures, the objective of which is to minimize the foreign exchange exposure of the Company and its subsidiaries, hedging mechanisms are maintained in order to mitigate the foreign exchange exposure. (II) Derivatives: In terms of derivative instruments, no verifications, monthly settlements or margin calls are made, and the contracts are settled upon maturity and recorded at fair value, considering the market conditions for terms and interest rates. The outstanding contracts as at June 30, 2013 were as follow: a - US$ vs. Interbank deposit certificate (CDI) swap agreements The Company had seven agreements of this nature, with an aggregate notional amount of US$ 182,798,000, and varying maturities up to June 18, 2018, being an asset (purchase) position in US Dollars and a liability (sale) position in CDI. The Company made these agreements in order to convert its debts denominated in US Dollars into debts indexed to the CDI. b - Fixed rate vs. Interbank deposit certificate (CDI) swap agreements The Company had four agreements with an aggregate amount of R$ 129,897, maturing through February 5, 2016, being an asset position at a fixed rate and a liability position at a percentage of the CDI. The subsidiary Duraflora S.A. had two agreements with an aggregate amount of R$ 163,545, maturing on December 11, 2014, being an asset position at a fixed rate and a liability position at a percentage of the CDI. The Company made these agreements in order to convert its total fixed interest rate debts into CDI-indexed debts. c - Calculation of the fair value of positions The fair value of the financial instruments was calculated by utilizing the estimated present value of both liability and asset positions, where the difference between the two represents the market value of the swap. Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

23 The gains or losses on the transactions listed above were offset against the liability and asset positions in interest rates and foreign currency, the effects of which were recognized in the financial statements. d - Sensitivity analysis The table below sets out a sensitivity analysis of the Company s financial instruments, including derivatives, and describes the risk scenarios which could generate material losses for the Group. The analysis involves a Probable Scenario (Base Scenario) plus two other scenarios (under the terms determined by CVM 475/08) representing a 25% and 50% deterioration in the risk variables. For the rates of risk variables used in the probable scenario, BM&FBOVESPA (São Paulo Stock, Futures and Commodities Exchange)/Bloomberg quotations for the respective maturity dates were used. (III) Cash flow or fair value risk associated with interest rates Interest rate risk is the risk that an economic loss will be suffered due to adverse changes in interest rates. This risk is continually monitored in order to evaluate any possible need to contract derivative transactions to hedge against interest rate volatility. (a) Credit Risk The Group's sales policy is directly associated with the level of credit risk it is willing to accept in the course of its business. The measures adopted to minimize defaults or losses on accounts receivable include: the diversification of the Group's portfolio of receivables, the selection of its customers, and the monitoring of sales financing terms and individual position limits. In relation to temporary cash investments and all other investments, the Company follows the policy of working only with blue-chip institutions and not concentrating its investments in any one economic group. Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

24 (b) Liquidity risk The Company and its subsidiaries have a debt policy which defines the limits and parameters for debt and the minimum level of funds which should be maintained, the latter being the higher of the following: an amount equivalent to 60 days of net revenue or the amount of the debt servicing expenses plus dividends and/or interest on capital forecast for the subsequent six months. The liquidity position is managed on a daily basis, by means of monitoring the cash flow. Listed below are the maturities of the Company and its subsidiaries' contracted financial liabilities as presented in the Condensed Interim Financial Information: The budget projections for the next fiscal year, approved by the Board of Directors, indicate that the Company will be able to generate sufficient cash to meet its obligations. 4.2 Capital management The Company and its subsidiaries manage their capital with the objective of ensuring the continuity of their operations, as well as providing shareholders with a return on their investment. This is achieved through capital cost optimization and control of the level of indebtedness monitoring the financial leverage index based on the ratio of net debt to total capital. The increase in financial leverage was due to the raising of funds for investments and a decrease in cash used for the amortization of financing in accordance with the debt policy of the Company. 4.3 Fair value estimates It is assumed that the book values of accounts receivable from customers and accounts payable to suppliers, less the provisions for loss (impairment), are close to their fair values. The fair values of financial liabilities for disclosure purposes are estimated by discounting the future contractual cash flow at the current market interest rate which is available to the Company and its subsidiaries for similar financial instruments. The Company and its subsidiaries apply CPC 40/IFRS 7 for financial instruments measured at fair value, which requires the disclosure of the measurement criteria used. As the Company has only Level 2 derivatives, it uses the following valuation techniques: Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

25 The fair value of the interest rate swap is calculated as the present value of the estimated future cash flow based on the yield curves adopted by the market The fair value of foreign currency forward contracts is determined based on future exchange rates as at the balance sheet dates, with the resulting amount discounted to its present value. The financial instruments (by category/level) are presented below: (*) Value recorded in "Other accounts receivable", non-current assets. (**) Derivative financial instruments are presented at their net values, asset or liability, and all are Level 2 financial instruments. Note 5 Cash and cash equivalents The bank deposit certificates in Brazil earn interest with reference to the CDI rate, and deposits abroad in US Dollars earn a fixed interest rate. Although they have long-term maturities, bank deposit certificates can be redeemed at any time without loss of remuneration. Note 6 Trade accounts receivable Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

26 The Company and its subsidiaries have a Credit Policy in place, establishing the procedures to be followed when granting credit in commercial operations, and when making sales of products and services, both domestically and abroad. The credit limit is determined on the basis of a credit analysis, considering the history of the customer, their capacity as a borrower, and market information. The credit limit is defined with reference to a percentage of net revenue and the stockholders equity, or a combination of these. Consideration is also given to the average volume of monthly purchases. The decision as to the credit limit is always supported by an evaluation of the economic and financial situation, an examination of the relevant documents and an assessment of the customer's reputation. Customers are classified as A, B, C or D based on the length of the Company s relationship with them and their payment history. The maximum credit risk exposure at the date of this report is the book value of each class of trade accounts receivable listed above. The Group has not pledged any receivables as collateral for liabilities. Note 7 - Inventory Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

27 Note 8 Recoverable taxes and contributions The Company has recoverable federal and state tax credits, the composition of which are as follow: (*) The recoverable amounts for State Value Added Tax (ICMS), Social Integration Program (PIS) and Social Contribution on Revenue (COFINS) were mainly generated on acquisitions of property, plant and equipment items for the industrial plants. Under current legislation, the PIS/COFINS credits will be utilized within 12 and 24 months, and the ICMS credits within 48 months. Note 9 Deferred income tax and social contribution Deferred income tax and social contribution balances are calculated on income tax and social contribution losses, temporary differences between the tax and book bases of assets and liabilities, and adjustments made to comply with CPCs/IFRS. The tax rates applied in this respect are 25% for income tax and 9% for social contributions. Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available to utilize temporary differences, considering the projections of future income. These projections are prepared on the basis of internal assumptions and make use of projected economic scenarios, and are, therefore, subject to change. Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

28 Note 10 Related parties a) Balances and transactions with subsidiaries Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

29 b) Transactions with other related parties (*) Refers to the costs of the rural leasing agreement with Ligna Florestal Ltda. (controlled by Ligna de Investimentos) entered into by the subsidiary Duraflora S.A. in connection with land used for reforestation. The monthly charges for this lease amount to R$ 1,161. The agreement will expire in July 2036, but may be renewed automatically for a further 15 years, and will be readjusted annually based on the Company's average price for the sale of MDP panels. The transactions with related parties correspond to trade purchases and sales, in the normal course of the Company's business, realized at market conditions. Financial investments in Banco Itaú S.A are made under normal financial market conditions, and within the limits set by the Company's management. The amounts presented as financial income represent earnings on investments, and financial expenses refer to fees for the collection of receivables. Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

30 c) Management remuneration The remuneration paid or payable to the executives of the Company and its subsidiaries up to June 30, 2013 was R$ 6,619 in fees (R$ 6,318 - June 30, 2012), R$ 7,102 in the form of profit sharing (R$ 4,508 - June 30, 2012), and R$ 4,095 in the form of long-term remuneration based on stock options (R$ 3,560 - June 30, 2012). Note 11 Investments in subsidiaries and associate a) Change in investments Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

31 In compliance with CPC 15 (R1) the Company has one year to adjust the possible values involved in the calculation of goodwill. Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

32 Note 12 Property, plant and equipment Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

33 Assets in progress refer mostly to the expansion of the industrial plants in Itapetininga-SP, Queimados-RJ and Taquari. As at June 30, 2013 the Company and its subsidiaries have formalized contracts for the expansion of the industrial plant in Itapetininga-SP and for the acquisition of equipment and services to increase capacity and make improvements in industrial units, totaling approximately R$ million. The annual depreciation rates are as follow: Note 13 Biological assets (forest reserves) Through its wholly-owned subsidiary Duraflora S.A., the Company is the owner of eucalyptus and pine forest reserves, which are primarily utilized as raw materials for producing wood panels, floors and components, and also for sale to third parties. Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

34 These reserves guarantee supplies to the factories, and also protect the Company against the risk of future wood price increases. Integrated with the manufacturing facilities, these reserves, together with a supply network, provide the Company with a high degree of self-sufficiency in terms of wood supplies. As at June 30, 2013 Duraflora S.A. had roughly 140 thousand hectares of planted areas (December 31, 2012: 140 thousand hectares), in the States of São Paulo, Minas Gerais, and Rio Grande do Sul. a) Fair value estimate The fair value is calculated based on an estimate of the volume of wood ready for harvesting, at the current prices for standing wood. In this respect there are exceptions for: (i) forests which are up to one year old, which are stated at cost (because the cost approximates the fair value in such cases), and (ii) forests in formation, for which the discounted cash flow method is employed. Biological assets are measured at fair value, less selling costs at the time of harvesting. Fair value is determined by valuing the estimated ready-to-harvest volumes at current market prices, based on volume estimates. The assumptions utilized were: i. Discounted cash flow the estimated volume of ready-to-harvest wood at current market prices, net of costs still to be incurred and the capital costs of the respective land (brought to present value). ii. Prices the cubic meter prices in R$ obtained from market surveys carried out by specialized firms surveying regions and products similar to those of the Company, in addition to prices obtained from third-party transactions in active markets. iii. Differentiation - the volumes harvested were categorized and valued according to: (a) speciespine and eucalyptus, (b) region, (c) destination: sawmill and processing. iv. Volume the estimated volumes ready for harvesting (i.e. in the 6 th year for eucalyptus trees and in the 12 th year for pine) were based on the projected average productivity for each region and for the two species. Average productivity may vary based on age, rotation, climatic conditions, quality of seedlings, fires, and other natural risks. In the case of mature forests, the actual volumes of wood are utilized in order to arrive at the estimates. Rotating physical inventory is realized from the second year of a forest's life, and the effects of this are incorporated into the financial statements. v. Regularity - expectations regarding future wood prices and volumes are reviewed at least every quarter, or when the rotational physical inventory is concluded. b) Composition of Balance The biological assets balance is made up of the cost of forest formation and adjustments to fair value, as shown below: Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

35 The forests are unencumbered by any third-party liens or pledges, including to financial institutions. In addition, none of the Company's forests has a restricted legal title. c) Changes in balance The following are the changes in the balance from the beginning to the end of the period: The adjustment related to the variation of the fair value results from higher prices in the present value of standing wood, and higher productivity. Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

36 Note 14 Intangible assets Average annual amortization rate 20% 0% 0% 6.67% Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

37 Average annual amortization rate 20% 0% 0% 6.67% Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

38 Note 15 Loans and financing a) Sureties and letters of guarantee Sureties and letters of guarantee securing the borrowing of Duratex S.A. were granted by Itaúsa S.A., totaling R$ 428,910 (R$ 419,717 as at December 31, 2012), Companhia Ligna de Investimentos, amounting to R$ 257,100 (R$ 243,525 as at December 31, 2012), Duratex Comercial Exportadora S.A., totaling R$ 531,828 (R$ 654,328 as at December 31, 2012) and Duraflora S.A., totaling R$ 33,821 as at December 31, In the case of loans and financing obtained by subsidiaries, sureties were granted by Itaúsa S.A., totaling R$ 40,902 (R$ 41,623 as at December 31, 2012), Duratex S.A., totaling R$ 299,960 (R$ 289,609 as at December 31, 2012) and Duratex Comercial Exportadora S.A., totaling R$ 7 (R$ 65 as at December 31, 2012). b) Other guarantees For the loans and financing obtained by the subsidiary Thermosystem Indústria Eletro Eletrônica Ltda, sureties were granted of machinery and equipment totaling R$ 708 and trade notes totaling R$ 1,693. Restrictive clauses Loans from the National Bank for Economic and Social Development (BNDES) are subject to restrictive covenants in accordance with usual market practice. On June 30, 2013 these covenants were fully complied with. Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

39 Loans and financing designated at fair value Certain loans and financing (identified in the table above as SWAPS) were designated at fair value through profit or loss. Note 16 Debentures convertible into shares As at February 8, 2012 the first private issue of debentures, with a floating guarantee and convertible into common shares of the Company, was approved. These debentures were and are to be issued through private subscription. The proceeds from the debentures are to be allocated as follows: (i) (ii) Fixed investment in the Company's industrial unit in Itapetininga SP in a new production line for the manufacture of medium density reconstituted wood fiber panels (MDF), a new low pressure coating line, and a new low pressure line for the impregnation of laminated paper The acquisition by the Company of locally manufactured machinery and equipment needed for (i). Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

40 The fair value of the liability component, included in non-current borrowing, was calculated using the market interest rate for an equivalent bond without conversion rights. The residual amount, representing the subscription bonus, is included in stockholders equity as a carrying value adjustment. Note 17 - Contingencies The Company and its subsidiaries are parties to judicial and administrative processes relating to labor, civil, and tax matters which arise in the normal course of their business. The provision for contingencies in relation to these processes takes into consideration an evaluation of the likelihood of loss by the Company's legal advisors. Based on the opinion of its legal advisors, the Company's management believes that the recorded provision for contingencies, presented below, is sufficient to cover any potential losses relating to these processes. Tax contingencies mainly relate to legal discussions regarding the Plano Verão (Government economic plan), in particular a lawsuit demanding the right to update the 1989 fiscal year balance sheet utilizing the full IPC inflation index (gross rate) of 70.28%, thereby avoiding distortions to the Company s balance sheet and the related income tax due to the non-recognition of the actual inflation rate. A judgment was obtained acknowledging the right to adjust the balance sheet using the rate of 42.72%, which was effected in the fiscal years 1994 to Though the Regional Federal Court (TRF) was opposed to the sentence, the Company obtained, by means of a writ of prevention, the suspension of the appeal to the Superior Court of Justice (STF), and the judgment was upheld. As at June 30, 2013 there was a provision of R$ 51,971 (R$ 51,485 at December 31, 2012) relating to the offsetting of income tax and social contribution on net income. Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

41 a) Contingencies not subject to provision The Company and its subsidiaries are involved in other tax lawsuits which total R$ 82,228. Of this total, R$ 62,294 is related to the question of incidence and credit of State Value-added Tax (ICMS) which, in the opinion of the legal advisors, entails a possible chance of loss. No provision has, therefore, been constituted. b) Contingent Assets The Company and its subsidiaries have filed legal actions for the refunding of certain taxes and contributions. According to legal counsel, the likelihood of success in these cases is high. Because the amounts, presented below, represent contingent assets, they have not been recognized in the Company's financial information: Note 18 Rural leases Amounts involved The rural leases are agreements entered into by the subsidiary Duraflora S.A. with Ligna Florestal Ltda (controlled by Companhia Ligna de Investimentos), in connection with property in Minas Gerais and Rio Grande do Sul, where the Company s forests are located. The monthly charges for these leases are R$ 1,161. The agreements will expire in July, 2036, may be renewed automatically for a further 15 years, and will be readjusted annually with reference to the average price charged by the Company for the sale of MDP panels. The minimum future payments are as follow: In compliance with CPC 06 Leases, the subsidiary Duraflora S.A. records the costs of the rural lease agreements using the straight line method. Note 19 Stockholders equity a) Capital The Company's authorized capital is 920,000,000 (nine hundred and twenty million) shares and the fully subscribed and paid-up capital is R$ 1,705,272, represented by 605,059,489 registered common shares with no par value. Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

42 In the second quarter of 2013 the capital was increased through: (1) The issue of common shares subscribed and paid-up by debenture holders, as shown below: (2) According to the Ordinary and Extraordinary General Meeting held on April 22, 2013 the capital increased from R$ 1,550,247 to R$ 1,705,272 through the capitalization of reserves and a simultaneous bonus share issue, attributing to shareholders 1 (one) new ordinary share for every 10 (ten) ordinary shares held as at April 22, 2013 (record date). b) Treasury Shares Based on the most recent market quotation as at June 28, 2013, the value of the Company's treasury shares is R$ 15,192 (R$ 12,306 as at December 31, 2012). c) Equity Reserves The amount presented in the Capital Reserves balance as a premium on the subscription of shares refers to the additional amount paid by the shareholders in relation to the nominal value per share at the time of the subscription for the shares. Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

43 The amount of Options Granted in the Capital Reserves balance represents the recognition of the awarding of the options on the grant date. As provided for in the bylaws, the balance appropriated to the statutory reserve will be utilized for: (i) The Reserve for Dividend Equalization, (ii) The Reserve for Increasing Working Capital, (iii) The Reserve for Capital Increases in Investees. d) Dividends Under the bylaws, the stockholders are assured a minimum mandatory dividend corresponding to 30% of net income. As at June 30, 2013 the Company made a provision dividends amounting to R$ 95,184 as interest on capital. Note 20 Insurance coverage As at June 30, 2013, the Company and its subsidiaries had insurance coverage against fire and various risks relating to property, plant and equipment, inventory and civil liabilities totaling R$ 3,617 million. The Company does not have insurance coverage for its forests. To minimize the risk to these, it maintains an internal fire brigade, fire trucks and motorized forest guards. The Company has not suffered losses in relation to forest fires. Note 21 Net sales revenue The reconciliation of gross and net sales revenue is as follows: Note 22 Expenses, by nature Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

44 Note 23 Financial income and expenses Note 24 Other operating income (expenses), net Note 25 Income tax and social contribution Reconciliation of income tax and social contribution expenses The reconciliation of income and social contribution tax expenses, at their nominal and effective rates, is as follows: Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

45 Note 26 Stock Option Plan As provided for in the bylaws, the Company has a Stock Option Plan, the objective of which is to integrate executives into the Company's medium- and long-term development process, enabling them to benefit from the value that their work and dedication adds to Duratex's shares. These options grant their owners the right, pursuant to the Plan's conditions, to subscribe to common shares of Duratex's authorized capital. The rules and operating procedures of the Plan are proposed by a Committee designated by the Company's Board of Directors. This Committee submits their proposals to the Board of Directors regarding the implementation of the Plan. Options will only be granted for fiscal years during which sufficient profits are earned to permit the mandatory minimum dividend distribution to shareholders. The total quantity of options to be granted during each fiscal year should not exceed 0.5% (one half percent) of the total number of shares owned by the controlling and non-controlling shareholders at the end of the same fiscal year. The exercise price payable to Duratex will be defined by the Committee when granting the option. In order to define the exercise price, the Committee will consider the average price of Duratex's common shares in BM&FBOVESPA trading sessions for a period of five to ninety days prior to the option issue date. This will be at the discretion of the Committee, which may make an upward or downward adjustment of up to 30%. The prices established will be readjusted until the month prior to the exercise of the options by the IGP-M index, or, in its absence, by an index specified by the Committee. Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,

46 Statement of value and appropriation of the options granted: As at June 30, 2013, the Company had 1,185,054 treasury shares that could be utilized for the exercise of options. Note 27 Private pension plan The Company and its subsidiaries are part of a group of sponsors of Fundação Itaúsa Industrial, a non-profit organization which has as its objective the administration of private plans providing pensions or supplementary income benefits, similar to those of the National Social Security. The Fundação manages a Defined Contribution Plan (DC Plan) and a Defined Benefit Plan (DB Plan). Note 28 Earnings per share (a) Basic The basic earnings per share are calculated by dividing the net income attributable to the Company s stockholders by the weighted average number of common shares outstanding during the period, excluding common shares purchased by the Company as treasury shares. Duratex S.A. Notes to the Condensed Interim Financial Information as at June 30,