The parent company is Irani Participações S.A., a Brazilian company organized by shares with closed capital.

Transcription

1 (Amounts in thousands of BRL, unless as otherwise specified). 1. OPERATING CONTEXT Celulose Irani S.A. ("Company") is a publicly-held company headquartered in Brazil, listed in the São Paulo Stock Exchange with registered address at Rua General João Manoel, nr 157, 9th floor, in the city of Porto Alegre, RS, Brazil. The company s and its subsidiaries have as their core business the industry of paper, corrugated cardboard packaging, industrialization of resinous products and derivatives thereof, as well as the marketing of furniture, predominantly wooden-made. It plays in the forestry and re-foresting segment, basing its total revenues on the production chain of planted forests. Its wholly-owned subsidiaries are listed in the explanatory note # 4. The parent company is Irani Participações S.A., a Brazilian company organized by shares with closed capital. The Administration, Finance and Investors Relations Director of the Company has approved the release of these interim financial statements on October 19th, FILING OF INTERIM ACCOUNTING REPORT The individual interim accounting report contained in the Form of Quarterly Statements- ITR concerning the quarter and the nine months period ended on September 30, 2011 was prepared in accordance with the CPC 21 technical opinion Intermediate Statement and the Intermediate Accounting Statement - was prepared in accordance with CPC 21 and with international standard IAS 34 Interim Financial Reporting, issued by the IASB, presented in a way that complies with CVM s (Brazilian SEC) standards for preparation of Quarterly Statements-ITR. The individual financial statements differ from the IFRS practices presented at the consolidated financial statements regarding the valuation of investments made in controlled companies by the equity methodology; in IFRS, these would be recorded at cost or fair value New accounting practices, amendments and interpretation: a) Practices, interpretations and amendments of existing practices in force as of September 30 th, 2011, which did not produce relevant impacts on the financial statements of the company.

2 The interpretations and amendments of the following existing practices were enacted and came into force on September 30 th, However, they did not produce relevant impacts in the interim financial statements of the company: Standard Main demands Effective date Improvements in IFRSs Amendment to several accounting practices Applicable for fiscal years beginning on or after January 1, 2011 Amendments to IFRS 1 Limited exemption of comparative disclosures of IFRS 7 for early adopters Applicable for fiscal years beginning on or after July 1, 2010 Amendments to IAS 24 Disclosures of related parties Applicable for fiscal years beginning on or after January 1, 2011 Amendments to IFRIC 14 Prepayments of minimum requirement Applicable for fiscal years beginning or financing on or after January 1, 2011 Amendments of IAS 32 Classification of emission rights Applicable for fiscal years beginning on or after February 1, 2011 IFRIC 19Suppression of financial liabilities Applicable for fiscal years beginning through equity tools on or after July 1, 2010 b) Practices, interpretations and amendments of existing standards which are not yet in force and which were not adopted in advance by the company. The following norms and changes in existing regulations were published and apply on financial years beginning on or after July 1 st, 2011, and for subsequent periods. However, the Company has not adopted such norms or changes in advance. Standard Main demands Effective date

3 IFRS 9 (as Financial tools Applicable to fiscal years beginning modified in 2010 on or after January 1, 2013 Amendments of IFRS 1Elimination of fixed dates for adopters in the first time of IFRSs Amendments of IFRS 7Disclosures - transfers of assets financial Applicable for fiscal years beginning on or after July 1, 2011 Applicable for fiscal years beginning on or after July 1, 2011 Amendments of IAS 12Deferred taxes - recovery of underlying assets when the asset is measured by the fair value model in accordance with IAS 40 Applicable for fiscal years beginning on or after January 1, 2012 IAS 28 (revised in 2011) "Investments in subsidiaries Entities with shared control" Revision of IAS 28 to include amendments introduced by IFRSs 10, 11 and 12 Applicable for fiscal years beginning on or after January 1, 2013 IAS 27 (Revised in 2011), "Separate Financial Statements" Requests of IAS 27 related to consolidated financial statements are replaced by IFRS 10. The requirement of separate financial statements is kept. Applicable for fiscal years beginning on or after January 1, 2013 IFRS 10 " Financial Statements" It has substituted IAS 27 with respect to applicable requests to consolidated financial statements and SIC 12. The IFRS 10 has determined a single consolidation control-based model regardless of the nature of the investment. Applicable for fiscal years beginning on or after January 1, 2013

4 IFRS 11 Shared Contracts Eliminated the proportional consolidation model for entities with shared control, retaining only the model by the equity method. Also eliminated the concept of "assets with shared control", keeping only "operations with shared control" and "shared-controlled entities". Applicable for fiscal years beginning on or after January 1, 2013 Expands the disclosure requests of the consolidated/non-consolidated entities in which the entities have influence. IFRS 12 Disclosures of Participations in Other Entities IFRS 13 Fair Value Measurements Applicable for fiscal years beginning on or after January 1, Replaces and consolidates all guidelines Applicable for fiscal years and requests related to the verification of beginning on or after January 1, fair value contained in the other Opinions of the IFRSs in a single statement. IFRS 13 defines fair value, tells how to determine the fair value and disclosure requirements related to the verification of fair value. However, it does not introduce any new requirements neither amendments regarding items that must be measured at fair value, which remains as set by the original opinions. Amendments of IAS 19 Benefits to Employees Amendments of IAS 1 Submission of Financial Statements Elimination of the focus on corridor Applicable for fiscal years ("corridor approach"); therefore, the actuarial beginning on or after January 1, gains or losses are recognized as other results related to pension plans and as results for other long-term benefits, when incurred, among other changes. Introduces a request demanding that the items recorded in other comprehensive results are segregated and totaled among items that are subsequently reclassified (or not) as profit or loss. Applicable for fiscal years beginning on or after January 1, 2013 Considering the current operations of the company and its subsidiaries, its management does not expect that these new standards, interpretations and amendments will have a material effect on the financial statements when they are adopted. The Committee of Accounting Pronouncements (' CPC ') has not issued its own opinions and amendments in regards to the new or reviewed aforementioned IFRS standards.. As a result of the commitment of the CPC and the Brazilian Securities and Exchange Commission ("CVM") to keep updated the set of standards issued based on the updates made by the International Accounting

5 Standards Board (' IASB '), such opinions and changes in IFRS standards are expected to be issued by CPC and approved by CVM prior to their respective applicability dates. 3. KEY ACCOUNTING PRACTICES a) Operational currency and conversion of foreign currencies The quarterly financial statements are presented in BRL (Brazilian Reais), which is the operational currency, for the Company and affiliates reporting. Transactions denominated in Foreign Currency are initially recorded at the exchange rate applicable at the respective transaction's date. Gains and losses resulting from differences in conversion of such foreign currencies into the operational currency are accrued and reflected in the profit & loss statement. b) Cash and cash equivalents These include balances in cash, bank accounts and financial investments with immediate liquidity, with low risks of fluctuation in value, maturing within less then 90 days from the placement date, aimed at meeting short term obligations. c) Accounts receivable and bad debt allowances Client accounts receivables are recorded by the nominal value of drafts representing such credits, added by exchange rate fluctuations when applicable. The allowances for doubtful accounts are calculated based on estimated losses, according to an individual assessment of the receivables, and taking into consideration the track-record of losses; its amount is regarded as sufficient by the Company's management, to cover for eventual losses incurred to realize such credits. d) Inventories These are shown at the lowest between the average production or acquisition value and the net attainable value. The net attainable value corresponds to the estimated sale price of the inventories, deducting all estimated costs and necessary expenses to complete the sale. e) Non-Current assets kept for sale The Non-Current assets are classified as kept for sale if their book value is recoverable mainly by a sale transaction and not by its continuous use. Such condition is only met when sale is highly probable and the non-current asset is available for immediate sale at its current condition. Management shall be committed with the sale, which is expected to be considered (when booked) as completed within one year following the date when it was classified as such.

6 The fixed assets classified as aimed at selling are valued at the lowest between the previously booked value and the fair value deducing the sales cost. f) Investments The investments made in controlled companies are valued by the equity method. According to the equity methodology, investments in controlled companies are adjusted for purposes of accruing the Group's share in the controlled party profits or losses and other applicable results. g) Fixed Assets The fixed assets are valued at their acquisition cost, deducting accumulated depreciation and losses due to decreases in the attainable value, when applicable. The cost of capitalized financings is recorded as part of the ongoing immobilization, in cases of eligible assets. Such immobilizations are classified under the proper categories of fixed assets when they are completed and ready for the intended use. The depreciation of these assets begins when they are ready to be used on the same basis as other fixed assets. The Company uses the linear depreciation method, based on the assessment of the estimated useful life of each asset, considering the expectation of future economic benefits generation, except for plots of land (real estate), which are not depreciated. The assessment of estimated useful life is reviewed on yearly basis, and adjusted if necessary, and may vary according to the technological updating of each unit. h) Biological assets The Company's biological assets are represented mainly by pine-tree forests, used for production of corrugated cardboard paper for packaging, boxes and boards, and also for sale to third parties and extraction of rosin. The pines forests are located near to the Pulp & Paper mill in the State of Santa Catarina, and in Rio Grande do Sul, where they are used for production of rosin and trade of pine tree logs. The biological assets are periodically valued at their respective fair value less sales expenses. The valuation for each period is reflected in the P&L as fluctuation of biological assets fair value.

7 i) Valuation of assets attainable value ( Impairment ) The Company adopts as a procedure the review of its fixed assets valuation, to determine whether there are indications that such assets have incurred any impairment due to decreases in their attainable value, whenever events or changes in circumstances indicate that the book value of an asset or group of assets may not be attainable based on a future cash flow. Such reviews do not imply the need to book losses due to such impairments. j) Income tax and social contribution (current and deferred) Provisions for these items are made based on the taxable income determined in accordance with the applicable tax legislation, which differs from the result shown in the P&L Statement, because it excludes taxable income or expenses deductible in other financial years, apart from excluding items that are non taxable or non deductible in a permanent manner. The provision for income tax and social contribution is assessed individually for each company, based on the tax rates applicable at the end of the financial year. The Company adopts the current rate of 34% to assess its taxes, save for the subsidiaries Habitasul Florestal S.A. and Iraflor Comércio de Madeiras Ltda which adopts a presumed rate of 3.08% and Irani Trading S.A., which adopts a presumed rate of 10.88%.. Over these interim differences, for tax purposes, the amounts of tax losses, reserves for revaluations, adjustments of assigned cost, and fluctuation in the fair value of biological assets, income tax and social contributions are assessed. The deferred tax liabilities and those on the assets side are accrued all eligible interim deductible differences, only when it is likely that the Company will have future profits in sufficient amounts to allow such deductible differences to be utilized. k) Loans and financings, debentures and real estate certificate of receivables - CRI The original notional borrowed amounts are recorded, deducting the respective transactional costs (when existing), monetarily adjusted by the index contractually agreed with the lenders, added by interest calculated at the effective interest rate, and adjusted by the exchange rate fluctuation (when applicable) up to the balance-sheet date, as described under these explanatory notes. l) Derivative financial instruments valued at fair value The derivative financial instruments are valued by their fair value as of the balance-sheet date, against financial income or expenses for the period's P&L.

8 m) Leasing Leased fixed assets where the Company substantially undertakes all of the property's risks and benefits are classified as financial leasing. All other leasing agreements are classified as operational ones and reflected in the financial year's results. Financial leasing is booked as if it was a financed purchase, recording in its initial date a fixed asset and a finance liability (leasing). The fixed assets acquired under financial leasing are depreciated according to the rates set under explanatory note number 14. Payments made in consideration for operating leasing (net of all allowances granted by the lessor) are accrued to P&L applying the linear method throughout the leasing agreement's tenor. n) Provisions A provision is booked when the Company has a present liability, legal or not formalized, arising from a past event, and it is likely that resources will be demanded in order to settle such obligation. The provided value is that regarded by management as sufficient to cover probable losses, updated until the balance-sheet's date, observing the nature of each risk, and supported by the Company's attorneys' opinion. o) Relevant accounting judgments, estimations and assumptions The preparation of the financial statements considered accounting judgments, estimations and assumptions for the booking of certain assets, liabilities and other transactions, as well as for the periods' income and expenses. The definition of such accounting judgments, estimations and assumptions adopted by Management was prepared employing the best available information as of the date of the quarterly financial statements, including past experienced events, forecast of future ones, and support from specialists, when applicable. Therefore, the interim financial statements include several estimations, such as (without being limited to these): determination of fixed assets' useful life; realization of deferred tax credits; provisions for doubtful receivables; fair value assessment of biological assets; provisions for taxes, social security, civil and labor litigations; assessment of the fair value for certain financial instruments; and decrease in the attainable value of assets. The actual results of the amounts booked using accounting judgments, estimations and assumptions at time of their effective realization may differ from those reflected in the quarterly financial statements.

9 p) Assessment of results Results are assessed using the accrual regime, including income, expenses and exchange rate variations at the official rates applicable on current and long term assets and liabilities, and when applicable also considering the revaluation of assets to their respective market value. q) Revenues Recognition Income is accrued using the fair value of the received or receivable consideration, deducting any estimations related to returns, trade discounts and/or bonuses granted to buyers, and other similar deductions. Income from products is accrued when all of the following conditions are met: The Company has transferred to the buyer all relevant risks and benefits concerning the proprietorship of the products; The Company is not continuously involved in managing products sold (to an extent usually related to ownership or effective control over such products); The income amount can be reliably assessed; It is likely that the economic benefits associated with the transaction at hand will be realized by the Company; Costs incurred or yet to incur regarding the transaction can be reliably assessed. r) Basic and diluted earnings per share (EPS) These are calculated based on the weighed average number of free floating shares during the financial year. s) Value added statement ( VAS ) The Brazilian corporate laws require the presentation of the Value Added Statement as part of the quarterly financial statements set produced by the Company. Such statement aims at portraying the wealth generated by the Company, and its respective distribution during the presented financial periods. The VAS was prepared according to the provisions contained under CPC 09 Added Value Statement, and based on information gathered from the Company, which served as basis for the preparation of the interim financial statements.

10 4. CONSOLIDATION OF INTERIM FINANCIAL STATEMENTS The consolidated quarterly information include Celulose Irani S.A. and its subsidiaries as follows: Participation in share capital - (%) Subsidiaries - direct participation 9/30/ /31/2010 Habitasul Florestal S.A Irani Trading S.A Meu Móvel de Madeira LTDA HGE - Geração de Energia Sustentável Iraflor - Comércio de Madeiras LTDA The accounting practices adopted by the controlled companies are consistent with those adopted by the controlling Company. In the interim consolidated financial statements the investments in the controlled companies were disregarded, as well as the results from equity and the operations performed and profits unrealized between these companies. The accounting information of the controlled parties, used for consolidation, have the same base-date as that applying to the Controlling Company. The operations of each one of the controlled companies are listed under explanatory note number CASH AND CASH EQUIVALENTS The balances for cash and cash equivalents are presented as follows: Parent company 9/30/ /31/201 9/30/ /31/201 Fixed fund Banks 1,648 2,195 1,920 2,445 Financial investments 50,074 36,979 51,063 37,896 51,737 39,191 53,004 40,362 Financial investments (placements) are subject to fixed income yields (CDB), at an average interest rate of 102.4% of the CDI (Brazilian Interbank Deposits Rate).

11 6. CUSTOMER ACCOUNTS RECEIVABLE Parent company 9/30/ /31/2010 9/30/ /31/2010 Receivables from: Customers - Domestic market 85,824 77,572 91,257 82,357 Customers - Foreign market 6,381 2,895 6,430 2,949 Related Parties 1,907 2, ,112 82,599 97,687 85,306 Provision for bad debts (5,837) (5,696) (6,547) (6,406) 88,275 76,903 91,140 78,900 The distribution of accounts receivable by aging is the following: Parent company 9/30/ /31/201 9/30/ /31/201 Yet to Mature 78,017 73,687 79,992 75,644 Past due - up to 30 days 5,770 2,113 6,408 2,203 Past due - from 31 to 60 days 2, , Past due - from 61 to 90 days Past due - from 91 to 180 days Past due - more than 180 days 6,658 5,939 7,423 6,560 94,112 82,599 97,687 85,306 The average credit period on sale of goods is 50 days. The Company records an allowance for doubtful accounts for receivables overdue for more than 180 days based on an analysis of the financial situation of each debtor and still based on past experience of default. They are also an allowance for doubtful accounts for receivables overdue less than 180 days, where the values are considered irrecoverable, considering the financial situation of each debtor. Parent company 9/30/ /31/201 9/30/ /31/201 Balance at the beginning of the period (5,696) (5,326) (6,406) (6,042) Provisions for recognized losses (146) (571) (146) (571) Amounts recovered over the period Balance at end of fiscal year (5,837) (5,696) (6,547) (6,406) Part of the receivables (in an amount near to BRL 43,568) are pledged in guarantee of certain financial transactions, amongst which a fiduciary Assignment of 25% of the principal outstanding balance of the debentures (explanatory note nr 17) as well as a fiduciary Assignment equivalent to 3 installments of the rent of the CRI operation (explanatory note nr 16).

12 7. INVENTORIES Parent company 9/30/ /31/201 9/30/ /31/201 Finished goods 6,487 6,237 8,043 7,975 Inputs for production 20,263 20,370 20,395 20,370 Consummables 11,437 10,340 11,469 10,340 Other inventories ,634 37,227 40,354 39, TAXES TO COUNTERCLAIM These are presented as follows: Parent company 9/30/ /31/201 9/30/ /31/201 ICMS on the acquisition of fixed asset 3,919 5,286 3,927 5,298 ICMS IPI 5,606 4,147 5,606 4,147 Income Tax Social contribution IRRF Others ,067 11,036 10,102 11,051 Current 8,064 8,635 8,099 8,650 Non-current 2,003 2,401 2,003 2,401 The ICMS credits for the acquisition of fixed assets are created in regards to purchases of Company's assets, and are used in 48 monthly consecutive installments as foreseen under the applicable legislation. The IPI credits are generated regarding to acquisitions of inputs used in production, and are utilized to set-off debits created by the sales operations of each production unit.

13 9. BANKS PLEDGED ACCOUNT Parent company and 9/30/ /31/201 Banco do Brasil - New York - a) 3,180 5,975 Banco Credit Suisse - Brazil - b) 5,326 4,509 8,506 10,484 Current 5,010 6,419 Non-current 3,496 4,065 a) Banco do Brasil New York represented by amounts withheld to guarantee the payment of the quarterly installments of a pre-export loan granted by the bank Credit Suisse, referring to the installment due in November b) Bank Credit Suisse Brazil represented by amounts withheld from financial investments, equivalent to 17.2% of the Brazilian Reais value, as guarantee of a Cash Flow Swap. Such amount is categorized under short and long terms regarding its repayment installments as set under the contract, which are 8 semi-annual installments starting on September 08 th, While withheld, it earns interest as a financial placement of private fixed income (CDB), at 108% of CDI (Brazilian Interbank Deposit Rate). 10. OTHER RECEIVABLES Parent company 9/30/ /31/201 9/30/ /31/201 Carbon credits 5,991 5,789 5,991 5,789 Advance to suppliers 2, , Personnel credits Renegotiation of customers 3,938 3,625 3,969 3,656 Prepaid expenses 194 2, ,298 Other credits ,215 13,410 14,318 13,563 Current 12,665 8,319 12,740 8,445 Non-current 1,550 5,091 1,578 5,118 Carbon Credits the Company holds carbon credits generating projects, originated by the reduction in greenhouse effect gases (such as carbon dioxide and methane), as consequence of setting up the Co-

14 generation power-plant and the Effluents Treatment Station at the Pulp & Paper Unit at Vargem Bonita, SC Brazil. Such credits are traded via contracts signed within the scope of the Kyoto protocol, having as counter-parties companies located in developed countries, obliged to reduce emissions. These credits are recognized according to the accrual system as a reduction in production costs, and are measured according to the methodology approved under the Kyoto Protocol for each project, estimated based on the signed contracts. Re-negotiation with Clients it refers to past due credits granted to clients, for which the Company has executed agreements of acknowledgement of debt, agreeing on its repayment. The final maturity of the monthly installments will be in November/2014, and the average applicable interest rate is 2% per month, accrued to the Company's results upon receipt. Some of these contracts have warranty clauses covered by machinery, equipments and real estate properties, guaranteeing the renegotiated debt's amount. Prepaid Expenses it refers mainly to insurance premiums paid when subscribing to insurance policies for all of the Company's units, and are accrued on the financial year's results on monthly basis, throughout the validity period of each of such policies. 11. ASSETS CATEGORIZED AS KEPT FOR SALE As decided by the Company's Management Committee in October/2010, the furniture manufacturing activities at Rio Negrinho SC (Brazil) were terminated. The assets from that unit were assessed by the Management, and categorized as kept for sale for their book residual value as of the balance-sheet's date, as the appraisals performed indicated a market value free from commissions and costs of sale which was higher than such residual book value. Inventories are categorized according to their respective acquisition book value, and Management deems them as attainable by market sales. The aforementioned operation had no liabilities as of September 30 th, Parent company and 9/30/ /31/20 Inventory Fixed assets 6,232 6,560 Assets from discontinued operation 6,460 7,090

15 12. DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION - ASSETS Parent company 9/30/ /31/2010 9/30/ /31/20 Deferred credit Income Tax On temporary provisions 11,076 9,203 11,087 9,206 On tax losses 687 1, ,272 Deferred credit Social Contribution On temporary provisions 3,987 3,316 3,990 3,316 On negative tax-base ,997 14,249 16,011 14,252 Management has recognized deferred income tax and social contribution over interim differences, tax losses and negative tax-base for social contribution. Based on budget forecasts approved by the Management Committee, Management estimates that such credits shall be realized as follows: Period Amount R$ , , , , and over 7,219 15, INVESTMENTS Habitasul Irani Meu Móvel Florestal Trading de Madeira As of December 31, Equity method results ( 7 7 ) Dividends proposed (24.053) (8.099) Capital Increments - - As of September 30, HGE Power Generation Iraflor Comercio de Madeiras Total 3, , , (32,152) - 37,536 37,536 3,529 38, ,732 Paid-up capital Income for the period Equity share % 28,260 41,226 4, ,916 85,749 1,469 5,009 8,740 (76) ,010 37,540 3,530-38,

16 Controlled company Habitasul Florestal S.A. operates with planting, cropping and handling pine-trees forests and extraction of rosin. Controlled company Irani Trading S.A. operates with brokerage of exports and imports of goods, exporting of merchandise acquired for such purpose, and real estate management and leasing. Controlled company Iraflor Comércio de Madeiras Ltda. Operates with pine-tree forests management and sales Controlled company Meu Movel de Madeira Comercio de Moveis e Decoracoes Ltda operates with retailing of furniture and decoration articles, and furniture assembly services. Controlled company HGE Geracao de Energia Sustentavel was acquired in 2009, having as its object the generation, transmission and distribution of electricity power from aeolian origin, aimed at commercialization in permanent basis, as an independent power producer. It remains at its pre-operating stage and assesses its projects aiming at their implementation.

17 14. FIXED ASSETS 9/30/ /31/2010 Depreciation Amount Amount Controlling Company Cost accumulated Net Net Plots of land - real estate property 123, , ,894 Buildings and constructions 36,222 (6,914) 29,308 28,136 Equipments and fixtures 513,629 (182,787) 330, ,035 Vehicles and tractors 1,719 (1,185) Other immobilizations (*) 12,891 (8,141) 4,750 4,757 Ongoing immobilizations 12,975-12,975 5,216 Advance to fixed asset supplier 7,834-7,834 6,740 Hire-purchase - financial leasing 27,852 (11,035) 16,817 17,745 Immobilizations in third-parties' property 16,061 (1,874) 14,187 14, ,084 (211,936) 541, ,705 9/30/ /31/201 Depreciation Amount Amount Cost accumulated Net Net Plots of land - real estate property 174, , ,014 Buildings and constructions 148,557 (30,316) 118, ,624 Equipments and fixtures 513,724 (182,815) 330, ,115 Vehicles and tractors 1,822 (1,195) Other immobilizations (*) 15,869 (8,379) 7,490 5,076 Ongoing immobilizations 13,383-13,383 7,736 Advance to fixed asset supplier 7,834-7,834 6,741 Hire-purchase - financial leasing 27,976 (11,036) 16,940 17,745 Immobilizations in third-parties' property 16,061 (1,874) 14,187 14, ,713 (235,615) 684, ,323 (*) Balance for the detentions as furniture and appliances, software and computer equipment. Summary of changes in fixed assets: Parent company 9/30/2011 9/30/ /31/201 9/30/2011 9/30/ /31/201 Opening Balance 545, , , , , ,409 Additions 24,147 10,739 19,926 30,326 12,844 20,882 Exclusions (1,960) (1,511) (12,085) (2,264) (2,238) (12,587) Depreciation (26,743) (24,253) (32,418) (28,287) (25,673) (33,381) Closing Balance 541, , , , , ,323

18 b) Depreciation method The table below shows the annual depreciation rates set based on the assets respective useful life. Rates were calculated based on their weighted average useful life. Rate % Buildings and constructions * 2.25 Equipment and fixtures ** 6.45 Furniture, utensils and IT equipments 5.71 Vehicles and tractors 20 * including weighted rates of third-party properties ** including weighted rates of financial leasing c) Other information Ongoing immobilizations refer to improvement and maintenance works in the production processes of the Units Paper & Packaging at Vargem Bonita (SC), and Packaging at Indaiatuba (SP). Advances made to suppliers refers to investments at the Unit Paper & Packaging at Vargem Bonita (SC). The Company is liable for leasing contracts related to machinery, IT equipments and vehicles, which include call options, negotiated at a fixed rate and a guaranteed 1% residual value balloon or diluted (through the contract term) payment, having as warranty the fiduciary lien of the goods themselves. As of Sep 31 st, 2011, the undertook obligations were recorded as Loans and Financings under current and noncurrent liabilities. Immobilizations at third-parties' properties refer to the civil construction works at the Indaiatuba (SP) Packaging unit, which is depreciated by the linear methodology at a 4% (four percent) annual rate. The proprietorship is held by companies MCFD Administração de Imóveis Ltda. and PFC Administração de Imóveis Ltda.; the renovation's charges were fully undertaken by Celulose Irani S.A. d) Losses due to fixed assets' impairment The Company has not identified indicators that could impair the attainable values of its assets as of September 30, 2011.

19 e) Assets transferred as warranty The Company has certain fixed assets under lien to guarantee financial transactions, as described in the explanatory notes 16 and BIOLOGICAL ASSET The Company's biological assets entail farming and planting of pine-trees and eucalyptus forests to provide raw-materials to produce pulp, which is used in the production process of paper, and sales of timber logs to third-parties. The Company's biological assets' balance comprises the costs incurred in creating the forests and the difference between the fair value against the creation costs, so that the overall biological assets' balance is reported at its fair value, as follows: Parent 9/30/2011 company 9/30/ /31/2010 9/30/2011 9/30/ /31/201 Generation costs of Biological assets 35,139 39,905 40,789 74,857 43,157 44,003 Difference of fair value 81, , , , , ,212 Biological asset at fair value 116, , , , , ,215 a) Assumptions to recognize the fair value deducting the cost of sale of biological assets. The Company recognizes its biological assets at their fair value, according to the following calculation assumptions: (i) (ii) (iii) (iv) (v) The methodology used to measure the biological assets' fair value corresponds to the future cash flows forecast, according to the projected productivity cycle of the forests, taking into account variations in their pricing and growth rates; The rate used to discount the cash flows was given by the Capital Asset Pricing Model (CAPM). It is based on return rates attained by investors in the market. The forests' projected productivity volumes were set by stratification of each specie, assorting the production plans, forests' age, production potential, and considering a production cycle for the forests. Alternatives are created for handling, in order to establish the ideal long-term production flow to maximize the forests' yield and provide the supplies demanded by the industry. The prices applied to biological assets are those valid for each analysis period, by researching the markets within the regions where such assets are located. Prices used are expressed in BRL / cubic meter, taking into account the costs required to prepare such assets for sale or consumption. Expenses incurred for planting are based on the costs that the Company incurs to form the

20 (vi) (vii) biological assets. The assessment of biological assets exhaustion is done based on the fair value of such assets cropped within the respective period, compared to the production expectations applicable to each forest. The Company reviews the biological assets' fair value periodically, understanding that such gap is sufficient to prevent lagging of the fair values reported under its quarterly financial statements. (viii) During this quarter, the company has not identified variations in its assumptions that could result in changes of its biological assets fair value. b) Key changes Changes during the assessed period are the following: Parent company Opening balance as of 143, ,743 Planting 2,287 2,467 Exhaustion (5,393) (11,483) Fair value variation 34,282 52,844 Balance as of 9/30/ , ,571 Planting 1,450 1,503 Exhaustion (2,111) (4,753) Fair value variation (12,945) (2,106) Balance as of 12/31/ , ,215 Planting 3,085 3,219 Exhaustion (5,307) (12,288) Transfers for capital increments of controlled companies (37,536) - Fair value variation (4,947) (1,224) Balance as of 9/30/ , ,922 Exhaustion of biological assets during the period was accrued at production costs. The Company s Board of Directors has approved, on June 3 rd, 2011, to pay up for a capital contribution for the benefit of Iraflor Comercio de Madeiras Ltda, by transferring certain of its owned forestry assets. Such transaction mainly aimed at achieving a better management of forestry assets, as well as at raising funding via CDCA (as per explanatory note nr 16). c) Biological assets pledged in warranty The Company has certain biological assets under lien to guarantee financial transactions, as described in the explanatory notes 16 and 17.

21 16. FUNDING Current National currency Parent company 9/30/ /31/2010 9/30/ /31/2010 FINAME 11,093 10,252 11,093 10,252 a) Working capital 40,999 63,308 41,474 63,308 b b) Working capital - CDCA 14,812-14,812 - c c) Financial leasing d d) e Real Estate Credit Note - CCI ,258 13,258 e) Total national currency 67,617 74,162 81,386 87,420 Foreign currency Financial leasing 2,413 2,199 2,413 2,199 f) Advance on exchange contract Banco Votorantim - 1,186-1,186 DF Deutsche Forfait s.r.o Toronto Dominion Bank g g) Banco Credit Suisse 19,190 16,824 19,190 16,824 h h) Banco C.I.T i i) Banco Santander (Brazil) 1,657 1,400 1,657 1,400 j j) Banco Santander 2,039 1,840 2,039 1,840 k k) Banco Santander PPE - 2,201-2,201 Total national currency 26,613 27,492 26,613 27,492 Total current 94, , , ,912 Non-Current National currency FINAME 9,256 15,066 9,256 15,066 a) Working capital 740 5, ,174 b b) Working capital - CDCA 76,050-76,050 - c) c Financial leasing 1, , d d) Real Estate Credit Note - CCI ,153 22,097 e e) Total national currency 87,266 20,934 99,506 43,031 Foreign currency Financial leasing 1,824 3,601 1,824 3,601 f f) Toronto Dominion Bank g) g Banco Credit Suisse 56,326 63,090 56,326 63,090 h h) Banco C.I.T i) i Banco Santander (Brazil) 1,657 2,800 1,657 2,800 j j) Banco Santander - 1,840-1,840 k) k Total national currency 60,048 72,349 60,048 72,349 Total non-current 147,314 93, , ,380 Total 241, , , ,292 a f a

22 Long-term maturity: 9/30/ /31/2010 9/30/ /31/ ,464 22,441 9,779 35, ,396 20,509 46,321 29, ,822 24,547 38,822 24, ,758 22,600 37,758 22,600 Over 26,874 3,186 26,874 3, ,314 93, , ,380 Loans denominated in Brazilian currency: a) Finame the average interest rate is 8.98% p.a., and final maturity is set for b) Working Capital average interest rate is 10.21% p.a., final maturity in the second half of c) Working capital - CDCA On June 20, 2011, the company has issued Agribusiness Asset-backed Securities - CDCAs, with a face value of R$ 90,000, in favor of Banco Itaú BBA S.A. and Banco Rabobank International Brazil S.A. Such CDCAs are backed by credit rights derived from Agricultural Producers Bonds ("CPR"), issued by controlled company Iraflor Comércio de Madeiras Ltda., whose original creditor is Celulose Irani S.A., according to law nr 8,929 dated August 22nd, The repayment schedule of such transaction entails 6 annual installments payable starting on June/2012, accruing interest charged according to the variation of the IPCA index plus a spread of 10.22% p.a.. Transaction Cost: The transaction cost incurred by the Company in connection with the aforementioned transaction was R$ 3,626; its effective interest rate (IRR) is 16%. Below, we present the transaction costs that will accrue in P&L accounts on each outstanding period thereof: Year Principal and over 899 3,395 d) Financial Leasing average interest rate is 17.18% p.a., final maturity in e) Real Estate Credit Note - CCI On August 03 rd /2010, affiliated Irani Trading S/A issued a Private Instrument of Real Estate Credits Note (CCI), backed by a leasing agreement signed on October 20 th /2009 between Irani Trading S/A and Celulose Irani S/A.

23 Irani Trading S/A assigned the CCI to Brazilian Securities Companhia de Securitizacao. Due to such assignment, the Securitizer has issued, in fiduciary basis, Real Estate Receivables Notes (CRIs), and in August 06th/2010 it paid to Irani Trading S/A the amount of the CCI assigned, valued at BRL 40,833 equivalent to the net present value of 37 future leasing installments at a rate of 14.70% p.a. Loans in foreign currency This transaction is being repaid in 37 monthly and consecutive installments, amounting to BRL 1,364 each, beginning on August 25 th, 2010 and maturing on August 25 th, 2013, owed by the lessee Celulose Irani S/A to assigner Irani Trading S/A by force of their leasing agreement. f) Financial Leasing subject to US Dollar exchange rate fluctuation, payable in quarterly installments, with final maturity at the end of g) Toronto Dominion Bank, updated by the USD exchange fluctuation, payable in semi-annual installments, final maturity during the first half of h) Credit Suisse Bank, updated by the USD exchange fluctuation, payable in quarterly installments, final maturity during 2015; it refers to a prepayment of exports transaction. This financing was contracted as approved by the Management Committee, and is aimed at supporting export sales, debt term extension, and implementation of the Company's investments' plan for 2007/2008, with final maturity date set for year According to explanatory note nr 31, interest applying to this transaction are not subject to F/X fluctuation, based on a Swap contract. Transaction costs: The above transaction costs incurred amounted R$ 5,310; its effective interest rate (IRR) is 19%. Below, the impact caused by accrual of such transaction costs in P&L is presented for each subsequent period: FY Principal i)c.i.t. Bank, updated by the EUR exchange fluctuation, payable in quarterly installments, final maturity in j) Santander Bank (Brazil), updated by the EUR exchange fluctuation, payable in annual installments, final maturity during k)santander Bank, updated by the EUR exchange fluctuation, payable in semi-annual installments, final maturity during 2012.

24 Warranties: To warrant the transactions the Company has provided aval from its controlling shareholders and/or mortgage or fiduciary lien on plots of land, buildings, machinery and equipments, biological assets (forests) and trust receipts with an approximate value totaling R$ 156,000. Other transactions have specific warranties, as follows: i) For Working Capital CDCA (certificate of agribusiness credit rights), the company provided real warranties for an approximate amount of R$ 91,600, as follows: Fiduciary assignment to the benefit of the creditor on credit rights from the CPRs Rural Producer Bonds linked to it. Mortgage of certain of the company s buildings, equivalent to 9,500 hectares, to the benefit of the banks. Trust receipt s on existing Pine and Eucalyptus forests planted at the mortgaged real estate, owned by the issuer. ii) For Real Estate Credit Note CCI, the company pledged real warranties to the benefit of the Securitizer, for an approximate amount of R$ 34,800, as follows: Mortgage of certain of Celulose Irani S.A. s properties, registered under Nrs 2,479, 2,481 and 8,535 of real estate Registry Office in the District of Ponte Serrada, SC. Agricultural Pledge of forest assets (pine and eucalyptus) in areas which are subject to mortgage, as aforementioned. Fiduciary Assignment of assets and rights represented by Pledge of Receivables, in a amount equivalent to 3 (three) monthly installments payable by tenant Celulose Irani S.A. to lessor Irani Trading S.A., by virtue of the lease contract between them. iii) To finance export prepayment, contracted with Banco Credit Suisse, the company pledged as warranty the shares held by it on its subsidiary Habitasul Florestal S.A., certain forested lands (plots and forests existing on it) belonging to Celulose Irani S.A., a corrugator machine of the brand B.H.S from its packaging unit in Indaiatuba SP, a boiler model 11 from HPB brand type Sermatec Mod. VS-500 of its Paper Unit and certain company shares owned by Irani Participações S.A. These guarantees reach an approximate amount of R$ 183,000. iv) To warrant the Banco Santander (Brazil) deal, the credit rights pertaining to the portfolio of carbon credits were pledged (originated from the Power Co-Generation project and negotiated within contracts that are valid up to year 2012).

25 Limiting Financial Clauses (Covenants): Certain financing contracts with financial institutions have limiting financial clauses linked to the maintenance of certain financial ratios, as below: i) Working Capital CDCA (Certificate of Agribusiness Credit Rights) a) The latest 12 months ratio between Net Debt and EBITDA may not exceed: (i) for quarters ending on September 30, December 31st/2011, March 31 st /2012: 3.0 (three times); (ii) for quarters ending on June 30 th and September 30 th /2012: 2.75 (two point seventy five times); and (iii) from the quarter ending on December 30 th /2012 onwards: 2.5 (two point five times). Provided, however, that if during a given Reference Quarter the ratio between Net Debt and EBITDA for the latest 12 months is not complied with on a period when the FX rate fluctuation has been positive and higher than 15% (fifteen percent), then it is established that only in such events the Issuer is waived from this covenant for that particular quarter. A new measurement of such ratio will be made based on the results of the immediate subsequent quarter (Subsequent Quarter), where the ratio between the latest 12 months net debt and EBITDA may not exceed the preset threshold related to the Reference Quarter. b) The latest 12 months EBITDA ratio against the same period's Net Financial Expenses may not be lower than: (i) for quarters ending on September 30 th, December 31 st /2011 and March 31 st /2012: 2.00 (two times); (ii) for quarters ending on June 30 th, September 30 th and December 31 st /;2012: 2.25 (two point twenty five times); and (iii) from the quarter ending on March 31 st, 2013 (inclusive) onwards, until the final settlement of all obligations under the Issuing Documents: 2.5 (two point five times). c) The latest 12 months ratio between EBITDA and Net Revenue of the same period shall be not lower than 17% throughout the whole transaction period, until the final settlement of all obligations under the Issuing Documents. As of September 30 th, 2011, the Company was compliant with all ratios demanded by the aforementioned contractual clauses. ii) Real Estate Credit Note CCI Certain covenants related to the maintenance of given financial ratios subject to quarterly assessments were defined and non-compliance may give rise to an event of debt acceleration. During this period, such covenants were fully met, as presented below: a) The latest 12 months ratio between Net Debt and EBITDA may not exceed: (i) for quarters ending on September 30, December 31st/2011, March 31 st /2012: 3.0 (three times); (ii) for quarters ending on June 30 th and September 30 th /2012: 2.75 (two point seventy five times); and (iii) from the quarter

26 ending on December 30 th /2012 onwards: 2.5 (two point five times). Provided, however, that if during a given Reference Quarter the ratio between Net Debt and EBITDA for the latest 12 months is not complied with on a period when the FX rate fluctuation has been positive and higher than 15% (fifteen percent), then it is established that only in such events the Issuer is waived from this covenant for that particular quarter. A new measurement of such ratio will be made based on the results of the immediate subsequent quarter (Subsequent Quarter), where the ratio between the latest 12 months net debt and EBITDA may not exceed the preset threshold related to the Reference Quarter (b) The latest 12 months EBITDA ratio against the same period's Net Financial Expenses may not be lower than: (i) for quarters ending on September 30 th, December 31 st /2011 and March 31 st /2012: 2.00 (two times); (ii) for quarters ending on June 30 th, September 30 th and December 31 st /;2012: 2.25 (two point twenty five times); and (iii) from the quarter ending on March 31 st, 2013 (inclusive) onwards, until the final settlement of all obligations under the Issuing Documents: 2.5 (two point five times). (c) The latest 12 months ratio between EBITDA and Net Revenue of the same period shall be not lower than 17% throughout the whole transaction period, until the final settlement of all obligations under the Issuing Documents. As of September 30 th, 2011, the Company was compliant with all ratios demanded by the aforementioned contractual clauses. iii) Banco Credit Suisse a) A Net Debt / EBITDA ratio no exceeding: (i) 3.0 times for quarters ending on September 30 th, December 31 st /2011 and March 31 st /2012; (ii) 2.75 times for quarters ending on June 30 th and September 30 th /2012; and (iii) 2.50 times for subsequent quarters, up to b) A ratio of EBITDA over Financial Expenses of at least 2.50 times for quarters ending on September 30 th /2011 and subsequent ones, up to c) The Net Debt, at the end of each quarter, shall not exceed USD 170 million, unless when the Net Debt against EBITDA ratio is equal or lower than 2.5 times. d) Investment expenses may not exceed 75% of the amount of Depreciation plus Exhaustion and Amortization, unless when the Net Debt against EBITDA ratio is equal or lower than 2.5 times. The contractual covenants related to Banco Credit Suisse were met by the Company, save for the ratio referred to under item b above, for which the Company obtained a specific waiver from the Creditor on September 30 th, iv) Banco Santander (Brazil) (audited for compliance only at the end of each fiscal year).

27 a) EBITDA Margin equal or greater than 17%; b) The ratio between net debt and EBITDA of 3 times; c) Maximum financial leverage of 2 times the tangible shareholders equity as defined in the contract. TLJP - Long-term interests rate. CDI - Interbank deposit rate EBITDA - operating result adjusted by net financial expenses (revenues) and depreciation, amortization and depletion. ROL - Net operating revenue 17. DEBENTURES a) The Company has issued simple debentures on April 12 th, 2010, non convertible into shares, which were placed by means of a public offer with limited distribution efforts, in the amount of BRL 100,000. These debentures are due in March 2015, and shall be repaid in eight semi-annual installments starting on September 2011, updated by the fluctuation of the CDI plus 5% p.a. Interests are due in semi-annual installments, without grace. Transaction Cost: This operation totaled a transaction cost of R$ 3,626, and its effective interest rate (IRR) is 16%. The balance of transaction costs to be appropriate to the result in each subsequent period is reported below: Year Principal ,045 Warranties: The debentures are backed by real warranties amounting to approximately R$ 160,000, as follows: Fiduciary lien favoring the Fiduciary Agent of Lands of Celulose Irani, according to the terms and conditions of the Private Agreement of Transfer of Irani Real Estate and other Matters, which shall guarantee the debt up to the limit of BRL 26 million. Fiduciary lien favoring the Fiduciary Agent of Lands and Buildings of Celulose Irani, according to the terms and conditions of the Private Agreement of Transfer of Irani Trading Real Estate and other Matters, which shall guarantee the debt up to the limit of BRL 40 million