REPORT OF THE BOARD OF DIRECTORS / 2 /

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3 / IndEX / REPORT OF THE BOARD OF DIRECTORS / 2 / Highlights / 2 / General Considerations / 4 / The Market / 5 / Communication and Information Technology / 6 / Forest Activities / 7 / Industrial Activities / 7 / Investments / 8 / Human Resources / 8 / Management Systems / 9 / Financial Activities / 11 / Proposal for Allocation of Profits / 12 / Notes of the Board of Directors / 12 / Financial Statements / 14 / Statement of Financial Position / 14 / Statement of Profit and Loss / 16 / Statement of Comprehensive Income / 17 / Statement of Changes in Equity / 18 / Cash Flow Statement / 20 / Notes to the Financial Statements / 22 / REPORT AND OPINION OF THE STATUTORY AUDIT BOARD AND LEGAL CERTIFICATIONS OF ACCOUNTS / 73 / Report and Opinion of the Statutory Audit Board / 73 / Legal Certification of Accounts / 74 /

4 REPORT OF THE BOARD OF DIRECTORS Highlights, December 31 st, 2010 EUR 1, Sales 328, ,893 Depreciation 33,057 20,346 Operational results 101,428 29,192 Net income 39, Net equity 261, ,246 Value added 133,367 35,214 Investment 20,034 81,919 Number of employees in December 31 st * (*) Fiscal and Board members not included.

5 / / 3 / Sales of Eucalyptus Pulp Thousand tonnes Sales Million EUR Year Total Year Total Net Worth Operational Results Million EUR Million EUR Year Total 80 Year Total Production of Eucalyptus Pulp Investment Thousand tonnes Million EUR Year Total 150 Year Total , , , , ,0

6 4 / ANNUAL REPORT 2010 / RePORT OF THE BOARD OF DIRECTORS Annual Report 2010 General Considerations The year 2010 will be directly associated with the project that doubled the production capacity of the Celbi mill and its inau guration by His Excellency the President of the Republic, Professor Cavaco Silva, on the 2 nd of July. With the start-up of the 76 MVA turbo generator on the 24 th of March, the overall process equipment included in the Expansion and Development Project C09 was in full operation, including the energy optimisation. This year s production amounted to 539,818 tonnes of pulp. Due to a strong demand for wood, created by a favourable market for bleached pulps, it was soon obvious that the volumes available in the domestic market would not be enough, making it inevitable to import wood not only from Galicia but also from South America. During the year 2010 we have gradually and systematically increa sed the production rate in accordance with the agreed learning curve for reaching the production level of 600 thousand tonnes of pulp per year. The average and daily productions achieved during the third quarter of 2010, together with the improvement in operational efficiency and the availability of the operational units, are clear indicators that support the ambitious budget set up for the year the quality of the Company s activities, particularly the positive trends of the parameters that characterise the sustainable development of the Organisation. The Description of the Organisation was updated in accordance with the EFQM Excellence Model and prepared so that a self-assessment session can be accomplished during the first four months of Approximately 7,200 hours were used to accomplish the Annual Training Plan. Some of the training actions were carried out in cooperation with Celtejo, particularly the ones aiming at the development of leadership, in other specific competences in essential areas and in the implementation of the Performance Management System. During 2010 the institutional dialogue with the trade unions was maintained. This practice was now extended to Celtejo. The year under review was marked by the involvement of different functional areas of Celbi the Financial Direction and cross departments, Engineering Techniques and Management Systems in other companies belonging to the Group, namely in Celtejo where a cultural change is definitely starting to show. The fourth Sustainability Report was produced and once again it was very welcome by all the stakeholders. The report enhances

7 / / 5 / The Market For the market pulp producers, 2010 was an exceptional year. The market was affected by the earthquake that occurred in Chile in February that withdrew from the market about 4.5 million tonnes. The demand in the first half-year far exceeded the supply with Asia (mainly in the SPOT market) facing an increasing demand caused by the planned start-up of new papermaking capacities in China. The international price of eucalyptus fibre began the year at USD 730/t ending at USD 850, after reaching USD 920 in June. SPOT prices, however, have greatly exceeded the reference prices, especially in the second quarter, when they reached values above USD 1,000/t in some regions of Asia. The exchange rate of the USD against the EUR had an impact on the Company s results since it ranged from USD in January to USD in December. The euro reached its lowest value, USD in June. Celbi naturally benefited from this exceptional market environment, reinforcing its position as a classic supplier of European har d wood pulp, keeping, however, a modest presence in the developing markets, particularly Asia. The strategy to focus sales in its natural market - Europe - persists, since this remains the largest market for paper pulp in the world. Celbi s product range, coupled with the new production capa city, makes the Company an exemplary manufacturer in an increa s ingly competitive market. The sales volume was 539,300 tonnes, 34.5% higher than in This increase was due to a sales effort that accompanied the greater availability of pulp due to the completion of the Expansion Project. Tissue P&W Packaging Specialities Other Europe Portugal Asia

8 6 / ANNUAL REPORT 2010 / RePORT OF THE BOARD OF DIRECTORS Communication and Information Technology The renewal of the agreement for the supply of IT equipment and of the corporate agreement for software licensing was carried out. Following the study and analysis of the implementation of a corporate ERP SAP System, the Project Altri SAP Unify & Máximo was initiated. This aims at establishing an IT platform for the Group (SAP) and supporting the process of maintenance man age ment by updating the existing Máximo System. We have completed the studies of document management sys tems and its extension to other Group units, as well as the study of the mill integration system for further extension to Celtejo. As part of the renovation and modernisation of the Information Systems and IT Infrastructure, several studies were performed, including a CAD System and a new system to support the Performance Management System. The service contract with Portugal Telecom (PT) was extended to Celtejo and Caima after revamping of the local telephone exchanges. The maintenance contracts have been renewed and several changes and improvements in the information systems were introduced. The work of installing anti-virus protection for the existing networks continued.

9 / / 7 / Despite the unfavourable weather conditions, the total area affected by fires did not exceed 387 hectares, of which 342 hectares of eucalyptus. The North and Central North of the country represented 85% of the affected area. Industrial Activities The year 2010 is characterised by changes in the production rate in accordance with the learning curve for the expected production level of 600,000 tonnes/year; by the mill shut-down that occurred in January to perform minor changes/corrections deemed necess ary; by the start-up of the 76 MVA turbo generator in late March and by the gradual and increasing consumption of non-iberian wood both in the form of logs and chips. We performed the first campaign of TCF pulp with very good indicators as to its future regular production, made standard trials and developed several applications that lead to the elimination of deposits caused by forest species originating from different areas of the Iberian Peninsula. The annual production amounted to 539,818 tonnes. Several prod uction records were broken during the last quarter of the year, such as: Monthly record 49,617.2 t; Daily average 1,653.9 t; Daily record 1,973.5 t. Forest Activities Celbi s forest department, particularly the wood supply area, sought to respond to the growing needs of raw material for the refurbished mill and the lack of wood supply in the domestic market. As a consequence, in addition to the substantial supply from own plantations, there was a need for importation of eucalyptus from Galicia and South America, particularly Uruguay and Chile. Altri Florestal aimed not only at compensating and ensuring the market s response and the flow from the import, but also specifically at guaranteeing the supply of FSC certified wood. The start-up of our chip silos, which took place at the end of the year, allowed for greater fluidity of movement of logs in the mill yard, especially chips from Latin America. The second half of 2010 saw the consolidation of the manufacturing operations and the stabilisation of the paper properties of the pulp, despite the high percentage of imported wood. The mill performance was significantly influenced by the quality, type and origin of the wood used in the process. Considering the fact that the supply of domestic wood has fallen sharply during certain periods of the year we were forced to use more than 50% of non-iberian wood, which definitely contributed to the high specific consumption (3.03 m 3 /ADTM*). We went further into the concept of predictive and conditioned maintenance to increase the reliability of facilities and operational efficiency and reduced the rate of overtime. *Air Dry Metric Ton

10 8 / ANNUAL REPORT 2010 / RePORT OF THE BOARD OF DIRECTORS Investments During 2010 we performed the operational tests that lead to the final acceptance of the following units: Digester; Recovery boiler; Turbine TG4. We have developed contacts with the authorities to obtain: Exemption from industrial licensing; Updating of environmental licensing; Licensing of a cogeneration plant; Licensing of the power grid; Licensing for the new buildings. We conducted a series of investment projects in Celbi, among which we would like to highlight the ones listed below, for its size and value of the investment: Reception of wood in chips and increase in chip storage capacity; Increase in storage capacity for pulp from the digester and equivalent filtrate; Increase in capacity for filtration of black liquor; Increase in storage capacity for green liquor non-filtered. Celbi, along with assuming responsibility for leading the design and deployment of a lot of significant investments/changes made in Celtejo, has carried out audits involving consulting experts and reputed suppliers in order to build a vision for the strategic development of that mill. Human Resources After its implementation, in late 2009, we have consolidated Celbi s Employee Portal, incorporating suggestions from users so as to make it more functional. We continued the development of skills of our employees. We submitted an application for a set of actions included in our training programme to the Operational Programme for Human Po ten tial (OPHP). These actions amount to a total 5,000 training hours. In 2010, more than 7,340 hours of training, of which about 3,000 framed in OPHP, were implemented. This training effort represents 1.8% of the total potential hours and an average of 4.1 training days per employee. The training priorities were focused on technical areas (process, electronics, instrumentation and mechanical) to meet the demands of new equipment (approx. 44%) and Occupational Safety and Health (approx. 23%). In addition to strengthening the training in Occupational Safety and Health, we reactivated in the last quarter the Zero Accident Programme, with the aim of raising awareness among employees, especially younger people, to the risks in the workplace in order to reduce accidents. The average number of staff stood at 240; the total worked hours decreased by about 1% as a result of a significant reduction in overtime that reached 6.1% of the potential of working hours (in 2009 it was 8.4%). In the end, personnel costs decreased by 6%, reaching 13.2 million euros. We cooperated with Celtejo, responding to their requests, par t icularly in its Performance Management System and completed the course Development of Leadership Skills for young staff in Celtejo and Celbi with the realisation of a practical action. As part of our Social Responsibility, we continued to cooperate with schools, providing about 50 curricular and extracurricular internships. We also broadened the scope of our Free-Time Programme in the summer months in order to include University students, helping 40 young people to occupy their time and get acquainted with the world of work.

11 / / 9 / On what concerns our involvement with the community we have given positive response to 49 of the 139 requests for support and donations. Management Systems The preparation and publication of the Sustainability Report for the year 2009, that includes the EMAS Environmental Statement, were carried out. We have renewed the certification of the Environmental Management System in compliance with ISO 14001, the Quality Management System in accordance with ISO 9001 and the EMAS registration. The Organisation Process Mapping was further revised. The process for the Management of Engineering Techniques was included in the Management System. Several documents that comprise the Management System were updated and the integration of the biomass power plant (owned by EDP Produção - Bioeléctrica, S.A.) in the Management System was consolidated. Throughout the year internal and external audits were carried out to ensure the normal functioning of the Management System (Quality, Environment, Safety and Chain of Custody for the wood). The actions leading to the registration of substances produced internally in compliance with the EU Regulation REACH* continued through the participation in partnerships and working teams as well as through the collection, preparation and dissemination of documentation related to the topic. As to waste management, the plan for the use of the controlled landfill and the composting station was fulfilled. A large part of the activity in waste management was focused on the selective collection and disposal of the waste. The contractors working at the mill site were involved in these activities as well. Logistics have been organised and procedures developed in order to increase the volume of industrial waste to be sent to external operators fully licensed for the utilisation or elimination of such waste. * Registration, Evaluation, Authorisation and Restriction of Chemicals.

12 10 / ANNUAL REPORT 2010 / RePORT OF THE BOARD OF DIRECTORS As to gaseous emissions, the exhaustion gases from the main chimneys were continuously monitored and air pollutants were analysed by external accredited laboratories in accordance with the Environmental Permit. In full observance of the legislation, the data concerning the monitoring of greenhouse gases was sent to the Portuguese Agency for the Environment (APA). In 2010, with the process stability achieved after the start-up of the equipment installed under the Expansion Project (C09), the specific emissions of fossil CO 2 decreased significantly compared to previous years results, following the reduction of the energy specific consumption. In the safety area, several improvement measures were carried out such as: reviewing of the Internal Emergency Plan; updating of documentation; modification of the fire combat water network; installation of new devices for collective protection and revamping of the existing protection systems. One fire drill was carried out. The Specific Improvement Programmes concerning safety management were maintained and improved. Technical improvements were applied to collective protection following the audits and inspections were carried out in the framework of the Safety Management System. The collaboration with external companies specialised in safety issues was intensified. On what concerns the liquid emissions, a campaign for studying the quality of the sea water and the beaches (the receiving medium of the liquid effluents) was put into action. The analytical programme for self-control of liquid effluents and water consumption was fulfilled. The liquid emissions were kept at the same level as the year before but the specific consumption of water decreased drastically. Considering the impacts derived from the C09 Project, the appropriate data included in Celbi s environmental and industrial permits were sent to the relevant authorities. Training courses on environment and safety were held for workers of companies providing industrial cleaning services, wood handling, mech anical and electrical maintenance and pulp handling and loading. On a regular basis training on safety was given to the workforce of the external companies involved in the imple mentation of projects and annual shutdown. Internally, training actions envisaged in the Annual Training Plan were implemented concerning the operation of the new process facilities and equipment maintenance, integration of operational staff, analy tical control, security and fire protection. In conformity with the applicable legislation and with the Envi ron m ental Permit, the self-control and environmental performance reports were sent to the relevant authorities. Likewise, the reports concerning the biomass power plant were sent off.

13 / / 11 / Financial Activities The consolidation of the Investment Project C09 allowed the production record of 539,818 tonnes which, combined with the rising prices of eucalyptus fibre in the international markets that in June reached 920 USD, contributed to Celbi s excellent results in Once the Expansion Project was concluded, the plant quickly reached a monthly average production of 45,000 tonnes, allow ing for an increase in production volume of 35.5% over The reference prices in international markets continued until June 2010 the upward trend that began in the second half of 2009, when the price reached EUR 740/t, closing the year at EUR 646/t As a result of the combination of increased volume with the price increase, Sales and Services rendered amounted to million euros, i.e., 106.7% higher than last year. This total also includes energy sales, which totalled 35.5 million euros, which surpassed the value obtained in 2009 by 84% due to the entry into operation of the new turbo generator. The Cost of Goods Sold and Materials Consumed was 136 million euros, higher than 2009 by 69.2%, while the increased production was 35.5%, which indicates an increase in production cost justified by the rising cost of wood. The External Supplies and Services reached 68.9 million euros, being 16.9 million euros higher last year. This is a result of the increase in production. It is worth noticing that the cost of salaries fell by 6.3% due to decreased use of overtime, which was very intensive during the Investment Project. The caption Interest and Other Similar Expenses includes pay ment of bank debt worth 15.5 million euros, the same as in Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec PIX PIX 2009 EBITDA achieved in 2010 was million euros representing an increase of over 200% when compared with the same value of the previous year and being, in absolute value, the highest ever recorded by Celbi. The Expansion Project is concluded, so the Depreciation for the year had an increase of 12.7 million, when compared with 2009, reaching 33.1 million euros. As a consequence, the Operational Result was 68.4 million euros, reaching a Net Profit of 39.9 million euros. Net debt as of 31 st December 2010 was 482 million euros, registering a decrease of 47.7 million euros compared to the same period last year. Leirosa, February 18 th, 2011

14 12 / ANNUAL REPORT 2010 / RePORT OF THE BOARD OF DIRECTORS Proposal for Allocation of Profits Notes of the Board of Directors As shown in the Balance sheet and Income Statement, Net Inco me for the year ended on 31 st December 2010 was 39,925, euros. That value derives from the fact that the Com p any has, in accordance with applicable accounting standards, recognised as an expense in the accounts for the year the value of 537, euros as the amount allocated to profit sharing by employees of the Company. The Board of Directors proposes that the Net Profit for the year ended on 31 st December 2010 in the amount of 39,925, euros is to be transferred to Retained Earnings. It is further proposed to assign, by way of profit sharing, to the Company s employees, this amount of 537, euros, according to the criteria established by the Board of Directors. 1. In accordance with article 447º (paragraph no. 5) of the Commercial Companies Code and concerning the individuals mentioned in nos. 1 and 2 of the referred article: 1.1 Shares owned as at December 31 st, 2010 This situation did not exist. 2. In accordance with article 448º (paragraph no. 4) of Commercial Companies Code: 2.1 Ownership of the capital Celulose Beira Industrial (Celbi), S.A. as at December 31 st, 2010: Altri - Participaciones y Trading, S.L 15,493,288 Leirosa, February 18 th, 2011 Leirosa, February 18 th, 2011 The Board of Directors Paulo Jorge dos Santos Fernandes (Chairman) João Manuel Matos Borges de Oliveira Pedro Macedo Pinto de Mendonça Domingos José Vieira de Matos Agostinho Dolores Ferreira Joaquim Ferreira Matos Francisco Ramos da Silva Gomes

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16 FINANCIAL STATEMENTS Statement of Financial Position at December 31 st, 2010 and 2009 (Amounts in euros) Assets Notes Noncurrent assets Biological assets 9 354, ,109 Tangible fixed assets 4 365,018, ,825,246 Intangible fixed assets 5 220, ,910 Investment properties 6 5,479,841 5,687,894 Investments in subsidiary companies 7 252,262, ,262,500 Other noncurrent assets , ,590 Deferred tax assets 8 5,058,499 4,528,610 Total noncurrent assets 628,793, ,552,859 Current assets Inventories 9 30,361,094 16,774,600 Customers 10, 11 and 27 90,901,271 62,198,591 Other debtors 10, 12 and 27 2,675,376 3,274,329 State and other public entities 13 3,877,321 7,699,248 Group companies 10 and ,564, ,982,157 Other current assets 14 1,572,245 1,137,569 Cash and cash equivalents 10 and ,672,862 71,399,246 Total current assets 364,624, ,465,740 Total assets 993,418, ,018,599

17 Equity and liabilities Notes Equity Share capital 16 77,500,000 77,500,000 Legal reserve 16 16,100,235 16,100,235 Other reserves ,124, ,493,803 Net profit/(loss) 39,925, ,462 Total equity 261,650, ,245,500 Liabilities Noncurrent liabilities Other loans 10 and ,744, ,412,774 Other noncurrent liabilities 19 19,467,948 - Deferred tax liabilities 8 157, ,278 Provisions 18 1,273,663 1,214,322 Total noncurrent liabilities 553,643, ,810,374 Current liabilities Bank loans 10 and 17-11,100,776 Other loans 10 and 17 70,805,621 34,351,153 Suppliers 10 and 20 53,624,938 20,273,774 Group companies 10 and 27 3,318,725 2,291,719 Other current creditors 10, 21 and 27 10,478,404 11,184,451 State and other public entities 13 11,566, ,511 Other current liabilities 22 13,821,651 8,385,798 Derivatives 10 and 23 14,509,396 9,719,543 Total current liabilities 178,125,079 97,962,725 Total liabilities 731,768, ,773,099 Total equity and liabilities 993,418, ,018,599 The accompanying notes are part and parcel of the Financial Statements.

18 16 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS Statement of Profit and Loss for Financial Years ended December 31 st, 2010 and 2009 (Amounts expressed in euros) Notes Sales 27 and ,904, ,893,222 Services rendered 28 1,392,245 1,899,640 Other income 29 7,192,886 17,296,872 Cost of sales 9 and 27 (134,574,162) (82,784,518) External supplies and services 26 and 27 (68,935,909) (51,991,108) Payroll expenses 33 (13,245,849) (14,129,740) Amortisation and depreciation 4, 5 and 6 (33,056,820) (20,346,046) Provisions and impairment losses 18 (99,138) 2,640,182 Other expenses 30 (19,206,356) (1,632,454) Financial expenses 31 (25,384,076) (15,393,986) Financial income 27 and 31 7,263,640 6,639,004 Profit before tax 50,250,803 91,068 Income tax 8 (10,325,564) 60,394 Net profit 39,925, ,462 Net profit 39,925, ,462 Earnings per share Basic Diluted The accompanying notes are part and parcel of the Financial Statements.

19 / / 17 / Statement of Comprehensive Income for Financial Years ended December 31 st, 2010 and 2009 (Amounts expressed in euros) Notes Net income 39,925, ,462 Change in fair value of cash flow hedging derivatives 23 (3,520,542) (16,365,714) Other comprehensive income for the year (3,520,542) (16,365,714) Total comprehensive income for the year 36,404,697 (16,214,252) The accompanying notes are part and parcel of the Financial Statements.

20 18 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS Statement of Changes in Equity for Financial Years ended December 31 st, 2010 and 2009 (Amounts expressed in euros) Notes Share capital Own shares (nominal value) Own shares (discounts and premiums) Legal reserve Balance as of January 1 st, 2009 (POC) 16 77,500,000 (33,560) 33,560 16,100,235 Adjustments of conversion to IFRS (cumulative effect) Balance as of January 1 st, 2009 (restated) 16 77,500,000 (33,560) 33,560 16,100,235 Application of 2008 results Transfer to retained earnings Total income for the year Balance as of December 31 st, ,500,000 (33,560) 33,560 16,100,235 Balance as of January 1 st, ,500,000 (33,560) 33,560 16,100,235 Application of 2009 results Transfer to retained earnings Total income for the year Balance as of December 31 st, ,500,000 (33,560) 33,560 16,100,235

21 / / 19 / Notes Other reserves Hedging reserves Other reserves and retained earnings Total other reserves Net profit Total shareholders funds Balance as of January 1 st, 2009 (POC) ,947, ,947,454 6,690, ,237,902 Adjustments of conversion to IFRS (cumulative effect) 3 9,221,850-9,221,850-9,221,850 Balance as of January 1 st, 2009 (restated) 16 9,221, ,947, ,169,304 6,690, ,459,752 Application of 2008 results Transfer to retained earnings - 6,690,213 6,690,213 (6,690,213) - Total income for the year (16,365,714) - (16,365,714) 151,462 (16,214,252) Balance as of December 31 st, (7,143,864) 138,637, ,493, , ,245,500 Balance as of January 1 st, (7,143,864) 138,637, ,493, , ,245,500 Application of 2009 results Transfer to retained earnings - 151, ,462 (151,462) - Total income for the year (3,520,541) - (3,520,541) 39,925,239 36,404,698 Balance as of December 31 st, (10,664,405) 138,789, ,124,724 39,925, ,650,198 The accompanying notes are part and parcel of the Financial Statements.

22 20 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS Cash Flow Statement for Financial Years ended December 31 st, 2010 and 2009 (Amounts expressed in euros) Notes Operating activities Collections from customers 304,239, ,840,725 Payments to suppliers (186,097,624) (117,616,602) Payments to personnel (9,626,293) (10,871,136) Other cash paid/cash receipts from operating activity (22,655,865) 11,949,481 Income tax paid 292,917 86,153,080 1,781,200 30,083,668 Cash flow from operating activities (1) 86,153,080 30,083,668 Investment activities Collections relating to Interests and similar income 4,807,247 6,839,660 Tangible fixed assets 1,162,141 2,314,466 Subsidies for investment 677,548 6,646,936 1,579,901 10,734,027 Payments relating to Loans (16,250,000) (6,020,000) Intangible assets (714,896) (156,825) Fixed tangible assets (19,020,161) (35,985,058) (102,987,035) (109,163,861) Cash flow from investing activities (2) (29,338,122) (98,429,834)

23 / / 21 / Notes Financing activities Collections relating to Loans ,226,658 86,226,658 Payments relating to Amortisation of leasing contracts Interests and similar costs (14,650,966) (17,615,342) Loans (10,890,376) (25,541,342) - (17,615,342) Cash flow from financing activities (3) (25,541,342) 68,611,316 Cash and cash equivalents at the beginning of the year 15 71,399,246 71,134,095 Variation of cash and cash equivalents: (1)+(2)+(3) 31,273, ,151 Cash and cash equivalents at the end of the year ,672,862 71,399,246

24 22 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS Notes to the Financial Statements of December 31 st, 2010 (Amounts in euros) 1. Introduction Celulose Beira Industrial (Celbi), S.A. (Company or Celbi) was established in 1965 and has its head office in Leirosa, Figuei ra da Foz. Its main activity is the production and marketing of paper pulp. In August 2006, following the public process of divestment by the former shareholder, Altri, SGPS, S.A. (Altri), through its subsidiary Altri - Participaciones y Trading, S.L. (Altri SL) acquired 99.96% of the Company s share capital, representing 100% of the voting rights, as the Company itself holds 6,712 shares. The Company is thus part of a business Group led by Altri, SGPS, S.A. (Altri) and listed on NYSE Euronext Lisbon. Celbi s financial statements are presented in euros rounded to the unit, which is the currency used by the Company in its business and thus considered the functional currency. 2. Main Accounting Policies The main accounting policies adopted in the preparation of the accompanying consolidated financial statements are as follows: 2.1. Basis of Preparation The accompanying consolidated financial statements have been prepared on a going concern basis from the books and accounting records of the companies included on the consolidation, which were prepared according to the International Financial Reporting Standards (IFRS) as adopted by the European Union and under the historical cost convention, except for some financial instruments which are stated at fair value. These standards include International Financial Reporting Standards issued by the International Accounting Standards Board (IASB), International Accounting Standards (IAS) issued by the International Accounting Standards Committee (IASC) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) or by the previous Standing Interpretations Committee (SIC), as adopted by the European Union. Standards and interpretations above mentioned will be generally presented as IAS/IFRS. The adoption of IAS/IFRS in the presentation of Financial Statements by the Company occurred for the first time in 2010, being January 1 st, 2009, the date of transition from the generally accepted accounting principles in Portugal (Official Accounting Plan) to these standards as required by IFRS 1 - First-Time Adoption of International Financial Reporting Standards. Under this standard, there were no effects reported to date of transition to IFRS (January 1 st, 2009) recorded under shareholders equity. The impact of adopting these accounting standards in the financial statements presented on December 31 st, 2009, is ex plained in Note 3.

25 / / 23 / The following standards, interpretations, changes and reviews have been endorsed by European Union, with mandatory application in the financial years starting on or after January 1 st, 2010 and were adopted for the first time in the year ended December 31 st, 2010: Standard/Interpretation Effective date (annual periods beinning on or after) IFRS 3 Business combination / IAS 27 Consolidated and Separate Financial Statements (2008 Revision) July 1 st, 09 This revision brings some changes on the accounting of business combinations, namely: (a) the mensuration of non-controlling interests (previously known as minority interests); (b) the recognition and measurement of contingent consideration; (c) the treatment of acquisition-related costs; (d) the accounting of the acquisition of equity interests on already controlled subsidiaries, and of the disposal of equity interests without the loss of control; and (e) the calculation of the gain or loss on the disposal of a controlling interest, and the need for the remeasurement of the residual interest. IAS 28 Investment in Associates (2008 review) July 1 st, 09 The above described principles, adopted by IAS 27 (2008), on the calculation of the gain or loss on the disposal, are extended to IAS 28. IFRS 1 Review First-Time Adoption of IFRS Jan 1 st, 10 This standard was revised to consolidate the various amendments that have occurred since its first release. IFRS 1 Amendments (additional exemptions) Jan 1 st, 10 This amendment includes exemptions in retrospective application, in terms of the mineral resources exploration, decommissioning liabilities and of the application of the IFRIC 4 requirements. IFRS 2 (Accounting for Group Cash-Settled Share-Based Payment Transactions) Jan 1 st, 10 These amendments clarify how an individual subsidiary in a group should account for some share-based payment arrangements in its own financial statements. IFRIC 12 - Service Concession Arrangements Jan 1 st, 10 This interpretation introduces rules on recognition and measurement by the private operator involved in the provision of infrastructure construction and operating under public-private partnership concessions. IFRIC 15 Agreements for the Construction of Real Estate Jan 1 st, 10 This interpretation establishes the way to assess whether a construction agreement for property is within the scope of IAS 11 Construction Contracts or in the scope of IAS 18 Revenue and how the corresponding revenue should be recognised. IFRIC 16 Hedges of a Net Investment in a Foreign Operation July 1 st, 09 This interpretation provides guidance on hedge accounting for net investments in foreign operations. IFRIC 17 Distribution of Non-Cash Assets to Owners July 1 st, 09 This interpretation provides guidance on the proper accounting for assets other than cash distributed to shareholders as dividends. IFRIC 18 Transfer of Assets From Customers Improvements to IFRS 2009 Amendment to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items Transfers made on or after Jan 1 st, 10 Various (mainly Jan 1 st, 10) July 1 st, 09 This interpretation provides guidance on accounting, by operators, of tangible assets of customers. This process included the review of 12 accounting standards. Clarifies the use of hedge accounting on the inflation component of financial instruments, and on options, when used as a hedge item. The consequences in financial statements of Celbi for the financial period ended at 31 st December 2010, due to implementation of standards and interpretations, reviews and changes mentioned above have not been significant.

26 24 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS The following standards, interpretations, changes and reviews, with mandatory application in future financial periods, have been endorsed by European Union, until approval date of these financial statements. Standard/Interpretation Effective date (annual periods beginning on or after) IAS 24 - Related Party Disclosures (review) Jan 1 st, 11 The revised standard addresses concern that the previous disclosure requirements and definition of a related party were too complex and difficult to apply in practice, particularly in environments where government control is pervasive. IFRS 1 - Amendment (Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters) July 1 st, 10 This amendment simplifies the obligation to disclosures the comparatives related with financial instruments for IFRS first-time adopters. IAS 32 Amendments (Classification of Issuing Rights) Feb 1 st, 10 This amendment says what are the conditions for issued rights that can be classified as equity instruments. IFRIC 14 Amendments (Voluntary pre-paid contributions) Jan 1 st, 11 This amendment deletes an unintended consequence of the treatment of prepayment of future contributions when it is necessary a minimum funding. IFRIC 19 - (Extinguishing Financial Liabilities with Equity Instruments) July 1 st, 10 This interpretation gives orientations about transactions account when the financial liability terms are renegotiated and result in equity instrument s emission in favor of a creditor, with the end of the fully or partially of these financial liability. 24

27 / / 25 / These standards were not implemented by Celbi during the financial period ended at 31 st December 2010, because they are not mandatory. Nevertheless, material impacts in consolidated financial statements as consequence of them are not expected. The accounting policies and mensuration criteria used in the preparation of the consolidated financial statements for the year ended in December 2010 are consistent with those used in the preparation of the financial statements for the year ended on 31 st December 2009, considering the referred in Note Main Accounting Policies The main accounting policies used in the preparation of the accompanying financial statements are as follows: a) Intangible Assets Intangible fixed assets are recorded at cost, net of depreciation and accumulated impairment losses. Intangible assets are only recognised if it is likely that future economic benefits will flow to Celbi, are controlled by the Company and if its cost can be reliably measured. In preparing financial statements in accordance with IAS/IFRS, the Board of Directors adopted certain estimates and assumptions that affect reported assets and liabilities as well as income and expenses incurred for the periods reported. All estimates and assumptions made by the Board of Directors were based on their best knowledge existing at the date of approval of the financial statements, events and transactions in progress. The financial statements have been prepared for consideration and approval at the General Assembly of Shareholders. The Board of Directors believes that they will be approved without changes. Development costs incurred on new technical knowledge, when existing, are recognised in the income statement. Development costs are recognised as an intangible asset if the Company has proven technical feasibility and ability to finish the development and to sell/use such assets and it is likely that those assets will generate future economic benefits. Development costs which do not fulfil these conditions are recorded as an expense in the period in which they incurred. Internal costs related with maintenance and development of software are recorded as expenses in the statement of profit and loss for the period in which they incurred, except when these costs are directly attributable to projects for which the existence of future economic benefits is likely. Being this the case, they are capitalised as intangible assets. Amortisation is calculated on a straight line basis, as from the date the asset is first used, over its expected useful life (usually three to five years).

28 26 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS b) Tangible Fixed Assets Tangible fixed assets acquired until 1 st January 2009 (IFRS transition date) and transferred to the Company through the demerger (Introductory Note) are recorded at deemed cost, which corresponds to its acquisition cost, or its acquisition cost revalued in accordance with generally accepted accounting principles in Portugal until that date, net of accumulated amortisation and accumulated impairment losses. Tangible fixed assets acquired after that date are recorded at acqui sition cost net of depreciation and accumulated impairment losses. Tangible fixed assets in progress correspond to fixed assets still in construction and are stated at acquisition cost, net of impairment losses. These assets are depreciated from the date they are concluded or ready to be used under the conditions and for the use established by the management. Gains or losses arising from the sale or disposal of tangible assets are calculated as the difference between the selling price and the asset s net book value as at the date of its sale/disposal, and are recorded in the statement of profit and loss under the captions Other income or Other Expenses, respectively. Depreciation is calculated after the assets are ready to be used on a straight-line basis in accordance with the period of useful life calculated for each group of assets. c) Lease Contracts Classifying a lease as financial or as operational depends on the substance of the transaction rather than the form of the contract. The depreciation rates used correspond to the following estimated useful lives: Years Land and natural resources 7-50 Buildings and other constructions Machinery and equipment 3-20 Vehicles 6 Tools 5-10 Office equipment 3-15 Other tangible assets 3-20 The item Land and Natural Resources includes, in addition to the land, roads, pavements, sewers, extension of the railway, wells and water pipes. As land is not depreciable the years of amortisation relate exclusively to the other components of this item. Maintenance and repair costs related to tangible assets which do not increase the useful life, or result in significant benefits or improvements in tangible fixed assets are recorded as expenses in the period they incurred. Lease contracts are classified as (i) a finance lease if the risks and rewards incidental to ownership lie with the lessee and (ii) as an operating lease if the risks and rewards incidental to ownership do not lie with the lessee. Tangible fixed assets acquired under financial lease contracts and the corresponding liabilities are recorded in accordance with the financial method. Under this method, the cost of the fixed assets and the corresponding liability are reflected in the balance sheet. In addition, interests included in the lease instalments and depreciation of the fixed assets, calculated as explained in Note 2.3.b), are recorded in the statement of profit and loss of the period to which they apply. The operational lease instalments on assets acquired under longterm rental contracts are recognised in full as expenses in the period to which they refer to. d) Grants from the Government or Other Public Entities Subsidies for personnel training programmes or production support are recorded in the statement of profit and loss caption Other income when attributed, independently of when they are received.

29 / / 27 / Non-repayable subsidies obtained to finance investment in tangible fixed assets are recorded as Other noncurrent liabilities and Other current liabilities corresponding to the instalments repayable in the long and short-term, respectively. These subsidies are recognised in the statement of profit and loss in accordance with the depreciation of the related tangible fixed assets. e) Impairment of Tangible and Intangible Assets Assets are assessed for impairment at each balance sheet date and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in the statement of profit and loss under the caption Provisions and Impairment Losses. The recoverable amount is the higher of an asset s net selling price and its value of use. The net selling price is the amount obtainable from the sale of an asset in an arm s length transaction less the costs of the disposal. The value of use is the present value of estimated future cash flows expected to arise from the continued use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if not possible, for the cash-generating unit to which the asset belongs. When the impairment losses recognised in prior years no longer exist, they are reversed. The reversal of an impairment loss is recognised in the income statement under Other Income. This reversal of the impairment loss is only up to the amount that would be recognised (net of amortisation or depreciation) if the impairment loss had not been recorded in previous years.

30 28 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS f) Financial Costs of Loans Obtained Borrowing costs are recognised as expense in the statement of profit and loss for the period in which they incurred, in an accrual basis. When the Company contracts loans to specifically finance capital assets, the corresponding interests are capitalised, being part of the cost of the asset. The capitalisation of these interests starts after the beginning of the preparation of the activities of construction, and ceases when the asset is ready for use or in case the project is suspended. g) Inventories Raw, subsidiary and consumable materials are stated at acquisition average cost, deducted from quantity discounts granted by suppliers, which is lower than its market value. Finished and intermediate goods, sub-products and work in progress are stated at production cost, which includes the cost of raw materials, direct labour and production overheads, which is lower than market value. Therefore, harvested wood owned by the Company is valued at production cost, which includes the costs incurred with the cutting, gathering and transport of harvested wood, as well as the accumulated cost of plantations, maintenance and administrative expenses in proportion to the harvested area. When necessary the Group companies record impairment losses to reduce inventories to its net realisable or market value. h) Biological Assets Plantations owned by the Company are classified in the caption Biological assets. Costs incurred with the acquisition of plantations and plantations made, and costs incurred with its development, conservation and maintenance are included in this caption. The cost of wood is transferred to production cost when the wood is harvested. The cost of wood harvested is determined based on the specific cost of each plantation attributed to each harvesting, which also includes the costs incurred on each plantation since the last harvesting. The Company records, as costs of the period, the accumulated cost of plantations, maintenance and administrative expenses in proportion to the area harvested during the period. 28

31 / / 29 / The Board of Directors decided not to record the biological assets at their its value for considering that, bearing in mind the type of assets being evaluated, the computation depends on assumptions which might not be accurately determined and consequently the fair value might not be reliably measured. However, the Board of Directors believes, based on some indicators, that the acquisition cost of the biological assets is close to its fair value. i) Investment Properties The Company s investment properties basically correspond to land and buildings leased to Group companies, not intended for use in the production or supply of goods or services or for administrative purposes or for sale in the ordinary course of business of the Company. Investment properties are measured at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated after the time when the asset is ready to be used, according to the straight-line basis, in compliance with the period of useful life for each group of assets, which in the case of properties investment varies between 7 and 50 years. j) Provisions Provisions are recognised when and only when the Company (i) has a present obligation (legal or constructive) resulting from a past event, (ii) it is likely that, in order to settle the obligation, an outflow of funds occurs and (iii) the amount of the obligation can be reasonably estimated. Provisions are reviewed at each balance sheet date and adjusted to reflect the best estimate of the Board on that date. Provisions for restructuring costs are recognised when there is a detailed and formal plan of restructuring and it has been communicated to the parties involved. Where a provision is determined taking into account the cash flows required to settle that obligation, this is recorded by the current value. k) Pension Fund When there are commitments to provide cash benefits to employees by way of complementary pensions for old age or disability, provisions are recorded based on actuarial calculations made by specialised agencies. The actuarial liabilities are calculated according to the Projected Unit Credit Method using the financial and actuarial assumptions considered most appropriate. l) Financial Instruments i) Investments in Group Companies Investments in share capital of subsidiary companies are measured in accordance with IAS 27 - Consolidated and Separate Financial Statements, at cost less any impairment losses. ii) Investments Investments held by the Company are classified as follows: Financial Assets at Fair Value through Profit or Loss: this category is divided into two subcategories: Financial assets held for trading and Investments at fair value through profit or loss. A financial asset is classified in this category if acquired with the purpose of selling in the short-term or if its performance and investment strategy are analysed and defined by the Board based on the fair value of the financial asset. Derivatives are also classified as held for trading unless they are allocated to hedging. Assets in this category are classified as current assets if they are held for trading or if it is expected to take place within less than 12 months of the balance sheet date; Investments held to Maturity: this category includes financial assets, non-derivatives, with fixed or variable pay, which have a fixed maturity and whose intention of the Board of Directors is to maintain them until the date of maturity; Investments Available for Sale: they include financial assets, non-derivatives that are designated as available for sale or those that do not fit the above categories. This category is included in noncurrent assets, unless the Board has the intention to sell the investment within less than 12 months of the balance sheet date. Investments are initially recorded at their acquisition value, which is the fair value of the price paid including transaction costs, for investments held to maturity and investments available for sale.

32 30 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS Investments available for sale and investments measured at fair value through profit and loss are subsequently measured at fair value by reference to the market value at the balance sheet date without any deduction for transaction costs which may be incurred until its sale. Investments in equity instruments which are not listed on a stock exchange market and whose fair value cannot be reliably measured are stated at cost net of impairment losses. Investments held to maturity are recorded at amortised cost, using the effective interest method. Gains or losses arising from a change in the fair value of available for sale investments are recognised under the equity caption Fair Value Reserve included in caption Other Reserves, until the investment is sold or disposed, or until it is determined to be impaired, at which time the cumulative loss previously recognised in equity is transferred to profit and loss account for the period. All purchases and sales of investments are recorded on its trade date, independently of the liquidation date. iii) Accounts Receivable Debts from customers, other debtors and other parties are recorded at nominal value and presented in the statement of financial position net of any impairment losses recognised in Accumulated Impairment Losses, to reflect the assets realisable value net. These items, when current, do not include interests as the impact of the discount is not considered relevant. Impairment losses are recorded in the sequence of events that indicate, objectively and in a quantifiable manner, that all or part of the outstanding balance will not be received. To this end, the Company takes into account market information that demonstrates that: The counterparty shows significant financial difficulty; Delays in payments by the counterparty are significant; It is probable that the debtor will enter into liquidation or financial restructuring. Recognised impairment losses equals to the difference between the nominal value of the receivable balance and the correspondent present value of future estimated discounted cash flows at the initial effective interest rate; when the payment is expected to occur in a period less than a year, the rate is considered null. iv) Loans and Noncurrent Payable Accounts Loans and noncurrent payable accounts are recorded in liabilities by amortised cost, using the effective interest rate method. Financial expenses are calculated based on the effective interest rate and are recorded in the statement of profit and loss on an accrual basis. Assets and liabilities are compensated and presented for its net amount as long as there is the right for compulsory fulfilment of compensation and the Board of Directors intends to realise them on a net basis or realise the asset and simultaneously settle the liability.

33 / / 31 / v) Accounts Payable Accounts payable, which do not bear interest, are recorded at their nominal value, which is basically equivalent to its fair value, given that the financial effect of discounting is considered immaterial. vi) Cash and Cash Equivalents The amounts included in Cash and Cash Equivalents refer to cash, bank deposits, term deposits and other short-term investments which mature in less than three months, and that can be mobilised immediately without significant risk of changes in value. In terms of the statement of cash flows, the Cash and Cash Equivalents comprises bank overdrafts included in the balance sheet caption Bank Loans. vii) Derivatives The Company uses hedge derivatives for the management and hedging of its financial risks not being used for the purpose of trading. Derivatives classified as cash flow hedge instruments are used by the Company mainly to hedge interest rate fluctuation, exchange rate and to fix pulp price. The index, the computation conventions, the interest rate hedging instruments are similar to the ones established for the underlying loans and therefore are qualified as perfect hedging. The derivatives most used by the Group are the price indexations of pulp using future contracts. The cash flow hedge instruments are recorded at its fair value. Changes in the fair value of these instruments are recorded in assets or liabilities, against the corresponding entry under the equity caption Hedging Reserves, and transferred to the statement of profit and loss when the operation subjected to hedging affects the net profit. The determination of the fair value of these financial instruments is made with informatic systems of derivative instruments valuation and had, on its basis the actualisation, for the balance sheet date, of the future fix and variable leg cash flows of the derivative instrument. Hedge accounting of derivative instruments is discontinued when the instrument matures or is sold. Whenever a derivative instrument can no longer be qualified as a hedging instrument, the fair value differences recorded and deferred in equity under the caption Hedging Reserves are transferred to profit and loss of the period or to the carrying amount of the asset that resulted from the hedged forecast transaction. Subsequent changes in fair value are recorded in the income statement. When embedded derivatives exist, they are accounted for as separate derivatives when the risks and the characteristics are not closely related to economic risks and characteristics of the host contract and when these are not stated at fair value with gains and losses not realisable are recorded in the profit and loss statement. The Company s criteria for classifying a derivative instrument as a cash flow hedge instrument are: The hedge transaction is expected to be highly effective in offsetting changes in cash flows attributable to the hedged risk; The effectiveness of the hedge can be reliably measured; There is adequate documentation of the hedging relationships at the inception of the hedge; The forecasted transaction that is being hedged is highly probable. When derivative instruments, although specifically contracted to hedge financial risks, do not fulfil the requirements listed above to be classified and accounted as hedge instruments, the changes in fair value are directly recorded in the profit and loss statement, as financial results.

34 32 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS viii) Financial Liabilities and Equity Instruments Financial liabilities and equity instruments are classified and accounted for based upon its contractual substance. Equity instruments are those that represent a residual interest upon the Company s net assets and are recorded by the amount received, net of costs incurred with its issuance. ix) Own Shares Own shares are recorded at acquisition cost as a deduction to equity captions. Gains or losses on their sale are recorded in the equity caption Other Reserves not affecting the project and loss statement for the period. x) Discount Notes and Accounts Receivable Transferred to Factoring Companies Only when the assets cash flows contractual right has expired or when the risks and benefits inherent to those assets property are transferred to a third entity the Company derecognise the financial assets of its financial statements. If the Company retains substantially the risks and benefits inherent to the property of such assets, the Company continues to recognize them in its financial statements, by recording in the caption Loans the monetary counterparty for the conceded assets.

35 / / 33 / In consequence, the costumers balances formed by nonoutstanding discounted bills and accounts receivable transferred to factoring companies as of the balance sheet date, with exception of the non-appealing factoring operations. xi) Assets Classified as Held for Sale or in Discontination The assets and liabilities are classified as held for sale or in discontinuation, when their realization is made not by its use but by its sale. The Company classifies assets and liabilities in this caption when exists a high probability of its sale becomes effective and the assets and liabilities are available for immediate sale. The Board of Directors is committed in the sale of the assets and liabilities recorded in this caption, and is their understanding that this sale will be completed in the next twelve months. The assets classified as held for sale or in discontinuation are valued at the lower of its accounting value at the date of the sale decision and its fair value deducted of their selling costs. m) Contingent Assets and Liabilities Contingent liabilities are defined by the Company as (i) possible obligations that arise from past events and which existence will be confirmed, or not, by one or more occurrences of uncertain future events not controlled by the Company, or (ii) present obligations that arise from past events but that are not recorded because it is unlikely that an outflow of resources occurs to settle the obligation or the obligation amount can not be reliably measured. Contingent liabilities are not recorded in the consolidated financial statements, being disclosed, unless the probability of a cash outflow is remote, in which case no disclosure is made. Contingent assets are possible assets arising from past events and whose existence will be confirmed, or not, by uncertain future events not controlled by the Company. Contingent assets are not recorded in the consolidated financial statements but only disclosed when the existence of future economic benefits is likely. n) Income Tax Income tax for the period is determined based on the taxable results of the companies included in the consolidation and takes into consideration deferred taxation.

36 34 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS Celbi is the parent company of a group of companies that are taxed under the Special Regime of Taxing Group Companies in accordance with Article 69 of the Code of Taxation of Income and Gains of Collective Persons. Deferred taxes are computed using the balance sheet liability method and reflect the timing differences between the amount of assets and liabilities for accounting purposes and the correspondent amounts for tax purposes. Deferred taxes are computed using the tax rate that is expected to be in force at the time these temporary differences are reversed. Deferred tax assets are only recorded when there is reasonable expectation that sufficient taxable profits will arise in the future to allow such deferred tax assets to be used. At the end of each period the company reviews its recorded and unrecorded deferred tax assets which are reduced whenever its realisation ceases to be likely, or recorded if it is likely that taxable profits will be generated in the future to enable its recovery. Deferred tax assets and liabilities are recorded in the statement of profit and loss, except if they relate to items directly recorded in equity. In these cases the corresponding deferred tax is recorded in the same equity captions. o) Income Recognition and Accrual Basis Revenue arising from the sale of goods is recognised in the consolidated income statement when (i) the risks and benefits have been transferred to the buyer, (ii) the company retains neither continued management involvement in a degree usually associated with ownership nor effective control over the goods sold, (iii) the amount of the revenue can be measured reasonably, (iv) it is likely that the economic benefits associated with the transaction will flow to the Company, and (v) the costs incurred or to be incurred related with the transaction can be reliably measured. Sales are recorded net of taxes, discounts and other expenses arising from the sale, and are measured at the fair value of the amount received or receivable. Dividends are recognised as income in the period its distribution is approved. All other income and expenses are recognised in the period to which they relate, independently of when the amounts are received or paid. Differences between the amounts received and paid and the corresponding income and expenses are recorded in the captions Other Current Assets, Other Current Liabilities, Other Noncurrent Assets and Other Noncurrent Liabilities. p) Balances and Transactions Expressed in Foreign Currencies All assets and liabilities expressed in foreign currencies were translated to Euro using the exchange rates in force on the balance sheet date. Favourable and unfavourable exchange differences arising from changes in the exchange rates between those prevailing on the dates of the transactions and those in force on the dates of payment, collection or as of the balance sheet date are recorded in the consolidated statement of profit and loss, except the ones related to non-monetary values which fair value variation be directly recorded in equity. q) Subsequent Events Events occurring after the balance sheet date that provide further evidence or information about conditions that existed at the balance sheet date ( adjusting events ) are reflected in financial statements. Events after the balance sheet date that are indicative of conditions that arose after the balance sheet date ( non-adjusting events ) are disclosed in the notes to the financial statements, if material. r) Statement of Cash Flow The statement of cash flow is prepared in accordance with IAS 7, using the direct method. The Company classifies as Cash and cash equivalent investments with maturity less than three months and for which the risk of change in value is irrelevant. The statement of cash flow is classified in operating activities (which include cash receipts from customers, payments to suppliers, personnel and other payments related to operating activities), financing (including, payments and receipts for the loans, leasing contracts and payment of dividends) and

37 / / 35 / investment (including, in particular, acquisitions and disposals of investments in subsidiaries and receipts and payments arising from the purchase and sale of tangible fixed assets). s) Judgements and Estimates In preparing the accompanying financial statements, judgements and estimates have been made and various assumptions were used that affect the reported amounts of assets and liabilities as well as the reported amounts of income and expenses for the year. The estimates and underlying assumptions were determined based on the best knowledge of current events and transactions existing at the date of approval of the financial statements, as well as the experience of past events and/or current events. However, situations may occur in subsequent periods that are not foreseeable at the time of approval of financial statements, and these are not considered in those estimates. Changes to the estimates that occur after the date of the financial statements will be corrected prospectively. For this reason and given the degree of uncertainty, actual results of the transactions in question may differ from the corresponding estimates. The main judgements and estimates made in preparing the accompanying financial statements were as follows: Useful lives of tangible and intangible assets; Analysis of impairment of tangible and intangible assets; Registration of provisions and impairment losses; Calculation of responsibility associated with the Pension Fund; Fair value of derivative financial instruments. t) Risk Management Policy The Company is basically exposed to (i) market risks, (ii) credit risks and (iii) liquidity risks. The main objective of risk management is to reduce these risks to an acceptable level. The general principles of risk management are approved by the Board of Directors and its implementation and monitoring supervised by the board members and directors. (i) Market Risk At this level of market risk, a particular importance is given to interest rate risk, exchange rate risk and variability of the commodities price risk. The Company uses derivative instruments on the management of their market risks which is exposed as a way of ensure its hedging and does not use derivative instruments with the objective of negotiation or speculation. i) Interest Rate Risk The Company s exposure to interest rates arises mainly from long-term loans which consist mostly of debt indexed to Euribor. The Company s objective is to limit the volatility of cash flows and results taking into account the profile of its operational activity through the use of an appropriate mix of fixed and floating rate debt. Company policies allow the use of interest rate derivatives to reduce exposure to changes in the Euribor but not for speculation purposes. Most derivative instruments used by the Company in interest rate management are defined as cash flow hedging instruments as these configure perfect hedging relations. The index, the computation conventions, the interest rate hedging instruments are similar to the ones established for the underlying loans. Nevertheless, there are some derivative instruments which, although have been contracted with the hedging interest risk objective, do not match with the requirements above defined for the hedging instruments classification. ii) Exchange Rate Risk The Company is exposed to exchange rate risk in transactions relating to sales of finished products in international markets in currencies other than the Euro. Whenever the Board deems necessary, to reduce the volatility of its results to the variability of exchange rates, exposure is controlled through a programme to buy foreign currency forward or other exchange rate derivatives. The Board of Directors believes that any changes in the exchange rate will have a significant effect on its financial statements.

38 36 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS iii) Risk of Variability in Commodities Prices By developing its activity in a commodity transactional industry (paper pulp), the Company is particularly exposed to its price fluctuations, with the correspondent impacts in their results. However, in order to manage this risk, paper pulp price fluctuations hedging contracts were celebrated by the adequate amounts by the foreseen operations, reducing the volatility of its results. (ii) Credit Risk The Company is exposed to the credit risk in its current operational activity. This risk is controlled trough a collecting information system of financial and qualitative information provided by recognised entities that supply information of risks, which allow the assessment of the clients viability in the fulfilment of their obligations in order to reduce the credit concession risk. The amounts presented in the balance sheet are net of accumulated impairment losses to doubtful debts which were estimated by the Company; as a result these assets are presented at fair value. The Company prosecutes an active refinancing policy distinguished by the maintenance of high free and immediate available resources to face short-term necessities and the extension or sustenance of the debt maturity in accordance with the predicted cash flows and the Balance leverage capability. The liquidity analysis for financial instruments is disclosed next to the respective note to each financial liabilities class. The risk credit is limited by the risk concentration management and a strict selection of counterparts as well as the contracting of credit insurances to specialised institutions which ensure a significant part of the conceded credit in result of the activity developed by the Company. (iii) Liquidity Risk The purpose of liquidity risk management is to ensure, at all times, that the Company has the financial capacity to fulfil its commitments as they become due and to carry on its business activities and strategy trough an adequate financing maturities management.

39 / / 37 / 3. Change in Accounting Policies and Correction of Errors According to paragraph 3 of article 4 of the Decree-law no. 158/2009 of 13 July the Company has chosen to present their fi nan cial statements in accordance with International Financial Reporting Standards (IFRS) following IFRS 1 - First-Time Adoption of International Financial Reporting Standards. The transition date considered for presentation of financial statements is January 1 st, The effects on the balance sheet at 31 st December 2009 of the conversion of financial statements prepared in accordance with accounting principles generally accepted in Portugal (the Official Accounting Plan) to International Financial Reporting Standards are as follows: Assets POC Adjustments and reclassifications of conversion to IFRS IFRS Noncurrents assets Biological assets 508, ,109 Tangible fixed assets 383,234,502 (5,409,256) 377,825,246 Intangible fixed assets 145, , ,910 Investment properties - 5,687,894 5,687,894 Investments in subsidiary companies 252,934,047 (671,547) 252,262,500 Other noncurrent assets 347, ,590 Deferred tax assets 1,952,931 2,575,679 4,528,610 Total noncurrent assets 639,122,562 2,430, ,552,859 Current assets Inventories 16,774,600-16,774,600 Customers 62,198,591-62,198,591 Other debtors 101,224,329 (97,950,000) 3,274,329 State and other public entities 7,699,248-7,699,248 Group companies 12,502, ,479, ,982,157 Other current assets 10,656,274 (9,518,705) 1,137,569 Cash and cash equivalents 71,399,246 71,399,246 Total current assets 282,454,682 (6,988,942) 275,465,740 Total assets 921,577,243 (4,558,645) 917,018,599

40 38 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS Equity and liabilities POC Adjustments and reclassifications of conversion to IFRS IFRS Equity Share capital 77,500,000-77,500,000 Legal reserve 16,100,235-16,100,235 Other reserves 138,637,667 (7,143,864) 131,493,803 Net profit/(loss) 151, ,462 Total equity 232,389,364 (7,143,864) 225,245,500 Liability Noncurrent LIABILITIES Other loans 598,898,250 (6,485,476) 592,412,774 Deferred tax liabilities 183, ,278 Provisions 1,214,322-1,214,322 Total Noncurrent liability 600,295,850 (6,485,476) 593,810,374 CURRENT LIABILITIES Bank loans 11,100,776-11,100,776 Other loans 35,000,000 (648,848) 34,351,153 Suppliers 20,273,774-20,273,774 Group companies 2,291,719-2,291,719 Other current creditors 11,184,451-11,184,451 State and other public entities 655, ,511 Other current liabilities 8,385,798-8,385,798 Derivatives - 9,719,543 9,719,543 Total current liability 88,892,029 9,070,696 97,962,725 Total liabilities 689,187,879 2,585, ,773,099 Total equity and liabilities 921,577,243 (4,558,645) 917,018,599 Reconciliation of equity at the transition date, January 1 st, 2009 and at December 31 st, 2009 in accordance with the Official Accounting Plan and presented in accordance with International Financial Reporting Standards is as follows: Share capital according to POC 232,237, ,389,364 Register of financial derivative instruments 9,221,850 (7,143,864) Share Capital according to IFRS 241,459, ,245,500

41 / / 39 / The effects on the income statement for the year ended 31 st December 2009 prepared in accordance with the POC and presented in accordance with the International Financial Reporting Standards are as follows: POC Adjustments and reclassifications of conversion to IFRS IFRS Sales 138,943,636 18,949, ,893,222 Services rendered 904, ,000 1,899,640 Other income 31,062,543 (13,765,671) 17,296,872 Cost of sales (82,784,518) - (82,784,518) External supplies and services (51,991,108) - (51,991,108) Payroll expenses (14,129,740) - (14,129,740) Amortisation and depreciation (20,346,046) - (20,346,046) Provisions and impairment losses 91,675 2,548,507 2,640,182 Other expenses (1,485,235) (147,219) (1,632,454) Financial expenses (15,899,708) 505,722 (15,393,986) Financial income 11,313,221 (4,674,217) 6,639,004 Extraordinary income 4,411,708 (4,411,708) - Profit before tax 91,068-91,068 Income tax 60,394-60,394 Net profit 151, ,462 The main changes and issues relevant to a better understanding of the process of transition to IFRS made by the Company may be summarised as follows: Registration of Derivative Financial Instruments The fair value of derivative financial instruments was recorded in the financial statements according to IFRS, which is the only adjustment to conversion with a patrimonial impact. Fixed Assets A group of assets that were previously classified as tangible fixed assets, mainly software, has been reclassified as intangible assets. Investment Properties The Company has a set of land and buildings leased to other companies in the Altri Group, which according to the POC were clas sified as Fixed Assets and in the process of converting the financial statements to IFRS were reclassified as Investment Properties. Classification of Costs and Revenues During the process of adoption of IFRS it was necessary to reclassify a set of costs and revenues to meet the provisions of IFRS, including: Extraordinary costs and revenues which are not foreseen in IFRS; Some items classified according to the POC as financial results, which were reclassified to operating results, such as, cash discounts granted and obtained, and gains or losses on derivatives exchange rate; Income from the sale of energy, which according to the POC were classified as Extraordinary Income but that in the prepa - ration of financial statements under IFRS are classified as Sales. During the year ended December 31 st, 2010, material errors relating to prior years were not corrected. Loans to Group Companies In the process of converting financial statements from POC to IFRS loans to Group companies that were classified as Other Receivables were reclassified to Group Companies.

42 40 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS 4. Tangible Fixed Assets During the financial years ended December 31 st, 2010 and 2009, movement occured in tangible fixed assets and the depreciation and accumulated impairment losses were as follows: Gross asset value 2010 Land and natural resources Buildings and other constructions Machinery and equipment Vehicles Opening balance 10,679,838 66,515, ,264, ,727 Additions 280,144 1,935 10,819,334 20,597 Disposals - (304,075) (1,807,817) (21,368) Transfers and write-offs 49, ,401,182 - Closing balance 11,009,422 66,213, ,677, ,955 Accumulated depreciation Opening balance 5,551,752 57,244, ,587, ,065 Additions 370, ,898 31,008,948 20,211 Disposals - (292,702) (1,769,377) (21,368) Transfers and write-offs - - (794,202) - Closing balance 5,922,615 57,737, ,033, ,908 5,086,807 8,476, ,644,371 27,047 Gross asset value 2009 Land and natural resources Buildings and other constructions Machinery and equipment Vehicles Opening balance 7,312,094 63,476, ,729, ,727 Additions 1,798,067 2,143,977 11,477,545 - Disposals - (171,036) (86,544,342) (6,000) Transfers and write-offs 1,569,677 1,066, ,601,907 - Closing balance 10,679,838 66,515, ,264, ,727 Accumulated depreciation Opening balance 5,195,624 56,567, ,806, ,003 Additions 356, ,064 18,208,008 15,062 Disposals - (158,103) (86,426,829) (6,000) Transfers and write-offs Closing balance 5,551,752 57,244, ,587, ,065 5,128,087 9,271, ,677,042 26,661

43 / / 41 / 2010 Office equipment Other tangible assets Ongoing tangible assets Prepayments for fixed assets Total 1,513,577 9,318, ,921,071 2,874, ,903, , ,603 8,334,187-19,883,542 - (78,086) - - (2,211,346) 2,557,169 (1,728,448) (179,773,657) (2,505,686) - 4,304,489 7,705,367 8,481, , ,575, ,438 8,931, ,077, , ,557 32,640,632 - (78,084) (2,161,531) 2,524,049 (1,729,847) - 3,801,642 7,274, ,557, , ,396 8,481, , ,018, Office equipment Other tangible assets Ongoing tangible assets Prepayments for fixed assets Total 1,300,227 10,532, ,464,910 2,901, ,538, ,693 63,173 65,902,693-81,493,147 (340,849) (1,290,388) - - (88,352,615) 446,507 12,834 (162,446,532) (26,250) 224,535 1,513,577 9,318, ,921,071 2,874, ,903, ,415 10,077, ,370, , ,963 19,962,195 (372,948) (1,290,388) (88,254,267) ,438 8,931, ,077, , , ,921,071 2,874, ,825,246

44 42 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS On December 31 st, 2009, in the framework of the project to increase production capacity, the installation of equipment to produce energy on the recovery boiler was in progress. This proj ect was completed during the year ended December 31 st, 2010, having then been transferred to firm assets. The most significant part of the amounts included in the line Disposals for the year ended December 31 st, 2009, corresponds to sale of part of the old equipment used by the Company in their productive activity, but replaced in the process of increasing the production capacity. On December 31 st, 2010, the principal amounts included under Tangible Assets in Progress relate to charges incurred for the renovation of the chip silo. 5. Intangible Assests During the financial years ended December 31 st, 2010 and 2009, changes in the value of intangible assets, as well as the correspondent depreciation and accumulated impairment losses were as follows: 2010 Gross assets Software Intangible assets in progress Total Opening balance 5,310,758-5,310,758 Additions 115, ,657 Disposals Transfers and write-offs Closing balance 5,426,415-5,426,415 Accumulated depreciation Software Total Opening balance 4,917,848 4,917,848 Additions 288, ,150 Disposals - - Transfers and write-offs - Closing balance 5,205,998 5,205, , ,417

45 / / 43 / 2009 Gross assets Software Intangible assets in progress Total Opening balance 4,885, ,535 5,109,721 Additions 201, ,037 Disposals Transfers and write-offs 224,535 (224,535) - Closing balance 5,310,758-5,310,758 Accumulated depreciation Software Total Opening balance 4,661,936 4,661,936 Additions 255, ,912 Disposals - - Transfers and write-offs - - Closing balance 4,917,848 4,917, , ,910

46 44 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS 6. Investment Properties The amount recorded in Investment Properties on December 31 st, 2010 and 2009, refers mainly to land and buildings leased to a Group company. The Board of Directors believes that the fair value of investment properties is greater than its net book value. The movements under the heading Investment Property dur ing the financial years ended December 31 st, 2010 and 2009 were as follows: 2010 Gross assets Opening balance Additions Disposals Transfers Closing balance 11,143,029 66,909 (215,730) - 10,994,208 Accumulated depreciation Opening balance Additions Disposals Transfers Closing balance 5,455, ,039 (68,807) - 5,514,367 5,687,894 5,479, Gross assets Opening balance Additions Disposals Transfers Closing balance 11,153,569 - (10,540) - 11,143,029 Accumulated depreciation Opening balance Additions Disposals Transfers Closing balance 5,327, , ,455,135 5,826,373 5,687, Investments in Group Companies On December 31 st, 2010 and 2009, the Group companies were as follows: Company Head Office Acquisition cost Percentage ownership Share capital Net profit Share capital Net profit Invescaima - Investimentos e Participações SGPS, S.A. Lisboa 252,238, % 165,935,863 (1,115,809) 167,051,672 (1,290,160) Celbinave - Tráfego e Estiva, SGPS, Unipessoal, Lda. Figueira da Foz 9, % 344,265 54, ,123 24,055 Viveiros do Furadouro Unipessoal, Lda. Óbidos 15, % 318, , ,968 (55,530) 252,262,500

47 / / 45 / 8. Current and Diferred Taxes According to current legislation, tax returns are subjected to revision and correction by the tax authorities for a period of four years (five years for Social Security), except where there are tax losses, tax benefits have been granted, or ongoing inspections, complaints or appeals, in which cases, depending on the circumstances, the deadlines are extended or suspended. Thus, the Company s tax returns since 2007 may still be subjected to revision. The Board of Directors of Celbi believes that any potential corrections resulting from reviews/inspections of these tax returns by the tax authorities will not have a significant effect on the consolidated financial statements as of 31 st December 2010 and Under article 81 of the Code of Taxation of Income and Gains of Collective Persons, the Company is subjected to additional tax on a separate set of charges at the rates provided in the article mentioned. (RETGS). Each of the companies included in this regime records the income tax in their individual accounts as consideration to the heading Group Companies. Where the subsidiaries contribute with losses, the amount of tax corresponding to the damage that may be compensated for the profits of other companies covered by this regime is recorded in individual accounts. Under current legislation Celbi uses a deferred tax rate of 26.5% in cases where the 1.5% municipal tax derrama applies, except on what concerns deferred tax assets resulting from reported tax losses, in which a rate of 25% is used. Furthermore, in accordance with the legislation in force, local tax corresponds to the application of an additional fee of 2.5% on the taxable portion of income exceeding 2,000,000 euros. The income taxes recognised in the income statement for the years ended 31 st December 2010 and 2009 are detailed as follows: Celbi is the parent Company of a Group of companies that are taxed under the Special Regime Taxing Group of Companies Current income tax 9,612,068 27,042 Diferred income tax 713,496 (87,436) 10,325,564 (60,394) Reconciliation of profit before tax for the tax of the year is as follows: Profit before tax 50,250,803 91,068 Tax rate (including municipal income tax derrama) 26,50% 26,50% 13,316,463 24,133 Difference between tax and accounting capital gains (133,445) (129,401) Tax benefits (5,069,720) (27,375) Autonomous taxation 101,703 27,043 Local tax 1,206,658 - Other effects 903,906 45,206 Income 10,325,564 (60,394) The item Tax Benefits on December 31 st, 2010 relates primarily to the use of part of the tax credit awarded by the Portuguese government in the framework of the global incentive given to Celbi investment for increasing its productive capacity (Note 34).

48 46 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS The movements occurred in deferred tax assets and liabilities in the years ended December 31 st, 2010 and 2009 were as follows: 2010 Deferred tax assets Deferred tax liabilities Opening balance as of ,528, ,278 Effects on income statement Increases/(Decreases) of tax losses carried forward (755,148) - Increases/(Decreases) in provisions not accepted for tax purposes 15,726 - Other effects - (25,927) Total effect on income statement (739,422) (25,927) Effect on shareholders funds Fair value of derivatives (Note 23) 1,269,311 - Closing balance as of ,058, , Deferred tax assets Deferred tax liabilities Opening balance as of ,892,279 3,534,947 Effects on income statement Increases/(Decreases) of tax losses carried forward 755,148 - Increases/(Decreases) in provisions not accepted for tax purposes (694,496) - Other effects - (26,784) Total effect on income statement 60,652 (26,784) Effect on shareholders' funds Fair value of derivatives (Note 23) 2,575,679 (3,324,885) Closing balance as of ,528, ,278 The breakdown of assets and liabilities for deferred tax at December 31 st, 2010 and 2009, according to the temporary differences that generated them, is as follows: Provision and impairment losses not accepted for tax purposes Deferred tax assets Deferred tax liabilities Deferred tax assets Deferred tax liabilities 1,213,509-1,197,783 - Tax losses carried forward ,148 - Fair value of derivatives 3,844,990-2,575,679 - Other - 157, ,278 5,058, ,351 4,528, ,278

49 / / 47 / 9. Inventories and Biological Assets On December 31 st, 2010 and 2009, the amount recorded under Biological Assets refers to plantations and related charges held by the Company and can be detailed as follows: Gross value 445, ,771 Accumulated imparment losses on biological assets (Note 18) (91,662) (91,662) 354, ,109 On December 31 st, 2010 and 2009, the amount recorded as Inventories may be detailed as follows: Raw, subsidiary and consumable materials 23,298,970 11,331,057 Product and works in progress 219, ,605 Finished and intermediate goods 9,368,054 7,721,938 32,886,094 19,299,600 Accumulated impairment losses (Note 18) (2,525,000) (2,525,000) 30,361,094 16,774,600 On December 31 st, 2010, the following stocks were outside the Company: In EU ports 3,846, ,458 In the custody of third parties 1,710,800 2,322,864 5,557,683 3,172,322 Furthermore, on December 31 st, 2010 and 2009, there were in the custody of the Company no stocks owned by third parties. Sales costs for the year ended 31 st December 2010 amounted to 134,574,162 euros and were calculated as follows: Raw, subsidiary and consumable materials Finished and intermediate goods Products and work in progress Total Opening balance 11,331,057 7,721, ,376 19,899,371 Purchases 147,953, ,953,376 Inventory adjustment 60,462 (7,202) - 53,260 Closing balance (23,298,970) (9,368,054) (664,820) (33,331,844) 136,045,925 (1,653,318) 181, ,574,162

50 48 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS Sales costs for the year ended 31 st December 2009 amounted to 82,784,518 euros and were calculated as follows: Raw, subsidiary and consumable materials Finished and intermediate goods Products and work in progress Total Opening balance 23,672,001 10,021, ,636 34,681,971 Purchases 68,048, ,048,642 Inventory adjustment 1,751 (48,475) - (46,724) Closing balance (11,331,057) (7,721,938) (846,376) (19,899,371) 80,391,337 2,250, ,261 82,784, Class of Financial Instruments The financial instruments, in accordance with the policies described in Note 2, were classified as follows: Financial assets Notes Financial assets Current assets Customers 11 90,901,271 Other debtors 12 2,675,376 Group companies ,564,506 Cash and cash equivalents ,672, ,814, Notes Financial assets Current assets Customers 11 62,198,591 Other debtors 12 3,274,329 Group companies ,982,157 Cash and cash equivalents 15 71,399, ,854,323

51 / / 49 / Financial liabilities Notes Financial liabilities Derivatives Total Noncurrent liabilities Other loans ,744, ,744, ,744, ,744,337 Current liabilities Other loans 17 70,805,621-70,805,621 Suppliers 20 53,624,938-53,624,938 Group companies 27 3,318,725-3,318,725 Other current creditors 21 10,478,404-10,478,404 Derivatives 23-14,509,396 14,509, ,227,688 14,509, ,737, ,972,025 14,509, ,481,421 Financial liabilities Notes Financial liabilities Derivatives Total Noncurrent liabilities Other loans ,412, ,412, ,412, ,412,774 Current liabilities Bank loans 17 11,100,776-11,100,776 Other loans 17 34,351,153-34,351,153 Suppliers 20 20,273,774-20,273,774 Group companies 27 2,291,719-2,291,719 Other current creditors 21 11,184,451-11,184,451 Derivatives 23-9,719,543 9,719,543 79,201,873 9,719,543 88,921, ,614,647 9,719, ,334,190 Financial Instruments Recognised at Fair Value The following table details the financial instruments that are measured at fair value after initial recognition, grouped into three levels according to the possibility to observe its fair value in the market: Level 1: The fair value is determined based on market prices of assets; Level 2: Fair value is determined based on valuation techniques. The main inputs of the valuation models are observable in the market; Level 3: Fair value is determined based on valuation models, whose main inputs are not observable in the market Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Financial liabilities measured at fair value Derivatives (Note 23) - 14,509, ,719,543 -

52 50 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS 11. Customers On December 31 st, 2010 and 2009, this caption was as follows: Customers, current accounts 90,901,271 62,198,591 Customers, doubtful debts 351, ,269 91,252,337 62,509,860 Accumulated impairment losses (Note 18) (351,066) (311,269) 90,901,271 62,198,591 The Company s exposure to credit risk is attributable mainly to the accounts receivable resulting from the Celbi s operating activity. The amounts recorded in the balance sheet are presented net of accumulated impairment losses for doubtful accounts that were estimated by the Company, in accordance with its experience and based on the economical environment evaluation. The Board of Directors believes that the recorded net amounts are close to their fair value; once these accounts receivable do not pay interests and the discount effect is immaterial. As of December 31 st, 2010 and 2009, the age of customers balances can be analysed as follows: Not due 51,644,830 26,851,551 Due with no impairment losses recorded 0-30 days 3,604,765 4,113, days 1,218,412 1,237, days 34,433,264 29,996,219 39,256,441 35,347,040 Total 90,901,271 62,198,591 The Company has hired credit insurance to cover the risk of uncollectible parts of the accounts receivable as follows: With credit insurance 42,661,413 19,074,701 Without credit insurance 48,590,924 43,435,159 91,252,337 62,509,860 Balances over 90 days, on December 31 st, 2010 and 2009, relate mainly to balances with Group companies (Note 27). Celbi does not charge any interests as long as the defined payment terms (on average 60 days) are being respected. Once the deadlines expire, the interest charged is the one set by contract according to the law and applicable to each case, which tends to occur only in extreme situations.

53 / / 51 / 12. Other Receivables During the financial years ended December 31 st, 2010 and 2009, the caption Other Debtors was composed as follows: Advances to suppliers 422,995 16,091 Other debtors 3,095,482 4,101,339 3,518,477 4,117,430 Accumulated impairment losses (Note 18) (843,101) (843,101) 2,675,376 3,274,329 On December 31 st, 2010 and 2009, the caption Other Debtors refers primarily to accounts receivable from the value added tax in foreign countries. Balances that are not due show no signs of impairment. The book value of net assets for impairment is considered to be close to its fair value, so the effect of the financial discount is immaterial. On December 31 st, 2010 and 2009, the time frame of the net value of clients balances under Other Debtors is entirely clas sified as not expired. 13. State and Other Public Entities On December 31 st, 2010 and 2009, this caption can be detailed as follows: Debt balances Withholding tax 467, ,976 Value added tax 3,410,051 6,871,272 3,877,321 7,699,248 Credit balances Income tax (11,030,256) (237,717) Retentions - IRS dependent work (306,531) (195,637) Social Security contributions (229,557) (222,152) Other - (5) (11,566,344) (655,511)

54 14. Other Current Assets The breakdown of Other Current Assets at December 31 st, 2010 and 2009, is as follows: Rents paid in advance 108, ,934 Insurances paid in advance 525, ,517 Other costs paid in advance 113, ,912 Accrued income 824, ,206 1,572,245 1,137, Cash and Equivalents On December 31 st, 2010 and 2009, the breakdown of Cash and Cash Equivalents was as follows: Cash 6,998 6,998 Bank deposits 102,665,864 71,392,248 Cash equivalents 102,672,862 71,399,246

55 / / 53 / 16. Equity and Reserves Equity On December 31 st, 2010, the Company s share capital was fully subscribed and paid and consisted of 15,500,000 shares with a nominal value of 5 euros each. On December 31 st, 2010, Altri - Participaciones y Trading, S.L. (Note 1) holds 99.96% of the shares representing the equity of the Company and 100% of voting rights. Additionally, on December 31 st, 2010, the Company holds 6,712 own shares. Legal Reserve Portuguese commercial legislation requires that at least 5% of annual net profit must be allocated to strengthen the Legal Reserve until it reaches at least 20% of the equity. This reserve is not to be distributed, except in case of liquidation of the Company, but can be used to absorb losses after all other reserves have been exhausted and to increase share capital. Other Reserves On December 31 st, 2010 and 2009, the item Other Reserves was as follows: Hedging reserves (10,664,405) (7,143,864) Other reserves and retained earnings 138,789, ,637, ,124, ,493,803 The caption Hedging Reserves reflects the fair value of the derivative financial instruments classified as cash flows hedging in the effective hedging component, net of the tax effect (Note 23).

56 54 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS 17. Bank Loans and Other Loans On December 31 st, 2010 and 2009, the captions Bank Loans and Other Loans are as follows: 2010 Nominal value Book value Current Noncurrent Total Current Noncurrent Total Commercial paper 71,000, ,000, ,000,000 70,805, ,705, ,510,781 Bonds - 375,000, ,000, ,930, ,930,527 Other loans 19,108,650 19,108,650-19,108,650 19,108,650 Other loans 71,000, ,108, ,108,650 70,805, ,744, ,549, Nominal value Book value Current Noncurrent Total Current Noncurrent Total Bank loans 11,100,776-11,100,776 11,100,776-11,100,776 Bank loans 11,100,776-11,100,776 11,100,776-11,100,776 Commercial paper 35,000, ,000, ,000,000 34,351, ,641, ,993,133 Bonds 375,000, ,000, ,872, ,872,544 Other loans 43,898,250 43,898,250-43,898,250 43,898,250 Other loans 35,000, ,898, ,898,250 34,351, ,412, ,763,927 46,100, ,898, ,999,026 45,451, ,412, ,864,703 The expenses incurred with the issuance of loans are deducted at face value, being recognised as interest over the period of the loan (Note 31). Commercial Paper The heading Commercial Paper refers to three commercial paper programmes. The first Programme in a maximum nominal amount up to 180,000,00 euros dates from 2007 has a maximum term of eight years from the date of signing, and on December 31 st, 2010 and 2009, was fully utilised. The second commercial paper programme, in a maximum nominal amount of 20,000,000 euros, has a maximum of five years term from the date of signature, i.e., April 8 th, And, finally, a third programme with the maximum amount of 15,000,000 euros, with a maximum term of three years from the date of signing the contract, i.e., October 21 st, 2011, with the same termination conditions aforementioned. The total amount used on December 31 st, 2010 and 2009, amounted to 215,000,000 euros. On December 31 st, 2010, the amount of 71,000,000 euros is classified as current debt, as it is either going to be repaid in 2011, or because according to the contract both parties have the right to terminate the contract provided they notify their intention 30 days prior to the date indicated for the denunciation.

57 / / 55 / Bond Loans In February 2007 Celbi issued a bond loan of 300,000,000 euros. The bonds have a term of eight years, maturing in In January and February 2008 the Company issued two new bonds amounting to 50,000,000 euros respectively 25,000,000 euros. Both loans have a term of ten years and its maturity is in The interest is half-yearly, in arrears from the date of subscription, based on interest rate Euribor six months plus spread. Other Loans In January 2007 Celbi signed a contract for financial and fiscal incentives under Decree-law no. 203/2003 of September 10 th, with AICEP Portugal Global (Agência Portuguesa para o Investimento e Comércio Externo de Portugal, E.P.E. - AICEP). The Portuguese government considered the project for expansion of Celbi s production capacity as a Project of National Interest (PIN). Up to the end of 2010 the mill received the amount of 43,898,250 euros as refundable incentive. The Board considers that, taking into account the objectives already fulfilled, the achievement premium for the year 2010 will be assigned according to the contract. The amount of 24,789,600 euros was then transferred to the items Other Current Liabilities and Other Noncurrent Liabilities (Notes 19, 22 and 34). On December 31 st, 2010, there are unused escrow accounts contracted by the Company in the amount of, approximately 67,500,000 euros. Sensitivity Analysis to Change in Interest Rate During the years ended December 31 st, 2010 and 2009, the Company s sensitivity to changes in the indexed interest rate of about one percentage point, measured as the change in financial results, can be analysed as follows, not considering the effect of coverage of derivatives (Note 23) Interests (Note 31) 10,567,776 11,844,199 Decrease of 1 p.p. in the interest rate applied to the entire debt (6,091,087) (6,449,990) Increase of 1 p.p. in the interest rate applied to the entire debt 6,091,087 6,449,990 The sensitivity analysis above was calculated based on the exposure to interest rate existing at the balance sheet date. For this analysis, it was taken as a basic assumption that the financing structure (interest bearing assets and liabilities) has remained stable throughout the year and similar to that presented on December 31 st, 2010 and 2009.

58 56 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS The term of repayment of bank loans and other loans is as follows: >2015 Total Commercial paper 71,000,000 36,000,000 36,000,000 36,000,000 36,000, ,000,000 Bonds ,000, ,000,000 Other loans 1,420,149 5,896,167 5,896,167 5,896,167 19,108,650 Total 71,000,000 37,420,149 41,896,167 41,896, ,896, ,108, >2014 Total Bank loans 11,100, ,100,776 Commercial paper 35,000,000 36,000,000 36,000,000 36,000,000 72,000, ,000,000 Bonds ,000, ,000,000 Other loans 3,262,503 13,545,249 13,545,249 13,545,249 43,898,250 Total 46,100,776 39,262,503 49,545,249 49,545, ,545, ,999, Accumulated Provisions and Impairment Losses The movement in provisions and impairment losses during the years ended December 31 st, 2010 and 2009, can be detailed as follows: Provisions Impairment losses in accounts receivable (Notes 11 and 12) Impairment losses in inventories and biological assets (Note 9) Total Opening balance 1,214,322 1,154,370 2,616,662 4,985,353 Increases 59,341 93, ,162 Utilisations/Reversions - (54,024) - (54,024) Transfers Closing balance 1,273,663 1,194,167 2,616,662 5,084, Provisions Impairment losses in accounts receivable (Notes 11 and 12) Impairment losses in inventories and biological assets (Note 9) Total Opening balance 3,514,421 1,179,452 2,931,662 7,625,535 Increases 248,408 21, , ,635 Utilisations/Reversions Transfers (2,548,508) (46,310) (600,000) (3,194,817) Closing balance 1,214,322 1,154,370 2,616,662 4,985,353 The increases in impairment losses occurred in the years ended December 31 st, 2010 and 2009, were recorded under the caption Provisions and Impairment Losses of the Profit and Loss Statement. The amount registered under Provisions on December 31 st, 2010 and 2009, corresponds to the Board of Management s best estimate to meet all the losses arising from general risks of the Company s activity.

59 / / 57 / 19. Other Noncurrent Liabilities The item Other Noncurrent Liabilities at December 31 st, 2010, amounting to 19,467,948 euros corresponds to portions of the investment allowance to be recognised as income in the medium and long term (Notes 17, 22 and 34). 20. Suppliers On December 31 st, 2010 and 2009, this caption was as follows: Payables days days >180 days Suppliers, current account 46,751,539 46,751, Suppliers, invoices in conference 6,873,399 6,873, ,624,938 53,624, Payables days days >180 days Suppliers, current account 15,252,517 15,252, Suppliers, invoices in conference 5,021,257 5,021, ,273,774 20,273, On December 31 st, 2010 and 2009, the heading Suppliers refers to amounts payable resulting from acquisitions in the normal course of Celbi s activities. The Board of Directors believes that the book value of these debts is approximate to their fair value.

60 58 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS 21. Other Creditors On December 31 st, 2010 and 2009, the item Other Creditors can be detailed as follows: Payables days days >180 days Fixed assets suppliers 6,123,073 6,123, Other debts 4,355,331 4,355, ,478,404 10,478, Payables days days >180 days Fixed assets suppliers 7,929,042 7,929, Other debts 3,255,409 3,255, ,184,451 11,184, On December 31 st, 2010 and 2009, under Other Debts refers primarily to value added tax, payable abroad. 22. Other Current Liabilities On December 31 st, 2010 and 2009, the caption Other Current Liabilities can be detailed as follows: Accrued expenses Amounts payable to employees (2,205,517) (1,907,659) Interest payable (4,714,770) (3,062,323) Other (2,662,559) (1,946,059) Current deferred income Investment subsidies (Notes 17, 19 and 34) (4,182,834) (1,469,757) Other (55,971) - (13,821,651) (8,385,798)

61 / / 59 / 23. Derivate Financial Instruments Interest Rate Derivatives In order to reduce their exposure to the volatility of interest rates, the Company contracted swaps of interest rate. These contracts were valued according to its fair value at December 31 st, 2010 and 2009, and the corresponding amount was registered under the heading Derivative Financial Instruments. On December 31 st, 2010 and 2009, contracts were established for interest rate derivatives whose totals are as follows: Fair value Type Rate Interest rate swap Pays fixed interest rate and received Euribor 6 months (5,774,119) (1,567,157) (5,774,119) (1,567,157) On accordance with the accounting policies adopted these derivatives meet the requirements to be designated as hedging instruments for interest rate (Note 2.2 k) vii)). The fair value of the Company contracted derivatives is determined by the respective counterparts (financial institutions with who were signed such contracts). The derivative evaluation model, used by the counterparts, is based on the Discounted Cash Flows Method, i.e., using the Swaps Par Rates, listed in the interbank market and available on the Reuters and Bloomberg, for the applicable periods where the forward rates and the discount factors used to discount the fixed cash flows (fix leg) and the variable cash flows (variable leg) are computed. The sum of these two components results on the Net Present Value of the future cash flows or on the fair value of the derivatives. Derivatives for Hedging Pulp Price In order to reduce their exposure to the volatility of the pulp price, Celbi contracted derivatives hedging the price of pulp, which were evaluated according to its fair value at December 31 st, 2010 and The corresponding amount was registered under the heading Derivatives. The increase/decrease of one percentage point in indexing the interest rate over the financial year 2010 and estimated for the duration of the derivatives would have led to the increase/ decrease of equity under the heading Hedging Reserve of approximately 4,600,000 euros before tax.

62 60 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS On December 31 st, 2010 and 2009 there were established the following paper pulp derivative contracts which total amounts are as follows: Fair value Hedging quantity Maturity t/month 11/08/31 (584,380) (528,945) 2,500 t/month 11/07/31 (2,822,442) (2,781,993) 1,750 t/month 10/12/31 (267,256) (79,639) 3,000 t/month 10/08/31 - (2,213,143) 3,000 t/month 12/12/31 (3,384,999) - 2,000 t/month 12/06/30 (459,532) - 2,000 t/month 13/06/30 (1,216,668) - (8,735,277) (5,603,720) The Derivative fair value valuation of the paper pulp price hedging, contracted by the Company was executed by the respective counterparts (financial institutions with which were signed such contracts). The derivative evaluation model, used by these counterparts is based on the Discounted Cash Flows Method, i.e., it is calculated the difference between the estimated paper pulp quotation (PIX) and the fixed price for the relevant periods, which is, afterwards, discounted to the evaluation date. In accordance with the adopted accounting policies, these paper pulp derivatives fulfil the requirements to be classified as hedging instruments; so the variation on its fair value was recorded in the equity s caption Hedging Reserves. The increase/decrease of 5% on the paper pulp price indexes (PIX) during the year ended 31 st December 2010 and estimated for the period of these derivatives duration would result in a decrease/increase of the operational result of the year ended 31 st December 2010 of 3,370,000 euros and decrease/increase on the equity s caption Hedging Reserves of 1,700,000 euros before considering the tax effects. Exchange Rate Derivatives Celbi uses derivatives exchange rate, mainly in order to hedge future cash flows. Thus Altri hired some exchange rate forwards of U.S. dollars in order to manage the risk of exchange rate to which is exposed. On December 31 st, 2009, the fair value of exchange rate derivatives, which was considered hedging derivatives, calculated based on current market values of financial instruments equivalent exchange rate is (2,548,666) euros, which were matured or prepaid during Determining the fair value of financial instruments is based on the discount to the date of the statement of financial position of the amount that is estimated to be received/paid on the date of expiry of the contract. The settlement amount is considered in the assessment equal to the reference currency multiplied by the exchange rate and the market contracted for the settlement date given the date of valuation.

63 / / 61 / The movement occurred in the fair value of the financial instruments during the years ended December 31 st, 2010 and 2009, can be detailed as follows: 2010 Pulp price hedging derivatives Interest rates derivatives Exchange rates derivatives Total Opening balance (5,603,720) (1,567,157) (2,548,666) (9,719,543) Derivatives fair value variation/cessation Effect on shareholders' funds (3,131,557) (4,206,962) 2,548,666 (4,789,853) Closing balance (8,735,277) (5,774,119) - (14,509,396) 2009 Pulp price hedging derivatives Interest rates derivatives Exchange rates derivatives Total Opening balance 12,546, ,546,735 Derivatives fair value variation/cessation Effect on shareholders' funds (18,150,455) (1,567,157) (2,548,666) (22,266,278) Closing balance (5,603,720) (1,567,157) (2,548,666) (9,719,543) Gains and losses for the year associated with the change in fair value of the hedging instruments in the period not elapsed, during the year 2010, (in accordance with IAS 39), amounting to (4,789,853) euros (22,266,278 euros during the year 2009) were recorded directly in equity items, net or deferred tax amounting to 1,269,311 euros (5,900,564 euros on December 31st, 2009) (Note 8). 24. Contingent Liabilities On December 31 st, 2010 and 2009, the main contingent liabilities complied with the tax claims (Note 35), environmental contingencies (Note 36) and guarantees which were as follows: AICEP/API (Note 34) 12,911,230 - Others 308, ,188 13,219, ,188

64 62 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS 25. Financial Commitments not Included in the Statements of Financial Position a) Pension Fund Celbi grants to its workers, with non-defined term labour contract, who retired while working for Celbi, a set of benefits in accordance with the Company s Rules for Pension Funds, published in the Republic Journal (Diário da República) no. 221-III serie, dated 21 st September In accordance with those rules, the Company grants the following benefits: i) Retirement by Age Limit The participants that retire in the normal timing will be entitled to an annual pension, equal to 11.5% of the pensionable annual salary; ii) Retirement due to Disability Plan A If the participant retires himself permanently due to disability by the normal regime of Social Security, or is accepted as so by the medical services of the Company and the management entity, the Fund secures the payment of a pension calculated in accordance with the following formulas: fifth of the monthly salary earned at the retirement date by each year of service. Pension 3 If the disability happens when the participant is more than 55 years old, to the amount referred to in Pension 2 is added 50% of the annual pensionable salary. Plan B - If the participant retires himself permanently due to disability by the normal regime of Social Security, or is accepted as so by the medical services of the Company and the management entity, the Fund secures the payment of an annual pension equal to 11.5% of the pensionable annual salary. Only the participants working for the Company when the present change took place can benefit from Plan A. In relation to these workers and in relation to Plans A and B the most favourable will be applicable. To the other participants is applicable the Plan B. Pension 1 1. With less than 10 years of service 50% of the annual pensionable salary; 2. With 10 or more years of service 80% of the annual pensionable salary. The amount of the annual pension is deducted to the annual pension computed as described above. This regime applies to all Celbi s workers. In accordance with the latest actuarial valuation prepared by the funds managers, the present value of the past service liabilities with retired and current employees as of 31 st December 2010 and 2009, as well as the funds patrimonial situation were as follows: Pension 2 The participants will be entitled to an amount equal to one Current responsibilities for past services 6,771,450 6,716,220 Assets of Pension Funds 7,667,099 7,751,916

65 / / 63 / The detail of the amounts recorded in the Statement of Profit and Loss related with the benefit Pension plans defined in the year ended December 31 st, 2010 and 2009, is as follow: Current services cost (252,318) (261,085) Interest on obligation (263,275) (275,736) Actuarial gains/(losses) 138, ,667 Return on plan assets 237, ,051 (140,047) 665,897 The movement in the present value of responsibilities for past services during the years ended December 31 st, 2010 and 2009 is as follows: Responsibilities in the beginning of the year 6,716,220 7,397,736 Benefits paid by the Pension Funds (322,070) (1,008,670) Current service cost 252, ,085 Interest costs 263, ,736 Actuarial (gains)/losses (138,293) (209,667) Responsibilities in the end of the year 6,771,450 6,716,220 The movement verified on Pension Funds patrimonial situation during the years ended December 31 st, 2010 and 2009, is as follow: Pension Funds value at the beginning of the year 7,751,916 7,767,535 Contributions - - Paid pensions (322,070) (1,008,670) Return on plan assets 237, ,051 Pension Funds value at the end of the year 7,667,099 7,751,916

66 64 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS Those liabilities were determined using the Projected Unit Credit Method, the GKF95 mortality tables and the SR 2001 handicap tables. In addition to the technical parameters referred to above, the valuation was performed assuming real long-term profitability of 4% until the age of retirement and a rate of 3% after that that age and a salary increase of 2.5%. b) Other Commitments On December 31 st, 2010 and 2009, Celbi assumed contractual commitments for acquisition of fixed assets amounting to 4,787,000 euros and 9,420,000 euros respectively. 26. Operating Leases During the financial years ended December 31 st, 2010 and 2009, the amount of approximately 731,442 euros and 537,639 euros respectively, concerning rents paid under operating lease con tracts, was recognised as a period cost. On December 31 st, 2010, Celbi participated as lessee in operating leases, whose minimum lease payments fall due as follows: Year , , , and following 516,419 1,447,840 On December 31 st, 2009, Celbi participated as lessee in operating leases, whose minimum lease payments fall due as follows: Year , , , and following 533, ,435

67 / / 65 / 27. Group Companies and Related Parties Altri Group companies have relationships between them that qualify as related party transactions, which were made at market prices. On December 31 st, 2010, the main balances with Group companies Altri are as follows: Receivables Payables Company Customers c/a Group companies Other debtors Suppliers c/a Group companies Celbinave - Tráfego e Estiva Unipessoal, Lda. 13, (666) Viveiros do Furadouro Unipessoal, Lda. 723,600 23, Celulose do Caima SGPS, S.A. - 39,119, Altri Florestal, S.A. 26,273,716 2,465,478 - (2,435,394) - Caima Energia S.A. - 1,331, Caima - Indústria de Celulose, S.A. 45,344 2,381, Celtejo - Empresa Celulose do Tejo, S.A. 2,842, (1,728) (2,433,423) Altri Energias Renováveis, S.A , Captaraiz - Unipessoal, Lda. 6, Sócasca - Recolha e Comércio de Recicláveis, S.A (100,513) Invescaima - Investimentos e Participações SGPS, S.A. - 70,041, (353,011) Altri - Participaciones Y Trading, S.L (8,213,564) - Altri, SGPS, S.A. - 17,040, (431,111) 29,905, ,564,506 - (10,650,686) (3,318,725) On December 31 st, 2009, the main balances with Altri Group companies are as follows: Receivables Payables Company Customers c/a Group companies Other debtors Suppliers c/a Group companies Others Celbinave - Tráfego e Estiva Unipessoal, Lda , Viveiros do Furadouro Unipessoal, Lda. 578, Operfoz - Operadores do Porto da Fig. Foz, Lda (91,917) - - Celulose do Caima SGPS, S.A. - 47,957,525 5,430, Altri Florestal, S.A. 23,585, ,577 2,369,282 (2,229,469) - - Caima Energia S.A. - 1,579, Caima - Indústria de Celulose, S.A. - 29, Celtejo - Empresa Celulose do Tejo, S.A. 2,055,347-24,700 - (1,187,917) (22,584) CPK - Companhia Produtora de Papel Kraftsack S.A (1,103,802) - Altri Energias Renováveis, S.A , Captaraiz - Unipessoal, Lda , Sócasca - Recolha e Comércio de Recicláveis, S.A , Invescaima - Investimentos e Participações SGPS, S.A. - 47,395,759 2,207, Altri - Participaciones Y Trading, S.L ,982 (1,563,006) - - Altri, SGPS, S.A. - 15,025, ,219, ,982,157 10,062,430 (3,884,391) (2,291,719) (22,584)

68 66 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS On December 31 st, 2010 and 2009, the heading Group Companies includes the following amounts related to current loans granted to Group companies: Celulose do Caima SGPS, S.A. 32,000,000 46,500,000 Invescaima - Investimentos e Participações SGPS, S.A. 62,500,000 36,350,000 Altri, SGPS, S.A. 17,000,000 15,000,000 Sócasca - Recolha e Comércio de Recicláveis, S.A , ,500,000 97,950,000 Accounts receivable from Altri Florestal, S.A. resulted primarily from transfers in previous years, of most of the forestry activities of the Company for this entity. The account payable to Altri - Participaciones Y Trading, S.L. results from the sales commissions associated with the Agency Agreement established with this entity. The remaining balance relates mainly to the effect of taxation in accordance with the Special Regime Taxing Group of Companies (Note 8) as in the Code of Taxation of Income and Gains of Collective Persons and interest income associated with loans. The main transactions with the Altri Group companies in the financial year 2010 can be summarised as follows: Company Sale/ acquisition of assets Other income Sale of products Acquisition raw and sub materials Other services rendered Financial cost/income Celbinave - Tráfego e Estiva Unipessoal, Lda Viveiros do Furadouro Unipessoal, Lda. - (120,000) Operfoz - Operadores do Porto da Figueira da Foz, Lda , ,334 - Celulose do Caima SGPS, S.A (1,137,309) Caima - Indústria de Celulose, S.A. - (37,536) (679,503) - - Altri Florestal, S.A. 2,917 (72,203) (196,421) 23,327, Celtejo - Empresa Celulose do Tejo, S.A. - (42,399) (566,791) 167,071 - (22,800) Captaraiz - Unipessoal, Lda Sócasca - Recolha e Comércio de Recicláveis, S.A (939) Invescaima - Investimentos e Participações SGPS, S.A (1,588,728) Altri - Participaciones Y Trading, S.L ,296,651 - Altri, SGPS, S. A (430,237) 2,917 (272,138) (1,442,715) 24,152,444 11,982,985 (3,180,012)

69 / / 67 / The main transactions with the Altri Group companies in the financial year 2009 can be summarised as follows: Company Sale/Acquisition of assets Other income Sale of products Acquisition raw and sub materials Other services rendered Celbinave - Tráfego e Estiva Unipessoal, Lda Viveiros do Furadouro Unipessoal, Lda. - (120,000) Operfoz - Operadores do Porto da Figueira da Foz, Lda ,910 Celulose do Caima SGPS, S.A. - (1,675,822) Caima - Indústria de Celulose, S.A. - (14,060) Altri Florestal, S.A. - (36,730) (240,274) 12,278,655 - Celtejo - Empresa Celulose do Tejo, S.A. (12,670) (9,116) (780,641) - - Captaraiz - Unipessoal, Lda. (6,600) Sócasca - Recolha e Comércio de Recicláveis, S.A. - (1,443) Invescaima - Investimentos e Participações SGPS, S.A. - (1,717,468) Altri - Participaciones Y Trading, S.L. - (11,982) - - 4,718,746 Altri, SGPS, S. A. - (417,397) (19,270) (4,004,018) (1,020,915) 12,278,655 5,395,656 Operfoz Operadores do Porto da Figueira da Foz, Lda provides services for port operations for the pulp. Celbi acquires wood from Altri Florestal, S.A. Altri - Participaciones Y Trading, S.L. is the pulp sales agent for the Altri Group, so the amount in column Other Supplies and Services with this organisation relates to sales commissions under the contract agency established with it. Other income for the year 2009 includes the amount of appro x im ately 3,800,000 euros related to interest earned on loans to the Altri Group companies. In addition to the above balances at December 31 st, 2010 and 2009, there was an account receivable from the subsidiary F. Ramada II - Imobiliária, S.A. amounting to 4,523,203 euros and 4,511,689 euros, respectively registered under Clients concerning the sale of land in previous years to this entity. 28. Sales and Services Geographically, the breakdown of sales and services of the Company by market is as follows: Domestic market 69,125,304 29,155,655 Foreign market 261,171, ,637, ,296, ,792,862

70 68 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS 29. Other Income The income statement line Other Income in the years ended December 31 st, 2010 and 2009, primarily includes: earnings from derivative instruments (Note 23), investment subsidies and compensation received. 30. Other Expenses The main component of Other Costs for the year ended December 31 st, 2010, concerns losses on derivative contracts (Note 23). Additionally, in the financial years ended December 31 st, 2010 and 2009, this item includes indirect taxes, rates and claims costs and donations. 31. Financial Results The financial results for the years ended December 31 st, 2010 and 2009, are detailed as follows: Financial expenses Interest (Note 17) (10,567,776) (11,844,199) Exchange losses (1,408,979) (733,949) Other financial expenses and losses (13,407,321) (2,815,839) (25,384,076) (15,393,986) Financial income Gains (Note 27) 4,784,422 5,899,571 Exchange gains 2,233, ,354 Other financial income and gains 245, ,263,640 6,639,004 On December 31 st, 2010 and 2009, the item Other Financial Expenses refers primarily to losses on derivatives (Note 23) costs incurred with the issuance of commercial paper and bank fees for services (Note 17).

71 / / 69 / 32. Earning per Share Share number considered for the computation of basic and diluted earning 15,500,000 15,500,000 Net profit considered for the computation of basic and diluted earning for continuing operations 39,925, ,462 Operations results per share Basic Diluted Number of Personnel During the years ended December 31 st, 2010 and 2009, the average number of employees of the Company was 240 and 239, respectively. 34. Subsidies In February 2007 the application of an investment project to financial incentives under Decree-law no. 203/2003 of 10 September and Decree-law no. 225/2002 of 30 th October was approved. The Project called SIME C is intended to increase the capacity of pulp production and marks the beginning of a broader process of technological innovation that contributes to the production of internationally tradable goods with high levels of national incorporation. The investment took place between 1 st February 2005 and 31 st December 2006 and had an estimated value of more than 17,000,000 euros. The financial incentive consists of i) the interest rate subsidy, ii) an achievement award against objectives set at a maximum of 81.25% of a loan corresponding to 16% of Eligible Expenses, iii) non-refundable incentive corresponding to Professional Training iv) a non-refundable incentive corresponding to mark-up Environmental Added Value. In 2007 Celbi received 155,000,000 euros in interest rate subsidies. In 2008 the Company received the remaining KEUR 40 in interest rate subsidies and 43,600,000 euros on the Professional Training component. In 2009 Celbi received 250,000,000 euros relating to the mark up of environmental added-value and 1,332,000 euros on achievement bonuses in relation with the degree of fulfilment of the contract calculated on measurements made at the end of the financial year 2008.

72 70 / ANNUAL REPORT 2010 / FINANCIAL STATEMENTS In January 2007 Celbi signed a contract granting financial and fiscal incentives under Decree-law no. 203/2003 of 10 September, with Agência para o Investimento e Comércio Externo de Portugal, E.P.E. (AICEP), as the Portuguese government considered the expansion of production capacity in Celbi as a project of national interest (PIN). The investment project ran from 1 st January 2007 through 30 th June 2010 and the contracted value was 320,000,000 euros of which the Portuguese government shall grant a refundable financial incentive equal to 16.5% of eligible expenses. If the Company meets the proposed objectives that will be measured by the end of 2010, 2013 and 2016 the Portuguese State shall grant a further Achievement Award that will correspond to non-repayment of up to 80% of the amount of refundable incentive. The government also grants an incentive corresponding to a tax credit on Corporation Income Tax amounting to 12% of relevant applications. Up to the end of the fiscal year ended 31 st December 2010 the Company received the amount of 43,898,250 euros for the refundable incentive. The Board of Directors is confident that the achievement award will reach 60%, taking into account the objectives already achieved. On this basis, the amount of 24,789,600 euros was transferred to the items Other current liabilities and Other Noncurrent liabilities (notes 19 and 22). On December 31 st, 2010 and 2009, the detail of the grants received but not yet recognised as income in the income statement is as follows: Subsidy associated to the expansion of the production capacity (Notes 17, 19 and 22) 22,128,774 - Other investment subsidies 1,522,009 1,469,757 23,650,783 1,469, Fiscal Processes By the end of 1994, following a visit paid by the tax authorities, the Company received a notification from General Management of Contributions and Taxes (Inland Revenue) claiming the payment of Corporate Income Tax amounting to 2,030,945 euros plus the corresponding interest on arrears amounting to 2,094,863 euros. This tax was claimed on the assumption that the technical services rendered to the Company in the years 1989 to 1992 as part of an investment project, are considered transfers of technology and as such subject to withholding tax. The Company decided to challenge in court the assessment made, in the full assurance that no payment is due. In late 1996 and also as a result of a visit by the tax authorities, the Company received another notification from General Management of Contributions and Taxes (Inland Revenue) claiming the payment of Corporate Income Tax amounting to 205,641 euros plus the corresponding compensatory interest of 110,276 euros for the technical services of the same nature, rendered to the Company in the years 1992 to Consistently the Company decided to challenge in court the assessment made. However, in order to benefit from the privileges granted by Decree 124/96, the Company chose to pay the tax claimed, while proceeding with the ongoing legal challenge, because it is the Board s conviction that such services do not fall within the tax authorities interpretation. On 15 th April 1998, the Tax Court of 1 st Instance of Coimbra deemed void the settlement of IRC following the notification received in In 2006, a judgment of the Supreme Administrative Court confirmed the decision previously made by the South Central Administrative Court to deny the appeal brought forward by the Public Treasury. For this reason, in October 2006 the Company got back the amount of 2,030,945 euros plus indemnity interest amounting to approximately 1,260,000 euros, for the process referring to years 1989 to1992.

73 / / 71 / The Company is still awaiting the decision on a notification received by the end of 1996, for the years 1992 to The balance of Other Noncurrent Assets relates primarily to this situation. 37. Aproval of Financial Statements The financial statements were approved by the Board of Directors and authorised for issue on February 18 th, The final approval is still subjected to agreement of the General Meeting. 36. Information on Environmental Issues Following the Kyoto Protocol, the European Union committed itself to reduce the emission of greenhouse gases. Therefore, it has issued a Directive that predicts the commercialisation of carbon dioxide emission licenses. This directive was trans posed to the Portuguese legislation and became mandatory since 1 st January 2005, namely, for the pulp and paper industry. 38. Explanation Added for Translation These consolidated financial statements are a translation of financial statements originally issued in Portuguese in accordance with International Financial Reporting Standards (IFRS/IAS), some of which may not conform or be required by generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails. Following the Ministerial Dispatch no. 2836/2008 dated 5 th February 2008, the Portuguese government distributed to the companies the carbon dioxide emission licenses. The Company received a free license for the emission of 87,229 tonnes of carbon dioxide in If the Company exceeds that amount it will have to buy in the market the remaining licenses. The distribution of the carbon dioxide emission licenses is made in the beginning of the following year, being the emission amounts presented subjected to a certification made by an independent entity. Bearing in mind that these licenses refer to the period , in accordance with the estimates for the year 2010, the Group does not expect this new legislation to carry significant additional costs. On 31 st December 2010 the Group has not recorded any liability concerning environmental issues, nor has disclosed any environmental contingency, since the Board of Directors believes that, as of that date, no obligations and responsibilities arising from past events have occurred that lead to significant costs to the Celbi.

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75 / / 73 / REPORT AND OPINION OF THE STATUTORY AUDIT BOARD AND legal certifications of accounts Report and Opinion of the Statutory Audit Board To the Shareholders of Celulose Beira Industrial (Celbi), S.A. In compliance with the applicable legislation and our mandate, we hereby submit our Report and Opinion, which covers the Board of Director s Report and Financial Statements of Celulose Beira Industrial (Celbi), S.A. (Company) for the year ended 31 st December 2010, which are the responsibility of the Company s Board of Directors. During the year under analysis, the Statutory Audit Board accompanied the operations of the Company, the timely writing up of accounting records, compliance with statutory and legal requirements and the effectiveness of the risk management and internal control systems, having held meetings with the periodicity and length considered appropriate and having always obtained from the Board of Directors and personnel of the Company all the information and explanations required. Financial Statements and the proposed allocation of results are in accordance with accounting, legal and statutory requirements and consequently may be approved by the General Shareholders Meeting. We wish to thank the Company s Board of Directors and the departments of the Company involved for the assistance provided to us. Porto, March 31 st, 2011 The Statutory Audit Board João da Silva Natária President As part of its duties, the Statutory Audit Board examined the statement of financial position as of 31 st December 2010, the statements of profit and loss, comprehensive income, cash flow, and changes in shareholders funds for the year then ended and the corresponding notes. Additionally, the Statutory Audit Board examined the Report of the Board of Directors for the year 2010 and fulfilled its duties concerning the review of the qualifications, independence and work of the Statutory Auditor, and reviewed the Statutory Audit Report and was in agreement with its content. Manuel Tiago Alves Baldaque de Marinho Fernandes Cristina Isabel Linhares Fernandes Considering the above, and taking into account paragraphs 5 and 6 of the Statutory Audit Report, in the opinion of the Statutory Audit Board, the Board of Director s Report and the

76 74 / ANNUAL REPORT 2010 / REPORT AND OPINION OF THE STATUtoRY AUDIT BOARD AND LEGAL CERTIFICATIONS OF ACCOUNTS Legal Certifications of Accounts Introduction 1. We have examined the accompanying financial statements of Celulose Beira Industrial (Celbi), S.A. (Company), which comprise the balance sheet as of 31 st December 2010 that presents a total of euros and shareholder s equity of euros, including a net profit of euros, the statements of profit and loss by nature, of comprehensive income, of changes in equity and of cash flows for the year then ended and the corresponding notes. Responsibilities 2. The preparation of financial statements that present a true and fair view of the financial position of the Company, the results and the comprehensive income of its operations, the changes in equity and its cash flows, as well as the adoption of adequate accounting principles and criteria and the maintenance of an appropriate system of internal control are the responsibility of the Company s Board of Directors. Our responsibility is to express a professional and independent opinion on these financial statements, based on our examination. Scope 3. Our examination was performed in accordance with the auditing standards (Normas Técnicas e as Directrizes de Revisão/ Auditoria) issued by the Portuguese Institute of Statutory Auditors (Ordem dos Revisores Oficiais de Contas), which required that the examination be planned and performed with the objective of obtaining reasonable assurance about whether the financial statements are free of material misstatement. An examination includes verifying, on a sample basis, evidence supporting the amounts and disclosures in the financial statements and assessing the significant estimates, based on judgements and criteria defined by the Board of Directors, used in their preparation. An examination also includes assessing the adequacy of the accounting principles used and their disclosure, taking into consideration the circumstances, verifying the applicability of the going concern concept and assessing the adequacy of the overall presentation of

77 / / 75 / the financial statements. Our examination also comprises verifying that the financial information contained in the Board of Directors Report is in accordance with the financial statements. We believe that our examination provides a reasonable basis for expressing our opinion. not required to do in accordance with the number 3 of Article 7 of Decree-law no. 158/2009 of 13 th July, since it is wholly owned, even if indirectly, by Altri, SGPS, S.A., which presents consolidated financial statements that includes the financial statements of the Company and its subsidiaries. Opinion 4. In our opinion, the financial statements referred to in paragraph 1 above, fairly present, for the purposes referred to in paragraph 6 bellow, in all material respects, the financial position of Celulose Beira Industrial (Celbi), S.A., as well as the results and the comprehensive income of its operations, the changes in equity and its cash flows for the year then ended, in accordance with the International Financial Reporting Standards as adopted by the European Union (IFRS) (see paragraph 5 bellow). Report on other legal requirements 7. It is also our opinion that the financial information included in the Board of Directors Report is in accordance with the financial statements of the year. Porto, March 31 st, 2011 Deloitte & Associados, SROC S.A. Represented by António Manuel Martins Amaral Emphasis 5. As referred in Note 2.1 of the Notes to the financial statements, the Company adopted, for the first time in 2010, the International Financial Reporting Standards as adopted by the European Union (IFRS). In the transition process from the accounting standards previously adopted in Portugal (POC) to IFRS, the Company followed the requirements of the IFRS 1 First-Time Adoption of the International Financial Reporting Standards, being the transition date reported to 1 st January Accordingly, the financial information of 2009 previously presented in accordance with POC was, for comparison purposes, restated in accordance with the IFRS (Note 3). 6. The financial statements referred to in paragraph 1 above, refer to the Company individually and were prepared for approval and publication according to law. As indicated in Note 2.2 of the Notes to Financial Statements, investments in subsidiaries are recorded at the acquisition cost. The Company will not prepare consolidated financial statements since it is

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