EX-99.1

EX-99.1 2 d645388dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

ARAUCO AND CONSTITUTION PULP INC

TABLE OF CONTENTS


Item		Page

1.	Ratio Analysis of the Consolidated Financial Statement		4
2.	Unaudited Consolidated Financial Statement		7
3.	Unaudited Consolidated Financial Income Statement		9
4.	Unaudited Consolidated Statement of Changes in Net Equity		10
5.	Unaudited Consolidated Statement of Cash Flow		11
6.	Unaudited Notes to the Consolidated Financial Statement		12
7.	Annex: Press Release

CELULOSA ARAUCO Y CONSTITUCION S.A.

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Ratio Analysis of the Consolidated Financial Statement

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

1. ANALYSIS OF FINANCIAL POSITION

a)	Statement of Financial Position

The principal components of assets and liabilities are at year end, as follows:


	09-30-2013		12-31-2012
Assets	ThU.S.$		ThU.S.$
Current assets		2,788,228		2,699,996
Non-current assets		10,793,498		10,857,844

Total assets		13,581,726		13,557,840


	09-30-2013		12-31-2012
Liabilities	ThU.S.$		ThU.S.$
Current liabilities		1,170,718		1,425,287
Non-current liabilities		5,313,300		5,166,794
Non –parent participation		71,015		74,437
Net equity attributable to parent company		7,026,693		6,891,322

Total net equity and liabilities		13,581,726		13,557,840

As of September 30, 2013, total assets increased US$24 million compared to December 31, 2012, equivalent to 0.18% of variation. This deviation is mainly attributable to an increase in the balance of cash and cash equivalents and inventories, partially offset by a decrease in non-financial Assets (in 2012, compensation was received for fire insurance in Nueva Aldea).

Moreover, liabilities decreased US$108 million mainly attributable to a net decrease in financial Liabilities due to payment of bond obligations offset by an increase in Non-Financial liabilities brought about by increasing the provision of minimum dividends (interim dividend recognition for the period 2013).

The main financial and operating indicators relating to balance are as follows:


Liquidity ratios	09-30-2013		12-31-2012
Current Liquidity (current assets / current liabilities)		2.38		1.89
Acid ratio ((current assets-inventories, biological assets) / Current liabilities)		1.43		1.14

Debt indicators	09-30-2013		12-31-2012
Debt to equity ratio (total liabilities / equity)		0.91		0.95
Short-term debt to total debt (current liabilities / total liabilities)		0.18		0.22
Long-term debt to total debt (non-current liabilities / total liabilities)		0.82		0.78

	09-30-2013		09-30-2012
Financial expenses coverage ratio (earnings before Taxes + interest expense / interest expense)		3.64		2.49

CELULOSA ARAUCO Y CONSTITUCION S.A.

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Ratio Analysis of the Consolidated Financial Statement

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


Activity ratio	09-30-2013		12-31-2012
Inventory turnover-times (cost of sales / inventories + current biological assets))		3.27		2.94
Inventory turnover-time (excluding biological assets) (Cost of sales /inventory)		4.27		3.91
Inventory permanence-days ( Inventories + biological assets)) /cost of sales)		110.02		122.63
Inventory permanence (excluding biological assets) (inventory / cost of sales)		84.26		92.09

The ratio current liquidity and the acid-test ratio present an increase in the period 2013 compared with exercise 2012, because of a net increase in current assets and a net decrease in current liabilities, due to bonds issued payments.

As of September 30, 2013, the short-term debt represented 18% of total liabilities (22% as of December 31, 2012).

The ratio of financial expenses covered represents an increase of 2.49 to 3.64. This increase is mainly attributable to a greater proportional result for the 2013 period, compared to the same period of 2012.

b)	Statements of income

Profit before Income Tax

Profit before Income Tax registered a profit of US$457 million compared to a profit of US$221 million in the same period of the previous year, positive variation of US$236 million. The effect is explained by the factors described in the following table:


Item	Million U.S.$
Gross margin		358
Other operating income		17
Distribution and administrative expenses		(123	)
Other operating expenses		5
Result in related companies		10
Income (financial expenses)		(22	)

Others item		(9	)

Net change in income before income tax		236

Gross Margin represents a profit of U.S.$1.199 million, U.S.$358 million higher compared to the previous period (U.S.$841 million) caused by a proportional increase in sales volumes and an increase in sales prices.

CELULOSA ARAUCO Y CONSTITUCION S.A.

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Ratio Analysis of the Consolidated Financial Statement

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

ANALYSIS OF FINANCIAL POSITION, continued

The main indicators related to result accounts and the details of revenues and operation costs are as follows:


	09-30-2013		09-30-2012
Revenues	ThU.S$		ThU.S$
Pulp		1,664,341		982,283
Sawn timber		614,075		364,626
Panels		1,466,828		604,222
Forestry		106,162		79,690
Other		24,476		16,341

Total revenues		3,875,882		2,047,162


	09-30-2013		09-30-2012
Sales costs	ThU.S$		ThU.S$
Wood		673,840		628,942
Forestry work		473,745		439,371
Depreciation		200,511		164,661
Other costs		1,328,990		1,004,784

Total sales costs		2,677,086		2,237,758


Profitability index	09-30-2013			12-31-2012
Profitability on equity		7.07			2.01
Profitability on assets		3.67			1.08
Return on operating assets		4.56			1.77

Profitability ratios	09-30-2013			09-30-2012
Income per share (U.S.$) (1)		3,02			0,49
Income after tax (ThU.S.$) (2)		373,046			58,789
Gross margin (ThU.S.$)		1,198,796			840,621
Financial costs (ThU.S.$)		(173,156	)		(148,451	)

(1)	Earnings per share refer to the profit to net equity to parent company.

(2)	Includes interest.


	09-30-2013			09-30-2012
EBITDA	ThU.S$			ThU.S$
Gain (loss)		373.0			58.8
Finance cost		173.2			148.5
Financial Income		(16.3	)		(12.9	)
Expenses for income tax		83.9			162.1
EBIT		613.8			356.5
Depreciation and amortization		238.5			176.3
EBITDA		852.3			532.8
Cost at fair value of the harvest		242.3			232.2
Gain from changes in fair value of biological assets		(202.6	)		(171.5	)
Exchange difference		9.2			15.8
Adjusted EBITDA		901.2			609.3

2. MAIN SOURCES OF FINANCING

Arauco’s financing needs are mainly covered through the capital markets, with bond issuances and credits with banks and financial institutions serving as the main sources of financing. For short-term borrowing, Arauco is regulated by its liquidity policy which indicates the amounts and institutions from which it can borrow according to several conditions defined in the policy. In the case of long-term debt, corporate bond issuances in the local

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

market and also in international markets are used as sources of new resources. Another source of long-term financing to credit corresponds mainly with banks and financial institutions around the world.

3. DIFFERENCE BETWEEN ECONOMIC VALUES AND BOOK ASSETS

Assets and liabilities are presented in the Financial Statements according to International Financial Reporting Standards and instructions issued by the Chilean Securities Commission.

We believe that there are no substantial differences between the economic value of our assets and the value reflected in these Financial Statements.

4. MARKET SITUATION

Pulp Division

Pulp sales reached US$ 572.9 million (including energy sales) for the third quarter of 2013, a decrease of 3.0% compared to the previous quarter. This decrease was mainly due to lower average prices of 1.3% and lower energy sales, and partially offset by higher volumes sales of 1.3%.

When compared with the same period of 2012, pulp sales increased 16.6%, mainly due to higher average prices of 5.4%, higher sales volume of 8.7% and higher energy sales.

During the third quarter of the year, price trends behaved differently depending on the pulp grade. For unbleached pulp, mainly used for packaging paper, the tendency changed and it obtained significant increases (approx. 5%) during this quarter. Softwood prices in general remained stable and in September alone it increased 1.5%, but we estimate this trend will continue for the fourth quarter. For hardwood, the situation is different, prices dropped during this quarter in most of the markets.

Price trends reflected global inventory changes. During the third quarter, inventories for long fiber remained stable and showed a decline of 2 days with respect to the same period of 2012. Short fiber inventories rose about 3-5 days when compared to the same period of 2012.

Asia in general showed good demand; however, the growth did not increase at the same pace as installed capacity. For printing & writing paper there was oversupply, hindering the transfer of costs to prices, even stock levels in this type of paper has rose pushing prices downward. This effect was especially reflected in China, Korea and Taiwan, these three countries are important producers of printing & writing paper for domestic and export markets. Supply in Asia increased and kept prices under pressure, especially in short fiber. For long fiber the supply was more limited and showed a positive trend in prices. The new capacity that entered a few months ago did not operate very well and these new volumes have been limited. Seasonal effects began at the end of the quarter and therefore there is optimism in prices for both fibers. Another important market is Tissue; this industry continues growing in Asia and particularly in China, replacing part of the pulp demand that has been lost in printing & writing paper.

Europe apparently did not bottom out during this quarter, but consumption began to stabilize in some paper industries, and there were even some increases in some types of graphic papers, such as magazine papers. In other types of paper, the oversupply continued as a

CELULOSA ARAUCO Y CONSTITUCION S.A.

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Ratio Analysis of the Consolidated Financial Statement

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

consequence of the economic adjustments and the replacement for electronic media and we expect more capacity closures, companies, consolidations, etc. For example in Germany, printing & writing paper production dropped 5.6% in September 2013 when compared to the same period in 2012, but other papers, such as Tissue and specialty papers have rose 5.1% and 2.4%, respectively.

Latin America began very actively with good prices, and this last quarter also showed demand increases in North America for Tissue, unbleached pulp and for the fibrocement industry that is directly related to the construction activity.

The fluff market for the diaper industry also could be improved by the increase in demand in North America and a lower pressure to ship fluff to different countries, such as Brazil, an important market for our fluff; and North America, one of the biggest and most competitive producers.

For the last quarter of 2013, we expect better demand and prices, confirming the trend that began at the end of the third quarter. During the third quarter, production levels were good and in line with our plans. We met production and sale targets. There were no special events that may affect the production and sales.

Sawn Timber Division

Our Sawn Timber division had total sales of US$ 219.2 million for the third quarter of 2013, representing a 5.4% increase compared to the previous quarter. This increase was mainly due to higher average prices of 7.2% and higher sales volume of 0.5%.

When compared with the same period of 2012, sawn timber and remanufactured wood products sales increased 13.8%, mainly due to higher sales volume and average prices of 8.0% and 6.0%, respectively.

The real estate and construction markets in the United States have remained around 900,000 units in housing starts during the third quarter of the year and continues to advance over the previous year. The Housing Starts Index reached 891,000 units per year in August, 19.0% higher than the same month last year. Current construction levels continue low compared to the historical 10 years average. During the third quarter, the sale price of moldings in the United States showed a slight increase when compared to the previous quarter. During the third quarter of this year, timber markets continued a positive trend in volumes and prices. Sales orders have increased and prices have been slightly higher in most of the markets we sell.

Panels Division

Panel’s sales reached US$ 502.0 million in the third quarter of this year, a decrease of 2.5% when compared to the US$ 514.9 million obtained in the second quarter of the year. This is mainly explained by a decrease in average prices of 1.4%, partially offset by a 1.2% increase in volume sales.

The panels division (MDF, PBO, Plywood and HB) closed the third quarter of the year with an increase of 65% in sales compared to the same quarter of 2012 and a 62% in accumulated sales respect to the same period of 2012. On the other hand, volume sales increased 1.2% when compared to the previous quarter of the year and 73% compared to the third quarter of 2012, accumulating a 66% of growth in relation to the period from January to September 2012. This strong growth over the previous year reflects the consolidation of Flakeboard in

CELULOSA ARAUCO Y CONSTITUCION S.A.

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Ratio Analysis of the Consolidated Financial Statement

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

North America. During the third quarter of the year, plywood sales volume had a 10% drop compared to the second quarter of this year. This is mainly explained by a lower production level principally associated to the startup process of new equipment.

In the case of MDF, sales volume increased 3% with respect to the second quarter of 2013. This increase is explained by higher sales in Latin American markets such as Brazil, Argentina and Mexico. Compared to the same quarter of 2012, MDF volume sales showed a rise 69% which is explained by an increase of supply from Flakeboard in North America and also because of the start of the new MDF line in Jaguariaiva, Brazil.

Sales volume of PBO grew 2% when compared to the second quarter of this year, which highlights the increase in sales of melamine to Mexico. Compared to the same quarter of 2012, particleboard sales volume increased 164%. This increase is mainly explained by the contribution of sales coming from our operations in North America and by a higher volume of our Teno Plant in Chile. Sales of MDF moldings showed a higher demand in the North American market, which goes in line with the recovery of the Housing Starts Index.

5. ANALYSIS OF CASH FLOW

The main components of net cash flow in each period are as follows:


	09-30-2013 ThU.S.$			09-30-2012 ThU.S.$
Positive (negative) Cash flow

Cash flow from operating activities		774,271			310,072
Cash flow from financing activities:
Loan and bond payments		(159,708	)		807,488
Dividend payments		(76,077	)		(176,672	)
Others
Cash flow from investment activities:		(2,514	)		(21	)
Purchase and sales of permanent investments (net)		(33,172	)		(327,137	)
Incorporation and sale of property, plant and equipment		(218,966	)		(423,904	)
Incorporation and sale of biological assets		(149,392	)		(89,924	)
Loan to related companies (net)		200			(51,000	)
Dividends received		17,490			3,980

Others		11,581			1,199

Positive Net cash flow (negative)		163,713			51,593

The operating cash flow has a positive balance of U.S.$164 million in the current year, with differences with respect to the previous year (positive balance of U.S. $52 million). This is mainly due to a higher ratio of receipt of customer payments versus payments to suppliers and lower tax payments in the period 2013.

In relation to the flow of investment, the current financial year decreased U.S.$372 million (U.S.$889 million in 2012), mainly due to lower capital investments and lower payments for acquisition of property, plant and equipment.

6. MARKET RISK ANALYSIS

In respect of the economic risks resulting from interest rate variations, the Company maintains, as of September 30, 2013, a ratio of fixed rate debt to total consolidated debt of approximately 81.1%, which it believes is consistent with industry standards. The Company does not engage in futures against variations in the selling prices of pulp and forest products because it believes that risks resulting from price variations are limited, in large part because the Company maintains one of the lowest cost structures in the industry.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The Company and most of its subsidiaries maintain their accounting records and prepare their financial statements in U.S. dollars. Both the accounts receivable and most financial liabilities are denominated in U.S. dollars or are covered by an exchange rate swap, as well as most of their revenues. As a result, exposure to changes in the exchange rate has decreased significantly.

In the report to the Interim Consolidated Financial Statements September 30, 2013, Note 23, a detailed analysis of the risks associated with the business of Arauco is available.

CELULOSA ARAUCO Y CONSTITUCION S.A.

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Unaudited Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


		09-30-2013		12-31-2012
	Note	ThU.S.$		ThU.S.$

Assets
Current Assets
Cash and cash equivalents	4		543,694		395,716
Other current financial assets	23		1,035		1,012
Other current non-financial assets	25		184,909		207,889
Trade and other current receivables	23		731,447		825,869
Accounts receivable from related companies	13		150,816		130,423
Current Inventories	3		855,078		815,782
Current biological assets	20		258,074		252,744
Current tax assets			48,381		56,951

Total Current Assets other than assets or disposal groups classified as held for sale			2,773,434		2,686,386

Non-Current Assets or disposal groups classified as held for sale	22		14,794		13,610
Total Current Assets			2,788,228		2,699,996
Non-Current Assets
Other non-current financial assets	23		61,387		61,350
Other non-current non-financial assets	25		122,370		125,254
Trade and other non-current receivables	23		5,370		11,877
Investments accounted for using equity method	15-16		1,048,458		1,048,463
Intangible assets other than goodwill	19		98,522		103,158
Goodwill	17		79,647		84,106
Property, plant and equipment	7		5,774,455		5,789,483
Non-current biological assets	20		3,478,650		3,473,442
Deferred tax assets	6		124,639		160,711
Total non-Current Assets			10,793,498		10,857,844
Total Assets			13,581,726		13,557,840

The accompanying notes are an integral part of these interim consolidated financial statements.

CELULOSA ARAUCO Y CONSTITUCION S.A.

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Unaudited Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)


		09-30-2013			12-31-2012
	Note	ThU.S.$			ThU.S.$

Equity and liabilities
Liabilities
Current Liabilities
Other current financial liabilities	23		439,931			808,614
Trade and other current payables	23		517,173			490,191
Accounts payable to related companies	13		11,372			9,168
Other current provisions	18		8,969			8,875
Current tax liabilities			5,049			12,264
Current provisions for employee benefits	10		3,902			3,945
Other current non-financial liabilities	25		184,322			92,230
Total Current Liabilities			1,170,718			1,425,287
Non-Current Liabilities
Other non-current financial liabilities	23		3,772,558			3,606,310
Other non-current provisions	18		22,261			13,281
Deferred tax liabilities	6		1,390,350			1,402,308
Non-current provisions for employee benefits	10		43,075			43,491
Other non-current non-financial liabilities	25		85,056			101,404
Total non - current liabilities			5,313,300			5,166,794
Total liabilities			6,484,018			6,592,081
Equity
Issued capital			353,176			353,176
Retained earnings			6,969,740			6,754,725
Other reserves			(296,223	)		-216,579
Equity attributable to parent company			7,026,693			6,891,322
Non-controlling interests			71,015			74,437
Total equity			7,097,708			6,965,759
Total equity and liabilities			13,581,726			13,557,840

The accompanying notes are an integral part of these interim consolidated financial statements.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

CONSOLIDATED STATEMENTS OF INCOME


		January-September						July-September
		2013			2012			2013			2012
	Note	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Income Statement

Revenue	9		3,875,882			3,078,379			1,334,913			1,031,217
Cost of sales	2		(2,677,086	)		(2,237,758	)		(926,471	)		(775,801	)
Gross profit			1,198,796			840,621			408,442			255,416
Other income	2		265,546			248,708			89,577			129,276
Distribution costs	2		(390,672	)		(329,758	)		(131,835	)		(115,833	)
Administrative expenses	2		(398,534	)		(336,280	)		(134,151	)		(114,764	)
Other expense	2		(57,272	)		(62,657	)		(23,769	)		(15,358	)
Other gains (losses)	14		0			16,248			0			(15	)
Profit (loss) from operating activities			617,864			376,882			208,264			138,722
Finance income	2		16,264			12,862			4,172			3,962
Finance costs	2		(173,156	)		(148,451	)		(59,663	)		(45,063	)
Share of profit (loss) of associates and joint ventures accounted for using equity method	15		5,180			(4,666	)		(5,123	)		3,911
Exchange rate differences			(9,202	)		(15,759	)		(1,359	)		(9,589	)
Income before income tax			456,950			220,868			146,291			91,943
Income Tax	6		(83,904	)		(162,079	)		(29,273	)		(148,668	)

Net Income			373,046			58,789			117,018			(56,725	)

Net income attributable to

Net income attributable to parent company			341,790			55,318			102,553			(58,248	)
Income attributable to non-controlling interests			31,256			3,471			14,465			1,523

Profit (loss)			373,046			58,789			117,018			(56,725	)


Basic earnings per share
Earnings per share from continuing operations			0.0030206			0.0004889			0.0009063			(0.0005148	)

Basic earnings per share			0.0030206			0.0004889			0.0009063			(0.0005148	)


Earnings per diluted shares
Earnings per diluted share from continuing operations			0.0030206			0.0004889			0.0009063			(0.0005148	)

Basic earnings per diluted share			0.0030206			0.0004889			0.0009063			(0.0005148	)

The accompanying notes are an integral part of these interim consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


		January-September						July-September
		2013			2012			2013			2012
	Note	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$

Profit (loss)			373,046			58,789			117,018			(56,725	)
Components of other comprehensive income, before tax:
Exchange differences on translation

Gains (losses) on exchange differences on translation, before tax	11		(113,787	)		(96,268	)		(6,665	)		(4,631	)

Cash flow hedges

Gains (losses) on cash flow hedges, before tax	23		33,850			(19,870	)		3,775			(13,568	)
Share of other comprehensive income of associates and joint ventures accounted for using equity method			3,735			120			1,834			(80	)

Other comprehensive income, net of tax			(76,202	)		(116,018	)		(1,056	)		(18,279	)

Income tax relating to cash flow hedges of other comprehensive income	6-23		(6,862	)		3,838			(5,486	)		2,316
Other comprehensive income			(83,064	)		(112,180	)		(6,542	)		(15,963	)

Total comprehensive income			289,982			(53,391	)		110,476			(72,688	)


Comprehensive Income attributable to
Comprehensive income, attributable to owners of parent company			262,146			(53,698	)		97,210			(74,064	)

Comprehensive income, attributable to non-controlling interests			27,836			307			13,266			1,376

Total comprehensive income			289,982			(53,391	)		110,476			(72,688	)

The accompanying notes are an integral part of these interim consolidated financial statements.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statement

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


09-30-2013	Issue Capital ThU.S.$		Reserve of exchange differences on translation ThU.S.$			Reserve of cash flow hedges ThU.S.$			Participation in other Comprehensive Income in Associates and Joint Venture ThU.S.$			Other Reserves ThU.S.$			Retained Earnings ThU.S.$		Equity attributable to owners of parent ThU.S.$			Non - controlling interests T.hU.S.$			Total Equity ThU.S.$
Opening balance at 01/01/2013		353,176		(169,377	)		(45,110	)		(2,092	)		(216,579	)		6,754,725		6,891,322			74,437			6,965,759
Restated opening balance		353,176		(169,377	)		(45,110	)		(2,092	)		(216,579	)		6,754,725		6,891,322			74,437			6,965,759
Changes in equity
Comprehensive income
Net income																341,790		341,790			31,256			373,046
Other comprehensive income, net of tax				(110,367	)		26,988			3,735			(79,644	)				(79,644	)		(3,420	)		(83,064	)
Comprehensive income				(110,367	)		26,988			3,735			(79,644	)		341,790		262,146			27,836			289,982
Dividens																-126775								(126,775	)
Increase (decrease) for transfer and other changes																		0			(29,037	)		(29,037	)
Increase (decrease) for changes in share od subsidiaries with not involve loss control													0					0			(2,221	)		(2,221	)
Total Changes in equity		0		(110,367	)		26,988			3,735			(79,644	)		215,015		135,371			(3,422	)		131,949
Closing balance at 09/30/2013		353,176		(279,744	)		(18,122	)		1,643			(296,223	)		6,969,740		7,026,693			71,015			7,097,708


09-30-2012	Issue Capital ThU.S.$		Conversion Reserves ThU.S.$			Hedge Reserves ThU.S.$			Participation in other Comprehensive Income in Associates and Joint Venture ThU.S.$			Other Reserves ThU.S.$			Retained Earnings ThU.S.$			Equity attributable to owners of parent T.hU.S.$			Non - controlling interests ThU.S.$			Total Equity ThU.S.$
Opening balance at 01/01/2012		353,176		(67,539	)		(25,914	)		(3,368	)		(96,821	)		6,683,252			6,939,607			90,543			7,030,150
Restated opening balance		353,176		(67,539	)		(25,914	)		(3,368	)		(96,821	)		6,683,252			6,939,607			90,543			7,030,150
Changes in equity
Comprehensive income																			0						0
Net income													0			55,318			55,318			3,471			58,789
Other comprehensive income, net of tax				(93,104	)		(16,032	)		120			(109,016	)					(109,016	)		(3,164	)		(112,180	)
Comprehensive income		0		(93,104	)		(16,032	)		120			(109,016	)		55,318			(53,698	)		307			(53,391	)
Dividends																(34,643	)		(34,643	)		0			(34,643	)
Increase (decrease) for transfer and other changes																			0			(14,484	)		(14,484	)
Total Changes in equity		0		(93,104	)		(16,032	)		120			(109,016	)		20,675			(88,341	)		(14,177	)		(102,518	)
Closing balance at 09/30/2012		353,176		(160,643	)		(41,946	)		(3,248	)		(205,837	)		6,703,927			6,851,266			76,366			6,927,632

The accompanying notes are an integral part of these interim consolidated financial statements.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

CONSOLIDATED STATEMENTS OF CASH FLOWS


	09-30-2013 ThU.S.$			09-30-2012 ThU.S.$
STATEMENTS OF CASH FLOWS
Cash Flows from (used in) Operating Activities
Classes of cash receipts from operating activities
Receipts from sales of goods and rendering of services		4,168,241			3,418,195
Receipts from premiums and claims, annuities and other policy benefits		29,819			122,182
Other cash receipts from operating activities		415,497			217,800
Classes of cash payments
Payments to suppliers for goods and services		(3,088,029	)		(2,839,665	)
Payments to and on behalf of employees		(368,068	)		(271,175	)
Other cash payments from operating activities		(178,612	)		(18,928	)
Interest paid		(167,837	)		(133,754	)
Interest received		9,000			10,252
Income taxes refund (paid)		(45,815	)		(194,843	)
Other (outflows) inflows of cash, net		75			8
Net Cash flows from Operating Activities		774,271			310,072


Cash flows (used in) investing activities

Cash flow used in obtaining control of subsidiaries or other businesses		—			(190,897	)
Cash flow used to contributions in associates		—			(13,560	)
Other cash receipts from sales of participations in joint ventures		43,500			6,607
Capital contributions to joint ventures		(76,672	)		(129,287	)
Loans to related parties		(33,000	)		(60,500	)
Proceeds from sale of property, plant and equipment		19,005			7,119
Purchase of property, plant and equipment		(237,971	)		(431,023	)
Proceeds from sales of intangible assets		—			3,250
Purchase of intangible assets		(2,985	)		(4,464	)
Proceeds from sale of other long-term assets		3,657			1,750
Purchase of biological assets		(153,049	)		(91,674	)
Proceeds from repayment of advances and loans to others		5,000			—
Cash receipts from repayment of advances and loans made to related parties		33,200			9,500
Dividends received		17,490			3,980
Other outflows of cash, net		9,566			15
Cash flows used in Investing Activities		(372,259	)		(889,184	)


Cash flows from (used in) Financing Activities

Total loans obtained		891,512			1,398,457
Proceeds from short-term borrowings		313,156			763,059
Loans obtained in long term		578,356			635,398
Repayments of borrowings		(1,051,220	)		(590,969	)
Dividends paid by subsidiaries or special purpose companies		(76,077	)		(176,762	)
Other inflows of cash, net		(2,514	)		(21	)
Cash flows from (used in) Financing Activities		(238,299	)		630,705

Net increase (decrease) in Cash and Cash Equivalents before effect of exchange rate changes		163,713			51,593

Effect of exchange rate changes on cash and cash equivalents		(15,735	)		2,784

Net increase (decrease) of Cash and Cash equivalents		147,978			54,377

Cash and cash equivalents, at the beginning of the period		395,716			315,901

Cash and cash equivalents, at the end of the period		543,694			370,278

The accompanying notes are an integral part of these interim consolidated financial statements.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.

PRESENTATION OF FINANCIAL STATEMENTS

Entity Information

Name of Reporting Entity

Celulosa Arauco y Constitución S.A. (the “Company” and together with its subsidiaries, “Arauco”), tax identification number 93,458,000-1, is a closely held corporation, that was registered in the Securities Registry (the “Registry”) of the Superintendency of Securities and Insurance (the “Superintendency”) under No. 042 on June 14, 1982. Forestal Cholguán S.A., subsidiary of Arauco, is also registered in the Registry under No. 030. Additionally, the Company is registered as a non-accelerated filer with the Securities and Exchange Commission of the United States.

The Company’s head office address is El Golf Avenue 150, floor 14 th, Las Condes, Santiago, Chile.

Arauco is principally engaged in the production and sale of forestry and wood products. Its main operations are focused on the following business areas: Pulp, Plywood and Fiberboard Panels, Sawn Timber and Forestry.

Arauco is controlled by Empresas Copec S.A., which owns 99.9779% of Arauco, and is registered in the Registry as No. 0028. Each of the above companies is subject to the oversight of the Superintendency.

The ultimate shareholders of Arauco are Mrs. Maria Noseda Zambra de Angelini, Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi through the entity Inversiones Angelini y Cia. Ltda., which owns 99.9780% of the shares of AntarChile S.A., the controlling shareholder of our parent company Empresas Copec S.A.

Arauco’s Interim Consolidated Financial Statements were prepared on a going concern basis.

Presentation of Financial Statements

The Financial Statements presented by Arauco as of September 30, 2013 are:

•

Consolidated Balance Sheet for the periods ended September 30, 2013 and December 31, 2012.

•

Consolidated Statements of Income for the periods of 9 and 3 months ended September 30, 2013 and 2012.

•

Consolidated Comprehensive Income Statements for the periods of 9 and 3 months ended September 30, 2013 and 2012.

•

Consolidated Statements of Changes in Net Equity for the periods of 9 months ended September 30, 2013 and 2012.

•

Consolidated Statements of Cash Flows – Direct Method for the periods of 9 months ended September 30, 2013 and 2012.

•

Notes to the consolidated financial statements.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Period covered by the Financial Statements

Period ended at September 30, 2013

Date of Approval of Financial Statements

These Interim consolidated financial statements were authorized and approved for issuance by the Board of Directors of the Company (the “Board”) at the Extraordinary Session N° 498 held on November 21 , 2013, for the period from 1 January to 30 September 2013.

Functional and Presentation Currency

Arauco and most of its subsidiaries has determined the U.S. Dollar as its functional currency since majority of its revenues from sales of its products are from exports, while its costs of sales are to a large extent related or index to the U.S. Dollar.

For the pulp operating segment, most of the sales are exports, and the costs are related mainly to plantation costs, which are settled in U.S. Dollars.

For the sawmill, panel and forestry operating segments, although total sales include a mix of domestic and exports sales, the prices for the products are established in U.S. Dollars, as is also the case for the cost structure of the related raw materials.

In relation to cost of sales, although the costs of labor and services are generally billed and paid in local currency, these costs are not as significant as the costs of raw materials, which are driven mainly by global markets and therefore, influenced mostly by the U.S. Dollar.

The presentation currency of the consolidated financial statements is the U.S. dollar.

Figures on these consolidated financial statements are presented in thousands of U.S. dollar (ThUS$).

Additional Information Relevant to the Understanding of the Financial Statements

The company Fondo de Inversión Bío Bío and its subsidiary Forestal Río Grande S.A. are consolidated, meet the requirements for classification as Special Purpose Entities. These entities are in substance controlled by Arauco, which is indicated, by the existence of exclusive contracts with Arauco for wood supply, future purchases of land and forest administration. Consequently, the financial statements of these companies are included in the consolidated financial statements of Arauco.

Compliance and adoption of IFRS

The accompanying consolidated financial statements of Arauco present in all material respects its financial position, its results of operations and its cash flows in accordance with IFRS as issued by the IASB.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

This presentation is required to give a faithful representation of the effects of transactions, as well as other events and conditions, according to the definitions and criteria established within the conceptual framework of IFRS for the recognition of assets, liabilities, income and expenses.

Summary of significant accounting policies

The accompanying Interim consolidated financial statements as of September 30, 2013 were prepared in accordance with Arauco’s accounting policies, which have been consistently applied to all periods presented in these Interim consolidated financial statements.

a)	Basis for presentation of financial statements

The accompanying Interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and they represent the integral, explicit and unreserved adoption of IFRS.

The Interim consolidated financial statements have been prepared on the historical cost basis except for biological assets, and certain financial assets and financial liabilities (including derivative instruments) that are measured at fair value.

b)	Critical accounting estimates and judgments

The preparation of consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the carrying amounts reported. The estimates are based on historical experience and various other assumptions that are considered to be reasonable. Actual results may differ from these estimates. Management believes that the accounting policies below are the critical judgments that have the most significant effect on the amounts recognized in the consolidated financial statements.

•

Property, Plant and Equipment

In a business acquisition, management values the acquired property, plant and equipment and their useful lives in consultation with a third party expert.

The carrying amounts of property, plant and equipment are reviewed whenever events or changes in circumstances indicate that the carrying amount of an asset may be impaired. The recoverable amount of an asset is the higher of fair value less costs to sell and its value in use, with an impairment loss recognized whenever the carrying amount exceeds the recoverable amount. The value in use is calculated using a discounted cash flow model, which is most sensitive to the discount rate as well as the expected future cash inflows.

•

Fair Value of Financial Instruments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Arauco uses its judgment to select a variety of methods and makes assumptions that are mainly based on market conditions existing at each reporting date.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Detailed financial information about the fair value of financial instruments and sensitivity analysis are presented in Note 23.

•

Biological Assets

The recovery of forest plantations is based on discounted cash flow models which mean that the fair value of biological assets is calculated using cash flows from continuing operations on a discounted basis, on our sustainable forest management plans and the estimated growth of forests.

These discounted cash flows require estimates in growth, harvest, sales prices and costs. It is therefore important that management make appropriate estimates of future levels and trends for sales and costs, as well as conduct regular surveys of the forests to establish the volumes of wood available for harvesting and their current growth rates. The main considerations used to measure forest plantations are presented in Note 20, including a sensitivity analysis.

•

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and suitable discount rate in order to calculate present value.

•

Employee benefits

The cost of defined employee benefits for termination of employment, as well as the present value of the obligation is determined using actuarial valuations. The actuarial valuations involve making assumptions about discount rates, staff turnover, future salary increases and mortality rates.

•

Litigation and Contingencies

Arauco and its subsidiaries are subject to certain litigation. Future effects on Arauco’s financial condition resulting from such litigation are estimated by management, in collaboration with its legal advisors. Arauco recognizes provisions on each statement of financial position date and/or upon each substantial modification to an underlying claim of any such litigation. For a description of current litigations see Note 18.

c)	Consolidation

The Interim consolidated financial statements include all entities over which Arauco has the power to govern the financial and operating policies, which is presumed to exist when Arauco holds more than one half of the voting rights of an entity so as to obtain benefits from its activities. Subsidiaries (including special purpose entities) are consolidated from the date on which control is transferred to the group and up to the date that control ceases.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Thus, the principle of control sets out the following three elements of control:

(a) power over the investee (that is, existing rights which give the ability to direct the relevant activities of the investee, that means, the activities that significantly affect the investee’s returns)

(b) exposure, or rights, to variable returns from involvement with the investee; and

The IFRS sets out requirements on how to apply the control principle:

(a) in circumstances when voting rights or similar rights give an investor power, including situations where the investor holds less than a majority of voting rights and in circumstances involving potential voting rights.

(b) in circumstances when an investee is designed so that voting rights are not the dominant factor in deciding who controls the investee, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.

(d) in circumstances when the investor has control over specified assets of an investee.

The IFRS requires an investor to reassess whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

When preparing consolidated financial statements, an entity must use uniform accounting policies for reporting like transactions and other events in similar circumstances. Intragroup balances and transactions must be eliminated. Non-controlling interests in subsidiaries must be presented in the consolidated statement of financial position within equity, separately from the equity of the owners of the parent.

The profit or loss of each component of other comprehensive income are attributed to owners of the Company and the non-controlling interest, as appropriate. Total comprehensive income is attributed to the owners of the Company and non-controlling interests even if the result of the non-controlling interest have a deficit balance.

If a subsidiary uses accounting policies different than those adopted in the consolidated financial statements for transactions and other events in similar circumstances, appropriate adjustments are made in the financial statements of subsidiaries to prepare consolidated financial statements to ensure compliance with Group’s accounting policies.

All intercompany transactions and unrealized gains and losses from subsidiaries have been fully eliminated from consolidation and non-controlling interests is presented in the Interim consolidated statement of financial position within equity, separately from the equity of the owners of the parent.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The interim consolidated financial statements corresponding to the periods between January 1 and September 30, 2013 and 2012 include the assets, liabilities, income and expenses of the subsidiaries shown in Note 13 and those of the Fondo de Inversión Bío Bío, and its subsidiary Forestal Río Grande S.A.

Certain consolidated subsidiaries have Brazilian Reales and Chilean Pesos as their functional currencies. For consolidation purposes, the financial statements of those subsidiaries have been prepared in accordance with IFRS and translated into the presentation currency as indicated in Note 1 e) (ii).

d)	Segments

Arauco has defined its operating segments according to its business areas, based on the products and services sold to its customers. This definition is consistent with the management, resource allocation and performance assessment made by key personnel responsible for making relevant decisions related to the Company’s operation. The Chief Operating Decision Maker (CODM) is the Chief Executive Officer who is responsible for making these decisions and it is supported by the Corporate Managing Directors of each segment.

In line with the above, the Company established operating segments according to the following business units:

•

Pulp

•

Panels

•

Sawn Timber

•

Forestry

Refer to Note 24 for detailed financial information by operating segment.

e)	Functional currency

(i)	Functional currency

All items in the financial statements of Arauco and each of its subsidiaries, associates and jointly controlled entities are measured using the currency of the primary economic environment in which each entity operates (the functional currency). The Interim consolidated financial statements are presented in U.S. dollars, which is Arauco’s functional and presentation currency.

(ii)	Translation to the presentation currency of Arauco

For the purposes of presenting consolidated financial statements, the assets and liabilities of Arauco’s foreign operations are translated into U.S. dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

(iii) Foreign Currency Transactions

Transactions in foreign currencies are recognized at the exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognized in profit or loss in the periods in which they arise except for exchange differences on transactions entered into in order to hedge certain foreign currency risks.

f)	Cash and cash equivalents

Cash and cash equivalents include cash-in-hand, deposits held on demand at banks and other short term highly liquid investments with an original maturity of less than three months and which are subject to an insignificant risk of changes in value.

g)	Financial Instruments

(i)	Financial assets and liabilities measured at fair value through profit or loss

Financial assets measured at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if it is acquired principally for the purpose of selling it in the short term.

Derivatives are also classified as held for trading unless they are designated and effective as hedging instruments. Assets in this category are classified as current assets and the obligation for these instruments is presented under other financial liabilities within the statement of financial position.

Regular purchases and sales of financial assets are recognized on the trade date, which is the date on which Arauco commits itself to purchase or sell the asset.

The financial assets and liabilities measured at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the statement of income. They are subsequently measured at fair value with any gains or losses from changes in fair value recognized in profit or loss.

Interest Rate and Currency Swaps: Swaps are measured using the discounted cash flow method at a discount rate consistent with the risk of the operation.

Foreign Exchange Forwards: These instruments are initially recognized at fair value at the date on which the contract is entered into and are subsequently remeasured at fair value. Forwards are recognized as assets when fair value is positive and, as liabilities when fair value is negative.

The fair value of foreign exchange forward contracts is calculated by reference to current forward exchange rates for contracts with similar maturities.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The fair value of interest rate forward contracts is calculated by reference to the difference of the existing interest rates between the interest rate contractually agreed and the market interest rate at the end of each reporting period.

Mutual Funds: They are highly liquid instruments that are sold in the short term and are carried at their net asset value at the end of each period.

(ii)	Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are classified as current assets, except for those with maturities more than 12 months after the reporting period, which are classified as non-current assets. Loans and receivables include trade and other receivables.

Loans and receivables are initially recognized at fair value and subsequently are measured at amortized cost using the effective interest rate method, less any impairment.

Repurchase Agreements: These are recognized at their initial investment cost plus accrued interest at the end of each reporting period. These contracts have maturities of less than 30 days.

(iii) Financial liabilities measured at amortized cost

Bank borrowings, debt issued (bonds) and financial liabilities of a similar nature are initially recognized at fair value. Transactions costs are included in the carrying amount of the liabilities and are amortized over the lives of the liabilities using the effective interest rate method).

In subsequent periods, they are measured at amortized cost and any difference between the proceeds (net of transaction costs) received, and the redemption value is recognized in profit or loss statement over the life of the debt using the effective interest rate method.

Financial liabilities are classified as current liabilities unless the Company has an unconditional right to defer settlement for at least twelve months after the reporting period.

The fair value of bank borrowings is determined using discounted cash flow techniques using rates consistent with the risk associated with bank borrowings of similar nature, while bonds are measured at their quoted market price.

(iv) Trade and other payables

These instruments are initially recognized at fair value and subsequently are measured at amortized cost using the effective interest rate method.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

(v)	Hedging instruments

The effective portion of changes in the fair value of derivatives that are designated and qualify as hedging instruments in cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the statement of income within other income or other expenses, respectively.

When a hedging instrument expires or is settled, or when it ceases to qualify for hedge accounting, any cumulative gain or loss recognized in equity remains in equity until the forecasted transaction occurs, when the transaction occurs it is reclassified to profit or loss. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss recognized in equity is immediately reclassified to profit or loss.

The fair value of hedging instruments is measured using internal model including discounted cash flow techniques that use a discount rate consistent with the operational risk using internal valuation methodology and market information from reputable suppliers.

h)	Embedded derivatives

The Company evaluates the existence of embedded derivatives in financial instrument contracts to determine if their characteristics and risks are closely related to the main contract provided that the set is not recorded at fair value. If they are not closely related, they are recorded separately and the accounting changes are in the value of the consolidated results.

i)	Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average cost method.

The cost of finished goods and products in process includes the cost of raw materials, direct labor, other direct costs and general overhead expenses, excluding interest expenses.

Initial costs of harvested wood are determined at fair value less cost of sale at the point of harvest.

Biological assets are transferred to inventories when forests are harvested.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When market conditions result in the production costs of a product exceeding its net realizable value, the inventories are write-down to its net realizable value. This write-down also includes obsolescence amounts resulting from slow moving inventories and technical obsolescence.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Spare parts that will be consumed in a period of less than twelve months, are presented in inventories and recognized as an expense when they are consumed.

j)	Non-current assets held for sale

The Group classifies as non-current assets held for sale property, plant and equipment, intangible assets, investments in associates and groups subject to expropriation (groups of assets to be sold together with their directly associated liabilities) which as of the closing date of the statement of financial position, are the subject of active sale efforts the completion of which is estimated to be highly probable.

These assets or groups subject to expropriation are valued at the lower of the carrying amount or the estimated retail value less the costs to carry it out, and are no longer amortized from the time they are classified as non-current assets held for sale.

k)	Business Combinations

Arauco applies the acquisition method to account for a business combination. This method, requires to identify the acquirer, determine the acquisition date, recognize and measure the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree; and recognize and measure goodwill or a gain from a bargain purchase. Identifiable assets acquired and liabilities assumed and any contingent liabilities in a business combination are initially measured at fair value at the acquisition date.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If the total of consideration transferred, non-controlling interest recognized and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the income statement.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For purposes of impairment testing, goodwill in a business combination is allocated as of the acquisition date to the cash generating unit of the group or groups of cash generating units expected to benefit from the synergies of the combination irrespective of whether other assets or liabilities of the acquire are allocated to those units or groups of units.

Acquisition-related costs are accounted for as expenses when they are incurred, except for costs to issue debt or equity securities which are recognized in accordance with IAS 32 and IAS 39.

A parent will present non-controlling interests in the consolidated statement of financial position within equity, separately from the equity of the owners of the parent.

Changes in the ownership interest of a parent in a subsidiary that do not result in a loss of control are equity transactions. Any difference between the amount which minority

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the parent. in carrying amount of goodwill was not made any adjustments. Neither gains or losses were recognized in the income statement.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the present ownership instruments’ proportionate share in the recognized amounts of the acquire’s identifiable net assets. The choice is made on a transaction-by-transaction basis.

Arauco measures the fair value of the acquired company in the business combination on a step by step basis, recognizing the effects of variation in the income statement.

If the initial accounting for a business combination is not completed by the end of the reporting period in which the combination occurs, Arauco reports provisional amounts for the items for which the accounting is incomplete. During the measurement period (no more than one year), these provisional amounts are retrospectively adjusted , or additional assets or liabilities are recognized to reflect new information about facts and circumstances that existed at the acquisition date, if known, would have affected the amounts recognized at that date, retrospectively.

l)	Investments in associates and joint ventures

Associates are entities over which Arauco exercises significant influence, generally when it holds between 20% and 50% of the voting rights, but not control.

Joint venture is defined as an entity over which there is joint control, which exists only when the decisions about strategic of activities, both financial and operational, require the unanimous consent of the parties sharing control.

Investments in associates and joint ventures are accounted for using the equity method and are initially recognized at cost. Their carrying amount is increased or decreased to recognize Arauco’s share of the profit or loss and other comprehensive income (exchange differences on translation to the reporting currency) of the associate or joint venture. Dividends received are recognized by deducting the carrying amount of the investment. Arauco’s investment in associates includes goodwill (net of any accumulated impairment loss).

If the total of consideration transferred, non-controlling interest recognized and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the income statement.

These investments are presented in the consolidated statement of financial position in the line item “Investments accounted for using equity method”.

If Arauco’s share of losses of an associate or joint venture equals or exceeds its interest in the associate or joint venture, Arauco discontinues recognizing its share of further losses. After Arauco’s carrying value in the investee is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that Arauco has incurred

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

legal or constructive obligations or made payments on behalf of the associate or joint venture. If the associate or joint venture subsequently reports profits, Arauco resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized.

m)	Intangible assets

After initial recognition, intangible assets with finite useful lives are carried at cost less any accumulated amortization and impairment losses.

Amortization of an intangible asset with a finite useful life is allocated on a systematic basis over the asset’s useful life. Amortization begins when the asset is available for use, i.e., when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

(i)	Computer Software

Computer software licenses are capitalized in terms of the costs incurred to acquire them and make them compatible with existing software. These costs are amortized over the estimated useful lives.

(ii)	Water Rights, Easements and Other Rights

This item includes water rights, easements and other acquired rights recognized at historical cost which have indefinite useful lives as there is no foreseeable limit to the period over which these assets are expected to generate net cash inflows. These rights are not amortized, but are tested for impairment at least annually, or when there is any indication that the assets might be impaired.

m)	Goodwill

Goodwill recognized for the acquisition of the subsidiary Arauco do Brasil S.A. whose functional currency is the Brazilian Real, is translated into U.S. Dollars at the closing exchange rate. At the date of these financial statements, the only change in the carrying amount of goodwill is related to the net exchange rate differences on translation.

n)	Property, Plant and Equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost includes expenditures that are directly attributable to the acquisition of the assets.

Subsequent costs, such as improvements and replacement of components, are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Arauco and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized from property, plant and equipment. All other repairs and maintenance costs are expensed in the period in which they are incurred.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Arauco capitalizes borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets as part of the cost of those assets, until the assets are ready for their intended use (see Note 12).

Depreciation is calculated by components using the straight-line method.

The useful lives of the items of property, plant and equipment is estimated according to the expected use of the assets.

The residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

o)	Leases

Arauco applies CINIIF 4 to assess whether an arrangement is, or contains, a lease. Leases of assets in which Arauco substantially holds all the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.

Finance leases are initially recognized at the lower of the fair value at the inception of the lease of the leased property and the present value of the minimum lease payments.

When assets are leased under a finance lease, the present value of lease payments are recognized as financial account receivables. Finance income, which is the difference between the gross receivable and the present value of such amount, is recognized as the interest rate of return.

Leases in which substantially all risks and rewards are not transferred to the lessee are classified as operating leases. Payments under operating leases (net of any incentives received from the lessor) are recognized as an expense on a straight-line basis over the lease term.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

p)	Biological Assets

IAS 41 requires that biological assets, such as standing trees, are measured at fair value in the statement of financial position. Plantations forestry are accounted for at fair value less costs to sell, based on the presumption that fair values of these assets can be measured reliably.

The measurement of plantations forestry is based on discounted cash flow models whereby the fair value of the biological assets is determined using estimated future cash flows from continuing operations calculated using our sustainable forest management plans and including the estimated growth of the forests. This valuation is performed on the basis of each identifiable farm block and for each type of tree.

The measurement of new plantations forestry made during the current year, is made at cost, which corresponds to the fair value at that date. After twelve months, the valuation methodology used is that explained in the preceding paragraph.

Biological assets shown as current assets correspond to those plantations forestry that will be harvested in the short term.

Biological growth and changes in fair value of plantations forestry are recognized in line item other income included in profit from operating activities in the statement of income.

The Company holds fire insurance policies for its plantations forestry, which together with company resources and efficient protection measures for these plantations assets allow financial and operational risks to be minimized.

q)	Income taxes and Deferred taxes

The tax liabilities are recognized in the financial statements based on the determination of taxable income for the year and calculated using the tax rates in force in the countries where Arauco operates.

Deferred income tax is recognized using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and that are expected to apply when the related deferred tax asset is realized or the deferred income tax liability is settled.

The goodwill arising on business combinations does not give rise to deferred tax.

The deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that future taxable profit will be available against which those deductible temporary differences can be utilized.

r)	Provisions

Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of past events; it is probable that an outflow of resources will be

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period.

s)	Revenue recognition

Revenues are recognized when Arauco has transferred the risks and rewards of ownership to the buyer and Arauco retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. This means that generally revenues are recorded upon delivery of goods to customers in accordance with the agreed terms of delivery.

(i)

Revenue recognition from the Sale of Goods

Revenue from the sale of goods is recognized when Arauco has transferred to the buyer the significant risks and rewards of ownership of the goods, when the amount of revenue can be reliably measured, when Arauco does not retain any managerial involvement over the goods sold and when it is probable that the economic benefits associated with the transaction will flow to Arauco and the costs incurred in respect of the transaction can be measured reliably.

Sales are recognized in terms of the price agreed to in the sales contract, less any volume discounts and estimated product returns at the date of the sale. Volume discounts are evaluated in terms of estimated annual purchases. There is no significant financing component given that receivables from sales are collected within a short period, which is in line with market practices.

(ii)

Revenue recognition from Rendering of Services

When the outcome of a transaction involving the rendering of services can be estimated reliably revenue associated with the transaction is recognized by reference to the stage of completion of the transaction at the date of the reporting period, and when it is probable that the economic benefits associated with the transaction will flow to the Arauco.

Arauco mainly provides power supply which are traded in the spot market of the Sistema Interconectado Central (Interconnected Central System). According to current regulations, the prices on that market called “Marginal Costs” are calculated by the Centro de Despacho Económico de Carga del Sistema Interconectado Central (CDEC – SIC) (Load Economical Dispatch Center of the Interconnected Central System) and are generally recognized in the period in which the services are rendered.

Electrical power is generated as a by-product of the pulp process and is a complementary business to it, which is firstly supplied to the group’s subsidiaries and any surplus is sold to the interconnected central system.

Arauco provides other non-core services such as port services and pest control whose revenues are derived from fixed price service contracts, generally recognized during the period of the service contract on a straight-line basis over the term of the contract.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Revenues from operating segments mentioned in Note 24 are measured in accordance with the policies indicated in the preceding paragraphs.

Revenues from inter-segment sales (which are made at market prices) are eliminated in the interim consolidated financial statements.

t)	Minimum dividend

Article No. 79 of the Chilean Corporations Law states that, unless otherwise unanimously agreed by the shareholders, corporations must distribute annually at least 30% of net income for the current year as cash dividend to shareholders determined in proportion to their shares or in the proportion established in the by-laws for preferred shares, if any, except where necessary to absorb accumulated losses from prior years.

The General Shareholders’ Meeting of Arauco agreed to distribute annual dividends at 40% of net distributable income, including an interim dividend to be distributed at year end. Dividends payable are recognized as a liability in the financial statements in the period when they are declared and approved by the Arauco’s shareholders or when arises the corresponding present obligation based on existing legislation or distribution policies established by the Shareholders’ Meeting.

The interim and final dividends are recorded in equity upon their approval by the Company’s Board of Directors and the shareholders.

Dividends payable are presented in the line item “other current non financial liabilities”.

Dividends paid are not deductible for income tax purposes.

u)	Impairment

Non-financial Assets

The recoverable amount of property, plant and equipment and other assets with finite useful lives are measured whenever there is any indication that the assets have suffered an impairment loss. Among the indications to consider as evidence of impairment are significant declines in the assets’ market value, significant adverse changes in the technological environment, obsolescence or physical damages of assets and changes in the manner in which the asset is used or expected to be used). Arauco evaluates at the end of each reporting period whether there is any evidence of the indications above mentioned.

For this evaluation, assets are grouped at the lowest level of group of assets that generates cash flows independently.

Goodwill and intangible assets with indefinite useful life are tested annually for impairment or whenever circumstances indicate it. The recoverable amount of an intangible asset is the higher of its fair value less costs of disposal and its value in use. An impairment loss is recognized whenever the carrying amount exceeds the recoverable amount.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

A previously recognized impairment loss is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. Impairment losses are reversed so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. An impairment loss recognized for goodwill is not reversed in subsequent periods.

For the purposes of assessing impairment losses, assets are grouped at the lowest level for which there is identifiable cash flows separately for each cash-generating unit. Non-financial assets, other than goodwill, which had suffered an impairment loss, are reviewed at the end of each reporting period whether there is any indication that an impairment loss previously recognized may no longer exists or have decreased.

“Cash-generating units” are the smallest identifiable groups of those cash inflows that are largely independent of the cash inflow from other assets or groups of assets.

Goodwill is allocated to cash-generating units for impairment testing purposes. The allocation is made between cash-generating units or groups of cash generating units expected to benefit from the synergies of the combination.

Financial Assets

At the end of each reporting period, an evaluation is performed in order to identify whether there is any objective evidence that a financial asset or a group of financial assets may have been impaired. Financial assets are impaired only when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of a financial asset, the estimated future cash flows of the financial asset have been affected. Impairment losses are recognized in the consolidated statement of income.

The allowance for doubtful accounts is established when there is objective evidence that Arauco will not receive payments under the original sale terms. Allowance is made when the customer is a party to a bankruptcy court agreement or cessation of payments, and are written-off when Arauco has exhausted all levels of recovery of the receivable in a reasonable time.

The allowance for doubtful accounts is measured as the difference between the carrying amount of receivables and the present value of estimated future cash flows. The carrying amount of the receivable is reduced through the use of the allowance. If the impairment loss decreases in later periods, it is reversed either directly or by adjusting the provision for doubtful accounts, with effect in profit or loss.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

v)	Employee Benefits

Arauco has severance payment obligations arising from voluntary termination of employment. These are paid to certain employees that have been employed by the company for more than five years in accordance with conditions established within collective or individual employment contracts.

This is an estimate of the years of service-based severance payments to be recognized as a future termination payment liability, in accordance with contracts between Arauco and its employees and pursuant to actuarial valuation criteria for this type of liability. These obligations are considered a defined benefit plan.

The main factors considered for calculating the actuarial value of severance payments obligation for years of service are employee turnover, salary increases and life expectancy of the workers included in this benefit.

Actuarial gains and losses are recognized in other comprehensive income in the year they are incurred.

These obligations are treated as post-employment benefits.

w)	Employee Vacations

Arauco recognizes the expense for employee vacation according to labor legislation in each country on an accrual basis.

This obligation is presented in the line item “Trade and Other payables” in the consolidated statement of financial position.

x)	Recent accounting pronouncements

The following accounting pronouncements were effective as of January 1, 2013:


New Standards and interpretations	Content	Mandatory application for annual periods beginning on or after

IAS 19 revised	Employee Benefits Issued in September 2011, replaces IAS 19 (1998). This revised standard changes the recognition and measurement of the cost of defined benefit plans and termination benefits. Additionally, it includes modifications to the disclosures of all employee benefits.	January 1, 2013

IAS 27 revised	Separate Financial Statements Issued in May 2011, replaces IAS 27 (2008). The scope of this standard is restricted from this change only to separate financial statements, as aspects relating to the definition of control and consolidation were removed and included in IFRS 10. Early adoption is permitted in conjunction with IFRS 10, IFRS 11 and IFRS 12 and the amendment to IAS 28.	January 1, 2013

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated



IFRS 10	Consolidated Financial Statements Issued in May 2011, replaces SIC 12 “Consolidation of special purpose entities” and parts of IAS 27” Consolidated Financial Statements”. Clarifications and establishing new parameters for the definition of control, and the principles for the preparation of consolidated financial statements. Early adoption is permitted in conjunction with IFRS 11, 12 and IFRS amendments to IAS 27 and 28.	January 1, 2013

IFRS 11	Joint Arrangements Issued in May 2011, replaces IAS 31 “Interests in Joint Ventures” and SIC 13 “Jointly controlled entities”. Among its modifications include eliminating the concept of jointly controlled assets and the option of proportional consolidation of joint control entities. Early adoption is permitted in conjunction with IFRS 10, 12 and IFRS amendments to IAS 27 and 28.	January 1, 2013

IFRS 12	Disclosure of interests in other entities Issued in May 2011, applies to those entities that have interest in subsidiaries, joint arrangements, associates or unconsolidated structured entities. Early adoption is permitted in conjunction with IFRS 10, 11 and IFRS amendments to IAS 27 and 28.	January 1, 2013

IFRS 13	Fair Value Measurement Issued in May 2011, brings together in one standard the requirements to measure the fair value of assets and liabilities and the disclosures necessary on it, and incorporates new concepts and clarifications for measurement.	January 1, 2013

IFRIC 20	Stripping Costs in the production phase of open pit mines Issued in October 2011, regulates the recognition of costs for the removal of waste overload “Stripping Costs” in the production phase of a mine as an asset, the initial and subsequent measurement of this asset. Additionally, this interpretation requires mining entities presenting IFRS financial statements to write down the existing assets recognized as “Stripping Costs” against retained earnings when they cannot be attributed to an identifiable component of a mine.	January 1, 2013


Amendments and improvements	Contents	Mandatory application for annual periods beginning on or

IAS 28	Investments in associates and joint ventures	January 1, 2013

	Issued in May 2011, sets out the accounting treatment of these investments by applying the equity method. Early adoption is permitted in conjunction with IFRS 10, IFRS 11 and IFRS 12 and the amendment to IAS 27.

IAS 1	Presentation of Financial Statements	July 1, 2012

	Issued in September 2011. The main modification of this

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


	amendment requires that the items of Other Comprehensive Income will be categorized and grouped by evaluating whether they will be potentially reclassified to profit or loss in subsequent periods. Early adoption is permitted.

IFRS 7	Financial Instruments	January 1,2013

	Disclosures and amendments to disclosures about netting of assets and liabilities.

Guidelines for transition Amendments to IFRS 10, IFRS 11 and IFRS 12	Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities.	January 1, 2013

At the date of issuance of these interim consolidated financial statements, the following accounting pronouncements were issued by the IASB, but are not:


Amendments and improvements	Contents	Mandatory application for annual periods beginning on or

IFRS 9	Financial Instruments Issued in December 2009, amending the classification and measurement of financial assets. In November 2010 it was also amended to include treatment and classification of liabilities. Early adoption is permitted.	January 1, 2015

CINIIF 21	Liens Guides about when to recognize a liability for a government imposed lien whether for those recorded in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and for those liens whose existence and amount is certain.	January 1, 2014

IAS 32	Offsetting of financial assets and liabilities	January 1,2014

	The amendments clarify the requirements for offsetting financial assets and financial liabilities in order to eliminate inconsistencies in the implementation of the current offsetting criteria in IAS 32. The Standard is applicable for annual periods beginning on or after January 1, 2014 and early adoption is permitted.

Amendments to IFRS 12, IFRS 10, IAS 27	Investment Entities Consolidated Financial Statements, Disclosure of Interests in Other Entities and Separate Financial Statements.	January 1, 2014

IAS 36	Impairment of Assets, Disclosures of the recoverable amount for nonfinancial assets	January 1, 2014

IAS 39	Financial Instruments: Recognition and Measurement-Novation of derivatives and continuation hedge accounting	January 1, 2014

Arauco believes that the adoption of the standards, amendments and interpretations described above will have no significant impact on its consolidated financial statements of that Company in the period of initial application. We are in the process of assessing the impact on the valuation and disclosures associated with these modifications.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 2. DISCLOSURE OF OTHER INFORMATION

a)	Disclosure of Information on Issued Capital

The issued capital authorized, subscribed and fully paid of Arauco for the period ended March 31, 2013 and December 31, 2012 is ThU.S.$353,176 which is composed of 113,152,446 ordinary shares of a single series.


	09-30-2013	12-31-2012
Description of Ordinary Capital Share Types	100% of Capital corresponds to ordinary shares
Number of Authorized Shares by Type of Capital in Ordinary Shares	113,152,446
Nominal Value of Shares by Type of Capital in Ordinary Shares	ThU.S.$0.0031211 per share
Amount of Capital in Shares by Type of Ordinary Shares that Constitute Capital	ThU.S.$353,176
	09-30-2013	12-31-2012
Number of Shares Issued and Fully Paid by Type of Capital in Ordinary Shares	113,152,446

b)	Dividends paid

The interim dividend paid each year is equivalent to 20% of the distributable net income calculated as of the end of September of each year and presented in the consolidated statement of changes in equity.

The final dividend paid each year corresponds to the difference between the 40% of prior year net income distributable and the amount of interim dividend paid at the end of the immediately preceding fiscal year.

The provision of minimum dividend corresponding to the year 2013 of ThU.S.$126,775 (ThU.S.$34,643 as of September 30, 2012) is presented in the consolidated statement of changes in equity.

The line item “Dividends paid” in the statement of cash flows for ThU.S.$76,077 as of September 30, 2013, (ThU.S.$176,762 as of September 30, 2012), which ThS.U.$47,017 (ThUS$161,568 as of September 30, 2012) correspond to payments of dividend of the holding company.

The following are the dividends paid during 2013 and the year 2012 and the corresponding amount per share:


Detail of Dividend Paid, Ordinary Shares
Dividend Paid		Final Dividend
Type of Shares for which there is a Dividend Paid		Ordinary Shares
Date of Dividend Paid		05-08-2013
Amount of Dividend		ThU.S.$ 47,017
Number of Shares for which Dividends are Paid		113,152,446
Dividend per Share		U.S.$0.41552

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


Detail of Dividend Paid, Ordinary Shares
Dividend Paid		Interim Dividend
Type of Shares for which there is a Dividend Paid		Ordinary Shares
Date of Dividend Paid		12-12-2012
Amount of Dividend		ThU.S.$ 17,321
Number of Shares for which Dividends are Paid		113,152,446
Dividend per Share		U.S.$0.15308


Detail of Dividend Paid, Ordinary Shares
Dividend Paid		Final Dividend
Type of Shares for which there is a Dividend Paid		Ordinary Shares
Date of Dividend Paid		05-09-2012
Amount of Dividend		ThU.S.$161,568
Number of Shares for which Dividends are Paid		113,152,446
Dividend per Share		U.S.$ 1.42788

c)	Disclosure of Information on Reserves

Other Reserves

Other reserves consist of reserves of exchange differences on translation, reserves of cash flow hedges and other reserves.

Arauco does not have any restrictions associated with these reserves.

Reserves of exchange differences on translation

Corresponds to exchange differences relating to the translation of the results and net assets of Arauco’s subsidiaries whose functional currency is other than Arauco’s presentation currency.

Reserves of cash flow hedges

Corresponds to the portion of gains or net losses of outstanding hedging swaps in Arauco at each period.

Other reserves

This mainly corresponds to the share of other comprehensive income of investment in associates and joint ventures.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

d)	Disclosures of other information

The table below sets forth other income, other expenses, finance income, finance costs and share of profit (loss) of associates and joint venture as of September 30, 2013 and 2012:


	January - September						July - September
	2013			2012			2013			2012
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Classes of Other Income by activity
Other Operating Income, Total		265,546			248,708			89,577			129,276
Gain from changes in fair value of biological assets (See note 20)		202,604			171,498			65,961			94,068
Net income from insurance compensation (*)		1,271			42,219			74			25,097
Revenue from export promotion		3,122			2,319			949			910
Leases received		1,540			1,712			891			55
Gain on sales of assets		6,190			9,925			4,446			1,909
Gain on sales of assets of special purpose entities (**)		29,624			—			14,360			—
Revenue from compensation of judgment		8,500			—			—			—
Revenue from administrative services		1,349			—			62			—
Other operating results (sale materials and waste, rent of easements, income tax recovery)		11,346			21,035			2,834			7,237

Classes of Other Expenses by activity
Total of other expenses by activity		(57,272	)		(62,657	)		(23,769	)		(15,358	)
Depreciations		(429	)		(452	)		(142	)		(142	)
Contingent provision		(17,433	)		(2,520	)		(14,397	)		(300	)
Impairment provision properties, plants and equipment and others		(3,956	)		(69	)		(352	)		—
Plants stopped operating expenses		(3,403	)		(13,151	)		2,403			(476	)
Expenses projects		—			(10,367	)		—			(1,539	)
Loss of assets		(6,733	)		(487	)		(4,779	)		(87	)
Loss of forest due to fires		(635	)		(2,907	)		(514	)		(165	)
Other Taxes		(3,190	)		(4,228	)		(961	)		(1,754	)
Research and development expenses		(1,954	)		(1,563	)		(701	)		(519	)
Compensation and eviction		(1,113	)		(5,504	)		(283	)		(1,924	)
Other expenses (cost of projects and studies, donations, fines, readjustments, repayments insurance )		(18,426	)		(21,409	)		(4,043	)		(8,452	)

Classes of financing income
Financing income, total		16,264			12,862			4,172			3,962
Financial income from mutual funds - deposits		7,411			6,276			3,303			1,555
Financial income resulting from swap - forward		2,487			2,979			(813	)		527
Other financial income		6,366			3,607			1,682			1,880

Classes of financing costs
Financing costs, Total		(173,156	)		(148,451	)		(59,663	)		(45,063	)
Interest expense, Loans banks		(18,288	)		(10,104	)		(6,695	)		(4,068	)
Interest expense, Bonds		(130,985	)		(115,851	)		(40,561	)		(36,157	)
Interest expense, financial instruments		(5,189	)		(10,660	)		(2,860	)		(2,838	)
Other financial costs		(18,694	)		(11,836	)		(9,547	)		(2,000	)

Classes of Participation in Income (Loss) of associates and joint ventures accounted for using the Equity Method
Total		5,180			(4,666	)		(5,123	)		3,911
Investments in associates		3,697			16,194			4,425			6,472
Joint ventures		1,483			(20,860	)		(9,548	)		(2,561	)

(*)	The amount corresponding to the period 2012 net income indemnity insurance (fire and other disasters)

(**)	Corresponding to the total income from sale of land and biological assets of SPE Arauco

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Below is the Balance of Expenses by nature:


	January - September				July - September
	2013		2012		2013		2012
Cost of sales	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Timber		673,840		628,942		246,306		215,509
Forestry labor costs		473,745		439,371		167,677		152,359
Depreciation		200,511		164,661		65,670		57,061
Maintenance costs		159,296		143,099		51,086		46,185
Chemical costs		371,272		263,563		121,568		95,123
Sawmill Services		137,517		135,575		45,954		40,565
Others Raw Materials		153,160		102,422		56,818		35,745
Indirect costs		117,832		93,041		42,324		26,002
Energy and fuel		147,897		105,064		50,301		37,774
Cost of electricity		67,367		54,071		21,653		24,446
Wage and salaries		174,649		107,949		57,114		45,032
Total		2,677,086		2,237,758		926,471		775,801


	January - September						July - September
	2013			2012			2012		2012
Distribution cost	ThU.S.$			ThU.S.$			ThU.S.$		ThU.S.$
Salling costs		24,599			20,529			7,429		7,023
Commissions		11,836			10,680			3,955		3,513
Insurance		4,519			3,538			1,308		1,536
Provision for doubtful accounts receivable		(393	)		(1,711	)		63		(1,157	)
Other selling costs		8,637			8,022			2,103		3,131
Shipping and freight costs		366,073			309,229			124,406		108,810
Port services		20,451			18,187			7,351		4,282
Freights		306,639			254,911			104,081		75,206
Other shipping and freight costs		38,983			36,131			12,974		29,322
Total		390,672			329,758			131,835		115,833


	January - September				July - September
	2013		2012		2012		2012
Administrative expenses	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Wage and salaries		165,955		138,890		50,672		48,759
Marketing, advertising, promotion and publications expenses		6,634		7,059		2,412		3,970
Insurance		30,132		23,896		9,215		9,948
Depreciation and amortization		16,715		8,523		9,742		3,128
Computer services		13,814		8,569		3,739		3,827
Lease rentals (offices, warehouses and machinery)		10,027		12,624		3,316		5,159
Auditor’s fees		2,722		2,770		900		-168
Donations, contributions, scholarships		8,453		7,938		3,179		1,737
Fees (legal and technical advisories)		36,690		30,990		11,101		5,024
Property taxes, patents and municipality rights		19,021		12,527		9,401		4,910
Other administration expenses (travel within and outside the country, cleaning services, security, basic services)		88,371		82,494		30,474		28,470
Total		398,534		336,280		134,151		114,764


	Note	January - September				July - September
		2013		2012		2013		2012
Expenses for		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Depreciations	7		212.667		174.297		70.840		59.591
Employee benefits	10		361.147		298.257		135.756		120.482
Amortization	19		6.864		2.018		5.157		1.023

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

e)	Auditor and Staffing Salaries

At the end of this period the Auditor and Staffing’s remuneration expenses are the following:


Auditor’s Salaries	MUS$
Financial Audit Services		1,745
Other services
Tax		978
Others		330
TOTAL		3,053

Staffing	N°
		13,227

NOTE 3. INVENTORIES


Components of Inventory	09-30-2013 ThU.S.$		12-31-2012 ThU.S.$
Raw materials		90,798		90,466
Production supplies		88,149		82,248
Products in progress		87,782		78,981
Finished goods		445,290		435,546
Spare Parts		143,059		128,541
Total Inventories		855,078		815,782

Inventories recognized as cost of sales at September 30, 2013 were ThU.S.$2,670,204 (ThU.S.$2,225,788 at September 30, 2012).

In order to recognize inventories at net realizable value, at September 30, 2013, a net increase of inventories associated with lower provision for obsolesce of ThU.S.$ 2,566 is recognized (lower provision of ThU.S.$2,403 as of September 30, 2012).

As of September 30, 2013 there are inventory penalties of ThU.S$1,724, at September 30, 2012 there were inventory penalties of ThU.S.$19,838, which were mainly caused as result of the fire that occurred in January 2012 affecting a panels plant in Complejo Forestal e Industrial Nueva Aldea.

The allowance of obsolescence is calculated based on the conditions of sale of products and age of inventory (inventory turnover).

No inventories have been pledged as security for liabilities at the end of each reporting period.

Agricultural Products

Agricultural Products are mainly forestry products that are intended for sale in the normal course of our operations and are measured at fair value less costs to sell at the point of harvest at the end of each reporting period Agricultural products are classified as raw materials within the line item inventories.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 4. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, bank checking account balances, time deposits, repurchase agreements and mutual funds. They are short-term highly liquid investments that are readily convertible to known amounts of cash, and are subject to an insignificant risk of changes in value.

The investment objective of time deposits and repurchase agreements is to maximize in the short-term the amounts of cash surpluses. These instruments are permitted under Arauco’s Investment Policy, which allows investing in fixed income securities. These instruments have a maturity of less than three months from the date of acquisition.

As of the date of these consolidated financial statements, there are no amounts of cash and cash equivalents with restrictions on use.


Components of Cash and Cash Equivalents	09-30-2013 ThU.S.$		12-31-2012 MUS$
Cash on hand		423		543
Bank checking account balances		124,897		62,816
Time deposits		276,882		151,799
Mutual funds		132,351		180,558
Other cash and cash equivalents (*)		9,141		—
Total		543,694		395,716

(*)	Applies to contracts for the purchase under resale

NOTE 5. ACCOUNTING POLICIES AND CHANGES IN ACCOUNTING ESTIMATES

Changes in Accounting Policies

The accounting policies have been developed in accordance with the effective IFRS as of September 30, 2013 and have been consistently applied to all periods presented in these interim consolidated financial statements.

Changes in Estimates and Accounting Policies

The financial statements as of September 30, 2013 do not show changes in accounting policies compared to the last year.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 6. TAXES

The tax rates applicable in the countries in which Arauco operates are 20% in Chile, 35% in Argentina, 34% in Brazil and 34% in the United States (federal tax).

On September 27, 2012, Law N° 20,630 was enacted in Chile, and among other changes, it increases the tax rate to a permanent 20%, effective beginning on taxes incurred in 2012. The change in the tax rate in 2012 affected the measurement of the tax consequences of temporary differences that are expected to reverse in the corresponding tax years.

The effect on the results of operations for the year ended December 31, 2012 due to the change in tax rate was an expense of ThU.S.$128,981, which was generated mainly the result of the expected reversal of temporary differences associated with property, plant, equipment and biological assets.

Deferred Tax Assets

The following table sets forth the deferred tax assets as of September 30, 2013 and at December 31, 2012:


Deferred Tax Assets	09-30-2013 ThU.S.$		12-31-2012 ThU.S.$
Deferred tax Assets relating to Provisions		8,481		4,752
Deferred tax Assets relating to accrued liabilities		6,239		6,385
Deferred tax Assets relating to Post-Employment benefits		9,231		9,341
Deferred tax Assets relating to Property, Plant and equipment		1,005		10,822
Deferred tax Assets relating to Financial Instruments		198		297
Deferred tax Assets relating to tax losses carryforwards		44,960		90,327
Deferred tax assets relating to biological assets		63		2,636
Deferred tax assets relating to inventories		5,493		9,142
Deferred tax assets relating to provisions for income		4,061		4,477
Deferred tax assets relating to provision for doubtful accounts		3,159		3,602
Deferred tax assets relating to other deductible temporary differences (*)		41,749		18,930
Total deferred tax assets		124,639		160,711

(*)	In the period 2013 there MUS $ 19,945 deferred tax relating to tax goodwill produced by fusion of Chilean forestry companies

As of December 31, 2012, certain of Arauco’s subsidiaries have carryforwards tax losses of ThU.S.$211,624 (ThU.S.$ 342,044 as of December 31, 2012) which are mainly generated due to operational and financial losses.

Arauco believes that it is probable that future taxable profits will be available in the subsidiaries against which the unused tax losses will be utilized.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Deferred Tax Liabilities

The following table sets for the deferred tax liabilities as of September 30, 2013 and at December 31, 2012:


Deferred Tax Liabilities	09-30-2013 ThU.S.$		12-31-2012 ThU.S.$
Deferred tax liabilities relating to property, Plant and equipment		739,718		743,184
Deferred tax liabilities relating to financial instruments		13,795		14,218
Deferred tax liabilities relating to biological assets		525,316		531,801
Deferred tax liabilities relating to inventory		14,985		16,517
Deferred tax liabilities due to prepaid expenses		57,592		55,614
Deferred tax liabilities relating to other taxable temporary differences		38,944		40,974
Total deferred tax liabilities		1,390,350		1,402,308

The effect of changes in deferred tax liabilities related to cash flow hedges corresponds to a charge of ThU.S.$6,862 as of September 30, 2013 (credit of ThU.S.$3,838 as of September 30, 2012), which is presented deducting the reserve of cash flow hedges in the statement of changes in equity.

The deferred tax assets and liabilities expected to be recovered and settled in less than twelve months amounts to ThU.S.$19,322 and ThU.S.$124,347 respectively, will be reversed in the next 12 months (used over a period of 12 months).

Arauco does not offset deferred tax assets and deferred tax liabilities since there is no legal enforceable right to offset amounts recognized in these items that relate to different tax jurisdictions.

Reconciliation of the asset and deferred tax liability


Deferred Tax Assets	Opening Balance 01-01-2013 ThU.S.$		Income (Expenses) for deferred tax recognized as a result ThU.S.$			Deferred tax of items directly credited to equity ThU.S.$		Increase (decrease) Net exchange differences ThU.S.$			Closing balance 09-30-2013 ThU.S.$
Deferred tax Assets relating to Provisions		4,752		3,863			—		(134	)		8,481
Deferred tax Assets relating to accrued liabilities		6,385		(146	)		—		0			6,239
Deferred tax Assets relating to Post-Employment benefits		9,341		(99	)		—		(11	)		9,231
Deferred tax Assets relating to Property, Plant and equipment		10,822		(8,117	)		—		(1,700	)		1,005
Deferred tax Assets relating to Financial Instruments		297		(233	)		—		134			198
Deferred tax Assets relating to tax losses carryforwards		90,327		(42,691	)		—		(2,676	)		44,960
Deferred tax assets relating to biological assets		2,636		(2,573	)		—		0			63
Deferred tax assets relating to provisions for income		9,142		(3,525	)		—		(124	)		5,493
Deferred tax assets relating to provisions for income		4,477		(412	)		—		(4	)		4,061
Deferred tax assets relating to provision for doubtful accounts		3,602		(432	)		—		(11	)		3,159
Defferred tax assets relating to other deductible temporary differences		18,930		22,051			—		768			41,749
Total deferred tax assets		160,711		(32,314	)		—		(3,758	)		124,639


Deferred Tax Liabilities	Opening Balance 01-01-2013 ThU.S.$		Income (Expenses) for deferred tax recognized as a result ThU.S.$			Deferred tax of items directly credited to equity ThU.S.$			Increase (decrease) Net exchange differences ThU.S.$			Closing balance 09-30-2013 ThU.S.$
Deferred tax liabilities relating to property, Plant and equipment		743,183		1,934			—			(5,399	)		739,718
Deferred tax liabilities relating to financial instruments		14,218		(111	)		(462	)		150			13,795
Deferred tax liabilities relating to biological assets		531,801		133			—			(6,618	)		525,316
Deferred tax liabilities relating to inventory		16,517		(1,698	)		—			166			14,985
Deferred tax liabilities due to prepaid expenses		55,614		1,981			—			(3	)		57,592
Deferred tax liabilities relating to other taxable temporary differences		40,975		(273	)		—			(1,758	)		38,944
Total deferred tax liabilities		1,402,308		1,966			(462	)		(13,462	)		1,390,350

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Temporary Differences

The following tables summarize the deductible and taxable temporary differences:

09-30-2013

12-31-2012

Deductible

Taxable

Deductible

Taxable

Difference

Detail of classes of Deferred Tax Temporary Differences

ThU.S.$

Deferred Tax Assets

79,679

70,384

Deferred Tax Assets - Tax losses

44,960

90,327

Deferred Tax Liabilities

1,390,350

1,402,308

Total

124,639

1,390,350

160,711

1,402,308


	January - September						July - September
	2013			2012			2013			2012
Detail of Temporary Difference Income and Loss Amounts	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Deferred Tax Assets		10,788			4,903			21,095			8,127
Deferred Tax Assets - Tax losses		(36,508	)		13,992			(25,404	)		4,519
Deferred Tax Liabilities		(8,558	)		(155,012	)		(9,637	)		(148,141	)
Total		(34,278	)		(136,117	)		(13,946	)		(135,495	)

Income Tax consists of the following:


	January - September						July - September
	2013			2012			2013			2012
Income Tax composition	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Current income tax expense		(74,197	)		(27,952	)		(36,714	)		(13,664	)
Tax benefit arising from unrecognized tax assets previously used to reduce tax expense		16,429			1,266			15,304			354
Previous period current tax adjustments		3,977			610			2,241			(11	)
Other current tax expenses		4,165			114			3,842			148
Current Tax Expense, Net		(49,626	)		(25,962	)		(15,327	)		(13,173	)

Deferred tax income (expense) relating to origination and reversal of temporary differences		2,230			(17,476	)		11,458			731

Deferred tax income (expense) relating to changes in tax rates or new tax rates		—			(128,981	)		—			(129,822	)

Tax benefit arising from previously unrecognized tax assets used to reduce deferred expense from taxes		(36,508	)		10,340			(25,404	)		700
Other current tax expenses		—			—			—			(7,104	)
Total deferred Tax Expense, Net		(34,278	)		(136,117	)		(13,946	)		(135,495	)
Income Tax Expense, Total		(83,904	)		(162,079	)		(29,273	)		(148,668	)

The following table sets for the current income tax expense detailed by foreign and domestic companies as of September 30, 2013 and 2012:


	January - September						July - September
	2013			2012			2013			2012
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Foreign current income tax expense		(11,675	)		(5,020	)		(3,177	)		(3,169	)
Domestic current income tax expense		(37,951	)		(20,942	)		(12,150	)		(10,004	)
Total current income tax expense		(49,626	)		(25,962	)		(15,327	)		(13,173	)

Foreign deferred tax expense		(17,890	)		18,719			(12,463	)		6,530
Domestic deferred tax expense		(16,388	)		(154,836	)		(1,483	)		(142,025	)
Total deferred tax expense		(34,278	)		(136,117	)		(13,946	)		(135,495	)

Total tax income (expense)		(83,904	)		(162,079	)		(29,273	)		(148,668	)

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Reconciliation of income tax expense from statutory tax rate to the effective tax rate.

The reconciliation of income tax expense is as follows:


	January - September						January - September
	2013			2012			2013			2012
Reconciliation of Income tax from Statutory Rate to Effective Tax Rate	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Tax Expense at applicable tax rate		(91,390	)		(44,174	)		(29,258	)		(20,323	)
Tax effect of foreign tax rates		(18,669	)		1,177			(11,397	)		1,129
Tax effect of revenues exempt from taxation		(1,233	)		13,005			(2,509	)		3,331
Tax effect of expense mot deductible in determining taxable profit (tax loss)		(2,404	)		(5,450	)		(1,807	)		2,358

Tax rate effect of tax losses		9,795			758			(625	)		79

Tax effect of profit previously unrecognized on the Income Statement		15,830			—			15,830			—
Tax rate effect from change in tax rate (opening balances)		—			(124,597	)		—			(125,438	)

Tax rate effect of adjustments for current tax of prior periods		792			610			(940	)		(11	)

Other tax rate effects		3,375			(3,408	)		1,433			(9,793	)
Total adjustments to tax expense at applicable tax rate		7,486			(117,905	)		(15	)		(128,345	)
Tax expense at effective tax rate		(83,904	)		(162,079	)		(29,273	)		(148,668	)

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 7. PROPERTY, PLANT AND EQUIPMENT


Properties, Plant and Equipment, Net	09-30-2013 ThU.S.$			12-31-2012 ThU.S.$
Construction in progress		408,148			487,380
Land		798,390			801,601
Buildings		1,653,558			1,628,854
Plant and equipment		2,774,607			2,727,345
Information technology equipment		24,035			25,454
Fixtures and fittings		7,511			8,691
Motor vehicles		9,527			9,734
Other property, plant and equipment		98,679			100,424
Total Net		5,774,455			5,789,483


Properties, Plant and Equipment, Gross
Construction in progress		408,148			487,380
Land		798,390			801,601
Buildings		2,946,233			2,872,553
Plant and equipment		4,909,860			4,799,185
Information technology equipment		60,729			59,836
Fixtures and fittings		30,935			27,960
Motor vehicles		35,030			34,558
Other property, plant and equipment		132,145			138,790
Total Gross		9,321,470			9,221,863


Accumulated depreciation and impairment

Buildings		(1,292,675	)		(1,243,699	)
Plant and equipment		(2,135,253	)		(2,071,840	)
Information technology equipment		(36,694	)		(34,382	)
Fixtures and fittings		(23,424	)		(19,269	)
Motor vehicles		(25,503	)		(24,824	)
Other property, plant and equipment		(33,466	)		(38,366	)
Total		(3,547,015	)		(3,432,380	)

Description of Property, Plant and Equipment Pledged as Security for Liabilities

In October 2006, Forestal Río Grande S.A, a subsidiary of Fondo de Inversión Bío Bío (Arauco’s special purpose entity), executed in favor of JPMorgan Chase Bank N.A. and Arauco, respectively, first and second degree mortgages, which prohibited the sale of any property owned by Fondo de Inversión Bío Bío in order to secure its obligations.

In September 2007, Forestal Río Grande S.A acquired a real estate in Yungay, located in Chile’s Eighth Region, for which the company executed a first and second degree mortgage in favor of JPMorgan and Arauco, respectively, which prohibited the sale and encumbrance of such property.

As of September 2013, there are no current contracts of between Arauco and Fondo de Inversión Bío Bío. Forest land and biological assets committed as collateral were sold to Arauco, so that there are no collateral assets in these consolidated financial statements to date.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


	09-30-2013 ThU.S.$		12-31-2012 ThU.S.$

Total property, plant and equipment pledged as security		—		16,413

Commitments for project disbursements or for the acquisition of property, plant and equipment


	09-30-2013 ThU.S.$		12-31-2012 ThU.S.$
Amount committed for the acquisition of property, plant and equipment		204,488		281,893

	09-30-2013 ThU.S.$		12-31-2012 ThU.S.$
Disbursements for property, plant and equipment under construction		244,248		424,474

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Movement on Property, Plant and Equipment

The following tables set forth the reconciliation of the carrying amount of property, plant and equipment as of September 30, 2013 and at December 31, 2012:


Movement of Property, Plant and Equipment	Construction in progress ThU.S.$			Land ThU.S.$			Buildings ThU.S.$			Plant and equipments ThU.S.$			IT Equipment ThU.S.$			Fixtures and fittings ThU.S.$			Motor vehicles ThU.S.$			Other Property, Plant and Equipment ThU.S.$			TOTAL ThU.S.$
Opening Balance 01-01-2013		487,380			801,601			1,628,854			2,727,345			25,454			8,691			9,734			100,424			5,789,483
Changes
Additions		242,529			12,650			7,842			32,485			282			340			1,882			2,770			300,780
Disposals		—			(837	)		(1,284	)		(249	)		—			(2	)		(85	)		(273	)		(2,730	)
Retirements		(1,567	)		(145	)		(274	)		(4,160	)		—			(4	)		59			(270	)		(6,361	)
Depreciation		—			—			(66,501	)		(162,528	)		(2,611	)		(1,780	)		(2,199	)		(2,099	)		(237,718	)
Impairment loss recognized in profit or loss		—			—			20			(470	)		—			—			—			—			(450	)
Increase (decrease) through net exchange differences		(8,480	)		(17,013	)		(11,916	)		(29,512	)		39			138			68			(1,873	)		(68,549	)
Increase (decrease) through transfers from construction in progress		(311,714	)		2,134			96,817			211,696			871			128			68			—			—
Total changes		(79,232	)		(3,211	)		24,704			47,262			(1,419	)		(1,180	)		(207	)		(1,745	)		(15,028	)
Closing balance 09-30-2013		408,148			798,390			1,653,558			2,774,607			24,035			7,511			9,527			98,679			5,774,455


Movement of Property, Plant and Equipment	Construction in progress ThU.S.$			Land ThU.S.$			Buildings ThU.S.$			Plant and equipments ThU.S.$			IT Equipment ThU.S.$			Fixtures and fittings ThU.S.$			Motor vehicles ThU.S.$			Other Property, Plant and Equipment ThU.S.$			TOTAL ThU.S.$
Opening Balance 01-01-2012		663,971			805,804			1,459,759			2,360,229			23,740			6,010			10,152			64,313			5,393,978
Changes
Additions		427,614			5,569			3,850			31,094			1,780			61			1,693			39,005			510,666
Acquisitions through business combinations		2,703			9,268			50,100			235,462			235			3,140			1,803			2,460			305,171
Disposals		(3,824	)		(668	)		5,767			(16,196	)		(1,176	)		(113	)		(435	)		(3,535	)		(20,180	)
Retirements		(12,062	)		(189	)		(19,979	)		(49,019	)		(103	)		(114	)		(1,175	)		(851	)		(83,492	)
Depreciation		—			—			(82,063	)		(198,720	)		(3,080	)		(1,963	)		(3,202	)		(410	)		(289,438	)
Impairment loss recognized in profit or loss		—			—			16,963			18,060			(4	)		(13	)		—			799			35,805
Increase (decrease) through net exchange differences		(16,033	)		(18,279	)		(8,851	)		(17,241	)		(225	)		(611	)		209			(1,996	)		(63,027	)
Increase (decrease) through transfers from construction in progress		(574,989	)		96			203,308			363,676			4,287			2,294			689			639			—
Total changes		(176,591	)		(4,203	)		169,095			367,116			1,714			2,681			(418	)		36,111			395,505
Closing balance 12-31-2012		487,380			801,601			1,628,854			2,727,345			25,454			8,691			9,734			100,424			5,789,483

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The depreciation expense as of September 30, 2013 and 2012 is as follows:


	January-September				July—September
Depreciation for the year	2013 ThU.S.$		2012 ThU.S.$		2013 ThU.S.$		2012 ThU.S.$
Cost of sales		198,099		162,691		64,964		55,091
Administrative expenses		12,263		8,475		5,290		4,075
Other expenses		2,305		3,131		586		425
Total		212,667		174,297		70,840		59,591

The useful lives of property, plant and equipment estimated based on the expected use of the assets are as follows:


		Minimum		Maximum		Average
Buildings	Useful Life in Years		16		89		39
Plant and equipment	Useful Life in Years		8		67		29
Information technology equipment	Useful Life in Years		6		18		5
Fixtures and fittings	Useful Life in Years		6		12		10
Motor vehicles	Useful Life in Years		6		26		13
Other property, plant and equipment	Useful Life in Years		5		27		16

A significant portion of items of property, plant and equipment do not have significant differences between the fair value and the cost of these assets.

Borrowing costs capitalized are detailed in Note No. 12.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 8. LEASES

Arauco acting as lessee


	09-30-2013		12-31-2012
	ThU.S.$		ThU.S.$
Property, Plant and Equipment under finance leases		92,117		55,879
Plant and equipment		92,117		55,879

Reconciliation of Financial Lease Minimum Payments:


	09-30-2013
	Gross		Interest		Present Value
Periods	ThU.S.$		ThU.S.$		ThU.S.$
Not later than one year		27,099		—		27,099
Later than one year and not later than five years		61,998		—		61,998
Later than five years		—		—		—
Total		89,097		—		89,097


	12-31-2012
	Gross		Interest		Present Value
Periods	ThU.S.$		ThU.S.$		ThU.S.$
Not later than one year		20,489		—		20,489
Later than one year and not later than five years		35,563		—		35,563
Later than five years		—		—		—
Total		56,052		—		56,052

Lease obligations are presented in the consolidated statement of financial position in line items “other current financial liabilities” and “Other non-current financial liabilities” depending on their maturities as stated above.

Arauco acting as lessor

Reconciliation of Financial Lease Minimum Payments:


	09-30-2013
	Gross		Interest		Present Value
Periods	ThU.S.$		ThU.S.$		ThU.S.$
Not later than one year		1,132		64		1,068
Later than one year and not later than five years		331		26		305
Later than five years		—		—		—
Total		1,463		90		1,373

12-31-2012

Gross

Interest

Present Value

Periods

ThU.S.$

Not later than one year

1,642

115

1,527

Later than one year and not later than five years

1,437

1,344

Later than five years

—

Total

3,079

208

2,871

Finance lease receivables are presented in the consolidated statement of financial position in line items “Trade and other current receivable” and “Trade and other non-current receivable” depending on their maturities stated above.

Arauco accounts for its lease contracts as finance leases. These lease contracts are for a term of less than five-years at market interest rates and leased assets are forestry machinery and equipment. They also include an early termination option, under general and special conditions stipulated in each contract.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

There are no contingent rents payable or restrictions imposed by lease arrangements.

NOTE 9. REVENUE

January - September

July - September

2013

2012

2013

2012

Classes of revenue

ThU.S.$

Revenue from sales of goods

3,741,843

2,972,622

1,296,370

996,469

Revenue from rendering of services

134,039

105,757

38,543

34,748

Total

3,875,882

3,078,379

1,334,913

1,031,217

NOTE 10. EMPLOYEE BENEFITS

Classes of Benefits and Expenses by Employee

January - September

July - September

2013

2012

2013

2012

ThU.S.$

Employee expenses

361,147

298,257

105,756

120,482

Wages and salaries

353,116

288,369

103,305

117,943

Severance indemnities

8,031

9,888

2,451

2,539

The main actuarial assumptions used by Arauco in the calculation of the severance indemnities obligation as of September 30, 2013 and 2012 are:


Discount rate	3.50	%
Inflation	3.00	%
Mortality rate	RV-2009

The following tables set forth the balances and the reconciliation of the present value of severance indemnities obligation as of September 30, 2013 and at December 31, 2012:


	09/30/2013		12/31/2012
	ThU.S.$		ThU.S.$
Current		3,902		3,945
Non-current		43,075		43,491
Total		46,977		47,436


	09/30/2013			12/31/2012
Reconciliation of the present value of severance indemnities obligation	ThU.S.$			ThU.S.$
Opening balance		47,436			39,409
Current service cost		2,187			4,137
Interest cost		1,510			1,261
Actuarial gains		3,575			3,838
Benefits paid		(5,585	)		(4,390	)
Increase (decrease) for foreign currency exchange rates changes		(2,146	)		3,181
Closing balance		46,977			47,436

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 11. EFFECT OF FOREIGN CURRENCY EXCHANGE RATE VARIATIONS

Local and foreign currency

Assets and liabilities by class of currency as of September 30, 2013 and at December 31, 2012 are as follows:


	09-30-2013		12-31-2012
	ThU.S.$		ThU.S.$
Total Current Assets		2,788,228		2,699,996

Cash and Cash Equivalents		543,694		395,716
U.S Dollar		432,643		325,340
Euro		1,081		1,867
Brazilian Real		75,774		38,477
Argentine pesos		14,769		4,877
Other currencies		2,114		2,726
Chilean Pesos		17,313		22,429

Other current financial assets		1,035		1,012
U.S Dollar		1,035		1,012

Other current non-financial assets		184,909		207,889
U.S Dollar		74,738		96,257
Euros		155		103
Brazilian Real		13,563		15,041
Argentine pesos		12,510		13,647
Other currencies		6,889		1,846
Chilean Pesos		77,054		80,995

Trade and other current receivables		731,447		825,869
U.S Dollar		478,256		520,803
Euro		27,899		26,711
Brazilian Real		62,776		53,057
Argentine pesos		41,510		38,256
Other currencies		23,058		22,543
Chilean Pesos		96,816		163,084
U.F.		1,132		1,415

Accounts receivable from related companies		150,816		130,423
U.S Dollar		135,782		122,315
Brazilian Real		3,688		1,268
Chilean Pesos		11,346		6,840

Current Inventories		855,078		815,782
U.S Dollar		744,295		718,348
Brazilian Real		89,579		77,340
Chilean Pesos		21,204		20,094

Current biological assets		258,074		252,744
U.S Dollar		247,418		252,744
Brazilian Real		10,656		—

Current tax assets		48,381		56,951
U.S Dollar		2,093		1,332
Brazilian Real		1,120		6,655
Argentine pesos		2,292		6,931
Other currencies		2,829		1,188
Chilean Pesos		40,047		40,845

Non-current assets or disposal groups classified as held for sale or as held for distribution to owners		14,794		13,610
U.S Dollar		14,794		13,610

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


	09-30-2013		12-31-2012
	ThU.S.$		ThU.S.$
Total Non Current Assets		10,793,498		10,857,844

Other non-current financial assets		61,387		61,350
U.S Dollar		60,524		60,333
Argentine pesos		863		1,017

Other non-current non-financial assets		122,370		125,254
U.S Dollar		106,292		105,414
Brazilian Real		9,695		17,042
Argentine pesos		853		1,540
Other currencies		631		681
Chilean Pesos		4,899		577

Trade and other non-current receivables		5,370		11,877
U.S Dollar		173		5,204
Chilean Pesos		3,199		3,374
U.F.		1,998		3,299

Investments accounted for using equity method		1,048,458		1,048,463
U.S Dollar		817,526		790,116
Brazilian Real		230,932		258,347

Intangible assets other than goodwill		98,522		103,158
U.S Dollar		93,919		98,997
Brazilian Real		4,523		4,070
Chilean Pesos		80		91

Goodwill		79,647		84,106
U.S Dollar		32,317		32,457
Brazilian Real		47,330		51,649

Property, plant and equipment		5,774,455		5,789,483
U.S Dollar		5,059,410		5,022,197
Brazilian Real		707,259		756,507
Chilean Pesos		7,786		10,779

Non-current biological assets		3,478,650		3,473,442
U.S Dollar		3,121,820		3,093,440
Brazilian Real		356,830		380,002

Deferred tax assets		124,639		160,711
U.S Dollar		93,327		113,080
Brazilian Real		30,396		46,464
Other currencies		166		361
Chilean Pesos		750		806

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


	09-30-2013						12-31-2012
	Up to 90 days		From 91 days to 1 year		Total		Up to 90 days		From 91 days to 1 year		Total
	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Total Liabilities, current		872,025		298,693		1,170,718		1,015,183		410,104		1,425,287

Other current financial liabilities		142,414		297,517		439,931		401,493		407,121		808,614
U.S Dollar		75,623		165,282		240,905		360,732		355,651		716,383
Brazilian Real		14,019		6,187		20,206		8,494		3,432		11,926
Argentine pesos		28,273		6,905		35,178		25,091		12,200		37,291
Chilean Pesos		212		578		790		111		330		441
U.F.		24,287		118,565		142,852		7,065		35,508		42,573

Bank Loans		103,016		162,242		265,258		347,256		66,015		413,271
U.S Dollar		60,724		149,150		209,874		313,671		50,383		364,054
Brazilian Real		14,019		6,187		20,206		8,494		3,432		11,926
Argentine pesos		28,273		6,905		35,178		25,091		12,200		37,291

Financial Leases		7,574		19,524		27,098		3,909		16,580		20,489
U.S Dollar		—		87		87		—		127		127
Chilean Pesos		212		578		790		111		330		441
U.F.		7,362		18,859		26,221		3,798		16,123		19,921

Other Loans		31,824		115,751		147,575		50,328		324,526		374,854
U.S Dollar		14,899		16,045		30,944		47,061		305,141		352,202
U.F.		16,925		99,706		116,631		3,267		19,385		22,652

Trade and other current payables		517,173		—		517,173		490,191		—		490,191
U.S Dollar		136,852		—		136,852		117,458		—		117,458
Euros		7,460		—		7,460		9,114		—		9,114
Brazilian Real		37,065		—		37,065		30,730		—		30,730
Argentine pesos		34,296		—		34,296		37,515		—		37,515
Other currencies		794		—		794		1,622		—		1,622
Chilean Pesos		298,117		—		298,117		291,190		—		291,190
U.F.		2,589		—		2,589		2,562		—		2,562

Accounts payable to related companies		11,372		—		11,372		9,168		—		9,168
U.S Dollar		1,799		—		1,799		1,474		—		1,474
Chilean Pesos		9,573		—		9,573		7,694		—		7,694

Other current provisions		8,969		—		8,969		8,875		—		8,875
Argentine pesos		8,969		—		8,969		8,875		—		8,875

Current tax liabilities		4,267		782		5,049		12,264		—		12,264
Euros		158		—		158		132		—		132
Brazilian Real		3,183		—		3,183		—		—		—
Argentine pesos		27		—		27		—		—		—
Other currencies		55		—		55		711		—		711
Chilean Pesos		844		782		1,626		11,421		—		11,421

Current provisions for employee benefits		3,508		394		3,902		962		2,983		3,945
Brazilian Real		1		—		1		—		—		—
Chilean Pesos		3,507		394		3,901		962		2,983		3,945

Other current non-financial liabilities		184,322		—		184,322		92,230		—		92,230
U.S Dollar		122,728		—		122,728		49,453		—		49,453
Brazilian Real		31,179		—		31,179		23,767		—		23,767
Argentine pesos		6,054		—		6,054		4,067		—		4,067
Other currencies		4,199		—		4,199		2,221		—		2,221
Chilean Pesos		18,315		—		18,315		10,620		—		10,620
U.F.		1,847		—		1,847		2,102		—		2,102

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


	09-30-2013						12-31-2012
	From 13 months to 5 years		More than 5 years		Total		From 13 months to 5 years		More than 5 years		Total
	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Total non-current liabilities		3,129,604		2,183,696		5,313,300		2,953,670		2,213,124		5,166,794

Other non-current financial liabilities		1,597,981		2,174,577		3,772,558		1,401,793		2,204,517		3,606,310
U.S Dollar		1,490,381		1,383,050		2,873,431		1,244,963		1,380,868		2,625,831
Brazilian Real		37,983		24,023		62,006		2,679		26,216		28,895
Argentine pesos		—		—		—		8,134		—		8,134
Chilean Pesos		1,234		—		1,234		781		—		781
U.F.		68,383		767,504		835,887		145,236		797,433		942,669

Bank Loans		754,374		28,788		783,162		477,457		30,981		508,438
U.S Dollar		716,391		4,765		721,156		466,644		4,765		471,409
Brazilian Real		37,983		24,023		62,006		2,679		26,216		28,895
Argentine pesos		—		—		—		8,134		—		8,134

Financial Leases		61,997		—		61,997		35,563		—		35,563
U.S Dollar		12		—		12		67		—		67
Chilean Pesos		1,234		—		1,234		781		—		781
U.F.		60,751		—		60,751		34,715		—		34,715

Other Loans		781,610		2,145,789		2,927,399		888,773		2,173,536		3,062,309
U.S Dollar		773,978		1,378,285		2,152,263		778,252		1,376,103		2,154,355
U.F.		7,632		767,504		775,136		110,521		797,433		907,954

Other non-current provisions		22,261		—		22,261		13,281		—		13,281
Brazilian Real		22,261		—		22,261		13,281		—		13,281

Deferred tax liabilities		1,390,350		—		1,390,350		1,402,308		—		1,402,308
U.S Dollar		1,238,296		—		1,238,296		1,229,196		—		1,229,196
Brazilian Real		146,563		—		146,563		166,553		—		166,553
Argentine pesos		5,049		—		5,049		5,503		—		5,503
Other currencies		121		—		121		596		—		596
Chilean Pesos		321		—		321		460		—		460

Non-current provisions for employee benefits		34,471		8,604		43,075		35,157		8,334		43,491
Other currencies		161		—		161		140		—		140
Chilean Pesos		34,310		8,604		42,914		35,017		8,334		43,351

Other non-current non-financial liabilities		84,541		515		85,056		101,131		273		101,404
U.S Dollar		—		—		—		500		—		500
Brazilian Real		82,568		—		82,568		97,695		—		97,695
Argentine pesos		1,680		515		2,195		2,917		—		2,917
Chilean Pesos		278		—		278		—		273		273
U.F.		15		—		15		19		—		19

The table below sets forth the subsidiaries that have determined a functional currency other than the U.S. Dollar as follows:


Subsidiary	Country	Functional Currency
Arauco do Brasil S.A	Brazil	Brazilian Real
Arauco Forest Brasil S.A	Brazil	Brazilian Real
Arauco Florestal Arapoti S.A	Brazil	Brazilian Real
Empreendimentos Florestais Santa Cruz Ltda	Brazil	Brazilian Real
Catan Empreendimentos e Participacoes S.A	Brazil	Brazilian Real
Mahal Empreendimentos e Participacoes S.A	Brazil	Brazilian Real
Arauco Distribucion S.A	Chile	Chilean Pesos
Investigaciones Forestales Bioforest S.A	Chile	Chilean Pesos
Controladora de Plagas Forestales S.A	Chile	Chilean Pesos

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The table below shows a detail per company of the effect in the period of the Reserve for Exchange Differences resulting from conversion of currencies:


	09/30/2013			09/30/2012
	ThU.S.$			ThU.S.$
Arauco Do Brasil S.A.		(48,610	)		(38,989	)
Arauco Forest Brasil S.A.		(37,650	)		(38,783	)
Arauco Florestal Arapoti S.A.		(13,845	)		(12,826	)
Arauco Distribución S.A.		(1,021	)		1,825
Alto Paraná S.A.		(4,664	)		(4,530	)
Flakeboard Company Limited		(4,360	)		—
Others		(217	)		199

Translation Adjustment Total		(110,367	)		(93,104	)

Effect of foreign exchange rates changes


	January - September						July - September
	2013			2012			2013			2012
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$

Exchange differences recognized in profit or loss, except for those arising on financial instruments measured at fair value through profit or loss		(8,187	)		(15,759	)		(898	)		(9,561	)

Reserve of exchange differences on translation		(113,787	)		(96,268	)		(6,665	)		(4,631	)

NOTE 12. BORROWING COSTS

Arauco estimates the average rate of borrowings to finance its investment projects (new plants, improvements and expansions) in Chile and Brazil in order to determine the amount of borrowing costs to be capitalized as part of property, plant and equipment.


	January - September						July - September
	2013			2012			2013			2012
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Property, plant and equipment capitalized cost

Property, plant and equipment capitalized interest cost rate		4.91	%		5.06	%		4.78	%		5.03	%

Amount of the capitalized interest cost, property, presented as plant and equipment		1,685			14,249			405			6,536

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 13. RELATED PARTIES

Related Party Disclosures

Related parties are those entities defined in IAS 24 and under the rules of the Chilean Superintendency of Securities and Insurance and the Chilean Corporations Law.

The receivable and payable amounts among related parties at the end of each period correspond to commercial and financing transactions denominated in Chilean Pesos, U.S. dollars and Euros, where collection or payment deadlines are shown in the following tables and in general do not bear interest, except for financing transactions.

At the close of these financial statements the main transactions recorded with related parties are loans to companies in Uruguay (joint agreements) and fuel purchases to Compañía de Petróleos de Chile S.A.

There is neither a provision for doubtful debts nor any guarantees granted or received related to the balances with related parties.

Name of Group’s Main Shareholders

The ultimate shareholders of Arauco are Mrs. Maria Noseda Zambra de Angelini, Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi through Inversiones Angelini y Cia. Ltda.

Name of the Intermediate Controlling Entity that Prepares Financial Statements for Public Use

Empresas Copec S.A.

Remunerations to Key Management Personnel

Remunerations to key management personnel, including directors, managers and deputy managers, consist of a fixed monthly salary, with a possible annual discretionary bonus.

Pricing Strategy Terms and Conditions Corresponding to Transactions with Related Parties

Related party transactions were made on terms of those prevailing under market conditions.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The table below sets forth information about the Relationship between Parent Company and its Subsidiaries


				% Ownership interest						% Ownership interest
			Functional	09/30/2013						12/31/2012
ID Nº	Company Name	Country	Currency	Direct		Indirect		Total		Direct		Indirect		Total
—	Agenciamiento y Servicios Profesionales S.A.	México	U.S Dollar		0.0020		99.9970		99.9990		0.0020		99.9970		99.9990
—	Alto Paraná S.A.	Argentina	U.S Dollar		9.9753		90.0048		99.9801		9.9753		90.0048		99.9801
—	Arauco Australia Pty Ltd.	Australia	U.S Dollar		—		99.9990		99.9990		—		99.9990		99.9990
96547510-9	Arauco Bioenergía S.A.	Chile	U.S Dollar		98.0000		1.9985		99.9985		98.0000		1.9985		99.9985
—	Arauco Colombia S.A.	Colombia	U.S Dollar		1.5000		98.4980		99.9980		1.5000		98.4980		99.9980
96765270-9	Arauco Distribución S.A.	Chile	Chilean pesos		—		99.9994		99.9994		—		99.9992		99.9992
—	Arauco do Brasil S.A.	Brazil	Real		1.4319		98.5666		99.9985		1.4573		98.5412		99.9985
—	Arauco Florestal Arapoti S.A.	Brazil	Real		—		79.9992		79.9992		—		79.9992		79.9992
—	Arauco Forest Brasil S.A.	Brazil	Real		13.3524		86.6466		99.9990		13.3524		86.6466		99.9990
—	Arauco Forest Products B.V.	Holland	U.S Dollar		—		99.9990		99.9990		—		99.9990		99.9990
—	Arauco Holanda Cooperatief U.A.	Holland	U.S Dollar		—		99.9990		99.9990		—		99.9990		99.9990
—	Arauco Panels Canada ULC	Canada	U.S Dollar		—		—		—		—		99.9990		99.9990
—	Arauco Panels USA, LLC	USA	U.S Dollar		—		99.9990		99.9990		—		99.9990		99.9990
—	Arauco Perú S.A.	Perú	U.S Dollar		0.0013		99.9977		99.9990		0.0013		99.9977		99.9990
—	Arauco Wood Products, Inc.	USA	U.S Dollar		0.0004		99.9981		99.9985		0.0004		99.9981		99.9985
—	Araucomex S.A. de C.V.	México	U.S Dollar		0.0005		99.9985		99.9990		0.0005		99.9985		99.9990
96565750-9	Aserraderos Arauco S.A.	Chile	U.S Dollar		99.0000		0.9993		99.9993		99.0000		0.9992		99.9992
82152700-7	Bosques Arauco S.A.	Chile	U.S Dollar		—		—		—		1.0000		98.9256		99.9256
—	Catan Empreendimentos e Participacoes S.A.	Brazil	Real		—		—		—		—		99.9934		99.9934
96657900-5	Controladora de Plagas Forestales S.A.	Chile	Chilean pesos		—		59.7654		59.7654		—		59.6326		59.6326
—	Empreendimentos Florestais Santa Cruz Ltda.	Brazil	Real		—		99.9789		99.9789		—		99.9789		99.9789
—	Flakeboard America Limited	USA	U.S Dollar		—		99.9990		99.9990		—		99.9990		99.9990
—	Flakeboard Company Ltd.(exArauco Panels Canada ULC)	USA	U.S Dollar		—		99.9990		99.9990		—		99.9990		99.9990
96573310-8	Forestal Arauco S.A.	Chile	U.S Dollar		99.9254		—		99.9254		99.9248		—		99.9248
85805200-9	Forestal Celco S.A.	Chile	U.S Dollar		1.0000		98.9256		99.9256		1.0000		98.9256		99.9256
93838000-7	Forestal Cholguán S.A.	Chile	U.S Dollar		—		98.1437		98.1437		—		97.4281		97.4281
—	Forestal Concepcion S.A	Panama	U.S Dollar		0.0050		99.9936		99.9986		0.0050		99.9936		99.9986
78049140-K	Forestal Los Lagos S.A.	Chile	U.S Dollar		—		79.9403		79.9403		—		79.9405		79.9405
—	Forestal Nuestra Señora del Carmen S.A.	Argentina	U.S Dollar		—		99.9805		99.9805		—		99.9805		99.9805
—	Forestal Talavera S.A.	Argentina	U.S Dollar		—		99.9942		99.9942		—		99.9942		99.9942
96567940-5	Forestal Valdivia S.A.	Chile	U.S Dollar		—		—		—		1.0000		98.9256		99.9256
76320036-1	Forestal Viñales S.A.	Chile	U.S Dollar		99.9248		—		99.9248		—		—		—
—	Greenagro S.A.	Argentina	U.S Dollar		—		97.9805		97.9805		—		97.9805		97.9805
96563550-5	Inversiones Arauco Internacional Ltda.	Chile	U.S Dollar		98.0186		1.9799		99.9985		98.0186		1.9799		99.9985
79990550-7	Investigaciones Forestales Bioforest S.A.	Chile	Chilean pesos		1.0000		98.9261		99.9261		1.0000		98.9256		99.9256
—	Leasing Forestal S.A.	Argentina	U.S Dollar		—		99.9801		99.9801		—		99.9801		99.9801
—	Mahal Empreendimentos e Participacoes S.A.	Brazil	Real		—		99.9932		99.9932		—		99.9932		99.9932
96510970-6	Paneles Arauco S.A.	Chile	U.S Dollar		99.0000		0.9993		99.9993		99.0000		0.9992		99.9992
—	Savitar S.A.	Argentina	U.S Dollar		—		99.9931		99.9931		—		99.9931		99.9931
96637330-K	Servicios Logísticos Arauco S.A.	Chile	U.S Dollar		45.0000		54.9997		99.9997		45.0000		54.9995		99.9995

All subsidiaries listed in the table above and the special purpose entities Fondo de Inversión Bío Bío and its subsidiary Forestal Río Grande S.A. are included in the consolidation process.

There are no significant restrictions on the ability of subsidiaries to transfer funds to Arauco, in the form of cash dividends or repay loans or advances.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Employee Benefits for Key Management Personnel


	January - September				July - September
	2013		2012		2013		2012
	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Salaries and bonuses		47,258		43,337		12,584		12,286
Per diem compensation to members of the Board of Directors		1,280		1,215		399		413
Termination benefits		3,622		1,825		571		179
Total		52,160		46,377		13,554		12,878

Accounts Receivable from Related Parties

Name of Related Party

Tax ID No.

Nature of
Relationship

Country

Currency

Maturity

09-30-2013
ThU.S.$

12-31-2012
ThU.S.$

Forestal Mininco S.A

91.440.000-7

Common director

Chile

Chilean pesos

30 days

Eka Chile S.A

99.500.140-3

Joint Venture

Chile

Chilean pesos

30 days

2,087

2,346

Forestal del Sur S.A

79.825.060-4

Common director

Chile

Chilean pesos

—

4,485

Stora Enso Arapoti Industria del Papel S.A

—

Associates

Brazil

Real

30 days

722

593

Empresa Electrica Guacolda S.A.

96.635.700-2

Controlling Parent’s
Associate

Chile

Chilean pesos

30 days

187

735

Unilin Arauco Pisos Ltda.

—

Joint Venture

Brazil

Real

30 days

2,966

675

Unilin Flooring Ltda.

—

Common director

EEUU

U.S. Dollar

30 days

184

—

Eufores S.A

—

Joint Venture

Uruguay

U.S. Dollar

Dec-13

63,853

73,095

Forestal Cono Sur S.A

—

Joint Venture

Uruguay

U.S. Dollar

Dec-13

11,500

19,201

Colbún S.A.

96.505.760-9

Common director

Chile

Chilean pesos

30 days

7,659

Ongar S.A

—

Joint Venture

Uruguay

U.S. Dollar

Dec-13

29,662

26,056

Celulosa y Energía Punta Pereira S.A

—

Joint Venture

Uruguay

U.S. Dollar

30 days

3,228

Zona Franca Punta Pereira S.A.

—

Joint Venture

Uruguay

U.S. Dollar

Dec-13

30,333

—

Fundación Educacional Arauco

71.625.000-8

Common director

Chile

Chilean pesos

30 days

1,542

—

TOTAL

150,816

130,423

Accounts Payable to Related Parties

Name of Related party

Tax ID No.

Nature of
Relationship

Country

Currency

Maturity

09-30-2013
ThU.S.$

12-31-2012
ThU.S.$

Compañía de Petróleos de Chile S.A.

99.520.000-7

Controlling Parent’s
Subsidiary

Chile

Chilean pesos

30 days

8,660

6,588

Abastible S.A.

91.806.000-6

Controlling Parent’s
Subsidiary

Chile

Chilean pesos

30 days

715

677

Empresas Copec S.A.

90.690.000-9

Controlling Parent

Chile

Chilean pesos

—

Fundación Educacional Arauco

71.625.000-8

Common director

Chile

Chilean pesos

—

380

Sigma S.A.

86.370.800-1

Common director

Chile

Chilean pesos

—

Forestal del Sur S.A

79.825.060-4

Common director

Chile

Chilean pesos

30 days

—

Portaluppi, Guzman y Bezanilla Abogados

78.096.080-9

Common director

Chile

Chilean pesos

30 days

153

—

Empresa Nacional de Telecomunicaciones S.A.

92.580.000-7

Common director

Chile

Chilean pesos

30 days

Servicios Corporativos Sercor S.A.

96.925.430-1

Associate

Chile

Chilean pesos

—

Puerto Lirquén S.A.(ex Portuaria Sur de Chile S.A.)

96.959.030-1

Associated subsidiary

Chile

U.S. Dollar

30 days

1,004

644

Compañía Puerto de Coronel S.A.

79.895.330-3

Associated subsidiary

Chile

U.S. Dollar

30 days

796

830

Depósitos Portuarios Lirquén S.A.

96.871.870-2

Associate

Chile

Chilean pesos

30 days

—

TOTAL

11,372

9,168

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Related party transactions

Purchases

Name of Related Party

Tax ID No.

Nature of
Relationship

Country

Currency

Transaction
Descriptions

09-30-2013
ThU.S.$

12-31-2012
ThU.S.$

Abastible S.A.

91.806.000-6

Controlling Parent’s
Subsidiary

Chile

Chilean pesos

Fuel

4,482

5,506

Empresas Copec S.A

90.690.000-9

Controlling Parent

Chile

Chilean pesos

Management service

232

306

Compañía de Petróleos de Chile S.A.

99.520.000-7

Controlling Parent’s
Subsidiary

Chile

Chilean pesos

Fuel and Other

78,952

113,948

Compañía Puerto de Coronel S.A.

79.895.330-3

Associated
subsidiary

Chile

Chilean pesos

Transport and
stowage

6,265

7,118

Puerto Lirquén S.A.(ex Portuaria Sur de Chile S.A.)

96.959.030-1

Associated
subsidiary

Chile

Chilean pesos

Port services

5,995

8,409

EKA Chile S.A.

99.500.140-3

Joint Venture

Chile

Chilean pesos

Sodium chlorate

46,951

67,163

Forestal del Sur S.A.

79.825.060-4

Common director

Chile

Chilean pesos

Wood and ships

318

777

Portaluppi, Guzman y Bezanilla Abogados

78.096.080-9

Common director

Chile

Chilean pesos

Legal services

1,237

1,698

Puertos y Logística S.A. (ex Puerto de Lirquén S.A.)

82.777.100-7

Associate

Chile

Chilean pesos

Port services

240

329

Empresa Nacional de Telecomunicaciones S.A.

92.580.000-7

Common director

Chile

Chilean pesos

Telephone services

299

503

CMPC Maderas S.A.

95.304.000-K

Common director

Chile

Chilean pesos

Ships

303

Forestal Mininco S.A.

91.440.000-7

Common director

Chile

Chilean pesos

Ships and Other

258

1,675

Colbún S.A.

96.505.760-9

Common director

Chile

Chilean pesos

Electrical Power

2,790

CMPC Celulosa S.A.

96.532.330-9

Common director

Chile

Chilean pesos

Others purchases

1,596

1,324

Sales

Name of Related Party

Tax ID No.

Nature of
Relationship

Country

Currency

Transaction
Descriptions

09-30-2013
ThU.S.$

12-31-2012
ThU.S.$

Colbún S.A.

96.505.760-9

Common director

Chile

Chilean pesos

Electrical Power

35,132

2,979

EKA Chile S.A.

99.500.140-3

Joint Venture

Chile

Chilean pesos

Electrical Power

17,980

25,011

Stora Enso Arapoti Industria de Papel S.A.

—

Associates

Brazil

Real

Wood

6,636

8,853

Forestal del Sur S.A.

79.825.060-4

Common director

Chile

Chilean pesos

Wood and chips

9,768

24,120

CMPC Celulosa S.A.

96.532.330-9

Common director

Chile

Chilean pesos

Wood

167

3,332

Cartulinas CMPC S.A.

96.731.890-6

Common director

Chile

Chilean pesos

Pulp

—

2,982

Eufores S.A.

—

Joint venture

Uruguay

U.S. Dollar

Loans and interest

1,758

55,215

Forestal Cono Sur S.A.

—

Joint venture

Uruguay

U.S. Dollar

Loans and interest

309

9,597

Zona Franca Punta Pereira S.A.

—

Joint venture

Uruguay

U.S. Dollar

Loans and interest

30,333

—

Ongar S.A

—

Joint venture

Uruguay

U.S. Dollar

Loans and interest

3,606

26,055

Empresa Eléctrica Guacolda S.A.

96.635.700-2

Controlling Parent’s
Associate

Chile

Chilean pesos

Electrical Power

3,279

13,794

Celulosa y Energía Punta Pereira S.A

—

Joint venture

Uruguay

U.S. Dollar

Other Sales

1,287

—

Unilin Arauco Pisos Ltda.

—

Joint venture

Brazil

Real

Wood

8,165

6,913

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 14. CONSOLIDATED FINANCIAL STATEMENTS

Subsidiaries

Merger of forest companies

For several years now, the functioning of forest subsidiaries Forestal Celco S.A., Forestal Valdivia S.A. and Bosques Arauco S.A., has been gradually unified through the standardization of processes and services (planning, human resources, safety and occupational health), a measure which has further intensified on occasion of the FSC certification process and of the creation of the new management department of forestry operations.

For the purpose of continuing to optimize processes and adopt the best practices within the Forest Business’s operations, the abovementioned companies shall be integrated through a gradual process of mergers. Said task began with the integration of companies Bosques Arauco S.A. and Forestal Valdivia S.A., which - prior approval of their respective shareholders - merged as from July 1, 2013, operating under the name Forestal Valdivia S.A.

Later, the newly created Forestal Valdivia S.A. shall be integrated with Forestal Celco S.A. and, thus, most of Arauco’s forestry assets shall remain under only one Company. This Company shall have three operational centers: North, Center and South, that shall be equivalent to what Forestal Celco, Bosques Arauco and Forestal Valdivia are currently.

Bosques Arauco S.A., the company merged on July 1, 2013, contributed its assets and liabilities at carrying amount.

On that same date, Forestal Arauco S.A. was split-off, creating company Forestal Viñales S.A., to which shares in Forestal Celco S.A. were contributed. This operation - which had no effect in the results - was performed within the context of the final restructuring and merging process of the aforementioned forest companies.

The above mergers did not generate accounting effects in the current consolidated financial statements, since they were considered as a reorganization of companies under joint control.

As of September 1, 2013, Forestal Arauco S.A. merged and absorbed Forestal Valdivia S.A., a transaction which generated a tax gain (Income Tax Act, Article 31, No. 9), of 97 million dollars, sum which entailed the registration of an asset corresponding to deferred taxes for 19 million dollars (See Note 6).

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Investments

Dated January 1, 2013, the company Arauco Panels Canada ULC merged with its subsidiary Flakeboard Company Ltd., which had no effect on the results of this operations.

Below are the investments or contributions to subsidiaries made in 2012, which had no effect on results, except for the acquisition of assets made by Arauco Panels USA, LLC.

On September 24, 2012, Arauco through its Canadian subsidiary Arauco Panels Canada ULC, acquired all of the shares of the Canadian entity, Flakeboard Company Limited (hereinafter “Flakeboard”) for ThU.S.$ 242,502.

Flakeboard is one of the leading producers of wood panels in North America, that directly and/or through its subsidiaries, owns and operates seven panel plants, with an aggregated production capacity of 1.2 million cubic meters per year for medium density fiberboards, a production capacity of 1.1 million cubic meters per year for particle board panels, and a production capacity of 180,000 cubic meters per year of melamine textured product.

Arauco carried out the initial registration of the acquisition of Flakeboard Company Limited based on the information that was available as of that date, and performing a preliminary determination of the allocation of the reasonable values in this Company’s acquisition. As of the closing of September 2013, the amount of the acquired assets and of the assumed liabilities has been determined, entailing a restatement of the financial statements as of December 31, 2012, as per the requirements of IFRS 3. This restatement meant a reallocation of the acquired assets and assumed liabilities.

The reclassified to December 31, 2012 in the statements of financial position presented in following table:


	MUS$
Property, plant and equipments		14,270
Intangible assets - customers and brands		80,847
Goodwill		25,461
Deferred tax		(6,654	)

On November 29, 2011, a new wholly owned subsidiary, Arauco Panels USA LLC, was incorporated through a capital contribution of ThU.S.$62,711, equivalent to 100% ownership, made by our subsidiary Arauco Wood Products, Inc. Subsequently, on January 24, 2012, Arauco Panels USA LLC acquired for ThU.S.$62,711 a Panel Business industrial plant which has a production line of medium density fiberboard (MDF) moldings and high density fiberboard (HDF), a production line of particle board (PB) panels, and two business lines of Melamine products. The plant is located in Moncure, North Carolina, USA. Was determined fair value of the acquired net assets and at the end of June 2012, recognized a gain on the transaction of ThU.S.$16,263.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The following tables exposed the fair values at the date of acquisition of the assets and liabilities acquired in 2012:


	09-24-2012
ARAUCO PANELS CANADA ULC	ThU.S.$
Cash		52,427
Trade and other receivables		42,717
Inventories		43,253
Property, plant and equipment		323,424
Other assets		11,608
Total Assets		473,429
Financial liabilities, current and non- current		184,531
Trade payables		42,527
Other liabilities		3,869
Total Liabilities		230,927


	01-24-2012
ARAUCO PANELS USA LLC.	ThU.S.$
Cash		—
Trade accounts receivable		258
Inventory		13,398
Property, plant and equipment		82,840
Other assets		41
Total Assets		96,537
Trade payables		6,030
Other liabilities		11,533
Total Liabilities		17,563

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The following table sets forth the amounts of revenue and profits or losses recognized from the date of acquisition by investment in Arauco Panels Canada ULC (now Arauco Company Ltd.) and in Arauco Panels USA LLC:


	09-24-2012 to 12-31-2012
Arauco Panels Canada ULC	ThU.S.$
Revenue		131,094
Profit/(Loss)		(5,558	)

Arauco Panels USA LLC	01-24-2012 to 12-31-2012
	ThU.S.$
Revenue		115,911
Profit/(Loss)		(5,321	)

The following table sets forth the revenue and recognized results as if the acquisition date had been as of the beginning of the annual investment in Arauco Panels Canada ULC (now Arauco Company Ltd.):


	January - December 2012
Arauco Panels Canada ULC	ThU.S.$
Revenue		518,071
Profit/(Loss)		4,711

For the purchase of net assets made by Arauco Panels USA, LLC, a negative goodwill was generated, which is presented in the income statement by function under Other gains (losses) and sets out in the following table.


	2012
Arauco Panels USA, LLC	ThU.S.$
Amount paid		62,711
Fair value of assets and liabilities acquired		78,974
Negative goodwill		16,263

The details of the subsidiaries included in the consolidation of Arauco are disclosed in Note 13.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 15. INVESTMENTS IN ASSOCIATES

At September 30, 2013, there are no new investments in associates to report.

In the months of January, February and April of year 2012, payments were made capital contributions for a total of ThU.S.$13,492 to society Puertos y Logística S.A. ( Ex Puerto Lirquén S.A.). Such contributions imply that at the date of these financial statements, Arauco owns 20.28% of the issued capital of such company.

On April 2012, Centaurus Holding S.A., merged with Florestal Vale Do Corisco S.A., latter being the successor entity. Subsequently, in May 2012, Klabin S.A., decreased capital by Florestal Vale Do Corisco SA, and as a result, Arauco Forest Brasil S.A., increased from 43% to 49% its participation in that company.

The following tables set forth information about Investments in associates as of September 30, 2013 and December 31, 2012, respectively:


Name	Puertos y Logística S.A.
Country	Chile
Functional Currency	U.S. Dollar
Corporate purpose	Docking and warehousing operations for proprietary use and third party own assets, cargo of all classes of goods, as well, as warehousing and transport operations.
Ownership interest (%)	20.2767%	20.2767%
	09-30-2013	12-31-2012
Carrying amount	ThU.S.$ 64,675	ThU.S.$ 63,384


Name	Inversiones Puerto Coronel S.A.
Country	Chile
Functional Currency	U.S. Dollar
Corporate purpose	Investments in movables and real estate, acquisition of companies, securities and investment instruments, investment management and development and/or participation in all kind of businesses and companies related to industrial, shipping, forestry and commercial activities.
Ownership interest (%)	50.0000%
	09-30-2013	12-31-2012
Carrying amount	ThU.S.$ 37,340	ThU.S.$ 35,780


Name	Servicios Corporativos Sercor S.A.
Country	Chile
Functional Currency	Chilean Pesos
Corporate purpose	Consulting services related to business management to Boards of Directors and Senior Management of all Arauco’s entities.
Ownership interest (%)	20.0000%
	09-30-2013	12-31-2012
Carrying amount	ThU.S.$ 1,096	ThU.S.$ 1,214

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


Name	Stora Enso Arapoti Industria de Papel S.A.
Country	Brazil
Functional Currency	Brazilian Real
Corporate purpose	Industrialization and commercialization of paper and cellulose, raw materials and by-products
Ownership interest (%)	20.0000%
	09-30-2013	12-31-2012
Carrying amount	ThU.S.$ 31,201	ThU.S.$ 40,821


Name	Genómica Forestal S.A.
Country	Chile
Functional Currency	Chilean Pesos
Corporate purpose	Developing forestry genomics, through the use of biotechnological, molecular and bioinformatics tools with the purpose of strengthening genetic programs so as to improve the competitive position of the Chilean forestry industry for priority tree species.
Ownership interest (%)	25.0000%
	09-30-2013	12-31-2012
Carrying amount	ThU.S.$ 57	ThU.S.$ 65


Name	Consorcio Tecnológico Bioenercel S.A.
Country	Chile
Functional Currency	Chilean Pesos
Corporate purpose	Developing of technologies which will allow implementing a biofuel industry in Chile, obtained from lingo-cellulosic materials. The future execution of this sustainable project is financed by the Innova Chile Committee.
Ownership interest (%)	20.0000%
	09-30-2013	12-31-2012
Carrying amount	ThU.S.$ 399	ThU.S.$ 326


Name	Novo Oeste Gestao de Ativos Florestais S.A.
Country	Brazil
Functional Currency	Real
Corporate purpose	Management of forestry activities and commercialization of wood and others.
Ownership interest (%)	48.9912%
	09-30-2013	12-31-2012
Carrying amount	(ThU.S.$ 13,782)	(ThU.S.$ 8,610)


Name	Vale do Corisco S.A.
Country	Brazil
Functional Currency	Brazilian Real
Corporate purpose	Management of forestry activities.
Ownership interest (%)	49.0000%	43.0500%
	09-30-2013	12-31-2012
Carrying amount	ThU.S.$ 195,055	ThU.S.$ 211,881

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Summarized Financial Information of Associates


09-30-2013
	Assets
	Puertos y			Inversiones Puerto			Serv.Corporativos			Stora Enso Arapoti			Novo Oeste Gestao de			Vale do			Consorcio Tecnológico			Genomica
	Logistica S.A.			Coronel S.A.			Sercor S.A.			Ind.de Papel S.A.			Ativos Florestais S.A.			Corisco S.A.			Bioenercel S.A.			Forestal S.A.			Total
Current		80,911			17			1,011			99,105			8,195			13,666			5,477			1,079			209,461
Non-current		312,045			74,723			8,021			60,608			134,702			508,762			1,211			591			1,100,663
Total		392,956			74,740			9,032			159,713			142,897			522,428			6,688			1,670			1,310,124


	Liabilities
	Puertos y			Inversiones Puerto			Serv.Corporativos			Stora Enso Arapoti			Novo Oeste Gestao de			Vale do			Consorcio Tecnológico			Genomica
	Logistica S.A.			Coronel S.A.			Sercor S.A.			Ind.de Papel S.A.			Ativos Florestais S.A.			Corisco S.A.			Bioenercel S.A.			Forestal S.A.			Total
Current		27,669			51			1,826			27,740			135,149			4,576			4,691			1,439			203,141
Non-current		46,326			9			1,725			1,965			35,874			119,781			0			0			205,680
Equity		318,961			74,680			5,481			130,008			(28,126	)		398,071			1,997			231			901,303
Total		392,956			74,740			9,032			159,713			142,897			522,428			6,688			1,670			1,310,124

Revenues		66,306			310			3,008			117,833			64			40,515			799			268			229,103
Expenses		(59,308	)		0			(3,305	)		(114,097	)		(12,660	)		(27,851	)		(900	)		(288	)		-218,409
Profit or loss		6,998			310			(297	)		3,736			(12,596	)		12,664			(101	)		(20	)		10,694


12-31-2012
	Assets
	Puertos y			Inversiones Puerto			Serv.Corporativos			Stora Enso Arapoti			Novo Oeste Gestao de			Vale do			Consorcio Tecnológico			Genomica
	Logistica S.A.			Coronel S.A.			Sercor S.A.			Ind.de Papel S.A.			Ativos Florestais S.A.			Corisco S.A.			Bioenercel S.A.			Forestal S.A.			Total
Current		128,879			17			3,390			129,557			6,718			14,427			5,087			623			288,698
Non-current		270,393			71,600			8,266			77,658			115,753			546,037			1,659			614			1,091,980
Total		399,272			71,617			11,656			207,215			122,471			560,464			6,746			1,237			1,380,678

	Liabilities
	Puertos y			Inversiones Puerto			Serv.Corporativos			Stora Enso Arapoti			Novo Oeste Gestao de			Vale do			Consorcio Tecnológico			Genomica
	Logistica S.A.			Coronel S.A.			Sercor S.A.			Ind.de Papel S.A.			Ativos Florestais S.A.			Corisco S.A.			Bioenercel S.A.			Forestal S.A.			Total
Current		45,162			50			4,141			31,481			667			2,932			5,114			978			90,525
Non-current		41,514			6			1,444			0			138,843			125,123			0			0			306,930
Equity		312,596			71,561			6,071			175,734			(17,039	)		432,409			1,632			259			983,223
Total		399,272			71,617			11,656			207,215			122,471			560,464			6,746			1,237			1,380,678


09-30-2012
Revenues		69,666			0			3,159			130,850			9,430			167			926			1,032			215,230
Expenses		(48,631	)		(939	)		(3,083	)		(100,137	)		(177	)		(104	)		(1,086	)		(1,055	)		(155,212	)
Profit or loss		21,035			(939	)		76			30,713			9,253			63			(160	)		(23	)		60,018

(*)	Includes only Investment in associates.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Movement in Investment in Associates and Joint Ventures


	09-30-2013			12-31-2012
	ThU.S.$			ThU.S.$
Opening balance as of January 1		1,048,463			886,706
Changes
Investments in associates, Additions		278			13,562

Investment in joint ventures, Additions		76,672			159,692
Disposals, Investments in associates		(55,000	)		(6,607	)

Share of profit (loss) in investment in associates		3,697			17,947

Share of profit (loss) in investment in joint ventures		1,483			(3,694	)

Dividends Received, Investments in Associates		(16,002	)		(3,057	)
Increase (Decrease) in foreign exchange currency on translation of Associates and Joint Ventures		(20,785	)		(21,879	)
Other increase (decrease) in investment and associates and joint ventures		9,652			5,793
Total changes		(5	)		161,757
Ending balance		1,048,458			1,048,463


	09-30-2013		12-31-2012
	ThU.S.$		ThU.S.$
Carrying amount of associates accounted for using equity method		329,824		353,472

Carrying amount of joint ventures accounted for using equity method		718,634		694,991

Total investment accounted for using equity method		1,048,458		1,048,463

NOTE 16. INTERESTS IN JOINT VENTURES

Investments and contributions made

As of September 30, 2013, Arauco, through its subsidiary Arauco Holanda Cooperatief U.A, made capital contributions for a total of ThU.S.$76,672 (ThU.S.$145,977 as of December 31, 2012) to two Uruguayan joint ventures, Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A., with Arauco holding 50% ownership interest in the joint venture. This transaction had no effect on results.

Celulosa y Energia Punta Pereira S.A. and Zona Franca Punta Pereira S.A. are both involved in the project known as “Montes del Plata”, the purpose of which is to build a cutting edge cellulose production plant, with a capacity of 1.3 million tons per year, a port and an energy generation unit utilizing renewable resources, which will be located at the town of Punta Pereira, Province of Colonia, Uruguay.

In March 2012 Arauco do Brasil S.A. (a subsidiary) made a capital contribution to Unilin Arauco Pisos Ltda. ( Ex Arauco Pisos Laminados S.A.) in the form of assets for a total of ThR$24,990 (ThU.S.$11,230 at September 30, 2013) for the flooring line of the Pien location (Paraná Brasil), no gain or loss was recognized on this contribution. In April 2012, Arauco sold a 50% interest of Unilin Arauco Pisos Ltda. to Mohwak Unilin International B.V. for ThR$12,500 (ThU.S.$5,617 at September 30, 2013), becoming a joint venture. The sale

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

price for this transaction was equivalent to its carrying amount, thus had no effect on profit or loss. This company is engaged in manufacturing, processing, industrialization and selling of wood laminate floors.

At the date of these financial statements, Arauco has committed capital contributions and/ or loans to Montes del Plata for 47 million euros (equivalent to ThU.S.$ 63,574).

Investments in Uruguay

The main assets acquired from former owner Grupo Empresarial Ence (Spanish company) during the year 2009 are: 130,000 hectares of land of which 73,000 hectares are forestry plantations; 6,000 hectares under agreements with third parties; one industrial site, the necessary environmental permits for the construction of a pulp mill; a river terminal; one chip producing mill, and one forest nursery.

All these assets were added to the land and plantations that Stora Enso and Arauco already control through a joint venture in Uruguay. With these additions, the joint venture currently maintains ownership interest in forestry area of approximately 220 thousand hectares of land, of which 135 thousand hectares are planted.

Investments in Uruguay are joint ventures because of existing contracts that stipulate that both Arauco and Stora Enso maintain joint control of such investments, each holding a 50% stake.

Furthermore, Arauco holds a 50% in Eka Chile S.A. (“Eka”), a company that sells sodium chlorate to cellulose plants in Chile. A contractual agreement in effect between Arauco and Eka has permitted Arauco and Eka to initiate certain joint venture activities.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The following tables set forth summarized financial information of the more significant interests in joint ventures:

09-30-2013

12-31-2012

Celulosa y Energía Punta Pereira S.A.

Assets

Liabilities

Assets

Liabilities

(Uruguay)

ThU.S.$

Current

48,484

179,601

207,222

105,029

Non-current

1,808,101

1,054,744

1,396,689

965,918

Equity

622,240

532,964

Total Joint Venture

1,856,585

1,603,911

Investment

311,120

266,482


	09-30-2013			09-30-2012
	ThU.S.$			ThU.S.$
Income		3,704			8,983
Expenses		(30,025	)		(18,708	)
Joint Venture Net Income (Loss)		(26,321	)		(9,725	)

09-30-2013

12-31-2012

Forestal Cono Sur S.A. (consolidated)

Assets

Liabilities

Assets

Liabilities

(Uruguay)

ThU.S.$

Current

53,698

49,734

145,133

66,794

Non-current

174,992

668

172,741

Equity

178,288

251,074

Total Joint Venture

228,690

317,874

Investment

89,144

125,537


	09-30-2013			09-30-2012
	ThU.S.$			ThU.S.$
Income		40,386			2,670
Expenses		(3,172	)		(15,951	)
Joint Venture Net Income (Loss)		37,214			(13,281	)

09-30-2013

12-31-2012

Eufores S.A. (consolidated)

Assets

Liabilities

Assets

Liabilities

(Uruguay)

ThU.S.$

Current

117,972

360,832

72,789

288,443

Non-current

653,390

17,016

618,704

868

Equity

393,514

402,182

Total Joint Venture

771,362

691,493

Investment

196,678

201,016


	09-30-2013			09-30-2012
	ThU.S.$			ThU.S.$
Income		41,388			36,197
Expenses		(50,065	)		(57,235	)
Joint Venture Net Income (Loss)		(8,677	)		(21,038	)

09-30-2013

12-31-2012

Zona Franca Punta Pereira S.A.

Assets

Liabilities

Assets

Liabilities

(Uruguay)

ThU.S.$

Current

10,812

82,600

9,996

40,818

Non-current

347,251

87,093

266,076

89,252

Equity

188,370

146,002

Total Joint Venture

358,063

276,072

Investment

94,185

73,001


	09-30-2013			09-30-2012
	ThU.S.$			ThU.S.$
Income		5,047			5,605
Expenses		(5,183	)		(5,029	)
Joint Venture Net Income (Loss)		(136	)		576

09-30-2013

12-31-2012

Assets

Liabilities

Assets

Liabilities

Unilin Arauco Pisos Ltda.

ThU.S.$

Current

9,047

5,030

8,294

3,054

Non-current

5,360

5,893

Equity

9,351

11,133

Total Joint Venture

14,407

14,187

Investment

4,676

5,645


	09-30-2013			09-30-2012
	ThU.S.$			ThU.S.$
Income		5,241			9,592
Expenses		(6,313	)		(10,199	)
Joint Venture Net Income (Loss)		(1,072	)		(607	)

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

09-30-2013

12-31-2012

Assets

Liabilities

Assets

Liabilities

Eka Chile S.A.

ThU.S.$

Current

23,714

4,109

28,271

8,001

Non-current

30,071

4,011

30,191

3,840

Equity

45,665

46,621

Total Joint Venture

53,785

58,462

Investment

22,833

23,310


	09-30-2013			09-30-2012
	ThU.S.$			ThU.S.$
Income		44,675			51,137
Expenses		(42,717	)		(48,781	)
Joint Venture Net Income (Loss)		1,958			2,356

NOTE 17. IMPAIRMENT OF ASSETS

Effects of forestry fire

On January 2, 2012, Paneles Arauco S.A.’s industrial facilities were materially damaged due to forestry fires. Such industrial facilities had production capacity of 450 thousand cubic meters of panels per year.

The fire destroyed the machinery, equipment and facilities of the panel processing area, as well as the administration buildings and inventory warehouses. It also damaged the operations of the biomass energy generation facility. The operations resumed on January 6, 2012.

Paneles Arauco S.A. had insurance policies covering fire damages. The insurance policies covered damages in the plants, industrial and non-industrial facilities, equipment, machinery, inventories, as well as losses due to business interruption.

All expenses due to fire damages were recognized as incurred. Insurance reimbursements were recognized as receivables once sufficient supporting documentation that the reimbursement would be received and/or at the date the reimbursement was received.

The line items in the financial statements as of December 31, 2012 include the following relating to the effect of the forestry fire:

•

Trade and other current receivables include insurance reimbursements not yet received for ThU.S.$29,819 relating to damages to property, plant and equipment, Inventories and business interruption.

•

Impairment loss of ThU.S$70,161 in line item property, plant and equipment.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

•

Inventories write down of ThU.S.$19,841.

•

During April and August 2012, Arauco received ThU.S.$120,000, as insurance reimbursement out of which ThU.S.$40,000 relates to business interruption losses, ThU.S.$70,000 to physical damage of property, plant and equipment and ThU.S.$10,000 to inventories losses.

During August and December 2012, Arauco received reimbursements from insurance relating to damaged inventory and property, plant and equipment.

•

The insurance reimbursement for inventory damaged was ThUS$20,801, which at the end of the reporting period has been fully received.

•

The insurance reimbursement received in December 2012, for property, plant and equipment damaged and business interruption losses were ThUS$96,986 and ThUS$46,088, respectively. As of December 31, 2012, an outstanding amount of ThUS$29,819 is yet to be received, which has been presented as trade and other current receivables.

Other effects

In December 2011, particle board (PBO) lines of Curitiba Plant (Brazil) were shut down due to higher cost of maintenance. The Company recognized an impairment loss of ThUS$6,088 related to machinery and equipment.

In the period 2013, there are no new provisions for impairment associated cash generating units to inform.

Disclosure of Impairment Losses of Assets

At September 30, 2013 and at December 31, 2012, respectively are presented provisions for Impairment of Property, Plant and Equipment due to technical obsolescence

Disclosure of Asset Impairment


Principal classes of Assets affected by Impairment and Reversal of Losses	Machinery and Equipment
Principal Facts and Circumstances that lead to Recognizing Impairment and Reversal of losses	Technical Obsolescence and Claim
	09-30-2013	12-31-2012
Information relevant to the sum of all impairment	ThU.S.$ 5,000	ThU.S.$ 4,720

Goodwill

Goodwill is allocated to the groups of cash-generating units that are expected to benefit from the synergies of the combination. The goodwill generated by the investment in Arauco do Brasil S.A. (formerly Tafisa) was allocated to the Pien panel segment plant. The recoverable amount of the cash-generating unit was determined based on calculations of its value in use. For this calculation we used the expected future cash flows based on the operational plan approved by the management for 10-year period, applying a discount rate

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

of 10%, which does not exceed the long-term average growth rate for the panel segment in Brazil. As of September 30, 2013 this goodwill amounted to ThU.S.$ 47,637 (ThU.S.$ 51,649 as of December 31, 2012) for a total of goodwill of ThU.S$ 54,406. The change in the balance of goodwill from Brasil is due only to the exchange difference on translation. Therefore, there has been no increase in the provision of deterioration.

NOTE 18. PROVISIONS, CONTINGENT ASSETS AND CONTINGENT LIABILITIES

Lawsuits or other Legal Proceedings

The contingent liabilities that Arauco deems appropriate to disclose are as follows:

Celulosa Arauco y Constitucion S.A.

1. On April 27, 2005, the National Defense Council (Consejo de Defensa del Estado) filed a civil lawsuit against Celulosa Arauco y Constitucion S.A. for reparation of environmental harm and indemnification, caused by the Valdivia Mill Plant, before the First Civil Court of Valdivia (Primer Juzgado Civil de Valdivia) (Rol 746-2005).

The Company filed its response, arguing that it is not responsible for the environmental damages and therefore that the indemnification payments as well as the alleged reparation, are inadmissible. Currently, expert reports have already been submitted, most of which were against the Company’s position. On September 5, 2011, observations regarding the experts’ reports were presented. The inspection of the court was held on the 13, 14 and 15 of March 2012. On March 13, 2013 the Court ordered the parties to hear judgment.

Subsequently, on March 26, 2013, the Court summoned the parties to two settlement hearings, which were conducted without positive results. Celulosa Arauco y Constitución S.A. mentioned to the Court a settlement proposal that it had submitted to evaluation.

On July 27, 2013, a first instance definitive ruling was issued in favor of the claim, with court expenses, particularly ordering that the company execute (at its own cost) the following measures in order to preserve the Nature Sanctuary:

To perform a study of the current status of the Wetland, through an interdisciplinary team comprised of various experts in the fields of biology, chemistry and physics, for which it must create an independent committee in which the parties participate, for a term that shall not exceed one year. The studies shall include the status of water and the Wetland’s flora and fauna.

The creation of an artificial wetland, as a sentinel controlled environment, with representative species of the río Cruces, which receive the first impact of the discharge of riles, which shall be located immediately after the tertiary treatment and before their discharge into the Río Cruces.

The performance of a constant environmental monitoring program by the defendant company, for a period that shall not be inferior to 5 years, which shall be conducted pursuant with the environmental assessment conditions set froth in RCA 279/98 and its subsequent amendments, by the competent authorities, notwithstanding those that may order.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The creation of a Wetlands Investigation Center, pursuant with what has been proposed by the defendant company.

Community development programs related to the Wetland, in the manner that has been proposed by the defendant company.

With regards to damages, the ruling fails to specify their nature or amount, which will therefore have to be subsequently determined.

Said ruling was notified to the Company on August 9, 2013. After a thorough analysis of the ruling, Celulosa Arauco y Constitución S.A. decided to abide by it, since the environmental problems that occurred in the Carlos Andwanter wetland in year 2004 were caused mainly by the Celulosa Valdivia plant. This decision was made because it would allow for the creation of the conditions for commencing - as soon as possible - the effective implementation of measures in favor of the Wetland, without waiting for further judicial terms.

Currently the judgment is enforceable.

2. On August 25, 2005, the Chilean Servicio de Impuestos Internos (the “Chilean IRS”) issued tax calculations No. 184 and No. 185 of 2005, objecting to certain capital reduction transactions effected by Arauco on April 16, 2011 and October 31, 2001, and furthermore, requested reimbursement from the Company for amounts returned to it in respect of certain claimed tax losses. On November 7, 2005, the Company requested a Review of the Supervision Action (Revisión de la Actuación Fiscalizadora, or “RAF”), which is an administrative review of the tax action brought by the Chilean IRS, and filed a claim disputing the abovementioned tax calculations No. 184 and 185 of 2005. The RAF was resolved on January 9, 2009 by the Chilean IRS, which resolution, however, only partially sustained the Company’s request. In response, the Company filed an additional complaint with regard to the portion of the RAF that was not granted by the administrative review. On February 19, 2010, the Court acknowledged receipt of the Company’s request. Subsequently, the tax authority issued a report and the Company commented on such report. This case is currently pending.

3. On September 22, 2011 Celulosa Arauco y Constitucion S.A. was notified of a civil claim for compensation of prejudice for an alleged tort liability, filed by twelve fishermen of the Mataquito river before the Court of First Instance, Guarantee and Family of Licantén under Docket number 73-2011, arising out of the dead fish allegedly found in the Mataquito river on September 5, 2007 caused by the Licancel Plant. The plaintiffs seek to be compensated for alleged damages that they have suffered from the aforementioned event, including lost profits, harm and suffering and an alleged contractual liability. Probationary period was finished, only need to be answered two letters addressed to several authorities and solve some incidences raised.

4. On December 20, 2012, the Company was notified of the civil damages claim in summary proceedings, lodged by a group of settlers in the La Concepción sector, near to the Nueva Aldea Plant, the settlers are claiming compensation for alleged environmental

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

damages that affected their quality of life. The claim demands monetary and non-monetary damages. The purported damages refer to atmospheric emissions, pollution in streams, risks related with truck transit and forest fire risks.

On December 27, 2012, the Company requested and obtained from the Court that the lawsuit be treated as ordinary and not summary proceedings. Currently the case is pending issued the corresponding self-test, having already exhausted the discussion period.

Alto Paraná S.A.

1. (i)On October 8, 2007, the Federal Administration of Public Income (Administración Federal de Ingresos Públicos) (“AFIP”) initiated an ex oficio proceeding against the Company’s Argentine affiliate Alto Paraná S.A. (“APSA”) questioning whether APSA erred in deducting from its income tax liability certain expenses, interest payments and exchange rate differences generated by Private Negotiable Obligations which were issued by APSA in 2001 and paid in 2007.

On November 20, 2007, APSA submitted a counterclaim to the claims presented by AFIP, completely rejecting all of AFIP’s allegations and asserting legal arguments that justify its actions in the determination of its tax burden.

On December 14, 2007, AFIP notified APSA that its counterclaim had been dismissed, thus issuing an ex oficio ruling and ordering the payment, within 15 working days, of the calculated income tax difference for the 2002, 2003 and 2004 fiscal years of $417,908,207 Argentine Pesos including capital (ThU.S.$ 72,185 at September 30, 2013), compensatory interest, and fines for omission.

On February 11, 2008, APSA appealed the aforementioned ruling before the National Tax Court (Tribunal Fiscal de la Nación) (“TFN”).

On February 8, 2010, APSA was notified of TFN’s ruling, which confirmed the ruling issued by AFIP, with court expenses, based on arguments different from those that justified AFIP’s ex oficio decision. This decision by the TFN extinguished the administrative process. As a result, the Company’s only remaining option was to pursue a remedy before the Contentious Administrative Matters Federal Appeals Court (Cámara de Apelaciones en lo Contencioso Administrativo Federal) (“CACAF”) and, subsequently, the National Supreme Court of Justice (Corte Suprema de Justicia de la Nación).

On February 15, 2010, APSA appealed before the CACAF, making all necessary submissions with the purpose of attaining a revocation of the contested decision. APSA paid litigation fees (tasa de justicia) in the amount of $5,886,053 Argentine Pesos (ThU.S.$1,017 at September 30, 2013).

On March 18, 2010, the CACAF issued a court decree in which it ordered the AFIP to refrain from requesting the blocking of preventive interim relief measures, administratively demanding payment, issuing debt invoices, or initiating judicial collection actions, including seizure of property and other enforcement measures, against APSA until CACAF reaches a decision on APSA’s request for an injunction.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

On May 13, 2010, the CACAF decided to grant the injunction requested by APSA, ordering to suspend the enforcement of the AFIP resolution until the final decision on this matter. This injunction was granted by the CACAF subject to the granting of a corresponding bond. On May 19, 2010, APSA filed with the Appeal Court a surety policy issued by Zurich Argentina Cía. de Seguros S.A. On May 20, 2010, the CACAF asked APSA to specify the areas covered by the suretyship insurance. On May 28, 2010 APSA complied with this request and attached Endorsement No. 1 of the surety policy in favor of the CACAF – Trial Chamber I – in the amount of $ 633,616,741 Argentine Pesos (equivalent to ThU.S.$109,444 as of September 30, 2013), which includes initial capital, plus adjustments and interests to the date of the bond. On June 2, 2010 the CACAF accepted this surety filed by APSA and sent notice to AFIP of the injunction granted. On June 4, 2010 the AFIP was notified of the ruling dated May 13, 2010, which is final since June 22, 2010.

On February 01, 2013, APSA received notice of the decision dated December 28, 2012, whereby the I Chamber of Appeals rejected the appeal lodged by the Company, confirming the ex officio determination of the AFIP, and imposed the judicial fees for both instances as per their generation, since there was contradictory case law. The Company appealed this decision before the Supreme Court of the Nation via the various legal procedural remedies available. On February 4, 2013, the Company filed an ordinary appeal against the Chamber’s decision and on February 19, 2013, it also filed an extraordinary appeal against the same judgment, both before the Supreme Court of the Nation. On May 6, 2013, APSA was notified of the decision of the Court of Appeals that, as of April 23, 2013 granted the ordinary appeal to the Supreme Court of Justice of the Nation and was present, to her chance the Extraordinary Appeal field. On May 27, 2013, the file was forwarded to the Supreme Court of Justice of the Country. On June 3, 2013, APSA was notified of the procedural ruling issued by the High Court on May 29, 2013, declaring that the Ordinary Appeal had been duly received. On June 17, 2013, APSA submitted a duly founded presentation in connectin to the Appeal, which the Corte subsquently ordered to be transfered to AFIP, circumstance which was notified on June 28, 2013.

The reasoning of the Chamber of Appeals’ decision did not modify the opinion of our external counsel in that the Company acted in accordance with law when deducting the interest, expenses and exchange differences in the indebtedness challenged by the State, and they still hold that there are good possibilities for the decision to be quashed, rendering without effect AFIP’s ex officio determination.

(ii)Within the course of this case’s proceedings, and particularly regarding payment of the litigation fees (tasa de justicia) before the TFN, on July 18, 2008, the Examining Officer ordered APSA to pay $10,447,705 Argentine Pesos (ThU.S.$1,805 at September 30, 2013) as payment of Tasa de Actuación (Litigation Fee) before the TFN. On August 14 2008, APSA filed a petition with the court requesting that this order be reconsidered, or in the alternative, rejected on the grounds that the requested amount was unreasonable. APSA provided evidence that it had paid $1,634,914 Argentine Pesos (ThU.S.$282 at September 30, 2013), considering that this was the actual amount due, pursuant to Law, for the Tasa de Actuación (Litigation Fee). On April 13, 2010, the First Courtroom of the CACAF denied APSA’s appeal. On April 26, 2011 APSA filed an ordinary appeal against the latter decree before the Supreme Court of the Justice, which was granted on February, 3, 2011. On June 23, 2011 the brief with the ordinary appeal was filed before the Supreme Court. On July, 14,

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

2011 the AFIP answered the petition of this brief. On May 8, 2012, the Supreme Court ruled that the ordinary remedy was wrongly admitted, since the appealed sentence was not a final ruling. The case file was returned to Chamber I of the National Appeals Court of Adversarial Administrative Matters. On June 15, 2012, APSA requested that the case be suspended until the substantial issues of the case were resolved, a request which was rejected by the CACAF on June 25, 2012. On July 2, 2012, APSA filed a motion to reconsider, requesting that such ruling be rendered ineffective and the extraordinary proceeding be suspended until the substantial issues of the case were ruled on, also expressing that it still maintained its interest in the extraordinary remedy that was submitted. On August 21, 2012, APSA filed a presentation which expressed its interest to maintain the extraordinary appeal. Based on their analysis of the grounds underlying the appeal, APSA’s counsel has an optimistic view of the case.

2. On November 28, 2008, Alto Paraná S.A. (APSA) was notified of Resolution 212 issued by the Argentine Central Bank (BCRA) on November 19, 2008, by which the BCRA ordered Indictment No. 3991 questioning the timely liquidation of certain foreign currency.

With respect to APSA’s export proceeds. APSA responded to the charges in a timely and correct manner. Currently, the report is in Nº 8 Economic Criminal Court, 16th Secretariat.

As of the date of these consolidated financial statements and considering the preliminary state of proceedings, Alto Paraná S.A. (APSA) legal advisors are not in a position to estimate the outcome. Therefore, with the understanding that there are no legal grounds for the charges, no provision has been made for this claim. At the closing date there are no other contingencies that might significantly affect the Company’s financial, economic or operational conditions.

Arauco do Brasil S.A.

On November 8, 2012, Brazilian Tax Authorities issued an Infraction Notice against one of our Brazilian subsidiaries, Arauco do Brasil S.A., for alleged unpaid taxes purportedly due by such company for the years 2006 to 2010 in the aggregate amount of R$172 million (approximately US$85 million). In particular, the Tax Authorities (i) objected to the deductibility of certain payments made and expenses incurred (including premium amortization, interest and legal expenses) by Arauco do Brasil between 2005 and 2010 and (ii) alleged that Arauco do Brasil made certain underpayments in respect of the Brazilian Corporate Income Tax (“IRPJ”) and the Brazilian Social Contribution on Net Profits (“CSL”) during 2010. Currently, the aggregate amount of the claims asserted in the Infraction Notice, plus interest, correspond to R$177 million (approximately US$88 million).

On December 11, 2012, Arauco do Brasil filed an objection to cancel the Infraction Notice before the Judgment Office of the Brazilian Revenue Service, first administrative level. As of the date of this annual report, judgment in respect of this objection remains pending. The Company believes that its objection to the Infraction Notice is supported by solid legal arguments and that there is a reasonable likelihood that this matter will result in a favorable outcome for the Company. However, if this result does not occur, it is possible that an obligation will arise for the amount specified, plus any accrued interest and penalties as of the payment date.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Forestal Celco S.A.

1. On April 14, 2009, Forestal Celco S.A. was notified of a civil lawsuit filed by Mario Felipe Rojas Sepúlveda, on behalf of Víctor Adrián Gavilán Villarroel against Cooperativa Eléctrica de Chillán Limitada and against Forestal Celco S.A. The lawsuit aims to make both companies jointly and severally liable for compensation of alleged material damages suffered as a result of a fire that occurred on January 12, 2007 on the El Tablón county property, which belongs to Forestal Celco S.A.

On April 30, 2009 Forestal Celco S.A. filed dilatory exceptions, which pointed to some defects in the demand. The plaintiff rectified the defects, and the Company replied to the demand. On March 8, 2011 the Court issued the legal judgment of first instance rejecting the claim. On March 21, 2011, the plaintiff appealed against the first instance verdict. The Court of Appeals confirmed the Civil Court’s ruling. The plaintiff filed cassation appeals before the Supreme Court, and their decision is still pending. The Court of Appeals of Chillán rejected both appeals. Against the latter judgment, the plaintiff filed a cassation appeal on the merits and the form. The case was forwarded to its Excellence the Supreme Court. The Company appeared before the Court on October 11, 2012, under case file No. 7610-2012. The case is currently pending.

2. On January 26, 2011, Forestal Celco S.A. was notified of a civil claim submitted by Mr. Hans Fritz Muller Knoop against Cooperativa Eléctrica de Chillán Limitada and Forestal Celco S.A., which seeks that both companies be condemned to pay (jointly and severally) an indemnity for the alleged material damages caused as a result of the spreading of a fire on January 12, 2007, in the estate named “El Tablon”, owned by Forestal Celco S.A. Case file N°4.860-2010, in the Second Civil Court of Chillán.

On January 10, 2012, the court ruled first instance verdict condemning both defendants to pay the plaintiff jointly the sum of $288.479.831. Both defendants contested the ruling. On June 4, 2013, the Court of Appeals of Chillán revoked the senence, deciding to reject the claim in all its parts. On June 21, 2013, the plaintiff submitted a Casation Appeal for annullment, based in the inobservance to both procedural and legal provisions. Currently, the declaration of admisibility for these proceedings is pending before the Supreme Court. The case was forwarded to its Excellence the Supreme Court. The Company appeared before the Court on July 10, 2013, under case file No. 4.553-2013. The case is currently pending.

3. On September 26, 2005, in proceedings numbered 48,679-2006 of the Civil Court of Constitución, Forestal Celco S.A. submitted a claim against Forestal Constitución Ltda. and Ms Vitelia Morán Sepúlveda and other 7 natural persons, with the goal of obtaining a ruling that acknowledges its sole ownership over the Lierecillo estate (1,126 hectares), formed by various property registrations, also seeking that the defendants be sentenced to jointly and severally pay $20,000,000 as well as a damage compensation for having harvested a portion of the aforementioned estate. On April 23, 2006, Mr. Adolfo Numi Velasco, acting on behalf of all the aforementioned natural persons, answered the claim requesting its rejection, arguing that his clients are the sole owners of the estate named “El Macaco”, also submitting a counterclaim with the purpose of demanding that Forestal Celco S.A. return the “El Macaco” estate, of 162.7 hectares, plus a damage compensation for the resulting damages, loss of profit and moral damage. On June 29, 2009, a first instance ruling was

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

issued in favor of Forestal Celco S.A’s claim, only with regards to the declaration of ownership, rejecting all other aspects of that claim as well as the corresponding counterclaim. Currently, the case is being reviewed by the Court of Appeals of Talca, under court registration number 267-2012, for a ruling regarding the appeal submitted by the defendant, who is also a counterclaiming plaintiff. Since January 15, 2013, the case file is being studied by the Court Rapporteur, prior to its presentation before the Court. The case is currently pending.

4. On September 11, 2012, Forestal Celco S.A. was served with a voidance claim regarding the partition award and the purchase and sale agreement dated November 28, 1994, referred to the property called “Loma Angosta”, which occupies an area of 281,89 hectares, a claim which also sued for damages. The lawsuit was filed by Julián Eduardo Rivas Alarcón, on behalf of Nimia del Carmen Álvarez Delgado, against Patricia del Carmen Muñoz Zamorano and Forestal Celco S.A. The lawsuit was filed before the Civil and Criminal Court of Quirihue, under docket number C-108-2012. On October 4, 2012, Forestal Celco S.A. submitted before the court a relative incompetence defense. On October 10, 2012, the other co-defendant also filed a defense arguing the Court’s relative incompetence. The Court’s decision on both defenses is currently pending. On October 4, 2012 Forestal Celco S.A. opposed dilatory exception of relative incompetence. Dated October 10, 2012, the other defendant also objected dilatory exception of lack of jurisdiction. Both exceptions are pending resolution by the Court. On August 1, 2013, the Court decided to dismiss the motions to correct the proceedings on formal grounds submitted by both defendants - additionally sentencing them to pay court costs - a ruling that was appealed by Forestal Celco S.A. In parallel, on August 7, 2013, Forestal Celco S.A. filed a motion to declare the proceedings abandoned, a request that was rejected by the Court on August 8, 2013, by way of a resolution that was appealed by Forestal Celco S.A. The resolution of both appeals is currently pending. On August 13, 2013, Forestal Celco S.A. answered the claim, requesting that it be rejected.

5. On January 4, 2013, Forestal Celco S.A. was served process of a civil claim lodged by Sociedad de Transportes Juan y Joel Cea Cares y Compañía Limitada which seeks to terminate the document known as “General Framework Agreement” including damages allegedly brought by Forestal Celco S.A. The company was notified of citation to a conciliation hearing on August 13, 2013 (Case File No.180-2012 in the Civil Court of Constitución).

Forestal Arauco S.A.

On October 26, 2012, Forestal Valdivia S.A., a subsidiary of Celulosa Arauco y Constitución S.A. was sued for recovery of real property. The aforesaid suit was filed by the community of heirs left after the death of Mrs. Julia Figueroa Oliveiro, which occurred over 60 years ago. That application was lodged with the Civil Court of Loncoche, Docket Number 79-2012, and the lawsuit demanded the recovery and restitution of two estates, with their products and improvements, arguing that the abovementioned community of heirs is the sole and exclusive owner of two real estate properties whose total surface amounts to 1,210 hectares, which would allegedly be occupied by Forestal Valdivia S.A. without any title whatsoever. On January 14, 2013, the Company filed, requesting their complete rejection. The ordinary term for providing evidence has expired as of this date. The conduction of

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

certain evidentiary proceedings requested by the parties during the ordinary term for providing evidence is still pending, and they will be carried out to the extent authorized by the court.

2. On November 17, 2003, Bosques Arauco S.A., now Forestal Arauco S.A., an affiliate of Celulosa Arauco y Constitución S.A., was notified of a property restitution claim brought by Ms. Celmira Maria Curin Tromo, who requested the restitution of certain real estate, its profits and damages in a Special Indigenous Lawsuit, claiming that she is the sole and exclusive owner of the 5.5 hectares of land, which would be occupied materially by Bosques Arauco S.A., in blatant disregard of her property interest. On September 6, 2008, the first instance decision was issued, denying the claim. The decision was appealed and the Corte de Apelaciones de Temuco (High Court of Appeals of Temuco) overturned the decision on January 6, 2009, finding in favor of the plaintiff with regard to every portion of the claim and ordering the restitution of the land, along with all profits and damages caused by Bosques Arauco S.A. to the land, the assessment of which was deferred to the decision’s execution phase.

On October 28, 2009, the plaintiff requested the execution of the ruling with notice to the defendant. Aside from the restitution of the property and its products, and compensation for the alleged moral harm personally experienced by her. After being notified of the request, Bosques Arauco S.A., in turn, requested that this request be nullified on the grounds that the alleged harm and suffering was not an issue in the judicial proceedings and that therefore there was no judgment on a condemn in that sense. This application has not yet been resolved by the court. On July 10, 2013 Bosques Arauco S.A. appropriated amount sued for property damage. On July 15, 2013, the Court had by recorded such amount.

3. In 1999, Bosques Arauco S.A., now Forestal Arauco S.A., was notified of a property recovery claim filed by Ms. Silvia Aurora Escalona Fernández, Mr. Nazario Israel Escalona Fernández and Mr. Carlos Alfonso Escalona Fernández, who demanded the restitution of a portion of land equal to 426.93 hectares located within a larger rural property named Cerro Alto y Las Ánimas, located in the borough of Los Álamos, with a total surface of 505.27 hectares, the claimants having reserved their right to discuss damages for deterioration and products for a later stage in the trial. The claim ultimately requested the court to declare that the claimants are the exclusive and lawful owners of the land named Cerro Alto y Las Ánimas in its entire surface, and, in lieu thereof, in the area determined by the court. The claim was filed before the Civil Court of Lebu, under Case File Number C-16,073-1999. At the appropriate time, the defendant answered the claim noting that the facts presented in said claim were untrue, and that the claimant only had rights and actions over a lot of forty blocks, Bosques Arauco S.A. being the exclusive owner of the land known as Cuyinco Alto, with an aggregate surface of 4,800 hectares. On April 29, 2013, the first instance court issued its decision wholly dismissing the claim. On June 21, 2013, the claimant appealed the first instance judgment by way of an ordinary appeal and a cassation appeal on formal grounds. As of October 11, 2013, both appeals are awaiting their hearing before the Court of Appeals of Concepción. Court File No. 1,229-2013.

4. In 1997, Bosques Arauco S.A., now Forestal Arauco S.A., was notified of a squatting claim filed by Mr. José Miguel González San Martín, who, in his capacity as co-owner and holder of rights and actions over the property known as Cuyinco, located in the borough of Los Álamos, with a surface of 1,250 hectares, argued that Bosques Arauco was unlawfully occupying the abovementioned property and requested that the latter be compelled to

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

restitute the land. Bosques Arauco S.A. answered the claim requesting its dismissal, in light of the fact that said company is the exclusive owner and registered possessor of the Cuyinco Alto property, within which land are the areas known as Cuyinco and Cerro Alto, having acquired the land by a purchase agreement to which the very plaintiff was one of the sellers. The claim was filed before the Civil Court of Lebu. On April 29, 2913, the court of first instance issued its decision wholly dismissing the claim. The claimant appealed the judgment and it was received by the Court of Appeals of Concepción on August 16, 2013. As of October 23, 2013, the appeal is awaiting its hearing before the Court of Appeals of Concepción. Court File No. 1,142-2013.

5. On September 4, 2013, Mr. Rigoberto Rojo Rojas was notified on behalf of Forestal Arauco S.A. in relation to a civil damages claim for alleged non-contractual liability, filed by Mr. José René Campos Castillo, Ms. Guadalupe del Carmen Gallardo Rivas, Mr. Iván Patricio Campos Gallardo, Ms. Elizabeth del Carmen Campos Gallardo, Mr. Remigio Pedreros Catril, Ms. Rosa Eudolia García Díaz, Mr. Edgardo Remigios Pedreros García, Ms. Marianela Judelina Pedreros García, Mr. Jorge Antonio Petit-Laurent Pries, Ms. Ida Haydeé Sáez Arriagada, Mr. Jaime Antonio Petit-Laurent Sáez and Mr. Víctor Mauricio Petit-Lauren Sáez against Empresa de Transportes y Servicios Forestales Trayenko Ltda. and Forestal Arauco S.A. The claim sought for the defendant companies to be held jointly and severally liable, or jointly liable in equal proportions, or in the proportion established by the Court, or in lieu thereof, to hold only the latter company liable for the payment of non-monetary damages suffered by the relatives identified in the claim, as per the contents of said claim, of Mr. Víctor Campos Gallardo, Mr. Danilo Pedreros García and Mr. Emilio Joaquín Petit-Laurent Sáez, the driver and occupants of a truck that overturned due to, according to the claimants, a mechanical failure, among other reasons, and that resulted in the death of three men after a traffic accident that occurred on September 10, 2009, in the Curaquilla Intersection, borough of Arauco.

The claim was filed before the Civil Court of Arauco, Case File No. C-371-2013. Forestal Arauco appeared in the trial presenting a motion to annul all proceedings, and in lieu thereof, a motion to amend proceedings as per number 6 of article 303 of the Civil Procedures Code. The Court admitted both motions and suspended the main proceedings while the motions were addressed, opening a term for evidence for the first of said motions. Forestal Arauco filed a reconsideration appeal with respect to this ruling. Concurrently, the main defendant answered the claim directly. The resolution of the motions is still pending.

6. On October 8, 2013, Mr. Rigoberto Rojo Rojas was notified on behalf of Bosques Arauco S.A., now Forestal Arauco S.A., in relation to a civil claim filed by Mr. Manuel Antonio Fren Casanova, requesting the court to declare the properties known as Cuyinco and Cuyinco Alto are two different properties and, therefore, to order the cancellation of the ownership registration in the name of Bosques Arauco S.A. found on page 266 number 290 of the Registry of Property kept by the Real Estate Registrar of Cuyinco Alto, on the grounds that, according to the claimant, Bosques Arauco S.A. erroneously understood that its property, Cuyinco Alto of 4,600 hectares, would also encompass the land known as Cuyinco, which property allegedly belongs to the claimant. The term for answering the claim is ongoing as of this date.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Forestal Cholguán S.A.

1.On December 12, 2010, the company Sociedad Forestal Cholguán S.A. was notified of a boundaries and site fencing claim, submitted by Banfactor Servicios Financieros Limitada’s Receiver before the 30^th Civil Court of Santiago, file number 12,825-2010, labelled “Banfactor Servicios Financieros Limitada and Forestal Cholguán S.A.”, which seeks to set the boundaries and site fencing between the neighboring property owned by Forestal Cholguán S.A., named Hacienda Canteras, and a estate named “Fundo Roma”. An expert determined that there is not any land adjoining called “Fundo Roma”, finding Hacienda Canteras perimeter closed and demarcated for many years. Within the context of these same proceedings, on December, 2010, the Court issued a cautionary injunctive measure prohibiting the execution of acts or agreements regarding the lumber and forest products located within “Fundo Roma”. On April 3, 2012, the court issued a decision rejecting the claim; the ruling was appealed by the plaintiff and the third adjuvant (Banco del Desarrollo). On April 13, 2012 Forestal Cholguán S.A. filed a request to lift the preliminary injunction, which was rejected by the Court, because of that, the company appealed again. Both plaintiff’s appeal against the decision of the court of first instance rejected the demand, as the Forest Appeal against the decision Forestal Cholguán rejected the request for injunction hoist have been in agreement. On October 10, 2013, the Court of Appeals upheld the first instance decision that had rejected the claim and confirmed that an injunction is only effectively lifted once the decision is final.

Inversiones Arauco Internacional Ltda.

1. On May 5, 2011, the Chilean Internal Revenue Service (“Chilean IRS”) issued liquidations N° 7 and 8 to Inversiones Arauco Internacional Ltda., objecting the reasonableness and necessity that a compensation payment made by the Company under the framework of partnership and participation in Forestal Cono Sur S.A. of Uruguay, is regarded as a deductible expense.

On May 4, 2012, the Company presented a claim to the Tax Court against liquidations No. 7 and 8. Currently in the Complaint was forwarded to the Inspector for that report. The auditor issued a report. The case is pending.

At the end of each reporting period there are no other contingencies that might significantly affect the Company’s financial, position or results of operations.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Provisions recorded as of September 30, 2013 and December 31, 2012 are as follow:


Classes of Provisions	09-30-2013 ThU.S.$		12-31-2012 ThU.S.$
Provisions, Current		8,969		8,875
Provisions for litigations		8,969		8,875
Provisions, non-Current		22,261		13,281
Provisions for litigations		8,479		4,671
Other provisions		13,782		8,610

Total Provisions		31,230		22,156


	09-30-2013
Movements in Provisions	Litigations ThU.S.$			Other Provisions ThU.S.$		Total ThU.S.$
Opening balance		13,546			8,610		22,156
Changes in provisions
Increase in existing provisions		8,754			—		8,754
Used provisions		(2,655	)		—		(2,655	)
Increase (decrease) in foreign currency exchange		(2,197	)		—		(2,197	)
Other Increases (Decreases)		—			5,172		5,172
Total Changes		3,902			5,172		9,074
Closing balance		17,448			13,782		31,230


	12-31-2012
Movements in Provisions	Litigations ThU.S.$			Other Provisions ThU.S.$			Total ThU.S.$
Opening balance		15,107			3,188			18,295
Changes in provisions
Increase in existing provisions		2,604			(202	)		2,402
Used provisions		(1,098	)		—			(1,098	)
Increase (decrease) in foreign currency exchange		(1,539	)		—			(1,539	)
Other Increases (Decreases)		(1,528	)		5,624			4,096
Total Changes		(1,561	)		5,422			3,861
Closing balance		13,546			8,610			22,156

Provisions for litigations are for labor and tax claims whose payment period is uncertain. Other provisions include the liability recognition for investments with net asset deficiency at the end of the reporting period.

NOTE 19. INTANGIBLE ASSETS

Disclosure of Identifiable Intangible Assets

CELULOSA ARAUCO Y CONSTITUCION S.A.

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


Classes of Intangible Assets, Net	09-30-2013 ThU.S.$			12-31-2012 ThU.S.$
Intangible assets, net		98,522			103,158
Computer software		13,577			12,391
Water rigths		5,403			5,114
Customer		72,092			77,454
Other identifiable intangible assets		7,450			8,199
Classes of intangible Assets, Gross		128,706			128,108
Computer software		37,750			35,782
Water rigths		5,403			5,114
Customer		77,315			78,800
Other identifiable intangible assets		8,238			8,412
Classes of accumulated amortization and impairment
Total accumulated amortization and impairment		(30,184	)		(24,950	)
Accumulated amortization and impairment, intangible assets		(30,184	)		(24,950	)
Computer software		(24,173	)		(23,391	)
Customer		(5,223	)		(1,346	)
Other identifiable intangible assets		(788	)		(213	)

Reconciliation of the carrying amount of intangible assets at the beginning and end of each reporting period balances


	09-30-2013
Reconciliation of intangible assets	Computer Software ThU.S.$			Water Rigths ThU.S.$			Customer ThU.S.$			Others ThU.S.$			TOTAL ThU.S.$
Opening Balance		12,391			5,114			77,454			8,199			103,158
Changes
Additions		2,985			—			—			—			2,985
Disposals		(335	)		—			—			—			(335	)
Amortization		(2,412	)		—			(3,877	)		(575	)		(6,864	)
Increase (decrease) in foreign currency conversion		948			—			(1,485	)		(174	)		(711	)
Others Increases (Decreases)		—			289			—			—			289
Changes Total		1,186			289			(5,362	)		(749	)		(4,636	)
Closing Balance		13,577			5,403			72,092			7,450			98,522

	12-31-2012
Reconciliation of intangible assets	Computer Software ThU.S.$			Water Rigths ThU.S.$			Customer ThU.S.$			Others ThU.S.$			TOTAL ThU.S.$
Opening Balance		9,217			5,811			—			2,581			17,609
Changes
Additions		6,422			—			—			307			6,729
Additions Business combination		—			—			78,800			5,500			84,300
Disposals		(347	)		(773	)		—			—			(1,120	)
Amortization		(2,779	)		—			(1,346	)		(213	)		(4,338	)
Increase (decrease) in foreign currency conversion		(123	)		—			—			(17	)		(140	)
Others Increases (Decreases)		1			76			—			41			118
Changes Total		3,174			(697	)		77,454			5,618			85,549
Closing Balance		12,391			5,114			77,454			8,199			103,158


		Minimum life		Maximum life
Computer Software	Years		3		16
Customer	Years		15		15
Trademark	Years		7		7

The amortization of computer software is presented in the Consolidated Statements of Income line item Administrative Expenses.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 20. BIOLOGICAL ASSETS

Biological assets comprise of plantations forestry, of mainly radiata and taeda pine, and to a lower extent of eucalyptus. The plantations are located in Chile, Argentina, and Brazil, with a total surface of 1.5 million hectares, out of which 930 thousand hectares are used for forestry planting, 385 thousand hectares are native forest, 145 thousand hectares are used for other purposes and 62 thousand hectares not yet planted.

As of September 30, 2013, the production volume of logs totaled 15.2 million cubic meters (14.1 million cubic meters as of September 30, 2012).

The main considerations in determining the fair value of biological assets include the following:

•

Arauco uses the discounted expected future cash flows of its forest plantations, which are based on a harvest projection date for all existing plantations.

•

Current plantations forestry are current expectations total volume does not decrease, with a minimum equal to the current supply demand.

•

Future plantations are not considered.

•

The harvest of plantations forestry supplies raw material for all other products that Arauco produces and sells. By directly controlling the development of forests that will be processed, Arauco ensures to itself, high quality timber for each of its products.

•

Expected cash flows are determined in terms of harvest and expected sale of forestry products, associated with the demand from the Company’s owned industrial centers and sales to third parties at market prices. Sales margin is also considered in the valuation of the different products that are harvested in the forest. Any changes in the fair value of the plantations are recognized in profit or loss in the line item other income within the statement of income. Changes in fair value of biological assets were ThUS$202,604 as of September 30, 2013 and ThUS$171,498, as of September 30, 2012, respectively. As a result of measuring biological assets at its fair value a higher cost of sales of ThUS$169,656 as of September 30, 2013 and ThUS$182,628 was recognized as of September 30, 2012, resulting from the difference between the cost of wood at fair value versus actual cost incurred.

•

Plantations forestry are harvested according to the needs of Arauco’s production plants.

•

The discount rates used are 8% in Chile, 12% in Argentina and 8% in Brazil.

•

It is expected that prices of harvested timber are constant in real terms based on market prices.

•

Cost expectations with respect to the lifetime of the forests are constant based on estimated costs included in the projections made by Arauco.

•

The average crop age by species and country is:


	Chile		Argentina		Brazil
Pine		24		15		15
Eucalyptus		12		10		7

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The following table sets forth changes in fair value of biological assets considering variations in significant assumptions considered in calculating the fair value of the assets:


		ThU.S.$
Discount rate	0.5		(126,704	)
	-0.5		133,839
Margins (%)	10		409,104
	-10		(409,104	)

Differences in valuation of biological assets, in the discount rate and in the margins are recognized in the Statement of Income under line items “other income” and “other expenses”, as appropriate.

Plantations forestry classified as current Biological assets are those to be harvested and sold within twelve months after the reporting period.

The Company has contracted fire insurance policies for its plantations forestry, which in conjunction with company resources and efficient protection measures for these forestry assets allow financial and operational risks to be minimized.

Uruguay

Arauco owns biological assets in Uruguay through a joint venture with Stora Enso, which is accounted for in these consolidated financial statements under the equity method (see Note 16).

As of September 30, 2013, Arauco’s investment in Uruguay represented a total of 110 thousand hectares, out of which 68 thousand hectares are allocated to plantations, 5 thousand hectares to native forest, 33 thousand hectares for other uses, and 4 thousand hectares for planting.

Detail of Biological Assets Pledged as Security

There are no forestry plantations pledged as security, except for those owned by Forestal Río Grande S.A. (affiliate of Fondo de Inversiones Bio Bio). In October 2006, Forestal Río Grande S.A. has pledged its forestry plantations with prohibition to sell and encumber them to secure its liabilities with JPMorgan and Arauco.

As of September 30, 2013, There are no forestry plantations pledged as security (ThU.S.$2,394 as of December 31, 2012).

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Detail of Biological Assets with Restricted Ownership

As of the date of these consolidated financial statements, there are no biological assets with restricted ownership.

No significant government grants have been received.

As of the date of these Financial Statements, the Current and Non-current biological assets are as follows:


	09-30-2013 ThU.S.$		12-31-2012 ThU.S.$
Current		258,074		252,744
Non-current		3,478,650		3,473,442
Total		3,736,724		3,726,186

Reconciliation of carrying amount of biological assets


Movement	09-30-2013 ThU.S.$
Opening Balance		3,726,186
Changes in Biological Assets
Additions		103,681
Decreases due to Sales		(745	)
Decreases due to Harvest		(259,869	)
Gain (losses) arising from changes in fair value less costs to sale		202,604
Increases (decreases) in Foreign Currency Translation		(34,405	)
Loss of forest due to fires		(636	)
Other Increases (decreases)		(92	)

Total Changes		10,538

Closing Balance		3,736,724

Movement	12-31-2012 ThU.S.$
Opening Balance		3,744,584
Changes in Biological Assets
Additions		122,595
Decreases due to Sales		(5,548	)
Decreases due to Harvest		(330,947	)
Gain (Loss) of Changes in Fair Value, less estimated Costs at Point of Sale		231,763
Increases (decreases) in Foreign Currency Translation		(34,553	)
Loss of forest due to fires		(3,388	)
Other Increases (decreases)		1,680
Total Changes		(18,398	)
Closing Balance		3,726,186

As of the date of these consolidated financial statements, there are no disbursements related to the acquisition of biological assets.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 21. ENVIRONMENT

Environment Management

For Arauco, sustainability means management strategy. This strategy incorporates values, commitments and standards, that together with the adoption of best practices as well as the use of the latest available technologies, seek to continuously improve the Company’s environmental management. It is the environmental department and each of its specialists that ensure these guidelines are met and are put in to practice in everyday company operations.

All of Arauco’s production units have certified environmental management systems, which reinforce the Company’s commitment to environmental performance and ensure the traceability of all raw materials used.

Arauco uses several supplies in its productive processes such as wood, chemical products, and water, etc., which in turn produce liquid and gas emissions. As a way to make the Company’s environmental management more efficient, significant progress has been made to reduce consumption and emissions.

Environmental investments have been made related to the control of atmospheric emissions, process improvements, water and waste management, as well as effluent treatment, in order to improve the environmental performance of all of Arauco’s business units.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Detail information of disbursements related to the environment

At September 30, 2013 and December 31, 2012, Arauco has made and / or has committed the following disbursements by major environmental projects:

09/30/2013

Disbursements undertaken 2013

Committed
Disbursements

Company

Name of project

State of
project

Amount
ThU.S.$

Asset
Expense

Asset/expense
destination item

Amount
ThU.S.$

Estimated date

Arauco Do Brasil S.A.

Environmental improvement studies

In process

335

Assets

Property, plant and equipment

925

2013

Celulosa Arauco Y Constitucion S.A.

Investment projects for the control and management of gas emissions from industrial process

In process

4,457

Assets

Property, plant and equipment

10,418

2013

Celulosa Arauco Y Constitucion S.A.

Environmental improvement studies

In process

1,144

Assets

Property, plant and equipment

3,799

2013

Celulosa Arauco Y Constitucion S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

In process

1,849

Assets

Property, plant and equipment

107

2013

Celulosa Arauco Y Constitucion S.A.

Environmental improvement studies

In process

14,620

Expense

Operating cost

11,722

2013

Alto Parana S.A.

Construction emissary

In process

Assets

Property, plant and equipment

758

2013

Alto Parana S.A.

Expansion of solid industrial waste dumpsite for management of these in the future

In process

198

Assets

Property, plant and equipment

1,738

2013

Alto Parana S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

In process

2,275

Assets

Property, plant and equipment

2013

Paneles Arauco S.A.

Environmental improvement studies

In process

Assets

Property, plant and equipment

2013

Paneles Arauco S.A.

Environmental improvement studies

In process

178

Expense

Administration expenses

225

2013

Paneles Arauco S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

In process

1,176

Expense

Operating cost

399

2013

Paneles Arauco S.A.

Expansion of solid industrial waste dumpsite for management of these in the future

In process

249

Expense

Administration expenses

2013

Forestal Celco S.A.

Environmental improvement studies

In process

426

Expense

Administration expenses

241

2013

Forestal Arauco S.A.

Environmental improvement studies

In process

190

Expense

Administration expenses

2013

Aserraderos Arauco S.A

Environmental improvement studies

In process

193

Assets

Property, plant and equipment

5,347

2013

Forestal los Lagos S.A

Environmental improvement studies

In process

169

Expense

Operating cost

2013

TOTAL

27,532

35,892

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

12/31/2012

Disbursements undertaken 2012

Committed Disbursements

Company

Name of project

State of
project

Amount
ThU.S.$

Asset
Expense

Asset/expense
destination item

Amount
ThU.S.$

Estimated
date

Arauco Do Brasil S.A.

Environmental improvement studies

In process

393

Assets

Property, plant and equipment

4,888

2013

Arauco Do Brasil S.A.

Investment projects for the control and management of gas emissions from industrial process

In process

Assets

Property, plant and equipment

354

2013

Celulosa Arauco Y Constitucion S.A.

Investment projects for the control and management of gas emissions from industrial process

In process

2,109

Assets

Property, plant and equipment

4,971

2013

Celulosa Arauco Y Constitucion S.A.

Environmental improvement studies

In process

1,400

Assets

Property, plant and equipment

1,264

2013

Celulosa Arauco Y Constitucion S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

In process

3,339

Assets

Property, plant and equipment

1,798

2013

Celulosa Arauco Y Constitucion S.A.

Expansion of solid industrial waste dumpsite for management of these in the future

In process

2,402

Assets

Property, plant and equipment

2012

Alto Parana S.A.

Construction emissary

In process

Assets

Property, plant and equipment

766

2013

Alto Parana S.A.

Expansion of solid industrial waste dumpsite for management of these in the future

In process

792

Assets

Property, plant and equipment

1,936

2013

Alto Parana S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

In process

4,202

Assets

Property, plant and equipment

645

2013

Paneles Arauco S.A.

Environmental improvement studies

In process

168

Assets

Property, plant and equipment

2013

Paneles Arauco S.A.

Environmental improvement studies

In process

1,046

Expense

Administration expenses

329

2013

Paneles Arauco S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

In process

148

Assets

Property, plant and equipment

2012

Paneles Arauco S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

In process

1,731

Expense

Operating cost

1,835

2013

Paneles Arauco S.A.

Expansion of solid industrial waste dumpsite for management of these in the future

In process

362

Expense

Administration expenses

390

2013

Forestal Celco S.A.

Environmental improvement studies

In process

687

Expense

Administration expenses

484

2013

Forestal Valdivia S.A.

Environmental improvement studies

In process

177

Expense

Administration expenses

100

2013

TOTAL

19,003

19,794

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 22. NON-CURRENT ASSETS HELD FOR SALE

As a result of decreases in demand for saw timber products due to the economic downturn in years 2008 and 2009, Arauco’s Management decided in December, 2010 to permanently close the following sawmills: La Araucana, Escuadrón, Lomas Coloradas, Coelemu and the remanufacturing plant Lomas Coloradas. Property, plant and equipment related to these facilities were classified held for sale. As of December 31, 2011, Arauco remains committed to its plan to sell these assets, although the completion of these sales have been delayed more than expected as the Company is seeking for more favorable offers.

The following table sets forth information on the main types of non-current assets held for sale:


	09-30-2013 Th.U.S.$		12-31-2012 Th.U.S.$
Land		5,818		5,011
Buildings		5,671		5,739
Property, plant and equipment		3,305		2,860
Total		14,794		13,610

At September 30, 2013, has been an effect on income totaling ThUS$519 related to decreased provision of impairment of these assets held for sale.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 23. FINANCIAL INSTRUMENTS

Classification

The following table sets forth the fair value of financial assets and financial liabilities as compared with the carrying amount as of September 30, 2013 and December 31, 2012.


Financial Instruments	September 2013				December 2012
*Thousands of dollars*	Carrying amount		Fair Value		Carrying amount		Fair Value
Assets Current and non Current

Fair value through profit or loss (held for trading)(1)		192,875		192,875		240,891		240,891
Mutual funds (2)		132,351		132,351		180,558		180,558
Hedging instruments		60,524		60,524		60,333		60,333
Swap foreign exchange		60,524		60,524		60,333		60,333
Loans and Accounts Receivables		1,298,976		1,298,976		1,183,327		1,183,327
Cash and cash equivalents		411,343		411,343		215,158		215,158
Cash		125,320		125,320		63,359		63,359
Time deposits		276,882		276,882		151,799		151,799
Agreements		9,141		9,141		—		—
Accounts Receivables (net)		736,817		736,817		837,746		837,746
Trades and other receivables		629,788		629,788		634,752		634,752
Lease receivable		1,373		1,373		2,871		2,871
Other receivables		105,656		105,656		200,123		200,123
Accounts receivable from related parties		150,816		150,816		130,423		130,423
Other Financial Assets		2,303		2,303		2,029		2,029

Financial Liabilities, Total		4,741,032		4,931,223		4,914,282		5,152,621
Financial Liabilities at amortized cost (3)		4,732,792		4,922,983		4,899,873		5,138,212
Bonds issued denominated in U.S. dollars		2,170,417		2,291,425		2,487,236		2,712,585
Bonds issued denominated in U.F. (4)		891,767		916,410		930,607		949,141
Banck Loans in Dollars and others		781,211		825,480		835,463		835,771
Bank borrowing denominated in U.S. dollars and other currencies		267,209		267,480		86,246		80,394
Financial Leasing		89,095		89,095		56,052		56,052
Government Loans		4,548		4,548		4,910		4,910
Trades and other Payables		517,173		517,173		490,191		490,191
Accounts payable to related parties		11,372		11,372		9,168		9,168
Financial liabilities at fair value through profit or loss		8,240		8,240		14,409		14,409
Interest Rate Swaps		109		109		1,070		1,070
Hedging instruments		8,131		8,131		13,339		13,339
Swap		7,899		7,899		12,694		12,694
Forward		232		232		645		645

(1)	Assets measured at fair value through profit or loss other than mutual funds classified as cash equivalents, are presented in the line item “other financial assets” in the consolidated statement of financial position.

(2)	Although mutual funds are measured at fair value through profit or loss for purposes of the consolidated statement of financial position mutual funds are classified as “Cash and cash equivalents” due to the are highly liquid short term investment.

(3)	Financial liabilities measured at amortized cost, other than “Trade and other payables” and derivatives are presented in the consolidated statement of financial position in the line item “Other financial liabilities” as current and non-current based on their maturity.

(4)	The Unidad de Fomento (“UF”) is a unit of account that is linked to, and is adjusted daily to reflect changes in the Chilean consumer price index.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Valuation techniques and assumptions applied for the purpose of measuring fair value

The carrying amount of trade and other receivables, trade and others payables, accounts payables related parties, cash and cash equivalents, and other financial assets and liabilities approximate their fair value due to the short-term nature of such instruments, and, in the case of trade and other receivables, due to the fact that any loss resulting from its recoverability is already reflected in the provision for impairment losses.

The fair value of non-derivative financial assets and financial liabilities that are not traded in active markets is estimated through the use of discounted cash flows that are calculated over market variables that are observable at the date of the financial statements.

The fair values of bonds issued were determined with reference to quoted market prices as they have standard terms and conditions and traded on an active liquid market.

The fair value of bank borrowings were determined based on discounted cash flow analysis, applying the corresponding discount yield curves to the remaining term to maturity.

The following table sets forth the current portion of the non-current bank borrowings and debt issued as of September 30, 2013, and December 31, 2012.


	September 2013 ThU.S.$		December 2012 ThU.S.$
Bank borrowings - current portion		71,992		91,652
Bonds issued - current portion		146,888		372,800
Total		218,880		464,452

FINANCIAL COVENANTS

The following table shows the compliance with financial covenants (debt to equity ratio) required by domestic bond indentures:


	September 2013 ThU.S.$			December 2012 ThU.S.$
Financial debt, current		439,589			806,899
Financial debt, non-current		3,764,658			3,593,615
Other debt guaranteed by Arauco		652,574			555,940
Total		4,856,821			4,956,454
Cash and cash equivalent		(543,694	)		(395,716	)
Net financial debt		4,313,127			4,560,738
Non-controlling interests		71,015			74,437
Equity attributable to owners of parent		7,026,693			6,891,322
Total equity		7,097,708			6,965,759

Debt to equity ratio		0.61			0.65

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The following table sets forth reconciliation between the financial liabilities and the statement of financial position as of as of September 30, 2013, and December 31, 2012:


	September 2013
*Thousands of dollars*	Current		Non Current		Total
Bonds obligations		146,889		2,915,296		3,062,185
Bank borrowings		265,258		783,162		1,048,420
Financial Leasing		27,099		61,998		89,097
Government Loans		345		4,203		4,548
Swap and Forward		341		7,899		8,240

Other Financial Liabilities		439,932		3,772,558		4,212,490


Trades and Other Payables		517,173		—		517,173
Related party payables		11,372		—		11,372

Accounts Payable, Total		528,545		—		528,545


Financial Liabilities, Total		968,477		3,772,558		4,741,035


	December 2012
*Thousands of dollars*	Current		Non Current		Total
Bonds obligations		372,800		3,045,043		3,417,843
Bank borrowings		413,271		508,438		921,709
Financial Leasing		20,489		35,563		56,052
Government Loans		339		4,571		4,910
Swap and Forward		1,715		12,694		14,409

Other Financial Liabilities		808,614		3,606,309		4,414,923


Trades and Other Payables		490,191		—		490,191
Related party payables		9,168		—		9,168

Accounts Payable, Total		499,359		—		499,359



Financial Liabilities, Total		1,307,973		3,606,309		4,914,282

FINANCIAL ASSETS

Financial Assets Measured at Fair Value through Profit or Loss (Held for Trading)

Financial assets measured at fair value through profit or loss are financial assets held for trading. Financial assets classified in this category are mainly acquired for sale in the short term. Derivatives are also classified as trading unless they are designated and effective as hedging instruments. Assets in this category are classified as current assets and are recorded at fair value with changes in value recognized profit or loss. These financial assets are held with the objective of maintaining adequate liquidity levels to meet the Arauco’s obligations.

The following table details Arauco’s financial assets measured at fair value through profit or loss:

September
2013
ThU.S.$

December
2012
ThU.S.$

Period
Variation

Fair value through profit or loss (held for trading)

132,351

180,558

-27

Mutual Funds

132,351

180,558

-27

Mutual Funds:

Arauco invests in local and international mutual funds in order to maximize the returns of cash surpluses denominated in Chilean Pesos or in foreign currencies such as U.S. Dollars or Euros. These instruments are permitted by Arauco’s Investment Policy. At the date of these financial statements the company has reduced its position in these instruments compared to December 2012 by 76%.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The following table sets forth the risk classification of mutual funds as of September 30, 2013 and December 31, 2012:


	September 2013 Th.U.S.$		December 2012 Th.U.S.$
AAAfm		131,889		180,318
AAfm		462		240
Total Mutual Funds		132,351		180,558

Hedging Instruments

As of September 30, 2013, Arauco has certain derivatives designated as hedging instruments for cash flow hedge purposes. Specifically, Arauco has designated cross currency swaps as hedging instruments whose fair value was ThU.S.$60,524 for those in an asset position and ThU.S.$7,899 for those in a liability position, which are presented in the consolidated statements of financial position in the line items “other non-current financial assets” and “other non-current financial liabilities”, respectively. Arauco has also designated foreign exchange forwards as hedging instruments whose fair value was ThU.S.$216, which is presented in the consolidated statements of financial position in the line item other current financial assets. Changes in fair value during the period have been recognized in other comprehensive income and have been accumulated in equity.

Nature of Risk

Arauco is exposed to the risk of variability in cash flows from changes in foreign exchange rates, mainly due to balances of assets denominated in U.S. Dollars and liabilities denominated in UF (obligations to the public), which causes mismatches that could affect operating results.

Information on Swaps Designated as Hedging Instruments

Swaps hedging Series H Bonds

Hedged Item

In March 2009, Arauco issued Bonds Serie H for total of U.F. 2,000,000 at an annual interest rate of 2.25% payable semi-annually (in March and September of each year). In order to mitigate the risk of variability of cash flows from changes in the exchange rate, Arauco entered into two cross-currency swaps that fully hedge the total amount of the bond issued:

Hedging instrument

Contract 1: Arauco receives semi-annual interest (in March and September of each year) based on a notional amount of 1,000,000 UF at a 2.25% annual interest rate, and pays semi-annual interest (in March and September of each year) based on a notional amount of US$ 35.7 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at an annual interest rate of 4.99%. The swap matures on March 1, 2014. The fair

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

value of the swap was ThU.S.$9,574 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Contract 2: Arauco receives semi-annual interest (in March and September of each year) based on a notional amount of 1,000,000 UF at an annual interest rate of 2.25%, and pays semi-annual interest (in March and September) based on a notional amount of U.S.$35.28 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at an annual interest rate of 4.94%. The swap matures on March 1, 2014. The fair value of the swap was ThU.S.$9,130 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Based on its test of effectiveness, Arauco determined that the hedging instrument is highly effective to offset the variability in cash flows of the hedged item from changes in the exchange rate.

Swaps Hedging Series F Bonds

Hedged Item

In November 2008 and March 2009, Arauco issued Bond Series F for a total of 7,000,000 UF at an annual interest rate of 4.25% payable semi-annually. In order to mitigate the risk of variability in cash flows from changes in the exchange rate, Arauco entered into four cross-currency swap contracts that fully hedge the total amount of the bond issued.

Hedging instrument

Contract 1: Arauco receives semi-annual interest payments (in April and October of each year) based on a notional amount of 1,000,000 UF at an annual interest rate of 4.25%, and pays semi-annual interest (in April and October of each year) based on a notional amount of U.S.$38.38 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at an annual interest rate of 5.86%. This contract matures on October 30, 2014. The fair value of this swap was ThU.S.$5,894 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Contract 2: Arauco receives semi-annual interest payments (in April and October of each year) based on a notional amount of 1,000,000 UF at an annual interest rate of 4.25%, and pays semi-annual interest (in April and October) based on a notional amount of U.S.$37.98 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at an annual interest rate of 5.79%. This contract matures on April 30, 2014. The fair value of this swap was ThU.S.$6,363 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income. On June 5, 2013, Arauco made an additional coverage to the previous description, lasting from April 30, 2014 to April 30, 2019 by the same notional amount at an annual interest rate of 4.69%. The market value of this new coverage is ThUS $ 7,400 as of September 30, 2013.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Contract 3: Arauco receives semi-annual interest payments (in April and October of each year) based on a notional amount of 1,000,000 UF at an annual interest rate of 4.25%, and pays semi-annual interest (in April and October of each year) based on a notional amount of U.S.$37.98 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at an annual interest rate of 5.8%. This contract matures on October 30, 2014. The fair value of this swap was ThU.S.$6,754 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Contract 4: Arauco receives semi-annual interest payments (in April and October of each year) based on a notional amount of 1,000,000 UF at an annual interest rate of 4.25%, and pays semi-annual interest (in April and October of each year) based on a notional amount of U.S.$37.62 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at an annual interest rate of 5.79%. This contract matures on October 30, 2014. The fair value of this swap was ThU.S.$6,880 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Contract 5: Arauco receives semi-annual interest payments (in April and October of each year) based on a notional amount of 1,000,000 UF at an annual interest rate of 4.25%, and pays semi-annual interest (in April and October) based on a notional amount of U.S.$38.42 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at an annual interest rate of 5.62%. This contract matures on October 30, 2014. The fair value of this swap was ThU.S.$5,982 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Contract 6: Arauco receives semi-annual interest payments (in April and October of each year) based on a notional amount of UF 1,000,000 at an annual interest rate of 4.25%, and pays semi-annual interest (in April and October of each year) based on a notional amount of U.S.$43.62 million (equivalent to UF 1,000,000 at the closing exchange rate of the contract) at an annual interest rate of 5.29%. This contract matures on October 30, 2021. The fair value of this swap was ThU.S.$423 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Contract 7: Arauco receives semi-annual interest payments (In April and October of each year) based on a notional amount of UF 1,000,000 at an annual interest rate of 4.25%, and pays semi-annual interest (In April and October of each year) based on a notional amount of U.S.$43.62 million (equivalent to UF 1,000,000 at the closing exchange rate of the contract) at an annual interest rate of 5.23%. This contract matures on October 30, 2021. The fair value of this swap is ThU.S.$623 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Based on its test of effectiveness, Arauco determined that the hedging instrument is highly effective to offset the variability in cash flows of the hedged item from changes in the exchange rate.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Swaps Hedging Series J Bonds

Hedged Item

In September 2010, Arauco issued bond series J for a total of 5,000,000 UF at an annual interest rate of 3.25% payable semi-annually. In order to mitigate the risk of variability in cash flows from changes in the exchange rate, Arauco entered into five cross-currency swap contracts that fully cover the total amount of the bond issued:

Hedging instrument

Contract 1: Arauco receives semi-annual interest payments (in March and September) based on a notional amount of 1,000,000 UF at an annual interest rate of 3.25%, and pays semi-annual interest (in March and September) based on a notional amount of U.S.$ 42.86 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at an annual interest rate of 5.20%. This contract matures on September 1, 2020. The fair value of this swap is ThU.S.$1,541 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Contract 2: Arauco receives semi-annual interest payments (in March and September) based on a notional amount of 1,000,000 UF at an annual interest rate of 3.25%, and pays semi-annual interest (in March and September) based on a notional amount of U.S.$ 42.86 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at an annual interest rate of 5.20%. This contract matures on September 1, 2020. The fair value of this swap is ThU.S.$1,541 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Contract 3: Arauco receives semi-annual interest payments (in March and September) based on a notional amount of 1,000,000 UF at an annual interest rate of 3.25%, and pays semi-annual interest (in March and September) based on a notional amount of U.S.$ 42.86 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at an annual interest rate of 5.25%. This contract matures on September 1, 2020. The fair value of this swap is ThU.S.$1,672 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Contract 4: Arauco receives semi-annual interest payments (in March and September) based on a notional amount of 1,000,000 UF at an annual interest rate of 3.25%, and pays semi-annual interest (in March and September) based on a notional amount of U.S.$ 42.87 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at an annual interest rate of 5.17%. This contract matures on September 1, 2020. The fair value of this swap is ThU.S.$1,466 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Contract 5: Arauco receives semi-annual interest payments (in March and September) based on a notional amount of 1,000,000 UF at an annual interest rate of 3.25%, and pays semi-annual interest (in March and September) based on a notional amount of U.S.$42.86

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at an annual interest rate of 5.09%. This contract matures on September 1, 2020. The fair value of this swap is ThU.S.$1,228 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Based on its test of effectiveness, Arauco determined that the hedging instrument is highly effective to offset the variability in cash flows of the hedged item from changes in the exchange rate.

Swaps Hedging Series E Bonds

Hedged Item

In November 2008 Arauco issued bond series E for a total of UF 1,000,000, at an annual interest rate 4.00%, payable semi-annually. In order to mitigate the risk of variability in cash flows from changes in the exchange rate, Arauco entered into a cross-currency swap, which fully covered the amount of the bond issued:

Hedging instrument

Contract 1: Arauco receives semi-annual interests (In April and October) based on a notional amount of UF 1,000,000 at an annual interest rate of 4.00% annually, and pays semi-annual interests (In April and October) based on a notional amount of U.S.$ 43.28 million (equivalent to UF 1,000,000 at the closing exchange rate of the contract) at an annual interest rate of 3.36%. This contract matures on October 30, 2014. The fair value of this swap is ThU.S.$1,156 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Based on its test of effectiveness, Arauco determined that the hedging instrument is highly effective to offset the variability in cash flows of the hedged item from changes in the exchange rate.

Swaps Hedging Series P Bonds

Hedged Item

In April 2012, Arauco issued bond series P for a total of 5,000,000 UF at an annual interest rate of 3.96% payable semi-annually. In order to mitigate the risk of variability in cash flows from changes in the exchange rate, Arauco entered into two cross-currency swaps that partially cover amount of the bond issued:

Hedging instrument

Contract 1: Arauco receives semi-annual interest payments (in May and November) based on a notional amount of 1,000,000 UF at an annual interest rate of 3.96%, and pays semi-annual interest (in May and November) based on a notional amount of U.S.$ 46.47 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at an annual interest rate of 4.39%. This contract matures on November 15, 2021. The fair value of this

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

swap is ThU.S.$451 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Contract 2: Arauco receives semi-annual interest (May and November) based on a notional amount of UF 1,000,000 at an annual interest rate of 3.96%, and pay semiannual interest (May and November) based on a notional amount of U.S.$ 47.16 million (equivalent to UF 1,000,000 at the year-end exchange rate) at an annual interest rate of 3.97%. This contract matures on November 15, 2021. The fair value is ThU.S.$347 as of September 30, 2013. According to the effectiveness test performed the swap is 100% effective, therefore was not ineffectiveness recognized in the income.

Based on its test of effectiveness, Arauco determined that the hedging instrument is highly effective to offset the variability in cash flows of the hedged item from changes in the exchange rate.

Hedging Strategy

Considering that Arauco has a high percentage of assets denominated in U.S. Dollars (its functional currency), it is exposed to the risk of exchange rate as it has bonds issued denominated in U.F. (Chilean inflation-indexed, peso-denominated monetary unit). The objective of entering into cross currency swaps is to hedge the variability in cash flows for the U.F. exchange rate, exchanging the cash flows from the bonds issued denominated in U.F., with cash flows in U.S. Dollar at a fixed exchange rate determined at inception of the cross currency swaps.

The table below sets forth summarized information of the fair value of the hedging instruments as of September 30, 2013:

Society

Type of
coverage

Risk

Classificatin/Type/Instrument

Fair
Value
(Th.U.S)

Type

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU E

1,156

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU F

5,894

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU
F (*)

13,763

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU F

6,754

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU F

6,880

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU F

5,982

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU F

423

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU F

623

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU H

9,574

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU H

9,130

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU J

(1,541

)

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU J

(1,541

)

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU J

(1,672

)

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU J

(1,466

)

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU J

(1,228

)

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU P

(451

)

Cross Currency Swap

Celulosa Arauco y Constitución S.A.

Clashflow

Exchange rate

Financial
Liabilities

Bonds issued
in UF

Swap BARAU P

347

Cross Currency Swap

Arauco Colombia S.A.

Clashflow

Exchange rate

Financial Assets

Forward

Forward
Colombian Peso

Forward

Arauco Colombia S.A.

Clashflow

Exchange rate

Financial Assets

Forward

Forward
Colombian Peso

(232

)

Forward

(*)	ThU.S. $ 6,363 corresponds to the current market value swap ThU.S. $ 7400 more for the market value of the new period covered Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. In the consolidated statements of financial position they are included in line items “Cash and cash equivalents” (certain components of cash and cash equivalents), “Trade and Other Current/Non-Current Receivables” and “Accounts receivable from related parties”.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Loans and receivables are measured at amortized cost using the effective interest rate method and are tested for impairment. Financial assets that are classified as loans and receivables are: cash and cash-equivalents, time deposits, repurchase agreements, trade and other current/non-current receivables, and account receivables from related parties.


	September		December
	2013		2012
	ThU.S.$		ThU.S.$
Loans and Receivables		1,298,976		1,183,327
Cash and cash equivalents		411,343		215,158
Cash		125,320		63,359
Time Deposits		276,882		151,799
Trade and other receivables		736,817		837,746
Trades and Other receivables		631,161		637,623
Other receivables		105,656		200,123
Accounts receivable from related parties		150,816		130,423

Cash and Cash Equivalents: Includes cash on hand, bank checking accounts balances and time deposits. They are short-term, highly liquid investments that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of changes in value.

The following table sets forth the cash and cash equivalents balances classified by currency as of September 30, 2013 and December 31, 2012.


	09-30-2013		12-31-2012
	ThU.S.$		ThU.S.$

Cash and Cash Equivalents		543,694		395,716
US Dollar		432,643		325,340
Euro		1,081		1,867
Other currencies		92,657		46,080
Chilean pesos		17,313		22,429

Time Deposits and Repurchase Agreements:

The investment objective of time deposits and repurchase agreements is to maximize in the short-term the amounts of cash surpluses. These instruments are authorized by Arauco’s Investment Policy, which allows investing in fixed income securities. These instruments have a maturity of less than three months from the date of acquisition.

Trades and Other Receivables: These represent enforceable rights for Arauco resulting from the normal course of the business.

Other Receivables: These correspond to receivables from sales, services or loans that are not considered within the normal course of the business.

The provision for doubtful accounts is presented as a deduction of trade and other receivables. The provision for doubtful accounts is established when there is objective evidence that Arauco will not receive payments under the original sale terms. Provisions are made when the customer is a party to a bankruptcy court agreement or cessation of payments, and are written-off when Arauco has exhausted all levels of recovery of debt in a reasonable time.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Accounts receivable from related parties: Represent enforceable rights for Arauco generated in the ordinary course of business, calling it normal to the line of business, activity or purpose of the operation and financing, in which Arauco owns a non-controlling interest in the ownership of the counterparty.

The following table sets forth trade and other current/non-current receivables classified by currencies as of September 30, 2013 and December 31, 2012:


	09-30-2013		12-31-2012
	ThU.S.$		ThU.S.$
Trades and other current receivables		731,447		825,869
US Dollar		478,256		520,803
Euros		27,899		26,711
Other currencies		127,344		113,856
Chilean pesos		96,816		163,084
U.F.		1,132		1,415

Accounts receivable from related parties, current		150,816		130,423
US Dollar		135,782		122,315
Other currencies		3,688		1,268
Chilean pesos		11,346		6,840

Trade and other non-current receivables		5,370		11,877
US Dollar		173		5,204
Chilean pesos		3,199		3,374
U.F.		1,998		3,299

The following table summarizes Arauco’s categories of financial assets at the end of each reporting period:


	September		December
	2013		2012
	ThU.S.$		ThU.S.$
Financial Assets		1,491,851		1,424,218
Fair value through profit or loss		192,875		240,891
Mutual Funds		132,351		180,558
Hedging Assets		60,524		60,333
Loans and receivables		1,298,976		1,183,327

FINANCIAL LIABILITIES

Financial Liabilities Measured at Amortized Cost

Financial liabilities correspond to non-derivative financial instruments with contractual cash flow payments that can be either fixed or variable.

Also, this category includes those non-derivative financial liabilities for services or goods delivered to Arauco at the end of each reporting period that have not yet been paid. These amounts are not insured and are generally paid within thirty days after being recognized.

As the end of each reporting period, Arauco includes in this category bank borrowings, bonds issued denominated in U.S. Dollars and in UF, trade and other payables.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


		September 2013		December 2012		September 2013		December 2012
	*Currency*	*Amortized Cost ThU.S.$*				*Fair Value ThU.S.$*
Total Financial Liabilities			4,732,792		4,899,873		4,922,983		5,138,212
Bonds Issued	U.S. Dollar		2,170,417		2,487,236		2,291,425		2,712,585
Bonds Issued	U.F.		891,767		930,607		916,410		949,141
Bank borrowings	U.S. Dollar		931,030		835,463		825,480		835,771
Bank borrowings	Other currencies		117,390		86,246		267,480		80,394
Government Loans	U.S. Dollar		4,548		4,910		4,548		4,910
Financial Leasing	U.F.		86,972		54,636		86,972		54,636
Financial Leasing	Chilean pesos		2,024		1,222		2,024		1,222
Financial Leasing	U.S. Dollar		99		194		99		194
Trades and Other Payables	U.S. Dollar		136,852		119,458		136,852		119,458
Trades and Other Payables	Euro		7,460		9,114		7,460		9,114
Trades and Other Payables	Other currencies		72,155		69,867		72,155		69,867
Trades and Other Payables	Chilean pesos		298,117		289,190		298,117		289,190
Trades and Other Payables	U.F.		2,589		2,562		2,589		2,562
Related party payables	U.S. Dollar		1,799		1,474		1,799		1,474
Related party payables	Chilean pesos		9,573		7,694		9,573		7,694

The financial liabilities at amortized cost presented in the consolidated statements of financial positions as of September 30, 2013 and December 31, 2012 are as follows:


	September 2013
	Current		Non Current
	ThU.S.$		ThU.S.$		Total
Other financial liabilities		439,589		3,764,658		4,204,247
Trade and other payables		517,173		—		517,173
Accounts payable to related companies		11,372		—		11,372
Total Financial Liabilities Measured at Amortized Cost		968,134		3,764,658		4,732,792


	December 2012
	Current		Non Current
	ThU.S.$		ThU.S.$		Total
Other financial liabilities		806,899		3,593,614		4,400,513
Trade and other payables		490,191		—		490,191
Accounts payable to related companies		9,168		—		9,168
Total Financial Liabilities Measured at Amortized Cost		1,306,258		3,593,614		4,899,872

Financial Liabilities Measured at Fair Value

As of the closing date of the financial statements, Arauco held a cross currency swap as a financial liability measures at fair value through profit or loss. This liability incurred a net decrease of 90%, generated mainly by a decrease in the horizon of the time in flows to be discounted.

Fair value

September

December

2013

2012

Period

ThU.S.$

Variation

Financial liabilities measured at fai value through profit or loss

109

1,070

-90

Swap

109

1,070

-90

The table below sets forth Arauco’s categories of financial liabilities at the end of each reporting period:


Financial Liabilities
	September		December
	2013 ThU.S.$		2012 ThU.S.$
Total Financial Liabilities		4,741,032		4,914,282
Financial liabilities at fair value through profit or loss (held for trading)		109		1,070
Hedging Liabilities		8,131		13,339
Financial Liabilities Measured at Amortized Cost		4,732,792		4,899,873

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Cash Flow Hedges Amounts Recognized in Other Comprehensive Income

The following table sets forth the reconciliation of cash flow hedges presented in Other Comprehensive Income:


	January - September						July - September
	2013			2012			2013			2012
	ThU.S.$			ThU.S.$			MUS$			MUS$
Opening balance		(45,110	)		(25,914	)		—			—
Fair value gains (losses) arising during the year		4,986			53,934			10,931			5,201
Exchange differences of bonds hedged		28,517			(72,375	)		(12,129	)		(149	)
Finance costs		5,162			4,128			1,919			(1,814	)
Settlements during the period		(4,930	)		(5,557	)		(2,860	)		911
Deferred taxes		(6,747	)		3,838			428			(985	)
Closing balance		(18,122	)		(41,946	)		(1,711	)		3,164

Effect in Profit or Loss

The following table sets forth the net gains/losses and impairment losses recognized in the statement of income on financial instruments:


		Net Gain (loss)						Impairment
		09-30-2013			12-31-2011			09-30-2013		12-31-2011
	Financial Instrument	ThU.S.$			ThU.S.$			ThU.S.$		ThU.S.$
Assets
Financial assets measure at fair value through profit or loss	Swap		961			2,020
	Forward		1,267			(4,758	)
	Mutual Funds		1,669			362
	Total		3,897			(2,376	)		—		—


Loans and Receivables	Fix terms deposits		5,740			5,913
	Repurchased agreements		937			391
	Trades and Other receivables		—			—			1,650		1,982
	Total		6,677			6,304			1,650		1,982


Hedges Instruments	Cash flow swap		(4,930	)		(5,557	)
	Total		(4,930	)		(5,557	)

Liabilities
At amortized cost	Bank loans		(18,286	)		(9,609	)
	Bond issued obligations		(129,076	)		(117,775	)
	Total		(147,362	)		(127,384	)		—		—

Fair Value Hierarchy

The assets and liabilities measured at fair value in the consolidated statements of financial position as of September 30, 2013, have been measured based on the valuation methodologies provided in IAS 39. The methodologies applied for each financial instrument are classified according to their hierarchy as follows:

•

Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities.

•

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

•

Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


			Fair value hierarchy levels
	Fair Value
*Thousands of dollars*	September 2013		Level 1		Level 2		Level 3
Financial assets measured at fair value
Hedging instruments		60,524		—		60,524		—
Foreign exchange forwards		—		—		—		—
Mutual Funds		132,351		132,351		—		—
Financial liabilities measured at fair value
Hedging instruments		8,008		—		8,008		—
Foreign exchange forwards		—		—		—		—

To value Level II instruments, in this particular case the swap, since the cross currency swap have 2 components, which are future flows in UF and future flows in dollars, what should be done is to calculate the present value of these flows. To bring the future cash flows up to date, must take 2 curves of discount must be considered, which are the zero coupon curve UF and zero coupon curve dollar. In both cases Bloomberg terminal is used as an information source.

Information on Objectives, Policies and Processes applied by the Company regarding Capital Management

Arauco’s policies on capital management have the objective of:

Ensuring business continuity and normal operations in the long term;

Ensuring funding for new investments to achieve sustainable growth over time;

Keeping adequate capital structure considering all economic cycles that impact the business and the nature of the industry; and

Maximizing the Company’s value and providing an adequate return to shareholders.

Qualitative Information on Objectives, Policies and Processes applied by the Company regarding Capital Management

Arauco determines and manages its capital structure based on its carrying amount of equity plus its financial debt (bank borrowings and bonds issued).

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Quantitative Information on Capital Management

The following table sets forth the financial covenants that the Company has to comply with as part of the terms of certain of its obligations:

Financial obligation

09/30/2013
(ThU.S.$)

12/31/2012
(ThU.S.$)

Coverage
Ratio
equal to
or
greater
than 2.0
times

Debt to
equity
ratio⁽¹⁾
equal to
or less
than 1.2
times

Debt to
total
assets
ratio⁽²⁾
equal to
or less
than 0.75
times

Domestic Bonds

891,767

930,607

N/R

Forestal Río Grande S.A. Loan

8,681

34,725

⁽³⁾

N/R

⁽³⁾

Bilateral BBVA Bank Loan

75,007

168,379

N/R

Bilateral Scotiabank Loan

199,876

198,650

N/R

Other Loans

321,862

371,291

No Financial Covenants Required

Foreign Bonds

2,170,417

2,487,236

No Financial Covenants Required

Commited Line

N/R

Flakeboard credit with Arauco warranty

149,819

153,574

N/R

Syndicated loan

297,723

N/R

N/R: Not required for the financial obligation

(1)

Debt to equity ratio (financial debt divided by equity plus non-controlling interests)

(2)

Debt to total assets ratio (financial debt divided by total assets)

(3)

Financial covenants required to the loan of Forestal Río Grande S.A. apply only to financial statements of that company

As of September 30, 2013 and December 31, 2012, Arauco has complied with all of its financial covenants.

The following table sets forth the credit ratings of our debt instruments as of September 30, 2013, are as follows:


Instrument	Standard & Poor’s	Fitch Ratings	Moody’s	Feller Rate
Local bonds	—	AA -	—	AA -
Foreign bonds	BBB -	BBB	Baa3*	—

*	Negative perspective

Capitalization requirements are established based on the Company’s financial needs and on maintaining an adequate liquidity level and complying with financial covenants established in current debt arrangements. The company manages its capital structure and makes adjustments based on the prevailing economic conditions in order to mitigate the risks associated with adverse market conditions, and based on opportunities that may arise to improve the Company’s level of liquidity.

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The capitalization of Arauco as of September 30, 2013 and December 31, 2012 is as follows:


*Thousands of dollars*	09-30-2013		12-31-2012
Equity		7,097,708		6,965,759
Bank borrowings		1,052,968		926,619
Financial leasing		89,095		56,052
Bonds issued		3,062,184		3,417,843

Capital		11,301,955		11,366,273

The nature of external capital requirements is determined by the obligation to maintain certain financial ratios that ensure payment compliance with bank borrowings or bonds issued, which provide guidelines on the capital ranges required for compliance with these requirements. Arauco has fulfilled all its external requirements.

Risk Management

Arauco’s financial instruments are exposed to various financial risks: credit risk, liquidity risk and market risk (including exchange rate risks, interest rate risks and price risks). Arauco’s overall risk management program focuses on uncertainty in financial markets and aims to minimize potential adverse effects on Arauco’s financial profitability.

Arauco’s financial risk management is overseen by the Financial Department. This department identifies, assesses and hedges financial risks in close collaboration with Arauco’s operational units.

Credit Risk

Description

Credit risk refers to financial uncertainty at different periods of time relating to the fulfillment of obligations subscribed to by counterparties, at the time of exercising the contract rights to receive cash or other financial assets on behalf of Arauco.

Explanation of Credit Risk Exposure and How This Risk Arises

Arauco’s exposure to credit risk is directly related to each of its customer’s individual abilities to fulfill their contractual commitments, reflected in trade receivables. Furthermore, credit risk also arises for time deposits, repurchase agreements and mutual funds.

As a policy for its trade receivables, Arauco entered into insurance policies for open account sales. The insurance policies are used to cover export sales from Arauco, Aserraderos Arauco S.A., Paneles Arauco S.A., Forestal Arauco S.A., and Alto Paraná S.A. as well as domestic sales of Arauco Distribución S.A., Arauco México S.A. de C.V., Arauco Wood Inc., Arauco Colombia S.A., Arauco Perú S.A., Arauco Panels USA LLC, Flakeboard Co Ltd., Flakeboard America Ltd. and Alto Paraná S.A. (and subsidiaries). Arauco contracts its insurance policies with Continental Credit Insurance Company (rated AA- by credit agencies as Humphreys and Fitch Ratings on April 04, 2012). Until November 30, 2012, Arauco do Brasil (and subsidiaries) insured its. Domestic credit sales with Euler Hermes Insurance Company and beginning on December 1, 2012, insurance policies all credit sales in the Arauco Group are insured with the Continental Credit Insurance Company. The insurance policies cover 90% of the amount invoice with no deductible.

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

In order to secure a credit line or an advanced payment to a supplier approved by the Credit Committee, Arauco gives several types of guarantees, such as mortgages, pledges, standby letters of credit, certificates of deposit, checks, promissory notes, mutual loans or any other guarantee that may be requested pursuant to each country’s legislation. The procedure to issue a guarantees is established in the Arauco’s Guarantee Policy, which has the purpose to control the accounting, maturity and valuation of such guarantees.

As of September 30, 2013, the total amount of guarantees given was U.S.$ 146 millions, which is summarized in the following table.


Guarantees Arauco Group
Guarantees Debtors	107,513,666	74	%
-Certificate of deposit	6,130,558	6	%
-Standby L/C	27,622,000	26	%
-Promissory notes	49,121,152	46	%
-Securities	11,549,671	11	%
-Mortgage	6,533,625	6	%
-Pledge	1,156,660	1	%
-Promissory note	5,400,000	5	%

Guarantees Creditors	38,392,068	26	%
-Certificate of deposit	30,723,970	80	%
-Standby L/C	717,202	2	%
-Promissory notes	2,621,378	7	%
-Mortgage	3,471,511	9	%
-Pledge	858,007	2	%

Total Guarantees	145.905.734	100	%

At the end of each reporting period, the Company’s maximum credit risk exposure is limited to the carrying amount of the recognized trade receivables less the amounts receivable insured by credit insurance companies and the guarantees received by Arauco.

As of September 30, 2013, Arauco’s consolidated revenues from sales were ThU.S.$3,771,055 out of which 72.93% correspond to credit sales, 21% to sales with letters of credit, and 6.07% to other classes of sales.

As of September 30, 2013, to the trade receivables balance was ThU.S.$628,690 that according to the agreed term of sales, 73.50% corresponded to credit sales, 23.51% to sales with letters of credit and 2.99% to other classes of sales, distributed among 2,138 customers. The customer with the largest open account outstanding did not exceed 1.98% of total.

Arauco has not entered into any refinancing or renegotiations with its customers which involve amendments to the invoice due, and if necessary, any renegotiation of debt with a client will be analyzed on a case by case and approved by the Corporate Finance.

The receivables covered by credit insurance and collateral were 98.42%, therefore, Arauco’s credit risk exposure of its portfolio is 1.58%.

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


Secured Open Account Receivables	ThU.S.$		%
Total open account receivables		462,088		100.00	%
Secured receivables		454,787		98.42	%
Unsecured receivables		7,301		1.58	%

(*)	Secured receivables are defined as the amount of trade receivables that are covered by credit insurance or collateral such as: stand-by letter of credits, mortgage or certificates of deposit, among others.

Accounts exposed to this type of risk are: trade receivable, financial lease debtors and other debtors.

Arauco does not have a securitized portfolio.


	September		December
	2013 Th.U.S.$		2012 Th.U.S.$
Current Receivables

Trades receivables		628,690		628,455
Financial lease receivables		1,068		1,527
Other Debtors		101,689		195,887
Net subtotal		731,447		825,869

Trades receivables		637,592		641,360
Financial lease receivables		1,068		1,563
Other Debtors		109,114		200,923
Gross subtotal		747,774		843,846

Provision for doubtful trade receivables		8,902		12,905
Provision for doubtful lease receivables		—		36
Provision for doubtful other debtors		7,425		5,036
Subtotal Bad Debt		16,327		17,977

Non Current Receivables

Trades receivables		1,098		6,297
Financial lease receivables		305		1,344
Other Debtors		3,967		4,236
Net Subtotal		5,370		11,877

Trades receivables		1,098		6,297
Financial lease receivables		305		1,344
Other Debtors		3,968		4,236
Gross subtotal		5,371		11,877

Provision for doubtful trade receivables		—		—
Provision for doubtful lease receivables		—		—
Provision for doubtful other debtors		1		—
Subtotal Bad Debt		1		—

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The following table sets forth the reconciliation of changes in the allowance for doubtful accounts as of September 30, 2013 and December 2012:


	09-30-2013			12-31-2012
	Th.U.S.$			Th.U.S.$
Opening balance		17,977			24,816
Impairment losses recognized on receivables		197			760
Increase (decrease) of foreign exchange translation		(95	)		88
Reversal of impairment losses		(1,752	)		(7,687	)
Closing balance		16,327			17,977

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

The Credit and Collections Department, which reports to the Financial Department, is responsible for minimizing receivables credit risk and supervising past due accounts. It is also responsible for the approval or rejection of credit limits for all sales. The standards and procedures governing the control and risk management of credit sales are set forth the Company’s Credit Policy.

For customer credit line approval and/or modification, all Arauco group companies must follow an established procedure. All Credit requests are entered into a Credit Evaluation model (EVARIE) where all available information is analyzed, including the credit line given by the credit insurance company. Subsequently, credit requests are approved or rejected by the internal committee of each company within the Arauco group considering the maximum amount authorized by the Credit Policy Department. If the credit line exceeds the maximum established amount, it is subsequently analyzed by the Corporate Committee. Credit lines are renewed on a yearly basis.

Sales with letters of credit are mainly to Asia and the Middle East. Credit assessments of the issuing banks are performed periodically, in order to obtain domestic and international credit ratings made by the principal credit rating agencies, and of their financial position over the past five years. Depending on this evaluation, it is decided whether the issuing bank is approved or confirmation of the letter of credit is requested.

All sales are controlled by a credit verification system that has set parameters to block orders from customers who have accumulated past due amounts of a defined percentage of the debt and/or customers who at the time of product delivery have exceeded their credit limit or whose credit limit has expired.

Of total trade receivables as of September 30, 2013, 91.09% is the debt to date, the 8.36% is between 1 and 30 days past due, 0.44% are between 30 and 60 days past due, 0.07% are between 60 and 90 days, 0.0315% are between 90 and 120 days.

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

September 30, 2013


Age of trade receivables
Days	Non - past due			1 to 30			31 to 60			61 to 90			91 to 120			121 to 150			151 to 180			181 to 210			211 to 250			More than 250			Total
Th.U.S.$		572,686			52,582			2,781			442			198			0			0			0			0			0			628,689
%		91.09	%		8.36	%		0.44	%		0.07	%		0.03	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		100	%

Financial Impairment in sections
Days	Non - past due			1 to 30			31 to 60			61 to 90			91 to 120			121 to 150			151 to 180			181 to 210			211 to 250			More than 250			Total
MUS$		-3,975			-732			-55			-97			182			-30			204			82			-1,092			-10,815			-16,328
%		24.35	%		4.48	%		0.34	%		0.59	%		-1.12	%		0.18	%		-1.25	%		-0.50	%		6.69	%		66.24	%		100	%

December 31, 2012


Age of trade receivables
Days	Non - past due			1 to 30			31 to 60			61 to 90			91 to 120			121 to 150			151 to 180			181 to 210			211 to 250			More than 250			Total
MUS$		552,319			62,884			3,417			1,421			187			0			462			0			0			7,766			628,455
%		87.89	%		10.01	%		0.54	%		0.23	%		0.03	%		0.00	%		0.74	%		0.00	%		0.00	%		1.24	%		100.00	%

Financial Impairment in sections
Days	Non - past due			1 to 30			31 to 60			61 to 90			91 to 120			121 to 150			151 to 180			181 to 210			211 to 250			More than 250			Total
MUS$		-643			22			-17			-98			1,096			-23			-64			92			48			-18,389			-17,977
%		3.58	%		-0.12	%		0.10	%		0.55	%		-6.10	%		0.13	%		0.36	%		-0.51	%		-0.27	%		102.29	%		100	%

Arauco has recognized impairment losses on trade receivables for a total of US$8,9 million over the last five years which represents 0.046% of total revenues from sales during that five-year period.


Impairment losses of trade receivables as a percentage of total revenues from sales
	2013			2012			2011			2010			2009			Last 5 years
Percentage of impairment losses		0.021	%		0.010	%		0.15	%		0.01	%		0.03	%		0.046	%

The amount recovered through possession of collateral, credit insurance reimbursements or any other credit enhancement during the year 2013 was ThU.S.$951, which represents 11,47% of the total impaired financial assets.

Explanation of any changes to risk exposure or changes in objectives, processes and policies regarding previous years’ risk management

In March 2009, Arauco implemented a Guarantee Policy in order to control accounting, valuation and expiration dates of collaterals received.

In May 2013, Arauco updated its Corporate Credit Policy.

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Regarding the credit risk of time deposits, repurchase agreements and mutual funds, Arauco has in place a policy that minimizes the risk through guidelines for management of cash flow surpluses in low-risk institutions.

Currently there is a policy for provisions for doubtful accounts receivable under IFRS for all the Arauco group companies.

Investment Policy:

Arauco has an Investment Policy which identifies and limits the financial instruments and the entities that Arauco and its subsidiaries are authorized to invest in.

The company’s Treasury Department is centralized with operations in Chile. The Head Office is responsible for carrying out investments, cash flow surplus investments, and short and long term debt subscriptions. Exceptions to this rule are specific investments made through other companies where authorization is required from the Chief Financial Officer.

For financial instruments, the only permitted investments are fixed income investments and instruments with adequate liquidity. Each instrument has defined classifications and limits, depending on duration and type of issuer.

Regarding to intermediaries (such as banks, securities brokers and broker/dealers of mutual funds), a scoring methodology is used to determining the relative degree of risk of each intermediary based on their financial position and assigning score points that result in a credit risk rating to each intermediary. Arauco uses this scoring system to determine its investment limits for each intermediary.

The required information to evaluate the various criteria are obtained from published financial statements from the banks under evaluation and from the credit risk ratings of short and long term debt securities obtained from rating agencies authorized by the Superintendency of Banks and Financial Institutions (Fitch Ratings Chile, Humphreys and Feller Rate).

The criteria evaluated are: Capital and Reserves, Current Ratio, Return on equity, Net Income to Operating income Ratio, Debt to Equity Ratio and the Credit Risk rating of each entity.

Any necessary exceptions regarding investment limits in each particular instrument or entity must have the authorization from Arauco’s Chief Financial Officer.

Liquidity Risk

Description

This risk corresponds to Arauco’s ability to fulfill its financial obligations upon maturity.

Explanation of Liquidity Risk Exposure and How This Risk Arises

Arauco’s exposure to liquidity risk is mainly from its obligations to bondholders, banks and financial institutions, creditors and other payables. Liquidity risk may arise if Arauco is unable to meet the net cash flow requirements, which sustain its operations under both normal and exceptional circumstances.

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Explanation of Objectives, Policies and Processes for Risk Management, and Measurement Methods

The Financial Management Department monitors on an ongoing basis the Company’s cash flow forecasts based on short and long term forecasts and available financing alternatives. In order to manage the risk level of financial assets, Arauco follows its investment policy.

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The following tables detail Arauco’s liquidity analysis for its financial liabilities as of December 31, 2012 and 2011. The tables have been drawn up based on the contractual undiscounted cash outflows and their remaining contractual maturities:

September 30, 2013:


				Maturity														Total
Tax ID	Name	Currency	Name - country Loans with banks	0 to 1 month ThU.S.$		1 to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 3 Years ThU.S.$		3 to 5 Years ThU.S.$		5 to 7 Years ThU.S.$		More than 7 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$	Type of Amortización	Effective Rate %			Nominal Rate
—	Arauco Do Brasil S.A.	Real	Banco Alfa - Brasil		89		0		0		0		0		0		0		89	0	Monthly		0.00	%		6.80	%
—	Arauco Do Brasil S.A.	Real	Banco Alfa - Brasil		20		0		0		0		0		0		0		20	0	Monthly		0.00	%		6.20	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Banco BBVA - Estados Unidos		0		0		30,007		45,850		0		0		0		30,007	45,850	(i) semmiannual; (k) semiannually from 2011		Libor 6 months + 0,2	%		Libor 6 months + 0,2	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Bancoestado NY		0		0		18,005		27,000		0		0		0		18,005	27,000	(i) semmiannual; (k) semiannually from 2011		0.00	%		Libor 6 meses + 0,2	%
—	Arauco Do Brasil S.A.	Real	Banco HSBC- Brasil		44		0		0		59		0		0		0		44	59	maturity		0.00	%		5.50	%
—	Arauco Do Brasil S.A.	Real	Banco HSBC- Brasil		0		136		0		14,409		0		0		0		136	14,409	maturity		0.00	%		8.00	%
—	Arauco Forest Brasil S.A.	Real	Banco HSBC- Brasil		0		0		1,383		0		0		0		0		1,383	0	maturity		0.00	%		5.50	%
—	Arauco Forest Brasil S.A.	Real	Banco Bradesco		0		0		4,804		0		0		0		0		4,804	0	maturity		0.00	%		5.50	%
—	Arauco Do Brasil S.A.	Real	Banco Bradesco		144		0		0		167		0		0		0		144	167	maturity		0.00	%		5.50	%
—	Arauco Do Brasil S.A.	Real	Banco do Brasil - Brasil		168		0		0		87		408		0		0		168	496	maturity		0.00	%		8.70	%
—	Arauco Do Brasil S.A.	Real	Banco do Brasil - Brasil		7,524		0		0		0		0		0		0		7,524	0	maturity		0.00	%		5.50	%
—	Arauco Forest Brasil S.A.	Real	Banco Votorantim - Brasil		54		0		0		658		431		2,987		0		54	4,077	Monthly		0.00	%		8.80	%
—	Arauco Do Brasil S.A.	Real	Banco Votorantim - Brasil		60		0		0		124		10		0		0		60	134	maturity		0.00	%		8.70	%
—	Arauco Do Brasil S.A.	Real	Banco Votorantim - Brasil		74		0		0		31		234		0		0		74	265	maturity		0.00	%		5.50	%
—	Arauco Do Brasil S.A.	Real	Banco ABC		0		16		0		85		0		0		0		16	85	maturity		0.00	%		2.50	%
—	Arauco Forest Brasil S.A.	U.S. Dollar	Banco Votorantim - Brasil		6		0		0		26		11		403		0		6	440	maturity		0.00	%		3.30	%
—	Arauco Do Brasil S.A.	Real	Banco Itau -Brasil		57		0		0		64		0		0		0		57	64	Monthly		0.00	%		4.50	%
—	Arauco Do Brasil S.A.	Real	Banco Itau -Brasil		31		0		0		49		0		0		0		31	49	maturity		0.00	%		5.50	%
—	Arauco Do Brasil S.A.	Real	Banco Itau -Brasil		234		0		0		506		40		0		0		234	547	maturity		0.00	%		8.70	%
—	Arauco Do Brasil S.A.	Real	Banco Itau -Brasil		68		0		0		147		12		0		0		68	159	maturity		0.00	%		8.70	%
—	Arauco Do Brasil S.A.	Real	Banco Itau -Brasil		948		0		0		0		0		0		0		948	0	maturity		0.00	%		5.50	%
—	Arauco Do Brasil S.A.	Real	Banco Santander		0		197		0		24,015		0		0		0		197	24,015	maturity		0.00	%		8.00	%
—	Arauco Forest Brasil S.A.	Real	Banco Itau -Brasil		258		0		0		317		0		0		0		258	317	maturity		0.00	%		4.50	%
—	Arauco Forest Brasil S.A.	Real	Bndes Subcrédito A-E-I		28		0		0		1,626		1,626		2,032		10,907		28	16,191	maturity		0.00	%		7.91	%
—	Arauco Forest Brasil S.A.	Real	Bndes Subcrédito B-F-J		19		0		0		1,099		1,099		1,373		6,668		19	10,239	maturity		0.00	%		8.91	%
—	Arauco Forest Brasil S.A.	U.S. Dollar	Bndes Subcrédito C-G-K		61		0		0		521		521		651		4,883		61	6,575	maturity		0.00	%		6.55	%
—	Arauco Forest Brasil S.A.	Real	Bndes Subcrédito D-H-L		23		0		0		1,385		1,385		1,732		7,571		23	12,073	maturity		0.00	%		10.11	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Scotiabank- Chile		0		845		0		206,137		0		0		0		845	206,137	maturity		0.00	%		1.69	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Scotiabank- Chile		0		1,127		0		303,961		0		0		0		1,127	303,961	maturity		0.00	%		1.42	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Santander- Chile		0		50,004		0		0		0		0		0		50,004	0	maturity		0.00	%		0.37	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Santander- Chile		0		0		50,079		0		0		0		0		50,079	0	maturity		0.00	%		0.58	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Santander- Chile		0		0		50,004		0		0		0		0		50,004	0	maturity		0.00	%		0.37	%
—	Alto Parana S.A.	U.S. Dollar	Banco BBVA - Argentina		32		1,726		0		0		0		0		0		1,758	0	maturity		0.00	%		21.50	%
—	Alto Parana S.A.	Argentine Pesos	Banco BBVA - Argentina		22		0		0		0		0		0		0		22	0	maturity		0.00	%		18.25	%
—	Alto Parana S.A.	Argentine Pesos	Banco BBVA - Argentina		92		5,179		0		0		0		0		0		5,271	0	maturity		0.00	%		21.50	%
—	Alto Parana S.A.	Argentine Pesos	Banco BBVA - Argentina		5,272		0		0		0		0		0		0		5,272	0	maturity		0.00	%		20.75	%
—	Alto Parana S.A.	Argentine Pesos	Banco BBVA - Argentina		5,247		0		0		0		0		0		0		5,247	0	maturity		0.00	%		20.50	%
—	Alto Parana S.A.	Argentine Pesos	Banco Santander		0		7,019		0		0		0		0		0		7,019	0	maturity		0.00	%		22.00	%
—	Alto Parana S.A.	Argentine Pesos	Banco BBVA - Argentina		77		0		6,905		0		0		0		0		6,982	0	maturity		0.00	%		19.40	%
—	Alto Parana S.A.	Argentine Pesos	Banco Galicia- Argentina		12		0		0		0		0		0		0		12	0	maturity		0.00	%		20.75	%
—	Alto Parana S.A.	Argentine Pesos	Banco Macro- Argentina		3,595		0		0		0		0		0		0		3,595	0	maturity		0.00	%		21.75	%
—	Arauco Do Brasil S.A.	Argentine Pesos	Fundo de Desenvolvimiento Econom. - Brasil		62		0		0		0		141		0		0		62	141	Monthly		0.00	%		0.00	%
76.721.630-0	Forestal Rio Grande S.A.	Real	J.P.Morgan - Estados Unidos		8,681		0		0		0		0		0		0		8,681	0	Quartely		0.00	%		Libor 3 months + 0,375	%
—	Arauco Florestal Arapoti S.A.	U.S. Dollar	Banco Bradesco		0		3,751		0		0		0		0		0		3,751	0	maturity		bor 3 months + 0,375	%		5.50	%
—	Arauco Florestal Arapoti S.A.	U.S. Dollar	Banco Itau		14		0		0		3		51		0		0		14	53	maturity					2.50	%
—	Flakeboard Company L	U.S. Dollar	J.P.Morgan - Estados Unidos		0		0		1,055		64,800		91,395		0		0		1,055	156,195	semiannually from 2016		0.00	%		L +1,35	%

			Total Préstamos con Bancos		33,016		70,000		162,242		693,128		97,363		9,179		30,029		265,258	829,698


				Maturity														Total
Tax ID	Name	Currency	Name - country Bonds obligation	0 to 1 month ThU.S.$		1 to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 3 Years ThU.S.$		3 to 5 Years ThU.S.$		5 to 7 Years ThU.S.$		More than 7 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$	Type of Amortización	Effective Rate %			Nominal Rate
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-E		7,906		0		7,529		7,783		0		0		0		15,435	7,783	(i) semiannual; (k) Maturity		4.02	%		3.96	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-F		5,618		0		0		26,966		26,966		26,047		366,737		5,618	446,715	(i) semiannual; (k) Maturity		4.24	%		4.25	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-H		0		0		91,562		0		0		0		0		91,562	0	(i) semiannual; (k) Maturity		2.40	%		2.25	%
93.458.000-2	Celulosa Arauco y Constitución S.A.	UF	Barau-J		0		0		615		20,671		20,671		249,496		0		615	290,839	(i) semiannual; (k) Maturity		3.23	%		3.22	%
93.458.000-3	Celulosa Arauco y Constitución S.A.	UF	Barau-P		0		3,401		0		18,139		18,139		18,139		291,384		3,401	345,802	(i) semiannual; (k) Maturity		3.96	%		3.96	%
—	Alto Paraná S.A.	U.S. Dollar	Bono 144 A - Argentina		0		5,307		0		319,731		0		0		0		5,307	319,731	(i) semiannual; (k) Maturity		6.39	%		6.38	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee Bonds 2019		0		0		6,142		72,500		72,500		531,750		0		6,142	676,750	(i) semiannual; (k) Maturity		7.26	%		7.25	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee Bonds 2a Emisión		0		0		391		18,750		134,105		0		0		391	152,855	(i) semiannual; (k) Maturity		7.50	%		7.50	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee Bonds 5a Emisión		0		0		0		0		0		0		0		0	0	(i) semiannual; (k) Maturity		5.14	%		5.13	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee Bonds 6a Emisión		9,250		0		0		389,865		0		0		0		9,250	389,865	(i) semiannual; (k) Maturity		5.64	%		5.63	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee 2021		0		0		3,889		40,000		40,000		40,000		404,271		3,889	524,271	(i) semiannual; (k) Maturity		5.02	%		5.00	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee 2022		0		0		5,278		47,500		47,500		47,500		524,139		5,278	666,639	(i) semiannual; (k) Maturity		4.77	%		4.75	%

			Total		22,774		8,708		115,406		961,905		359,881		912,932		1,586,531		146,888	3,821,249

110

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


				Maturity														Total
Tax ID	Name	Currency	Name - country Lease	0 to 1 month ThU.S.$		1 to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 3 Years ThU.S.$		3 to 5 Years ThU.S.$		5 to 7 Years ThU.S.$		More than 7 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$	Type of Amortización	Effective Rate %			Nominal Rate
—	Arauco Canada Panels ULC	U.S. Dollar	Business New Brunswick		0		0		0		4,041		0		0		0		0	4,041	maturity		4.70	%		4.70	%
—	Arauco Canada Panels ULC	U.S. Dollar	Fednor (industry Canada)		0		0		67		16		0		0		0		67	16	maturity		0.00	%		0.00	%
—	Arauco Canada Panels ULC	U.S. Dollar	SSM EDC		0		0		278		146		0		0		0		278	146	maturity		1.80	%		1.80	%

			Total		0		0		345		4,203		0		0		0		345	4,203


				Maturity														Total
Tax ID	Name	Currency	Name - country Lease	0 to 1 month ThU.S.$		1 to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 3 Years ThU.S.$		3 to 5 Years ThU.S.$		5 to 7 Years ThU.S.$		More than 7 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$	Type of Amortización	Effective Rate %			Nominal Rate
85.805.200-9	Forestal Celco S.A.	UF	Banco Santander		423		659		2,054		3,115		153		0		0		3,136	3,268	Monthly		—			—
85.805.200-9	Forestal Celco S.A.	UF	Banco Scotiabank		253		506		2,279		6,077		4,634		0		0		3,038	10,711	Monthly		—			—
85.805.200-9	Forestal Celco S.A.	UF	Banco Estado		9		19		84		223		158		0		0		112	381	Monthly		—			—
82.152.700-7	Bosques Arauco S.A.	UF	Banco Santander		116		232		1,044		4,069		862		0		0		1,392	4,931	Monthly		—			—
96.567.940-5	Forestal Valdivia S.A.	UF	Banco BBVA		80		159		716		2,976		0		0		0		955	2,976	Monthly		—			—
85.805.200-9	Forestal Celco S.A.	UF	Banco de Chile		1,086		1,596		5,582		12,065		1,404		0		0		8,264	13,469	Monthly		—			—
82.152.700-7	Bosques Arauco S.A.	UF	Banco de Chile		93		185		834		1,700		70		0		0		1,112	1,770	Monthly		—			—
96.567.940-5	Forestal Valdivia S.A.	UF	Banco de Chile		250		495		2,228		8,998		0		0		0		2,973	8,998	Monthly		—			—
96.567.940-5	Forestal Valdivia S.A.	UF	Banco Santander		10		23		533		2,925		0		0		0		566	2,925	Monthly		—			—
82.152.700-7	Bosques Arauco S.A.	UF	Banco BBVA		389		779		3,505		8,550		2,772		0		0		4,673	11,322	Monthly		—			—
85.805.200-9	Forestal Celco S.A.	Chilean Pesos	Banco Santander		2		3		15		41		5		0		0		20	46	Monthly		—			—
85.805.200-9	Forestal Celco S.A.	Chilean Pesos	Banco Chile		5		11		49		131		109		0		0		65	240	Monthly		—			—
82.152.700-7	Bosques Arauco S.A.	Chilean Pesos	Banco Santander		2		5		21		34		0		0		0		28	34	Monthly		—			—
96.567.940-5	Forestal Valdivia S.A.	Chilean Pesos	Banco Santander		40		81		302		515		0		0		0		423	515	Monthly		—			—
82.152.700-7	Bosques Arauco S.A.	Chilean Pesos	Banco de Chile		9		18		81		191		0		0		0		108	191	Monthly		—			—
96.567.940-5	Forestal Valdivia S.A.	Chilean Pesos	Banco de Chile		12		24		110		208		0		0		0		146	208	Monthly		—			—
—	Arauco Canada Panels ULC	U.S. Dollar	Automotive Leases		0		0		87		12		0		0		0		87	12	Monthly		—			—

			Total		2,779		4,795		19,524		51,830		10,167		0		0		27,098	61,997

111

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

December 31, 2012:


				Maturity														Total
Tax ID	Name	Currency	Name - country Loans with banks	0 to 1 month ThU.S.$		1 to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 3 Years ThU.S.$		3 to 5 Years ThU.S.$		5 to 7 Years ThU.S.$		More than 7 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Type of Amortización	Effective Rate %			Nominal Rate
—	Arauco Do Brasil S.A.	Real	Banco Alfa - Brasil		116		0		0		72		0		0		0		116		72	Monthly		7.00	%		7.00	%
—	Arauco Do Brasil S.A.	Real	Banco Alfa - Brasil		121		0		0		0		0		0		0		121		0	Monthly		6.70	%		6.70	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Banco BBVA - Estados Unidos		0		24,379		24,000		97,187		24,169		0		0		48,379		121,355	emmiannual; (k) semiannually from		Libor 6 months + 0,2	%		Libor 6 months + 0,2	%
—	Arauco Do Brasil S.A.	Real	Banco HSBC- Brasil		48		0		0		111		0		0		0		48		111	maturity		5.50	%		5.50	%
—	Arauco Forest Brasil S.A.	Real	Banco HSBC- Brasil		0		0		3,432		0		0		0		0		3,432		0	maturity		5.50	%		5.50	%
—	Arauco Do Brasil S.A.	Real	Banco Bradesco		158		0		0		288		0		0		0		158		288	maturity		5.50	%		5.50	%
—	Arauco Do Brasil S.A.	Real	Banco do Brasil - Brasil		292		0		0		0		435		0		0		292		435	maturity		8.70	%		8.70	%
—	Arauco Do Brasil S.A.	Real	Banco do Brasil - Brasil		4,270		0		0		0		0		0		0		4,270		0	Monthly		5.50	%		5.50	%
—	Arauco Forest Brasil S.A.	Real	Banco Votorantim - Brasil		63		0		0		722		646		3,472		0		63		4,840	maturity		9.30	%		9.30	%
—	Arauco Do Brasil S.A.	Real	Banco Votorantim - Brasil		86		0		0		0		0		0		0		86		0	Monthly		6.60	%		6.60	%
—	Arauco Do Brasil S.A.	Real	Banco Votorantim - Brasil		66		0		0		0		157		0		0		66		157	maturity		8.70	%		8.70	%
—	Arauco Forest Brasil S.A.	U.S. Dollar	Banco Votorantim - Brasil		6		0		0		0		0		403		0		6		403	Monthly		3.30	%		3.30	%
—	Arauco Do Brasil S.A.	Real	Banco Itau -Brasil		62		0		0		98		0		0		0		62		98	maturity		4.50	%		4.50	%
—	Arauco Do Brasil S.A.	Real	Banco Itau -Brasil		34		0		0		0		75		0		0		34		75	maturity		5.50	%		5.50	%
—	Arauco Do Brasil S.A.	Real	Banco Itau -Brasil		256		0		0		0		634		0		0		256		634	maturity		8.70	%		8.70	%
—	Arauco Do Brasil S.A.	Real	Banco Itau -Brasil		74		0		0		0		184		0		0		74		184	maturity		8.70	%		8.70	%
—	Arauco Do Brasil S.A.	Real	Banco Itau -Brasil		0		2,446		0		0		0		0		0		2,446		0	maturity		5.50	%		5.50	%
—	Arauco Forest Brasil S.A.	Real	Banco Itau -Brasil		256		0		0		0		452		0		0		256		452	maturity		4.50	%		4.50	%
—	Arauco Forest Brasil S.A.	Real	Bndes Subcrédito A-E-I		0		32		0		1,131		1,131		1,131		11,824		32		15,216	maturity		8.41	%		8.41	%
—	Arauco Forest Brasil S.A.	Real	Bndes Subcrédito B-F-J		0		21		0		759		759		759		7,215		21		9,492	maturity		9.41	%		9.41	%
—	Arauco Forest Brasil S.A.	U.S. Dollar	Bndes Subcrédito C-G-K		60		0		0		385		385		385		5,037		60		6,193	maturity		6.47	%		6.47	%
—	Arauco Forest Brasil S.A.	Real	Bndes Subcrédito D-H-L		0		26		0		951		951		951		8,178		26		11,031	maturity		10.61	%		10.61	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Scotiabank- Chile		0		0		198		202,671		0		0		0		198		202,671	maturity		1.59	%		1.59	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Scotiabank- Chile		0		15,007		0		0		0		0		0		15,007		0	maturity		0.45	%		0.45	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Scotiabank- Chile		0		35,015		0		0		0		0		0		35,015		0	maturity		0.45	%		0.45	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Santander- Chile		0		50,054		0		0		0		0		0		50,054		0	maturity		0.46	%		0.46	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Santander- Chile		0		30,010		0		0		0		0		0		30,010		0	maturity		0.49	%		0.49	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Banco del Estado		100,093		0		0		0		0		0		0		100,093		0	maturity		0.48	%		0.48	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Banco Chile		0		50,035		0		0		0		0		0		50,035		0	maturity		0.71	%		0.71	%
—	Alto Parana S.A.	Argentine Pesos	Banco BBVA - Argentina		108		0		6,100		0		0		0		0		6,208		0	maturity		19.90	%		19.90	%
—	Alto Parana S.A.	Argentine Pesos	Banco BBVA - Argentina		100		0		6,100		0		0		0		0		6,200		0	maturity		18.25	%		18.25	%
—	Alto Parana S.A.	Argentine Pesos	Banco BBVA - Argentina		69		4,067		0		0		0		0		0		4,136		0	maturity		19.00	%		19.00	%
—	Alto Parana S.A.	Argentine Pesos	Banco BBVA - Argentina		0		104		0		8,960		0		0		0		104		8,960	maturity		19.40	%		19.40	%
—	Alto Parana S.A.	Argentine Pesos	Banco Galicia- Argentina		8,254		0		0		0		0		0		0		8,254		0	maturity		16.60	%		16.60	%
—	Alto Parana S.A.	Argentine Pesos	Banco Macro- Argentina		122		8,133		0		0		0		0		0		8,255		0	Monthly		16.50	%		16.50	%
—	Alto Parana S.A.	Argentine Pesos	Banco Macro- Argentina		67		4,067		0		0		0		0		0		4,134		0	Quarterly		19.25	%		19.25	%
—	Arauco Do Brasil S.A.	Real	Fundo de Desenvolvimiento Econom. - Brasil		67		0		0		0		193		0		0		67		193	maturity		0.00	%		0.00	%
76.721.630-0	Forestal Rio Grande S.A.	U.S. Dollar	J.P.Morgan - Estados Unidos		9,012		0		25,713		0		0		0		0		34,725		0	maturity		bor 3 months + 0,375	%		Libor 3 months + 0,375	%
—	Arauco Canada Panels ULC	U.S. Dollar	J.P.Morgan - Estados Unidos		0		0		472		0		148,192		0		0		472		148,192	maturity		L +6,5	%		L +6,5	%
—	Arauco Canada Panels ULC	U.S. Dollar	Business New Brunswick		0		0		0		4,072		0		0		0		0		4,072	maturity		4.70	%		4.70	%
—	Arauco Canada Panels ULC	U.S. Dollar	Fednor (industry Canada)		0		0		69		69		0		0		0		69		69	maturity		0.00	%		0.00	%
—	Arauco Canada Panels ULC	U.S. Dollar	SSM EDC		0		0		270		430		0		0		0		270		430	maturity		1.50	%		1.50	%

			Total Préstamos con Bancos		123,860		223,396		66,354		317,906		178,363		7,101		32,254		413,610		535,623


				Maturity														Total
Tax ID	Name	Currency	Name - country Bonds obligation	0 to 1 month ThU.S.$		1 to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 3 Years ThU.S.$		3 to 5 Years ThU.S.$		5 to 7 Years ThU.S.$		More than 7 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Type of Amortización	Effective Rate %			Nominal Rate
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-E		0		0		15,844		16,182		0		0		0		15,844		16,182	(i) semiannual; (k) Maturity		4.02	%		3.96	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-F		0		0		2,336		28,020		28,021		27,702		387,369		2,336		471,112	(i) semiannual; (k) Maturity		4.24	%		4.25	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-H		0		710		0		95,875		0		0		0		710		95,875	(i) semiannual; (k) Maturity		2.40	%		2.25	%
93.458.000-2	Celulosa Arauco y Constitución S.A.	UF	Barau-J		0		2,557		0		21,480		21,480		21,480		248,505		2,557		312,945	(i) semiannual; (k) Maturity		3.23	%		3.22	%
93.458.000-3	Celulosa Arauco y Constitución S.A.	UF	Barau-P		0		0		1,205		18,849		18,849		18,849		307,494		1,205		364,041	(i) semiannual; (k) Maturity		3.96	%		3.96	%
—	Alto Paraná S.A.	U.S. Dollar	Bono 144 A - Argentina		0		0		1,004		34,425		293,522		0		0		1,004		327,947	(i) semiannual; (k) Maturity		6.39	%		6.38	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee Bonds 2019		15,205		0		0		72,500		72,500		567,423		0		15,205		712,423	(i) semiannual; (k) Maturity		7.26	%		7.25	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee Bonds 2a Emisión		0		2,734		0		18,750		143,429		0		0		2,734		162,179	(i) semiannual; (k) Maturity		7.50	%		7.50	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee Bonds 5a Emisión		7,303		0		299,751		0		0		0		0		307,054		0	(i) semiannual; (k) Maturity		5.14	%		5.13	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee Bonds 6a Emisión		0		0		4,047		399,822		0		0		0		4,047		399,822	(i) semiannual; (k) Maturity		5.64	%		5.63	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee 2021		8,889		0		0		40,000		40,000		40,000		423,664		8,889		543,664	(i) semiannual; (k) Maturity		5.02	%		5.00	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee 2022		11,215		0		0		47,500		47,500		47,500		546,891		11,215		689,391	(i) semiannual; (k) Maturity		4.77	%		4.75	%

			Total		42,612		6,001		324,187		793,403		665,301		722,954		1,913,923		372,800		4,095,581


				Maturity														Total
Tax ID	Name	Currency	Name - country Lease	0 to 1 month ThU.S.$		1 to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 3 Years ThU.S.$		3 to 5 Years ThU.S.$		5 to 7 Years ThU.S.$		More than 7 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Type of Amortización	Effective Rate %			Nominal Rate
85.805.200-9	Forestal Celco S.A.	UF	Banco Santander		196		392		4,270		4,216		1,186		0		0		4,858		5,402	Monthly		—			—
82.152.700-7	Bosques Arauco S.A.	UF	Banco Santander		0		0		818		0		0		0		0		818		0	Monthly		—			—
96.567.940-5	Forestal Valdivia S.A.	UF	Banco Santander		42		84		400		753		96		0		0		526		849	Monthly		—			—
85.805.200-9	Forestal Celco S.A.	UF	Banco de Chile		700		1,400		7,307		13,336		4,798		0		0		9,407		18,134	Monthly		—			—
82.152.700-7	Bosques Arauco S.A.	UF	Banco de Chile		71		142		752		1,450		149		0		0		965		1,599	Monthly		—			—
96.567.940-5	Forestal Valdivia S.A.	UF	Banco de Chile		23		46		470		722		307		0		0		539		1,029	Monthly		—			—
82.152.700-7	Bosques Arauco S.A.	UF	Banco BBVA		234		468		2,106		5,273		2,429		0		0		2,808		7,702	Monthly		—			—
85.805.200-9	Forestal Celco S.A.	Chilean Pesos	Banco Santander		2		4		16		43		21		0		0		22		64	Monthly		—			—
82.152.700-7	Bosques Arauco S.A.	Chilean Pesos	Banco Santander		2		5		22		55		0		0		0		29		55	Monthly		—			—
96.567.940-5	Forestal Valdivia S.A.	Chilean Pesos	Banco Santander		10		21		92		46		0		0		0		123		46	Monthly		—			—
82.152.700-7	Bosques Arauco S.A.	Chilean Pesos	Banco de Chile		9		19		84		225		57		0		0		112		282	Monthly		—			—
96.567.940-5	Forestal Valdivia S.A.	Chilean Pesos	Banco de Chile		13		26		116		309		25		0		0		155		334	Monthly		—			—
—	Arauco Canada Panels ULC	U.S. Dollar	Automotive Leases		0		0		127		67		0		0		0		127		67

			Total		1,302		2,607		16,580		26,495		9,068		0		0		20,489		35,563

112

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Guarantees provided

As of the date of these financial statements, Arauco has financial assets of approximately ThU.S.$92 that have been pledged to third parties (beneficiaries), as direct guarantee. If Arauco does not fulfill its obligations, the guarantors could execute the guarantees.

As of September 30, 2013, the total assets pledged as an indirect guarantee were ThU.S.$923. In contrast to direct guarantees, indirect guarantees are given to secure obligations assumed by a third party.

On September 29, 2011, Arauco entered into a Security Agreement under which it granted a jointly and not several guarantee limited to 50% of the obligations of the Uruguayan companies (joint ventures) Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A., under the IDB Facility Agreement in the amount of up to ThU.S.$454,000 and the Finnevera Guaranteed Facility Agreement in the amount of up to ThU.S.$900,000. Both loan agreements were signed with the International Development Bank. Such guarantee is included in the table below, under indirect guarantees.

Direct and indirect guarantees granted by Arauco:

DIRECT

Subsidiary

Guarantee

Assets pledged

Currency

ThU.S.$

Guarantor

Arauco Forest Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

392

Bank Itaú BBA S.A.

Arauco Forest Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

152

Bank Itaú BBA S.A.

Arauco Forest Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

430

Bank Itaú BBA S.A.

Arauco Forest Brasil S.A.

Endorsement of Arauco do Brasil+Guarantee letter

—

US Dollar

4,038

Bank Votorantim S.A.

Mortgage Industrial Plant of Jaguariaíva of Arauco do

Arauco Forest Brasil S.A.

Brasil

—

US Dollar

68,750

BNDES

Arauco Forest Brasil S.A.

Endorsement of Arauco do Brasil

—

US Dollar

3,139

Bank HSBC Bank Brasil S.A.

Arauco Forest Brasil S.A.

Endorsement of Arauco do Brasil

—

US Dollar

1,345

Bank HSBC Bank Brasil S.A.

Arauco Forest Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

105

Bank Itaú BBA S.A.

Arauco Forest Brasil S.A.

Endorsement of Arauco do Brasil

—

US Dollar

2,691

Bank Santander S.A.

Arauco do Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

479

Bank Alfa S.A.

Arauco do Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

424

Bank Alfa S.A.

Arauco do Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

630

Bank Votorantim S.A.

Arauco do Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

239

Bank Votorantim S.A.

Arauco do Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

575

Bank Bradesco S.A.

Arauco do Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

198

Bank HSBC Bank Brasil S.A.

Arauco do Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

255

Bank Itaú BBA S.A.

Arauco do Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

138

Bank Itaú BBA S.A.

Arauco do Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

1,309

Bank Itaú BBA S.A.

Arauco do Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

664

Bank do Brasil S.A.

Arauco do Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

294

Bank Votorantim S.A.

Arauco do Brasil S.A.

Equipment

Property, plant and equipment

US Dollar

573

Bank ABC Brasil S.A.

Arauco Florestal Arapoti S.A.

Equipment

Property, plant and equipment

US Dollar

3,684

Bank Bradesco S.A.

Arauco Bioenergía S.A.

Guarantee Letter

—

Chilean Pesos

893

Minera Escondida Ltda

Arauco Bioenergía S.A.

Guarantee Letter

—

Chilean Pesos

223

Minera Spence S.A

Total

91,620

INDIRECT

Subsidiary

Guarantee

Assets pledged

Currency

ThU.S.$

Guarantor

Celulosa Arauco y Constitución S.A.

Suretyship not supportive and cumulative

—

US Dollar

652,574

Joint ventures-Uruguay

Celulosa Arauco y Constitución S.A.

Full Guarantee

—

US Dollar

270,000

Alto Paraná (bondholders – 144A)

Total

922,574

113

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Type of Risk: Market Risk – Exchange Rate

Description

Market risk arises from the probability of being affected by losses from fluctuations in currencies exchange rates in which assets and liabilities are denominated, in a functional currency other than the functional currency of Arauco.

Explanation of Currency Risk Exposure and How This Risk Arises

Arauco is exposed to the foreign currency risk from currency fluctuations arising from sales, purchases and obligations undertaken in foreign currencies, such as the Chilean Peso, Euro, Brazilian Real or other foreign currencies. In the case of significant exchange rate variations, the Chilean Peso is the currency that represents the main currency risk. See note 11 for details assets and liabilities classified by currency.

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

Arauco performs sensitivity analyses to measure the currency risk over the EBITDA and Net Income.

Sensitivity analysis considers a variation of +/- 10% of the exchange rate over the Chilean Peso. This fluctuation range is considered possible given current market conditions at the closing date. With all other variables at a constant rate, a U.S. Dollar exchange rate variation of +/- 10% in relation to the Chilean Peso would mean a change in the net income after tax +/- 0.44% (equivalent to ThU.S.$ +/-2,125), and +/- 0.02% of assets (equivalent to ThU.S.$ +/-1,795) and +/-0,03 over the EBITDA (equivalent to ThU.S.$ +/-340).

The main financial instrument subject to the risk in exchange rate corresponds to domestic bonds issued denominated in UF and that are not hedged with cross currency swaps described in the hedge accounting disclosures.


	September		December
	2013		2012
Bonds Issued in UF (P Series) (*)		3,000,000		3,000,000

Additionally, a sensitivity analysis is carried out assuming a variation of +/- 10% in the closing exchange rate on the Brazilian Real, which is considered a possible range of fluctuation given the market conditions at the closing date. With all the other variables constant, a variation of +/- 10% in the exchange rate of the dollar on the Brazilian Real would mean a variation on the net income after tax +/- 0.13% (equivalent to ThU.S.$613) and a change on the equity of +/- 0.01% (equivalent to ThU.S.$613).

114

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Market Risk – Interest rate risk

Description

Interest rate risk refers to the sensitivity of the value of financial assets and liabilities in terms of interest rate fluctuations.

Explanation of Interest Rate Risk Exposure and How This Risk Arises

Arauco is exposed to risks due to interest rate fluctuations for bonds issued, bank borrowings and financial instruments that bear interest at a variable rate.

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

Arauco completes its risk analysis by reviewing its exposure to changes in interest rates. As of September 30, 2013, 18.9% of the Company’s bonds and bank loans bear interest at variable rates. A change of +/- 10% interest, rate is considered a possible range of fluctuation. Such market conditions would affect the income after tax at rate of +/- 0.01% (equivalent to ThU.S.$+/- 36) and +/- 0.00% (equivalent to ThU.S.$+/- 19) on equity.


*Thousands of dollars*	September 2013		Total

Fixed rate		3,408,138		81.1	%
Bonds issued		3,062,184
Bank borrowings (*)		252,311
Financial leasing		89,095
Variable rate		796,109		18.9	%
Bonds issued		—
Loans with Banks		796,109
Total		4,204,247		100.0	%


*Thousands of dollars*	Diciembre 2012		Total

Fixed rate		3,853,494		87.6	%
Bonds issued		3,417,843
Bank borrowings (*)		379,599
Financial leasing		56,052
Variable rate		547,020		12.4	%
Bonds issued		—
Loans with Banks		547,020
Total		4,400,514		100.0	%

(*)	Includes variable rate bank borrowings swapped to a fixed rate.

115

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Market Risk – Price of Pulp Risks

Description

Pulp prices are determined by world and regional market conditions. Prices fluctuate based on demand, production capacity, commercial strategies adopted by large-scale forestry companies, pulp and paper producers and by the availability of substitutes.

Explanation of Price Risk Exposure and How This Risk Arises

Pulp prices are reflected in revenue from sales and directly affect the net income for the period.

As of September 30, 2013, revenue due to pulp sales accounted for 34.6% of total sales. Pulp prices are fixed on a monthly basis in accordance with the market. Forward contracts or other financial instruments are not used for pulp sales.

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

This risk is approached in different ways. Arauco has a team of specialists who perform periodic market and competition analyses, providing tools to analyze and evaluate trends and adjust forecasts. Similarly, Arauco performs price financial sensitivity analysis in order to take the necessary safeguards to confront different scenarios in the best possible manner.

Sensitivity analysis considers a variation of +/- 10% in the average pulp price, a possible fluctuation range given current market conditions at the date of the closing balance. With all other variables constant, a variation of +/- 10% in the average pulp price would mean an EBITDA annual variation of +/- 4.3% (equivalent to ThU.S.$53 ), on the income after tax and +/- 7.9% (equivalent to ThU.S.$41) and +/- 0.4% (equivalent to U.S.$29 million) on equity.

NOTE 24. OPERATING SEGMENTS

The main products that generate revenue for each operating segment are described as follows:

•

Pulp: The main products sold by this operating segment are long fiber bleached pulp (BSKP), short fiber bleached pulp (BHKP), long fiber raw pulp (UKP), and pulp fluff.

•

Panels: The main products sold by this operating segment are plywood panels, MDF panels (medium density fiberboard), Hardboard Panels, PB Panels (agglomerated) and MDF Moldings.

•

Sawn Timber: The range of products sold by this operating segment includes different sizes of sawn wood and remanufactured products such as moldings, precut pieces and finger joints.

•

Forestry: This operating segment produces and sells sawn logs, pulpable logs, posts and chips made from owned forests of Radiata and Taeda pine, eucalyptus globulus and nitens forests. Additionally, purchases logs and woodchip from third parties, which it sells to its other operating segment.

116

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Pulp

The Pulp operating segment uses wood exclusively from pine and eucalyptus plantations for the production of different classes of wood cellulose or pulp. Bleached pulp is mainly used as raw material for producing printing and writing paper, as well as toilet paper and high quality wrapping paper. Unbleached pulp is used to produce packing paper, filters, fiber cement products, dielectric paper and others. On the other hand, fluff pulp is mainly used in the production of diapers and female hygiene products.

Arauco has six plants, five in Chile and one in Argentina, and they have a total production capacity of approximately 3.2 million tons per year. Pulp is sold in more than 39 countries, mainly in Asia and Europe.

Panels

The Panels operating segment produces a wide range of panel products and several kinds of moldings aimed at the furniture, decoration and construction industries. It consists of 15 industrial plants: 3 in Chile, 2 in Argentina, 2 in Brazil, and 8 plants around USA and Canada. The Company has a total annual production capacity of 5.7 million cubic meters of PBO, MDF, Hardboards, plywood and moldings.

Sawn Timber

The Sawn Timber operating segment produces a wide range of wood and remanufactured products with different kinds of uses and appearances, which include a wide variety of uses in the furniture, packing, construction and refurbishing industries.

With 9 saw mills in operation (8 in Chile and 1 in Argentina), the Company has a production capacity of 2.4 million cubic meters of sawn wood.

Furthermore, the Company has 5 remanufacturing plants, 4 in Chile and 1 in Argentina. These plants reprocess sawn wood and produce high quality remanufactured products, such as finger joint and solid moldings as well as precut pieces. These products are sold in more than 36 countries.

Forestry

The Forestry operating segment is Arauco’s core business. It provides raw materials for all products manufactured and sold by the Company. By directly controlling the growth of the forests to be processed, Arauco guarantees itself quality wood for each of its products.

Arauco holds forestry assets distributed throughout Chile, Argentina and Brazil, reaching 1.5 million hectares, of which 930 thousand hectares are used for plantations, 385 thousand hectares for native forests, 145 thousand hectares for other uses and 62 thousand hectares are to be planted. Arauco’s principal plantations consist of radiata and taeda pine and eucalyptus to a lesser degree. These are species that have fast growth rates and short harvest cycles compared with other long fiber commercial woods.

117

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

Additionally, Arauco jointly owns a plantation forestry of 110 thousand hectares in Uruguay through a joint venture with Stora Enso, which is presented under line item “Investment in associates accounted for the equity method” (see Note 15 and 16).

Arauco has no customers representing 10% or more of its revenues.

118

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

A summary of financial information of assets, liabilities, profit or loss for each operating segment for the years ended December 31, 2012, 2011 and 2010 is presented in the tables below:


	Pulp			Sawn timber		Forestry		Panels			Others		Corporate			Sub Total			Elimination			Total
Period ended September 30, 2013	ThU.S.$			ThU.S.$		ThU.S.$		ThU.S.$			ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S .$
Revenues from external customers		1,664,341			614,075		106,162		1,466,828			24,476		—			3,875,882			—			3,875,882
Revenues from transactions with other operating segments		38,115			19		814,797		10,346			23,397		—			886,674			(886,674	)		—

Finance income		—			—		—		—			—		16,264			16,264			—			16,264
Finance costs		—			—		—		—			—		(173,156	)		(173,156	)		—			(173,156	)
Net finance costs		—			—		—		—			—		(156,892	)		(156,892	)		—			(156,892	)

Depreciation and amortizations		120,164			16,356		8,488		65,550			2,985		5,987			219,530			—			219,530

Sum of significant income accounts		6			—		153,925		—			—		—			153,931			—			153,931

Sum of significant expense accounts		—			7,880		121		15,639			—		—			23,640			—			23,640

Profit (loss) of each reportable segment		335,760			95,643		86,778		154,327			1,579		(301,041	)		373,046			—			373,046

Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		—			—		—		—			—		3,697			3,697			—			3,697
Joint ventures		(13,229	)		—		14,269		(536	)		—		979			1,483			—			1,483

Income tax expense		—			—		—		—			—		(83,904	)		(83,904	)		—			(83,904	)


Geographical information on revenues
Revenue – Chilean entities		1,489,838			555,635		58,514		565,126			136		—			2,669,249			—			2,669,249
Revenue – Foreign entities		174,503			58,440		47,648		901,702			24,340		—			1,206,633			—			1,206,633

Total Ordinary Income		1,664,341			614,075		106,162		1,466,828			24,476		—			3,875,882			—			3,875,882

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


	Pulp			Sawn timber			Forestry			Panels			Others			Corporate			Sub Total			Elimination			Total
Period ended September 30, 2013	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Amounts of additions to non-current assets

Acquisition of property, plant and equipment and biological assets		74,813			8,105			177,673			132,051			793			570			394,005			—			394,005

Acquisition and contribution of investments in associates and joint venture		76,672			—			—			—			—			—			76,672			—			76,672

Segment Cash Flows
Cash Flows from (used in) Operating Activities		362,750			85,548			185,859			186,721			3,814			(50,421	)		774,271			—			774,271
Cash flows (used in) investing activities		(149,791	)		(7,420	)		(146,028	)		(143,011	)		(793	)		74,784			(372,259	)		—			(372,259	)
Cash flows from (used in) Financing Activities		—			—			(46,723	)		43,619			—			(235,195	)		(238,299	)		—			(238,299	)
Net increase (decrease) in Cash and Cash Equivalents		212,959			78,128			(6,892	)		87,329			3,021			(210,832	)		163,713			—			163,713


	Pulp			Sawn timber			Forestry			Panels			Others			Corporate			Sub Total			Elimination			Total
Period ended September 30, 2013	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Segment assets		4,259,351			633,238			5,463,857			2,099,962			47,485			1,118,762			13,622,655			(40,929	)		13,581,726

Investments accounted through equity method
Associates		—			—			195,055			4,675			—			134,769			334,499			—			334,499
Joint Ventures		405,304			—			285,822			—			—			22,833			713,959			—			713,959
Segment liabilities		219,766			63,786			149,876			278,881			14,710			5,756,999			6,484,018			—			6,484,018

Geographical information on non-current assets
Chile		2,679,217			316,079			3,628,587			523,469			30			257,565			7,404,947			683			7,405,630
Foreign countries		875,746			20,443			1,367,910			990,917			28,897			103,955			3,387,868			—			3,387,868
Non-current assets, Total		3,554,963			336,522			4,996,497			1,514,386			28,927			361,520			10,792,815			683			10,793,498

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AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


	Pulp			Sawn timber		Forestry			Panels			Others			Corporate			Sub Total			Elimination			Total
Period ended September 30, 2012	ThU.S.$			ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Revenues from external customers		1,473,666			557,254		115,506			907,883			24,070			—			3,078,379			—			3,078,379
Revenues from transactions with other operating segments		31,007			11		732,680			10,254			22,913			—			796,865			(796,865	)		—

Finance income		—			—		—			—			—			12,862			12,862			—			12,862
Finance costs		—			—		—			—			—			(148,451	)		(148,451	)		—			(148,451	)
Net finance costs		—			—		—			—			—			(135,589	)		(135,589	)		—			(135,589	)

Depreciation and amortizations		112,237			16,257		8,296			34,262			3,222			2,039			176,313			—			176,313
Sum of significant income accounts		6,188			—		171,564			35,964			—			—			213,716			—			213,716
Sum of significant expense accounts		—			7,880		2,907			15,639			—			—			26,426			—			26,426

Profit (loss) of each reportable segment		237,571			63,410		51,044			110,091			(1,003	)		(402,324	)		58,789			—			58,789

Share of profit (loss) of associates and joint ventures accounted for using equity method

Associates		—			—		—			—			—			16,194			16,194			—			16,194
Joint ventures		(4,574	)		—		(17,160	)		(304	)		—			1,178			(20,860	)		—			(20,860	)

Income tax expense		—			—		—			—			—			(162,079	)		(162,079	)		—			(162,079	)

Geographical information on revenues
Revenue – Chilean entities		1,318,489			511,238		71,636			528,270			562			—			2,430,195			—			2,430,195
Revenue – Foreign entities		155,177			46,016		43,870			379,613			23,508			—			648,184			—			648,184
Total Ordinary Income		1,473,666			557,254		115,506			907,883			24,070			—			3,078,379			—			3,078,379

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


	Pulp			Sawn timber			Forestry			Panels			Others			Corporate			Sub Total			Elimination			Total
Period ended September 30, 2012	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Amounts of additions to non-current assets

Acquisition of property, plant and equipment and biological assets		124,956			35,708			107,965			257,325			280			927			527,161			—			527,161

Acquisition and contribution of investments in associates and joint venture		125,574			—			822			193,788			—			13,560			333,744			—			333,744

Segment Cash Flows
Cash Flows from (used in) Operating Activities		(58,835	)		52,120			113,115			201,339			1,622			711			310,072			—			310,072
Cash flows (used in) investing activities		(123,299	)		(35,697	)		(89,305	)		(444,197	)		(280	)		(196,406	)		(889,184	)		—			(889,184	)
Cash flows from (used in) Financing Activities		—			—			(39,065	)		242,502			—			427,268			630,705			—			630,705
Net increase (decrease) in Cash and Cash Equivalents		(182,134	)		16,423			(15,255	)		(356	)		1,342			231,573			51,593			—			51,593


	Pulp			Sawn timber			Forestry			Panels			Others			Corporate			Sub Total			Elimination			Total
Year ended December 31, 2012	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Segment assets		4,292,121			648,727			5,495,698			2,088,237			49,337			1,006,303			13,580,423			(22,583	)		13,557,840

Investments accounted through equity method
Associates		—			—			211,881			5,645			—			141,591			359,117			—			359,117
Joint Ventures		339,483			—			326,553			—			—			23,310			689,346			—			689,346
Segment liabilities		187,403			74,458			150,801			280,599			13,409			5,885,411			6,592,081			—			6,592,081

Geographical information on non-current assets
Chile		2,695,193			340,135			3,573,964			469,836			15			272,846			7,351,989			1,048			7,353,037
Foreign countries		834,659			21,228			1,434,819			1,048,981			29,412			135,708			3,504,807			—			3,504,807
Non-current assets, Total		3,529,852			361,363			5,008,783			1,518,817			29,427			408,554			10,856,796			1,048			10,857,844

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AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


	Pulp			Sawn timber			Forestry			Panels			Others			Corporate			Sub Total			Elimination			Total
Quarter July-September 2013	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Revenues from external customers		572,865			219,213			32,770			502,044			8,021			—			1,334,913			—			1,334,913
Revenues from transactions with other operating segments		11,983			1			286,698			1,869			8,132			—			308,683			(308,683	)		—

Finance income		—			—			—			—			—			4,172			4,172			—			4,172
Finance costs		—			—			—			—			—			(59,663	)		(59,663	)		—			(59,663	)
Net finance costs		—			—			—			—			—			(55,491	)		(55,491	)		—			(55,491	)

Depreciation and amortizations		40,972			5,856			3,612			22,611			994			1,951			75,996			—			75,996
Sum of significant income accounts		—			—			—			—			—			—			—			—			—
Sum of significant expense accounts		—			—			—			—			—			—			—			—			—

Profit (loss) of each reportable segment		114,034			41,154			3,482			63,347			(1,165	)		(103,834	)		117,018			—			117,018

Share of profit (loss) of associates and joint ventures accounted for using equity method

Associates		—			—			—			—			—			4,424			4,424			—			4,424
Joint ventures		(6,400	)		—			(3,787	)		(19	)		—			659			(9,547	)		—			(9,547	)

Income tax expense		—			—			—			—			—			(29,273	)		(29,273	)		—			(29,273	)


Geographical information on revenues
Revenue – Chilean entities		509,408			200,035			17,495			193,812			45			—			920,795			—			920,795
Revenue – Foreign entities		63,457			19,178			15,275			308,232			7,976			—			414,118			—			414,118
Total Ordinary Income		572,865			219,213			32,770			502,044			8,021			—			1,334,913			—			1,334,913


Amounts of additions to non-current assets

Acquisition of property, plant and equipment and biological assets		19,936			2,769			101,016			32,176			215			44			156,156			—			156,156
Acquisition and contribution of investments in associates and joint venture		54,109			—			—			—			—			—			54,109			—			54,109


Segment Cash Flows
Cash Flows from (used in) Operating Activities		173,996			51,754			118,036			92,735			1,265			(49,502	)		388,284			—			388,284
Cash flows (used in) investing activities		(73,186	)		(2,726	)		(95,236	)		(31,484	)		(215	)		41,022			(161,825	)		—			(161,825	)
Cash flows from (used in) Financing Activities		—			—			(12,750	)		(2,332	)		—			(411,429	)		(426,511	)		—			(426,511	)
Net increase (decrease) in Cash and Cash Equivalents		100,810			49,028			10,050			58,919			1,050			(419,909	)		(200,052	)		—			(200,052	)

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated


	Pulp			Sawn timber			Forestry			Panels			Others			Corporate			Sub Total			Elimination			Total
Quarter July-September 2012	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$

Revenues from external customers		491,383			192,628			35,816			303,661			7,729			—			1,031,217			—			1,031,217
Revenues from transactions with other operating segments		10,126			2			244,695			4,114			7,491			—			266,428			(266,428	)		—

Finance income		—			—			—			—			—			3,962			3,962			—			3,962
Finance costs		—			—			—			—			—			(45,063	)		(45,063	)		—			(45,063	)

Net finance costs		—			—			—			—			—			(41,101	)		(41,101	)		—			(41,101	)

Depreciation and amortizations		39,715			6,103			2,786			10,169			1,155			685			60,613			—			60,613
Sum of significant income accounts		6,188			—			127,674			35,964			—			—			169,826			—			169,826
Sum of significant expense accounts		—			3,025			324			1,209			—			—			4,558			—			4,558

Profit (loss) of each reportable segment		54,855			29,355			41,699			37,965			300			(220,899	)		(56,725	)		—			(56,725	)

Share of profit (loss) of associates and joint ventures accounted for using equity method

Associates		—			—			(7,301	)		8			—			13,773			6,480			—			6,480
Joint ventures		3,049			—			(5,778	)		(304	)		—			464			(2,569	)		—			(2,569	)

Income tax expense		—			—			—			—			—			(148,668	)		(148,668	)		—			(148,668	)


Geographical information on revenues
Revenue – Chilean entities		442,209			172,873			21,527			234,302			179			—			871,090			—			871,090
Revenue – Foreign entities		49,174			19,755			14,289			69,359			7,550			—			160,127			—			160,127

Total Ordinary Income		491,383			192,628			35,816			303,661			7,729			—			1,031,217			—			1,031,217


Amounts of additions to non-current assets

Acquisition of property, plant and equipment and biological assets		44,343			5,063			33,167			116,977			(1,085	)		502			198,967			—			198,967
Acquisition and contribution of investments in associates and joint venture		46,184			—			—			127,164			—			70			173,418			—			173,418


Segment Cash Flows
Cash Flows from (used in) Operating Activities		1,354			14,207			25,043			76,133			1,243			(1,902	)		116,078			—			116,078
Cash flows (used in) investing activities		(213,899	)		(5,052	)		(25,741	)		(369,804	)		1,085			229,864			(383,547	)		—			(383,547	)
Cash flows from (used in) Financing Activities		—			—			(12,672	)		242,502			—			(65,426	)		164,404			—			164,404
Net increase (decrease) in Cash and Cash Equivalents		(212,545	)		9,155			(13,370	)		(51,169	)		2,328			162,536			(103,065	)		—			(103,065	)

124

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AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 25. OTHER NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES


	09-30-2013		12-31-2012
Current non-financial assets	ThU.S.$		ThU.S.$
Current roads to amortize		47,470		69,441
Prepayment to amortize (insurance y others)		43,149		29,591
Recoverable taxes (Relating to purchases)		88,869		100,360
Other current non financial assets		5,421		8,497
Total		184,909		207,889


	09-30-2013		12-31-2012
Non current non-financial assets	ThU.S.$		ThU.S.$
Non Current roads to amortize		108,594		103,026
Guarantee values		671		737
Recoverable taxes (Relating to purchases)		6,528		12,457
Other non current non financial assets		6,577		9,034
Total		122,370		125,254


	09-30-2013		12-31-2012
Current non financial liabilities	ThU.S.$		ThU.S.$
Provision of minimum dividend (1)		127,012		47,259
ICMS tax payable		31,177		25,818
Other tax payable		13,538		13,295
Other Current non financial liabilities		12,594		5,858
Total		184,322		92,230

(1)	Provision includes a minimum dividend of subsidiary minority.


	09-30-2013		12-31-2012
Non current non financial liabilities	ThU.S.$		ThU.S.$
ICMS tax payable		82,336		100,589
Other non current non financial liabilities		2,720		815
Total		85,056		101,404

NOTE 26. DISTRIBUTABLE NET INCOME AND EARNINGS PER SHARE

Distributable net income

As a general policy, the Board of Directors of Arauco agreed that the net income to be distributed as dividend is determined based on realized net gains/(losses) of any relevant variations in the value of unrealized assets and liabilities, which are excluded from the calculation of net income during the period such changes are made.

As a result of the foregoing, for purposes of determining the distributable net income of the Company, which is the same considered for calculating the minimum dividend required and additional dividend, the following unrealized gains/losses are excluded from the net income for the year:

1)	Unrealized gains/losses relating to the fair value recorded for forestry assets under IAS 41, adding them back to net income when they are realized through sale or disposed of by other means.

2)	Those generated through the acquisition of entities. These results will be added back to net income when they are realized through sale.

3)	The deferred taxes associated with the amounts described in 1) and 2) above are also excluded.

125

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

The following table details the adjustments made for the determination of distributable net income as of September 30, 2013 and 2012 in order to determine the provision of 40% of the distributable net income for each year:


	Distributable Net Income ThU.S.$
Net income attributable to owners of parent at 09-30-2013		341,790
Adjustments:
Biological Assets
Unrealized gains/losses		(200,697	)
Realized gains/losses		169,656
Deferred income taxes		6,192
Total adjustments		(24,849	)
Distributable Net Income at 09-30-2013		316,941

	Distributable Net Profit ThU.S.$
Net income attributable to owners of parent at 09-30-2012		55,318
Adjustments
Biological Assets
Unrealized		(171,497	)
Realized		182,628
Deferred income taxes		(9,738	)
Deferred income taxes - exchange rate effect of opening balance biological assets		55.043
Total Biological Assets (net)		56,436
Negative goodwill		(25,148	)
Total adjustments		31,288
Distributable Net Income at 09-30-2012		86,606

The Company expects to maintain its policy of distributing 40% of its net distributable income as dividends for all future fiscal years, but will also consider the alternative of distributing a provisional dividend at year end.

The line “Other current non-financial liabilities” included in the Consolidated Balance Sheet as of September 30, 2013 in the amount of ThU.S.$184,322, represents a total of ThU.S.$126,775, which corresponds to the provision of minimum dividend recorded for the period 2013 of the parent company.

Basic and diluted earnings per share

Basic earnings per share are calculated by dividing the profit or loss attributable to ordinary equity holders of parent by the weighted average number of ordinary shares outstanding. Arauco does not have any shares with potential dilutive effect.


	January-September				July-September
	2013		2012		2013		2012
Earnings (losses) per share	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$

Profit or loss attributable to ordinary equity holder of parent		341,790		55,318		102,553		(58,248	)
Weighted average of number of shares		113,152,446		113,152,446		113,152,447		113,152,448
Basic earnings per share (in US$ per share		3.02		0.49		1		(1	)

126

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AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2013

Amounts in thousands of U.S. dollars, except as indicated

NOTE 27. EVENTS AFTER THE REPORTING PERIOD

1) In the Celulosa Arauco’s Extraordinary Shareholders Meeting held on October 24, 2013, the Company approved the merger of Forestal Viñales S.A. into the Company, the latter absorbing the former, acquiring the entirety of its assets and liabilities and acting as its legal successor in all rights and obligations. The merger will come into effect on November 1, 2013.

113,127,700 shares were present at the Company’s abovementioned Extraordinary Shareholders Meeting (i.e., approximately 99.98% of the Company’s outstanding shares), all of which voted in favor of the approval of the resolutions submitted before the assembly.

The approval of these merger resolutions grants dissenting shareholders the right to withdraw from the Company as per the terms of the circular letter that will be sent to the dissenting shareholder on October 25, 2013.

We believe that the information contained in this letter should not have an impact on the Company’s profits and losses.

2) The authorization for the issuance and publication of these Interim Consolidated Financial Statements for the period from January 1 to September 30, 2013 was approved by the Board of Directors of Arauco (the “Board”) at the Extraordinary Session No. 498 held on November 21, 2013.

Subsequent to September 30, 2013 and until the date of issuance of these financial statements, there have been no events that could materially affect the presentation of these financial statements.

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