As filed with the Securities and Exchange Commission on April 29, 2016

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR

15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

Commission File Number: 33-99720

CELULOSA ARAUCO Y CONSTITUCIÓN S.A.

(Exact name of Registrant as specified in its charter)

Arauco and Constitution Pulp Inc.

(Translation of Registrant’s name into English)

Republic of Chile

(Jurisdiction of incorporation or organization)

Avenida El Golf 150

14^th Floor

Las Condes, Santiago

Chile

(Address of principal executive offices)

Gianfranco Truffello

Tel.: 56-2-2461-7221

E-mail: gianfranco.truffello@arauco.cl

Avenida El Golf 150

14^th Floor

Las Condes, Santiago

Chile

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

None

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

Title of each class:

7.500% Notes due 2017

7.250% Notes due 2019

5.000% Notes due 2021

4.750% Notes due 2022

4.500% Notes due 2024

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: Shares of Common Stock, without par value: 113,159,655

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ¨  No x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  Yes ¨  No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

N/A

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large accelerated filer  ¨                Accelerated filer  ¨                Non-accelerated filer  x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statement included in this filing:

U.S. GAAP  ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board  x Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:   Item 17 ¨  Item 18 ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨  No x

TABLE OF CONTENTS

		Page
PART I
Item 1.	Identity of Directors, Senior Management and Advisers		1
Item 2.	Offer Statistics and Expected Timetable		1
Item 3.	Key Information		1
Item 4.	Information on our Company		20
Item 5.	Operating and Financial Review and Prospects		44
Item 6.	Directors, Senior Management and Employees		63
Item 7.	Major Shareholders and Related Party Transactions		69
Item 8.	Financial Information		71
Item 9.	The Offer and Listing		74
Item 10.	Additional Information		75
Item 11.	Quantitative and Qualitative Disclosures About Market Risk		82
Item 12.	Description of Securities Other than Equity Securities		84
PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies		84
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		84
Item 15.	Controls and Procedures		84
Item 16A.	Audit Committee Financial Expert		85
Item 16B.	Code of Ethics		85
Item 16C.	Principal Accountant Fees and Services		85
Item 16D.	Exemptions from the Listing Standards for Audit Committees		86
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		86
Item 16F.	Change in Registrant’s Certifying Accountant		86
Item 16G.	Corporate Governance		86
Item 16H.	Mine Safety Disclosures		87
PART III
Item 17.	Financial Statements		87
Item 18.	Financial Statements		87
Item 19.	Exhibits		88

i

CERTAIN TERMS AND CONVENTIONS

Celulosa Arauco y Constitución S.A. is a sociedad anónima (corporation) organized under the laws of the Republic of Chile, and subject to certain rules applicable to sociedades anónimas abiertas (Chilean public corporations). Except where otherwise specified or the context otherwise requires, when we refer to the “Company,” “Arauco” or “we,” in this annual report, we mean Celulosa Arauco y Constitución S.A. and its consolidated subsidiaries. When we refer to “Chile,” we mean the Republic of Chile; when we refer to “Argentina,” we mean the Argentine Republic; when we refer to “Brazil,” we mean the Federative Republic of Brazil; when we refer to “the U.S.,” “U.S.A.,” or “the United States,” we mean the United States of America; and when we refer to “Uruguay,” we mean the Oriental Republic of Uruguay. All references to “tonnes” are to metric tons (1,000 kilograms), which equal 2,204.7 pounds. One “hectare” equals 10,000 square meters or 2.471 acres. Discrepancies in any table between totals and the sums of the amounts listed are due to rounding.

Unless otherwise specified, all references to “$,” “U.S.$,” “U.S. dollars” or “dollars” are to United States dollars; references to “Chilean pesos” or “Ch$” are to Chilean pesos; references to “Argentine pesos” or “AR$” are to Argentine pesos; references to “Brazilian reais” “Brazilian reals” or “R$” are to Brazilian reais; references to “€” or “euro” are to the euro, the single European currency established pursuant to the European Economic and Monetary Union; references to “Rubles” are to Russian rubles; and references to “UF” are to Unidades de Fomento. The UF is a unit of account that is linked to, and adjusted daily to reflect changes in, the Chilean consumer price index reported by the Instituto Nacional de Estadísticas (Chilean National Institute of Statistics). As of December 31, 2015, one UF equaled U.S.$36.09 and Ch$25,629.09.

PRESENTATION OF FINANCIAL DATA

This report includes the audited consolidated statement of financial position of Arauco and our subsidiaries as of December 31, 2015 and 2014 and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years for the period ended December 31, 2015 (collectively, the “audited consolidated financial statements” or “financial statements”). In addition, this report includes selected financial information as of and for the periods ended December 31, 2011, 2012, 2013, 2014 and 2015.

For your convenience, this annual report contains certain translations of Chilean peso amounts into U.S. dollars at specified rates. Unless otherwise indicated, the U.S. dollar equivalent for information in Chilean pesos is based on the observed exchange rate reported by Banco Central de Chile, which we refer to as the “Central Bank of Chile” or the “Central Bank.” The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos. On December 31, 2015, the observed exchange rate for Chilean pesos, as published in the Diario Oficial de la República de Chile (Official Gazette) on January 4, 2016, was Ch$710.16 to U.S.$1.00, and on April 26, 2016, the observed exchange rate was Ch$669.01 to U.S.$1.00. See “Exchange Rates.” You should not construe these translations as representations that the Chilean peso amounts actually represent such dollar amounts or could be converted into U.S. dollars at the rates indicated or at any other rate. Unless otherwise specified, references to the devaluation or the appreciation of the Chilean peso against the U.S. dollar are in nominal terms (without adjusting for inflation) based on the observed exchange rates published by the Central Bank of Chile for the relevant period.

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

1

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial information as of December 31, 2011, 2012, 2013, 2014 and 2015 and for each of the five years then ended is derived from, should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements which have been prepared in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

	As of and for the year ended December 31,(1)
	2011			2012			2013			2014			2015
	(in thousands of U.S. dollars, except ratios and share data)
INCOME STATEMENT DATA
Revenue		4,374,495			4,298,663			5,145,500			5,342,643			5,146,740
Cost of sales		(2,882,455	)		(3,163,432	)		(3,557,210	)		(3,654,146	)		(3,511,425	)
Gross profit		1,492,040			1,135,231			1,588,290			1,688,497			1,635,315
Other income		475,014			408,251			385,055			368,924			273,026
Distribution costs		(477,628	)		(452,760	)		(523,587	)		(556,837	)		(528,470	)
Administrative expenses		(415,521	)		(479,625	)		(544,694	)		(550,809	)		(551,977	)
Other expenses		(90,313	)		(105,325	)		(136,812	)		(138,769	)		(83,388	)
Other gains (losses)		—			16,133			—			—			—
Finance income		24,589			23,476			19,062			30,772			50,284
Finance costs		(196,356	)		(236,741	)		(232,843	)		(246,473	)		(262,962	)
Share of profit (loss) of associates and joint ventures accounted for using equity method		(11,897	)		18,933			6,260			7,481			6,748
Exchange rate differences		(26,643	)		(17,245	)		(11,797	)		(9,961	)		(41,171	)
Income before income tax		773,285			310,328			548,934			592,825			497,405
Income tax		(152,499	)		(166,787	)		(130,357	)		(448,652	)		(129,694	)
Net income		620,786			143,541			418,577			144,173			367,711
BALANCE SHEET DATA
Current assets		2,462,660			2,785,517			2,808,321			3,140,715			2,651,920
Property, plant and equipment		5,393,978			6,816,742			7,137,467			7,119,583			6,896,396
Biological assets(2)		3,744,584			3,873,070			3,892,203			3,846,353			3,826,597
Total assets		12,552,178			14,259,614			14,493,395			14,747,897			13,806,907
Total current liabilities		1,031,945			1,546,728			1,682,016			1,547,086			1,034,251
Total non-current liabilities		4,490,083			5,747,127			5,766,839			6,386,075			6,126,211
Issued capital		353,176			353,176			353,618			353,618			353,618
Total equity		7,030,150			6,965,759			7,044,540			6,814,736			6,646,445
CASH FLOW DATA
Net cash flow from operating activities		980,517			442,394			897,720			985,175			853,650
Net cash flow from investing activities		(1,207,137	)		(1,345,849	)		(687,620	)		(655,158	)		(477,780	)
Net cash flow from financing activities		(481,184	)		1,055,482			(7,776	)		(7,885	)		(812,176	)
Net (decrease) increase in cash and equivalents before effect of exchange rate changes		(707,804	)		152,027			202,324			322,132			(436,306	)
OTHER FINANCIAL DATA
Capital expenditures(3)		748,272			1,186,374			942,638			604,155			564,795
Depreciation and amortization		230,737			252,381			298,647			353,434			400,145
Fair value cost of timber harvested(4)		335,142			311,821			320,894			353,273			306,673
EBIT(4)		945,052			523,593			762,715			808,526			710,083
Adjusted EBITDA(4)		1,307,685			861,745			1,143,382			1,272,209			1,282,443
Adjusted EBITDA(4)/total interest expense		6.66			3.64			4.91			5.16			4.88
Adjusted EBITDA(4)/revenue		29.9	%		20.0	%		22.2	%		23.8	%		24.9	%
Average debt(5)/Adjusted EBITDA(4)		2.55			4.80			4.37			3.97			3.66
Total debt(6)		3,283,107			4,962,116			5,026,494			5,078,430			4,305,435
Total debt(6)/capitalization (7)		31.8	%		41.6	%		41.6	%		42.7	%		39.3	%
Total debt(6)/equity attributable to parent company		47.3	%		72.0	%		71.9	%		75.0	%		65.1	%
Working capital(8)		1,430,715			1,238,789			1,126,305			1,593,629			1,617,669
Number of shares		113,152,446			113,152,446			113,159,655			113,159,655			113,159,655
Net income per share(U.S.$ per share)		5.41			1.2			3.4			1.2			3.2
Dividends paid		291,512			196,816			140,054			141,089			143,003
Dividends per share (U.S.$ per share)		2.58			1.74			1.24			1.25			1.26

2

(1) Montes del Plata has been accounted for as a joint operation between Arauco and Stora Enso Oyj as of January 1, 2013 (with a restrospective effect on 2012), consolidating assets, liabilities, income and expenses in accordance with its interest ownership (50%). Prior to 2012, this investment was accounted for on the basis of the equity method.

(2) Biological assets refer to our forests and long-standing trees (current and non-current).

(3) Includes capital expenditures in respect of property, plant and equipment and biological assets accrued for the period. Excludes acquisitions of companies.

(4) We calculate EBIT as “net income” before “finance costs,” “finance income” and “income tax.” We calculate EBITDA as EBIT, plus “depreciation and amortization.”

Adjusted EBITDA is calculated by adding “fair value cost of timber harvested,” “exchange rate differences” and other expenses, and deducting “gain from changes in fair value of biological assets” to EBITDA. “Fair value cost of timber harvested” is a non-cash expense included in our cost of sales (as a component of raw materials) that represents the fair value of the wood harvested and sold from our own plantations, which is commonly excluded from the non-generally accepted accounting principles (non-GAAP) measures used by analysts to compare participants in our industry as it is a non-cash item (purchases of wood from third parties are cash expenses that are not included in “fair value cost of timber harvested”). “Gain from changes in fair value of biological assets” is a gain that does not represent cash flow. We believe that Adjusted EBITDA provides investors with a useful supplemental indicator of the performance of our core business because (i) it cancels out the effects of fair value that are independent of the cost efficiency of our operating facilities and (ii) it excludes the effect of exchange rate differences, which are mainly derived from our debt instruments.

In evaluating the performance of Arauco, we believe that each of these non-GAAP financial measures should be considered together with and should not be considered in isolation, or as a substitute for, the analysis of our results as reported under IFRS. Some of the limitations of our non-GAAP financial measures are that EBIT, EBITDA and Adjusted EBITDA do not reflect: (i) our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (ii) changes in, or cash requirements for, working capital needs; or (iii) the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our outstanding debt.

Because not all companies calculate EBIT, EBITDA or Adjusted EBITDA in the same manner, such measures as calculated by us may differ from such measures calculated by other companies. We compensate for these limitations by using EBIT, EBITDA and Adjusted EBITDA as supplemental measures to monitor our performance and by relying primarily on our financial statements that have been prepared in accordance with IFRS.

The following table presents, for the periods indicated, the reconciliation of EBIT, EBITDA and Adjusted EBITDA to net income. Since the filing date of our annual report on Form 20-F for the year ended December 31, 2010, we have revised the methodology that we use to calculate our non-GAAP financial measures. Although we believe that the methodology used to calculate the non-GAAP financial measures included in our filings on Form 20-F for years ended prior to December 31, 2011 was compliant with the requirements of Form 20-F, we believe that the revised methodology provides readers of our annual report with an improved understanding of our operational performance from a core business perspective. However, as a result of the modifications to our calculation methodology, the reconciliation table set forth below and certain amounts included therein are not directly comparable to those included in filings on Form 20-F for years ended prior to December 31, 2011.

	As of and for the year ended December 31,
	2011			2012			2013			2014			2015
	(in thousands of U.S. dollars)
Net income		620,786			143,541			418,577			144,173			367,711
(+) Finance costs		196,356			236,741			232,843			246,473			262,962
(-)  Finance income		(24,589	)		(23,476	)		(19,062	)		(30,772	)		(50,284	)
(+) Income Tax		152,499			166,787			130,357			448,652			129,694
EBIT		945,052			523,593			762,715			808,526			710,083
(+) Depreciation and amortization		230,737			252,381			298.647			353,434			400,145
EBITDA		1,175,789			775,974			1,061,362			1,161,960			1,110,228
(+) Fair value cost of timber harvested		335,142			311,821			320,894			353,273			306,673
(-)  Gain from changes in fair value of biological assets		(229,889	)		(243,295	)		(269,671	)		(284,497	)		(210,479	)
(+) Exchange rate differences		26,643			17,245			11,797			9,961			41,171
(+) Others(9)		—			—			19,000			31,512			34,850
Adjusted EBITDA		1,307,685			861,745			1,143,382			1,272,209			1,282,443

3

(5) Average debt is calculated as the average of total debt between the beginning and the end of the applicable year.

(6) Total debt is calculated as the sum of other current financial liabilities and other non-current financial liabilities, less hedging instruments.

(7) Capitalization is calculated as total debt, including accrued interest, plus total equity.

(8) Working capital is calculated by subtracting current liabilities from current assets.

(9) “Others” includes other non-cash expenses or gains. For 2013, “Others” included amortization of forest roads; for 2014 and 2015, “Others” included provision for forestry losses.

4

EXCHANGE RATES

The following table sets forth, for the periods and dates indicated, certain information concerning the observed exchange rates reported by the Central Bank. No representation is made that the Chilean peso or U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or Chilean pesos, as the case may be, at the rates indicated or at any other rate. The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos. See “Item 10. Additional Information—Exchange Controls.”

	Daily Observed Exchange Rate
Year Ended December 31,	High		Low		Average(1)			Period-End
	Ch$ per U.S.$
2011		533.74		455.91		483.57	519.20
2012		519.69		469.65		486.59	479.96
2013		533.95		466.50		495.18	524.61
2014		621.41		527.53		570.34	606.75
2015		715.66		597.10		654.66	710.16
Months (2015-2016)
November		715.66		688.94		704.33	711.20
December		711.52		693.72		704.19	710.16
January		730.31		710.37		721.96	710.37
February		715.41		689.18		703.31	714.44
March		694.82		669.80		680.96	669.80
April (through April 26)		682.45		657.90		670.38	669.01

Source: Central Bank of Chile

(1) For each year, the average of the month-end exchange rates for the relevant year. For each month, the average daily exchange rate for the relevant month.

On April 26, 2016, the observed exchange rate, as published in the Official Gazette on April 27, 2016, was Ch$669.01 to U.S.$1.00.

FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains words such as “believe,” “expect,” “anticipate” and similar expressions that identify forward-looking statements, which reflect our views about future events and financial performance. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Such statements constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the United States Private Securities Litigation Reform Act of 1995, as amended.

Forward-looking statements involve inherent risks and uncertainties. These forward-looking statements are based on current plans, estimates and projections; therefore, readers should not place undue reliance on them. Actual results could differ materially from those projected in such forward-looking statements because of various factors that may be beyond our control, including but not limited to our ability to service our debt, fund our working capital requirements, comply with financial covenants in certain of our debt instruments, fund and implement our capital expenditure programs and maintain our relationships with customers, as well as a change in control, the effects on us from competition, future demand for forestry, panels and wood products in the Chilean, Argentine, Brazilian, Uruguayan and North American export markets, international prices for forestry and wood products, the condition of our forests, possible shortages of energy, including electricity, the state of the Chilean and world economies and manufacturing industries, the relative value of the Chilean peso compared to other currencies, inflation, increases in interest rates, the effects of earthquakes, floods, tsunamis or other catastrophic events and changes in our regulatory environment, including our ability to comply with new or stricter environmental regulations and to resolve environmental liabilities. Forward-looking statements in this annual report speak only as of their dates, and we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise.

5

RISK FACTORS

We are subject to various changing economic, political, social and competitive conditions, particularly in our principal markets. Any of the following risks, if they actually occur, could materially and adversely affect our business, financial condition, results of operations and cash flows.

Risks Relating to Us and the Forestry Industry

Fluctuations in market price for our products could adversely affect our financial condition, results of operations and cash flows.

Prices for many of the products we sell can fluctuate significantly. The price of commodities such as pulp and solid wood are highly correlated with international prices, while panelboards are more closely correlated with local prices. Consequently, the prices that we are able to charge for these products are highly dependent on prevailing international and local prices. Historically, such prices have been subject to substantial variation. For example, during the period from January 1, 2011 to December 31, 2015, the average price for Norscan bleached softwood kraft market pulp (pulp produced in North American, Nordic and Central European countries and sold to manufacturers of paper products delivered in Northern Europe, or NBSK), which is the benchmark for softwood bleached pulp, ranged from a low of U.S.$762.18 per tonne in September 2012 to a high of U.S.$1,023.1 per tonne in June 2011. In the case of bleached hardwood kraft pulp (pulp made from eucalyptus or birch which is sold in Europe), which is the benchmark for Bleached Eucalyptus Kraft Pulp (BEKP), prices ranged from a low of U.S.$648.31 per tonne in December 2011 to a high of U.S.$876.85 per tonne in June 2011. In 2011, prices of NBSK and BEKP averaged U.S.$961.14 per tonne and U.S.$811.57 per tonne, respectively. In 2012, prices of NBSK and BEKP averaged U.S.$814.46 per tonne and U.S.$749.46 per tonne, respectively. In 2013, prices of NBSK and BEKP averaged U.S.$856.91 per tonne and U.S.$791.58 per tonne, respectively.13 In 2014, two new pulp mills the shortfiber pulp market had entered with a combined annual production capacity of 2.8 million tonnes. The additional supply caused BEKP prices to decline during the first nine months of 2014, reaching its lowest price at U.S.$724.27 per tonne in September 2015. Since then BEKP prices have been on an upward trend, reaching U.S.$811.17 per tonne in November 2015 and ending the year at U.S.$788.91 per tonne. On the other hand, NBSK stood at high price levels throughout 2014, reaching U.S.$932.15 per tonne in mid-January 2015. Throughout 2015, NBSK prices followed a downward trend, reaching U.S.$803.36 at the end of that year.

Although panelboards and solid wood markets improved until mid-year 2015, new competition from countries with depreciated currencies increased supply to our traditional markets, such as North America, which caused a decrease in average prices. The North American market showed an improvement in the construction sector, which provided steady demand. Global economic conditions may exert downward pressure on commodity prices, including the international prices of the products we sell, which could result in material and adverse declines in our revenues, results of operations and financial condition. We have no control over the factors that cause prices to change which include, among others:

• worldwide demand (which may be affected by a number of factors, including economic or political conditions in Asia, Latin America, North America and Europe);

• prevailing world prices, which historically have been subject to significant fluctuations over relatively short periods of time, depending on worldwide demand;

• world production capacity;

• the business strategies adopted by major integrated forestry, pulp and paper producers and other major producers; and

• the availability of substitutes.

In addition, the prices of many of the products we sell are correlated to some extent, and historical fluctuations in the price of one product have usually been accompanied by similar fluctuations in the prices of other products. If the price of one or more of the products that we sell were to decline significantly from current levels, it could have a material adverse effect on our revenues, results of operations and financial condition.

6

Worldwide competition in the markets for our products could adversely affect our business, financial condition, results of operations and cash flows.

We experience substantial worldwide competition in each of our geographical markets and in each of our product lines. Several of our competitors are larger than we are and have greater financial and other resources. The pulp industry is sensitive to changes in industry capacity and producer inventories, as well as to cyclical changes in the world’s economies, all of which may significantly affect selling prices and, thereby, our profitability. One or more of these factors could materially and adversely affect our business, financial condition, results of operations and cash flows.

Global economic developments, and particularly economic developments in the Asian, European and U.S. economies, could have an adverse effect on the demand for our products, our financial condition, results of operations and cash flows.

The global economy, and in particular global industrial production, is the primary driver of demand for pulp, paper and wood products. Global industrial production dropped during the second half of 2008 and first half of 2009 due to the financial crisis and global economic conditions, resulting in a significant and widespread contraction in demand for pulp, paper and wood products. Due to this downturn in global industrial production, our pulp segment experienced significant price declines in the last quarter of 2008 and the first quarter of 2009, which severely affected our results. In addition, the significant downturn in the home-building industry in the United States and Europe resulted in increased inventories of available new homes, significant declines in home prices, loss of home-equity values and loss of consumer confidence and demand. As a result of these events, our plywood and panel sales were adversely affected, continuing a downward trend both in volume and price across all markets. Our medium-density fiberboard molding sales also experienced a sharp decline in volume mainly due to lower activity in the United States and Canadian construction markets. Our wood products segment, which is also highly dependent on the strength of the home-building industry, experienced decreases in its prices of and demand for its products. The decrease in demand of sawn timber products due primarily to the credit crisis and downturn in the real estate market in the United States resulted in our decision to close five sawmills in 2008 and 2009.

A decrease in the level of activity in either the domestic or the international markets within which we operate could adversely affect the demand and the price of our products and thus our cash flows and operational and financial results.

In late 2009, high levels of sovereign debt and insufficient public sector revenues resulted in a European sovereign debt crisis. During this crisis, credit rating agencies downgraded the credit ratings of many of the Eurozone governments, including Greece, Spain, Italy, Portugal and France, among others. During 2011 and 2012, the deepening of this crisis caused a general economic downturn in Europe, which negatively affected the banking and credit systems, employment and production. As a result, demand and prices for pulp and wood products declined in the European market.

The devaluation of the Chinese Yuan during the third quarter of 2015 increased volatility in the markets and resulted in a decline in global demand for commodities. Also in 2015, the currencies of several countries depreciated, such as the Canadian dollar, the euro, the Chilean peso, the Brazilian real and the Argentine peso resulting in increased competition in exports, which in turn negatively impacted the average price of our panelboard and sawn timber products.

Export sales of our sawn timber products to Asia accounted for 30.6% of our revenue in 2015 compared to 41.4% in 2014 and 37.0% in 2013, and export sales of our sawn timber products to North America accounted for 35.3% of our revenue in 2015 compared to 33.7% in 2014 and 26.8% in 2013.

Our business, financial condition, results of operations and cash flows could be materially and adversely affected if the economic conditions in Asia, Europe, the United States and elsewhere abroad deteriorate, and if we are unable to reallocate our sawn timber and other products in other markets on equally beneficial terms, which could require us to recognize additional impairment charges.

We depend on free international trade as well as economic and other conditions in our principal export markets.

In 2015, export sales, defined as sales out of the country where our goods were produced, accounted for 62.1% of our total revenues. During this period, 52.4% of our export sales were to customers in Asia and Oceania, 20.5% to customers in North America, 7.4% to customers in Europe, 15.1% to customers in Central and South America and 4.6% to customers in other countries. As a result, our results of operations and cash flows depend, to a significant degree, on economic, political and regulatory conditions in our principal export markets. Our ability to compete effectively in our export markets could be materially and adversely affected by a number of factors beyond our control, including deterioration in macroeconomic conditions, exchange rate volatility, government subsidies and the imposition of increased tariffs or other trade barriers. If our ability to sell our products competitively in one or more of our principal export markets were impaired by any of these developments, it might be difficult to re-allocate our products to other markets on equally favorable terms and our business, financial condition, results of operations and cash flows might be adversely affected.

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We are located in a seismic area that exposes our property in Chile to the risk of earthquakes and tsunamis, and we experienced significant business disruption and losses as a result of the February 27, 2010 earthquake.

Our properties in Chile are located in a seismic area that exposes our facilities, plants, equipment and inventories to the risk of earthquakes and even subsequent tsunamis in some areas. A significant earthquake or other catastrophic event could severely affect our ability to meet our production targets, or satisfy customer demand and could require us to make unplanned capital expenditures, resulting in lower sales and having a material adverse effect on our financial results.

On February 27, 2010, an earthquake measured at a magnitude of 8.8 on the Richter scale, followed by a tsunami that affected the coast, occurred in the South-Central Region of Chile, an area where we maintain a substantial portion of our Chilean industrial operations. Immediately after the earthquake, all of our production units implemented their contingency plans, which involved shutting down operations and evaluating the damage caused to each facility by the earthquake. As a result of the earthquake and the subsequent tsunami, our Mutrún sawmill was destroyed.

The suspension of our operations in Chile resulted in significant asset impairment charges due to earthquake-related damage to property and inventories as well as a significant decrease in our sales volumes due to plant closures, which had an adverse effect on our results of operations and cash flows. Our insurance policies provided coverage up to an aggregate amount of U.S.$650 million for damages to our property, plant, equipment and inventories, with a deductible of U.S.$1 million for property damage, and for losses due to business interruption caused by such damage after the first 15 days for business interruption. On November 15, 2011, we and the insurers accepted the final report of the insurance adjusters. In accordance with such final report, we received a total recovery of U.S.$532.0 million.

We cannot assure you that we will not experience other suspensions or interruptions or unexpected damage to our property as a result of other earthquakes, aftershocks, tsunamis, any related repair and maintenance or other consequences associated with such events, any of which could have a material and adverse effect on our revenue, results of operations and financial condition.

The costs to comply with, and to address liabilities arising under, environmental laws and regulations could adversely affect our business, financial condition, results of operations and cash flows.

In each country where we have operations, we are subject to a wide range of national and local environmental laws and regulations concerning, among other matters, the preparation of environmental impact assessments for our projects, the protection of the environment and human health, the generation, storage, handling and disposal of waste, the discharge of pollutants and the remediation of contamination. As a forest products manufacturer, we generate air and water emissions and solid and hazardous wastes. These emissions and our waste disposal are subject to limits or controls prescribed by law or by our operating permits, and we may be required to install or upgrade our pollution control equipment in order to meet these legal requirements. We have made, and expect to continue to make, expenditures to maintain compliance with environmental laws. Notwithstanding our policy to strictly comply with all requirements established by applicable environmental laws, any failure to comply with such environmental laws may result in civil, administrative or criminal fines or sanctions, claims for environmental damages, remediation obligations, the revocation of environmental authorizations or the temporary or permanent closure of facilities. Environmental regulations in Chile and other countries in which we operate have become increasingly stringent in recent years (for example, in connection with the approval and development of new projects), and this trend is likely to continue. Future changes in environmental laws, or in the application, interpretation or enforcement of those laws, including new or stricter requirements related to harvesting activities, air and water emissions and/or climate change regulations, could result in substantially increased capital, operating or compliance costs, impose conditions that restrict or limit our operations or otherwise adversely affect our business, financial condition, results of operations and cash flows. These changes could also limit the availability of our funds for other purposes, which could adversely affect our business, financial condition, results of operations and cash flows.

We have been subject to a number of environmental administrative and judicial proceedings in Chile, including proceedings related to the Valdivia Mill, the Arauco Mill, the Nueva Aldea complex and the Licancel Mill. As a result of these proceedings, we have been subject to monetary fines as well as sanctions, including orders to suspend or limit our operations.

The operations of the Valdivia Mill recently became subject to the Secondary Water Quality Standard for the Valdivia River Basin (hereinafter, the “Norm” or “SWQSVR”). The Valdivia Mill discharges its treated effluents into the Cruces River, which is part of the Valdivia River Basin. We cannot exclude that the authority declare that the Basin is contaminated and thus initiate an administrative procedure to enact a decontamination plan, which may include limits on discharges of wastewater applicable to the Valdivia Mill.

Arauco expressed concerns, among others, regarding various aspects of the Norm’s General Environmental and Social Impact Assessment (AGIES, for its acronym in Spanish), prior to its enactment. These objections included the lack of identification and consideration for the effective economic and social costs resulting from the adoption of the Norm. Other objections include that the Norm’s parameters and limits exceed the reviewed water quality criteria enforced by reference countries in both quantity and stringency; and that many of the parameters and limits are not technically or environmentally reasonable. The Company challenged the validity of the Norm before the Third Environmental Court in January 2016. Several technical, economical and legal reports from third parties (scientists, economists and attorneys from different countries) were filed to support the challenge. Other local actors challenged the Norm as well, such as Corporación para el Desarrollo de la Región de Los Rĺos (Association for the Development of Los Rĺos Region) CODEPROVAL (for its acronym in Spanish) and the local company Forestal Calle Calle S.A. The case public hearing was held on March 3, 2016. A ruling is expected during 2016, decision that may be challenged before the Supreme Court.

In the United States, our Moncure mill was subject to an administrative proceeding by the North Carolina Department of Environment and Natural Resources. We negotiated a settlement (Special Order by Consent) in 2015 with the Environmental Management Commission (an agency of the state of North Carolina), which included a monetary fine and an agreement to replace certain emissions control equipment. We expect that the administrative proceeding to be closed by October 1, 2018. Our Eugene, Oregon mill was subject to an administrative proceeding by the Lane Regional Air Protection Agency. We negotiated a settlement that included monetary fines and an agreement to implement improvements to certain emissions control equipment and processes. Additional proceedings, enforcement actions or claims related to compliance with environmental requirements or alleged environmental damages may also be brought against us in the future. Any such proceedings or claims may have an adverse effect on our business, financial condition, results of operations and cash flows. See “Item 3. Key Information—Risk Factors—Risks Relating to Us and the Forestry Industry—Environmental concerns led to the temporary suspension of our operations at the Valdivia Mill in 2005, which adversely affected, and in the future may continue to adversely affect, our business, financial condition, results of operations and cash flows.”

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Environmental concerns led to the temporary suspension of our operations at the Valdivia Mill in 2005, which adversely affected, and in the future may continue to adversely affect, our business, financial condition, results of operations and cash flows.

Our operations at the Valdivia Mill, have been subject to environmental scrutiny by Chilean environmental regulators and the Chilean public since the mill began its operations in 2004. A variety of concerns and claims have been raised regarding the mill’s potential environmental impacts in the area. Primarily, it has been alleged that the mill’s operations impacted the habitat of the nearby Carlos Anwandter Nature Sanctuary and contributed to the migration and death of black-neck swans living in the area. In connection with an environmental administrative proceeding, environmental regulators required us to temporarily suspend operations at the Valdivia Mill for approximately one month in January 2005.

In June 2005, we again suspended operations at the Valdivia Mill until certain technical and legal conditions could be clarified with the applicable regulatory authorities. We estimate this suspension resulted in a loss of sales of approximately U.S.$1.0 million per day and a loss of profits of approximately U.S.$250,000 per day. Pursuant to the decision of our Board of Directors, based on certain clarifications provided by the Comisión Regional del Medio Ambiente (the regional environmental authority, or COREMA), of the Tenth Region of Chile, the mill resumed operations in August 2005, after 64 days of suspended operations, at 80% of its authorized production capacity. In order to achieve the full production capacity authorized by applicable permits, the mill had to fulfill certain new requirements established by the COREMA. In January 2008, the COREMA authorized the Valdivia Mill to return to its annual authorized production capacity of 550,000 tonnes. The mill gradually increased its production over a four-month period starting in March 2008 and reached full capacity in June 2008.

In June 2007, we were required to submit to the COREMA of the Tenth Region of Chile an environmental impact study for the implementation of substantial technological improvements on the quality of the effluents generated by the Valdivia Mill. In June 2008, the COREMA approved our environmental impact study subject to certain conditions that, in our opinion, adversely affected the feasibility of the project. Accordingly, we filed an appeal before the Consejo Directivo (Directive Council) of the Comisión Nacional del Medio Ambiente (National Environmental Commission, or CONAMA), challenging the conditions imposed by the COREMA. Our administrative appeal was partially accepted by the CONAMA, which upheld some of the conditions that we believed would adversely affect the feasibility of the project. Consequently, in September 2009, we presented another appeal in the relevant court. On December 5, 2012, the Environmental Evaluation Service of the Tenth Region of Chile authorized certain changes to the project based on the implementation of certain technological improvements. Then, on November 9, 2012, we withdrew our appeal. The court approved the withdrawal on November 29, 2012.

Until October 2007, our Valdivia Mill was under the jurisdiction of the COREMA of the Tenth Region of Chile, but due to a change in legislation creating two additional administrative regions in Chile, our Valdivia Mill became subject to the jurisdiction of the COREMA of the Fourteenth Region of Chile. In February 2009, as previously required by the COREMA of the Tenth Region of Chile, we submitted an environmental impact study for the construction of a pipeline to discharge the Valdivia Mill’s wastewater in the Pacific Ocean near Punta Maiquillahue, complying with the requirement that such wastewater be discharged in a body of water other than the Cruces River, the Carlos Anwandter Nature Sanctuary or their respective sources. In February 2010, through Exempt

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Resolution No. 27/2010, the COREMA approved this environmental impact study subject to additional conditions, certain of which we challenged before the Directive Council primarily because they would have prohibited the discharge of wastewater into the Cruces River under any circumstance, including emergencies. On October 23, 2012, the Committee of Ministers passed Exempt Resolution No. 1052, which upheld in part our appeal in permitting the discharge into the Cruces River upon the occurrence of certain contingencies that may affect the normal functioning of the conduction system and/or outfall, including bombings or sabotage, natural disasters, or accidents caused by third parties. On March 29, 2010, two Chilean individuals filed a recurso de participación ciudadana (reclamation action) before the COREMA of the Fourteenth Region of Chile, challenging Exempt Resolution No. 27/2010. On April 30, 2013, the Committee of Ministers passed Exempt Resolution No. 391, which upheld in part such reclamation action, modifying paragraph 4.8.3, and updating tables 8, 9.a and 9.b of the Exempt Resolution No. 27/2010 (thereby establishing effluent discharge limits for 13 parameters, including total chromium, total hydrocarbons, sulfur, oil and grease, suspended solids and phosphorus). According to Chilean law, the environmental permit shall expire five years after its issuance, provided that the execution of the respective project had not begun. However, on May 16, 2014, the regional environmental authority issued letter No. 165 in which it recognized that although we have not yet carried out physical works with respect to the project, we have carried out systematic, uninterrupted and permanent activities towards its execution.

The construction and operation of the pipeline requested by the environmental authority in order to discharge the Valdivia Mill’s wastewater in a body of water other than the Cruces River, the Carlos Anwandter Nature Sanctuary or their respective sources, remains subject to many environmental, regulatory, engineering and political uncertainties. As of the date of this annual report, it has not been possible to obtain the relevant permits and authorizations for the project. As a result, we cannot provide any assurances that the project will be completed and that any deadline extensions would be granted, even if we comply with all the requirements that may be set forth by those authorities. If the installation of the pipeline is delayed for reasons attributable to us, we may face sanctions that include warnings, fines or the revocation of the Valdivia Mill’s environmental permit for operation. See “Item 4. Information on the Company—Description of Business—Pulp—Pulp mills—Chile—Valdivia Mill” and “Item 8. Financial Information—Legal Proceedings.”

The suspension of operations at the Valdivia Mill in 2005 adversely affected our business, financial condition, results of operations and cash flows. Any future suspension of operations at the Valdivia Mill or at any other of our significant operating plants can be expected to have similar adverse effects. We offer no assurance that the Valdivia Mill, or our other mills, will be able to operate without further interruption. See “Item 8. Financial Information—Legal Proceedings.”

We have been subject to legal proceedings related to our mills which could adversely affect our business, financial condition, results of operations and cash flows.

In April 2005, the Consejo de Defensa del Estado (National Defense Council), the Chilean national agency that institutes legal proceedings on behalf of the Chilean government, instituted a civil lawsuit seeking reparations, damages and indemnification from us for environmental harm caused in the Carlos Anwandter Nature Sanctuary allegedly caused by effluent discharges from our Valdivia Mill. The National Defense Council did not quantify the damages it was seeking in connection with the Valdivia Mill lawsuit. On July 27, 2013, a civil court of Valdivia ruled that the alleged environmental events were mainly caused by the Valdivia Mill. We decided not to appeal this ruling, in order to create the conditions to shortly begin an effective implementation of measures in favor of that Nature Sanctuary, without the delay of further legal action. In April 2014, we agreed with and paid the National Defense Council an indemnification amount of approximately U.S.$5,000,000. This indemnification is in addition to another U.S.$5,000,000, which will be designated for social programs for the benefit of the community of Valdivia. There were four additional measures ordered by the ruling (though not included in the agreement with the National Defense Council), which were discussed by the members of the Consejo Científico Social (Social Council), which includes representatives from Arauco, the National Defense Council, academic institutions, NGOs and public authorities. These measures are: (i) conducting a study, within one year, undertaken by an interdisciplinary committee of experts, about the current status of the wetland; (ii) creating an artificial sentinel wetland for representative species, upriver from the discharge of effluents; (iii) implementation of a monitoring program of environmental impact, within a five-year period; and (iv) creating a new research center focused on wetlands (Centro de Investigación de Humedales). The National Defense Council and Arauco have agreed upon the manner in which these measures have been implemented.

Since the end of 2004, we have been subject to various criminal proceedings relating to alleged violations of several environmental laws in Chile, some of which have been either terminated or abandoned by the prosecutor (decisión de no perseverar) as of the date of this annual report. See “Item 8. Financial Information—Legal Proceedings.” The commencement of similar criminal proceedings against Arauco at any time in the future could adversely affect some of our mills. We can neither predict the likelihood that we will face such similar proceedings in the future, nor the likely outcome or impact of any such proceedings.

We are also subject to certain administrative proceedings as a result of a pipe leakage in the Nueva Aldea Mill in 2013, the death of fish in the Cruces River in January 2014, close to the Valdivia Mill effluent discharge, and a pipe leakage in the Arauco Mill in February 2016, all of which are currently under investigation by the competent authorities. In addition, the Superintendence of the Environment has recently initiated two administrative proceedings against both Valdivia and Nueva Aldea mills, which may result in material administrative fines or sanctions, the revocation of environmental authorizations or the temporary or permanent closure of facilities.

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As a result of such proceedings, we cannot assure you that, our mills will be able to operate without interruption. Any such interruption, or unexpected costs to resolve such proceedings, could have a material and adverse effect on our business, financial condition, results of operations and cash flows.

We are subject to a substantial tax claim in Argentina.

On December 14, 2007, the Administración Federal de Ingresos Públicos (Federal Administration of Public Revenues, or AFIP), Argentina’s internal revenue service, notified our Argentine subsidiary, Alto Paraná S.A., which effective January 1, 2015, changed its name to Arauco Argentina S.A., or Arauco Argentina, of a claim for alleged unpaid taxes for fiscal years 2002, 2003 and 2004 in the aggregate amount of AR$418 million (or approximately U.S.$105 million at the then-current exchange rate) including principal, interest and penalties accrued through such date, arising from a dispute regarding certain income tax deductions (related to debt issued by Arauco Argentina in 2001 and repaid in 2007) taken by Arauco Argentina and challenged by the AFIP. On February 8, 2010, the Tribunal Fiscal de la Nación (Argentina’s Tax Court), issued an administrative ruling requiring that Arauco Argentina pay the AFIP’s claim in full.

Arauco Argentina appealed this administrative ruling to the Court of Appeals, in addition to filing an injunctive action requesting that the court stay Arauco Argentina’s payment obligation until resolution of its pending appeal. On May 13, 2010, the Court of Appeals granted an injunction of Arauco Argentina’s payment obligation in exchange for the posting of a surety bond in the amount of AR$633.6 million (or approximately U.S.$129 million at the then-current exchange rate). On December 28, 2012, the Court of Appeals dismissed Arauco Argentina’s appeal. Arauco Argentina appealed this decision before the Argentine Supreme Court of Justice, or the Argentine Supreme Court. The appeal has been under consideration by the Argentine Supreme Court since May 29, 2013. As of the date of this annual report, the injunction granted by the Court of Appeals is still in force.

We can offer no assurance that the Argentine Supreme Court will issue a ruling favorable to us. If the Argentine Supreme Court upholds the decision of the Court of Appeals, Arauco Argentina will be required to satisfy the above-mentioned claim (together with interest accrued), which would have an adverse effect on our financial condition and results of operations. For more information regarding this claim or any other substantial tax claim in Argentina, see “Item 8. Financial Information—Legal Proceedings—Tax Litigation in Argentina.”

Our ability to access local and international credit or capital markets may be restricted at a time when we need financing, which could have a material adverse effect on our flexibility to react to changing economic and business conditions.

As of December 31, 2015, we had approximately U.S.$4.3 billion of outstanding indebtedness. See “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources—Contractual obligations.” The economic environment prevailing at any point in time may prevent us from accessing, or restrict our access to, credit and capital markets to satisfy our financing needs, or we may not be able to refinance our existing indebtedness on terms that are favorable to us or at all. If we are unable to refinance our indebtedness as it becomes due, or if we refinance such indebtedness on terms that are not favorable to us, our business, results of operations and financial condition could be materially and adversely affected.

Material disruptions at any of our manufacturing, mills processing or remanufacturing facilities could negatively impact our financial results.

A material disruption at any of our manufacturing, processing or remanufacturing facilities could prevent us from satisfying customer demand for our products, meeting our production targets and/or require us to make unplanned capital expenditures, resulting in lower sales, which would have a negative effect on our financial results. Our Chilean facilities are located in a region known for seismic activity that exposes our facilities in Chile to the risk of earthquakes and in some areas, to subsequent tsunamis. In addition, our facilities (or any of our machines within an otherwise operational facility) could cease operations unexpectedly due to a number of events, including:

• unscheduled maintenance outages;

• prolonged power failures;

• an equipment failure;

• fires, floods, hurricanes or other adverse weather;

• disruptions in the transportation infrastructure, including roads, bridges, railroad tracks and tunnels;

• a chemical spill or release;

• explosion of a boiler;

• the effect of a drought or reduced rainfall on its water supply;

• labor difficulties;

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• terrorism or threats of terrorism;

• domestic and international laws and regulations applicable to our Company and our business partners, including joint operation partners, around the world; and

• other operating problems.

Disease or fire could affect our forests and manufacturing processes and, in turn, adversely affect our business, financial condition, results of operations and cash flows.

Our operations are subject to various risks affecting our forests and manufacturing facilities, including disease and fire. Although to date certain pests and diseases afflicting radiata or taeda pine plantations in other parts of the world have not significantly affected the forestry industries in Chile, Argentina, Brazil or Uruguay, these pests or diseases may migrate and may significantly affect the forestry industries in Chile, Argentina, Brazil or Uruguay in the future. Similarly, forest fires are always a risk, particularly during low rainfall conditions. We do not maintain insurance against pests, diseases or, in certain areas, fires that could affect our forests, and as a result, our business, financial condition, results of operations and cash flows could be adversely affected if any of these risks were realized.

Beginning on December 31, 2011, wildfires, exacerbated by high temperatures and strong winds, broke out in the Eighth Region of Chile. As a result, the fires destroyed our Nueva Aldea plywood mill and approximately 8,200 hectares of our forest plantations. The affected forest plantations represented approximately 0.8% of our total forest plantations. Our Nueva Aldea plywood mill, which represented a cash investment of approximately U.S.$110 million, had an annual production capacity of 450,000 cubic meters, representing approximately 14.2% of our total panel production capacity at the time of the event. Although the plywood mill at Nueva Aldea and our forest plantations were insured, our insurance is subject to deductibles and caps, including a 15-day deductible relating to our business interruption insurance for the Nueva Aldea plywood mill. We received U.S.$143.1 million from these insurance policies. In December 2013, we finished reconstruction of the Nueva Aldea plywood mill and began the start-up and commissioning process, which concluded in 2014. Our Nueva Aldea plywood mill achieved full production during the second semester of 2015, and we expect it to reach an annual production capacity of 360,000 cubic meters of plywood panels.

During the fourth quarter of 2014 and the first quarter of 2015, fires affected our forest plantations and destroyed 8,570 hectares. During the fourth quarter of 2015 and the first quarter of 2016, fires affected our forest plantations and destroyed 618 hectares.

Climate change may negatively affect our business, financial condition, results of operations and cash flows.

A significant number of scientists, environmentalists, international organizations, regulators and other commentators maintain that global climate change has contributed, and will continue to contribute, to the increasing unpredictability, frequency and severity of natural disasters (including, but not limited to, hurricanes, droughts, tornadoes, freezes, other storms and fires) in certain parts of the world. As a result, a number of legal and regulatory measures as well as social initiatives have been introduced in numerous countries in an effort to reduce carbon dioxide and other greenhouse gas emissions and combat global climate change. Such reductions in greenhouse gas emissions could result in increased energy, transportation and raw material costs and may require us to make additional investments in facilities and equipment. In addition, our plantations are located in regions which have ideal climatic conditions for a short growing cycle. Any climate changes that negatively affect such favorable climate conditions in central or southern Chile or in any region in which we benefit from favorable climate conditions could adversely affect the growth rate and quality of our plantations, or our production costs. Although we cannot predict the impact of changing global climate conditions, if any, or if legal, regulatory and social responses to concerns about global climate change, any such occurrences may negatively affect our business, financial condition, results of operations and cash flows.

We may undertake mergers, acquisitions and investments to expand or complement our operations that could result in operating difficulties or otherwise adversely affect our business, financial conditions and results of operations.

From time to time, we carry out mergers, acquisitions and investments to expand or complement our operations. In connection with such transactions, we may be exposed to various risks, including those arising from: (i) not having accurately assessed the value, future growth potential, strengths, weaknesses and potential profitability of potential acquisition targets; (ii) difficulties in successfully integrating, operating, maintaining or managing newly-acquired operations, including personnel; (iii) unexpected costs of such transactions or (iv) unexpected contingent or other liabilities or claims that may arise from such transactions. If any of these risks were to materialize, it could adversely affect our business, financial condition and results of operations.

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Our operations could be adversely affected by labor disputes.

Approximately 34% of our employees in Chile, 47% of our employees in Argentina, 23% of our employees in Uruguay, almost 100% of our employees in Brazil and none of our employees in the United States or Canada were unionized as of December 31, 2015. In the past, certain work slowdowns, stoppages and other labor-related disruptions have adversely affected our operations.

During 2015, transportation contractors blocked the entrances of our Horcones complex (Chile) on four separate occasions, on January 13, February 17, March 23 and September 21, 2015.

During 2014, there were two events of transportation contractors blocking the entrance to our Valdivia mill. The first blockade was on June 12, 2014 and lasted one day. The second was between August 29 and September 5, 2014. There were also four separate occasions of transportation contractors blocking the entrances of our Horcones complex on February 24 and 25, September 3, October 22 and 23, and November 20, 2014.

In January 2013, we experienced a four-day stoppage in Chile at the Arauco plywood mill in January 2013, caused by employees of third-party contractors.

In Chile, we also experienced a four-day work stoppage in July 2012 at our Arauco plywood mill located in Arauco, during which production partially resumed after the second day, which was caused by the employees of our third-party forestry contractors.

In January 2015, we experienced a five-day stoppage at Arauco Argentina’s mills in Misiones as a result of a road blockage led by the truckers union, and we also experienced a four-day stoppage at Arauco Argentina’s pulp mill in December 2014 as a result of a strike by the pulp union.

During 2015, production shifts were reduced at the unit in Piray MDF and in the particleboard plant in Zarate (Argentina), in order to improve operational efficiencies. Although the shift reductions and communications were performed in accordance with the provisions of the Labor Contract Law, workers of the plant in Zarate went on strike, causing a six-hour stoppage. Also during 2015, the pulp union carried out three work stoppages and blockades in Arauco Argentina’s pulp mill: the first event occurred on May 25 for 3 days; the second on August 3, also lasting 3 days; and the last one on September 1, which lasted 14 days.

During 2013, we experienced (i) a 27-day stoppage at Arauco Argentina’s Zarate mill in April 2013, as a result of a strike by the construction union; (ii) a two-day stoppage at Arauco Argentina’s chemical mill in May 2013, as a result of a strike by the Santa Fe Federation of Labour; and (iii) a one-day stoppage at Arauco Argentina’s pulp mill in June 2013 and a three-day stoppage at Arauco Argentina’s pulp mill in October 2013, both as a result of a strike by the pulp union. During 2011 we experienced a three-day stoppage at Arauco Argentina’s chemical mill in March 2011, as a result of a strike by the chemical union, but the strike were limited to two hours per shift and did not materially affect operations.

Our Brazilian operations have not experienced any work stoppages in the last five years.

During 2014, we experienced 7.5 days of work stoppages during the final phase of construction at Montes del Plata and the start of operations, caused by contractors and third parties. During 2015, there were 28 minor events amounting to 5.5 days of work stoppages, caused by transportation and timber logistics contractors.

In September 2011, we experienced a 21-day work stoppage of construction at the Montes del Plata joint operation in Uruguay. In 2012, we experienced approximately 17 days of work stoppages and in 2013, approximately 33 days of work stoppages during the construction at Montes del Plata. These stoppages were caused by national and local strikes related to various labor conflicts mostly of Montes del Plata subcontractors.

Our Canadian and U.S. operations did not experience any work stoppages in 2012, 2013, 2014 or 2015.

We renewed all of the collective-bargaining agreements that expired during 2015 in Chile, with the exception of two agreements whose renewals were postponed until May. We cannot assure you that a work slowdown, or a work stoppage or strike, will not occur prior to or upon the expiration of our labor agreements, and we are unable to estimate the extent to which any such work slowdown, stoppage or strike may adversely affect our sales.

In addition, we depend to a significant extent on employees of contractors to which we outsource a wide range of services including management of certain of our plantations and transportation of raw materials and products. On July 1, 2012, we commenced the process of insourcing the operation of 13 sawn timber industrial facilities, which had previously been managed by third-party

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companies. In the process, we hired 2,900 employees of these third-party companies. As of December 31, 2015, we had contracts with approximately 788 contractors, who employed approximately 21,353 employees. Under Chilean and Brazilian labor legislation, we are secondarily liable for the payment of labor and the social security obligations owed to employees of our contractors. In Chile, in the event that we do not exercise the rights granted to us by the labor laws regarding the supervision of our contractors in their compliance of their labor and social security obligations, then our responsibility is elevated from secondary to joint and several, thus enabling an employee of a contractor to bring a claim relating to these obligations against both the contractor and us, as the party hiring such contractor, although the contractor would remain primarily liable for such obligations. Generally, we are also responsible for the health and safety conditions of the contractors’ workers and are obligated to ensure that the contractors comply with all obligations related to such conditions while such workers are performing activities for us within our corporate purpose.

In Argentina, substantially similar joint liability rules apply to a principal and its contractors. In addition, national rural labor law, Law No. 26,727, promulgated on December 28, 2011 and fully in effect since March 2013, permits contractor employees under forestry contracts to bring actions directly against the principal to whom the employees’ services are being provided, instead of requiring them to bring actions against the contractor. For work or services related to the ordinary production process of a principal, the law provides that an employment relationship is deemed to exist between the principal and the employee of the contractor.

As a result of the foregoing, we may be affected by future strikes, work slowdowns, stoppages or other labor-related developments in the various countries in which we operate, including such developments attributable to employees of contractors performing outsourced services, and such strikes, slowdowns, stoppages or other developments could have a material adverse effect on our business, financial condition, results of operations or prospects.

Risks Relating to Chile

Adverse changes in Chile’s political and economic conditions could directly impact our business and the market price of our securities.

As of December 31, 2015, 64.5% of our property, plant and equipment and forest assets were directly owned by Celulosa Arauco y Constitución S.A., and our Chilean subsidiaries, and in 2015, 59.7% of our revenues were attributable to our Chilean operations. Accordingly, our business, financial condition, results of operations and cash flows depend, to a considerable extent, upon economic conditions in Chile. Future changes in the Chilean economy could adversely affect our business, financial condition, results of operations and cash flows and may impair our ability to proceed with our strategic plan of business. In addition, such changes may impact the market price of our securities.

The Chilean government’s actions have had and may continue to have a material effect on private sector entities. We have no control over and cannot predict how government intervention and policies will affect the Chilean economy or, directly and indirectly, our operations and revenues.

The Chilean government has exercised and continues to exercise substantial influence over many aspects of the economy. In September 2014, the Chilean Congress approved a tax reform bill that has a significant impact on Chilean companies. See “A tax reform bill with significant changes for companies was approved in September 2014 and the Chilean Superintendency of Securities and Insurance, or SVS, modified accounting reporting standards for companies under its supervision in October 2014.” We have no control over and cannot predict how government intervention and policies will affect the Chilean economy or, directly and indirectly, our operations and revenues. Our operations and financial condition and the market price of our securities may be adversely affected by changes in policies involving exchange controls, taxation and other matters.

A tax reform bill with significant changes for companies was approved in September 2014 and the Chilean Superintendency of Securities and Insurance, or SVS, modified accounting reporting standards for companies under its supervision in October 2014.

On September 29, 2014, Law No. 20,780, or the Tax Reform, was published in the Official Gazette, introducing significant changes to the Chilean taxation system and strengthening the powers of the Servicio de Impuestos Internos (Chilean IRS) to control and prevent tax avoidance. The Tax Reform contemplates, among other matters, changes to the corporate tax regime to create two tax regimes. Starting on January 1, 2017, Chilean companies will be subject to the sistema parcialmente integrado (the partially integrated regime) or the sistema de renta atribuida (the deemed taxation regime). The partially integrated regime will be the default regime for companies owned by legal entities and only those companies owned by natural persons or non-resident taxpayers will be eligible to opt for the deemed taxation regime. Both regimes provide for the gradual increase of the corporate tax rate to 24% in 2016 (21% in 2014, 22.5% in 2015 and 24% in 2016). Depending on the tax regime applicable to a company, tax rates will gradually be increased to a maximum rate of 25% in 2017, in the case of the deemed taxation regime, or 27% in 2018, in the case of the partially integrated regime.

Under the amended regulations as a sociedad anónima, the default regime that applies to us is the partially integrated regime.

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The Superintendency of Securities and Insurance issued Oficio Circular No. 856 on October 17, 2014, which instructs regulated entities to record as a charge to shareholders’ equity in their statutory financial statements the difference in deferred tax assets and liabilities that results from the increase in the tax rate set forth in Law No. 20,780. The impact of this circular has been incorporated in the statutory financial statements which are used to determine the distributable income. This circular differs from International Financial Reporting Standards (IFRS), which requires the impact to be recorded as part of the income statement. However, the financial statements that we prepared and filed with the SVS as of and for the periods ended September 30 and December 31, 2014 and 2015, account for deferred taxes in accordance with Oficio Circular No. 856.

In the attached financial statements prepared in accordance with IFRS, the effect of the change in the tax rate of first category in assets and liabilities relating to deferred taxes resulted in an expense of U.S.$292,717,000 (U.S.$292,155,000 attributable to owners of the parent) has been recorded in the income statement for the year ended December 31, 2014.

Further amendments could affect our income tax rates. We have no control and cannot predict how such amendments will affect, directly or indirectly, the Chilean economy or our operations and revenues. Our operations and financial condition and the market price of our securities may be adversely affected by changes in policies involving exchange controls, taxation and other matters. Furthermore, the change imposed by SVS by Oficio Circular 856 dated October 17, 2014 obliging companies under its supervision not to follow IFRS could lead investors to improperly determine Arauco’s results with respect to the effect of the tax reform on Arauco’s deferred taxes.

Chile has different corporate disclosure standards from those with which you may be familiar in the United States, and Chile’s securities laws may not afford you the same protections as U.S. securities laws.

The securities disclosure requirements applicable to certain foreign private issuers differ from those applicable to issuers domiciled in the United States in some important respects. Accordingly, the information about us available to you will not be the same as the information disclosed by a U.S. company required to file reports with the U.S. Securities and Exchange Commission, or SEC.

In addition, although Chilean law imposes restrictions on insider trading and price manipulation, applicable Chilean securities laws and regulations are different from those in the United States, and some investor protections available in the United States may not be available in the same form, or at all, in Chile.

Inflation in Chile may disrupt our business and have an adverse effect on our business, results of operations, financial condition and cash flows.

Chile has experienced high rates of inflation in the past, the highest of which occurred more than 20 years ago. The annual rates of inflation (as measured by changes in the consumer price index and as reported by the Chilean National Institute of Statistics) in 2011, 2012, 2013, 2014 and 2015 were 4.4%, 1.5%, 3.0%, 4.6% and 4.4% respectively. High levels of inflation in Chile could adversely affect the Chilean economy and have a material adverse effect on our revenues, results of operations, financial condition and cash flows. Changes in the rate of inflation in Chile could continue in the future. Due to the competitive pressures we face in each of our product lines, we may not be able to increase prices in lock-step with inflation, which could materially and adversely affect our revenues, results of operations, financial condition and cash flows.

Currency fluctuations may have a negative effect on our financial results.

The Chilean peso has been subject to depreciations and appreciations in the past and may be subject to significant fluctuations in the future. We transact a significant portion of our business in U.S. dollars, and the U.S. dollar is the currency of the primary economic environment in which we operate. A portion of our operating costs, however, are denominated in Chilean pesos. An increase in the Chilean peso/U.S. dollar exchange rate increases our Chilean peso-denominated costs.

In addition, as an international company operating in Chile and several other countries, we transact a portion of our business and have assets and liabilities in Chilean pesos and other non-U.S. dollar currencies, such as the Euro, the Argentine peso, the Uruguayan peso, the Brazilian real, the Colombian peso, the Mexican peso and the Canadian dollar, among others. To the extent that the Chilean peso depreciates against the U.S. dollar, our domestic revenues may be adversely affected when expressed in U.S. dollars. The same effects may occur for our domestic sales in Argentina, Brazil and Canada, or other countries where we have operations for revenues related to products sold in each of the respective local currencies. As a result, fluctuations in the exchange rates of such foreign currencies to the U.S. dollar may have a material adverse effect on our business, results of operations, financial condition and cash flows.

Risks Relating to Argentina

The economic conditions in Argentina may adversely affect our financial condition, results of operations and cash flows.

As of December 31, 2015, 9.2% of our property, plant and equipment and forest assets were owned by our Argentine subsidiaries, and in 2015, 10.6% of our revenues were attributable to our Argentine operations. The financial condition and results of our Argentine operations, including the ability of our Argentine subsidiary Arauco Argentina to raise capital, depend, among other factors, upon economic conditions prevailing in Argentina. See “Item 4. Information on our Company—Description of Business—History.”

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There are various aspects of the Argentine economy that could adversely affect our operations, including, among others, inflation, interest rates, foreign exchange controls and taxes. Since 2001 there have been a number of monetary and currency exchange control measures implemented in Argentina, which have included the obligation to repatriate foreign currency earned abroad and tight restrictions on transferring funds abroad, with certain exceptions for authorized transactions. As of the date of this annual report, in order to begin to normalize the economy, certain of these measures have been eliminated or relaxed by the new Argentine administration that took office as of December 10, 2015. After moving quickly to eliminate foreign-exchange restrictions and shifting to a more flexible exchange rate, the government plans to reduce inflation gradually.

We guarantee a portion of Arauco Argentina’s debt. We may be required to fulfill our obligation under our guarantees if Arauco Argentina’s ability to transfer funds abroad to service such debt is restricted. For a description of Arauco Argentina’s debt which we guarantee see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

Although past restrictions did not materially affect Arauco Argentina’s business, financial condition, results of operations and cash flows, including its ability to service its debt, if in the future such payments are restricted, such restrictions would be an obstacle to Arauco Argentina’s ability to transfer money abroad, which may negatively affect its financial condition, results of operations and cash flows.

We have no control over and cannot predict how any future changes in economic policy or other changes in the Argentine economy could affect our operations and revenues in Argentina.

Risks Relating to Brazil

Economic conditions in Brazil may have a direct impact on our business, financial condition, results of operations and cash flows.

As of December 31, 2015, 7.4% of our property, plant and equipment and forest assets were owned by our Brazilian subsidiaries, and in 2015, 7.0% of our revenues were attributable to our Brazilian operations. See “Item 4. Information on our Company—Description of Business.” As a result of the foregoing, to a certain extent, our business, financial condition, results of operations and cash flows will be dependent on economic conditions in Brazil.

The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy. Brazilian political and economic conditions have a direct impact on our business.

The Brazilian government has exercised and continues to exercise a substantial influence over many aspects of the Brazilian economy. The Brazilian government’s actions to control inflation and other policies and regulations have often involved, among other measures, wage and price controls, currency devaluations, capital controls and limits on imports. The business, financial condition, results of operations and cash flows of our Brazilian subsidiaries may be adversely affected by such matters, changes in policy or regulation involving tariffs and exchange controls, as well as by factors such as:

• currency fluctuations;

• inflation;

• social instability;

• price instability;

• interest rates;

• liquidity of domestic capital and lending markets,

• tax policy;

• political instability; and

• other political, diplomatic, social and economic developments in or affecting Brazil.

The Brazilian government’s actions have had and may continue to have a material effect on private sector entities, including our operations in Brazil. We have no control over and cannot predict how government intervention and policies will affect the Brazilian economy or, directly and indirectly, our operations and revenues.

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Future economic, social and political developments in Brazil may adversely affect the business, financial condition, results of operations and cash flows of our Brazilian subsidiaries.

Inflation and efforts by the Brazilian government to combat inflation may contribute significantly to economic uncertainty in Brazil and could harm the business of our Brazilian subsidiaries.

Brazil has, in the past, experienced high rates of inflation. More recently, Brazil’s rates of inflation were 6.5% in 2011, 5.8% in 2012, 5.9% in 2013, 6.4% in 2014 and 10.7% in 2015, as measured by the Índice de Preços ao Consumidor-Amplo (Brazilian Consumer Price Index). In the past, inflation, governmental measures to combat inflation and public speculation about possible future actions have had significant effects on the Brazilian economy and on the financial condition and results of operation of business, such as ours, operating in Brazil.

Fluctuations in the value of Brazil’s currency against the value of the U.S. dollar may result in uncertainty in the Brazilian economy, which may adversely affect the financial condition, results of operations and cash flows of our recently acquired Brazilian subsidiaries.

The Brazilian real has historically suffered frequent devaluation. In the past, the Brazilian government has implemented various economic plans and exchange rate policies, including sudden devaluations, periodic mini-devaluations during which the frequency of adjustments has ranged from daily to monthly, floating exchange rate systems, exchange controls and dual exchange rate markets. Depreciation over shorter periods has resulted in significant fluctuations in the exchange rate between the Brazilian real and the U.S. dollar and other currencies.

For example, the Brazilian real depreciated against the U.S. dollar by 10.8% and by 47.7% in 2014 and in 2015, respectively. The exchange rate between the Brazilian real and the U.S. dollar may continue to fluctuate and may rise or decline substantially from current levels. From January 1 to March 31, 2016 the Brazilian real appreciated by 12.1% with respect to the U.S. dollar.

Devaluation of the Brazilian real and currency instability may adversely affect our results of operation and financial condition in terms of U.S. dollars and could adversely affect the ability of our Brazilian subsidiaries to meet their foreign currency obligations in the future and could result in a monetary loss relating to these obligations.

Risks Relating to Uruguay

Economic conditions in Uruguay, or the failure of Montes del Plata and its affiliates to service their debt, may have a direct impact on our financial condition, results of operations and cash flows.

As of December 31, 2015, 16.2% of our property, plant and equipment and forest assets were owned by Montes del Plata and its affiliates in Uruguay, and in 2015, 7.0% of our revenues were attributable to the Uruguayan operations of Montes del Plata. See “Item 4. Information on our Company—Description of Business.”

We have made significant investments in Uruguay and we may make additional investments in Uruguay in the future. See “Item 4. Information on our Company—Description of Business.” As a result, our financial condition and results of operations may consequently depend, to a certain extent, on political and economic conditions in Uruguay. Certain future actions by the Uruguayan government, including, among others, actions with respect to inflation, interest rates, foreign exchange controls and taxes, could have a material adverse effect on our operations in Uruguay.

Risks Relating to the United States and Canada

Economic conditions in the United States and Canada may have a direct impact on our business, financial condition, results of operations and cash flows.

As of December 31, 2015, 2.3% of our property, plant and equipment and forest assets were owned by our U.S. subsidiaries, and in 2015, 11.8% of our revenues were attributable to our U.S. subsidiaries. See “Item 4. Information on our Company—Description of Business.”

As of December 31, 2015, 0.4% of our property, plant and equipment and forest assets were owned by our Canadian subsidiaries, and in 2015, 3.9% of our revenues were attributable to our consolidated Canadian subsidiaries, which includes our Canadian subsidiaries’ operations in the United States. See “Item 4. Information on our Company—Description of Business.”

As a result of the foregoing, to a certain extent, our business, financial condition, results of operations and cash flows will be dependent on economic conditions in the United States and Canada.

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Risks Relating to Other Markets

Our business, earnings and prospects may be adversely affected by developments in other countries that are beyond our control.

Our business, financial condition, results of operations and cash flows depend, to a large extent, on the level of economic activity, government and foreign exchange policies and political and economic developments in our principal export markets. In 2013, 2014 and 2015, 92.8%, 91.8% and 90.8%, respectively, of our total pulp sales, and 41.3%, 43.9% and 42.3%, respectively, of our total sales of forestry, wood and panel products, were attributable to exports, principally to customers in Asia, the Americas and Western Europe, collectively. Our business, earnings and prospects, as well as our financial condition, results of operations, cash flows and the market price of our securities, may be materially and adversely affected by developments in these export markets relating to inflation, interest rates, currency fluctuations, protectionism, government subsidies, price and wage controls, exchange control regulations, taxation, expropriation, social instability or other political, economic or diplomatic developments. For example, certain target countries to which we export may impose buying restrictions in our industry, which may adversely affect our sales. We have no control over these conditions and developments which could adversely affect us and our business, financial condition, results of operations and cash flows or the price or market of our securities.

Developments in other emerging and developed markets may adversely affect the market price of our securities and our ability to raise additional financing.

Our financial condition and the market price of our securities may be adversely affected by declines in the international financial markets and world economic conditions. Chilean securities markets are, to varying degrees, influenced by general economic, political, social and market conditions in other emerging and developed market countries, especially those in the United States, Europe, China and Latin America. Investors’ reactions to developments in one country can affect the securities markets and the securities of issuers in other countries, including Chile. Negative developments in the international financial markets in the future could adversely affect the market price of our securities and impair our ability to raise additional capital.

Risks Relating to Our Securities

The non-payment of funds by our subsidiaries could have a material adverse effect on our business, financial condition, results of operations and ability to service our debt, including our securities.

Our cash flow and our ability to service debt is dependent, in part, on the cash flow and earnings of our subsidiaries and the payment of funds by those subsidiaries to us, in the form of loans, interest, dividends or otherwise. Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due under the terms of our securities or to make any funds available for such purpose.

Furthermore, claims of creditors of our subsidiaries, including trade creditors, will have priority over our creditors, including holders of our securities, with respect to the assets and cash flow of our subsidiaries. Our right to receive assets of any of our subsidiaries upon their liquidation or reorganization (and the consequent right of the holders of our securities to participate in those assets) will be effectively subordinated to the claims of that subsidiary’s creditors.

Changes in Chilean tax laws could lead us to redeem our securities.

Under current Chilean law and regulations, payments of interest made from Chile to holders of debt securities who are neither residents nor domiciled or organized in Chile for purposes of Chilean taxation will, generally, be subject to Chilean withholding tax at a rate of 4.0%. Subject to certain exceptions, we will pay additional amounts (as described in “Item 10. Additional Information—Taxation”) so that the net amounts received by the holder of the notes (including additional amounts) after such Chilean withholding tax will equal the amounts that would have been received in respect of the notes in the absence of such Chilean withholding tax. In the event of certain changes in Chilean tax laws requiring that we pay additional amounts that are in excess of the additional amounts that we would owe if payments of interest on our securities were subject only to a 4.0% withholding tax, we will have the right to redeem our securities.

Credit rating downgrades below investment grade could have a material and adverse effect on our business, financial condition, results of operations and ability to service our debt, including our securities.

Credit rating agencies could downgrade our ratings either due to factors specific to us, a prolonged cyclical downturn in the forestry industry or macroeconomic trends (such as global or regional recessions) and trends in credit and capital markets more generally. Any decline in our credit rating would increase our cost of borrowing and may significantly harm our financial condition, results of operations and profitability, including our ability to refinance our existing indebtedness.

In October 2012, citing soft pulp prices and our increased leverage due to the Flakeboard acquisition and the construction of the Montes del Plata pulp plant in Uruguay, Fitch Ratings, or Fitch, downgraded our foreign and local currency Issuer Default Ratings (IDR) to “BBB” from “BBB+,” in addition to downgrading our national scale rating from “AA (cl)” to “AA- (cl).” Fitch also downgraded the foreign currency IDR of Arauco Argentina, to “BBB” from “BBB+.” The unsecured debt issued by Arauco Argentina and us was also downgraded to “BBB” and “AA- (cl),” respectively, from “BBB+” and “AA.” On February 6, 2013, Feller Rate, a Chilean subsidiary of Standard & Poor’s Ratings Services, or S&P, lowered our national scale rating to “AA-” from “AA”, citing the adoption of an aggressive financial policy combined with a cycle of low prices and increased costs of raw materials.

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On March 7, 2013, Moody’s Investors Service, or Moody’s, downgraded our senior unsecured ratings to “Baa3” from “Baa2” with a negative outlook, citing deterioration in our performance coupled with a significant increase in debt that resulted in a significant increase in leverage. Additionally, Moody’s downgraded the rated notes of Arauco Argentina to “Baa3” from “Baa2”. On March 27, 2013, S&P lowered its rating on us from “BBB” to “BBB-”, citing high debt, our recent acquisitions, and soft pulp prices and rising operating costs. It considered our financial risk profile to be “intermediate” due to expectations of improved leverage.

On April 5, 2013, S&P lowered its corporate credit rating foreign currency on Arauco Argentina from “B+” to “B,” due to worsening business conditions in Argentina and our recent downgrade, as Arauco Argentina’s parent company, from “BBB” to “BBB-” on March 27, 2013. Then on September 13, 2013, the rating was downgraded again from “B” to “B-” following similar action on the Republic of Argentina which was lowered from “B-” to “CCC+.” On December 20, 2013, the foreign currency global scale rating on Arauco Argentina suffered its third downgrade from “B-” to “CCC+” to reflect the same transfer and convertibility risk assessment for Argentina, due to restrictions on access to foreign currency and/or restrictions on transferring money abroad.

On June 19, 2014, Moody’s changed our ratings outlook to stable from negative. Also, the Baa3 note rating of our Argentinean subsidiary Arauco Argentina, was affirmed, and its outlook changed to stable.

During 2015, our ratings and outlook at the national and international scale remained unchanged.

We cannot assure you that we will not be subject to further credit rating downgrades. Credit rating downgrades below investment grade could have a material and adverse effect on our ability to service our debt, including our securities, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.

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Item 4. Information on our Company

DESCRIPTION OF BUSINESS

We believe that, as of December 31, 2015, we were one of Latin America’s largest forest plantation owners, and that we are Chile’s largest exporter of forestry and wood products in terms of revenue. We have industrial operations in Chile, Argentina, Brazil, the United States, Canada and Uruguay (via our 50% share in Montes del Plata). As of December 31, 2015, we had more than 1.0 million hectares of plantations in Chile, Argentina, Brazil and Uruguay combined. During 2015, we harvested approximately 22.5 million cubic meters of sawlogs and pulplogs and sold approximately 8.0 million cubic meters of wood products, including sawn timber (green and kiln-dried lumber), remanufactured wood products and panels (plywood, medium density fiber board, or MDF, particleboard, or PBO, and high density fiber board, or HB). During 2015, we sold approximately 3.5 million tonnes of pulp in the form of hardwood bleached pulp, softwood bleached pulp, softwood unbleached pulp and fluff pulp.

Based on information published by Hawkins Wright Ltd., an independent research company for the pulp and paper industry, as of December 31, 2015, we were one of the world’s largest producers of bleached and unbleached softwood kraft market pulp in terms of production capacity, with an estimated 7.2% share of the total world production capacity of bleached softwood kraft market pulp and a 24.2% share of the total world production capacity of unbleached softwood kraft market pulp. “Market pulp” is pulp sold to manufacturers of paper products, as opposed to pulp produced by an integrated paper producer for use in its paper production facilities. “Kraft pulp” is pulp produced using a chemical process.

Based on information published by Hawkins Wright Ltd., we were also one of the world’s lowest-cost producers of softwood kraft market pulp. We believe that we are able to produce our products at a lower cost than our competitors because of the high growth rate and short harvest cycle of radiata and taeda pine compared to other commercial softwoods, the advanced genetic and silviculture techniques we apply in our forest management, our modern mill facilities and, in the case of Chile, the proximity of our operations to Pacific coast ports.

History

Celulosa Arauco y Constitución S.A. is a sociedad anónima (corporation) organized under the laws of Chile and subject to certain rules applicable to sociedades anónimas abiertas (Chilean public corporations). Our principal executive offices are located at Avenida El Golf 150, 14^th Floor, Las Condes, Santiago, Chile, and our telephone number is +56-2-2461-7200.

We were formed on September 14, 1979 in a merger between Industrias de Celulosa Arauco S.A., or Industrias Arauco, and Celulosa Constitución S.A., or Celulosa Constitución. Our two predecessor companies were created in the late 1960s and early 1970s by Corporación de Fomento de la Producción, or Corfo, a Chilean government development corporation, to develop forest resources, improve soil quality in former farming areas and promote employment. As part of the Chilean government’s privatization program, Corfo sold Industrias Arauco to Compañía de Petróleos de Chile S.A., or Copec, in 1977 and Celulosa Constitución to Copec in 1979. In October 2003, Copec transferred all of its gasoline- and fuel-related business assets to a new subsidiary, and changed its legal name to Empresas Copec S.A., or Empresas Copec. See “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders.”

In 1996, we acquired Alto Paraná S.A., an Argentine company (that effective January 1, 2015, changed its name to Arauco Argentina S.A.), which, at the time of the acquisition, owned plantations and other land in Argentina and manufactured and sold bleached softwood kraft pulp. With this acquisition, we expanded our market opportunities outside of Chile.

In 2005, 2006 and 2007, we expanded our presence in Chile, Argentina and Brazil through a series of acquisitions that increased our land holdings and the production capacity of various sectors of our business.

On May 17, 2009, our subsidiary Inversiones Arauco Internacional Limitada (previously known as Arauco Internacional S.A.), or Arauco Internacional, and a subsidiary of Stora Enso agreed through a joint operation partnership to acquire the Uruguayan subsidiaries of ENCE, which acquisition was completed on October 16, 2009. The companies acquired by the joint operation partnership were Eufores S.A., Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A. The main assets of these subsidiaries included 130,000 hectares of land, of which 73,000 had forestry plantations, 6,000 hectares under agreements with third parties, an industrial site, the necessary environmental permits for the construction of a pulp mill, a river terminal, a chip producing mill and a nursery. The agreed value of these assets, pursuant to the aforementioned transaction, was U.S.$335 million, of which we paid 50% (or U.S.$167.5 million). See “Item 5. Operating and Financial Review and Prospects—Results of Operations.”

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On August 26, 2009, our subsidiary Placas do Paraná S.A. (now, Arauco do Brasil S.A.) acquired 100% of the shares of Tafisa Brasil, by means of a share purchase agreement executed among SCS Beheer, B.V., Tafiber—Tableros de Fibras Ibéricos, S.L. (each of which is a subsidiary of Sonae Indústria, SGPS, S.A.) and Placas do Paraná S.A. Pursuant to the transaction, we paid a purchase price of U.S.$227 million, of which U.S.$165.2 million was allocated to pay the value of the shares of Tafisa Brasil, with the balance corresponding to liabilities that the acquired company maintained. The primary asset of Tafisa Brasil (which has been renamed Arauco do Brasil S.A.) is a panel production facility located in the city of Pien, Brazil, which is in the state of Paraná. The facility has an annual total installed capacity of 750,000 cubic meters, which includes three production lines: two lines producing MDF and one line producing PBO. The facility also has added-value lines to produce products for the construction and furniture industries.

On September 27, 2009, Arauco and its subsidiary Inversiones Arauco Internacional, executed a series of joint operation agreements with Stora Enso, pursuant to which Stora Enso Amsterdam B.V. agreed to transfer the ownership of 100% of the shares of Stora Enso Uruguay S.A. to Forestal Cono Sur. As a consequence of this transaction, Arauco and Stora Enso equally control all assets that both companies own in Uruguay.

In April 2010, our subsidiary Arauco do Brasil S.A. acquired 50% of the shares of Dynea Brasil S.A. from Dynea AS for U.S.$15 million. As a result of this acquisition, we became the owner of 100% of the shares of Dynea Brasil S.A., which was absorbed by Arauco do Brasil S.A. in May 2010.

On January 18, 2011, Arauco and Stora Enso agreed to carry out the construction of a state of the art pulp mill with an annual capacity of 1.3 million tonnes, a port and a power producing unit based on renewable sources, all located in Punta Pereira, department of Colonia, Uruguay. The total investment was approximately U.S.$2.5 billion. The pulp mill entered the production phase in June 2014, and reached full production capacity in October 2015.

On November 17, 2011, Centaurus Holdings S.A., a Brazilian company that is 51% owned by Klabin S.A. and 49% by our subsidiary Arauco Forest Brasil S.A., acquired the shares of Florestal Vale do Corisco Ltda., which has 107,000 hectares of land in the Brazilian state of Paraná. The total purchase price for the transaction was U.S.$473.5 million, of which we paid 49%. On May 31, 2012, Centaurus Holdings S.A. was absorbed by Florestal Vale do Corisco Ltda.

On December 20, 2011, Arauco Argentina acquired 100% of the shares of Greenagro S.A. or Greenagro, a company duly incorporated under the laws of Argentina, for a total purchase price of U.S.$10.7 million. Greenagro is engaged in forestry activities in the area of Isla Victoria, province of Entre Ríos, Argentina. As stipulated by Argentine competition rules, the acquisition was subject to approval by the National Commission for the Defense of Competition (CNDC). On October 29, 2013, the Secretary of Commerce authorized the acquisition.

On December 29, 2011, Arauco Panels USA, one of our U.S. subsidiaries, entered into an asset purchase agreement to acquire an industrial facility in Moncure, North Carolina for U.S.$56 million plus approximately U.S.$6 million in respect of working capital, subject to adjustment based on actual working capital at closing. The facility includes MDF and high-density fiberboard, or HDF, production lines with annual production capacity of up to 330,000 cubic meters, a PBO production line with annual production capacity of up to 270,000 cubic meters and two melamine product production lines. This transaction closed in January 2012.

On June 7, 2012, we signed a share purchase agreement to acquire 100% of the shares of Flakeboard Company Limited or Flakeboard, a Canadian company, for a total purchase price of U.S.$242.5 million. Flakeboard is a key North American producer of wood paneling for furniture. It owns and operates seven panel mills in Canada and the U.S. with an aggregate annual production capacity of 1.2 million cubic meters of MDF panels, an annual production capacity of 1.2 million cubic meters of PB, and an annual production capacity of 634,000 cubic meters of melamine. This transaction closed in September 2012.

During the second quarter of 2013, the Arauco wholly-owned forestry subsidiaries—Bosques Arauco S.A., Forestal Valdivia S.A., Forestal Arauco S.A., and Forestal Celco S.A.—were merged into Forestal Celco S.A. This process started on July 1, 2013, when Bosques Arauco was merged into Forestal Valdivia. Later, on September 1, 2013, Forestal Valdivia was merged into Forestal Arauco. On December 1, 2013, Forestal Arauco was merged into Forestal Celco. Finally, in May 2014, Forestal Celco changed its name to Forestal Arauco S.A.

On July 28, 2015, Mahal Empreendimentos e Participações S.A., a Brazilian company, of which our subsidiary Arauco Forest Brasil S.A. owns 84.53% and Empreendimentos Florestais Santa Cruz Ltda. owns 15.47%, acquired 37,625 hectares of land in the Brazilian state of Mato Grosso do Sul. The total purchase price for the transaction was U.S.$ 53 million.

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On October 27, 2015, our subsidiary Arauco Forest Brasil S.A acquired 51% of the shares of Novo Oeste Gestão de Ativos Florestais S.A. As a result of this acquisition, we became the owner of 100% of the shares of Novo Oeste Gestão de Ativos Florestais S.A., which has 26,229 hectares of forestry plantations in the Brazilian state of Mato Grosso do Sul.

On December 1, 2015, Arauco’s wholly-owned subsidiaries Paneles Arauco S.A., Aserraderos Arauco S.A. and Arauco Distribución S.A. were merged into Paneles Arauco S.A., company which will operate the panel and sawmill business.

On November 30, 2015, our subsidiary Inversiones Arauco Internacional Limitada, entered into a share purchase agreement with Sonae Industria (“Sonae”) under which the purchase of 50% of the shares of a Spanish subsidiary of Sonae, currently named Tableros de Fibras S.A., was agreed, along with the name change to “Sonae Arauco”. According with the executed agreements, both Sonae and Arauco will jointly control Sonae Arauco. The share purchase agreement is subject to the satisfaction of certain conditions precedent including: (i) the approval of the purchase by the relevant antitrust authorities; (ii) the restructuring of the total debt of the companies that will remain under the control of the future Sonae Arauco (which would leave Sonae Arauco with a total debt ranging between €220 to €230 million); (iii) the corporate restructuring of certain of the future Sonae Arauco’s subsidiaries; and (iv) the transfer to Sonae of certain subsidiaries that are currently under the control of Tafisa, and that are not in the joint venture’s interest. It is expected that the transaction will close during the first half of 2017, if the conditions precedent are satisfied.

The price agreed for the Sonae Arauco transaction is €137,500,000, payable at closing. Sonae Arauco and its subsidiaries are expected to produce and market wood panels, of the OSB, MDF and PB type, and sawn timber through the operation of: (i) two panel plants and one sawmill in Spain; (ii) two panel plants and one resin plant in Portugal; (iii) four panel plants in Germany, (iv) and two panel mills in South Africa. In aggregate, the production capacity of Sonae Arauco, after the required restructurings are concluded, is expected to be of approximately 460,000 cubic meters of OSB, 1,450,000 cubic meters of MDF, 2,270,000 cubic meters of particleboards and 100,000 cubic meters of sawn timber.

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Corporate Structure

We are substantially wholly owned by Empresas Copec S.A., a public company listed on the Santiago Stock Exchange, the Valparaíso Stock Exchange and the Chilean Electronic Stock Exchange. Empresas Copec is a holding company, the principal interests of which are in Arauco, gasoline and gas distribution, electricity, fishing and mining. See “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders.”

The following table sets forth our ownership interests in our subsidiaries as of December 31, 2015.

	Country of incorporation	Total stock held
Agenciamiento y Servicios Profesionales S.A. de C.V.	Mexico		99.9990	%
Arauco Argentina S.A. (Ex-Alto Paraná S.A.)	Argentina		99.9801
Arauco Australia Pty Ltd.	Australia		99.9990
Arauco Bioenergía S.A.	Chile		99.9999
Arauco Colombia S.A.	Colombia		99.9982
Arauco do Brasil S.A	Brazil		99.9990
Arauco Florestal Arapoti S.A.	Brazil		79.9992
Arauco Forest Brasil S.A.	Brazil		99.9991
Arauco Europe Cooperatief U.A. (Ex-Holanda Cooperatief U.A.)	The Netherlands		99.9990
Arauco Panels USA LLC	U.S.A.		99.9990
Arauco Perú S.A.	Peru		99.9990
Arauco Wood Products, Inc.	U.S.A.		99.9990
Araucomex S.A. de C.V.	Mexico		99.9990
Consorcio Protección Fitosanitaria Forestal S.A.	Chile		57.7404
Empreendimentos Florestais Santa Cruz Ltda.	Brazil		99.9789
Flakeboard America Limited	U.S.A.		99.9990
Flakeboard Company Limited	Canada		99.9990
Forestal Arauco S.A.	Chile		99.9484
Forestal Cholguán S.A.	Panama		98.4478
Forestal Concepción S.A.	Chile		99.9990
Forestal Los Lagos S.A.	Chile		79.9587
Forestal Nuestra Señora del Carmen S.A.	Argentina		99.9805
Forestal Talavera S.A.	Argentina		99.9942
Greenagro S.A.	Argentina		97.9805
Inversiones Arauco Internacional Ltda.	Chile		99.9990
Investigaciones Forestales Bioforest S.A.	Chile		99.9489
Leasing Forestal S.A.	Argentina		99.9801
Mahal Empreendimentos e Participacoes S.A.	Brazil		99.9934
Novo Oeste Gestao de Ativos Florestais S.A.	Brazil		99.9990
Paneles Arauco S.A.	Chile		99.9995
Savitar S.A.	Argentina		99.9841
Servicios Aéreos Forestales Ltda.	Chile		99.9990
Servicios Logísticos Arauco S.A.	Chile		99.9997

Business Strategy

Our business strategy is to maximize the value of our forest plantations by pursuing sustainable growth opportunities in our core businesses and expanding into new markets and products. We are implementing our business strategy through the following initiatives:

• we are improving the growth rate and quality of our plantations through advanced forest management techniques;

• we are executing a capital expenditure plan designed to reinforce our competitive advantages through economies of scale and scope, improving the efficiency and productivity of our industrial activities and optimizing the use of our forests through biomass energy generation;

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• we continue to develop our facilities, transportation, shipping, storage and product distribution network that allow us to reach over 80 countries worldwide; and

• we are expanding internationally into new regions that we believe have comparative advantages in the forestry and wood products sector.

Domestic and Export Sales

The following table sets forth our revenue derived from exports and domestic sales for the years indicated.

	Year ended December 31,
	2013		2014		2015
	(in millions of U.S. dollars)
Export Sales
Bleached pulp	$	1,591	$	1,714	$	1,762
Unbleached pulp		293		302		275
Sawn timber		479		538		419
Remanufactured wood products		207		204		231
Panels		507		547		504
Other		5		2		4
Total export revenue	$	3,082	$	3,306	$	3,195
Domestic Sales
Bleached pulp	$	139	$	171	$	197
Unbleached pulp		7		9		8
Logs		118		121		88
Sawn timber		105		100		79
Remanufactured wood products		38		32		57
Chips		21		20		18
Electric power		146		160		121
Panels		1,420		1,374		1,333
Other		70		50		50
Total domestic revenue	$	2,064	$	2,037		1,952
Revenue	$	5,146	$	5,343		5,147

The following table sets forth a geographic market breakdown of our export revenue for the years indicated.

	Year ended December 31
	2013		2014		2015
	(in millions of U.S. dollars)
Asia and Oceania	$	1,564	$	1,720	$	1,673
North America		618		661		656
Europe		417		354		236
Central and South America		330		353		482
Other		154		218		148
Total	$	3,082	$	3,306	$	3,195

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Forestry Activity

Radiata pine grows at the fastest rates within a narrow band of latitude and under certain climatic conditions. One of Chile’s main advantages in the forestry products industry lies in the short growing cycle of its radiata pine plantations. The faster growth rate of radiata pine trees in Chile allows harvesting of pulplogs and sawlogs 16 to 18 years after planting and of high quality sawlogs 25 years after planting. For most temperate softwood forests in the Northern Hemisphere this range is 18 to 45 years for pulplogs and 50 to 150 years for high quality sawn timber. Consequently, the Chilean forestry industry is a relatively low-cost producer, since a Chilean producer generally requires less time and a smaller area to produce the same volume of pine as its North American or European competitors, who face lower forest growth rates and higher transportation and investment costs as a result of the larger tracts of forests necessary to produce equivalent yields of softwood. Accordingly, since the mid-1970s, we have focused our forest management toward the application of advanced genetic and silviculture techniques to increase productivity and the quality of our plantations.

Eucalyptus, which we began planting in 1989, grows well in the forest regions of Chile. Once planted, eucalyptus trees require no further forest management (other than fire control and reduction of weeds) until harvest. The average harvest cycle of eucalyptus plantations is approximately 12 years. Once harvested, eucalyptus can be replanted or regrown.

Throughout our history, we have demonstrated a continued commitment to the improvement of our forest management policies. In particular, we have adopted environmentally sensitive policies towards our holdings of native forests, which are protected and preserved in their entirety. Our products come from our established plantations only; we do not sell any products derived from our native forests. We conduct our forestry operations in accordance with current legislative and environmental sustainability standards. Certain of our subsidiaries have received various environmental certifications as of the date of this annual report, which include, but are not limited to the following:

• Forest Stewardship Council^® Forest Management Certification: a forest management certification aimed at promoting forest management that is environmentally responsible, socially beneficial and economically viable for the world’s forests. FSC^® is a non-profit organization devoted to encouraging the responsible management of the world’s forests (Forestal Arauco license code: FSC-C108276);

• Sustainable Forest Management Certification (CERTFOR): the Chilean certification of sustainable forest management, as determined since 2004 by the PEFC (Program for the Endorsement of Forest Certifications Schemes). PEFC is an international non-profit, non-governmental organization dedicated to promoting sustainable forest management;

• CERTFOR Chain of Custody Certification: a certification granted by the PEFC and designed to ensure that certified raw materials are used in finished products;

• FSC^® Chain of Custody Certification: a certification from the FSC^® that is designed to ensure traceability from certified forest and other controlled sources to the finished product (Forestal Arauco Zona Norte license code: FSC – C013026);

• Environmental Management System ISO 14001: a certification issued by the International Standards Organization (ISO), awarded to organizations that comply with environmental legislation, monitor significant environmental impacts, prevent pollution and maintain a continuing program of environmental improvement. ISO is an international non-profit, non-governmental organization dedicated to developing international business standards; and

• Occupational Health and Safety Assessment Series (OHSAS) 18001: a certification awarded for the effective management of conditions and factors that may adversely affect the work environment of employees, temporary workers, contractors and other persons who are in the workplace.

Forest Plantations

The information in this section includes 100% of the plantations owned by Forestal Arauco S.A. (Chile), 80% of the plantations owned by Forestal Los Lagos S.A., 100% of the plantations owned by Arauco Argentina, 50% of the plantations we own in Uruguay through the Montes del Plata joint operation, 100% of the plantations owned by Arauco Forest Brasil, 80% of the plantations owned by Arauco Florestal Arapoti and 100% of the plantations owned by Mahal Empreendimentos e Participacoes S.A, unless otherwise mentioned.

As of December 31, 2015, our planted forests consisted of 69.0% radiata, taeda and elliottii pine and 28.9% eucalyptus. Radiata, taeda and elliottii pine have a rapid growth rate and a short harvest cycle compared to other commercial softwoods. These pine species are sufficiently versatile for both the production of forestry and wood products and the production of long-fiber pulp for sale to manufacturers of paper and packaging.

We seek to manage our forestry resources seeking to ensure that the annual growth of our forest is equal to or greater than the volume of resources harvested each year. In 2015, Arauco planted a total of 58,863 hectares and harvested a total of 60,700 hectares in Chile, Argentina, Brazil and Uruguay. We believe that our annual harvests and plantations, long-term sustainable equilibrium is approximately 64.8 thousand hectares.

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Our planted radiata pine forests are located in central and southern Chile, and most are located in close proximity to our major production facilities and to port facilities. As of December 31, 2015, our aggregate radiata pine holdings comprised 38% of all Chilean radiata pine plantations, making us the country’s largest radiata pine plantation owner according to the Chilean Forestry Institute. As of December 31, 2015, we owned approximately 1.1 million hectares of land in Chile, of which 719 thousand hectares are forest plantations.

As of December 31, 2015, we owned approximately 263,384 hectares of forest and other land in Argentina, approximately 181,908 hectares of forest and other land in Brazil and approximately 118,016 hectares of forest and other land that Montes del Plata owns in Uruguay. Of the total land we own in Uruguay through Montes del Plata, 100% is planted with eucalyptus: dunnii (74%), globulus (11%), grandis (7%) and other species (8%).

Of the total land we own in these four countries, approximately 146,774 hectares of land is planted with taeda pine and elliottii pine, both species of softwood that has a growth rate similar to that of radiata pine. The balance includes plantations of other species of trees, land to be planted, protected areas and native forests.

The following table sets forth the number of hectares and types of uses of our land holdings and rights, as of December 31, 2015.

	As of December 31, 2015
	Total		Distribution
	(in hectares)		(percentage)
Pine plantations(1)
0-5 years		171,654		10.3	%
6-10 years		164,457		9.8	%
11-15 years		141,751		8.5	%
16-20 years		138,635		8.3	%
21+ years		89,679		5.4	%
Subtotal		706,176		42.2	%
Eucalyptus plantations(2)		296,239		17.7	%
Plantations of other species		21,689		1.3	%
Subtotal of Plantations		1,024,104		61.2	%
Land for plantations		55,055		3.3	%
Land for other uses(3)		592,833		35.5	%
Total(4)		1,671,990		100.0	%

(1) All years are calculated from the date of planting.

(2) Approximately 76.6% of our eucalyptus plantations are less than 10 years old.

(3) Includes roads, firebreaks, native forests and yards.

(4) Includes 100% of the plantations owned by Forestal Arauco S.A. (Chile), 80% of the plantations owned by Forestal Los Lagos S.A., 100% of the plantations owned by Arauco Argentina, 50% of the plantations we own in Uruguay through the Montes del Plata joint operation, 100% of the plantations owned by Arauco Forest Brasil, 80% of the plantations owned by Arauco Florestal Arapoti and 100% of the plantations owned by Mahal Empreendimentos e Participacoes S.A. Also includes 23,112 hectares for which we have the right to harvest but do not own the land, of which 16,208 hectares are in Chile, 6,599 hectares are in Uruguay and 305 hectares are in Argentina.

Land Acquisition and Afforestation

Our total land assets have increased from fewer than 170,000 hectares in 1980 to 1,671,990 hectares as of December 31, 2015. In the five years ending December 31, 2015, we purchased 110,422 hectares of land, of which 40,406 hectares were purchased in Chile, 5,506 in Argentina, 55,107 in Brazil and 9,403 in Uruguay. For more information regarding our material acquisitions, see “—History”.

We expect to acquire additional land if we are presented with the possibility to do so at a desired price or location. There can be no assurance that we would be able to acquire land at a desired price or in a desired location.

We plan to continue our policy of supplementing our pulplog production with purchases from domestic third parties. We believe that this policy is economically efficient, given the significant quantities of pulplog available from third parties and our increasing proportion of sawlogs yielded from our plantations. We believe that the aggregate of our existing plantations, land currently held by us that we intend to afforest and the third-party purchases we make in the ordinary course of our business will be sufficient to satisfy our anticipated future demand for sawlogs and pulplogs.

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Forest Management

For our pine plantations, our forestry management activities seek to increase sawlogs through advanced genetic techniques, planting and site preparation procedures, thinning and pruning. Managed forests can produce trees of larger diameter and, if pruned, a higher proportion of clear wood, which generally commands a higher price than knotted wood. Although some land is not suitable for the production of pruned logs, as of December 31, 2015, approximately 56% of our pine forests in Chile were conducive to clear wood production.

For our eucalyptus plantations, our forestry management activities seek to increase the amount of fiber production per hectare through advanced genetic techniques and planting and site preparation procedures. Eucalyptus is more expensive to plant than pine; however, after planting, eucalyptus requires minimal forest management, yields more fiber per hectare and has a shorter growth cycle and greater wood density than pine, resulting in a greater amount of pulp production per hectare.

As of December 31, 2015, we had 18 nurseries in Chile, Argentina, Brazil and Uruguay, in which we grow seedlings using seeds and cuttings from genetically selected trees. To achieve higher quality trees and an increased growth rate, we apply strict selection criteria to the trees from which seedlings are produced. We then plant the seedlings manually. Depending upon the species of tree to be planted and the nutrient and physical characteristics of the soil, we may also undertake a certain amount of ground preparation before planting. Our other principal forest activities are thinning, pruning and harvesting.

Thinning, or culling inferior trees from the plantation, occurs when commercially necessary. Thinned trees are used in pulp production or, depending on the quality of the particular land, as sawlogs. Commercial thinning occurs when trees are eight to 14 years old and results in an average reduction of the number of trees per hectare from the original stocking of 1,250 and 1,600, depending on the productivity of the land, to 700 in the first thinning (8-9 years) and to approximately 450 in the second thinning (12-14 years).

This high level of thinning benefits Arauco for the following reasons:

• the cost of planting is relatively low,

• the higher number of young trees provide each other with natural protection from the elements, and

• the high degree of selection that thinning makes possible leaves only the highest quality trees to be harvested.

Pruning involves removing branches, the source of knots, which are the main defect in sawn timber. Pruning results in a high-quality clear wood saw log of 5.3 meters from each tree, and is conducted three times:

• when trees are five to seven years old,

• one year later, when trees are six to eight years old, and

• one year later, when trees are seven to nine years old.

Our eucalyptus plantations are neither thinned nor pruned.

Harvesting timber involves felling trees, removing branches from the logs, cutting the logs into appropriate sections and loading the logs onto trucks for transport to sawmills, panel mills or pulp mills. We use the lower section of the radiata pine, comprising the first 7 to 12 meters, in sawmills and plywood mills. We use the mid-section of the radiata pine, comprising, on average, the next 8 to 13 meters, in either sawmills or pulp mills, depending on the diameter and quality of the pine. We use the top section of the tree for pulp, MDF and medium-density particleboard, or MDP, production.

We monitor product demand and our current inventory levels, and we match harvests from sections of our plantations that will provide the optimal yield given our product requirements. This process involves the use of sophisticated research models and close communication between our different operating areas to ensure that the correct amounts of timber of the required characteristics are supplied. We replant as soon as practicable after harvesting, with an average period between harvesting and replanting of one year.

The following table illustrates, on a hectare basis, the extent of our thinning, pruning and harvesting activities in Chile during the periods indicated.

	2013		2014		2015
	(in hectares)
Thinning		13,156		12,574		14,003
Pruning		26,086		28,195		31,292
Harvesting		35,852		35,653		33,266

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We manage our forest activities, but we hire independent contractors to perform the bulk of our operations, including planting, maintenance, thinning, pruning, harvesting, transportation and access road construction. As of December 31, 2015, we had arrangements with more than 273 independent contractors that employed over 12,307 workers in Chile. Many of these contractors have long-standing relationships with us, but we award the majority of contracts based on competitive bids. We believe that our arrangements with independent contractors provide greater flexibility and efficiency than performing these activities directly.

Our plantations are interspersed with native forest and farmland, and, as a result, they are naturally protected against the spread of certain diseases. In addition, our subsidiary Investigaciones Forestales Bioforest S.A., or Bioforest, has developed strategies to protect our forests from pests and diseases. During the last five years, radiata pine plantations in Chile have been affected by two health problems in particular: 1) the sirex noctilio, a wasp which attacks stressed trees, has caused a natural selection for thinning and 2) the disease produced by phytophthora pinifolia has reduced the growth rate of certain trees. To mitigate the effects of the sirex noctilio, Bioforest has implemented a biological control program under which it has released into the affected forests natural enemies of the sirex noctilio, including the nematode, the beddingia siricidicola and the parasitoid ibalia leucospoide. To control the spread of phytophthora pinifolia, Bioforest has begun a genetic program to make our trees more tolerant to this disease and has also begun dispersing in our forests a fertilizer that further promotes resistance. For more information regarding certain risks to our forests presented by disease, see “Item 3. Key Information—Risk Factors—Disease or fire could affect our forests and manufacturing processes and, in turn, adversely affect our business, financial condition, results of operation and cash flows.”

We operate an extensive fire control organization that interacts with the fire control organizations of other forestry companies to ensure that any fire damage to our forests is minimal. The operation consists primarily of a system of spotter towers, manned 24 hours a day during the summer months, from which spotters report the direction of any fire observed to a central command post, where the fire’s exact location is determined and an appropriate ground and/or aerial response is formulated. The focus of this operation is to detect and control fires in less than 10 minutes in order to prevent fires from spreading. Over the last five years, this system has limited fire damage to our forests to an average of 5,788 hectares of the plantations per year. Nevertheless, beginning on December 31, 2011, wildfires, exacerbated by high temperatures and strong winds, broke out in the Eighth Region of Chile. As a result, the fires destroyed our Nueva Aldea plywood mill and approximately 8,200 hectares of our forest plantations. The affected forest plantations represented approximately 0.8% of our total forest plantations.

During the end of 2015 and during the first quarter of 2016, fires that affected our forest plantations destroyed 618 hectares. See “Item 3. Key Information — Risk Factors — Risks Relating to US and the Forestry Industry — Disease or fire could affect our forests and manufacturing processes and, in turn, adversely affect our business financial conditions, results of operations and cash flows.”

Forest Production

We harvested 22.5 million cubic meters of logs during the year ended December 31, 2015, consisting of 10.1 million cubic meters of sawlogs, 6.7 million cubic meters of pine pulplogs and 5.7 million cubic meters of eucalyptus pulplogs and other logs. We did not export any pulplogs during 2015 because substantially all of the pulplogs from our forests were used in our pulp or panel mills. During 2015, our sawmills and panel mills used 7.4 million cubic meters of sawlogs. We also sold 1.8 million cubic meters of sawlogs to unaffiliated domestic sawmills during 2015.

A log merchandising facility located at the same site as our Horcones I and Horcones II sawmills optimizes, cuts and classifies wood destined for our plywood facility, sawmills or pulp mills with an annual processing capacity of 1.7 million cubic meters of logs per year. The Nueva Aldea complex also includes a log merchandising facility, with an annual processing capacity of 2.6 million cubic meters of logs per year.

Pulp

We believe that we were Chile’s largest producer of bleached and unbleached softwood market pulp in terms of production in 2015. For the year ended December 31, 2015, pulp sales were U.S.$2.2 billion, representing 43.6% of our total revenue for the period.

Pulp obtained from wood fibers is mainly used in the manufacture of printing and writing paper, hygienic and sanitary paper, board and packaging. Whether a specific kind of pulp is suitable for a particular end use depends not only on the type of wood but also on the process used to transform the wood into pulp. Pulp made from softwoods, such as radiata pine, has long fibers and is used to provide strength to paper products. Hardwood bleached pulp is used primarily for printing and writing papers and for tissue. Unbleached pulp is used primarily for linerboard (a packaging material). Pulp made from hardwoods, such as eucalyptus, has short fibers and is used in combination with long fiber in manufacturing paper products.

We use a chemical process, known as the kraft process, in our pulp mills in Chile, Argentina, and Uruguay. The raw wood is in the form of pulplogs and chips, which are used in the production process to produce pulp. The pulplogs are first debarked and chipped. The chips are then screened, mixed and cooked with chemicals to separate the bulk of the lignin from the wood fibers. After the material is screened and washed, it is then passed to high-density tanks. For bleached pulp, the next step is a five-stage bleaching process using chemicals, primarily chlorine dioxide. At all of our pulp mills, the bleaching process is preceded by an oxygen delignification stage. Then, the fibers are subject to a final stage where a sheet is formed and subsequently dried and baled for transport to customers. The lignin and bark produced during this process is used as fuel in the boilers to produce steam, providing heat and generating electricity for the mill. Our bleached pulp is bleached to a 90+ brightness level, as measured by the ISO test procedure, which is one of the industry’s measurement methods.

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Pulp Mills

As of December 31, 2015, we owned and operated five pulp mills in Chile, one in Argentina, and jointly owned and operated one in Uruguay with Stora Enso, with an aggregate installed annual production capacity of approximately 3.9 million tonnes. This figure includes 50% of our Montes del Plata joint operation. Our six pulp mills, together with the 50% volume we include from our interest in the Montes del Plata mill, produced 3.1 million tonnes of bleached pulp and 0.5 million tonnes of unbleached pulp in 2015.

All of our pulp mills in Chile are certified under ISO 9001, ISO 14001 and under standard Chain of Custody FSC^® and CERTFOR (PEFC Homolgated). The Puerto Esperanza Pulp Mill in Argentina is certified under ISO 9001, ISO 14001, OHSAS 18001 and Chain of Custody FSC^®. The following list sets forth the codes of license COC FSC^® for each pulp mill:

• Arauco Pulp Mill: FSC-C006552

• Licancel Pulp Mill: FSC-C109896

• Constitución Pulp Mill: FSC-C109895

• Nueva Aldea Pulp Mill: FSC-C011929

• Valdivia Pulp Mill: FSC-C005084

• Puerto Esperanza Pulp Mill: FSC-C121377

• Celulosa y Energía Punta Pereira (Montes del Plata) Pulp Mill: FSC-C116413

The following table sets out bleached and unbleached kraft pulp production by plant for each of the years indicated.

	Year ended December 31,
	2011		2012		2013		2014		2015
	(in thousands of tonnes)
Chile
Arauco Mill (bleached)
Arauco I		279		282		284		269		268
Arauco II		469		505		510		483		474
Valdivia Mill (bleached)		513		550		550		550		549
Constitución Mill (unbleached)		324		307		311		310		303
Nueva Aldea Mill (bleached)		793		882		944		985		934
Nueva Aldea Mill (unbleached)		—		—		3		—		—
Licancel Mill (bleached)		50		—		—		—		—
Licancel Mill (unbleached)(1)		83		137		147		150		152
Subtotal		2,511		2,663		2,749		2,747		2,681
Argentina
Alto Paraná Mill (bleached)		305		307		331		282		314
Uruguay
Montes del Plata (50%)								240		608
Total		2,816		2,970		3,080		3,269		3,603

(1) During 2011, the Licancel Mill produced unbleached pulp for a seven-month period. During 2012, 2013, 2014 and 2015, the Licancel Mill produced unbleached pulp for the entire period.

The following is a description of each of our pulp mills in Chile, Argentina and Uruguay.

Chile

Arauco I. Arauco I, which began operations in 1972, is located at the Arauco Mill in the heart of a group of our radiata pine plantations in the Eighth Region of Chile. Arauco I produces elementary chlorine-free pulp, which does not use chlorine gas. Elementary chlorine-free pulp is also produced by most of our competitors in each of the world’s major pulp producing regions. The installed annual production capacity of Arauco I is approximately 290,000 tonnes of eucalyptus and pine bleached kraft pulp.

Arauco II. Also located at the Arauco Mill, Arauco II was completed in 1991. Arauco II’s pulping process is generally the same as that of Arauco I, but it includes technological improvements in its production process and environmental design. Arauco II is also equipped to produce elementary chlorine-free pulp. The installed annual production capacity of Arauco II is approximately 510,000 tonnes of pine bleached kraft pulp.

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As a consequence of the earthquake that occurred in Chile on February 27, 2010, the operations of Arauco II were temporarily suspended until February 2, 2011, when it resumed its operations.

Constitución Mill. The Constitución Mill is located in the heart of a group of our radiata pine forests in the Seventh Region of Chile. As of December 31, 2015, the Constitución Mill was the largest unbleached softwood market pulp mill in the world, with an installed annual production capacity of approximately 355,000 tonnes. The unbleached pulp produced in this mill does not use any chlorine in its production process.

Licancel Mill. We acquired the Licancel Mill in September 1999. It is located in Licantén, which is 250 kilometers south of Santiago. The mill has an installed annual production capacity of approximately 155,000 tonnes of eucalyptus kraft pulp and pine bleached and unbleached kraft pulp. The Licancel Mill is equipped to produce elementary chlorine-free pulp.

Valdivia Mill. The Valdivia Mill commenced operations in February 2004. The Valdivia Mill is located in the Fourteenth Region of Chile (which was previously part of the Tenth Region of Chile), an area with significant radiata pine and eucalyptus plantations. The Valdivia Mill has an installed potential annual production capacity of approximately 550,000 tonnes of bleached pulp, consisting of softwood pulp and eucalyptus pulp. The Valdivia Mill is equipped to produce elementary chlorine-free pulp.

In February 2015, the Environmental Assessment Service (SEA) unanimously approved the Environmental Impact Statement submitted by Arauco in order to move forward with the dissolving pulp project being developed at Valdivia Pulp Mill. This initiative, which requires a U.S.$185 million investment, will allow Arauco to be the first company in Chile to produce this type of pulp, in addition to creating a value added product and diversifying its supply to the market. Dissolving pulp is mainly used in the manufacture of viscose, which is known for its softness, shine, purity and high water absorption, making it suitable for use in the production of fabric medical items and personal care items, specifically clothing. Unlike synthetic fibers that are mostly produced from oil based sources, dissolving pulp is natural and renewable. In addition, this project will increase the facility’s power generation by 15 MW in comparison with the power generation during bleached hardwood kraft pulp campaign. The construction and operation of this project is subject to many environmental, regulatory, engineering and political uncertainties. As a result, we cannot provide any assurances that the project will be completed.

Nueva Aldea Mill. Located in the Eighth Region of Chile, this mill was completed in 2006 and currently has a production capacity of 1,027,000 tonnes per year, half of which is for the production of pine bleached kraft pulp and the other half of which is for the production of eucalyptus bleached kraft pulp. The Nueva Aldea Mill is equipped to produce elementary chlorine-free pulp.

Argentina

Arauco Argentina’s softwood pulp mill is located in the Province of Misiones, a region whose soil and climate are favorable for the rapid growth of pine trees. The Alto Paraná Mill is the only bleached softwood kraft market pulp facility in Argentina. The mill has an installed annual production capacity of 350,000 tonnes of pulp, consisting of fluff pulp and bleached softwood pulp for paper use, currently representing almost all of the total bleached softwood pulp production capacity in Argentina.

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Uruguay

Montes del Plata. In January 2011, we and Stora Enso agreed to commence construction of a new pulp mill with an annual capacity of approximately 1.3 million air-dry tonnes, or Adt, a port and a power generation facility based on renewable resources, all located in Punta Pereira, department of Colonia, Uruguay. The total investment was approximately U.S.$2.5 billion. After securing the necessary permits, we began construction in May 2011. In September 2011, two of our Uruguayan joint operation companies entered into two credit facilities, respectively, to finance the construction of the project. For more information regarding these credit facilities, see “Item 3. Key Information—Risk Factors—Risks Relating to Uruguay—Economic conditions in Uruguay may have a direct impact on our financial condition and results of operations.”

The Montes del Plata mill began operations on June 6, 2014 and the mill produced 1.2 million tonnes of bleached pulp in 2015.

On June 4, 2014, the environmental authorities of Uruguay (MVOTMA) approved an annual production capacity of the Montes del Plata mill of 1.5 million Adt per year.

Production Costs

Based on information published by Hawkins Wright, our cash costs for softwood pulp production are lower than the average costs of market pulp producers in Canada, the United States and Scandinavia, particularly with respect to transportation, which enables our costs to be lower than the average costs of our Northern Hemisphere competitors, on a total delivered cost basis. The following table compares our costs for the production of bleached softwood kraft market pulp to the average cost of market pulp producers in selected regions in the Northern Hemisphere.

	Bleached Softwood Kraft Pulp Producers’ Cost
	Arauco(1)(4)		British Columbia Coast		West Canada Interior		United States(4)		Sweden(4)		Finland(4)
	(in U.S.$ per tonne)
Wood		199		204		187		189		255		278
Chemicals		58		53		54		68		49		44
Labor and Others(2)		108		181		174		188		99		87
Total cash cost		365		438		415		445		403		409
Transportation(3)		36		67		101		69		64		71
Marketing and Sales		4		7		11		11		6		8
Total delivered cost		405		512		528		525		473		488

Source: Hawkins Wright. The Outlook for Paper Grade Pulp Demand, Supply, Costs and Prices, December 2015.

(1) For comparative purposes, includes only Arauco’s operations in Chile.

(2) Includes labor, energy, maintenance costs, and other mill costs.

(3) Delivered in China.

(4) Hawkins Wright and Arauco take into account a byproduct credit, which is not included in the total delivered cost shown in the table above.

Sales

Total shipments of bleached kraft market pulp in the global market during the year ended December 31, 2015 equaled 3.1 million tonnes. Based on information published by Pulp and Paper Production Council, we believe that our production represented 5.6% of this market in 2015. During the year ended December 31, 2015, we exported 89.9% of our bleached pulp, principally to customers in Asia and Western Europe.

Integrated manufacturers dominate the world production of unbleached softwood pulp, as opposed to non-integrated companies that sell market pulp, like us. “Market pulp” is pulp sold to manufacturers of paper products, as opposed to pulp produced by an integrated paper producer for use in its paper production facilities. With a total world production of unbleached softwood kraft pulp of 1.85 million tonnes for 2015, according to Pulp and Paper Production Council, we are the world’s largest single producer of unbleached softwood market pulp, based on sales, with 24.2% of the total market in 2015. During the year ended December 31, 2015, 97.1% of our total unbleached market pulp sales consisted of export sales. While for the last five years Asia has been our principal export market for unbleached market pulp, we continually seek niche markets for our products in Western Europe and the United States.

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The following table sets forth, by region, the sales volumes of bleached and unbleached pulp for the years indicated.

	For the Year Ended December 31,
	2013		2014		2015
	(in tonnes)
Bleached Pulp
Asia and Oceania		1,623,377		1,874,346		2,003,058
Europe		609,825		527,839		603,593
North and South America		356,538		416,539		435,287
Other		8,379		9,077		35,999
Total		2,598,119		2,827,801		3,077,937
Unbleached Pulp
Asia and Oceania		382,390		332,964		325,394
North and South America		80,518		100,352		116,613
Europe		12,149		11,270		6,795
Other		6,799		6,920		10,756
Total		481,856		451,505		459,558

While there are many grades and varieties, pulp is a commodity that is marketed primarily based on price and service. In marketing our pulp, we seek to establish long-term relationships with non-integrated end users of pulp by providing a competitively priced, high-quality, consistent product and excellent service. The quality of our pulp derives from the high standards of production that we maintain at our mills and our use of a single species of tree, in contrast to pulp producers in some of the world’s major softwood pulp producing regions that mix different species, depending on availability and seasonality. Our bleached pulp is marketed under the brand names “Arauco” and “Arauco Argentina” and our unbleached pulp is marketed under the brand name “Celco.” The 50% share of the pulp produced from Montes del Plata is marketed under the brand name “Arauco.”

Prices for bleached kraft market pulp produced from radiata pine and eucalyptus normally fluctuate depending on prevailing world prices, which historically have been cyclical. The fluctuations generally depend on worldwide demand, world production capacity, business strategies adopted by major forestry, pulp and paper producers, the availability of substitutes and the relative strength of the U.S. dollar. See “Item 5. Operating and Financial Review and Prospects—Management’s Discussion and Analysis of Financial Conditions, Results of Operations and Cash Flows—Overview” and “—Pulp Prices” and “Item 3. Risk Factors-Risks Relating to Us and the Forestry Industry-Fluctuations in market price for our products could adversely affect our financial condition, results of operations and cash flows.”

The following table sets forth our average bleached and unbleached pine pulp prices per tonne at the indicated dates, for the years referenced.

	2013		2014		2015
	(U.S.$ per tonne)
Bleached Pulp
March 31		656		690		644
June 30		663		670		643
September 30		648		668		652
December 31		698		644		610
Unbleached Pulp
March 31		617		704		619
June 30		628		705		600
September 30		659		678		628
December 31		733		664		621

In accordance with customary pulp market practice, we do not have long-term sales contracts with our customers (except for in a few limited cases); rather, we maintain long-standing relationships with our customers with whom we periodically reach agreements on specific volumes and prices. We have a diversified customer base located throughout the world and totaling, as of December 31, 2015, more than 270 customers. As of December 31, 2015, we employed 15 sales agents to represent us in more than 45 countries. We manage this worldwide sales network from our headquarters in Chile.

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Panels

Our panel products consist of plywood and fiberboard panels. For the year ended December 31, 2015, sales of panels were equal to U.S.$1.8 billion, representing 35.7% of our total revenues.

Exports, which include sales to countries other than the countries in which the goods are produced, accounted for 27.4% of our total revenues of panels for the year ended December 31, 2015. We sell panels primarily to customers in North America, Brazil, Chile, Argentina and other countries in Latin America.

The following table sets forth, by category, our panel sales to unaffiliated third parties for each of the years indicated.

	Year ended December 31,
	2011		2012		2013		2014		2015
	(in thousands of cubic meters)
Total Panels		3,222		3,555		5,163		5,284		5,509

As of December 31, 2015, we owned and operated four panel mills in Chile, two in Argentina, two in Brazil, six in the United States and two in Canada, with an aggregate installed annual production capacity of approximately 6.6 million cubic meters. Two acquisitions, in particular, expanded our North American manufacturing presence. In December 2011, Arauco Panels USA, one of our U.S. subsidiaries, entered into an asset purchase agreement to acquire an industrial facility in Moncure, North Carolina for U.S.$56 million plus approximately U.S.$6 million in working capital. In June 2012, we entered into a share purchase agreement to acquire five panel mills in the United States, one of which was located in Albany, Oregon; two in Bennettsville, South Carolina; one in Eugene, Oregon; and one in Malvern, Arkansas and two panel mills in Canada, located in St. Stephen, New Brunswick and Sault Ste. Marie, Ontario for a total purchase price of U.S.$242.5 million.

Our panel mills in Chile are certified under standard Chain of Custody FSC^® (License Code FSC-C119538), which includes two panel mills and two plywood mills. Additionally, all of our panel mills in Chile, with the exception of our Teno Mill, are certified under CERTFOR (PEFC homologated).

In North America, all of our panel mills are certified under the Chain of Custody FSC^® standard (License Code FSC-C019364) and our composite panel mills are also certified under the ISO 14001/ OHSAS 18001 standard.

Our Zárate Mill in Argentina is certified under the Chain of Custody FSC^® standard (License Code FSC-C119529). All of our mills in Argentina are certified under the Environmental Management System ISO 14001 standard, as well as under the Occupational Health and Safety Assessment Series (OHSAS) 18001 standard.

Our panel mills in Brazil are certified under the Chain of Custody FSC^® standard (License Code FSC-C010928 and FSC-C118530), the Environmental Management System ISO 14011 standard and the Occupational Health and Safety Assessment Series (OHSAS) 18001 standard.

The following is a description of each of our panel mills:

Chile

Arauco Mill. This mill has an installed annual production capacity of approximately 350,000 cubic meters of plywood panels. It has two production lines with respective production capacities of 140,000 and 210,000 cubic meters.

Nueva Aldea Mill. This mill was constructed on the same site as the original mill, which was destroyed as a result of the wildfires that commenced on December 31, 2011 in the Bio-Bio Region of Chile. The production of the first plywood panel marked the start-up of the new Nueva Aldea plywood mill on December 18, 2013. It has an annual production capacity of 360,000 cubic meters of plywood panels.

Teno Mill. This mill, which began production on July 4, 2012, has an installed annual production capacity of 300,000 cubic meters of PBO and 240,000 cubic meters of melamine laminate panels. The complex has a continuous PBO panel production line, two laminated panel production lines and one impregnation line.

Trupán-Cholguán Mill. This mill has an installed annual production capacity of approximately 575,000 cubic meters of panels and 35,000 cubic meters of melamine panels. It has three production lines, one of which produces HB with an annual capacity of 60,000 cubic meters and the other two of which produce MDF with an annual production capacity of 165,000 and 350,000 cubic meters, respectively.

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Argentina

Piray Mill. This mill has an installed annual production capacity of approximately 300,000 cubic meters of MDF panels and 120,000 cubic meters of melamine lamination.

Zárate Mill. This mill has an installed annual production capacity of approximately 260,000 cubic meters of PBO panels and 220,000 cubic meters of melamine lamination, in addition to producing PBO.

Brazil

Jaguariaiva Mill. This mill produces MDF and has an installed annual production capacity of approximately 815,000 cubic meters of MDF panels and 540,000 cubic meters of melamine lamination. In April 2011, a project to expand the Jaguariaiva mill was approved. In May 2013, the second production line was started with an estimated annual installed capacity of 500,000 cubic meters of MDF boards per year. In the same month, a decorative paper impregnation line and a melamine lamination press were built.

Pien Mill. This mill has an installed annual production capacity of approximately 750,000 cubic meters of panels distributed among two production lines with a production capacity of 440,000 cubic meters of MDF boards, 310,000 cubic meters of PBO and 150,000 cubic meters of melamine lamination.

United States

Duraflake Mill. This mill has an installed annual production capacity of approximately 442,000 cubic meters of PBO and 132,000 cubic meters of melamine lamination.

Bennettsville Mill. This mill located in South Carolina has an installed annual production capacity of approximately 251,000 cubic meters of MDF.

Eugene Mill. This mill located in Oregon has an installed annual production capacity of approximately 154,000 cubic meters of MDF.

Malvern Mill. This mill located in Arkansas has an installed annual production capacity of approximately 310,000 cubic meters of MDF.

Carolina Mill. This mill located in South Carolina has an installed annual production capacity of approximately 496,000 cubic meters of PBO and 132,000 cubic meters of melamine lamination. A new production line, Scheduled to be completed in the fourth quarter of 2016, is expected to increase the mill’s PBO production capacity by 90,000 cubic meters and melamine capacity by 120,000 cubic meters.

Moncure Mill. This facility located in North Carolina includes an MDF production line with an annual production capacity of 285,000 cubic meters, a PBO production line with an annual production capacity of 262,000 cubic meters and two melamine lamination production lines with a combined annual production capacity of 150,000 cubic meters.

Canada

Sault Ste. Marie Mill. This mill located in Ontario has an installed annual production capacity of approximately 310,000 cubic meters of MDF and 115,000 cubic meters of melamine lamination.

St. Stephen Mill. This mill located in New Brunswick has an installed annual production capacity of approximately 376,000 cubic meters of panels distributed between two production lines with a production capacity of 216,000 cubic meters of PBO and 160,000 cubic meters of thin HDF, in addition to a melamine lamination capacity of 255,000 cubic meters, paint/print and décor paper lines and with an on-site resin facility.

Wood Products

Our wood products consist of sawn timber (green, kiln-dried lumber and flitches) and remanufactured wood products. For the year ended December 31, 2015, revenue from sales of wood products was U.S.$785.9 million, representing 15.3% of our total revenues for the period.

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The following table sets forth, by category, our wood product sales to unaffiliated third parties for each of the periods indicated:

	Year ended December 31,
	2011		2012		2013		2014		2015
	(in thousands of cubic meters)
Sawn timber		2,181		2,009		2,284		2,361		2,079
Remanufactured wood products		363		413		411		429		419

As of December 31, 2015, we had nine sawmills in operation, eight in Chile and one in Argentina, with an aggregate installed annual production capacity of approximately 3.0 million cubic meters of lumber. We operate our sawmills in coordination with our forestry and sales operations, since our sawn timber is generally produced in accordance with customer specifications. All of our sawmills are located near our pine plantations. As of December 31, 2015, we also owned five remanufacturing facilities—four in Chile and one in Argentina—that reprocess sawn timber into remanufactured wood products, such as moldings, jams and pre-cut pieces that end users require for doors, furniture and door and window frames. These facilities produced 435,026 cubic meters of remanufactured wood products in 2015.

On July 1, 2012, we commenced the process of insourcing the operation of 13 sawn timber industrial facilities in Chile, which had previously been managed by third-party companies. As a result, we incorporated 2,900 people into our workforce in that same year.

In Chile, our eight sawmills and remanufacturing facilities are certified under the Chain of Custody FSC^® standard (License Code FSC-C119538), as well as under CERTFOR (PEFC homologated).

The following is a brief description of our sawmills and remanufacturing facilities and their production capacity, as of December 31, 2015.

Chile

Cholguán Sawmill and Remanufacturing Facilities. This sawmill has installed annual production capacity of approximately 319,000 cubic meters of lumber, as well as drying kiln facilities with installed annual production capacity of approximately 202,000 cubic meters and two remanufacturing facilities with installed annual production capacity of approximately 92,000 cubic meters of remanufactured wood products. The Cholguán sawmill also has a special facility for making laminating beams with installed annual production capacity of approximately 12,500 cubic meters.

Colorado Sawmill. This sawmill has installed annual production capacity of approximately 274,000 cubic meters of lumber and produces “green” sawn timber (or sawn timber that is not kiln dried) for the Chilean, Japanese and Middle Eastern markets. It also has drying facilities with installed annual production capacity of approximately 132,000 cubic meters.

El Cruce Sawmill. This sawmill has installed annual production capacity of approximately 117,000 cubic meters of lumber.

Horcones I Sawmill and Remanufacturing Facility. This sawmill has installed annual production capacity of approximately 397,000 cubic meters of lumber. It also has drying kilns with installed annual production capacity of approximately 297,000 cubic meters and a remanufacturing facility with installed annual production capacity of approximately 130,000 cubic meters of remanufactured wood products.

Horcones II Sawmill. The annual production capacity of this mill is approximately 249,000 cubic meters of lumber. It also has drying facilities with installed annual production capacity of approximately 141,000 cubic meters.

Nueva Aldea Sawmill. This mill has installed annual production capacity of approximately 423,000 cubic meters of sawn timber and is equipped with drying kilns with installed annual production capacity of approximately 282,000 cubic meters.

Valdivia Sawmill and Remanufacturing Facility. This sawmill has installed annual production capacity of approximately 443,000 cubic meters of lumber. It also has drying facilities with installed annual production capacity of approximately 283,000 cubic meters and a remanufacturing facility with installed annual production capacity of approximately 85,000 cubic meters of remanufactured wood products.

Viñales Sawmill and Remanufacturing Facility. This sawmill has installed annual production capacity of approximately 382,000 cubic meters of lumber. It is also equipped with drying kilns with installed annual production capacity of approximately 277,000 cubic meters and a remanufacturing facility with installed annual production capacity of approximately 101,000 cubic meters of remanufactured wood products.

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Argentina

Piray Sawmill and Remanufacturing Facility. This sawmill has installed annual production capacity of approximately 344,000 cubic meters of lumber. It is also equipped with drying kilns with installed annual production capacity of approximately 334,000 cubic meters and a remanufacturing facility with installed annual production capacity of approximately 67,000 cubic meters of remanufactured wood products.

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Forestry Products

Our forestry products are sawlogs, pulplogs, posts and chips. As a result of our forest management policies and the increasing maturity of our plantations, our plantations are yielding increasing volumes of forestry products, particularly clear wood. As the volume of clear wood has grown, we have broadened our range of forestry products. For the year ended December 31, 2015, sales of forestry products were U.S.$109.2 million, representing 2.1% of our revenues for such year.

The following table sets forth, by category, forestry product sales to unaffiliated third parties for each of the years indicated.

	Year ended December 31,
	2011		2012		2013		2014		2015
	(in thousands of cubic meters)
Sawlogs		2,123		2,250		2,149		2,262		1,793
Pulplogs		443		274		546		499		591
Posts		24		22		13		2		0
Chips		398		365		305		303		278

Sustainable Development

We utilize renewable fuels such as forest biomass sub-products in power plants that cogenerate the steam and electricity required for our manufacturing operations, thus contributing to reducing greenhouse emissions. Biomass co-generation allows for a high thermal efficiency, approaching 80% in some cases. In addition to meeting our own energy needs, we generate a significant amount of surplus power, which we deliver to the Sistema Interconectado Central (Chilean power grid, or SIC), which distributes electrical power throughout the Central and Southern Regions of Chile. In Uruguay, biomass sub-products from our Montes del Plata Mill also cogenerate the steam and electricity to meet our energy needs, and surplus power is delivered to the Uruguayan power grid.

As of December 31, 2015, we had registered five co-generation power plants in Chile as greenhouse emission reduction project activities under the Clean Development Mechanism (CDM) of the Kyoto Protocol. Three of them were registered during 2006, Trupán, Nueva Aldea (first phase) and Nueva Aldea (second phase); a fourth one was registered in 2009, the Valdivia biomass power plant; and the fifth one was registered in January 2011, the Horcones power plant expansion project. Each of these power plants generates electricity through forestry biomass (forestry and wood industrial sub-products, including the woodpulp by-product called “black liquor”), which is a renewable carbon-neutral fuel that allows the facilities to decrease their reliance on fossil-fuel intensive grid electricity.

Arauco was the first Chilean forestry company to issue Certificates of Emission Reductions (CERs or carbon credits) through the CDM of the Kyoto Protocol in Chile. As of December 31, 2015, we had issued a total of 3.5 million CERs with our CDM projects. As of the date of this annual report we have sold 1.1 million CERs, mainly to European companies subject to compliance obligations under the European Trading Scheme (ETS). The following table presents the total amount of CERs issued and sold by Arauco for each of the years indicated:

	Year ended December 31
	2007-2011		2012		2013		2014		2015
CERs issued (net of the commission paid to United Nations Framework Convention on Climate Change, or UNFCCC)		1,070,787		632,197		488,475		403,317		827,971
CERs sold or donated		1,070,787		3,030		—		42,567		1,375

In 2015, Arauco entered into a long-term sale agreement with Vattenfall Energy Trading Netherlands N.V. pursuant to which Arauco agreed to sell all of its CERs generated between 2013 and 2020 to Vattenfall. This agreement is expected to ensure the sale of our carbon credits in the European compliance market, which is the largest carbon credit market currently in operation.

The Viñales biomass power plant, which began operations on May 17, 2012, reached its maximum production capacity on August 29, 2012. The power plant is located alongside the Viñales sawmill, in Chile’s Seventh Region. The plant includes a biomass-fueled power boiler with capacity to produce 210 tonnes of steam per hour and a 41 Megawatt extraction-condensing turbo generator. This power plant was also developed as an emission reduction project initiative by Arauco. On January 27, 2013, the Viñales emission reduction project activity was successfully registered as a greenhouse gas emission reduction project activity under the voluntary carbon standard: Verified Carbon Standard (VCS). It is expected that this project will issue its first verified emission reductions (VERs) in the first half of 2016.

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During January 2013, the biomass cogeneration power plant located in the Montes del Plata pulp mill facility in Uruguay was successfully registered as a CDM project activity. This was the eleventh CDM project registered in Uruguay. This project activity is expected to generate an average of 124,000 CERs per year, during its first 7-year crediting period.

Competition

We experience substantial worldwide competition in each of our geographical markets and in each of our product lines.

Pulp

In general, our competitors in the pulp market vary depending on the geographical region and variety of pulp involved. CMPC Celulosa S.A., or CMPC and Fibria Cellulose S.A., or Fibria, are our main competitors in most geographical regions. While Fibria produces hardwood pulp only, CMPC produces both softwood and hardwood pulp. In Asia, we also face competition from Canadian, Brazilian, Russian and Indonesian producers. In Europe, we face competition from Brazilian, Scandinavian and U.S. producers. Our main competitors with respect to unbleached softwood pulp are from Canada and Russia.

Panels

Arauco’s principal competitors in the plywood markets are located in the United States, Finland, Chile and China. We mainly compete with CMPC, Eagon, Roseburg, Georgia-Pacific, and UPM, among others.

Arauco’s main competitors in the MDF market are: in Latin America, Duratex S.A., Masisa S.A., Berneck, and other large South American producers; in North America, local producers such as Roseburg Forest Products Co.; in Asia, producers from Malaysia and China; and in the Middle East, European producers.

For sales of PBO, in the Latin American market we compete with Duratex S.A., Masisa S.A., Berneck S.A. and Fibraplac S.A. In North America, we mainly compete with Roseburg Forest Products Co., Temple-Inland Inc., Kaycan Ltd. and Sonae Indústria, SGPS, SA.

Wood Products

For remanufactured wood products, our main competitors are located in Chile, Brazil and the United States. For sawn timber, our main competitors are located in Europe, New Zealand, Canada and Chile. We believe that our operating efficiencies, competitive logistics costs, ability to serve customers with multiple specifications, geographical presence in 38 countries and the versatility of our radiata and taeda pine allow us to compete effectively in the world market for wood products.

Transportation, Storage and Distribution

To remain competitive worldwide, we ship our products to various distribution centers around the world from which final delivery to the customer is made.

The following are the principal Chilean ports that we use, each of which is operational as of the date of this annual report:

• Coronel. A private port located between Concepción and the Arauco Mill, which we built as a member of a consortium with five other companies and in which we have an equity interest of 50%. We shipped 51.0% of our aggregate export volume through this port in 2015;

• Lirquén. A private port in Concepción in which we have an equity interest of 20.2% and through which we shipped 24.1% of our aggregate export volume during 2015; and

• San Vicente. A state-owned port near the city of Concepción through which we shipped 24.9% of our aggregate export volume during 2015.

The closest ports to our Chilean mills are located as follows: approximately 60 kilometers from the Arauco Mill, 310 kilometers from the Constitución Mill, 370 kilometers from the Licancel Mill, 70 kilometers from the Nueva Aldea Mill and 430 kilometers from the Valdivia Mill. We do not own pulp storage warehouses at any of these ports.

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We ship pulp to various ports in Europe, North and South America and Asia and, as is customary in the pulp industry, we store some stock in those ports. We use 12 foreign ports that have warehouse facilities available, and standard storage terms provide that we are entitled to a certain period of storage free of charge. We seek to ensure that we do not exceed the free storage period for each shipment. As of December 31, 2015, we had approximately 95,350 Adt of pulp in storage in warehouses at foreign ports.

We believe that our shipping costs are comparable to those of our international competitors, notwithstanding Chile’s greater distance from Europe, because of the proximity of our plantations and mills to the Pacific coast and the economies of scale we achieve through the volume of our exports.

In Argentina, timely and competitively priced delivery of finished products to our customers is an important factor in our ability to compete effectively, and we ship most orders either by truck or railway almost immediately after they are produced.

In Brazil, our efficient distribution system, which delivers finished products to more than 870 customers in over 350 cities, many of which are separated by long distances, is a key component to our competitiveness.

In North America, products sourced from our South American operations are shipped into 17 major ports of entry and are dispatched to more than 3,500 locations in the United States and Canada. Arauco’s eight composite panel plants in North America service over 580 customers throughout the region, in addition to exporting products to the Caribbean, Central America and the Middle East.

Description of Property

Our principal properties consist of land and production plants and facilities, the majority of which are located in Chile. As of December 31, 2015, we owned 1.1 million hectares of land in Chile, of which 757 thousand hectares were forest plantations, and 563 thousand hectares of land in Argentina, Brazil and Uruguay, of which 323 thousand were forest plantations. In addition, as of December 31, 2015, we owned and operated various plants and facilities, including five pulp mills, four panel mills, eight sawmills and four remanufacturing facilities in Chile; one pulp mill, one sawmill, one MDF mill, one PBO mill, one chemical plant and one sawmill and remanufacturing facility in Argentina; one MDF mill and one MDF-PBO mill in Brazil; two PBO mills, three MDF mills and one MDF-PBO mill in the United States; and one MDF mill and one PBO-MDF mill in Canada. We also own 50% of the shares of a pulp mill in Uruguay. Future expansion plans will depend on global market conditions. For information regarding environmental risks associated with our use of our properties, see “Item 3. Key Information—Risk Factors—Risks Relating to Us and the Forestry Industry.”

Insurance

Consistent with industry practice, we maintain fire insurance coverage for all our Chilean forest holdings and nurseries but do not insure against pests or disease. In Argentina, we maintain fire insurance for 14,652 hectares of timber assets located in the Delta del Paraná, near Buenos Aires and Entre Ríos. For the rest of our Argentine operations, we do not maintain fire insurance for our timber assets because we believe that the risk of damage from fire is low as Argentina receives significant amounts of rainfall, particularly during the summer months. For our forests in Brazil we maintain fire insurance for 26,000 hectares of Novo Oeste’s timber assets located in Mato Grosso do Sul. For the rest of our forests in Brazil, we do not maintain fire insurance because we believe the risk of damage from fire does not justify the costs of carrying insurance.

The forestry insurance for plantations located in Chile is carried by the RSA Group (60%) and Penta Security Compañía de Seguros S.A. (40%). The insurance policies for plantations located in the Delta del Paraná, Argentina, are carried by Sancor Seguros. Our insurance policies for some of our plantations located in Mato Grosso do Sul, Brazil, are carried by Allianz Insurance. Our insurance policies in all the countries where we operate are consistent with industry practice.

We also carry insurance, consistent with industry practice, covering our production plants, facilities and equipment. This insurance provides coverage, in the event of fire, explosion, machinery breakdowns or natural disasters, including earthquakes and tsunamis. Our insurance covers up to U.S.$750 million per loss in Chile, U.S.$300 million per loss in Argentina and U.S.$ 300 million per loss in United States and Canada (for Arauco North America), including physical damage and business interruption for up to 18 months. The deductible for Chile and Argentina for physical damage is U.S.$3 million for damages caused by earthquakes and tsunamis, with a deductible of 2% of the insured amount for each location, subject to a cap of U.S.$25 million. Deductibles for business interruption are 30 days for all losses, 45 days for machinery breakdowns and 60 days for machinery breakdowns of turbines. The deductible for Arauco North America, including physical damage and business interruption is U.S.$2.5 million. We also have an annual self-insurance retention of U.S.$20 million, with a U.S.$10 million maximum per event. All of our insurance policies covering our production plants, facilities and equipment in Chile, Argentina, United States and Canada are carried by the RSA group, Mapfre S.A. and Ace Group.

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Our MDF and PBO mills in Brazil are insured by Ace Seguros Soluções Corporativas. Our policies cover fire, explosions, implosion, electrical damage, equipment damage and loss of profit, up to a limit of U.S.$160 million. For more information regarding the risks for which we insure our property, see “Item 3. Key Information—Risk Factors—Risks Relating to Us and the Forestry Industry.”

As described in more detail in “Item 3—Key Information—Risk factors Disease of fire could affect our forests and manufacturing processes and, in turn, adversely affect our business, financial conditions, results of operations and cash flows,” our Nueva Aldea complex suffered significant fire related damage to our plywood mill and forests due to wildfires that affected the Eight Region of Chile. Our insurance covered the losses related to our forest plantations. We had a U.S.$1.0 million deductible for property damage and U.S.$1.97 million deductible for business interruption at our Nueva Aldea plywood mill. On December 11, 2012, we and the insurers accepted the final report of the insurance adjusters. In accordance with such final report, as of December 31, 2013, we received a total recovery of U.S.$33 million, net of U.S.$110 million in advance payments that we had already received. With respect to our inventory, which was covered under a different policy, we received during 2013 a total recovery of U.S. $20.8 million.

CAPITAL EXPENDITURES

To utilize our increasing volume of forest production, we have added to, expanded and modernized our processing facilities.

For the year ended December 31, 2013, our aggregate capital expenditures were U.S.$942.6 million, consisting primarily of U.S.$781.2 million for addition of property, plant and equipment and U.S.$161.5 million for the addition of biological assets.

For the year ended December 31, 2014, our aggregate capital expenditures were U.S.$604.2 million, consisting primarily of U.S.$471.2 million for addition of property, plant and equipment and U.S.$133.0 million for the addition of biological assets.

For the year ended December 31, 2015, our aggregate capital expenditures were U.S.$564.8 million, consisting primarily of U.S.$438.7 million for addition of property, plant and equipment and U.S.$126.1 million for the addition of biological assets.

For the year ending December 31, 2016, we have planned capital expenditures of U.S.$ 766.7 million, which principally include U.S.$352.9 million in maintenance of our existing mills, U.S.$116.9 million in expansion and other strategic initiatives, U.S.$ 150.0 million in acquisitions, and U.S.$146.9 million in maintenance and acquisition of biological assets.

GOVERNMENT REGULATION

Environmental Regulation

In each country where we have operations, we are subject to numerous national and local environmental laws, regulations, decrees and municipal ordinances concerning, among other things, health, the handling and disposal of solid and hazardous waste, discharges into the air, soil and water and other environmental impacts. Some of these laws require us to conduct environmental impact studies of future projects or activities (or major modifications thereto). Under these laws, our operations may be subject to specific approvals, consents and regulatory requirements, and emissions and discharges may be required to meet specific standards and limitations. We have made and will continue to make substantial expenditures to comply with such environmental laws, regulations, decrees and ordinances.

Chile

The Chilean legislation to which we are subject includes the Ley Sobre Bases Generales del Medio Ambiente (Chilean Environmental Law) and related regulations. Current environmental institutions include the following public entities: the Ministry of the Environment (aimed at developing national environmental policy), the Service of Environmental Evaluation (in charge of administering the environmental assessment system), the Evaluation Commissions (in charge of evaluating projects and activities within the Environmental Impact Evaluation System), and the Superintendency of Environment (in charge of supervising and auditing environmental compliance).

Under the Chilean Environmental Law, we are required to conduct environmental impact studies or declarations on the environmental impact of any future projects or activities (or their significant modifications) that may affect the environment. These and other regulations also establish procedures for private citizens to object to the plans or studies submitted by project owners.

Governmental agencies may participate in the oversight of the implementation of projects in accordance with their environmental impact studies or declarations of environmental impact. Under the Chilean Environmental Law and other regulations, affected private citizens, public agencies and local authorities can sue to enforce compliance with environmental regulations. Enforcement remedies include temporary or permanent closure of facilities and fines. The Superintendency of Environment has issued numerous resolutions, instructions and requirements to various companies, officials and supervised parties, including our Company.

The operations of the Valdivia Mill recently became subject to the Norm. The Valdivia Mill discharges its treated effluents into the Cruces River, which is part of the Valdivia River Basin. We cannot exclude that the authority declare that the Basin is contaminated and thus initiate an administrative procedure to enact a decontamination plan, which may include limits on discharges of wastewater applicable to the Valdivia Mill.

Arauco expressed concerns, among others, regarding various aspects of the Norm’s General Environmental and Social Impact Assessment (AGIES, for its acronym in Spanish), prior to its enactment. These objections included the lack of identification and consideration for the effective economic and social costs resulting from the adoption of the Norm. Other objections include that the Norm’s parameters and limits exceed the reviewed water quality criteria enforced by reference countries in both quantity and stringency; and that many of the parameters and limits are not technically or environmentally reasonable. The Company challenged the validity of the Norm before the Third Environmental Court in January 2016. Several technical, economical and legal reports from third parties (scientists, economists and attorneys from different countries) were filed to support the challenge. Other local actors challenged the Norm as well, such as Corporación para el Desarrollo de la Región de Los Rĺos (Association for the Development of Los Rĺos Region) CODEPROVAL (for its acronym in Spanish) and the local company Forestal Calle Calle S.A. The case public hearing was held on March 3, 2016. A ruling is expected during 2016, decision that may be challenged before the Supreme Court.

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The application of these environmental laws and remedies may adversely affect the manner in which we seek to implement our business strategy and our ability to realize our strategy. See “Item 3. Key Information—Risk Factors—Risks Relating to Us and the Forestry Industry—The costs to comply with, and to address liabilities arising under, environmental laws and regulations could adversely affect our business, financial condition, results of operations and cash flows.”

As of the date of this annual report, we have been subject to certain inspections, and the Superintendency has issued several information requests to us. As stated above, there are two administrative proceedings recently initiated by the Superintendency against both Valdivia and Nueva Aldea pulp mills, which may result in material administrative fines or sanctions, the revocation of environmental authorizations or the temporary or permanent closure of facilities. We have faced, and continue to face, certain other environmental proceedings in connection with certain of our mills. For a description of these proceedings, see “Item 8. Financial Information—Legal Proceedings.”

Argentina

Our operations in Argentina are subject to Argentine environmental legislation, including regulation by municipal, provincial and federal governmental authorities.

Argentine environmental legislation includes the requirement that water used or recovered in the production process has to be chemically, biologically and thermally treated before being returned to public waters, such as the Paraná River. In addition, all gaseous emissions must be scrubbed to ensure satisfactory levels of waste particle recovery and odor removal. Regular testing of river water and air quality is used to monitor the ultimate impact of the mill on the environment.

We believe that we are currently in material compliance with all applicable local and national environmental regulations governing our operations in Argentina.

Brazil

Our Brazilian operations are subject to environmental legislation, including municipal, regional and federal governmental laws, regulations and licensing requirements. Law No. 6,938 establishes strict liability for environmental damage, mechanisms for the enforcement of environmental standards and licensing requirements for activities that are damaging or potentially damaging to the environment. A violation of environmental laws and regulations may result in:

• fines,

• partial or total suspension of activities,

• forfeiture or restriction of tax incentives or benefits, or

• forfeiture or suspension of participation in credit lines with official credit establishments.

As a result, we may become liable for environmental damages caused by the management of our materials, including damages caused during the transportation, treatment and disposal of our industrial waste, even where third parties manage such activities on our behalf.

Law No. 9,605 provides that individuals or entities whose conduct or activities cause harm to the environment are subject to criminal and administrative sanctions and are liable for any costs to repair the damages resulting from such harm. For individuals who commit environmental crimes, criminal sanctions range from fines to imprisonment; for legal entities, criminal sanctions may include fines, partial or total suspension of activities, restrictions on participation in government contracts and, in cases of bad faith, dissolution. In addition, Law No. 9,605 establishes that the corporate structure of a company may be disregarded if the structure impedes the recovery for harm caused to the environment. We are not aware of any successful assertion of claims against shareholders under this provision of Law No. 9,605.

We believe we are currently in material compliance with all applicable local and national environmental regulations governing our operations in Brazil.

Uruguay

Our activities at Montes del Plata are subject to Uruguayan national and municipal environmental regulations. The principal environmental authorization required to carry out such project’s construction activities was the environmental authorization, or AAP, regulated by the Environmental Impact Assessment Act, Law No. 16,466, and its regulatory Decree No. 349/005. AAPs are granted by the National Environmental Bureau, or DINAMA, which pertains to the Ministry of Housing, Land Use Management and Environment, or MVOTMA. In order to obtain this authorization, an applicant must submit a complete report regarding all aspects of any proposed works including a classification of the same by a competent professional in one of the three categories, A, B or C. If the proposed project is classified as B or C, a comprehensive environmental impact assessment (which includes all aspects of the project, including water and noise, among others) is required and in some cases a public hearing may be required. Once the AAP is granted, the interested party is required to perform the project in accordance with the terms and conditions of such authorization.

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For certain activities (including construction of an industrial plant) listed in Article 2 of Decree No. 349/005, a Viability Location Report, or VAL, is required. This report should be submitted before the National Environmental Bureau and must include a notification to the municipal government where the project is to be located (the Intendencia) and the delivery of information similar to that required for the AAP. This process contemplates a period for public comment on summary information that is available. The Intendencia involved in any such project may submit its findings to the DINAMA for consideration. The VAL, if needed, must be obtained prior to the AAP. The relevant companies that comprise Montes del Plata have already obtained the AAP and the VAL. We believe that the Montes del Plata project is currently in material compliance with applicable local and national environmental regulations in Uruguay.

Once construction is completed according to the approved project and the AAP conditions, and prior to starting operations, a company needs to obtain the environmental authorization for operation, or AAO, which is regulated by the same decree, and comes to regulate the environmental compliance of the relevant companies in the operational phase of the endeavor. Montes del Plata obtained this authorization from the National Environmental Bureau, DINAMA, in June 2014.

We believe that the Montes del Plata project is currently in material compliance with applicable local and national environmental regulations in Uruguay.

United States and Canada

Our North American operations are subject to U.S. and Canadian environmental legislation, including federal, provincial, state and local laws and regulations. Such laws and regulations govern the use, storage, handling, generation, treatment, emission, release, discharge and disposal of certain hazardous materials and wastes, the remediation of contaminated soil and groundwater, plant and wildlife protection, landfill sites and the health and safety of employees. For example, under the Clean Air Act, the United States Environmental Protection Agency, or the EPA, has established Maximum Achievable Control Technology, or MACT, environmental regulations that establish emission standards for point sources of pollution, such as press and dryer exhausts, process vents and equipment leaks. In addition, some of our operations require environmental permits and controls to prevent and reduce air and water pollution. Our failure to comply with applicable environmental, health and safety requirements, including permits related thereto, may result in:

• civil penalties;

• supplemental environmental projects;

• enforcement actions or other sanctions, such as judicial orders enjoining or curtailing operations or requiring corrective measures;

• loss of operating permits;

• required installation of pollution control equipment; or

• remedial actions.

In addition, we may become liable for third-party claims for personal injury and property damage due to contamination at our mills, even where the activity that caused such contamination occurred before we owned the mills.

We believe we are currently in material compliance with all applicable local and national environmental regulations and orders governing our operations in the United States and Canada.

Forestry, Land-Use and Land Ownership Regulations

Chile

The management and exploitation of forests in Chile is regulated by the Forests Law of 1931, as amended, and Decree Law No. 701 of 1974, as amended. The Forests Law and Decree Law No. 701 impose a variety of restrictions on the management and exploitation of forests. Forestry activities, including thinning, on land that is designated as preferably suited for forests or that has native or planted forests, are subject to management plans that require the approval of the Corporación Nacional Forestal, or National Forest Service (CONAF). In addition, the Forests Law and Decree Law No. 701 impose fines for the harvesting or destruction of trees and shrubs in violation of the terms of a forest management plan. We believe that we are in material compliance with the Forests Law and Decree Law No. 701.

Law No. 20,283, published in the Official Gazette on July 30, 2008, provides for the management and conservation of native tree forests and forest development. Its purposes are the protection, recovery and improvement of native forests in order to guarantee both forest sustainability and environmental policy. This law established a fund for the conservation and sustainable management of native forests. According to this law, owners of native forests are able to exploit them so long as they have a “management plan”

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approved by the CONAF. Depending on the owner’s approved plan, as well as other factors, the subsidy provided by the fund may vary between U.S.$200 and U.S.$400 per hectare. The law also prohibits the harvesting of native trees in certain areas and under certain conditions. In compliance with applicable regulations, we have adopted environmentally sensitive policies towards our holdings of native forests, which are protected and preserved in their entirety. Our products come from established plantations only; we do not sell any wood derived from our native forests. Arauco’s forestry operations adhere to our international control systems, which are all in accordance with current legislative and environmental sustainability standards. We believe that we are in material compliance with Law No. 20,283. See “Item 4. Description of Business—Forestry Activity.”

Argentina

The management and exploitation of forests in Argentina is regulated by National Law No. 13,273, National Law No. 25,080, and National Law No. 26,432, National Decree No. 710, Provincial Law No. 854, Provincial Law No. 3,426 and other regulations promulgated thereunder, which collectively constitute the regulatory framework. The regulatory framework imposes a variety of restrictions on the management and exploitation of forests in Argentina. The regulatory framework regulates the replanting of land after harvesting.

On December 28, 2011, National Law No. 26,737 was promulgated, which established limitations on the ability of foreigners to purchase rural land in Argentina. This law provides that foreigners cannot acquire more than 15% of all rural land in the country, and that no foreigner can individually hold more than 30% of said 15%. For the purposes of the National Law No. 26,737, rural land is all land located outside the urban area.

We believe that our Argentine operations are in material compliance with the regulatory framework.

Brazil

Environmental laws and regulations relating to the management and exploitation of forests and the protection of Brazilian plants and wildlife govern our Brazilian forestry operations. Under this regulatory framework Brazilian authorities establish forest preservation areas and regulate replanting of forests after harvesting.

There are currently certain Brazilian legal restrictions on the acquisition of rural properties by foreign companies and by Brazilian companies controlled by foreign persons. Those restrictions are contained in the new Opinion issued by the Office of the General Counsel to the Federal Government in August 2010 about the Federal Law No. 5,709/1971. However, recent judgments of several tribunals and administrative agencies have determined that the restrictions in the Federal Law No. 5,709/1971 are not applicable to Brazilian companies with foreign shareholders, for being contrary to the Brazilian constitution. In consideration of the above, our legal advisors have advised us that these restrictions are not applicable to the transactions that our Brazilian subsidiaries may consider in the future.

We believe that our Brazilian operations are in material compliance with the regulatory framework.

Uruguay

The management and exploitation of forests in Uruguay is regulated primarily by Law No. 15,939 (as amended by Law No. 18,083 and by the regulatory decree Nº 452/988), which has declared forestry activity as an area of national interest. This law classifies forests into three categories: protectors, yield and general, and provides certain tax and financial benefits related to forests classified as protectors and yield located in areas classified as forestry priority. If such forests were planted after January 1, 2007, they must also comply with the definition of quality wood. In order to obtain such classification, interested parties have to submit a forestry management plan to the General Forestry Bureau. This law also establishes certain conservation requirements and controls for each category of forest.

Additionally, forest activity is subject to environmental and soil care regulations. According to Law No. 16,466 and Decree No. 349/005, plantations of more than 100 hectares need prior environmental authorization. Law No. 15,239 also provides certain measures that must be adopted to reduce erosion and degradation of the soil to promote its restoration when necessary.

We believe that the Montes del Plata forestry operations are in material compliance with the applicable regulatory framework.

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Item 5. Operating and Financial Review and Prospects

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION, RESULTS OF OPERATIONS AND CASH FLOWS

The following discussion is based on and should be read in conjunction with our audited consolidated financial statements and the notes thereto, included elsewhere in this annual report. Our consolidated financial statements are prepared in U.S. dollars in accordance with IFRS.

Overview

We derive our revenue from the sale of bleached and unbleached pulp, panels such as plywood, MDF, PBO and HB, wood products such as sawn timber and remanufactured wood products, forestry products, such as sawlogs and pulplogs, and sales of electricity to the grid. Export sales constituted 61.9% of our total revenue for the year ended December 31, 2014 and 62.1% of our total sales revenue for the year ended December 31, 2015. Sales of pulp constitute the single largest component of our revenue. As with many commodities, pulp is subject to significant cyclical price fluctuations determined by global supply and demand. Accordingly, our revenue is subject to cyclical fluctuations. Prices for panels, wood products and forestry products, also fluctuate significantly among markets. Although prices tend to have the most significant effect on our results of operations, sales volume and product mix, production costs and exchange rate fluctuations also can have a substantial impact on our results.

Our business, results of operations and cash flows depend, to a large extent, on the level of economic activity, on government and foreign exchange policies and on political and economic developments in our principal export markets. In 2014, we exported our products to Asia, North, Central and South America, Europe and, to a lesser extent, Africa and the Middle East. In 2014 and 2015, 91.8% and 90.8%, respectively, of total pulp revenues were export sales, and 43.9% and 42.3%, respectively, of total panels, wood products and forestry product revenues were export sales. Our business, earnings and prospects may be materially and adversely affected by developments in our export markets with respect to inflation, interest rates, currency fluctuations, protectionism, government subsidies, price and wage controls, exchange control regulations, taxation, expropriation or social instability, as well as by political, economic or diplomatic developments.

As of December 31, 2015, 64.5% of our property, plant, equipment and forest assets were directly owned by Arauco and our Chilean subsidiaries, 9.2% by our Argentine subsidiaries, 7.4% by our Brazilian subsidiaries, 2.7% by our U.S. and Canadian subsidiaries and 16.2% by our joint operation in Uruguay. In 2015, 59.7% of our consolidated revenue was derived from our operations in Chile, 10.6% of our consolidated revenue was derived from our operations in Argentina, 7.0% of our consolidated revenue was derived from our operations in Brazil, 15.7% of our consolidated revenue was derived from our operations in the United States and Canada and 7.0% of our revenue was derived from our operations in Uruguay. Accordingly, our financial condition, results of operations and cash flows are affected by, to a significant degree, economic conditions in Chile, Argentina, Brazil, Uruguay, the United States and Canada.

Economic Indicators in Chile, Argentina, Brazil, Uruguay, the United States and Canada

Chile

According to the Central Bank of Chile, Chile’s GDP increased by 4.0% in real terms during 2013, and in 2014 and 2015 it grew at rates of 1.9% and 2.1%, respectively. See “Item 3. Key Information—Risk Factors—Risks Relating to Chile.”

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Argentina

According to the Instituto Nacional de Estadística y Censos (the Argentine National Statistics and Census Institute, or the INDEC), Argentina’s GDP increased by 2.9% in real terms during 2013, and in 2014, it grew at a rate of 0.5%. For 2015, the INDEC has reported a 2.1% growth in real GDP. In 2013, the Argentine peso depreciated against the U.S. dollar by 32.6% and in 2014 and 2015, the Argentine peso depreciated against the U.S. dollar by 31.1% and 51.7%, respectively. From 2007 through 2015, the INDEC, underwent institutional and methodological reforms that gave rise to controversy regarding the reliability of the information that it produced, including inflation, GDP, unemployment and poverty data. Reports published by the IMF have stated that their staff uses alternative measures of inflation for macroeconomic surveillance, including data produced by private sources, which have shown inflation rates considerably higher than those published by the INDEC between 2007 and 2015.

On January 8, 2016, based on its determination that the INDEC had failed to produce reliable statistical information, particularly with respect to its CPI, GDP and foreign trade data, the new Argentine administration declared a state of administrative emergency for the national statistical system and the INDEC until December 31, 2016. The INDEC has suspended publication of certain statistical data pending completion of a reorganization of its technical and administrative structure. Future economic, social and political developments in Argentina, over which we have no control, could impair our and Arauco Argentina’s business, financial condition or results of operations. See “Item 3. Key Information—Risk Factors—Risks Relating to Argentina.”

Brazil

According to the Instituto Brasileiro de Geografia e Estatística (the Brazilian Institute of Geography and Statistics), Brazil’s GDP increased in real terms by 2.3% during 2013, by 0.1% in 2014 and decreased by 3.8% in 2015. In 2013, the Brazilian real depreciated against the U.S. dollar by 12.8% and in 2014 and 2015, the Brazilian real depreciated against the U.S. dollar by 11.8% and 32.0%, respectively. See “Item 3. Key Information—Risk Factors—Risks Relating to Brazil.”

Uruguay

According to the Banco Central del Uruguay (the Central Bank of Uruguay), Uruguay’s GDP increased by 4.6% in real terms during 2013, and in 2014 and 2015 it grew at rates of 3.2% and 1.0%, respectively. In 2013, the Uruguayan peso depreciated against the U.S. dollar by 21.1%, in 2014 the Uruguayan peso appreciated against the U.S. dollar by 12.8% and in 2015 the Uruguayan peso depreciated against the U.S. dollar by 23.2%. See “Item 3. Key Information—Risk Factors—Risks Relating to Uruguay.”

United States

According to the U.S. Bureau of Economic Analysis, the United States GDP increased by 2.2% in real terms during 2013, and in each of 2014 and 2015 it grew by 2.4%. See “Item 3. Key Information—Risk Factors—Risks Relating to the United States and Canada.”

Canada

According to the Bank of Canada, Canada’s GDP increased by 2.0% in real terms during 2013, and in 2014 and 2015 it grew at rates of 2.5% and 1.2%, respectively. The Canadian dollar depreciated against the U.S. dollar by 7.1% in 2013, 9.0% in 2014 and 19.6% in 2015. See “Item 3. Key Information—Risk Factors—Risks Relating to the United States and Canada.”

Exchange Rate Fluctuations

We generally price our exports in U.S. dollars, whereas our domestic sales in Chile are priced in Chilean pesos; domestic sales in Brazil are priced in Brazilian reals and domestic sales in Argentina are priced in Argentine pesos except for pulp sales, which are priced in U.S. dollars. To the extent that the Chilean peso depreciates against the U.S. dollar, our domestic revenues may be adversely affected when expressed in U.S. dollars. The same effects may occur for our domestic sales in Argentina and Brazil for products sold in each of the respective local currencies.

The Chilean peso has been subject to devaluation in the past and could be subject to significant fluctuations in the future. During 2015, the value of the Chilean peso relative to the U.S. dollar decreased 17.0% in nominal terms, based on the observed exchange rates on December 31, 2014 and December 31, 2015. The observed exchange rate on April 26, 2016, as published in the Official Gazette on April 27, 2016, was Ch$669.01 to U.S.$1.00. For information regarding historical rates of exchange in Chile from January 1, 2011, see “Item 3. Key Information—Exchange Rates.”

The effect of exchange rate fluctuations is partially offset by the fact that certain of our operating expenses are denominated in U.S. dollars (such as our freight costs and selling expenses in the form of commissions paid to our sales agents abroad) and a

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significant part of our indebtedness is denominated in U.S. dollars. As of December 31, 2015, our U.S. dollar denominated indebtedness was U.S. $3.3 billion. In addition, as the U.S. dollar appreciates against the legal currency in any of our export markets, we must from time to time price our sales in that local currency to compete effectively.

Future developments in the Chilean, Argentine, Brazilian, Uruguayan, Canadian and U.S. economies may impair our ability to proceed with our strategic plan, including with respect to pricing. For additional discussion regarding the risks we face in each of the aforementioned markets, see “Item 3. Key Information—Risk Factors—Risks Relating to Chile,” “—Risks Relating to Argentina,” “—Risks Relating to Brazil,” “—Risks Relating to Uruguay” and “—Risks Relating to the United States and Canada.”

In recent years, our revenue has been affected by price level volatility in the export market. The prices for each of our pulp, panels, wood and forestry products depend on the markets in which they are sold. While prices are generally similar for a given product on a global basis, regionalized market conditions affect prices in markets such as Asia, Europe and the United States.

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The following table sets forth, for the periods indicated, average unit sales prices for our products.

	Year ended December 31,(1)
Product(2)	2013		2014		2015
	(U.S.$ per tonne)(3)
Pulp
Bleached pulp		665.8		666.8		636.7
Unbleached pulp		623.4		687.0		616.6
	(U.S.$ per cubic meter)(3)
Wood Products
Sawn timber		256.0		270.0		239.8
Remanufactured wood products		596.6		549.6		686.4
Panels
Plywood and fiberboard panels		374.0		363.8		333.7
Forestry Products
Logs		43.9		43.9		36.9

(1) Calculated as average unit prices for the year based on our internally collected data.

(2) Each category of product contains different grades and types and the shipping terms vary with the product, as well as the customer.

(3) We generally quote our prices in U.S. dollars for export sales and in Chilean pesos, Argentine pesos or Brazilian reals, as applicable for domestic sales.

Pulp Prices

Overview

Historically, world pulp prices have been subject to significant fluctuations over relatively short periods of time. Pulp prices mainly depend on worldwide demand, world production capacity, worldwide pulp and paper inventory levels and availability of substitutes, and in general terms, are directly related to global economic growth. All of these factors are beyond our control. See “Item 3. Risk Factors—Risks Relating to Us and the Forestry Industry— Fluctuations in market price for our products could adversely affect our financial condition, results of operations and cash flows”.

Prices for bleached grades of hardwood pulp, including eucalyptus, generally follow the same cyclical pattern as prices for NBSK, which is the benchmark for softwood bleached pulp. However, the latter historically has had higher prices mainly due to lower global supply. Moreover, during the last five years, the majority of the added global pulp production capacity has been dedicated to the production of hardwood pulp, particularly eucalyptus pulp.

Prices for unbleached softwood market pulp also follow cyclical patterns related to worldwide demand, stock levels and supply. Unbleached softwood market pulp represents about 3.2% of the total wood pulp market. The majority of such pulp is sold in Asia, and its price does not necessarily follow the cycle of prices for NBSK or BEKP.

In 2015, a new pulp mill entered into the shortfiber pulp market with an annual production capacity of 1.3 million tonnes. During the first half of 2015 the shortfiber market remained stable, with a peak price of U.S$ 811.2 per tonne in October. Following the October peak BEKP prices began to decrease as a result of the global economic downturn and lower demand in the Chinese market as a result of the devaluation of the Yuan, ending the year at a price of U.S.$788.9 per tonne. In addition, NBSK prices decreased throughout the year, reaching its minimum price of US$ 803.4 per tonne in December 2015.

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Price of NBSK

The market price for NBSK was U.S.$809.60 per tonne as of December 31, 2012, a 2.9% decrease as compared to December 31, 2011. The market price for NBSK was U.S.$906.48 per tonne as of December 31, 2013, a 12.0% increase as compared to December 31, 2012. The market price for NBSK was U.S.$932.06 per tonne as of December 31, 2014, a 2.8% increase as compared to December 31, 2013. The market price for NBSK was U.S.$803.36 per tonne as of December 31, 2015, a 13.8% decrease as compared to December 31, 2014.

Price of BEKP

The market price for BEKP was U.S.$775.94 per tonne as of December 31, 2012, a 19% increase as compared to December 31, 2011. As of December 31, 2013, the market price for BEKP was U.S.$769.73 per tonne, which represented a 0.8% decrease as compared to December 31, 2012. As of December 31, 2014, the market price for BEKP was U.S.$742.90 per tonne, which represented a 3.5% decrease as compared to December 31, 2013. As of December 31, 2015, the market price for BEKP was U.S.$788.91 per tonne, which represented a 6.2% increase as compared to December 31, 2014.

Price of UKP

The market price for unbleached kraftwood pulp, or UKP was U.S.$600.3 per tonne as of December 31, 2012, a 1.6% decrease as compared to December 31, 2011. The market price for UKP as of December 31, 2013 was U.S.$721.5 per tonne which represented an increase of 23.8% as compared to December 31, 2012. The market price for UKP as of December 31, 2014 was U.S.$650.4, per tonne which represented a 9.9% decrease as compared to December 31, 2013. The market price for UKP as of December 31, 2015 was U.S.$601.7 per tonne which represented a 7.5% decrease as compared to December 31, 2014.

Forestry, Wood Product and Panels Prices

Over the last five years, the average prices for our forestry, wood products and panels have fluctuated significantly, reflecting the effect on demand of global economic developments.

During 2011, although the construction and real estate market in the United States continued to underperform compared to historical averages, there was a slight trend of recovery as compared with 2009 and 2010. This recovery was reflected in increased demand for wood products and price increases. In Latin America the demand for our sawn timber and panels products remained positive, which resulted in increases in revenue of 18.0% and 15.6%, respectively. Our sawn timber products increased in sales volume and average price by 3.9% and 9.3%, respectively. Revenue from our remanufactured products increased 32.4% as a consequence of a 15.1% increase in sales volume and a 15.1% increase in average prices. Average prices of our panels products increased 8.8%, and total sales volume increased 6.3%.

During 2012, average sales prices in our wood products segment increased as compared to 2011, mainly due to a 6.7% increase in average sales prices of sawn timber. In 2012, sales in our panel segment increased by 3.7% as compared to 2011. This increase was mainly due to a 10.4% increase in sales volume, which was partially explained by the acquisition of the Moncure mill and Flakeboard in 2012.

During 2013, the average prices in our wood products segment increased 1.0%. The average price of panels increased 0.5%.

During 2014, all solid wood markets improved, with increased demand that permitted the sales mix and prices to improve relative to 2013. Asian markets, in particular, Japan, South Korea and China followed this positive trend. The North American market, despite an improvement in the Housing Starts index, did not show significant improvement, however prices rose in our solid wood moldings business. Also, our MDF and PBO sales in North America had positive and stable price levels. In Brazil, our panels business had relatively stable price levels in Brazilian reals.

During 2015, average prices for our panels and wood products declined by 6.4% and 3.7% respectively, compared to 2014. Overall, countries with depreciated currencies increased their exports, resulting in greater supply in several markets, which in turn, lowered prices. In Brazil, for example, overall average prices dropped due to the country’s economic slowdown. In North America, increased competition mainly affected the MDF market, with increased exports from Brazilian and Canadian producers, among others. Prices for our moldings products remained stable. As a result of the decrease in Argentina’s competitiveness in the export market, we focused our sales efforts with respect to panels primarily on the domestic market. The higher production of our Nueva Aldea Mill increased our plywood sales volume throughout the year. Particleboards also showed increased sales benefitting from production at our Teno Mill, which reached full production capacity during the first quarter of 2015. We were also able to improve product mix sales, increasing sales of our greater value added products (such as melamine products). We also experienced increased competition in the Middle East in the sawn timber market during the first six months of 2015 due to higher supply from European markets.

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Prices for our panel, forestry and wood products may decline in the future. Our results of operations may be materially adversely affected if the prices of our products decline from current levels.

Costs

Our major costs of sales are the following:

• the cost of timber,

• costs related to harvesting (forestry works),

• maintenance costs,

• chemical costs,

• the cost of sawmill processing,

• depreciation, and

• energy and fuel costs.

Our major administrative and selling expenses are wages and salaries, traffic, shipping and freight costs, insurance expenses and commissions.

Our property, plant and equipment are depreciated on a straight-line basis over the remaining useful lives of the underlying assets. However, the amount of such depreciation that relates to our fixed production assets, such as pulp mills and sawmills, is allocated to finished goods held as inventories and accumulates until charged to cost of sales when the finished goods are sold. Forests and land are not depreciated. For additional information relating to the accounting treatment of our biological assets, see “—Critical Accounting Policies—Biological Assets.”

Selling expenses consist primarily of per tonne fees we pay to our selling agents. Traffic, shipping and freight costs are the outbound logistics costs of carrying the product to the client’s destination.

During 2011, cost of sales increased 26.6% as a result of increased sales volumes among all of our business segments and increases in the unit costs of our main products. In particular, our costs of sale per tonne of our bleached softwood pulp, bleached hardwood pulp and unbleached softwood pulp increased 10.7%, 21.7% and 15.5%, respectively, as compared to 2010. In 2011, our cost of sales measured as a percentage of total revenues represented 65.9%, as compared to 60.4% in 2010.

Cost of sales increased 9.2% during 2012 as a result of increased sales volume in all of our business segments and increases in the unit costs of our main products. Compared to 2011, our costs of sales per tonne increased 8.7% for bleached softwood pulp, increased 7.2% for bleached hardwood pulp, and increased 19.1% for unbleached softwood pulp. In 2012, our cost of sales measured as a percentage of total revenues was 73.6%, as compared to 65.9% in 2011.

Cost of sales increased 12.4% during 2013, when compared with 2012. This was mainly the result of an increase in the sales volumes of our panels, pulp and wood products business segments by 45.2%, 5.2% and 7.3%, respectively. In 2013, we were able to achieve lower unit costs of pulp. Our cost of sales per tonne of BKPR and EKPR decreased 4.7% and 6.0%, respectively. This was largely due to an improvement in production rates at our pulp mills as compared to 2012. In 2013, our cost of sales measured as a percentage of total revenues was 69.1%, as compared to 73.6% in 2012.

In 2014, our cost of sales increased 2.7% when compared with 2013. However as a percentage of our revenues, in 2014 and 2013 cost of sales represented 68.6% and 69.1% of total revenues, respectively. The 2.7% increase in cost of sales reflects the volume increase in our sales of pulp, sawn timber and panels by 6.5%, 3.6% and 2.3%, respectively.

In 2015, our cost of sales decreased 3.9% when compared to 2014. Energy and fuel costs decreased 25.5% when compared to 2014, mainly due to the global decline in crude oil prices and its derivatives. In addition, cost of timber declined 20.7% mainly due to the decrease in the volume of sales of sawn timber, especially in Chile. The depreciation of each of the Chilean peso, the Argentine peso and the Brazilian real against the U.S. Dollar had a positive effect on costs denominated in those depreciated currencies.

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Critical Accounting Policies

A summary of our significant accounting policies is included in Note 1 to our audited consolidated financial statements, which are included in this annual report. The preparation of consolidated financial statements in accordance with IFRS requires management to make subjective estimates and assumptions that affect the amounts reported. Estimates are based on historical experience and various other assumptions that are believed to be reasonable, though actual results and timing could differ from the estimates. Management believes that the accounting policies below take into account those matters that require the exercise of judgment, but acknowledge that different judgments could result in substantially different results. The most critical accounting policies and estimates are described below.

Property, Plant and Equipment

Property, plant and equipment are stated at cost and are depreciated using the straight-line method based on the estimated useful lives of the assets. The amount of such depreciation that related to our fixed production assets, such as pulp mills and sawmills, is allocated to finished goods held as inventories and accumulates until charged to cost of sales when the finished goods are sold. Forests and lands are not depreciated.

In estimating useful lives, we have primarily relied upon actual experience with the same or similar types of equipment and recommendations from the manufacturers. Useful lives are based on the number of years an asset is estimated to be productive. Estimates are revised periodically to recognize potential impacts caused by new technologies, changes to maintenance procedures, changes in utilization of the equipment, and changing market prices of new and used equipment of the same or similar types.

Property, plant and equipment assets are appraised for possible impairment. Factors that would indicate potential impairment may include, but are not limited to, significant decreases in the market value of a long-lived asset, a significant change in a long-lived asset’s physical condition and operating or cash flow losses associated with the use of a long-lived asset. This process requires our estimate of future cash flows generated by each asset or group of assets. For any instance where this evaluation process indicates impairment, the appropriate asset’s carrying values are written down to net realizable value and the amount of the write-down is charged against the results of continuing operations.

Expenditures that substantially improve and/or increase the useful life of facilities and equipment are capitalized. Other maintenance or repair costs are charged to income as incurred.

Fair Value of Financial Instruments

We recognize certain financial assets and liabilities on our statement of financial position at fair value, which is the value that we estimate would be attributable to such asset or liability in an arms-length disposition. As of the date of the initial recognition, our management classifies its financial assets at fair value through (i) income or (ii) collectible credits and accounts, depending on the purpose for which the financial assets were acquired.

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 make assumptions that are mainly based on market conditions existing at each balance sheet date.

The doubtful provision of trade receivables is established when there is evidence that Arauco will not receive payments under the original terms of sale. Provisions are made when the client is a party to a bankruptcy court agreement or cessation of payments, or when Arauco has exhausted all levels of recovery of debt in a reasonable time. See Note 23 to our consolidated financial statements.

Biological Assets

IAS 41 requires that biological assets, such as standing trees, are shown on the statement of financial position at fair value. Our forests are thus accounted for at fair value less estimated point-of-sale costs at harvest, considering that the fair value of these assets can be measured reliably.

The recovery of forest plantations is based on discounted cash flow models, which means that the fair value of biological assets is calculated using cash flows from continuing operations on the basis of sustainable forest management plans and considering the potential growth of forests. This recovery is performed on the basis of each forest stand identified and for each type of tree species.

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 administer regular surveys of the forests to establish the volumes of wood available for harvesting and their current growth rates. The principal considerations used to calculate the valuation of forest plantations are presented in Note 20 to our audited consolidated financial statements.

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Impairment of goodwill

Determining whether goodwill is impaired requires an estimate of the value in use of the cash-generating units to which goodwill has been allocated. Arauco estimates the value either based on appraisals and/or the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. See Note 17 to our audited consolidated financial statements.

Employee benefits

The cost of defined employee benefits for the 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. See Note 10 to our audited consolidated financial statements.

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Litigation and Contingencies

Arauco, its subsidiaries and our Uruguayan joint venture Montes del Plata are subject to certain ongoing lawsuits, the future effects of which need to be estimated by our management in collaboration with our legal advisors. See “Item 3. Key Information—Risk Factors—Risks Relating to Us and the Forestry Industry—We are subject to legal proceedings related to our mills which could adversely affect our business, financial condition, results of operations and cash flows” and “Item 8. Financial Information—Legal Proceedings.” See Note 18 to our audited consolidated financial statements.

Recently Issued Accounting Standards

Note 1 to our audited consolidated financial statements discusses new accounting pronouncements under IFRS that apply to annual periods beginning on or after January 1, 2015. There are no additional pronouncements, amendments or interpretations that could have a material impact on our financial statements.

Results of Operations

The following table provides a breakdown of our financial results of operations and sales volumes as of and for the years ended December 31, 2013, 2014 and 2015. The table and the discussion that follows are based on and should be read in conjunction with our audited consolidated financial statements, including the notes thereto, as of and for the years ended December 31, 2013, 2014 and 2015 included elsewhere herein. The audited consolidated financial statements included herein are prepared in U.S. dollars and in accordance with IFRS.

	For the year ended December 31,
	2013								2014								2015
	Sales			%			Volume		Sales			%			Volume		Sales			%			Volume
	(in millions of U.S. dollars, except where indicated)
Revenue
Pulp
Bleached pulp(1)	U.S.$	1,729.8			33.6	%		2,598.1		1,8885.5			35.3	%		2,827.8		1,959.7			38.1	%		3,077.9
Unbleached pulp(1)		300.4			5.8			481.9		310.2			5.8			451.5		283.4			5.5			459.6
Total		2,030.2			39.5			3,080.0		2,195.7			41.1			3,279.3		2,243.1			43.6			3,537.5
Panels
Plywood and fiberboard panels		1,927.3			37.5			5,163.2		1,921.2			36.0			5,284.0		1,837.1			35.7			5,508.9
Total		1,927.3			37.5			5,163.2		1,921.2			36.0			5,284.0		1,837.1			35.7			5,508.9
Solid Wood Products
Sawn timber(2)		584.7			11.4			2,283.9		637.6			11.9			2,361.5		498.4			9.7			2,078.9
Remanufactured wood products(2)		245.3			4.8			411.0		235.9			4.4			429.3		287.5			5.6			418.8
Total		829.9			16.1			2,694.9		873.5			16.3			2,790.7		785.9			15.3			2,497.7
Forestry Products
Logs, net(2)		118.2			2.3			2,694.4		121.2			2.3			2,760.9		87.9			1.7			2,384.3
Chips		21.2			0.4			304.8		19.5			0.4			302.5		17.6			0.3			277.6
Other		6.2			0.1			18.3		2.1			0.0			44.0		3.8			0.1			15.7
Total		145.6			2.8			3,017.5		142.8			2.7			3,107.4		109.2			2.1			2,677.6
Energy		146.3			2.8					159.9			3.0					121.1			2.4
Other		66.2			1.3					49.5			0.9					50.4			1.0
Total revenue		5,145.5			100	%				5,342.6			100	%				5,146.7			100	%
Cost of sales
Timber		(869.0	)							(809.0	)							(641.8	)
Forestry labor costs		(631.7	)							(655.3	)							(636.1	)
Maintenance costs		(210.0	)							(278.3	)							(305.7	)
Chemical costs		(485.8	)							(541.3	)							(539.9	)
Depreciation		(271.7	)							(323.3	)							(371.9	)
Other costs of sales		(1,088.9	)							(1,047.0	)							(1,016.1	)
Total cost of sales		(3,557.2	)							(3,654.1	)							(3,511.4	)
Gross profit		1,588.3			30.9	%				1,688.5			31.6	%				1,639.8			31.9	%
Other income		385.1								368.9								273.0
Distribution costs		(523.6	)							(556.8	)							(528.5	)
Administrative expenses		(544.7	)							(550.8	)							(552.0	)
Other expenses		(136.8	)							(138.8	)							(83.4	)
Other gains (losses)		0.0								0.0								0.0
Finance income		19.1								30.8								50.3
Finance costs		(232.8	)							(246.5	)							(263.0	)
Share of profit (loss) of associates and joint ventures accounted for using equity method		6.3								7.5								6.7
Exchange rate differences		(11.8	)							(10.0	)							(41.2	)
Income before income tax		548.9								592.8								497.4
Income tax		(130.4	)							(448.7	)							(129.7	)
Net income		418.6								144.2								367.7

(1) Volumes measured in thousands of tonnes.

(2) Volumes measured in thousands of cubic meters.

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Year Ended December 31, 2014 Compared to Year Ended December 31, 2015

Revenue

Revenue decreased 3.7% from U.S.$5,343 million in 2014 to U.S.$5,147 million in 2015, primarily as a result of:

• a 10.0%, or U.S.$87.5 million, decrease in revenue from wood products;

• a 4.4%, or U.S.$84.2 million, decrease in revenue from panels and fiberboard panels;

• a 23.5%, or U.S.$33.6 million, decrease in revenue from forestry products; which was partially offset by

• a 2.2%, or U.S.$47.4 million, increase in revenue from pulp.

Pulp. Revenue from bleached and unbleached pulp increased 2.2% from U.S.$ 2,195.7 million in 2014 to U.S.$2,243.1 million in 2015, reflecting a 7.9% increase in sales volume, offset by a 5.3% decrease in average prices. Sales of bleached pulp increased 3.9% due to a 8.8% increase in sales volume, offset by a 4.5% decrease in average prices. Our increase in sales volume partially reflects new sales from the Montes del Plata mill. During 2015, the price difference between softwood pulp and hardwood pulp decreased, and in the third quarter, hardwood pulp traded above softwood pulp. This was mainly because softwood prices decreased driven by large discounts made by Russian producers, who benefited from the depreciation of the Ruble. Also, European producers have benefited from a weaker Euro and this has resulted in market pressure to lower softwood prices. In the fourth quarter of 2015, hardwood prices fell below softwood prices, mainly driven by uncertainty in the Chinese market as a result of the devaluation of the Chinese Yuan, which added pressure to pulp prices overall. Revenue from unbleached pulp decreased 8.6% due to a 10.2% decrease in average prices, which was partially offset by a 1.8% increase in sales volume.

Panels. Revenue from panels decreased 4.4% from U.S.$ 1,921.1 million in 2014 to U.S.$1,837.1 million in 2015. This decrease in revenues was primarily due to a 8.3% decrease in average prices. Panel prices, in particular for MDF moldings and other value added products, declined as a result of increased supply originating from Argentina, Brazil and other countries with depreciated currencies, which in turn increased competition, especially in North America.

Wood products. Revenue from sawn timber and remanufactured wood products decreased 10.0% from U.S.$873.5 million in 2014 to U.S.$785.9 million in 2015, primarily as a result of a 10.5% decrease in sales volume, partially offset by a 0.5% increase in average prices. Sawn timber revenue decreased 21.8% from U.S.$637.6 million to U.S.$498.4 million due to a 12.0% decrease in sales volume and a 11.2% decrease in average prices. Prices declined throughout 2015 due to increased exports from countries with depreciated currencies to countries with better market conditions. Remanufactured products revenue increased 21.9% from U.S.$ 235.9 million in 2014 to U.S.$287.5 million due to a 24.9% increase in average prices, offset by a 2.4% decrease in sales volume. The North American market maintained its dynamism, with the Housing Starts index maintaining its positive trend during 2015, resulting in a sustained demand for solid wood products. Our product mix sales also improved, with products with higher margins accounting for a higher share of our sales.

Forestry products. Revenue from forestry products decreased 23.5% from U.S.$142.8 million in 2014 to U.S.$109.2 million in 2015. This decrease was primarily the result of a U.S.$ 33.4 million decrease in the revenue of logs, driven by a U.S.$47.0 million decrease in sales of sawlogs, which was partially offset by a U.S.$ 13.7 million increase in sales of pulplogs.

Other revenue. Revenue from other sources, consisting mainly of sales of energy and chemicals, decreased 17.7% from U.S.$208.3 million in 2014 to U.S.$171.4 million in 2015. This was primarily the result of a U.S.$38.8 million decrease in our energy sales, as a result of a decrease in average electricity prices in Chile.

Cost of sales

Cost of sales decreased 3.9% from U.S.$ 3,654.1 million in 2014 to U.S.$3,511.4 million in 2015, primarily as a result of a 10.5% decrease in our sales volume of wood products, which in turn decreased timber costs by 20.7%. In Brazil, timber costs decreased in U.S. Dollar terms as a result of the depreciation of the Brazilian real. Costs of energy and fuel used in our operations decreased by 25.5% compared to 2014, as well as costs of energy we sold back to the power grid by 47.1%, mainly driven by a decline in prices of crude oil and its derivatives.

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Gross Profit

As a percentage of total revenue, our gross profit increased slightly from 31.6% in 2014 to 31.8% in 2015, primarily as a result of a 3.9% decrease in our cost of sales, which was offset by a 3.7% decrease in sales revenue.

Other income

Other income decreased 26.0% from U.S.$368.9 million in 2014 to U.S.$273.0 million in 2015. Profits from changes in fair value of our biological assets decreased by 26.0% when compared to 2014, which reflects the lower U.S. dollar valuation of our biological assets, primarily in Brazil. In addition, gains from asset sales decreased 79.4% when compared to 2014. In 2014, the sale of 11,000 hectares of non-strategic plantations in Chile generated a non-recurring gain of U.S.$91 million.

Distribution costs

Distribution costs decreased 5.1% from U.S.$ 556.8 million in 2014 to U.S.$528.5 million in 2015, primarily due to a 5.5%, or U.S.$27.9 million, decrease in total shipping and freight costs. This is explained by a decline in shipping and freight tariffs. As a percentage of revenue, distribution costs remained fairly stable, at 10.3% in 2015, compared to 10.4% in 2014.

Administrative expenses

Administrative expenses increased slightly from U.S.$ 550.8 million in 2014 to U.S.$552.0 million in 2015. As a percentage of revenue, administrative expenses also increased from 10.3% in 2014 to 10.7% in 2015.

Finance costs

Finance costs increased 6.7% from U.S.$ 246.5 million in 2014 to U.S.$263.0 million in 2015. This increase was mainly due to the impact of the full year accrual of interest on the debt related to Montes del Plata, compared to six-months in 2014.

Exchange rate differences

Losses from exchange rate differences totaled U.S.$ 41.2 million in 2015, as a consequence of the currency depreciation in most of the countries in which we have operations, especially in our Argentine and Brazilian subsidiaries. In particular, the depreciation of the Argentine peso affected our cash and cash equivalents and account receivables of our Argentine subsidiary. In our Brazilian subsidiaries, Arauco do Brasil S.A. and Arauco Forest Brasil S.A., the depreciation of the Brazilian real generated a loss given that the outstanding loans are denominated in U.S. dollars. See “—Economic Indicators in Chile, Argentina, Brazil, Uruguay, the United States and Canada—Argentina.”

Income tax

We recorded an income tax expense of U.S.$ 129.7 million in 2015 compared to U.S.$ 448.7 million in 2014. This decrease is mainly explained by a direct charge in 2014 of approximately U.S.$292 million explained by the impact of a net increase in deferred liabilities attributable to the increase of the tax rate in accordance with Law No.20,780, in force since 2014. See “Item 3. Risk Factors—Risks Relating to Chile—A tax reform bill with significant changes for companies was approved in September 2014 and the Chilean Superintendency of Securities and Insurance, or SVS, modified accounting reporting standards for companies under its supervision in October 2014.”

Net income

Net income in 2015 increased 155.0% from U.S.$ 144.2 million in 2014 to U.S.$367.7 million in 2015., due to the impact of the non-recurring charge on income taxes in 2014. See “Item 3—Risk Factors—Risks Relating to Chile—A tax reform bill with significant changes for companies was approved in September 2014 and the Chilean Superintendency of Securities and Insurance, or SVS, modified accounting reporting standards for companies under its supervision in October 2014.”

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Year Ended December 31, 2013 Compared to Year Ended December 31, 2014

Revenue

Revenue increased 3.8% from U.S.$5,145.5 million in 2013 to U.S.$5,342.6 million in 2014, primarily as a result of:

• an 8.2%, or U.S.$165.5 million, increase in revenue from pulp; and

• a 5.2%, or U.S.$43.6 million, increase in revenue from wood products; which was partially offset by

• a 0.3%, or U.S.$6.0 million, decrease in revenue from panels; and

• a 1.9%, or U.S.$2.8 million, decrease in revenue from forestry products.

Pulp. Revenue from bleached and unbleached pulp increased 8.2% from U.S.$2,030.2 million in 2013 to U.S.$2,195.7 million in 2014, reflecting a 1.6% increase in average prices, and a 6.5% increase in sales volume. Sales of bleached pulp increased 9.0% due to a 0.2% increase in average prices and an 8.8% increase in sales volume. Our increase in sales volume partially reflects new sales from the Montes del Plata mill. Also, during 2014 we experienced higher demand, mostly from Asia, of shortfiber pulp, which resulted in price increases during the second half of the year. Prices of softwood, on the other hand, decreased during the last quarter of the year driven by large discounts made by Russian producers, who benefited from the depreciation of the Ruble. Also, European producers have benefited from a weaker Euro and this has resulted in market pressure to lower softwood prices. Revenue from unbleached pulp increased 3.2% due to a 10.2% increase in average prices, which was partially offset by a 6.3% decrease in sales volume.

Panels. Revenue from panels decreased 0.3% from U.S.$1,927.3 million in 2013 to U.S.$1,921.2 million in 2014. This decrease in revenues was primarily due to a 2.6% decrease in average prices due to the economic situation in Argentina and Brazil, and in particular the effect of currency devaluation over domestic sales in local currency. This was partially offset by a 2.3% increase in sales volume. See “Economic Indicators in Chile, Argentina, Brazil, Uruguay, the United States and Canada.” In 2014, we increased the plywood output at our Nueva Aldea Mill, which explains the higher volume produced and sold as compared to 2013.

Wood products. Revenue from sawn timber and remanufactured wood products increased 5.2% from U.S.$829.9 million in 2013 to U.S.$ 873.5 million in 2014, primarily as a result of a 1.6% increase in average prices, and a 3.6% increase in sales volume. Sawn timber revenue increased 9.0% from U.S.$584.7 million to U.S.$637.6 million due to a 3.4% increase in sales volume and a 5.5% increase in average prices. Remanufactured products revenue decreased 3.8% from U.S.$245.3 million in 2013 to U.S.$235.9 million due to a 7.9% decrease in average prices and a 4.4% increase in sales volume. All solid wood markets improved during 2014, with increased demand that permitted the sales mix and prices, to improve with respect to 2013. Asian markets, in particular, Japan, South Korea and China followed this positive trend. In the North American market, despite the Housing Starts index not showing a significant improvement, our solid wood moldings business grew both in volume and prices.

Forestry products. Revenue from forestry products decreased 1.9% from U.S.$145.6 million in 2013 to U.S.$142.8 million in 2014. This decrease was primarily the result of an aggregate U.S.$4.1 million decrease in the revenue of other forestry products.

Other revenue. Revenue from other sources, consisting principally of sales of energy and chemicals, decreased 2.0% from U.S.$212.5 million in 2013 to U.S.$208.3 million in 2014. This was primarily the result of a U.S.$17.7 million decrease in our chemical sales and other sales, partially offset by a U.S.$13.5 million increase in our energy sales.

Cost of sales

Cost of sales increased 2.7% from U.S.$3,557.2 million in 2013 to U.S.$3,654.1 million in 2014, primarily as a result of a volume increase in our sales of pulp, panels and wood products business segments by 6.5%, 2.3% and 3.6%, respectively. In particular, as compared to 2014, our maintenance costs increased by 32.5%, or U.S.$68.3 million, and our chemical cost increased 11.4%, or U.S.$ 55.5 million, and in each case, these increases are mainly explained by the costs added by our new Montes del Plata mill which began its ramp-up process in June 2014. We have also experienced an increase in unit costs of pulp. In particular, our cost of sales per tonne of BKP, EKP and UKP increased 1.3%, 5.7% and 0.3%, respectively as compared to 2013. The cost of sales was partially offset because the cost of timber decreased 6.9%, or U.S.$60.0 million, and the indirect cost of production decreased 26.5%, or U.S.$45.6 million.

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Gross Profit

As a percent of total revenue, our gross profit increased from 30.9% in 2013 to 31.6% in 2014, primarily as a result of a 3.8% increase in revenue, which was partially offset by an 2.7% increase in cost of sales.

Other income

Other income decreased 4.2% from U.S.$385.1 million in 2013 to U.S.$368.9 million in 2014. Other income in 2013 included a gain of U.S.$17.7 million from sales of assets.

Distribution costs

Distribution costs increased 6.4% from U.S.$523.6 million in 2013 to U.S.$556.8 million in 2014, primarily due to a 3.6%, or U.S.$17.8 million, increase in total shipping and freight costs. This is explained by higher sales volume of our pulp, panels and wood products business segments by 6.5%, 2.3%and 3.6%, respectively. As a percentage of revenue, distribution costs remained stable, at 10.2% in 2013 and 10.4% in 2014.

Administrative expenses

Administrative expenses increased 1.1% from U.S.$544.7 million in 2013 to U.S.$550.8 million in 2014, primarily as a result of an increase in wages and salaries, other administrative expenses, IT services and professional fees of U.S.$3.3 million, U.S.$11.8 million, U.S.$5.4 million and U.S.$5.7 million, respectively. As a percentage of revenue, however, administrative expenses decreased from 10.6% in 2013 to 10.3% in 2014.

Finance costs

Finance costs increased 5.9% from U.S.$232.8 million in 2013 to U.S.$246.5 million in 2014. This increase was mainly due to an increase of U.S$16.4 million in interest expenses on our outstanding bonds, which reflects an increase in the amount of our outstanding bonds in 2014.

Exchange rate differences

Losses from exchange rate differences decreased U.S.$1.8 million from U.S.$11.8 million in 2013 to U.S.$10.0 million in 2014. See “—Economic Indicators in Chile, Argentina, Brazil, Uruguay, the United States and Canada—Argentina.”

Income tax

We recorded an income tax expense of U.S.$130.4 million in 2013 compared to U.S.$448.7 million in 2014. This increase is mainly explained by a direct charge in 2014 of approximately U.S.$292 million explained by the impact of a net increase in deferred liabilities attributable to the increase of the tax rate in accordance with Law No.20,780, in force since 2014. See “Item 3. Risk Factors—Risks Relating to Chile—A tax reform bill with significant changes for companies was approved in September 2014 and the Chilean Superintendency of Securities and Insurance, or SVS, modified accounting reporting standards for companies under its supervision in October 2014.”

Net income

Net income in 2014 decreased 65.6% from U.S.$418.6 million in 2013 to U.S.$144.2 million in 2014, due to the impact of the non-recurring charge on income taxes. See “Item 3- Risk Factors—Risks Relating to Chile—A tax reform bill with significant changes for companies was approved in September 2014 and the Chilean Superintendency of Securities and Insurance, or SVS, modified accounting reporting standards for companies under its supervision in October 2014.”

Liquidity and Capital Resources

Our primary sources of liquidity are funds from operations, domestic and international borrowings from commercial and investment banks and debt offerings in the domestic and international capital markets.

Arauco has a liquidity policy, approved by the Board of Directors, which maintains conservative criteria regarding Arauco’s liquidity management. Using a combination of different variables, we define scenarios, each of which has independent criteria for defining a minimum liquidity level.

We also have access to two committed credit facility lines, which total U.S.$320 million. The first line has an available amount of UF 2,885,000, or approximately U.S.$120.0 million, and matures on January 29, 2020. The second line has a maximum available amount of U.S.$200.0 million and matures on March 27, 2020. As of the date of this annual report, Arauco has not used any of these committed credit facility lines.

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Cash Flow from Operating Activities

Our net cash flow provided by operating activities was U.S.$853.7 million in 2015 and U.S.$985.2 million in 2014. This decline was principally due to a U.S.$70.3 million increase in payments to suppliers of goods and services, as well as a U.S.$ 50.5 million increase in income taxes paid, among others. This was partially offset by U.S.$104.5 million increase in the collection of sales of goods and services.

Our net cash flow provided by operating activities was U.S.$985.2 million in 2014 and U.S.$897.7 million in 2013. This increase was principally due to a U.S.$74.7 million decrease in other payments from our operating activities and a U.S.$ 74.2 million decrease in payments to employees, partially offset by an increase of U.S.$72.4 million in payments to suppliers.

Cash Flow Used in Investing Activities

Our net cash used in investing activities was U.S.$477.8 million in 2015 and U.S.$655.2 million in 2014. This decrease was principally due to a 30.1%, or U.S.$138.4 million, decrease in our purchases of property, plant and equipment, mainly explained by the completion of the Montes del Plata mill during the third quarter of 2014. Additionally, compared to 2014, there was a decrease of 85.1%, or U.S.$ 135.2 million, in loans to related parties.

Our net cash used in investing activities was U.S.$655.2 million in 2014 and U.S.$687.6 million in 2013. This decrease was principally due to a 28.8%, or U.S.$ 185.6 million, decrease in our purchases of property, plant and equipment, partially offset by an increase of U.S.$158.8 million used during 2014 for a loan to related parties.

Cash Flow Used in Financing Activities

Our net cash used in financing activities was U.S.$812.2 million in 2015, compared to U.S.$7.9 million used in 2014. During 2015 we received U.S.$280.9 million in loan proceeds, and we paid U.S.$949.2 million of principal of and interest on our debt, including U.S.$370 million in a U.S. dollar-denominated bond, and U.S.$150 million in the prepayment of debt held by our subsidiary Flakeboard in North America. In addition, we paid U.S.$143.0 million in dividends.

Our net cash used in financing activities was U.S.$7.9 million in 2014, compared to the U.S.$7.8 million used in 2013. During 2014 we received U.S.$1,035.6 million, and we paid U.S.$900.6 million of principal of and interest on our debt. In addition, we paid U.S.$141.1 million in dividends.

We believe that cash flow generated by operations, cash balances, borrowings from commercial banks and debt offerings in the domestic and international capital markets will be sufficient to meet our working capital, debt service and capital expenditure requirements for the foreseeable future. See “Item 4—Information on our Company—Capital Expenditures.”

Contractual Obligations

As is customary practice in the pulp industry, we generally do not have long-term sales contracts with our customers; rather, we maintain relationships with our customers, with whom we reach agreements from time to time on specific volumes and prices.

The following table sets forth certain contractual obligations as of December 31, 2015, and the period in which the contractual obligations come due.

	Payments Due by Period
	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
	(in thousands of U.S. dollars)
Debt obligations(1)		254,936		1,206,158		1,184,271		2,429,344		5,074,709
Purchase obligations(2)		31,287		2,692		0		0		33,979
Capital (finance) lease obligations		36,862		56,299		34,398		0		127,559
Total		222,576		1,292,710		1,218,669		2,429,344		5,163,299

(1) Includes estimated interest payments related to debt obligations based on market values as of December 31, 2015.

(2) Excludes contracts entered into with independent contractors to perform operations on our behalf. Our payment obligations under such contracts are not pre-determined, but rather depend on the performance of certain variables. Accordingly, we cannot quantify our contractual obligations under such contracts.

Investing Activities

During 2015, our investment activities were mainly aimed at sustaining our existing property, plant and equipment, as well as our biological assets. Other investments included:

• U.S.$18.6 million for the expansion project in our Carolina Particleboard Mill; and

• U.S.$6.7 million for the new water treatment plan in the Arauco Mill.

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Financing Activities

During 2015, our principal financing activities were as follows:

• On January 29, 2015, Arauco executed a committed credit facility for 2,885,000 UF, or approximately U.S.$120 million, with a local bank, which matures on January 29, 2020. On March 27, 2015, a committed credit facility for U.S.$ 200 million was entered into with a syndicate of three foreign banks, which matures on March 27, 2020. After these lines of credit were entered into, Arauco terminated two committed facilities for U.S.$ 320 million that had been entered into in 2012 and expired during the last quarter of 2015.

• On April 20, 2015, we paid in full a U.S. dollar-denominated bond of U.S.$370 million.

• On September 28, 2015, we extended the maturity of a credit agreement entered into with a foreign bank originally maturing in June 2016 to September 27, 2018, and reduced the spread over LIBOR.

• On November 2, 2015, we prepaid in full a U.S.$ 150 million bank loan advanced to Flakeboard, maturing on November 1, 2017.

• On December 30, 2015, we issued two series of bonds in Chile, with ten and thirty years maturity and UF 20 million (U.S.$ 76 million) principal amount each.

As of December 31, 2015, our current portion of our bank debt was U.S.$199.7 million of which 86.1% was U.S. dollar-denominated. As of December 31, 2015, our total non-current portion of our bank debt was U.S.$797.8 million of which 98.0% was U.S. dollar-denominated.

As of December 31, 2015, we guaranteed obligations of U.S.$566.5 million related to Montes del Plata, U.S.$270.0 million related to Arauco Argentina and U.S.$16.4 million related to Arauco Forest Brasil y Mahal. As of December 31, 2015, we also had total capital markets borrowings (including the current portion of such debt) of U.S.$3,180.3 million, 72.9% of which was U.S. dollar-denominated. As of December 31, 2015, the weighted average maturity of our non-current debt was 6.48 years. The interest rate on our floating rate debt is determined principally by reference to the London inter-bank offered rate (LIBOR), and as of December 31, 2015, the average interest rate for our U.S. dollar floating rate debt over six-month LIBOR was 1.8%. As of December 31, 2015, the average interest rate for our U.S. dollar fixed rate debt was 5.3%. These average rates do not reflect the effect of swap agreements.

The instruments and agreements governing our bank loans and local bonds set limits on our incurrence of debt and liabilities through the use of financial covenants. The principal financial covenants contained in the bank loan agreements in effect on December 31, 2015 are as follows:

• Our debt to equity ratio must not exceed 1.2:1; and

• Our interest coverage ratio must not be less than 2:1.

The principal financial covenant contained in the local bond agreements is:

• Our debt to equity ratio must not exceed 1.2:1.

We were in compliance with all bank loan and bond covenants as of December 31, 2015. Our U.S. dollar-denominated bonds do not contain financial covenants.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements.

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TREASURY MANAGEMENT

We manage the treasury activities of all of our Chilean subsidiaries on a centralized basis. Our Chilean subsidiaries borrow from or lend money to us in accordance with their daily cash requirements or surplus, maintaining their cash balance close to zero. Our policy is not to allow our Chilean subsidiaries to invest in financial instruments and other transactions. We make decisions regarding short-term loans, short-term investments, currency transactions and other transactions on a consolidated basis. Treasury activities are governed by our cash and deposits policy, which is approved by the Board of Directors. The main principles of our cash and deposits policy are as follows:

• investments must be in fixed income instruments;

• investments must be in instruments from the Central Bank of Chile or from reputable financial institutions; and

• transactions must be carried out only with banks or bank subsidiaries.

Our Argentine, Brazilian, Canadian and U.S. subsidiaries manage their treasury activities independently from us. Their activities are governed by corporate cash and deposit policies approved by our Chief Financial Officer. These policies are based on the same principles underlying our cash and deposits policy, and subject to compliance with local regulations, including foreign exchange controls.

HEDGING

We periodically review our exposure to risks arising from fluctuations in foreign exchange rates and interest rates and make a determination, on a case-by-case basis, at our senior management level whether or not to hedge such risks. Our Derivatives Policy establishes the minimum requisites our counterparties must meet, as well as proper procedures. As a result, from time to time we enter into currency and interest rate swaps with respect to a portion of our borrowings. See Note 23 to our audited consolidated financial statements. Arauco applies hedge accounting for financial instruments whose purpose is to hedge against foreign currency fluctuations.

Cross Currency Swap Agreements

We have outstanding the following cross currency swap agreements in Chile to hedge our local bonds issued in UF:

Bank	U.F. notional amount		U.S.$ notional amount		Hedging Start Date	Maturity
Deutsche—England		1,000,000		43,618,307	30-10-2011	30-10-2021
JP Morgan—N.A.		1,000,000		43,618,307	30-10-2011	30-10-2021
Deutsche—England		1,000,000		37,977,065	30-04-2014	30-04-2019
BBVA—Chile		1,000,000		38,426,435	30-10-2014	30-04-2023
BBVA—Chile		1,000,000		38,378,440	30-10-2014	30-04-2023
Santander—Chile		1,000,000		37,977,065	30-10-2014	30-04-2023
BCI—Chile		1,000,000		37,621,562	30-10-2014	30-04-2023
Corpbanca—Chile		1,000,000		42,864,859	01-09-2010	01-09-2020
BBVA—Chile		1,000,000		42,864,859	01-09-2010	01-09-2020
Deutsche—England		1,000,000		42,864,859	01-09-2010	01-09-2020
Santander—Spain		1,000,000		42,873,112	01-09-2010	01-09-2020
BBVA—Chile		1,000,000		42,864,257	01-09-2010	01-09-2020
Corpbanca—Chile		1,000,000		46,474,122	15-05-2012	15-11-2021
JP Morgan—N.A.		1,000,000		47,163,640	15-11-2012	15-11-2021
BBVA—Chile		1,000,000		42,412,852	15-11-2013	15-11-2023
Santander—Chile		1,000,000		41,752,718	15-11-2013	15-11-2023
Deutsche—England		1,000,000		41,752,718	15-11-2013	15-11-2023
Santander—Chile		3,000,000		128,611,183	01-10-2014	01-04-2024
JP Morgan – U.K.		1,000,000		43,185,224	01-10-2014	01-04-2024
Corpbanca—Chile		1,000,000		43,277,070	01-10-2014	01-04-2024
BCI—Chile		1,000,000		43,185,224	01-10-2014	01-04-2021
BCI—Chile		1,000,000		43,196,695	01-10-2014	01-04-2021
TOTAL		24,000,000		1,012,960,573

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These cross currency swap agreements allow us to address uncertainties regarding exchange rates. Through these agreements, we receive cash flows in UF, which allow us to comply with the terms of our outstanding bonds and pay fixed amounts in U.S. dollars, the currency in which a significant amount of our assets are denominated.

The aggregate fair value of our cross currency swap agreements as of December 31, 2015 represented a liability of U.S.$ 205.6 million as compared to December 31, 2014, when they represented a liability of U.S.$110.0 million.

Zero Cost Collar Agreements

We have also analyzed our exposure to risks associated with fluctuations in the prices of commodities, including pulp and fuel oil. As of December 31, 2015, we had outstanding the following zero cost collar agreements to hedge fluctuations in the prices of fuel oil and diesel in Chile:

Bank	Commodity	Amount	Hedging Start Date	Maturity
JP Morgan—U.K.	Fuel Oil N°6	674 Thousands Bbl.	01-01-2015	31-12-2015
JP Morgan—U.K.	Diesel	29,465 Thousand Gall.	01-06-2015	31-05-2016
JP Morgan—U.K.	Fuel Oil N°6	337 Thousand Bbl	01-01-2016	30-06-2016

The fair value of these agreements as of December 31, 2015 represented a liability of U.S.$16.8 million.

Commodity Swap Agreements

As of December 31, 2015, we have outstanding the following commodity swap agreements to hedge fluctuations in the prices of fuel oil in Uruguay:

Bank	Commodity	U.S.$ Notional Amount
JP Morgan – N.A.	Fuel Oil N°6	13,374,141(1)
DNB Bank ASA	Fuel Oil N°6	5,770,950(1)

(1) U.S.$ notional amount includes multiple contract agreements.

The fair value of these agreements as of December 31, 2015 represented a liability of U.S.$4.1 million for Arauco. The fair value shown in the table above represents 50% of total fair value, since these agreements were entered into by Montes del Plata (of which Arauco owns 50% of its shares).

Interest Rate Swap Agreements

We have outstanding the following interest rate swap agreements to hedge fluctuations in floating rates for long-term debt in Uruguay:

Bank	Currency	U.S.$ Notional Amount
JP Morgan – N.A	USD	135,033,619(1)

(1) U.S.$ notional amount includes multiple contract agreements.

The fair value of this agreement as of December 31, 2015 represented an asset of U.S.$0.2 million for Arauco. We note that fair value shown in the table above is 50% of total fair value, since these agreements were entered into by Montes del Plata (of which Arauco owns 50% of its shares).

Forward Agreements

As of December 31, 2015, we have outstanding agreements in Argentina, Colombia and Uruguay to hedge fluctuations in their respective local currencies, as follows:

Bank	Exchange Rate	U.S.$ Notional Amount			Hedging Start Date	Maturity
BBVA Banco Frances	USD-ARG		8,606,250		08-09-2015	31-05-2016
Corpbanca Colombia	USD-COP		4,000,000		11-11-2015	01-02-2016
BBVA Colombia	USD-COP		9,000,000		03-12-2015	01-03-2016
Banco Santander Uy	USD-UYU		33,000,000	(1)	—	—
JPMorgan Chase Bank, N.A.	USD-UYU		2,000,000	(1)	—	—
Citibank U.K.	USD-UYU		4,410,000	(1)	—	—
Citibank Uruguay	USD-UYU		4,500,000		13-03-2015	10-03-2016
HSBC Uruguay	USD-UYU		14,350,000	(1)	—	—

(1) U.S.$ notional amount includes multiple contract agreements.

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The fair value of these agreements as of December 31, 2015 represented an asset of U.S.$2.2 million for Arauco, which includes 50% of total fair value for agreements entered into by Montes del Plata (of which Arauco owns 50% of its shares).

RESEARCH AND DEVELOPMENT

We spent U.S.$2.6 million in 2013, U.S.$3.1 million in 2014 and U.S.$2.6 million in 2015 on research and development. We conduct our principal research and development programs through our subsidiary, Bioforest, which concentrates its efforts on applying and implementing advanced technologies to the specific characteristics of our forests and mills.

In our Forestry product business segment, we are continuously researching and attempting to develop different strains of long-fiber pine and short fiber eucalyptus trees to improve their quality and to shorten their average harvest cycle. Additionally, we maintain close relations with certain international research institutes and the scientific community that participate in our industry. Bioforest has increased the growth rate of our radiata pines, eucalyptus globulus and eucalyptus nitens, adding more value to our plantations.

In the pulp and panels business segments, Bioforest has been adding value to Arauco through researching and developing new technologies in order to produce our goods in a more efficient way and improve the quality of our products, to use them in new ways and to create a better understanding and knowledge of our process.

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TREND INFORMATION

From December 31, 2015 to March 31, 2016, prices for softwood decreased by 1.73%, reaching U.S.$789.47 per tonne, while prices for hardwood decreased by 6.61% to U.S.$736.79 per tonne. The depreciation of the Chinese yuan during 2015 continues to have repercussions on prices in 2016, although the Chinese yuan has slightly appreciated 0.41% during the first three months of the year. Hardwood prices have been under pressure by increased supplies to the markets while demand has remained stable. Average prices in Europe and the Middle East have also declined, although less than in China.

For the panel business, we expect the market for PBO to remain stable and demand for MDF to increase. Sales of MDF and PBO in Argentina are expected to remain stable. Uncertainty regarding Brazil may impact regional markets. North America has maintained its dynamism, in spite of growing supplies from countries with depreciated currencies

Although wood products experienced a decline in sales during the second half of 2015, we expect sales to regain their momentum and stabilize. Our moldings in North America have maintained solid demand. In Latin America, our sales have remained stable and we have increased our market share. Prices may be affected by increased competition from countries whose local currency has depreciated during 2015, although many have appreciated throughout the last three months, such as the Brazilian real.

For more information regarding trends in our business, see “Item 5. Operating and Financial Review and Prospects—Overview” and “—Exchange Rate Fluctuations.” For risks affecting our business, see “Item 3. Key Information—Risk Factors.”

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Item 6. Directors, Senior Management and Employees

DIRECTORS AND EXECUTIVE OFFICERS

Directors

A Board of Directors manages our business. Our estatutos (by-laws) require that the Board of Directors consist of nine directors. Our directors cannot also be our executives. The entire board is elected every three years and can be re-elected for any number of periods. The current board was elected in April 2016, and their terms will be renewed in April 2019. The board may appoint replacements to fill any vacancies that occur during periods between elections; however, at the annual shareholders’ meeting following any such replacement, an election of the entire board must take place. Scheduled meetings of the Board of Directors are generally held once a month. Extraordinary board meetings are called when summoned by the Chairman or when requested by at least two directors. We have not entered into any contracts with our current directors to provide any benefits upon the termination of their relationship with us. We do not have a compensation committee.

Our current directors are listed below.

Name	Years as Director	Position	Age
Manuel Bezanilla	29	Chairman	71
Roberto Angelini	29	First Vice-Chairman	67
Jorge Andueza	22	Second Vice-Chairman	67
José Rafael Campino	6	Director	63
Alberto Etchegaray	22	Director	70
Eduardo Navarro	8	Director	50
Timothy C. Purcell	11	Director	56
Franco Mellafe	1	Director	40
Juan Ignacio Langlois	0	Director	48

Included below are brief biographical descriptions of each of our directors.

Manuel Bezanilla became a Director on April 30, 1986 and became Chairman of the Board of Directors on April 23, 2013. He served as Second Vice-Chairman of the Board of Directors from May 4, 2007 to April 23, 2013. He is also a partner of the law firm Portaluppi, Guzmán y Bezanilla. He serves as Chairman of the board of Forestal Arauco and serves as a member of the boards of directors of Pesquera Iquique-Guanaye S.A., AntarChile and Inversiones Siemel S.A. Mr. Bezanilla holds a law degree from the Catholic University of Chile.

Roberto Angelini became a Director on April 30, 1986 and became First Vice-Chairman of the Board of Directors on May 4, 2007. He served as Vice-Chairman of the Board of Directors from April 18, 1991 to January 4, 2005, when he voluntarily resigned, and as Second Vice-Chairman of the Board of Directors from January 27, 2005 to May 4, 2007. He serves as Chairman of the board of directors of Empresas Copec, COPEC, AntarChile, Corpesca S.A., Pesquera Iquique-Guanaye S.A., Inversiones Alxar S.A. and Servicios Corporativos Sercor S.A. He also serves as a member of the boards of directors of Forestal Arauco, Empresa Pesquera Eperva S.A., Orizon S.A. and Inversiones Siemel S.A. Mr. Angelini holds a degree in civil engineering from the Catholic University of Chile.

Jorge Andueza became a Director on April 11, 1994 and was appointed Second Vice-Chairman of the Board of Directors on April 23, 2013. He is also the Chief Executive Officer of AntarChile, the Chairman of the board of directors of Inversiones Siemel S.A. and Orizon S.A., and serves as a member of the boards of directors of COPEC, Empresas Copec, Forestal Arauco, Empresa Pesquera Eperva S.A., Corpesca S.A., Pesquera Iquique-Guanaye S.A., Organización Terpel S.A. and Servicios Corporativos Sercor S.A. Mr. Andueza holds a degree in electronic civil engineering from Federico Santa María Technical University.

José Rafael Campino became a Director on March 23, 2010. He is currently Chairman of the board of directors and Chief Executive Officer of Forestal del Sur S.A., a member of the board of directors of Forestal Los Lagos S.A. and Forestales Regionales S.A., Managing Partner of Forestal Atlántico Sur S.A.R.L. in Montevideo, Uruguay and former President of the Corporación Chilena de la Madera (Chilean Forestry Association). Mr. Campino holds a degree in civil engineering from the Catholic University of Chile and Master of Science degree in management from Stanford University.

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Alberto Etchegaray became a Director on April 11, 1994 and served as Chairman of the Board of Directors from January 4, 2005 to May 4, 2007, when he voluntarily resigned. He is also a partner of Domet Ltda., the Chairman of the board of directors of Inversiones La Construcción S.A. and Red Salud S.A., and the Vice Chairman of the Board of Directors of Salfacorp S.A. He served as the Chilean Minister of Housing for four years. Mr. Etchegaray holds a degree in civil engineering from the Catholic University of Chile.

Eduardo Navarro became a Director on September 25, 2007. He is also the Chief Executive Officer of Empresas Copec S.A., the Chief Executive Officer of Pesquera Iquique-Guanaye S.A., and serves as a member of the board of directors of COPEC, Abastible S.A.,, Corpesca S.A., Orizon S.A., Inversiones Alxar S.A., Inversiones Laguna Blanca S.A., Inversiones del Nordeste S.A. and Colbún S.A. Mr. Navarro holds degrees in commercial engineering and economics, and a master’s degree in economics, all from the Catholic University of Chile.

Timothy C. Purcell became a director on April 26, 2005. He is also Managing Partner of Linzor Capital Partners, LP. Mr. Purcell currently serves as a member of the board of directors of Komax, S.A., Tip de México, S.A. de C.V., and Corporación Santo Tomás. He is also a director of Enseña Chile, a Trustee of International House in New York and a Trustee of the Chilean chapter of The Nature Conservancy. Mr. Purcell received an undergraduate degree with distinction in Economics from Cornell University, as well as a Master’s Degree in International Studies from the University of Pennsylvania and a master’s degree in business (MBA) from Wharton Business School.

Franco Mellafe became a director on April 21, 2015. He has also served as member of the board of directors of Inversiones Angelini y Compañía Limitada since July 2013. Mr. Mellafe holds a Master’s Degree in Business Administration from Babson College and an undergraduate degree in Business Administration from Gabriela Mistral University. Before joining our Board of Directors, Mr. Mellafe worked for twelve years in different positions in Arauco.

Juan Ignacio Langlois became a director on April 26, 2016. He is also Partner of Tyndall Group. Mr. Langlois currently serves as a member of the board of directors of Metrogas S.A. and the Instituto Chileno de Administración Racional de Empresas (ICARE). He also serves as alternate director of Minera Las Cenizas S.A. Mr. Langlois received a law degree with maximum distinction from the Universidad de Chile School of law as well as a master’s degree in business administration (MBA) from the Kenan-Flagler Business School, University of North Carolina at Chapel Hill.

Executive Officers

Our executive officers are appointed by the Board of Directors and hold office at its discretion. Our current principal executive officers and the directors of each area or department are listed below.

Name	Years with Arauco	Position	Age
Matías Domeyko(1)	27	Chief Executive Officer	54
Cristián Infante	20	President and Chief Operating Officer	49
Gianfranco Truffello	21	Chief Financial Officer	48
Robinson Tajmuch	25	Senior Vice-President Comptroller	59
Camila Merino	5	Senior Vice-President Human Resources and EHS	48
Franco Bozzalla	26	Senior Vice-President Wood Pulp and Energy	53
Charles Kimber	30	Senior Vice-President Commercial & Corporate Affairs	54
Antonio Luque	24	Senior Vice-President Timber and Panels	59
Alvaro Saavedra	24	Senior Vice-President Forestry	60
Gonzalo Zegers	8	Senior Vice-President International and Business Development	55
Felipe Guzmán	7	General Counsel	46

(1) Matías Domeyko worked at Arauco from 1987 to 1994. He rejoined Arauco in 1997.

Included below are brief biographical descriptions of each of our executive officers and the directors of each area or department.

Matías Domeyko is the Chief Executive Officer of Arauco. Mr. Domeyko worked at Arauco from 1987 to 1994, and then rejoined in 1997 as our Chief Financial Officer. In 2005, Mr. Domeyko assumed the position of Chief Executive Officer of Arauco. He previously served as the Director of Development of Copec. Mr. Domeyko holds a degree in commercial engineering from the University of Chile.

Cristián Infante is the President and Chief Operating Officer of Arauco, a position that was created by Arauco in July 2011. He joined Arauco in 1996 as a woodpulp sales representative, and in 1998 was appointed sales manager for industrial lumber and remanufactured products of Forestal Arauco. He then moved to Centromaderas S.A. where he worked until 2001. Mr. Infante later served as the Corporate Management & Development Director and the Atlantic Region Managing Director. Mr. Infante holds a degree in civil engineering from the Catholic University of Chile.

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Gianfranco Truffello is the Chief Financial Officer of Arauco. He joined Arauco in 1994 and was previously our Finance Manager. He also served as the Chief Financial Officer of Arauco Argentina S.A. Mr. Truffello holds a degree in civil engineering from the Catholic University of Chile and a master’s degree in business administration from the Massachusetts Institute of Technology.

Robinson Tajmuch is the Senior Vice-President Comptroller of Arauco. He joined Arauco in 1991 and was previously our Comptroller. Before joining Arauco, he served as Auditing Manager at Price Waterhouse. Mr. Tajmuch holds a degree in accounting and auditing from the Santiago University of Chile.

Camila Merino is the Senior Vice-President Human Resources and EHS of Arauco. Prior to joining Arauco, Ms. Merino served as the Labor Minister of the Chilean government. She also served as Chief Executive Officer at Metro de Santiago and Corporate Vice President at SQM. Ms. Merino holds a degree in civil engineering from the Catholic University of Chile and a master’s degree in business administration from the Massachusetts Institute of Technology.

Franco Bozzalla is the Senior Vice-President Woodpulp and Energy of Arauco. He joined Arauco in 1990. He was formerly a sales representative of Forestal Arauco and the Panels Area Managing Director. Mr. Bozzalla holds a degree in civil engineering from the Catholic University of Chile.

Charles Kimber is the Senior Vice-President Commercial & Corporate Affairs of Arauco. He graduated from the Catholic University of Chile with a degree in Commercial Engineering and joined Arauco in 1986, where he has held several positions in sales. He was previously Managing Director of Arauco Wood Products Inc.

Antonio Luque is the Senior Vice-President Timber and Panels of Arauco. He joined Arauco in 1993. Before joining Arauco, he was the General Manager of Cabildo S.A. and a research engineer at Compañía Industrial. Mr. Luque holds a degree in civil engineering from the University of Chile.

Alvaro Saavedra is the Senior Vice-President Forestry of Arauco. He joined Arauco in 1991. Previously, he was the Director of Development of Forestal Arauco. He holds a degree in civil engineering from the University of Chile and a master’s degree in science from the University of London.

Gonzalo Zegers is the Senior Vice-President International and Business Development of Arauco. He joined Arauco in 2008. Before joining our Company, he was the general manager of Agrofruta S.A. from 1991 to 1995, Chief Financial Officer (1995-1996) and Chief Executive Officer (1996-2005) of MASISA, and Chief Executive Officer of ATC Panels Inc. (USA) until 2008. Mr. Zegers holds a degree in commercial engineering from the Santiago University of Chile.

Felipe Guzmán is the General Counsel of Arauco. He joined Arauco in December 2008. Before joining our Company, he worked at the law firm Portaluppi, Guzmán & Bezanilla (1996-2008), and he spent a year as an International Associate at Simpson, Thacher & Bartlett in New York (2000-2001). Mr. Guzmán holds a law degree from Finis Terrae University, and a Master of Law from Duke University.

Compensation

For 2015, the aggregate compensation of all our directors and executive officers and senior managers paid or accrued in that year for services in all capacities, including salaries and compensation for their service to those executive officers who serve as directors, was U.S.$1.1 million. We do not maintain any pension or retirement programs or incentive compensation plans for our directors or executive officers. We also do not maintain any plans providing for benefits upon termination of employment. The following table sets out the compensation of our directors for their services as directors in the years provided.

Name	2014		2015
Manuel Bezanilla	U.S.$	198,191	U.S.$	173,830
Roberto Angelini		136,881		124,329
Jorge Andueza		136,881		124,329
José Tomás Guzmán		121,639		110,532
Cristián Infante		99,913		74,864
Matías Domeyko		87,274		63,336
Jorge Garnham M.		60,669		62,929
José Rafael Campino		61,126		55,196
Alberto Etchegaray		60,969		55,196
Eduardo Navarro		61,126		55,196
Timothy C. Purcell		61,126		55,196
Franco Mellafe				36,345
Alvaro Saavedra		39,244		19,528

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Name	2014		2015
Nicolás Majluf		61,126		14,018
Jorge Serón		4,063		11,528
Robinson Tajmuch		23,244		11,528
Antonio Luque		26,605		8,000
Gonzalo Zegers		16,000		8,000
Franco Bozzalla		29,514		7,616
Pablo Ruival		12,900		3,000
Sergio Gantuz		12,900		3,000
Eduardo Zañartu		12,639		2,932
Charles Kimber		29,848		—
Gianfranco Truffello		10,605		—
Total Compensation		1,364,483		1,080,428

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Board Practices

In 2013, we created an audit committee, which is composed of two directors, Jorge Andueza and Timothy C. Purcell, as well as the Chief Executive Officer of Arauco, the Chief Operating Officer of Arauco, the Senior Vice-President Comptroller of Arauco and the General Counsel of Arauco. Our securities are not listed on any U.S. national securities exchange and, therefore, we are not subject to the rules relating to audit committees imposed by the Sarbanes-Oxley Act of 2002, as amended. In the Board of Director´s Meeting of November 24, 2015, it was agreed to reinforce the role of the audit committee, giving it new powers and amplifying its members. It is now composed by three directors: Jorge Andueza, Timothy C. Purcell, and Eduardo Navarro, as well as the Chief Executive Officer of Arauco, the President and Chief Operating Officer of Arauco, the Senior Vice-President Comptroller of Arauco, and the General Counsel of Arauco. It was also agreed that it would report to the Board of Directors on a biannual basis.

We also have an ethics committee that ensures compliance with our ethics code, which defines, promotes and regulates behavior of professional and personal excellence consistent with our philosophy and values to be followed by all our staff.

Employees

The following table provides a breakdown of our employees by main category of activity as of the end of each year in the three-year period ended December 31, 2015.

	As of December 31,
	2013		2014		2015
Executives		371		391		446
Professionals and Technicians		4,152		4,257		4,621
Workers		8,801		8,928		9,681
Total		13,324		13,576		14,748

Under Chilean and Brazilian labor legislation, we are secondarily liable for the payment of labor and the social security obligations owed to employees of our contractors. In Chile, in the event that we do not exercise the rights granted to us by the labor laws regarding the supervision of our contractors in their compliance of their labor and social security obligations, then our responsibility is elevated from secondary to joint and several, thus enabling an employee of a contractor to bring a claim relating to these obligations against both the contractor and to us, as the party hiring such contractor, although the contractor would remain primarily liable for such obligations. Furthermore, as a general rule, we are also responsible for some of the health and safety conditions of the contractors’ workers, and we are obligated to supervise the compliance by our contractors with all obligations related to such conditions while such workers are performing activities for us within our corporate purpose.

In Argentina, substantially similar joint liability rules apply to a principal and its contractors. In addition, national rural labor law, Law No. 26,727, promulgated on December 28, 2011 and fully operational in March 2013 after publication of certain relevant regulations, permits contractor employees under forestry contracts to bring actions directly against the principal to whom the employees’ services are being provided, instead of requiring them to bring actions against the contractor. For work or services related to the ordinary production process of a principal, the law provides that an employment relationship exists between the principal and the employee of the contractor.

Approximately 34% of our employees in Chile, 47% of our employees in Argentina, 23% of our employees in Uruguay, almost 100% of our employees in Brazil and none of our employees in the United States or Canada were unionized as of December 31, 2015. We negotiate collective bargaining agreements of two, three or four years’ duration with unionized employees.

We have stable employee relations in Chile, Argentina, Brazil, the United States and Canada. Our Chilean operations have not experienced any work stoppages in the last five years other than (i) four separate occasions of transportation contractors blocking the entrance of our Horcones Complex on January 13, February 17, March 24, and September 21, 2015; (ii) a one-day stoppage at the Valdivia Pulp Mill in June and an eight-day stoppage in September 2014, caused by employees of third party service providers, (iii) four separate occasions of transportation contractors blocking the entrances of our Horcones complex on February 24 and 25, September 3, October 22 and 23, and November 20, 2014, (iv) a four-day stoppage at the Arauco plywood mill in January 2013, caused by employees of third-party contractors and (v) a four-day work stoppage in July 2012 at our Arauco plywood mill located in Arauco, during which production resumed partially after the second day; which was caused by the employees of our third-party forestry contractors at each of the respective facilities. During 2015, the pulp union carried out three work stoppages and blockade; the first event occurred on May 25 for three days, the second on August 3, lasting three days; and the last one on September 1, which lasted 14 days.

Our Argentine operations have not experienced any work stoppages in the last five years other than (i) a three-day stoppage at Arauco Argentina’s chemical mill in March 2011, as a result of a strike by the chemical union; (ii) a 27-day stoppage at Arauco Argentina’s Zarate mill in April 2013, as a result of a strike by the construction union; (iii) a two-day stoppage at Arauco Argentina’s chemical mill in May 2013, as a result of a strike by the Santa Fe Federation of Labour; (iv) a one-day stoppage at Arauco Argentina’s

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pulp mill in June 2013 and a three-day stoppage at Arauco Argentina’s pulp mill in October 2013, both as a result of a strike by the pulp union; (v) a four-day stoppage at Arauco Argentina’s pulp mill in December 2014, as a result of a strike by the pulp union; (vii) a five-day stoppage at Arauco Argentina’s mill in Misiones in January 2015, as a result of a road blockage lead by the truckers union; (viii) a 6-hour stoppage in Arauco Argentina’s mill in Zarate; and a stoppage of 3 days during May 2015 and August 2015, as well as a 14-day stoppage during September in Arauco Argentina’s pulp mill, Alto Paraná.

Our Brazilian operations have not experienced any work stoppages in the last five years.

In September 2011, we experienced a 21-day work stoppage of construction at the Montes del Plata joint operation in Uruguay. In 2012, we experienced approximately 17 days of work stoppages and in 2013, approximately 33 days of work stoppages during the construction at Montes del Plata. These stoppages were caused by national and local strikes, related to various labor conflicts mostly of Montes del Plata subcontractors.

During the last four years, there have been no strikes or other material work stoppages at our U.S. and Canadian subsidiaries.

SHARE OWNERSHIP

Our First Vice-Chairman, Roberto Angelini, owns directly and indirectly 29.7% of Inversiones Angelini y Compañía Limitada (“Inversiones Angelini”), which is the principal shareholder of AntarChile. He directly owns 0.2% of AntarChile. Through his direct and indirect interests in Inversiones Angelini, AntarChile and Empresas Copec, Roberto Angelini beneficially owns 15.2% of our shares.

None of our other directors or executive officers beneficially owns 1% or more of our shares.

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Item 7. Major Shareholders and Related Party Transactions

MAJOR SHAREHOLDERS

Our only outstanding voting securities are shares of common stock of a single series, without nominal (par) value. The following table sets forth certain information concerning ownership of our common stock, as of April 27, 2016, with respect to each shareholder known by us to own more than 5% of the outstanding shares of our common stock and all of our directors and executive officers, as a group.

	Number of Shares Owned		Percentage Ownership
Empresas Copec		113,134,814		99.98
Directors and executive officers of our Company, as a group		—		—

Through its ownership of our Common Stock, Empresas Copec currently has voting control over us.

Empresas Copec is a Chilean public company listed on the Santiago Stock Exchange, the Valparaíso Stock Exchange and the Chilean Electronic Stock Exchange. It is a holding company, the principal interests of which are in Arauco, gasoline distribution, electricity, gas distribution, fishing and mining. Before October 1, 2003, Empresas Copec’s legal name was Compañía de Petróleos de Chile S.A. As of that date, Compañía de Petróleos de Chile S.A. transferred all its gasoline and fuel-related business assets to a new subsidiary, Compañía de Petróleos de Chile COPEC S.A., and changed its legal name to Empresas Copec S.A. As of December 31, 2015, AntarChile owned 60.8% of Empresas Copec.

Through its ownership in Empresas Copec, AntarChile beneficially owned 60.8% of our shares as of December 31, 2015. As of April 27, 2016, AntarChile beneficially owned 60.8% of our shares. Inversiones Angelini in turn owns 63.4% of AntarChile’s shares, and certain other related investors own an additional 10.52% of AntarChile. Inversiones Angelini and such other investors are defined herein as the “Angelini Group.”

The principal equity owners of interest in Inversiones Angelini are Mrs. María Noseda Zambra with 10.9%, Mr. Roberto Angelini Rossi directly and indirectly with 29.7%, and Mrs. Patricia Angelini Rossi directly and indirectly with 24.3%.

As of December 31, 2015 and April 27, 2016, the Angelini Group controlled Arauco through the ownership structure described above.

RELATED PARTY TRANSACTIONS

We engage in a variety of transactions in the ordinary course of business with related parties. Related parties include, among others, directors, officers and affiliates of our Company. The norms for transactions with related parties by and among public corporations and their subsidiaries are mainly regulated by Title XVI of the Chilean Companies Act, or Title XVI, which was included by Law No. 20,382 published in the Official Gazette on October 20, 2009, and articles 44 and 89 of the Chilean Companies Act. Title XVI requires that our transactions with related parties contribute to our Company’s interest and be on a market basis or on terms similar to those prevailing in the market. In addition, Title XVI provides that related party transactions must be approved by an informed majority of the disinterested members of the Board of Directors. If a majority of the disinterested directors abstains from voting on a particular transaction, the transaction must be approved by a unanimous vote of the non-abstaining disinterested directors or by two-thirds of the shares with voting rights. Resolutions approving any such transactions must be reported to our shareholders at the next annual shareholders’ meeting.

Notwithstanding the above, in accordance with Article 147 of the Chilean Companies Act, our Board has resolved that the following transactions with related parties do not need to follow the procedure set forth in the previous paragraph: (i) transactions which do not involve material amounts; (ii) transactions with affiliates in which we control 95% or more of the equity; and (iii) transactions that are considered by our Board to be performed in the ordinary course of our business in accordance with our general policy of customary dealings, which was approved by our Board on December 29, 2009 and is available to shareholders at our main office and is published on our website, at www.arauco.cl.

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Article 146 of the Chilean Companies Act defines related party transactions as negotiations, acts, contracts or transactions between a company and any other person or entity that involve the following:

• directors or officers of a corporation (or their respective spouses and certain other relatives) acting on their own or on behalf of persons different from the corporation;

• directors or officers of a corporation (or their respective spouses and certain other relatives) who have a direct or indirect ownership interest of at least 10% of the equity shares of the other company or are also directors or officers of such other company;

• persons who have been in the last 18 months previous to the transaction, directors or officers of the corporation; and

• “related persons” of the corporation, as defined in article 100 of the Chilean Securities Markets Law.

Article 100 of the Chilean Securities Markets Law establishes that the following are “related persons” to a company: (i) the entities of the grupo empresarial (corporate group) to which such company belongs; (ii) the entities that are either parent company, subsidiary, owners of at least 10% of the equity of a company or other companies in which the company owns at least 10%; (iii) directors or officers of the company (or their respective spouses and certain other relatives); (iv) any person who, individually or with other persons under a voting agreement can designate at least one member of the management of the company or control at least 10% of the capital of such company; and (v) any other person who is indicated as such by the Chilean Superintendencia de Valores y Seguros, in accordance with certain parameters established by the above-mentioned Article 100.

Our transactions with affiliates include the following:

• We purchase goods and services that may also be provided by other suppliers. Among the most significant are our fuel purchases from COPEC, a subsidiary of Empresas Copec, our majority shareholder; and

• We purchase port services from our 20.2% affiliates Puertos y Logística S.A. (formerly Puerto de Lirquén S.A.) and Puerto Lirquén S.A. (formerly Portuaria Sur de Chile S.A.), and our 50% affiliate Compañía Puerto de Coronel S.A.;

• We purchase from EKA Chile, a chlorate sodium supplier, which is 50% controlled by Arauco, and we provide EKA Chile with electricity; and

• We obtain legal services from Portaluppi, Guzmán y Bezanilla, a law firm of which one of our directors, Manuel Bezanilla is a partner. In addition, José Tomás Guzmán, a former director who resigned in December 2015, is also a partner of such firm.

Financial information concerning transactions with affiliates is included in Note 13 to our audited consolidated financial statements.

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Item 8. Financial Information

See “Item 18—Financial Statements.”

EXPORT SALES

Export sales constituted 62.1% of our revenue for the year ended December 31, 2015. Our total export revenue for 2015 was U.S.$3,194.7 million. Our principal overseas markets are Asia, North America and Western Europe. See “Item 4. Information on our Company—Description of Business—Domestic and Export Sales.”

LEGAL PROCEEDINGS

From time to time, we have been subject to environmental proceedings related to allegations by the Chilean environmental regulators and private parties. We are also subject to certain other legal proceedings arising from the ordinary course of our business. For more information regarding the environmental proceedings and other legal proceedings arising from the ordinary course of business, see Note 18 to our audited consolidated financial statements.

While Chilean law in general provides that only individuals can be convicted in criminal actions, Chilean Law No. 20,393, which was published in the Official Gazette on December 2, 2009, provides an exception to this general rule, under which criminal responsibility of legal entities can be established for criminal offenses related to the financing of terrorism, asset laundering or bribery. We do not have knowledge of any fact that could result in our criminal responsibility under such law.

Valdivia Mill

Our operations at the Valdivia Mill have been subject to continued environmental scrutiny by Chilean environmental regulators and the Chilean public since the mill began its operations in 2004. There were allegations of a causal connection between the migration and death of black-neck swans and the operations at the Valdivia mill, and in a study dated April 18, 2005, researchers at the Austral University in Valdivia concluded that wastewater discharges from the Valdivia Mill had significantly altered the quality of the Cruces River. The study also concluded that the effluent discharges were a significant contributing factor in the death or migration of a large population of the black-necked swans in the Carlos Anwandter Nature Sanctuary downstream from the Valdivia Mill. In April 2005, the National Defense Council instituted a civil lawsuit seeking reparations, damages and indemnification from us for environmental harm allegedly caused by the discharges from the Valdivia Mill. In response, we argued to the court that this action should be rejected, as several studies have demonstrated that there is no relationship between the alleged damages and the operation of the Valdivia Mill. The National Defense Council did not quantify the damages it was seeking in connection with the Valdivia Mill lawsuit. On July 27, 2013, a civil court of Valdivia ruled that the alleged environmental events were mainly caused by the Valdivia Mill. We decided not to appeal this ruling, in order to create the conditions to shortly begin an effective implementation of measures in favor of that Nature Sanctuary, without the delay of further legal deadlines. In April 2014, we agreed with and paid the National Defense Council an indemnification amount of approximately U.S.$5,000,000. This is in addition to another amount of U.S.$5,000,000, which was designated for social programs for the benefit of the community of Valdivia.

There are four additional measures ordered by the ruling that were discussed by the members of the Social Council, which includes representatives from Arauco, the National Defense Council, academic institutions, NGOs and public authorities. These measures are: (i) conducting a study, within one year, undertaken by an interdisciplinary committee of experts, about the current status of the wetland; (ii) creating an artificial sentinel wetland for representative species, upriver from the discharge of effluents; (iii) implementation of a monitoring program of environmental impact, within a five-year period; and (iv) creating a new research center focused on wetlands (Centro de Investigación de Humedales).

In June 2005, we suspended operations at the Valdivia Mill until certain technical and legal conditions could be clarified with the applicable regulatory authorities. We estimate this suspension resulted in a loss of sales of approximately U.S.$1.0 million per day and a loss of profits of approximately U.S.$250,000 per day. Pursuant to the decision of our Board of Directors, based on certain clarifications provided by the Regional Environmental Commission, or COREMA of the Tenth Region of Chile, the mill resumed operations in August 2005, after 64 days of suspended operations, at 80% of its authorized production capacity. In order to achieve the full production capacity authorized by applicable permits, the mill had to fulfill certain new requirements established by the COREMA. On January 18, 2008, the COREMA authorized the Valdivia Mill to return to its annual authorized production capacity of 550,000 metric tonnes. The mill gradually increased its production over a four-month period starting in March 2008 and reached full capacity in June 2008. The suspension of operations at the Valdivia Mill in 2005 adversely affected our business, financial condition, results of operations and cash flows. Any future suspension of operations at the Valdivia Mill or at any other of our significant operating plants can be expected to have similar adverse effects. We offer no assurance that the Valdivia Mill, or our other mills, will be able to operate without further interruption. See “Item 3. Key Information—Risk Factors—Risks Relating to Us and the Forestry

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Industry—Environmental concerns led to the temporary suspension of our operations at the Valdivia Mill in 2005 and at the Licancel Mill in 2007, which adversely affected, and in the future may continue to adversely affect, our business, financial condition, results of operations and cash flows” and “Item 4. Information on our Company—Description of Business—Pulp—Pulp mills—Chile—Valdivia Mill.”

In June 2007, we were required to submit to the COREMA of the Tenth Region of Chile an environmental impact study for the implementation of substantial technological improvements on the quality of the effluents generated by the Valdivia Mill. On June 30, 2008, the COREMA approved that environmental impact study. However, the approval was subject to certain conditions that, in our opinion, adversely affected the feasibility of the project. For such reason, we filed a recurso de reclamación (appeal) before the Board of Directors of CONAMA, challenging the conditions imposed by the COREMA. Our administrative appeal was partially accepted by the CONAMA, which upheld some of the conditions that we believed would adversely affect the feasibility of the project. Consequently, on September 17, 2009, we presented another appeal before the relevant courts. On December 5, 2012, the Environmental Evaluation Service of the Tenth Region of Chile authorized certain changes to the project based on the implementation of certain technological improvements. On November 9, 2012, we withdrew our appeal. The court approved the withdrawal on November 29, 2012.

In February 2009, as previously required by the environmental authority, we submitted to the COREMA of the Fourteenth Region of Chile an environmental impact study for the construction of a pipeline to discharge the Valdivia Mill’s wastewater in the Pacific Ocean near Punta Maiquillahue, complying with the requirement that such wastewater be discharged in a body of water other than the Cruces River, the Carlos Anwandter Nature Sanctuary or their respective sources. In February 2010, the environmental authority approved this environmental impact study subject to additional conditions, certain of which we challenged before the Board of Directors primarily because they would have prohibited the discharge of wastewater into the Cruces River under any circumstance, including emergencies. On October 23, 2012, the Committee of Ministers passed Exempt Resolution No. 1052, which upheld in part our appeal in permitting the discharge into the Cruces River upon the occurrence of certain contingencies that may affect the normal functioning of the conduction system and/or outfall, including bombings or sabotage, natural disasters, or accidents caused by third parties. On March 29, 2010, two Chilean individuals filed a recurso de participación ciudadana (reclamation action) before the environmental authority, challenging Exempt Resolution No. 27/2010. On April 30, 2013, the Committee of Ministers passed Exempt Resolution No. 391, which upheld in part such reclamation action, modifying paragraph 4.8.3 and updating tables 8, 9.a and 9.b, all of the Exempt Resolution No. 27/2010 (thereby establishing effluent discharge limits for 13 parameters, including total chromium, total hydrocarbons, sulfur, oil and grease, suspended solids and phosphorus).

As stated in the environmental impact study, the construction of this pipeline will commence once (i) the COREMA (or the relevant environmental authority under the Chilean Environmental Law) approves the environmental impact study in its final form, and (ii) all necessary permits for the construction of the pipeline have been issued by the competent authorities. In the environmental impact study, we estimated that the construction of the pipeline will take 24 months. Once the construction of the pipeline has been completed, we will conduct a 6-month trial phase of the pipeline and will then begin normal operations.

The construction and operation of the pipeline remain subject to many environmental, regulatory, engineering and political uncertainties. As a result, we cannot provide any assurances that the project will be finally completed. If the installation of the pipeline is delayed for reasons attributable to us, we may face sanctions that include warnings, fines or the revocation of the Valdivia Mill’s environmental permit for operation. Alternatively, if any delays are attributable to reasons beyond our control, we believe that the environmental authorities should extend the applicable deadlines. However, we can provide no assurances that any deadline extensions would be granted, even if we comply with all the requirements that may be set forth by those authorities. See “Item 3. Key Information—Risk Factors—Risks Relating to Us and the Forestry Industry—Environmental concerns led to the temporary suspension of our operations at the Valdivia Mill in 2005 and at the Licancel Mill in 2007, which adversely affected, and in the future may continue to adversely affect, our business, financial condition, results of operations and cash flows” and “Item 4. Information on our Company—Description of Business—Pulp—Pulp mills—Chile—Valdivia Mill.”

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Tax Litigation in Argentina

On December 14, 2007, the AFIP, Argentina’s internal revenue service, notified our Argentine subsidiary, Alto Paraná S.A., which effective January 1, 2015, changed its name to Arauco Argentina S.A.,of a claim for alleged unpaid taxes for fiscal years 2002, 2003 and 2004 in the aggregate amount of AR$418 million (or approximately U.S.$105 million) (including principal, interest and penalties accrued through such date), arising from a dispute regarding certain income tax deductions (related to debt issued by Arauco Argentina in 2001 and repaid in 2007) taken by Arauco Argentina and rejected by the AFIP. On February 8, 2010, Tribunal Fiscal de la Nación (Argentina’s Tax Court) issued an unfavorable administrative ruling requiring that Alto Paraná pay the AFIP’s claim in full.

Arauco Argentina appealed this unfavorable administrative ruling to the Court of Appeals and also filed an injunctive action requesting that the court stay Arauco Argentina’s payment obligation until resolution of its pending appeal. On May 13, 2010, the Court of Appeals granted an injunction of Arauco Argentina’s payment obligation in exchange for the posting of a surety bond in the amount of AR$633.6 million (or approximately U.S.$129 million). On December 28, 2012, the Court of Appeals dismissed Arauco Argentina’s appeal. Arauco Argentina appealed this decision before the Argentine Supreme Court of Justice. On April 23, 2013, the appeal was granted. Since May 29, 2013, the appeal is currently under consideration by the Supreme Court. The injunction granted by the Court of Appeals is still in force.

We have not established any reserve in respect of this contingency and can offer no assurance that the Supreme Court will issue a ruling favorable to us. If the Supreme Court upholds the decision of the Court of Appeals, Arauco Argentina will be required to satisfy the above-mentioned claim, an outcome that would have an adverse effect on our financial condition and results of operations.

Tax Litigation in Chile

On August 25, 2005, 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, 2001 and October 31, 2001, and furthermore, requesting reimbursement for amounts returned to us in respect of certain claimed tax losses. On November 7, 2005, we requested a Revisión de la Actuación Fiscalizadora (Review of the Supervision Action, or RAF), which is an administrative review of the tax action brought by the Chilean IRS, and subsequently, a claim was filed against the above-mentioned tax calculations No. 184 and No. 185 of 2005. The RAF was resolved on January 9, 2009 by the Chilean IRS, which resolution, however, only partially sustained our request. In response, we filed an additional complaint with regard to the portion of the RAF that was not granted administrative review. As of the date of this annual report, the investigation in respect of this complaint is pending.

Our Company believes that its position in respect of this complaint is supported by solid legal arguments and that there is a reasonable likelihood that this matter will result in a favorable outcome for us. However, if this result does not occur, it is possible that an obligation will arise for the amount specified, which was Ch$3,362,265,453, plus any accrued interest as of the payment date.

Tax Litigation in Brazil

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 U.S.$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 and the Brazilian Social Contribution on Net Profits during 2010. Currently, the aggregate amount of the claims asserted in the Infraction Notice, plus interest, correspond to R$185 million (approximately U.S.$79 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.

On July 20, 2015, the Judgment Office of the Brazilian Revenue Service rejected Arauco do Brasil’s objection. Arauco do Brasil filed an appeal before the CARF (Conselho Administrativo de Recursos Fiscais), which is the second administrative level. As of the date of this annual report, a decision on this appeal is still pending. We believe that the appeal is based on solid legal arguments and that there is a reasonable likelihood that this matter will result in a favorable outcome for Arauco do Brasil. If the appeal is rejected, we intend to begin the relevant proceedings to contest the Infraction Notice before the Brazilian Justice. However, if the cancellation of the Infraction Notice 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.

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DIVIDEND POLICY

Chilean law currently requires that, unless otherwise decided by the unanimous vote of our issued and subscribed shares eligible to vote, public corporations distribute a cash dividend in an amount equal to at least 30% of the corporation’s consolidated net income for each year, unless and except to the extent the corporation has unabsorbed losses from prior years. In April 2002, our shareholders approved the current dividend policy, setting the cash dividend at 40% of our consolidated net income for each year, which was determined on a Chilean GAAP basis through the year ended December 31, 2008, and has been determined on an IFRS basis since January 1, 2009. In accordance with IFRS, the determination of the dividend amount is based on the effective realized profit net of any relevant variations in the value of unrealized assets and liabilities.

For the year ended December 31, 2014, under IFRS, our results were affected by an increase in our deferred taxes resulting from the increase of the tax rate set forth in Law No. 20,780. However, according to Oficio Circular 856 of the SVS dated October 17, 2014, we were required to record the difference in assets and liabilities for deferred taxes as a charge to our net worth for purposes of our financial statements reported to the SVS. As such, our annual dividend distribution for the year ended December 31, 2014 was based on our profit calculated according to IFRS, as modified by Oficio Circular 856 of the SVS. See “Item 3. Key Information—Risk Factors—Risks Relating to Chile—A tax reform bill with significant changes for companies was approved in September 2014 and the Chilean Superintendency of Securities and Insurance, or SVS, modified accounting reporting standards for companies under its supervision in October 2014.”

On April 22, 2014 our shareholders approved a final dividend of U.S.$0.66652828 per share for 2013, which was distributed on May 7, 2014. On November 25, 2014, our Board of Directors approved an interim dividend of U.S.$0.5461976 per share, which was distributed on December 10, 2014. On April 21, 2015 our shareholders approved a final dividend of U.S.$0.866672295 per share for 2014, which was distributed on May 13, 2015. On November 24, 2015, our Board of Directors approved an interim dividend of U.S.$0.385117532 per share, which was distributed on December 16, 2015. On April 26, 2016 our shareholders approved a final dividend of U.S.$0.876827598 per share for 2015, which will be distributed on May 11, 2016.

Although the Board of Directors has no current plans to recommend changes in our dividend policy, the policy has been changed in the past and no assurance can be given that the policy will not be changed in the future, due to changes in Chilean law, capital requirements, operating results or other factors.

Item 9. The Offer and Listing

Neither our stock nor our SEC-registered securities are listed on any stock exchange or other regulated market.

Trading in our securities takes place primarily in the over-the-counter market. Accordingly, we are unable to obtain reliable information on such trading.

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Item 10. Additional Information

ARTICLES OF INCORPORATION AND BY-LAWS

When we refer to the “Company,” “Arauco” or “we,” in this description of the articles of incorporation and by-laws, we mean Celulosa Arauco y Constitución S.A.

Organization and Registration

We are a sociedad anónima (corporation) organized in Chile under the laws of Chile, subject to certain rules applicable to sociedades anónima abiertas (Chilean public corporations) and registered on August 18, 1971, by resolution 300-S of the Chilean Securities Commission and recorded in the Santiago Commercial Register of 1971 on page 6433 under entry number 2994 and on page 6431 under entry number 2993. Notice was published in the Official Gazette on September 4, 1971.

Objects and Purposes

Our purpose, as stated in our estatutos (by-laws), includes the manufacture of forestry products, the management of forestry lands and other activities.

Capital

In 2002, our by-laws were amended such that our capital is denominated in U.S. dollars. In 2002, we and two of our subsidiaries, Aserraderos Arauco and Paneles Arauco, which are currently merged into Paneles Arauco, received authorization from the Chilean IRS to prepare our audited consolidated financial statements in U.S. dollars, beginning January 1, 2002. On January 1, 2003, our subsidiaries Forestal Arauco, Bosques Arauco, Forestal Valdivia, Forestal Celco, which are currently merged into Forestal Celco, and Cholguán obtained the same permission from the Chilean IRS. The same permission from the Chilean IRS was obtained by our subsidiary Inversiones Arauco Internacional Ltda. in January 2003, by our subsidiary Forestal Los Lagos in January 2005 and by our subsidiaries Arauco Bioenergía S.A. and Servicios Logísticos Arauco S.A in January 2008.

Directors

Pursuant to our by-laws, our Board of Directors is composed of nine members elected at a regular meeting of our shareholders. Our directors are not required to be shareholders. Our by-laws state that the amount of compensation to be received by the directors for their directorial services shall be fixed by the shareholders’ meeting. Directors may be compensated for any non-directorial services rendered to us at levels of compensation comparable with compensation commonly paid for these services, compensation which is compatible with the directors’ compensation fixed by the shareholders’ meeting. The by-laws also state that our Board of Directors has all of the authorities of administration and disposal that Chilean law or the by-laws do not confer upon the shareholders’ meeting. The Board of Directors has the right to act on our behalf without the need for a special power of attorney, even in cases where a power of attorney is required by law. In particular, the by-laws provide that the Board of Directors is empowered to encumber our assets, real and personal property with mortgages, easements or pledges regardless of the value of such property or the amount of the respective encumbrances and to borrow money paying interest, with or without a guaranty for the loan.

Our by-laws provide that we may enter into acts or contracts in which one or more directors are interested only if the interested director’s interest is made known to the board, the acts or contracts are approved by the board and the terms of the act or contract conform to those prevailing in the market. In addition, board resolutions approving interested director transactions must be reported by the chair of the meeting at the first shareholders’ meeting following the approval of the interested director transaction. See “Item 7. Major Shareholders and Related Party Transaction” for further information on related party transactions.

See “Item 6. Directors, Senior Management and Employees” for further information about our Board of Directors.

Shareholders

Our share capital consists of ordinary shares of no par value issued in registered form. Record holders of shares are registered in our share register. Any transfer of shares must be noted in our share register.

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Voting Rights

Each share of our stock entitles the holder to one vote at any meeting of shareholders. Resolutions may be taken upon a vote of an absolute majority of the voting shares present or represented. Any resolution relating to amendments to our by-laws must be approved by an absolute majority of the voting shares issued. Resolutions with regard to the following matters, among others, require the affirmative vote of two-thirds of the voting shares issued:

• transformation, including division or merger with another company;

• advanced dissolution;

• change of corporate domicile;

• reduction in our equity capital;

• approval and appraisal of non-cash capital contributions;

• reduction in the number of members of the Board of Directors;

• the disposal of 50% or more of our assets, whether or not such disposal also includes any of our liabilities; the disposal of 50% or more of the assets of one our subsidiaries, provided that such subsidiary represents at least 20% of our assets; and any disposal of shares by our Company that causes us to lose control of a subsidiary that represents at least 20% of our assets; and

• changes to the way in which corporate benefits will be distributed.

According to our by-laws, holders of our shares also have the right to vote at the regular shareholders’ meeting for the election of directors. Shareholders or their representatives may accumulate their votes in favor of one candidate or distribute them among various candidates. A vote on the election of directors may be omitted if an election is proposed by acclamation and none of the shareholders present or represented opposes the motion. The Board of Directors may also be dismissed by a regular or special shareholders’ meeting, though the shareholders may only vote to dismiss the board as a whole.

Changes to Shareholders’ Rights

To change the rights of holders of our shares or create a new series of our shares, we must amend our by-laws. Any reduction of the rights of our shares requires a two-thirds majority vote of all holders of our shares under Chilean law. Chilean law also requires that public corporations distribute a cash dividend in an amount equal to at least 30% of the corporation’s consolidated net income for each year (on an IFRS basis), unless otherwise decided by a unanimous vote of the corporation’s issued and subscribed shares eligible to vote. Any changes to the way in which corporate benefits are distributed must be approved by a two-thirds majority of all holders of the corporation’s shares.

Shareholders’ Meetings

Our by-laws provide that the Board of Directors shall call shareholders’ meetings. Notice of shareholders’ meetings must be made by a prominent notice published at least three times, on different days, in the newspaper of one of our corporate domiciles, as determined by a shareholders’ meeting, or in the absence of a determination, in the Official Gazette.

A shareholder must be registered in our share register as of the meeting date to be entitled to participate and vote at any shareholders’ meeting. In addition, other persons may represent shareholders at meetings. Powers of attorney must be given in writing and must be granted with respect to all of the shares the shareholder is entitled to vote as of the date of the shareholders’ meeting.

Shareholders’ meetings may be regular or special meetings. Regular shareholders’ meetings are held once a year within the first four months of the year. Among other things, the regular shareholders’ meeting appoints independent external auditors to examine our accounts, inventory, balance sheet and other financial results. The by-laws provide that the following matters are to be considered at regular shareholders’ meetings:

• the review of our results of operations and external auditors’ reports and the approval or rejection of our annual report, our balance sheet and financial statements;

• the distribution of profits of each financial period and the distribution of our dividends;

• the election or dismissal of the members of the Board of Directors; and

• any matter of corporate interest that is not transacted at a special shareholders’ meeting.

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Special shareholders’ meetings may be held at any time required by corporate needs to consider any matter that the law or our by-laws require to be considered at a shareholders’ meeting. Our by-laws require the meeting notice to disclose any matters to be discussed at a special shareholders’ meeting. According to the by-laws, the following matters must be considered at special shareholders’ meetings:

• dissolution;

• transformation, merger or division and the amendment of our by-laws;

• the issue of bonds or debentures convertible into shares;

• the disposal of 50% or more of our assets, whether or not such disposal also includes any of our liabilities; the disposal of 50% or more of the assets of one our subsidiaries, provided that such subsidiary represents at least 20% of our assets; and any disposal of shares by the Company that causes us to lose control of a subsidiary that represents at least 20% of our assets; and

• the grant of real or personal guarantees to secure obligations of third parties, unless they are subsidiaries, in which case the approval of the Board of Directors will be sufficient.

Any other matters within the competence of regular shareholders’ meetings may be considered at special shareholders’ meetings.

Any act of a shareholders’ meeting relating to our dissolution, transformation, merger or division, the amendment of our by-laws, any disposal of 50% or more of our assets or the issue of bonds convertible into shares or convertible debentures must be held before a notary public, who must certify that the minutes of such meeting are the true expression of what occurred and was resolved at such meeting.

Allocation of Net Income and Distribution of Dividends

Our by-laws provide that the shareholders at a regular shareholders’ meeting shall determine the annual distribution of our net profits for each financial period, within the limitations prescribed by law. The shareholders shall also set the date on which any distribution shall be paid, within the time limits prescribed by law. Chilean law prescribes that distributions shall be paid within 30 days of the regular shareholders’ meeting at which such distribution was determined.

In accordance with Chilean law, in the event of liquidation, capital can be distributed to the shareholders only after the rights of the creditors have been secured or debts owed to creditors have been paid. Our by-laws provide that a shareholders’ meeting will appoint one or more liquidators to carry out the liquidation and to call shareholders’ meetings, as required under Chilean law.

Regulation of and Restrictions on Foreign Investors

There are no limitations on the rights to hold securities, including rights of non-resident or foreign shareholders to hold or exercise voting rights on securities.

Disclosure of Shareholder Ownership

We register certain information about our shareholders in our shareholder registry. We are required to disclose this information to the Chilean Securities Commission on a quarterly basis.

Rights of Shareholders

Our by-laws provide that, in the case of a dispute between shareholders or between shareholders and management, the parties will submit their dispute to an arbitrator, who may determine the procedural rules to be used in the arbitration but must issue a final judgment in accordance with Chilean law. Subject to limited exceptions, the arbitrator’s judgment shall not be subject to appeal. The parties shall appoint the arbitrator by mutual agreement and if no agreement is reached, an arbitrator will be appointed by the civil court system from among present and former associate justices of the Supreme Court of Justice of Chile.

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EXCHANGE CONTROLS

The Central Bank is responsible for, among other things, monetary policies and exchange controls in Chile. Prior to 1989, Chilean law permitted the purchase and sale of foreign currency only in cases explicitly authorized by the Central Bank. Law No. 18,840, the Ley Orgánica Constitucional del Banco Central de Chile (Organic Law of the Central Bank of Chile), or the Central Bank Act, enacted in 1989, liberalized the rules that govern the ability to buy and sell foreign currency.

The Central Bank Act empowers the Central Bank to determine which types of foreign exchange operations must be carried out in the Formal Exchange Market rather than the Mercado Cambiario Informal (Informal Exchange Market). The Central Bank has ruled that certain foreign exchange transactions, including those attendant to foreign investments and bond issuances, may be effected only in the Formal Exchange Market. The Central Bank may also impose restrictions on foreign exchange operations that are conducted or are required to be conducted in the Formal Exchange Market. These restrictions may include the requirement of prior authorization from the Central Bank, the imposition of reserve requirements and the limitation of foreign exchange operations that may be conducted by the entities that participate in the Formal Exchange Market.

The Formal Exchange Market consists of banks and other entities authorized by the Central Bank to participate in such Formal Exchange Market. On April 16, 2001, the Central Bank agreed that, effective April 19, 2001, the prior foreign exchange restrictions would be eliminated and a new Compendio de Normas de Cambios Internacionales (Compendium of Foreign Exchange Regulations) would be applied.

The main objective of this change was to facilitate capital movements from and into Chile and to encourage foreign investment.

The following specific restrictions were eliminated:

• a reserve requirement with the Central Bank for a period of one year;

• the requirement for prior approval by the Central Bank for certain operations, such as repatriation of investments and payments to foreign creditors;

• the mandatory return of foreign currencies to Chile; and

• the mandatory conversion of foreign currencies into Chilean pesos.

Under the amended regulations, only the following limitations are applicable to these operations:

• the Central Bank must be provided with information related to certain operations, such as foreign investments and foreign credits; and

• certain operations, such as money transfers to and from Chile related to foreign investments and foreign credits, must be conducted within the Formal Exchange Market.

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International Issue of Bonds

Before April 19, 2001, any international issue of bonds was subject to approval by the Central Bank after submission of an application to the Central Bank through a bank or other participant in the Formal Exchange Market. Absent the Central Bank’s authorization, issuers were unable to offer bonds outside of Chile. On April 19, 2001, the Central Bank issued foreign exchange regulations, effective as of March 1, 2002, that were included in the Chapters XIV and VIII of the Compendium, applicable to bond issues made either from Chile or through an agency abroad. It must be noted however, that all debt issues made before the regulations remain subject to the regulations existing at the time of their issue.

Debt Securities Issued Directly By Us

In accordance with the regulations issued by the Central Bank, which are included in the Chapter XIV of the Compendium, any international issue of bonds in an aggregate amount exceeding U.S.$1,000,000 must be registered and dated by the Central Bank or by a bank or other entity authorized by the Central Bank to participate in the Formal Exchange Market before the proceeds from the issuance can be remitted to Chile and received by the issuer or simultaneously with the remittance into Chile of such proceeds. The issuer must submit forms regarding the offering to the registering entity or directly to the Central Bank, along with a letter of instructions indicating whether it prefers to receive the proceeds in Chilean pesos or in a foreign currency. If presented through a Formal Exchange Market entity, such entity must, in turn, verify that the forms submitted by the issuer are in accordance with the documentation relating to the issue and inform the Central Bank of the operation no later than 11:00 a.m. on the banking business day following the date on which the proceeds of the issue are transferred to the issuer.

If the issuer opts to receive the proceeds of the issue outside of Chile, it must report this to the Central Bank directly or through a Formal Exchange Market entity during the first ten calendar days of the month following the one in which the proceeds were received.

Chapter XIV of the Compendium also states that proceeds from the issue, as well as payment of capital and interest relating to the issue, must be received and sent from and through the Formal Exchange Market, but purchases of U.S. dollars in connection with payments on debt securities issued directly by us can be made either in the Formal or in the Informal Exchange Market. There can be no assurance, however, that we will be able to purchase U.S. dollars in the Informal Exchange Market or in the Formal Exchange Market at the time or in the amounts required to pay debt service related to any such debt securities. There can also be no assurance that further Central Bank regulations or legislative changes to the current foreign exchange control regime in Chile would not restrict or prevent our purchase of U.S. dollars to make payments under our securities.

In the case of debt securities issued directly by us before the effectiveness of the foreign exchange regulations, the registration of the debt securities with the Central Bank grants us access to the Formal Exchange Market for the purchase of U.S. dollars necessary to make payments in respect of those securities but requires that payments on such debt securities shall be made only with U.S. dollars purchased in the Formal Exchange Market.

We will also be required to inform the Central Bank quarterly of the outstanding amounts due under our securities and from time to time of any information that has been previously filed.

The regulations of Chapter XIV of the Compendium do not make any reference to the one-year mandatory deposit in the Central Bank that was previously required by Chapter XIV. However, the Central Bank is authorized, under the Central Bank Act, to impose such a requirement.

Debt Securities Issued Through Our Panamanian Agency

In December 1996, we established a registered agency in Panama. We may from time to time issue debt securities directly or through our Panamanian agency depending on, among other factors, whether or not we expect to bring the proceeds thereof into Chile. In such cases, the proceeds of such issuance of the notes may be brought into Chile or held abroad. In either case, however, in accordance with Chapter VIII of the Compendium, we were required to inform the Central Bank of the issuance of international bonds through our Panamanian agency during the first ten calendar days of the month following the one in which the disbursement of funds to the agency was produced, and provide the schedule of payments of the notes. On December 27, 2007, the requirement to provide such information to the Central Bank was eliminated. We will no longer be required to inform the Central Bank of future issuances of bonds made through our Panamanian agency.

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Purchases of U.S. dollars in connection with payments on debt securities issued through our Panamanian agency, whether before or after April 19, 2001, can be made either in the Formal Exchange Market or in the Informal Exchange Market. Although we were required to inform the Central Bank of the issuance of debt securities through our Panamanian agency, such communication to the Central Bank did not give us access to the Formal Exchange Market for the purchase of U.S. dollars necessary to make payments in respect of those debt securities.

There can be no assurance that we will be able to purchase U.S. dollars in the Informal Exchange Market or in the Formal Exchange Market at the time or in the amounts required to pay debt service related to any such debt securities. There can also be no assurance that further Central Bank regulations or legislative changes to the current foreign exchange control regime in Chile and will not restrict or prevent our purchase of U.S. dollars to make payments under our securities from Chile.

TAXATION

General

The following summary contains a description of the principal Chilean and United States federal income tax consequences of the purchase, ownership and disposition of our securities, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase our securities. This summary does not describe any tax consequences arising under the laws of any state, locality or taxing jurisdiction other than the United States and Chile.

This summary is based on the tax laws of Chile (including the relevant matters pursuant to the tax reform Law No. 20,780) and the United States as in effect on the date of this Form 20-F, as well as regulations, rulings and decisions of Chile and the United States available on or before such date and now in effect. All of the foregoing is subject to change, and any changes could apply retroactively and could affect the continued validity of this summary.

Prospective purchasers of our securities should consult their own tax advisors as to the Chilean, United States or other tax consequences of the purchase, ownership and disposition of our securities, including, in particular, the application to their particular situations of the tax considerations discussed below, as well as the application of state, local, foreign or other tax laws.

Chile and the United States have executed an income and capital tax treaty for the avoidance of double taxation and the prevention of fiscal evasion, but this treaty is not in effect, and its effectiveness is contingent upon ratification in the United States Senate and by the Chilean Congress. At this time it is not clear when the United States Senate and the Chilean Congress will consider ratification, and therefore the effective date of the treaty is uncertain.

Chilean Taxation

The following is a general summary of the principal consequences under Chilean tax law, as currently in effect, of an investment in our securities made by a foreign holder. Foreign holder means either:

• in the case of an individual, a person who neither is a resident nor is domiciled in Chile. For Chilean tax purposes, an individual is domiciled in Chile if such individual has his or her principal place of business in Chile. The individual will be considered as a resident if she or he stays in Chile for more than six months in one calendar year or a total of more than six months in two consecutive fiscal years; or

• in the case of a legal entity, a legal entity that is not organized under the laws of Chile, unless our securities are assigned to a branch or a permanent establishment of such entity in Chile.

Under Chile’s income tax law, our payments of interest made from Chile in respect to our securities to a foreign holder will generally be subject to a Chilean withholding tax assessed at a rate of 4.0% or the Chilean Interest Withholding Tax, only to the extent the requirements for applying a 4.0% rate are complied with. In addition, consideration should be given to the fact that the rate might be higher if these payments do not comply with the requirements established in the law with the purpose to determine the indebtedness limit of the local entity.

We have agreed, subject to specific exceptions and limitations, to pay to the foreign holders of notes additional amounts in respect of the Chilean Interest Withholding Tax in order to ensure that the interest amount the foreign holder receives is net of Chilean Interest Withholding Tax. If we pay additional amounts in respect of the Chilean Interest Withholding Tax, any tax refunds in respect of these amounts will be for our benefit. In the event that certain changes in Chilean tax laws require us to pay additional interest amounts in respect of the Chilean Interest Withholding Tax at a rate in excess of 4.0%, we have the right to redeem our securities.

Under existing Chilean law and regulations, a foreign holder will not be subject to any Chilean taxes in respect of payments of principal that we make with respect to our securities. Our payments with respect to our securities of amounts not considered principal or interest may be subject to a Chilean withholding tax of up to 35%.

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The Chilean Income Tax Law provides that a foreign holder is subject to income tax on his Chilean source income. For this purpose, Chilean source income means earnings from activities developed in Chile or goods located in the country. As a general rule according to the Chilean Income Tax Law, the source of interest income corresponds to the residence country of the debtor. Nevertheless, there are special rules that may apply to bonds and other public or private debt instruments issued by taxpayers domiciled, or resident in Chile which may establish Chile as the source of interest income. Under these rules and in connection with our securities, capital gains arising out of the sale or other disposition of securities issued abroad by a foreign holder will not be subject to withholding taxes on capital gains, provided that the sale or disposition occurs outside of Chile.

A foreign holder will not be liable for gift, inheritance or similar taxes with respect to its holdings unless the securities held by a foreign holder:

• are located in Chile at the time of such foreign holder’s death, or

• are located outside of Chile, but were purchased or acquired with funds derived from Chilean source income.

A foreign holder should not be liable for Chilean stamp, registration or similar taxes.

The issue of our securities directly by us was subject to the Chilean stamp tax, which we paid. The issue of our securities through our Panamanian Branch was not subject to a stamp tax.

United States Taxation

This summary of certain United States federal income tax considerations deals principally with United States Holders that acquired our securities as part of the initial offering of our securities, hold our securities as capital assets and whose functional currency is the United States dollar. It does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a particular investor, and generally does not address the tax treatment of United States Holders that may be subject to special tax rules, such as banks, financial institutions, tax-exempt entities, regulated investment companies, real estate investment trusts, insurance companies, partnerships and partners therein, dealers in securities or currencies, traders in securities electing to mark to market, certain short-term holders of our securities, persons that will hold our securities as a position in a “straddle” or conversion transaction, or as part of a “synthetic security” or other integrated financial transaction, persons that own (or are deemed to own for United States tax purposes) 10% or more of our voting stock or persons that are not United States Holders. United States Holders should be aware that the U.S. federal income tax consequences of holding our securities may be materially different for investors described in the previous sentence, including as a result of certain laws applicable to investors with short holding periods or that engage in hedging transactions.

As used under this section “United States Taxation,” the term “United States Holder” means a beneficial owner of a Note that is a citizen or resident of the United States or a United States domestic corporation or that otherwise is subject to United States federal income taxation on a net income basis in respect of our securities.

Taxation of Interest and Additional Amounts

A United States Holder will treat the gross amount of interest and Additional Amounts (i.e., without reduction for Chilean Interest Withholding Tax, determined utilizing the 4.0% Chilean Interest Withholding Tax rate applicable to all United States Holders of our securities) as ordinary interest income in respect of our securities at the time that such payments are accrued or are received, in accordance with the United States Holder’s method of tax accounting. Any Chilean Interest Withholding Tax paid will be treated as foreign income taxes eligible for credit against such United States Holder’s United States federal income tax liability, subject to generally applicable limitations and conditions, or, at the election of such United States Holder, for deduction in computing such United States Holder’s taxable income. Interest and Additional Amounts will constitute income from sources outside the United States for foreign tax credit purposes. Such income generally will constitute “passive category income.” Foreign tax credits will not be allowed for withholding taxes imposed in respect of certain short-term or hedged positions in securities and may not be allowed for withholding taxes imposed in respect of arrangements in which a United States Holder’s expected economic profit is insubstantial. United States Holders should consult their own advisors concerning the implications of these rules in light of their particular circumstances.

The calculation of foreign tax credits and, in the case of a United States Holder that elects to deduct foreign taxes, the availability of deductions, involves the application of rules that depend on a United States Holder’s particular circumstances. United States Holders should consult their own tax advisors regarding the availability of foreign tax credits and the treatment of Additional Amounts.

A Holder of our securities that is, with respect to the United States, a foreign corporation or a nonresident alien individual (a “Non-U.S. Holder”) generally will not be subject to United States federal income or withholding tax on interest income or Additional Amounts earned in respect of our securities, unless such income is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States.

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Taxation of Dispositions

A United States Holder will generally recognize gain or loss on the sale, exchange or other disposition of a security in an amount equal to the difference between the amount realized on the sale, exchange or other disposition and the tax basis in the security. If Chilean income tax is withheld on the sale, exchange or other disposition of our securities, the amount realized by a U.S. holder will include the gross amount of the proceeds of that sale, exchange or other disposition before deduction of the Chilean income tax. A United States Holder’s tax basis in a security will generally equal its cost. Gain or loss realized by a United States Holder on the sale, redemption or other disposition of our securities generally will be treated as capital gain or loss and such gain or loss will be long-term capital gain or loss if at the time of the disposition, our securities have been held for more than one year. The net amount of long-term capital gain realized by a United States Holder that is an individual is generally taxed at a reduced rate. Gain, if any, realized by a United States Holder generally will be treated as U.S. source income for U.S. foreign tax credit purposes. Consequently, in the case of gain from the disposition of securities that is subject to Chilean income tax, a United States Holder may not be able to benefit from the foreign tax credit for that Chilean income tax, unless the United States Holder can apply the credit against U.S. federal income tax payable on other income from foreign sources. Alternatively, the United States Holder may generally elect to take a deduction for the Chilean income tax paid. The rules governing foreign tax credits are complex and a United States Holder should consult its own tax advisor regarding the availability of foreign tax credits under its particular circumstances.

A Non-U.S. Holder of our securities will not be subject to United States federal income or withholding tax on gain realized on the sale or other disposition of our securities unless (i) such gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States or (ii) in the case of gain realized by an individual Non-U.S. Holder, the Non-U.S. Holder is present in the United States for 183 days or more in the taxable year of the sale and certain other conditions are met.

Backup Withholding and Information Reporting

Payments of principal, premium, if any, and interest on our securities and payment of the proceeds of any disposition of our securities made to certain United States Holders may be subject to U.S. information reporting requirements. In addition, certain United States Holders may be subject to a U.S. backup withholding tax in respect of such payments if they do not provide their taxpayer identification numbers to the payor or otherwise establish an exemption. Non-U.S. Holders generally are exempt from these withholding and reporting requirements, but may be required to comply with applicable certification and identification procedures to establish their eligibility for such an exemption.

DOCUMENTS ON DISPLAY

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file reports and other information with the SEC. These materials, including this Annual Report and the exhibits thereto, may be inspected and copied at the Commission’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the materials may be obtained from the Public Reference Room at the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, the Commission maintains an Internet website at http://www.sec.gov, from which these materials may be electronically accessed. The public may obtain information on the operation of the Commission’s Public Reference Room by calling the Commission in the United States at 1-800-SEC-0330.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

The following discussion about our risk management activities includes forward-looking statements that involve risk and uncertainties. Actual results could differ materially from those projected in such forward-looking statements.

We are exposed to market risk from changes in interest rates and currency exchange rates. Our Board of Directors approves our policies that address these risks. From time to time, we assess our exposure and monitor opportunities to manage these risks, including entering into derivative contracts. For information on the currency and interest rate swaps into which we enter with respect to a portion of our borrowings, see “Item 5. Operating and Financial Review and Prospects—Hedging” and Note 23 to our audited consolidated financial statements. In the normal course of business, we also face risks that are either non-financial or non-quantifiable. Such risks principally include country risk, credit risk and legal risk and are not represented in the tables below.

Interest Rate Risk

Interest rate risk exists principally with respect to our indebtedness that bears interest at floating rates. As of December 31, 2015, we had outstanding U.S.$4,305.4 million of indebtedness, including accrued interest and discounts and costs of issuance, of which 85.7% bore interest at fixed interest rates and 14.3% bore interest at floating rates of interest. These average rates do not reflect the effect of swap agreements. 76.0% of our indebtedness was denominated in U.S. dollars as of that date. The interest rate on our variable rate debt is determined principally by reference to LIBOR. As of December 31, 2015, we were party to an interest rate swap agreement in our Uruguayan subsidiary to hedge fluctuations in floating rates for long-term debt. See “Item 5. Operating and Financial review and Prospects – Hedging” and Note 23 to our audited consolidated financial statements

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The following table summarizes our debt obligations, as of December 31, 2015. These obligations are sensitive to changes in interest rates. The table presents the aggregate principal amount of each category of indebtedness maturing in each year, at the weighted average interest rate for each category of indebtedness. Average interest rates for liabilities are calculated based on the prevailing interest rate for each loan as of December 31, 2015.

	Average Interest Rate			2016		2017		2018		2019		2020		Thereafter		Total Debt		Fair Value
	(millions of U.S.$)
Interest
Bearing Debt
Fixed Rate
(U.S.$-denominated)		5.31	%		107.8		437.5		43.9		541.8		45.6		1,493.8		2,670.2		2,801.1
(UF/CLP$-denominated)		3.71	%		43.6		37.3		46.4		74.7		220.6		568.2		990.7		1,051.3
(R$-denominated)		7.93	%		27.0		0.3		0.4		0.2		0.2		1.4		29.5		29.5
(Ar$-denominated)		15.25	%		0.4		0.0		—		—		—		—		0.4		0.4
Floating Rate
(U.S.$ denominated) LIBOR +		1.75	%		112.7		38.5		337.3		40.6		40.2		31.5		600.9		613.2
(R$-denominated) TJLP +		10.56	%		0.3		0.0		1.4		5.6		5.8		0.5		13.8		13.8
Total					291.5		513.6		428.0		657.3		306.6		2,094.8		4,305.4		4,509.3

Foreign Currency Risk

Our principal exchange rate risk involves changes in the value of the Chilean peso and, to a lesser extent, the Brazilian real, the Argentine peso and the euro relative to the dollar. We estimate that a majority of our consolidated costs and expenses are denominated in dollars. As of December 31, 2015:

• 69.1% of our accounts receivable were denominated in U.S. dollars, 16.9% in Chilean pesos and 5.2% were denominated in Brazilian reals;

• 77.8% of our cash and short-term investments were denominated in U.S. dollars, 8.7% were denominated in Chilean pesos, 8.1% in Argentine pesos and 4.3% in Brazilian reals;

• a significant portion of our indebtedness was denominated in U.S. dollars; and

• a significant portion of our consolidated total assets was denominated in U.S. dollars.

Substantially all of our foreign currency-denominated revenues, costs and expenses, receivables and indebtedness are denominated in U.S. dollars. As of December 31, 2015, 76.0% of our debt was denominated in U.S. dollars before swaps. As of December 31, 2015, we were party to cross currency swap agreements in Chile to hedge our local bonds in UF, and forward agreements to swap local currencies to U.S. dollars. See “Item 5. Operating and Financial review and Prospects – Hedging” and Note 23 to our audited consolidated financial statements. Accordingly, variations in the value of the Chilean peso relative to the U.S. dollar will not have a significant effect on the cost in U.S. dollars of our foreign debt service obligations.

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Commodity Risk

Prices for pulp and forestry and wood products can fluctuate significantly, and our revenue is highly sensitive to fluctuations in such prices. For a more detailed discussion and sensitivity analysis relating to the risks arising from changes in the market price of pulp, which is our primary commodity risk, see Note 23 to our audited consolidated financial statements. As of December 31, 2015, we were party to derivative contracts to partially hedge our exposure to fuel oil in Chile and Uruguay, which include commodity swap agreements and zero cost collar agreements. Additionaly, in Chile we are party to a derivatives contract to partially hedge our exposure to diesel. See “Item 5. Operating and Financial review and Prospects – Hedging” and Note 23 to our audited consolidated financial statements.

Item 12. Description of Securities Other than Equity Securities

Not applicable.

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

(a) Disclosure controls and procedures. We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Senior Vice-President Comptroller, of the effectiveness of the design and operation of our disclosure controls and procedures, as of December 31, 2015. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our Chief Executive Officer and Senior Vice-President Comptroller concluded that the disclosure controls and procedures, as of December 31, 2015, were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the U.S. Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Senior Vice-President Comptroller, as appropriate to allow timely decisions regarding required disclosure.

(b) Management’s annual report on internal controls and procedures. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Under the supervision and with the participation of our management, including our Chief Executive Officer and Senior Vice-President Comptroller, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on our evaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2015.

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(c) Attestation Report of the registered public accounting firm. Not applicable.

(d) Changes in internal controls over financial reporting. There has been no change in our internal control over financial reporting during 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16A. Audit Committee Financial Expert

We have an audit committee, described in “Item 6. Directors, Senior Management and Employees—Directors and Executive Officers.” We believe that the members of our audit committee have sufficient financial and other experience to perform their responsibilities. Our Board of Directors has determined that Timothy C. Purcell qualifies as an “audit committee financial expert” within the meaning of Item 16A of Form 20-F and is independent as that term is defined in Rule 10A-3 under the Exchange Act. For a description of Mr. Purcell’s professional experience, see “Item 6. Directors, Senior Management and Employees—Directors and Executive Officers.”

Item 16B. Code of Ethics

We have adopted a code of ethics, as defined in Item 16B of Form 20-F under the Securities Exchange Act of 1934, as amended. Our code of ethics applies to all of our employees, including, but not limited to, our Chief Executive Officer, Chief Financial Officer and Senior Vice-President Comptroller. We will provide any person without charge, upon request, a copy of such code of ethics. Requests for a copy of the code of ethics may be made to Celulosa Arauco y Constitución S.A., El Golf 150, 14^th Floor, Santiago, Chile, Attn: Gianfranco Truffello, tel. (011-562) 2461-7200, fax (011-562) 2461-7541. Our code of ethics is also published on our website at www.arauco.cl. If we amend the provisions of our code of ethics that apply to our Chief Executive Officer, Chief Financial Officer and Senior Vice-President Comptroller, or if we grant any waiver of such provisions, we will disclose the amendment or waiver in our annual report on Form 20-F.

Item 16C. Principal Accountant Fees and Services

Audit and Non-Audit Fees

The following table sets forth the fees billed to us by our former independent auditors, Deloitte Auditores y Consultores Ltda., or Deloitte, during the fiscal year ended December 31, 2014 and the fees billed to us by our current independent auditors PricewaterhouseCoopers Consultores, Auditores y Compañía Limitada, or PwC, during the fiscal year ended December 31, 2015.

	Year ended December 31,
	2014		2015
	(U.S.$ in thousands)
Audit fees	$	2,641	$	1,718
Tax fees		34		414
Other fees		300		5
Total fees	$	2,974	$	2,137

Audit fees in the above table are the aggregate fees billed by Deloitte for the fiscal year ended December 31, 2014 and the aggregate fees billed by PwC for the fiscal year ended December 31, 2015, in each case in connection with the audit of our annual financial statements in accordance with IFRS, as well as the review of other filings.

Tax fees in the above table are fees billed by Deloitte for the fiscal year ended December 31, 2014 and fees billed by PwC for the fiscal year ended December 31, 2015, in each case associated with the issuance of certificates for tax and legal compliance purposes in Brazil, Argentina and Uruguay; and tax consultation in the United States, Mexico, Argentina and Uruguay. Fees billed by PwC for the fiscal year ended December 31, 2015, were also associated with tax compliance services in Chile, Brazil, Argentina, Mexico and Uruguay; and tax consultation services in Chile, Argentina and the United States.

Other fees in the above table are fees billed by Deloitte for the fiscal year ended December 31, 2014 in connection with bond issuances and fees billed by PwC for the fiscal year ended December 31, 2015, in connection with a salary survey study performed in Uruguay.

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Audit Committee Approval Policies and Procedures

Our Board of Directors has established pre-approval policies and procedures for the engagement of our independent auditors. Pursuant to our pre-approval policy, our Board of Directors has pre-approved a list of services that our independent auditors are allowed to provide to us or our subsidiaries.

Additionally, our Board of Directors expressly approves, on a case-by-case basis, any engagement of our independent auditors for audit and non-audit services that are not included on the pre-approved list.

All services described in each of paragraphs (b) through (d) of this Item were approved by the Board of Directors pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

Item 16F. Change in Registrant’s Certifying Accountant

On March 30, 2015, the Board of Directors resolved to propose to shareholders a change in the Company’s independent registered public accounting firm at the General Shareholders’ Meeting to be held on April 21, 2015. On such date, the shareholders approved the Board of Directors’ proposal to nominate PwC as the new independent registered public accounting firm for Celulosa Arauco y Constitución S.A. Deloitte Auditores y Consultores Ltda. (“Deloitte”) served as the independent registered public accounting firm for Celulosa Arauco y Constitución S.A. for the 2014 and 2013 fiscal years, in each case pursuant to the terms of an annual engagement letter. On April 22, 2015, PwC was notified by the Company that shareholders had approved its appointment as the Company’s new independent registered public accounting firm for the 2015 fiscal year, and the company dismissed Deloitte from its engagement. Such dismissal became effective upon completion by Deloitte of its procedures on the financial statements of Celulosa Arauco y Constitución S.A as of December 31, 2014 and 2013 and for the three years ended December 31, 2014 and the filing of the related Form 20-F.

The audit reports of Deloitte on the Company’s consolidated financial statements as of and for the years ended December 31, 2014 and 2013 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

During the Company’s two fiscal years ended December 31, 2014 and 2013, and the subsequent interim periods through April 21, 2015, there were no disagreements with Deloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Deloitte’s satisfaction, would have caused Deloitte to make reference thereto in their reports on the Company’s consolidated financial statements for such periods.

During the Company’s two fiscal years ended December 31, 2014 and 2013 and the subsequent periods through April 21, 2015, there were no reportable events (as defined in Item 16F(a)(1)(v) of Form 20-F).

The Company has provided Deloitte with a copy of this Form 20-F prior to its filing with the Securities and Exchange Commission (“SEC”). The Company requested Deloitte to furnish the Company with a copy of a letter addressed to the SEC stating whether or not it agrees with the above statements, as required by Item 16F(a)(3) of Form 20-F. Such letter dated April 29, 2016 is filed as Exhibit 15.1.

During the Company’s two fiscal years - ended December 31, 2014 and 2013 - and the subsequent interim period through April 22, 2015, neither the Company nor anyone acting on its behalf has consulted with PwC on any of the matters described in Item 16F(a)(2)(i) and Item 16F(a)(2)(ii) of Form 20-F.

Item 16G. Corporate Governance

Not applicable. Neither our stock nor our SEC-registered securities are listed on any stock exchange or other regulated market.

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Item 16H. Mine Safety Disclosures

Not applicable.

PART III

Item 17. Financial Statements

Not applicable.

Item 18. Financial Statements

Our audited consolidated financial statements have been prepared in accordance with IFRS, as issued by the IASB, and are included in this annual report beginning at page F-1.

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Item 19. Exhibits

Documents filed as exhibits to this annual report:

1.1	English translation of the estatutos (by-laws) of Celulosa Arauco y Constitución S.A., as of April 22, 2014 (incorporated by reference to Exhibit 1.1 to Arauco’s Annual Report on Form 20-F for the fiscal year ended December 31, 2013, filed on April 29, 2014, Commission file No. 033-99720).
7.1	Statement Regarding Calculation of Ratios of Earnings to Fixed Charges
8.1	List of subsidiaries
12.1	Certification of chief executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2	Certification of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1	Certification of chief executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1	Letter from Deloitte Auditores y Consultores Ltda. to the Securities and Exchange Commission dated April 29, 2016, regarding the change in certifying accountant

Omitted from the exhibits filed with this annual report are certain instruments and agreements with respect to our long-term debt, none of which authorizes securities in a total amount that exceeds 10% of our total assets. We hereby agree to furnish to the SEC copies of any such omitted instruments or agreements as the SEC requests.

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The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

CELULOSA ARAUCO Y CONSTITUCIÓN S.A.
By:	/s/ Matías Domeyko
	Matías Domeyko
	Chief Executive Officer

Date: April 29, 2016

CONSOLIDATED

FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

INDEX

	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Statements of Financial Position	F-3
Consolidated Statements of Profit or Loss	F-5
Consolidated Statements of Comprehensive Income	F-6
Consolidated Statements of Changes in Equity	F-7
Consolidated Statements of Cash Flows	F-9
NOTE 1 - Presentation of Financial Statement	F-10
NOTE 2 - Accounting Policies, Changes in Accounting Estimates	F-29
NOTE 3 - Disclosure of Other Information	F-29
NOTE 4 - Inventories	F-34
NOTE 5 - Cash and Cash Equivalents	F-35
NOTE 6 - Income Taxes	F-36
NOTE 7 - Property, Plant and Equipment	F-42
NOTE 8 - Leases	F-46
NOTE 9 - Revenue	F-47
NOTE 10 - Employee Benefits	F-48
NOTE 11 - Balances in foreign currency and foreign currency exchange rate impact in profit or loss	F-49
NOTE 12 - Borrowing Costs	F-53
NOTE 13 - Related Parties	F-54
NOTE 14 - Consolidated Financial Statements	F-59
NOTE 15 - Investment in Associates	F-61
NOTE 16 - Interests in Joint Arrangements	F-64
NOTE 17 - Impairment of Assets	F-67
NOTE 18 - Provisions, Contingent Assets and Contingent Liabilities	F-68
NOTE 19 - Intangible Assets	F-76
NOTE 20 - Biological Assets	F-77
NOTE 21 - Environmental Matters	F-80
NOTE 22 - Non-Current Assets Held for Sale	F-83
NOTE 23 - Financial Instruments	F-84
NOTE 24 - Operating Segments	F-111
NOTE 25 - Other Non-Financial Assets and Non-Financial Liabilities	F-119
NOTE 26 - Distributable Net Income and Earnings Per Share	F-120
NOTE 27 - Subsequent Events	F-121

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Celulosa Arauco y Constitución S.A.

In our opinion, the accompanying consolidated statement of financial position and the related statement of profit or loss, comprehensive income, changes in equity, and cash flows present fairly, in all material respects, the financial position of Celulosa Arauco y Constitución S.A. and its subsidiaries at December 31, 2015, and the results of their operations and their cash flows for the year ended December 31, 2015 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers

Santiago, Chile

April 26, 2016

PwC Chile, Av. Andrés Bello 2711 – piso 5, Las Condes – Santiago, Chile

RUT: 81-513-400-1 | Teléfono: (562) 29400000 | www.pwc.cl

F-1

  Deloitte Auditores y Consultores Limitada Rosario Norte 407 Las Condes, Santiago Chile Fono: (56) 227 297 000 Fax: (56) 223 749 177 deloittechile@deloitte.com www.deloitte.cl

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Celulosa Arauco y Constitución S.A.

We have audited the accompanying consolidated statements of financial position of Celulosa Arauco y Constitución S.A. and subsidiaries (the “Company”) as of December 31, 2014, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the two years in the period ended December 31, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above, present fairly, in all material respects, the financial position of Celulosa Arauco y Constitución S.A. and subsidiaries as of December 31, 2014, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2014, in conformity with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

/s/ Deloitte

Santiago, Chile

April 21, 2015

F-2

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	Note	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Assets
Current Assets
Cash and cash equivalents	5		500,025		971,152
Other current financial assets	23		32,195		7,633
Other current non-financial assets	25		133,956		177,728
Trade and other current receivables	23		733,322		731,908
Account receivables due from related companies	13		3,124		4,705
Current inventories	4		909,988		893,573
Current biological assets	20		272,037		307,551
Current tax assets			64,079		38,477
Total Current Assets other than assets or disposal groups classified as held for sale			2,648,726		3,132,727
Non-Current assets or disposal groups classified as held for sale	22		3,194		7,988
Non-Current Assets or disposal groups classified as held for sale or as held for distribution to owners			3,194		7,988
Total Current Assets			2,651,920		3,140,715
Non-Current Assets	23
Other non-current financial assets	25		595		5,024
Other non-current non-financial assets	23		125,516		101,094
Trade and other non-current receivables			15,270		31,001
Account receivables due from related parties, non current	13		0		151,519
Investments accounted for using equity method	15		264,812		326,045
Intangible assets other than goodwill	19		88,112		93,258
Goodwill	17		69,475		82,573
Property, plant and equipment	7		6,896,396		7,119,583
Non-current biological assets	20		3,554,560		3,538,802
Deferred tax assets			140,251		158,283
Total non-Current Assets			11,154,987		11,607,182
Total Assets			13,806,907		14,747,897

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

F-3

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)

	Note		12-31-2015 ThU.S.$			12-31-2014 ThU.S.$
Equity and liabilities
Liabilities
Current Liabilities
Other current financial liabilities		23		296,038			742,343
Trade and other current payables		23		583,018			630,406
Accounts payable to related companies		13		7,141			6,036
Other current provisions		18		858			2,535
Current tax liabilities				10,976			25,860
Current provisions for employee benefits		10		4,497			3,590
Other current non-financial liabilities		25		131,723			136,316
Total current liabilities other than assets included in disposal groups classified as held for sale				1,034,251			1,547,086
Total Current Liabilities				1,034,251			1,547,086
Non-Current Liabilities
Other non-current financial liabilities		23		4,236,965			4,453,819
Other non-current provisions		18		34,541			64,529
Deferred tax liabilities		6		1,755,528			1,757,149
Non-current provisions for employee benefits		10		51,936			48,582
Other non-current non-financial liabilities		25		47,241			61,996
Total non - current liabilities				6,126,211			6,386,075
Total liabilities				7,160,462			7,933,161
Equity
Issued capital				353,618			353,618
Retained earnings				7,204,452			6,984,564
Other reserves				(949,360	)		(571,052	)
Equity attributable to parent company				6,608,710			6,767,130
Non-controlling interests				37,735			47,606
Total equity				6,646,445			6,814,736
Total equity and liabilities				13,806,907			14,747,897

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

F-4

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

		For the periods ended December 31,
	Note	2015 ThU.S.$			2014 ThU.S.$			2013 ThU.S.$
Statements of profit or loss
Revenue	9		5,146,740			5,342,643			5,145,500
Cost of sales	3		(3,511,425	)		(3,654,146	)		(3,557,210	)
Gross profit			1,635,315			1,688,497			1,588,290
Other income	3		273,026			368,924			385,055
Distribution costs	3		(528,470	)		(556,837	)		(523,587	)
Administrative expenses	3		(551,977	)		(550,809	)		(544,694	)
Other expense	3		(83,388	)		(138,769	)		(136,812	)
Profit from operating activities			744,506			811,006			768,252
Finance income	3		50,284			30,772			19,062
Finance costs	3		(262,962	)		(246,473	)		(232,843	)
Share of profits of associates and joint ventures accounted for using equity method	15		6,748			7,481			6,260
Exchange rate differences			(41,171	)		(9,961	)		(11,797	)
Profit before income tax			497,405			592,825			548,934
Income Tax	6		(129,694	)		(448,652	)		(130,357	)
Net Profit			367,711			144,173			418,577
Net profit attributable to
Net profit attributable to parent company			362,689			139,803			385,657
Net profit attributable to non-controlling interests			5,022			4,370			32,920
Net Profit			367,711			144,173			418,577
Basic earnings per share
Basic earnings per share from continuing operations			0.0032051			0.0012354			0.0034081
Basic earnings per share			0.0032051			0.0012354			0.0034081
Earnings per diluted shares
Earnings per diluted shares from continuing operations			0.0032051			0.0012354			0.0034081
Earnings per diluted share			0.0032051			0.0012354			0.0034081

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

F-5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

		For the periods ended December 31,
	Note	2015 ThU.S.$			2014 ThU.S.$			2013 ThU.S.$
Net profit			367,711			144,173			418,577
Components of other comprehensive income that will not be reclassified to profit or loss before tax:
Other comprehensive income before tax actuarial losses on defined benefit plans			(1,530	)		(12,829	)		(4,143	)
Share of other comprehensive income of associates and joint ventures accounted for using equity method			(781	)		(4,781	)		2,222
Other Comprehensive Income that will not be reclassified to profit or loss before tax			(2,311	)		(17,610	)		(1,921	)
Components of other comprehensive income that will be reclassified to profit or loss before tax:
Exchange differences on translation
Gains (losses) on exchange differences on translation, before tax	11		(385,109	)		(163,844	)		(174,985	)
Other Comprehensive Income before tax exchange differences on translation			(385,109	)		(163,844	)		(174,985	)
Cash flow hedges
Gains (losses) on cash flow hedges, before tax			11,859			(43,228	)		35,789
Recycle of cash flow hedges to profit or loss before tax			(16,122	)		949			(5,880	)
Other Comprehensive Income before tax Cash flow hedges			(4,263	)		(42,279	)		29,909
Other Comprehensive income that will be reclassified to profit or loss before tax			(389,372	)		(206,123	)		(145,076	)
Income tax relating to components of other comprehensive Income that will not be reclassified to profit or loss before tax
Income tax relating to actuarial losses on defined benefit plans			649			3,404			829
Income tax relating to components of other comprehensive Income that will be reclassified to profit or loss before tax
Income tax relating to cash flow hedges	6		1,889			10,764			(5,400	)
Income tax relating to components of other comprehensive income that will be reclassified to profit or loss			1,889			10,764			(5,400	)
Other comprehensive loss			(389,145	)		(209,565	)		(151,568	)
Comprehensive (loss) income			(21,434	)		(65,392	)		267,009
Comprehensive Income attributable to
Comprehensive (loss) income, attributable to owners of parent company			(15,619	)		(65,289	)		239,346
Comprehensive (loss) income, attributable to non-controlling interests			(5,815	)		(103	)		27,663
Total comprehensive (loss) income			(21,434	)		(65,392	)		267,009

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

F-6

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

12-31-2015	Issued Capital ThU.S.$		Reserve of exchange differences on translation ThU.S.$			Reserve of cash flow hedges ThU.S.$			Reserve of actuarial losses on defined benefit plans ThU.S.$			Other Reserves ThU.S.$			Total 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 01/01/2015		353,618		(498,495	)		(53,022	)		(15,790	)		(3,745	)		(571,052	)		6,984,564			6,767,130			47,606			6,814,736
Changes in Equity:
Comprehensive income
Net profit																			362,689			362,689			5,022			367,711
Other comprehensive income, net of tax				(374,275	)		(2,374	)		(878	)		(781	)		(378,308	)					(378,308	)		(10,837	)		(389,145	)
Comprehensive income		0		(374,275	)		(2,374	)		(878	)		(781	)		(378,308	)		362,689			(15,619	)		(5,815	)		(21,434	)
Dividends																			(142,801	)		(142,801	)		(3,228	)		(146,029	)
Decrease from transfers and other changes in equity																			0			0			(828	)		(828	)
Changes in equity		0		(374,275	)		(2,374	)		(878	)		(781	)		(378,308	)		219,888			(158,420	)		(9,871	)		(168,291	)
Closing balance at 12/31/2015		353,618		(872,770	)		(55,396	)		(16,668	)		(4,526	)		(949,360	)		7,204,452			6,608,710			37,735			6,646,445

12-31-2014	Issued Capital ThU.S.$		Reserve of exchange differences on translation ThU.S.$			Reserve of cash flow hedges ThU.S.$			Reserve of actuarial losses on defined benefit plans ThU.S.$			Other Reserves ThU.S.$			Total 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 01/01/2014		353,618		(339,105	)		(21,507	)		(6,384	)		1,036			(365,960	)		7,004,640			6,992,298			52,242			7,044,540
Changes in Equity:
Comprehensive income
Net profit																			139,803			139,803			4,370			144,173
Other comprehensive income, net of tax				(159,390	)		(31,515	)		(9,406	)		(4,781	)		(205,092	)					(205,092	)		(4,473	)		(209,565	)
Comprehensive income		0		(159,390	)		(31,515	)		(9,406	)		(4,781	)		(205,092	)		139,803			(65,289	)		(103	)		(65,392	)
Dividends																			(159,879	)		(159,879	)		(4,533	)		(164,412	)
Changes in equity		0		(159,390	)		(31,515	)		(9,406	)		(4,781	)		(205,092	)		(20,076	)		(225,168	)		(4,636	)		(229,804	)
Closing balance at 12/31/2014		353,618		(498,495	)		(53,022	)		(15,790	)		(3,745	)		(571,052	)		6,984,564			6,767,130			47,606			6,814,736

F-7

12-31-2013	Issued Capital ThU.S.$		Reserve of exchange differences on translation ThU.S.$			Reserve of cash flow hedges ThU.S.$			Reserve of actuarial losses on defined benefit plans ThU.S.$			Other Reserves ThU.S.$			Total 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 01/01/2013		353,176		(169,377	)		(46,016	)		(3,070	)		(1,186	)		(219,649	)		6,757,795			6,891,322			74,437			6,965,759
Changes in Equity:																												0
Comprehensive income																												0
Net profit																			385,657			385,657			32,920			418,577
Other comprehensive income, net of tax				(169,728	)		24,509			(3,314	)		2,222			(146,311	)					(146,311	)		(5,257	)		(151,568	)
Comprehensive income		0		(169,728	)		24,509			(3,314	)		2,222			(146,311	)		385,657			239,346			27,663			267,009
Issuance of shares		442																				442			(442	)		0
Dividends																			(138,812	)		(138,812	)		(29,760	)		(168,572	)
Decrease from transfers and other changes in equity																			0			0			(17,392	)		(17,392	)
Decrease from changes in ownership interest in subsidiaries that do not result in loss of control																						0			(2,264	)		(2,264	)
Changes in equity		442		(169,728	)		24,509			(3,314	)		2,222			(146,311	)		246,845			100,976			(22,195	)		78,781
Closing balance at 12/31/2013		353,618		(339,105	)		(21,507	)		(6,384	)		1,036			(365,960	)		7,004,640			6,992,298			52,242			7,044,540

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

F-8

CONSOLIDATED STATEMENTS OF CASH FLOWS

	12-31-2015 ThU.S.$			12-31-2014 ThU.S.$			12-31-2013 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		5,733,693			5,629,175			5,609,104
Receipts from collections from insurance claims, annuities and other policy benefits		4,715			5,100			29,840
Other cash receipts from operating activities		332,981			359,539			408,257
Classes of cash payments
Payments to suppliers for goods and services		(4,260,587	)		(4,190,295	)		(4,117,942	)
Payments to and on behalf of employees		(490,723	)		(499,370	)		(573,538	)
Other cash payments from operating activities		(169,237	)		(122,027	)		(196,775	)
Interest paid		(229,894	)		(204,915	)		(223,571	)
Interest received		17,720			46,658			18,451
Income taxes paid		(87,784	)		(37,285	)		(55,272	)
Other inflows (outflows) of cash, net		2,766			(1,405	)		(834	)
Net Cash flows from Operating Activities		853,650			985,175			897,720
Cash flows (used in) investing activities
Cash flow used in obtaining control of subsidiaries or other businesses		(10,090	)		0			0
Cash flow used for contributions in associates		(814	)		0			0
Cash flow used in purchase of associates and joint ventures		0			(1,882	)		0
Loans to related parties		(23,628	)		(158,797	)		0
Proceeds from sale of property, plant and equipment		5,860			63,492			116,639
Purchase of property, plant and equipment		(321,385	)		(459,796	)		(645,388	)
Proceeds from sales of intangible assets		99			0			0
Purchase of intangible assets		(10,395	)		(10,101	)		(5,889	)
Proceeds from sales of other long-term assets		506			40,257			28,992
Purchase of other non-current assets		(126,132	)		(142,138	)		(213,244	)
Cash receipts from repayment of advances and loans made to related parties		0			0			5,000
Dividends received		6,350			12,073			18,562
Other inflows of cash, net		1,849			1,734			7,708
Cash flows used in Investing Activities		(477,780	)		(655,158	)		(687,620	)
Cash flows from (used in) Financing Activities
Total borrowings obtained		280,863			1,035,601			1,351,682
Debt obtained in long term		890			829,348			394,464
Proceeds from short-term borrowings		279,973			206,253			957,218
Repayments of borrowings		(949,183	)		(900,595	)		(1,216,917	)
Dividends paid by subsidiaries		(143,003	)		(141,089	)		(140,054	)
Other outflows of cash, net		(853	)		(1,802	)		(2,487	)
Cash flows used in Financing Activities		(812,176	)		(7,885	)		(7,776	)
Net (decrease) increase in Cash and Cash Equivalents before effect of exchange rate changes		(436,306	)		322,132			202,324
Effect of exchange rate changes on cash and cash equivalents		(34,821	)		(18,192	)		(23,610	)
Net (decrease) increase of Cash and Cash equivalents		(471,127	)		303,940			178,714
Cash and cash equivalents, at the beginning of the period		971,152			667,212			488,498
Cash and cash equivalents, at the end of the period		500,025			971,152			667,212

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

F-9

CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2015

NOTE 1. PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

Entity Information

Celulosa Arauco y Constitución S.A. and subsidiaries, (hereafter “Arauco” or the “Company”), 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 “SVS”) as No. 042 on June 14, 1982. Additionally, the Company is registered as a non-accelerated filer in the Securities and Exchange Commission (SEC) of the United States of America.

Forestal Cholguán S.A., subsidiary of Arauco, is also registered in the Securities Registry as No. 030.

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 timber 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 99.9780% of Arauco, and is registered in the Securities Registry as No. 0028. Each of the above mentioned companies is subject to the oversight of the SVS.

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 63.4015% of the shares of AntarChile S.A., the controlling shareholder of our parent company Empresas Copec S.A.

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

Presentation of Consolidated Financial Statements

The Financial Statements presented by Arauco are comprised by the following:

• Consolidated Statements of Financial Position as of December 31, 2015 and 2014.

• Consolidated Statements of Profit or Loss by function for the periods between January 1 and December 31, 2015, 2014 and 2013.

• Statements of Other Consolidated Comprehensive Income for the periods between January 1 and December 31, 2015, 2014 and 2013

• Consolidated Statements of Changes in Equity for the periods between January 1 and December 31, 2015, 2014 and 2013.

• Consolidated Statements of Cash Flows for the periods between January 1 and December 31, 2015, 2014 and 2013.

• Explanatory disclosures (notes)

F-10

Period Covered by the Consolidated Financial Statements

As of December 31, 2015 and 2014 and for the periods between January 1 and December 31, 2015, 2014 and 2013

Date of Approval of Consolidated Financial Statements

These consolidated financial statements were approved by the Board of Directors of the Company (the “Board”) on April 26, 2016.

Abbreviations used in this report:

IFRS – International Financial Reporting Standards

IASB – International Accounting Standards Board

IAS – International Accounting Standards

IFRIC – International Financial Reporting Standards Interpretations Committee

MU.S.$ – Millions of U.S. dollars

ThU.S.$ – Thousands of U.S. dollars

U.F. – Inflation index-linked units of account

EBITDA – Profit Before financing cost, Financial income, Income taxes, Depreciation, and Amortization (1)

ICMS – Tax movement of inventories and services (Brazil)

(1) Non gaap measure (See Risk Management Note 23.12.5)

F-11

Functional and Presentation Currency

Arauco and most of its subsidiaries determined the United States (“U.S.”) Dollar as its functional currency since the majority of its revenues from sales of its products are derived from exports denominated in U.S. Dollars, while their costs of sales are in a large extent related or indexed to the U.S. Dollar.

In relation to the cost of sales, although the labor and services costs 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.

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

For the sawn timber, panel and forestry operating segments, although total sales include a mix of domestic (Domestic sales in the producing country) and exports sales, prices of the products are established in U.S. Dollars, which it is also the case for the cost structure of the related raw materials.

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 (ThU.S.$).

F-12

Summary of significant accounting policies

a) Basis for preparation of consolidated financial statements

The accompanying 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 explicit and unreserved adoption of IFRS.

The consolidated financial statements have been prepared on the historical cost basis, except for biological assets and derivative financial instruments which are measured at fair value at the end of each period as explained in the following significant accounting policies.

b) Critical accounting estimates and judgments

The preparation of these consolidated financial statements in accordance with IFRS, requires management to make estimates and assumptions that affect the carrying amounts reported. These 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.

-Biological Assets

The recovery of forest plantations is based on discounted cash flow models which means that the fair value of biological assets is calculated using cash flows from continuing operations on a discounted basis, based 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; therefore it is 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.

-Goodwill

Goodwill represents the excess of the acquisition cost over the fair value of the Group’s holding in the identifiable net assets of the acquired subsidiary at the date of acquisition. Said fair value is determined whether based on assessments and/or the discounted future flow method using hypotheses in their determination, such as sales prices and industry indexes, among others. See Note 17.

-Litigation and Contingencies

Arauco and its subsidiaries are subject to certain litigation proceedings. Future impact on Arauco’s financial condition derived from such litigations is estimated by management, in collaboration with its legal advisors. Arauco applies judgment when interpreting the reports of its legal advisors who provide updated estimates of the legal contingencies at each reporting period and/or at each time a modification is determined to be necessary. For a description of current litigations see Note 18.

F-13

c) Consolidation

The consolidated financial statements include all entities over which Arauco has the power to direct the relevant financial and operating activities. Subsidiaries are consolidated from the date on which control is obtained and up to the date that control ceases.

Specifically, a company controls an investee or subsidiary if, and only if, they have all of the following:

(a) power over the investee, i.e. the investor has existing rights which give it the ability to direct the relevant activities (the activities that significantly affect the investee’s returns)

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

(c) the ability to use power over the investee to affect the amount of the investor’s returns.

When Arauco holds less than the majority of voting rights in a company in which it participates, it nonetheless has the power over said company - when these voting rights are enough - to grant it in practice the ability to unilaterally direct said company’s relevant activities. Arauco takes into account all facts and circumstances in order to assess if the voting rights in a company in which it participates are enough for granting it nthe power, including:

a) the size of the investor’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

b) potential voting rights held by the investor, other vote holders or other parties;

c) rights arising from other contractual arrangements; and

d) any additional facts and circumstances that indicate the investor has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

The Company will reevaluate whether or not it holds control of a company in which it participates if the facts and circumstances indicate that changes have occurred in one or more of the three elements of control mentioned above.

Consolidation of an investee shall begin from the date the investor obtains control of the investee and cease when the investor loses control of the investee. An entity includes the income and expenses of an acquired or sold subsidiary in the consolidated financial statements from the date it gains control until the date when the entity ceases to control the subsidiary.

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

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

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

F-14

The consolidated financial statements at the end of this period include the assets, liabilities, income and expenses of the subsidiaries shown in Note 13.

Certain consolidated subsidiaries have Brazilian Real 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.

Based on the aforementioned process, the Company has 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 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, assets and liabilities of Arauco’s operations in a functional currency different from Arauco´s 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 rate differences are recognized in other comprehensive income and accumulated in “Other reserves” within–equity.

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(iii) Foreign Currency Transactions

Transactions in currencies other than the functional currency are recognized at the exchange rates prevailing at the dates of the transactions. Profit or loss on transactions in currencies other than the functional currency resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognized in the statement of income, except those which are recorded in other comprehensive income and accumulated in equity such as cash flows hedging derivatives.

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 three months or less and which are subject to an insignificant risk of changes in value.

g) Financial Instruments

Financial assets

Financial assets are classified into the following specified categories: ‘loans and receivables’ and “derivative financial instruments”. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All purchases and sales of financial assets are recognized and derecognized on the trade date, which require delivery of assets within the same time frame established by regulation or convention in the marketplace.

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 plus transaction costs that are directly attributable to the acquisition and are subsequently measured at amortized cost using the effective interest rate method, less any impairment.

Derivative financial instruments are explained in Note 1 h)

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Financial liabilities

Financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortized cost using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments (including all fees and amounts paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Financial obligations are classified as current liabilities, unless Arauco holds an unconditional right to defer their settlement during at least 12 months after the balance sheet’s date.

The estimate of the fair value of obligations with banks is determined using valuation techniques that include discounted cash flow analyses applying rates of similar loans. Bonds are appraised at market value.

h) Derivative financial instruments

(i) Derivative Financial Instruments - The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts, interest rate swaps, currency swaps and zero cost collar contracts. The Company policy’s is to enter into derivatives contracts only for economic hedging purposes.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently re-measured at fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss unless the derivative is designated as a hedging instrument and complies with hedge accounting requirements of IAS 39, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

(ii) Embedded derivatives - The Company assesses the existence of embedded derivatives in financial instrument contracts. Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at FVTPL as a whole. Arauco has determined that no embedded derivatives currently exist.

(iii) Hedge accounting - The Company designates certain hedging instruments as either fair value hedges or cash flow hedges.

At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, Arauco documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.

-Fair Value Hedges under IAS 39- Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk are recognized in profit or loss in the line item relating to the hedged item.

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-Cash flow hedges under IAS 39 - The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss, and is included in the Finance costs line item in the consolidated statement of profit or loss. Amounts previously recognized in other comprehensive income are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognized hedged item.

Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognized in other comprehensive income and accumulated in equity at that time remains in equity and is recognized when the forecasted transaction is ultimately recognized in profit or loss. When a forecasted transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss.

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 and in process products includes the cost of raw materials, direct labor, other direct costs and manufacturing overhead 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 written-down to their net realizable value. This write-down also includes obsolescence amounts resulting from slow moving inventories and technical obsolescence.

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.

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j) Non-current assets held for sale

The Group classifies certain property, plant and equipment, intangible assets, investments in associates and disposal groups (groups of assets to be sold together with their directly associated liabilities) as non-current assets held for sale which as of the date of the statement of financial position are the subject of active sale efforts which are estimated to be highly probable. Non-current assets held for sale are presented separately from the other assets in the balance sheet.

These assets or disposal groups are measured at the lower of the carrying amount or the fair value less the costs to sell, and are no longer depreciated or 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 the identification of the acquirer, determination of the acquisition date, recognition and measurement of the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree; and recognition and measurement of 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, except:

-deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with IAS 12 Income Taxes and IAS 19 respectively;

-liabilities or equity instruments related to share-based payment arrangements of the acquire or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquire are measured in accordance with IFRS 3 at the acquisition date; and

-assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with such standard.

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 company.

Changes in the ownership interest of a parent in its subsidiary that do not result in a loss of control are treated as equity transactions. Any difference between the amount by which non-controlling 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 company. No adjustment is made to the carrying amount of goodwill, neither gains nor losses are recognized in the statement of profit or loss.

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 initially be measured either at fair value or at the present ownership instruments’ proportionate share of non-controlling interests, in the recognized amounts of the acquiree’s identifiable net assets. The choice is made on a transaction-by-transaction basis.

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Arauco measures the fair value of the acquired company in the business combination achieved in stage (“step acquisition”), recognizing the effects of remeasurement of previously held equity interest in the acquiree in the statements of income.

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 preliminary amounts for the items for which the accounting is incomplete. During the measurement period (no more than one year), these preliminary 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.

Business combinations that are under common control transactions are accounted using as a reference the pooling of interest. Under this method, assets and liabilities related to the transaction carry over the previous carrying values. Any difference between assets and liabilities included in the consolidation and the consideration transferred, is accounted in equity.

l) Investments in associates and joint arrangements

Associates are entities over which Arauco exercises significant influence, but not control. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

Joint arrangement 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 joint arrangements are classified as a joint venture or as a joint operation. A joint operation is a joint arrangement in which the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement in which the parties that have joint control of the arrangement (i.e., participants in a joint venture) have rights to the net assets of the arrangement.

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. Dividends received are recognized by deducting the amount received from the carrying amount of the investment. Arauco’s investment in associates includes goodwill (both net of any accumulated impairment loss).

The investments in joint operations are recognized through consolidation of assets, liabilities and results of operations in relation to Arauco’s ownership percentage.

Investments in associates and joint ventures 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 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.

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m) Intangible assets other than goodwill

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 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 and make them compatible with existing software. These costs are amortized over the estimated useful lives of the software.

(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 future cash flows. 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.

(iii) Customers and trade relations with customers

Correspond to the valuation over the time of the established relationship with customers, from the sale of products and services through its sales team. These relations will materialize in sales orders, which generate revenue and cost of sales. The useful life has been determined to be 15 years.

n) Goodwill

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 statement of income.

Goodwill is not amortized but tested for impairment on annual basis.

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 or a group of cash generating units expected to benefit from the synergies of the combination irrespective of whether other assets or liabilities of the acquiree are allocated to those units or group of units.

The goodwill generated on acquisitions of foreign companies, is expressed in the functional currency of such foreign company.

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 consolidated financial statements, the change in the carrying amount of goodwill in Brazil is only related to the net exchange rate differences on translation.

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o) Property, Plant and Equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment. 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.

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 of assets are reviewed and adjusted, if appropriate, annually.

p) Leases

Arauco applies IFRIC 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.

Arauco evaluates the economic nature of the contracts that grant the right to use certain assets, for the purposes of determining the existence of implied leases. In these cases, the Company separates - at the beginning of the contract, and based on relative fair values - payments and considerations associated with the lease, from the rest of the elements incorporated to the contract.

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q) Biological Assets

IAS 41 requires that biological assets, such as standing trees, are measured at fair value less cost to sell in the statement of financial position. Forestry plantations 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 forestry plantations 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 forestry plantations 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 forestry plantations that will be harvested in the short term.

Biological growth and changes in fair value of forestry plantations are recognized in the line item “Other income” in the consolidated statement of profit or loss.

r) Income tax expense and deferred income tax assets and liabilities.

The tax liabilities are recognized in the consolidated 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 liability method, on the temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated annual accounts. Deferred income tax is determined using tax rates contained in laws adopted as of the date of the financial statements and that are expected to be applicable 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 and tax credits 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.

s) 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 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.

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t) Revenue recognition

Revenues are recognized when Arauco has transferred the risks and rewards of ownership to the buyer and Arauco has no right to dispose of the assets, nor effective control of such good.

(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.

The structure for recognizing revenue from export sales is based on the 2010 Incoterms, which are the official rules for the interpretation of commercial terms issued by the International Chamber of Commerce.

The main Incoterms used by Arauco are the following:

“CFR (Cost and freight)”, where the company bears all costs including main transportation, until the products arrives at its port of destination. The risk is transferred to the purchaser once the products have been loaded onto the vessel, in the country of origin.

“CIF (Cost Insurance & Freight)”, where the Company organizes and pays for external freight services and some other expenses. Arauco is no longer responsible for the products once it has been delivered to the ocean carrier company. The point of sale is the delivery of the products to the carrier chartered by the seller.

(ii) Revenue recognition from Rendering of Services

When the outcome of a transaction involving the rendering of services can be reliably estimated, revenue 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 services which are transacted principally in the spot market of the Sistema Interconectado Central (“Central Interconnected 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) (“Economic Load Dispatch Center of the Central Interconnected 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 and wood process and is a complementary business to it, which is initially supplied to the group’s subsidiaries and any surplus is sold to the CDEC-SIC.

F-24

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.

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 consolidated financial statements.

u) 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 dividends payable provision is registered for 40% of the liquid distributable profit and against a lower equity, based on the yearly resolution of the Shareholders’ Meeting.

Dividends payable are presented in the line item “Other current non-financial liabilities” in the consolidated statement of financial position.

v) Earning per share

Basic earnings per share are calculated by dividing the net profit for the period attributable to the parent company by the weighted average number of ordinary shares outstanding during the period, excluding the average number of shares in the Company held by a subsidiary, if such circumstance exists. Arauco has not performed any type of transaction with a potential dilutive effect that would cause diluted earnings per share to be different from basic earnings per share.

w) 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 circumstances indicating that the assets have to recognize an impairment loss. Among the circumstances 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.

A previously recognized impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount however a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

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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 recognized an impairment loss, are reviewed at the end of each reporting period whether there is any circumstances indicating that an impairment loss previously recognized may no longer exists or has 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

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 to sell and its value in use. An impairment loss is recognized whenever the carrying amount exceeds the recoverable amount.

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.

A cash-generating unit, for which goodwill has been allocated, is tested for impairment annually or more frequently when there is a circumstance indicating 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 other assets pro rata based on the carrying amount of each asset in the unit. Any impairment loss of goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

Financial Assets

At the end of each reporting period, an assessment 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 loss 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 profit or loss.

An allowance for doubtful accounts is established based on an analysis of the maturity of the portfolio and considering the insurance coverage on accounts receivable. Other conditions are assessed, for example, when there is objective evidence of default or delinquency in payments under the original sale terms and when the customer enter into bankruptcy or financial reorganization, and is 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.

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x) Employee Benefits

Arauco constitutes labor obligations for severance payable in all circumstances for certain of its employees with at least 5 years of work in the Company, based on the terms of the staff’s collective and individual bargaining agreements.

The related provision is an estimate of the years of service to be recognized as a future labor obligation liability, in accordance with contracts between Arauco and its employees and pursuant to actuarial valuation criteria for this type of liability. This post-employment benefit is considered a defined benefit plan.

The main factors considered for calculating the actuarial value of severance 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.

y) 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 current payables” and “Trade and Other non-current payables” depending on their respective maturities in the consolidated statement of financial position.

z) Recent accounting pronouncements

The following new standards and interpretations have been adopted in these consolidated financial statements:

Amendments and improvements	Contents	Mandatory application for annual periods beginning on or after
IAS 19	Employee Benefits Clarifies the requirements related to the way in which contributions from employees or others which are linked to the service must be attributed to periods of service.	July 1, 2014
Annual improvements 2010-2012-Amendments to IFRS 6	IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24	July 1, 2014
Annual Improvement 2011-2013 -Amendments to IFRS 4	IFRS 1, IFRS 3, IFRS 13, IAS 40	July 1, 2014

The application of the standards, amendments and interpretations outlined above, did not have a significant impact on Arauco´s consolidated financial statements.

As of the date of issue of these consolidated financial statements, the following accounting statements have been issued by the IAS, which have not been subject to early adoption.

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Standards and interpretations	Contents	Mandatory application for annual periods beginning on or after
IFRS 9	Financial Instruments The complete version of IFRS 9 replaces most of the guidance in IAS 39. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39.	January 1, 2018
IFRS 15	This standard defines a new model to recognize revenue from contracts with costumers.	January 1, 2018
IFRS 16	Leases Specifies guidelines to recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value.	January 1, 2019
Amendments and improvements	Contents	Mandatory application for annual periods beginning on or after
IFRS 11-Amendments	Establishes how to account for the acquisition of an interest in a joint venture operation that qualifies as a business.	January 1, 2016
IAS 16 and IAS 38 – Amendments	This amendment clarifies that the use of revenue-based methods to calculate the depreciation of an asset is not appropiate. It also clarifies that revenue is generally presumed to be an inappropiate basis for measuring the consumption of the economic benefits embodied in an intangible asset.	January 1, 2016
IAS 16 and IAS 41 – Amendments	These amendments change the reporting for bearer plants, which should be accounted for in the same way as property, plant and equipment. The amendments include them in the scope of IAS 16 rather tan IAS 41.	January 1, 2016
IAS 27-Amendments	Allows entities to use the equity method to account for investments in subsidiaries, join ventures and associates in their separate financial statements.	January 1, 2016
IFRS 10 and IAS 28- Amendments	These amendments address an inconsistency between IFRS 10 and IAS 28 regarding the contribution of assets between an investor and its associate or join venture. The amendments aim at clarifying IAS 1 to address perceived impediments to preparers exercising their judgement in presenting their financial reports	January 1, 2016
IFRS 10, and IAS 28- Amendments	Amendments address issues that have arisen in the context of applying the consolidation exception for investment entities.	January 1, 2016
IAS 1-Amendments	The amendments aim at clarifying IAS 1 to address perceived impediments to preparers exercising their judgement in presenting their financial reports.	January 1, 2016
Annual Improvements 2012-2014 Cycle		January 1, 2016
Amendment to IFRS 5 “ Non-current Assets Held for Sale and Discontinued Operations”	Adds specific guidance in IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-for-distribution accounting is discontinued.	January 1, 2016
Improvements to IFRS 7 “ Financial Instruments: Disclosures”	Adds additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of determining the disclosures required. Clarifies the applicability of the amendments to IFRS 7 on offsetting disclosures to condensed interim financial statements.	January 1, 2016
Improvements to IAS 19, “Employee Benefits”	Clarifies that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid.	January 1, 2016
Improvements to IAS 34, “ Interim Financial Reporting”	Clarifies the meaning of ‘elsewhere in the interim report’ and requires a cross-reference	January 1, 2016

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Arauco is in the process of evaluating the impacts on the financial statements as a result of the adoption of IFRS 9, IFRS 15 and IFRS 16. Arauco estimates that the adoption of the other amendments and interpretations will not have a substantial impact on the Company’s Consolidated Financial Statements during their period of their initial application.

NOTE 2. CHANGES IN POLICIES AND ACCOUNTING ESTIMATES

There have been no changes in the treatment of estimates, amendments and accounting policies with respect to last year

NOTE 3. DISCLOSURE OF OTHER INFORMATION

a) Disclosure of Information on Issued Capital

At the date of these consolidated financial statements the share capital of Arauco is ThU.S.$353,618.

100% of Capital corresponds to ordinary shares

	12-31-2015	12-31-2014
Description of Ordinary Capital Share Types	100% of Capital corresponds to ordinary shares
Number of Authorized Shares by Type of Capital in Ordinary Shares	113,159,655
Nominal Value of Shares by Type of Capital in Ordinary Shares	ThU.S.$0.0031210 per share
Amount of Capital in Shares by Type of Ordinary Shares that Constitute Capital	ThU.S.$353,618
	12-31-2015	12-31-2014
Number of Shares Issued and Fully Paid by Type of Capital in Ordinary Shares	113,159,655

b) Dividends paid

The interim dividend paid in the year was equivalent to 15% of the distributable net profit calculated as of the end of September 2015 was considered a decrease in the statement of changes in equity.

The final dividend paid each year corresponds to the difference between the 40% of the prior year distributable net profit and the amount of the interim dividend paid.

F-29

The ThU.S.$142,801 (ThU.S.$159,879 as of December 31, 2014) presented in the statement of changes in equity correspond to the minimum dividend provision recorded for the period 2015 (period 2014).

In the Cash Flow Statement, in the line item “Dividends paid” an amount of ThU.S.$143,003 is presented for the year ended December 31, 2015 (ThU.S.$141,089 for the year ended December 31, 2014) which ThU.S.$141,652 (ThU.S.$137,232 for the year ended December 31, 2014) correspond to the payment of dividends to the parent company.

The following are the dividends paid and per share amounts during the period 2015 and 2014:

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	12-16-2015
Amount of Dividend	ThU.S.$43,580
Number of Shares for which Dividends are Paid	113,159,655
Dividend per Share, Ordinary Shares	U.S.$0.38512

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	05-12-2015
Amount of Dividend	ThU.S.$98,072
Number of Shares for which Dividends are Paid	113,159,655
Dividend per Share	U.S.$0.86667

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	12-09-2014
Amount of Dividend	ThU.S.$61,808
Number of Shares for which Dividends are Paid	113,159,655
Dividend per Share	U.S.$0.54620

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	05-09-2014
Amount of Dividend	ThU.S.$75,424
Number of Shares for which Dividends are Paid	113,159,655
Dividend per Share	U.S.$0.66653

c) Disclosure of Information on Reserves

Other reserves comprise reserves of exchange differences on translation, reserves of cash flow hedges and other reserves. Arauco does not have any restrictions associated with these reserves.

F-30

Reserves of exchange differences on translation

Reserves of exchange differences on translation correspond 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

Reserves of cash flow hedges correspond to the portion of net gain or loss of derivative financial instruments that complies with the requirements of hedge accounting at the end of each period.

Reserve of Actuarial Losses in Defined Benefit Plans

This corresponds to changes in the present value of the obligation for defined benefits resulting from experience adjustments (the effect of the differences between the previous actuarial assumptions and the events that occurred within the context of the plan) and the effects of the changes in the actuarial assumptions.

Other reserves

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

F-31

d) Other items in the Statement of Income

Other income, other expenses, finance income, finance costs and share profit (loss) of associates and joint ventures for the years ended December 31, 2015, 2014 and 2013 are as follows:

	January - December
	2015			2014			2013
	ThU.S.$			ThU.S.$			ThU.S.$
Classes of Other Income
Other Income, Total		273,026			368,924			385,055
Gain from changes in fair value of biological assets (See note 20)		210,479			284,497			269,671
Net income from insurance compensation		1,522			2,264			1,297
Revenue from export promotion		2,692			4,032			4,115
Lease income		2,654			2,708			2,315
Gain on sales of assets		11,849			57,653			46,473
Gain on sales of assets classified as held for sale		—			244			29,137
Gain from compensation of judgement		—			—			8,500
Gain on business combination achieved in stages		8,744			—			—
Access easement		8,160			5,158			1,771
Recovery of tax credits		8,081			—			—
Other operating results (sale materials and waste, rent of easements, income tax recovery)		18,845			12,368			21,776
Classes of Other Expenses by activity
Total of other expenses by activity		(83,388	)		(138,769	)		(136,812	)
Depreciation		(1,407	)		(2,084	)		(568	)
Legal expenses		(3,334	)		(4,806	)		(17,065	)
Impairment provision for property, plant and equipment and others		(12,321	)		(11,929	)		(14,339	)
Operating expenses related to plants stoppage		(3,917	)		(5,102	)		(9,676	)
Expenses related to projects		(532	)		(7,447	)		(17,707	)
Start-up costs		—			(9,591	)		—
Loss of forest due to fires		(34,850	)		(31,512	)		(8,546	)
Other Taxes		(8,981	)		(7,540	)		(4,458	)
Research and development expenses		(2,604	)		(3,105	)		(2,641	)
Severance payments and evictions		(1,748	)		(8,256	)		(1,974	)
Fines, readjustments and interests		(1,139	)		(3,749	)		(2,530	)
Other expenses		(12,555	)		(43,648	)		(57,308	)
Classes of financial income
Financial income, total		50,284			30,772			19,062
Financial income from mutual funds – term deposits		15,128			13,786			10,539
Financial income resulting from swap – forward instruments		4,439			4,673			4,287
Financial income resulting from loans with related companies		17,629			6,570			—
Other financial income		13,088			5,743			4,236
Classes of financing costs
Financing costs, Total		(262,962	)		(246,473	)		(232,843	)
Interest expense, Bank loans		(40,690	)		(32,978	)		(29,349	)
Interest expense, Bonds		(189,526	)		(186,186	)		(169,806	)
Interest expense, Other financial instruments		(7,260	)		(8,612	)		(6,139	)
Other financial costs		(25,486	)		(18,697	)		(27,549	)
Share of profit (loss) of associates and joint ventures accounted for using equity method
Total		6,748			7,481			6,260
Investments in associates		5,573			6,958			5,657
Joint ventures		1,175			523			603

F-32

The analysis of expenses by nature contained in these consolidated financial statements is presented below:

	January - December
Cost of sales	2015 ThU.S.$		2014 ThU.S.$		2013 ThU.S.$
Timber		641,821		808,991		869,036
Forestry labor costs		636,100		655,257		631,749
Depreciation and amortization		371,851		323,306		271,708
Maintenance costs		305,701		278,280		209,977
Chemical costs		539,856		541,327		485,799
Sawmill Services		128,801		129,052		124,501
Other Raw Materials		226,342		184,836		203,667
Other Indirect costs		138,900		126,129		171,704
Energy and fuel		172,077		231,120		200,161
Cost of electricity		41,674		78,760		89,818
Wage and salaries		308,302		297,088		299,090
Total		3,511,425		3,654,146		3,557,210

	January - December
Distribution cost	2015 ThU.S.$		2014 ThU.S.$		2013 ThU.S.$
Selling costs		48,160		48,656		33,242
Commissions		15,801		16,201		15,781
Insurance		4,601		5,330		5,913
Provision for doubtful accounts		3,137		2,497		(372	)
Other selling costs		24,621		24,628		11,920
Shipping and freight costs		480,310		508,181		490,345
Port services		26,216		28,906		27,185
Freights		387,081		402,386		405,136
Other shipping and freight costs		67,013		76,889		58,024
Total		528,470		556,837		523,587

	January - December
Administrative expenses	2015 ThU.S.$		2014 ThU.S.$		2013 ThU.S.$
Wage and salaries		227,407		215,662		212,346
Marketing, advertising, promotion and publications expenses		10,422		11,343		9,721
Insurance		28,216		32,367		39,044
Depreciation and amortization		24,587		25,686		24,070
Computer services		31,897		25,136		19,760
Lease rentals (offices, storage of supplies and data archiving and vehicles)		13,527		10,209		14,650
Donations, contributions, scholarships		11,172		10,407		15,638
Fees (legal and technical advisors)		49,556		51,301		45,587
Property taxes, patents and municipality rights		19,196		20,790		27,812
Other administration expenses (travel within and outside the country, cleaning services, security, basic services)		135,997		147,908		136,066
Total		551,977		550,809		544,694

			January-December
Expenses for	Note		2015 ThU.S.$		2014 ThU.S.$		2013 ThU.S.$
Depreciations		7		388,192		340,959		288,812
Employee benefits		10		537,629		525,220		573,538
Amortization		19		11,953		12,475		9,836

F-33

NOTE 4. INVENTORIES

Components of Inventory	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Raw materials		85,999		98,242
Production supplies		97,755		107,067
Products in progress		62,475		66,635
Finished goods		503,059		469,561
Spare Parts		160,700		152,068
Total Inventories		909,988		893,573

Inventories recognized as cost of sales at December 31, 2015 were ThU.S.$3,411,774 (ThU.S.$3,569,213 at December 31, 2014).

In order to have the inventories recorded at net realizable value at December 31, 2015, a net decrease of inventories was recognized associated with a greater provision of obsolescence of ThU.S.$6,909 (greater provision of ThU.S.$2,967 at December 31, 2014). As of December 31, 2015, the amount of obsolescence provision is ThU.S.$18,577 (ThU.S.$11,668 at December 31, 2014).

At December 31, 2015 there were inventory write-offs of ThU.S.$4,215 (ThU.S.$548 at December 31, 2014)

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

As of the date of these consolidated financial statements, there are no inventories pledged as security to report.

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.

F-34

NOTE 5. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, bank checking account balances, time deposits, repurchase agreements and mutual funds. These 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 the amounts of cash surpluses in the short-term. 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.

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 under Arauco’s Investment Policy.

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	12-31-2015 ThU.S.$		12-31-2015 ThU.S.$
Cash on hand		201		391
Bank checking account balances		143,123		157,611
Time deposits		159,912		669,545
Mutual funds		196,789		128,985
Other cash and cash equivalents (*)		0		14,620
Total		500,025		971,152

(*) Corresponds to financial instruments under resale agreements

The risk classification of the mutual funds in effect as of December 31, 2015 and 2014 is shown bellow.

	December 2015 ThU.S.$		December 2014 ThU.S.$
AAAfm		196,749		128,833
AAfm		40		152
Total Mutual Funds		196,789		128,985

F-35

NOTE 6. INCOME TAXES

The tax rates applicable in the countries in which Arauco operates are 22.5% in Chile, 35% in Argentina, 34% in Brazil, 25% in Uruguay and 34% in the United States (federal tax).

On September 29, 2014, the Official Gazette published Law No. 20,780, which introduced various amendments to the current income tax system in Chile, as well as to other taxes. Derived from the changes in this law, the Company will be required to choose the application of the partially integrated system, which increase the tax rates to 21%, 22.5%, 24%, 25.5% y 27% for the fiscal years 2014, 2015, 2016 and 2017.

The effect on the results of operations for the year ended December 31, 2014 due to the change in tax rate was an expense of ThU.S.$ 292,717, which was generated mainly from the result of the expected reversal of temporary defferences associated with property, plant, equipment and biological assets.

Deferred Tax Assets

The following table sets forth the deferred tax assets as of the dates indicated:

Deferred Tax Assets	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Deferred tax Assets relating to Provisions		13,498		14,923
Deferred tax Assets relating to Accrued Liabilities		8,535		11,120
Deferred tax Assets relating to Post-Employment benefits		15,480		13,859
Deferred tax Assets relating to Property, Plant and equipment		7,730		11,199
Deferred tax Assets relating to Financial Instruments		21,805		14,129
Deferred tax Assets relating to Tax Loss Carryforwards		35,751		44,832
Deferred tax Assets relating to Inventories		4,240		3,157
Deferred tax Assets relating to Provisions for Income		3,997		5,827
Deferred tax Assets relating to Allowance for Doubful Accounts		4,572		3,855
Intangible revaluation differences		56		1,080
Deferred tax Assets relating to Other Deductible Temporary Differences		24,587		34,302
Total Deferred Tax Assets		140,251		158,283

Certain subsidiaries of Arauco, as of the date of these consolidated financial statements, present tax losses for which we estimate that, given the projection of future profits, will allow the recovery of these assets. The total amount of these tax losses is ThU.S.$112,383 (ThU.S.$132,292 at December 31, 2014), which are mainly originated by operational and financial losses.

In addition, as of the date of these consolidated financial statements there are ThU.S.$114,507 (ThU.S.$92,809 at December 31, 2014) of non-recoverable tax losses from Inversiones Arauco Internacional and entities classified as joint operation based on the participation of Arauco, for which deferred tax assets have not been recognized. The estimated recovery period exceeds the expiry date of such tax losses.

F-36

Deferred Tax Liabilities

The following table sets forth the deferred tax liabilities as of the dates indicated:

Deferred Tax Liabilities	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Deferred tax Liabilities relating to Property, plant and equipment		930,608		941,666
Deferred tax Liabilities relating to Financial Instruments		6,376		4,906
Deferred tax Liabilities relating to Biological Assets		693,103		681,505
Deferred tax Liabilities relating to Inventory		31,912		25,688
Deferred tax Liabilities due to Prepaid Expenses		40,907		40,888
Deferred tax Liabilities due to Intangible		26,419		32,990
Deferred tax Liabilities relating to Other Taxable Temporary Differences		26,203		29,506
Total Deferred Tax Liabilities		1,755,528		1,757,149

The effect of changes in current and deferred tax liabilities related to cash flow hedges corresponds to a credit of ThU.S.$1,889 for the year ended December 31, 2015 (compared to a credit of ThU.S.$10,764 for the December 31, 2014), which is presented in consolidated statements of other comprehensive income and accumulated in Reserves for cash flow hedges in the consolidated statement of changes in equity.

F-37

Reconciliation of deferred tax assets and liabilities

Deferred Tax Assets	Opening Balance 01-01-2015 ThU.S.$		Deferred tax Expenses (Income) ThU.S.$			Deferred tax of items charged to other comprehensive income ThU.S.$		Increase (decrease) from business combinations ThU.S.$		Increase (decrease) Net exchange differences ThU.S.$			Closing balance 12/31/2015 ThU.S.$
Deferred tax Assets relating to Provisions		14,923		(813	)		—		—		(612	)		13,498
Deferred tax Assets relating to accrued liabilities		11,120		(2,561	)		—		—		(24	)		8,535
Deferred tax Assets relating to Post-Employment benefits		13,859		971			692		—		(42	)		15,480
Deferred tax Assets relating to Property, Plant and equipment		11,199		(3,469	)		—		—		—			7,730
Deferred tax Assets relating to Financial Instruments		14,129		23			7,653		—		—			21,805
Deferred tax Assets relating to tax loss carryforwards		44,832		(959	)		—		—		(8,122	)		35,751
Deferred tax assets relating to provisions for income		3,157		1,487			—		—		(404	)		4,240
Deferred tax assets relating to provisions for income		5,827		(1,825	)		—		—		(5	)		3,997
Deferred tax assets relating to provision for doubful accounts		3,855		797			—		—		(80	)		4,572
Intangible revaluation differences		1,080		(1,024	)		—		—		—			56
Deferred tax assets relating to other deductible temporary differences		34,302		(8,892	)		—		—		(823	)		24,587
Total deferred tax assets		158,283		(16,265	)		8,345		—		(10,112	)		140,251

Deferred Tax Liabilities	Opening Balance 01-01-2015 ThU.S.$		Deferred tax Expenses (Income) ThU.S.$			Deferred tax of items charged to other comprehensive income ThU.S.$		Increase (decrease) From business combination ThU.S.$		Increase (decrease) Net exchange differences ThU.S.$			Closing balance 12/31/2015 ThU.S.$
Deferred tax liabilities relating to property, Plant and equipment		941,666		5,221			—		—		(16,279	)		930,608
Deferred tax liabilities relating to financial instruments		4,906		1,470			—		—		0			6,376
Deferred tax liabilities relating to biological assets		681,505		18,823			—		16,051		(23,276	)		693,103
Deferred tax liabilities relating to inventory		25,688		6,224			—		—		—			31,912
Deferred tax liabilities relating to prepaid expenses		40,888		(184	)		—		—		203			40,907
Deferred tax liabilities relating to intangible		32,990		2,666			—		—		(9,237	)		26,419
Deferred tax liabilities relating to other taxable temporary differences		29,506		(7,961	)		—		—		4,658			26,203
Total deferred tax liabilities		1,757,149		26,259			—		16,051		(43,931	)		1,755,528

F-38

Deferred Tax Assets	Opening Balance 01-01-2014 ThU.S.$		Deferred tax Expenses (Income) ThU.S.$			Deferred tax of items charged to other comprehensive income ThU.S.$		Increase (decrease) Net exchange differences ThU.S.$			Closing balance 12-31-2014 ThU.S.$
Deferred tax Assets relating to Provisions		12,016		3,210			0		(303	)		14,923
Deferred tax Assets relating to accrued liabilities		10,118		1,023			0		(21	)		11,120
Deferred tax Assets relating to Post-Employment benefits		9,012		1,537			3,404		(94	)		13,859
Deferred tax Assets relating to Property, Plant and equipment		8,842		2,404			0		(47	)		11,199
Deferred tax Assets relating to Financial Instruments		343		824			12,962		—			14,129
Deferred tax Assets relating to tax loss carryforwards		56,333		(9,008	)		0		(2,493	)		44,832
Deferred tax assets relating to biological assets		73		(73	)		0		—			0
Deferred tax assets relating to provisions for income		4,910		(1,624	)		0		(129	)		3,157
Deferred tax assets relating to inventories		3,678		2,149			0		—			5,827
Deferred tax assets relating to provision for doubful accounts		3,104		792			0		(41	)		3,855
Intangible revaluation differences		—		1,080			0		—			1,080
Defferred tax assets relating to other deductible temporary differences		52,169		(17,637	)		0		(230	)		34,302
Total deferred tax assets		160,598		(15,323	)		16,366		(3,358	)		158,283

Deferred Tax Liabilities	Opening Balance 01-01-2014 ThU.S.$		Deferred tax Expenses (Income) ThU.S.$			Deferred tax of items charged to other comprehensive income ThU.S.$			Increase (decrease) Net exchange differences ThU.S.$			Closing balance 12-31-2014 ThU.S.$
Deferred tax liabilities relating to property, Plant and equipment		781,777		166,499			0			(6,610	)		941, 666
Deferred tax liabilities relating to financial instruments		10,060		688			(5,842	)		—			4,906
Deferred tax liabilities relating to biological assets		534,161		156,093			0			(8,749	)		681,505
Deferred tax liabilities relating to inventory		15,422		10,266			0			—			25,688
Deferred tax liabilities relating to prepaid expenses		56,558		(15,670	)		0			0			40,888
Deferred tax liabilities relating to intangible		34,188		(1,198	)		0			0			32,990
Deferred tax liabilities relating to other taxable temporary differences		30,129		896			0			(1,519	)		29,506
Total deferred tax liabilities		1,462,295		317,574			(5,842	)		(16,878	)		1,757,149

F-39

Temporary Differences

The following tables summarize the deductible and taxable temporary differences:

	12-31-2015				12-31-2014
Detail of classes of Deferred Tax Temporary Differences	Deductible Difference ThU.S.$		Taxable Difference ThU.S.$		Deductible Difference ThU.S.$		Taxable Difference ThU.S.$
Deferred Tax Assets		104,500				113,451
Deferred Tax Assets - Tax loss carry forwards		35,751				44,832
Deferred Tax Liabilities				1,755,528				1,757,149
Total		140,251		1,755,528		158,283		1,757,149

	January - December
Detail of Temporary Difference Income and Loss Amounts	2015 ThU.S.$			2014 ThU.S.$			2013 ThU.S.$
Deferred Tax Assets		(15,306	)		(6,758	)		24,981
Deferred Tax Assets - Tax losses		(959	)		(9,008	)		(65,777	)
Deferred Tax Liabilities		(26,259	)		(317,131	)		(32,313	)
Total		(42,524	)		(332,897	)		(73,109	)

Income Tax Expense

Income tax expense consists of the following:

	January - December
Income Tax composition	2015 ThU.S.$			2014 ThU.S.$			2013 ThU.S.$
Current income tax expense		(87,908	)		(127,057	)		(89,378	)
Use of tax benefit arising from unrecognized tax loss carry-forwards		—			—			25,687
Prior period current income tax adjustments		4,033			2,555			1,826
Other current tax (expenses) benefit		(3,295	)		8,747			4,617
Current Tax Expense, Net		(87,170	)		(115,755	)		(57,248	)
Deferred tax expense relating to origination and reversal of temporary differences		(41,565	)		(30,753	)		(19,961	)
Deferred tax expense relating to changes in tax rates		—			(292,717	)		—
Tax benefit arising from unrecognized tax loss carry-forwards		(959	)		(9,427	)		(53,148	)
Total deferred Tax Expense, Net		(42,524	)		(332,897	)		(73,109	)
Income Tax Expense, Total		(129,694	)		(448,652	)		(130,357	)

F-40

The following table presents the current income tax expense detailed by foreign and domestic (Chile) companies at December 31, 2015 and 2014:

	January - December
	2015 ThU.S.$			2014 ThU.S.$			2013 ThU.S.$
Foreign current income tax expense		(33,129	)		(30,458	)		(4,145	)
Domestic current income tax expense		(54,041	)		(85,297	)		(53,103	)
Total current income tax expense		(87,170	)		(115,755	)		(57,248	)
Foreign deferred tax expense		(17,240	)		(25,806	)		(66,558	)
Domestic deferred tax expense		(25,284	)		(307,091	)		(6,551	)
Total deferred tax expense		(42,524	)		(332,897	)		(73,109	)
Total tax expense		(129,694	)		(448,652	)		(130,357	)

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

The reconciliation of income tax expense is as follows:

	January - December
	2015			2014			2013
Reconciliation of Income tax from Statutory Rate to Effective Tax Rate	ThU.S.$			ThU.S.$			ThU.S.$
Statutory domestic (Chile) income tax rate		22.5	%		21	%		20	%
Tax Expense at statutory tax rate		(111,916	)		(124,493	)		(109,787	)
Tax effect of foreign tax rates		(16,099	)		(23,170	)		(24,688	)
Tax effect of revenues exempt from taxation		41,268			9,832			(4,589	)
Tax effect of not deductible expenses		(40,866	)		(19,203	)		(9,792	)
Tax rate effect of tax loss carry forwards		14			(515	)		(4,330	)
Tax effect of Previously Unrecognized Tax Benefit in the Income Statement		(857	)		(2,935	)		15,769
Tax effect of a new evaluation of assets for deferred not recognized taxes		307			12			(3,182	)
Tax rate effect from change in tax rate (opening balances)		(3,445	)		(292,717	)		0
Tax rate effect of adjustments for current tax of prior periods		4,033			2,555			1,826
Other tax rate effects		(2,128	)		1,982			8,416
Total adjustments to tax expense at applicable tax rate		(17,778	)		(324,159	)		(20,570	)
Tax expense at effective tax rate		(129,694	)		(448,652	)		(130,357	)

F-41

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

	12-31-2015			12-31-2014
Property, Plant and Equipment, Net	ThU.S.$			ThU.S.$
Construction in progress		251,519			265,440
Land		951,638			949,531
Buildings		2,182,643			2,172,177
Plant and equipment		3,346,675			3,565,502
Information technology equipment		26,210			28,521
Fixtures and fittings		11,860			11,654
Motor vehicles		16,721			17,346
Other property, plant and equipment		109,130			109,412
Total Net		6,896,396			7,119,583
Property, Plant and Equipment, Gross
Construction in progress		251,519			265,440
Land		951,638			949,531
Buildings		3,698,351			3,593,306
Plant and equipment		5,927,789			5,944,394
Information technology equipment		73,573			71,838
Fixtures and fittings		35,283			37,382
Motor vehicles		45,503			46,293
Other property, plant and equipment		131,894			128,012
Total Gross		11,115,550			11,036,196
Accumulated depreciation and impairment
Buildings		(1,515,708	)		(1,421,129	)
Plant and equipment		(2,581,114	)		(2,378,892	)
Information technology equipment		(47,363	)		(43,317	)
Fixtures and fittings		(23,423	)		(25,728	)
Motor vehicles		(28,782	)		(28,947	)
Other property, plant and equipment		(22,764	)		(18,600	)
Total		(4,219,154	)		(3,916,613	)

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

As of December 31, 2015, there are no significant assets pledged as collateral for these consolidated financial statements.

F-42

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

	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Amount committed for the acquisition of property, plant and equipment		109,713		139,927
	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Disbursements for property, plant and equipment under construction		215,035		371,286

F-43

Reconciliation of Property, Plant and Equipment

The following tables set forth the reconciliation of the carrying amount of property, plant and equipment as of December 31, 2015 and 2014:

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 01-01-2015		265,440			949,531			2,172,177			3,565,502			28,521			11,654			17,346			109,412			7,119,583
Changes
Additions		215,035			50,504			17,360			139,749			2,178			2,234			1,829			9,774			438,663
Acquisitions through business combinations		—			—			1,474			7			—			15			—			—			1,496
Disposals		(20	)		(591	)		(456	)		(583	)		(78	)		(5	)		(432	)		(10	)		(2,175	)
Retirements		(4,596	)		(44	)		(1,389	)		(1,942	)		(5	)		(7	)		(101	)		(481	)		(8,565	)
Depreciation		—			—			(117,337	)		(320,135	)		(5,302	)		(2,980	)		(4,110	)		(5,915	)		(455,779	)
Impairment loss recognized in profit or loss		—			—			—			(4,065	)		—			—			0			—			(4,065	)
(Decrease) Increase through net exchange differences		(4,432	)		(52,284	)		(30,258	)		(103,972	)		(290	)		(519	)		(300	)		(6,025	)		(198,080	)
Reclassification of assets held for sale		—			2,759			2,676			(117	)		—			—			—			—			5,318
Increase (decrease) through transfers from construction in progress		(219,908	)		1,763			138,396			72,231			1,186			1,468			2,489			2,375			—
Total changes		(13,921	)		2,107			10,466			(218,827	)		(2,311	)		206			(625	)		(282	)		(223,187	)
Closing balance 12-31-2015		251,519			951,638			2,182,643			3,346,675			26,210			11,860			16,721			109,130			6,896,396
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 01-01-2014		1,542,739			975,617			1,694,924			2,774,551			25,575			7,627			13,597			102,837			7,137,467
Changes
Additions		371,286			1,215			17,438			54,011			2,605			1,195			4,608			18,828			471,186
Disposals		(2,969	)		(5,596	)		(513	)		(1,715	)		(59	)		(515	)		(458	)		(776	)		(12,601	)
Retirements		(6,278	)		(41	)		(17,369	)		(23,026	)		(12	)		(6	)		(247	)		(5,670	)		(52,649	)
Depreciation		—			—			(102,068	)		(222,232	)		(4,944	)		(2,084	)		(4,241	)		(4,018	)		(339,587	)
Impairment loss recognized in profit or loss		—			—			—			—			—			—			(636	)		—			(636	)
Increase (decrease) through net exchange differences		310			(21,664	)		(30,620	)		(26,928	)		(269	)		(175	)		(123	)		(2,198	)		(81,667	)
Reclassification of assets held for sale		(1,930	)		—			—			—			—			—			—			—			(1,930	)
Increase (decrease) through transfers from construction in progress		(1,637,718	)		—			610,385			1,010,841			5,625			5,612			4,846			409			—
Total changes		(1,277,299	)		(26,086	)		477,253			790,951			2,946			4,027			3,749			6,575			(17,884	)
Closing balance 12-31-2014		265,440			949,531			2,172,177			3,565,502			28,521			11,654			17,346			109,412			7,119,583

F-44

The depreciation expense for the period ending December 31, 2015 and 2014 is as follows:

	January-December
	2015		2014		2013
Depreciation for the year	ThU.S.$		ThU.S.$		ThU.S.$
Cost of sales		365,401		316,607		267,793
Administrative expenses		19,084		19,910		18,149
Other expenses		3,707		4,441		2,870
Total		388,192		340,958		288,812

The useful lives of property, plant and equipment are estimated based on the expected use of the assets. The average useful lives by asset class are as follow:

	Useful Life (Average)
Buildings		58
Plant and equipment		30
Information technology equipment		8
Fixtures and fittings		28
Motor vehicles		7
Other property, plant and equipment		14

See Note 12 for details of capitalized borrowing costs.

F-45

NOTE 8. LEASES

Arauco acting as lessee

	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Property, Plant and Equipment under finance leases		132,836		94,996
Plant and equipment		132,836		94,996

Reconciliation of Financial Lease Minimum Payments:

	12-31-2015
	Present Value
Periods	ThU.S.$
Less than one year		36,862
Between one and five years		90,697
More than five years		—
Total		127,559
	12-31-2014
Periods	Present Value ThU.S.$
Less than one year		31,706
Between one and five years		65,289
More than five years		—
Total		96,995

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 respective maturities as stated above.

F-46

Arauco acting as lessor

Reconciliation of Financial Lease Minimum Payments:

	12-31-2015
	Gross		Interest		Present Value
Periods	ThU.S.$		ThU.S.$		ThU.S.$
Less than one year		10		1		9
Between one and five years		6		0		6
More than five years		—		—		—
Total		16		1		15

	12-31-2014
	Gross		Interest		Present Value
Periods	ThU.S.$		ThU.S.$		ThU.S.$
Less than one year		141		5		136
Between one and five years		20		3		17
More than five years		—		—		—
Total		161		8		153

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.

Arauco holds leases as lessee and lessor, described in the previous tables, for which there are no impairment contingent payments or restrictions to report.

NOTE 9. REVENUE

	January - December
Classes of revenue	2015 ThU.S.$		2014 ThU.S.$		2013 ThU.S.$
Revenue from sales of goods		5,018,138		5,174,936		4,981,423
Revenue from rendering of services		128,602		167,707		164,077
Total		5,146,740		5,342,643		5,145,500

F-47

NOTE 10. EMPLOYEE BENEFITS

Classes of Benefits and Expenses by Employee

	2015 ThU.S.$		2014 ThU.S.$		2013 ThU.S.$
Employee expenses		537,629		525,220		573,538
Wages and salaries		519,066		514,826		563,836
Severance indemnities		18,563		10,394		9,702

	2015			2014
Discount rate		4.91	%		4.61	%
Inflation		2.95	%		2.97	%
Annual rate of wage growth		5.22	%		5.79	%
Mortality rate (1)		RV-2009			RV-2009

(1) For the purposes of determining the technical reserves, Chilean annuity providers are required by law to utilize the mortality tables specified by the SVS. The most recent table is the RV-2009, which is based on Chilean pensioner experience from 2002-2007 (SP & SVS, 2010). The mortality tables distinguish between males and females.

sensitivities to assumptions	Th.U.S.$
Discount rate
Increase in 100 bps		(3,943	)
Decrease in 100 bps		4,608
Wage growth rates
Increase in 100 bps		4,546
Decrease in 100 bps		(3,967	)

The following tables set forth the balances and the reconciliation of the present value of severance indemnities obligations as of December 31, 2015 and 2014:

	12-31-2015			12-31-2014
	ThU.S.$			ThU.S.$
Current		4,497			3,590
Non-current		51,936			48,582
Total		56,433			52,172
Reconciliation of the present value of severance indemnities obligations	12-31-2015 ThU.S.$			12-31-2014 ThU.S.$
Opening balance		52,172			45,984
Current service cost		13,032			1,938
Interest cost		2,257			2,977
(Gains) losses from changes in actuarial assumptions		(5,723	)		8,640
Actuarial gains and losses arising from experience		6,980			4,189
Benefits paid		(3,482	)		(5,388	)
Decrease for foreign currency exchange rates changes		(8,803	)		(6,168	)
Closing balance		56,433			52,172

F-48

NOTE 11. BALANCES IN FOREIGN CURRENCY AND FOREIGN CURRENCY EXCHANGE RATE IMPACT IN PROFIT OR LOSS

	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Total Current Assets		2,651,920		3,140,715
Cash and Cash Equivalents		500,025		971,152
U.S Dollar		388,818		877,418
Euro		2,501		8,114
Brazilian Real		21,676		43,604
Argentine Pesos		40,573		15,794
Other currencies		2,979		2,983
Chilean Pesos		43,478		23,239
Other current financial assets		32,195		7,633
U.S Dollar		29,367		7,632
Argentine Pesos		2,828		—
Chilean Pesos		—		1
Other current non-financial assets		133,956		177,728
U.S Dollar		55,365		103,689
Euros		82		45
Brazilian Real		16,505		11,489
Argentine Pesos		3,705		13,711
Other currencies		4,801		6,335
Chilean Pesos		53,280		42,459
U.F.		218		—
Trade and other current receivables		733,322		731,908
U.S Dollar		507,032		464,219
Euro		27,595		72,353
Brazilian Real		37,975		47,043
Argentine Pesos		23,016		31,354
Other currencies		14,091		19,733
Chilean Pesos		123,056		96,241
U.F.		557		965
Accounts receivable from related companies		3,124		4,705
U.S Dollar		21		—
Brazilian Real		995		1,998
Chilean Pesos		2,108		2,707
Current Inventories		909,988		893,573
U.S Dollar		871,629		829,830
Brazilian Real		38,359		48,046
Chilean Pesos		—		15,697
Current biological assets		272,037		307,551
U.S Dollar		272,037		307,551
Current tax assets		64,079		38,477
U.S Dollar		5,464		2,358
Euros		—		81
Brazilian Real		5,243		2,691
Argentine Pesos		2,000		1,464
Other currencies		850		3,653
Chilean Pesos		50,522		28,230
Non-current assets or disposal groups classified as held for sale or as held for distribution to owners		3,194		7,988
U.S Dollar		3,194		7,988

F-49

	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Total Non Current Assets		11,154,987		11,607,182
Other non-current financial assets		595		5,024
U.S Dollar		212		4,439
Argentine Pesos		383		585
Other non-current non-financial assets		125,516		101,094
U.S Dollar		114,164		92,437
Brazilian Real		2,987		5,705
Argentine Pesos		7,138		563
Other currencies		706		885
Chilean Pesos		521		1,504
Trade and other non-current receivables		15,270		31,001
U.S Dollar		9,976		26,773
Other currencies		729		—
Chilean Pesos		3,145		3,591
U.F.		1,420		637
Related party receivables, non current		—		151,519
Brazilian Reales		—		151,519
Investments accounted for using equity method		264,812		326,045
U.S Dollar		122,483		119,405
Brazilian Real		142,329		206,640
Intangible assets other than goodwill		88,112		93,258
U.S Dollar		87,154		91,408
Brazilian Real		876		1,771
Chilean Pesos		82		79
Goodwill		69,475		82,573
U.S Dollar		42,445		42,838
Brazilian Real		27,030		39,735
Property, plant and equipment		6,896,396		7,119,583
U.S Dollar		6,448,616		6,527,093
Brazilian Real		442,959		586,398
Chilean Pesos		4,821		6,092
Non-current biological assets		3,554,560		3,538,802
U.S Dollar		3,297,710		3,188,043
Brazilian Real		256,850		350,759
Deferred tax assets		140,251		158,283
U.S Dollar		122,374		129,119
Brazilian Real		17,538		28,345
Other currencies		—		67
Chilean Pesos		339		752

F-50

	12-31-2015						12-31-2014
	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		910,436		123,815		1,034,251		1,002,859		544,227		1,547,086
Other current financial liabilities		189,693		106,345		296,038		203,170		539,173		742,343
U.S Dollar		153,361		71,330		224,691		173,579		484,254		657,833
Brazilian Real		25,092		2,266		27,358		17,145		27,507		44,652
Argentine Pesos		—		356		356		—		544		544
Chilean Pesos		902		2,622		3,524		288		809		1,097
U.F.		10,338		29,771		40,109		12,158		26,059		38,217
Bank Loans		126,795		72,948		199,743		139,916		133,554		273,470
U.S Dollar		101,703		70,326		172,029		122,771		105,503		228,274
Brazilian Real		25,092		2,266		27,358		17,145		27,507		44,652
Argentine Pesos		—		356		356		—		544		544
Financial Leases		9,301		27,561		36,862		7,851		23,855		31,706
U.S Dollar		—		—		—		—		6		6
Chilean Pesos		902		2,622		3,524		288		809		1,097
U.F.		8,399		24,939		33,338		7,563		23,040		30,603
Other Loans		53,597		5,836		59,433		55,403		381,764		437,167
U.S Dollar		51,658		1,004		52,662		50,808		378,745		429,553
U.F.		1,939		4,832		6,771		4,595		3,019		7,614
Trade and other current payables		583,018		—		583,018		627,972		2,434		630,406
U.S Dollar		174,469		—		174,469		180,164		—		180,164
Euros		8,808		—		8,808		44,887		—		44,887
Brazilian Real		25,616		—		25,616		22,662		2,434		25,096
Argentine Pesos		27,068		—		27,068		34,879		—		34,879
Other currencies		17,619		—		17,619		2,187		—		2,187
Chilean Pesos		324,361		—		324,361		340,858		—		340,858
U.F.		5,077		—		5,077		2,335		—		2,335
Accounts payable to related companies		7,141		—		7,141		6,036		—		6,036
U.S Dollar		962		—		962		1,612		—		1,612
Chilean Pesos		6,179		—		6,179		4,424		—		4,424
Other current provisions		858		—		858		2,535		—		2,535
U.S Dollar		858		—		858		2,535		—		2,535
Current tax liabilities		10,030		946		10,976		25,860		—		25,860
U.S Dollar		6,380		—		6,380		782		—		782
Euros		1,093		—		1,093		—		—		—
Brazilian Real		530		—		530		1,921		—		1,921
Argentine Pesos		24		—		24		6,063		—		6,063
Other currencies		1,716		—		1,716		—		—		—
Chilean Pesos		287		946		1,233		17,094		—		17,094
Current provisions for employee benefits		1,751		2,746		4,497		1,211		2,379		3,590
Chilean Pesos		1,751		2,746		4,497		1,211		2,379		3,590
Other current non-financial liabilities		117,945		13,778		131,723		136,075		241		136,316
U.S Dollar		79,673		13,633		93,306		100,904		—		100,904
Euros		44		—		44		—		—		—
Brazilian Real		22,251		—		22,251		19,041		—		19,041
Argentine Pesos		4,428		139		4,567		6,143		184		6,327
Other currencies		3,704		—		3,704		4,307		—		4,307
Chilean Pesos		7,823		6		7,829		5,575		57		5,632
U.F.		22		—		22		105		—		105

F-51

	12-31-2015						12-31-2014
	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		3,868,722		2,257,489		6,126,211		3,412,073		2,974,002		6,386,075
Other non-current financial liabilities		2,141,600		2,095,365		4,236,965		1,943,952		2,509,867		4,453,819
U.S Dollar		1,748,723		1,525,269		3,273,992		1,767,326		1,603,825		3,371,151
Brazilian Real		13,953		1,929		15,882		34,612		18,434		53,046
Argentine Pesos		48		—		48		614		—		614
Chilean Pesos		10,455		—		10,455		2,352		—		2,352
U.F.		368,421		568,167		936,588		139,048		887,608		1,026,656
Bank Loans		648,017		149,782		797,799		797,628		248,117		1,045,745
U.S Dollar		634,016		147,853		781,869		762,402		229,683		992,085
Brazilian Real		13,953		1,929		15,882		34,612		18,434		53,046
Argentine Pesos		48		—		48		614		—		614
Financial Leases		90,697		—		90,697		65,289		—		65,289
Chilean Pesos		10,455		—		10,455		2,352		—		2,352
U.F.		80,242		—		80,242		62,937		—		62,937
Other Loans		1,402,886		1,945,583		3,348,469		1,081,035		2,261,750		3,342,785
U.S Dollar		1,114,707		1,377,416		2,492,123		1,004,924		1,374,142		2,379,066
U.F.		288,179		568,167		856,346		76,111		887,608		963,719
Other non-current provisions		34,541		—		34,541		64,529		—		64,529
U.S Dollar		4		—		4		4		—		4
Brazilian Real		4,410		—		4,410		31,374		—		31,374
Argentine Pesos		30,127		—		30,127		30,301		—		30,301
Chileans $		—		—		—		2,850		—		2,850
Deferred tax liabilities		1,593,404		162,124		1,755,528		1,299,714		457,435		1,757,149
U.S Dollar		1,508,250		162,124		1,670,374		1,159,805		457,435		1,617,240
Euros		—		—		—		4,044		—		4,044
Brazilian Real		84,976		—		84,976		135,600		—		135,600
Chilean Pesos		178		—		178		265		—		265
Non-current provisions for employee benefits		51,936		—		51,936		41,882		6,700		48,582
Other currencies		149		—		149		172		—		172
Chilean Pesos		51,787		—		51,787		41,710		6,700		48,410
Other non-current non-financial liabilities		47,241		—		47,241		61,996		—		61,996
U.S Dollar		392		—		392		1,043		—		1,043
Brazilian Real		46,043		—		46,043		59,497		—		59,497
Argentine Pesos		608		—		608		1,206		—		1,206
Chilean Pesos		195		—		195		246		—		246
U.F.		3		—		3		4		—		4

F-52

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
Mahal Empreendimentos e Participacoes S.A.	Brazil	Brazilian Real
Investigaciones Forestales Bioforest S.A.	Chile	Chilean Pesos
Consorcio Protección Fitosanitaria Forestal S.A. (Ex-Controladora de Plagas Forestales S.A.)	Chile	Chilean Pesos
Flakeboard Company Limited	Canada	Canadian Dollar

The table below shows a detail per company of the effect in the period of the Reserve for Exchange Differences on translation:

	January - December
	2015			2014
	ThU.S.$			ThU.S.$
Arauco Do Brasil S.A.		(155,390	)		(66,222	)
Arauco Forest Brasil S.A.		(140,992	)		(57,515	)
Arauco Florestal Arapoti S.A.		(43,189	)		(17,640	)
Arauco Distribución S.A.		(4,180	)		(3,793	)
Arauco Argentina S.A.		(13,308	)		(5,765	)
Flakeboard Company Limited		(16,915	)		(8,049	)
Others		(301	)		(406	)
Total reserve of exchange differences on translation		(374,275	)		(159,390	)

Effect of foreign exchange rates changes

	January - December
	2015 ThU.S.$			2014 ThU.S.$			2013 ThU.S.$
Exchange differences recognized in profit or loss, except for those arising on financial instruments measured at fair value through profit or loss		(40,827	)		(7,763	)		(10,284	)
Reserve of exchange differences on translation (with Non-controlling interests)		(385,109	)		(163,844	)		(174,985	)

NOTE 12. BORROWING COSTS

Arauco estimates the average rate of borrowings to finance its current investment projects. At the end of the previous period, the balance corresponded principally to the accumulated amount that was capitalized until the end of construction of pulp production plant in Uruguay. The average rate loans to finance these investment projects were calculated to record the capitalization.

	January - December
	2015			2014
	ThU.S.$			ThU.S.$
Property, plant and equipment capitalized cost
Property, plant and equipment capitalized interest cost rate		4.87	%		4.7	%
Amount of the capitalized interest cost, property, plant and equipment		1,893			19,586

F-53

NOTE 13. RELATED PARTIES

Related Party Disclosures

Related parties are those entities defined in IAS 24 and under the rules of the Chilean SVS 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 Brazilian Real, where collection or payment deadlines are shown in the following tables and in general do not bear interest, except for financing transactions.

As of the date of these consolidated financial statements, the main transactions with related parties are related to fuel purchases with Compañía de Petróleos de Chile S.A., sodium chlorate purchases at EKA Chile S.A., chips sales to Forestal del Sur S.A.

As of the date of these consolidated financial statements, there are neither provisions for doubtful accounts 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 Produces Consolidated Financial Statements for Public Use

Empresas Copec S.A.

F-54

Compensation to Key Management Personnel

Compensation to key management personnel, including directors, managers and deputy managers, consist of a fixed monthly salary and an annual bonus subject to the results of the Company and the fulfillment of goals of the business as well as individual performance.

Pricing Strategy Terms and Conditions Corresponding to Transactions with Related Parties

Related party transactions were made on terms of those prevailing under market conditions, with mutual independence of the parties.

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

ID N°	Company Name	Country	Functional	% Ownership interest 12-31-2015						% Ownership interest 12-31-2014
			Currency	Direct		Indirect		Total		Direct		Indirect		Total
—	Agenciamiento y Servicios Profesionales S.A.	Mexico	U.S. Dollar		0.0020		99.9970		99.9990		0.0020		99.9970		99.9990
—	Arauco Argentina S.A.(Ex-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		1.9999		99.9999		98.0000		1.9999		99.9999
—	Arauco Colombia S.A.	Colombia	U.S. Dollar		1.4778		98.5204		99.9982		1.5000		98.4983		99.9983
96765270-9	Arauco Distribución S.A.	Chile	Chilean Pesos		—		—		—		—		99.9996		99.9996
—	Arauco do Brasil S.A.	Brazil	Brazilian Real		1.2485		98.7505		99.9990		1.3418		98.6572		99.9990
—	Arauco Europe Cooperatief U.A. (Ex-Arauco Holanda Cooperatief U.A.)	Holland	U.S. Dollar		0.4843		99.5147		99.9990		0.5389		99.4601		99.9990
—	Arauco Florestal Arapoti S.A.	Brazil	Brazilian Real		—		79.9992		79.9992		—		79.9992		79.9992
—	Arauco Forest Brasil S.A.	Brazil	Brazilian Real		10.1297		89.8694		99.9991		11.1520		88.8470		99.9990
—	Arauco Forest Products B.V.	Holland	U.S. Dollar		—		—		—		—		99.9990		99.9990
—	Arauco Middle East DMCC	Dubai	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.	Peru	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		99.9986		99.9990		0.0004		99.9986		99.9990
—	Araucomex S.A. de C.V.	Mexico	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		0.9995		99.9995
96657900-5	Consorcio Protección Fitosanitaria Forestal S.A.	Chile	Chilean Pesos		—		57.5404		57.5404		—		57.7503		57.7503
—	Empreendimentos Florestais Santa Cruz Ltda.	Brazil	Brazilian 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.	Canada	Canadian Dollar		—		99.9990		99.9990		—		99.9990		99.9990
85805200-9	Forestal Arauco S.A.	Chile	U.S. Dollar		99.9484		—		99.9484		99.9484		—		99.9484
93838000-7	Forestal Cholguán S.A.	Chile	U.S. Dollar		—		98.4478		98.4478		—		98.1796		98.1796
—	Forestal Concepción S.A.	Panama	U.S. Dollar		0.0050		99.9940		99.9990		0.0050		99.9940		99.9990
78049140-K	Forestal Los Lagos S.A.	Chile	U.S. Dollar		—		79.9587		79.9587		—		79.9587		79.9587
—	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
—	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		1.9804		99.9990		98.0186		1.9804		99.9990
79990550-7	Investigaciones Forestales Bioforest S.A.	Chile	Chilean Pesos		1.0000		98.9489		99.9489		1.0000		98.9489		99.9489
—	Leasing Forestal S.A.	Argentina	U.S. Dollar		—		99.9801		99.9801		—		99.9801		99.9801
—	Mahal Empreendimentos e Participacoes S.A.	Brazil	Brazilian Real		—		99.9934		99.9934		—		99.9934		99.9934
—	Novo Oeste Gestao de Ativos Florestais S.A.	Brazil	Brazilian Real		—		99.9990		99.9990		—		—		—
96510970-6	Paneles Arauco S.A.	Chile	U.S. Dollar		99.0000		0.9995		99.9995		99.0000		0.9995		99.9995
—	Savitar S.A.	Argentina	U.S. Dollar		—		99.9841		99.9841		—		99.9841		99.9841
76375371-9	Servicios Aéreos Forestales Ltda.	Chile	U.S. Dollar		0.0100		99.9890		99.9990		0.0100		99.9890		99.9990
96637330-K	Servicios Logísticos Arauco S.A.	Chile	U.S. Dollar		45.0000		54.9997		99.9997		45.0000		54.9997		99.9997

F-55

The companies in the table below are classified as joint operations in accordance with IFRS 11. The assets, liabilities, income and expenses are recorded in relation to the Company’s ownership percentage in accordance with accounting standards applicable in each case.

ID N°	Company Name	Country		Functional Currency
—	Eufores S.A.		Uruguay		U.S. Dollar
—	Celulosa y Energía Punta Pereira S.A.		Uruguay		U.S. Dollar
—	Zona Franca Punta Pereira S.A.		Uruguay		U.S. Dollar
—	Forestal Cono Sur S.A.		Uruguay		U.S. Dollar
—	Stora Enso Uruguay S.A.		Uruguay		U.S. Dollar
—	El Esparragal Asociación Agraria de R.L.		Uruguay		U.S. Dollar
—	Ongar S.A.		Uruguay		U.S. Dollar
—	Terminal Logística e Industrial M’Bopicua S.A.		Uruguay		U.S. Dollar

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

Employee Benefits for Key Management Personnel

	January - December
	2015		2014		2013
	ThU.S.$		ThU.S.$		ThU.S.$
Salaries and bonuses		65,760		63,159		63,633
Per diem compensation to members of the Board of Directors		1,097		1,397		1,607
Termination benefits		2,250		4,073		3,491
Total		69,107		68,629		68,731

Related Party Receivables, Current

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Maturity

12-31-2015 ThU.S.$

12-31-2014 ThU.S.$

Forestal Mininco S.A

91.440.000-7

Common director

Chile

Chilean pesos

30 days

44

19

Eka Chile S.A

99.500.140-3

Joint Venture

Chile

Chilean pesos

30 days

1,646

2,083

Forestal del Sur S.A

79.825.060-4

Common director

Chile

Chilean pesos

—

584

Stora Enso Arapoti Industria del Papel S.A

—

Associate

Brazil

Brazilian Real

30 days

472

588

Unilin Arauco Pisos Ltda.

—

Joint Venture

Brazil

Brazilian Real

30 days

523

1,389

Abastible S.A.

91.806.000-6

Common director

Chile

Chilean pesos

30 days

142

—

Novo Oeste Gestao de Ativo Florestais S.A.

—

Subsidiary (1)

Brazil

Brazilian Real

—

21

Fundación Educacional Arauco

71.625.000-8

Common director

Chile

Chilean pesos

30 days

276

—

CMPC Celulosa S.A.

96.532.330-9

Common director

Chile

Chilean pesos

—

1

Corpesca S.A

96.893.820-7

Common director

Chile

Chilean pesos

—

20

Fundación Acerca Redes

65.097.218-K

Common director

Chile

U.S. Dollar

30 days

21

—

TOTAL

3,124

4,705

(1) Since October 2015, the company is a subsidiary of Arauco, therefore, the transactions presented in this note are those made with this company until that month (see Note 14).

F-56

Related Party Receivables, Non-Current

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Maturity

12-31-2015 ThU.S.$

12-31-2014 ThU.S.$

Novo Oeste Gestao de Ativo Florestais S.A.(*)

—

Subsidiary

(1)

Brazil

Brazilian Real

—

151,519

TOTAL

—

151,519

(*) Accrued an annual CDI interest (interbank rate) +2.3%. The debt was capitalized and the company has been a subsidiary since October of year 2015.

(1) Since October 2015, the company is a subsidiary of Arauco, therefore, the transactions presented in this note are those made with this company until that month (see Note 14).

Related Party Payables, Current

Name of Related party	Tax ID No.	Nature of Relationship	Country	Currency	Maturity	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Compañía de Petróleos de Chile S.A.	99.520.000-7	Controlling Parent’s Subsidiary	Chile	Chilean pesos	30 days		6,057		4,073
Abastible S.A.	91.806.000-6	Controlling Parent’s Subsidiary	Chile	Chilean pesos			—		302
Fundación Educacional Arauco	71.625.000-8	Common director	Chile	Chilean pesos			—		29
Sigma S.A.	86.370.800-1	Common director	Chile	Chilean pesos			—		8
Portaluppi, Guzman y Bezanilla Abogados	78.096.080-9	Common director	Chile	Chilean pesos	30 days		98		—
Puerto Lirquén S.A.	96.959.030-1	Associate	Chile	U.S. Dollar	30 days		851		987
Compañía Puerto de Coronel S.A.	79.895.330-3	Associate	Chile	U.S. Dollar	30 days		111		122
Colbún Transmisión S.A.	76.218.856-2	Common director	Chile	Chilean pesos			—		8
Empresa de Residuos Resiter Ltda	89.696.400-3	Common director	Chile	Chilean pesos			—		4
Resiter Uruguay S.A	—	Common director	Uruguay	U.S. Dollar			—		503
Empresas Copec S.A.	90.690.000-9	Common director	Chile	Chilean pesos	30 days		24		—
TOTAL							7,141		6,036

F-57

Related Party Transactions

Purchases

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Transaction Descriptions

12-31-2015 ThU.S.$

12-31-2014 ThU.S.$

12-31-2013 ThU.S.$

Abastible S.A.

91.806.000-6

Controlling Parent’s Subsidiary

Chile

Chilean pesos

Fuel

2,503

3,676

5,928

Empresas Copec S.A

90.690.000-9

Controlling Parent

Chile

Chilean pesos

Management service

233

277

306

Compañía de Petróleos de Chile S.A.

99.520.000-7

Controlling Parent’s Subsidiary

Chile

Chilean pesos

Fuel and other

61,245

96,497

101,547

Compañía Puerto de Coronel S.A.

79.895.330-3

Associate

Chile

U.S. Dollar

Transport and stowage

10,917

9,458

7,966

Puerto Lirquén S.A.

96.959.030-1

Associate

Chile

U.S. Dollar

Port services

7,694

9,937

10,012

EKA Chile S.A.

99.500.140-3

Joint Venture

Chile

Chilean pesos

Sodium chlorate

39,362

48,696

56,134

Forestal del Sur S.A.

79.825.060-4

Common director

Chile

Chilean pesos

Wood and ships

2,018

—

294

Portaluppi, Guzman y Bezanilla Abogados

78.096.080-9

Common director

Chile

Chilean pesos

Legal services

1,312

1,761

1,684

Puertos y Logística S.A.

82.777.100-7

Associate

Chile

Chilean pesos

Port services

—

—

339

Empresa Nacional de Telecomunicaciones S.A.

92.580.000-7

Common director

Chile

Chilean pesos

Telephone services

552

474

387

CMPC Maderas S.A.

95.304.000-K

Common director

Chile

Chilean pesos

Wood and logs

267

489

349

Forestal Mininco S.A.

91.440.000-7

Common director

Chile

Chilean pesos

Wood and logs

204

204

258

Empresa de Residuos Resiter Ltda

89.696.400-3

Common director

Chile

Chilean pesos

Industrial Cleaning Services

(285

)

4,157

—

Empresas de Residuos Industriales Resiter Ltda

76.329.072-7

Common director

Chile

Chilean pesos

Industrial Cleaning Services

5,027

1,432

—

Resiter Uruguay S.A

—

Common director

Uruguay

U.S. Dollar

Service to collect solid waste

774

1,167

—

Colbún Transmisión S.A.

76.218.856-2

Common director

Chile

Chilean pesos

Electrical Power

447

330

—

CMPC Celulosa S.A.

96.532.330-9

Common director

Chile

Chilean pesos

Other purchases

2,217

1,023

1,633

Sales

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Transaction Descriptions

12-31-2015 ThU.S.$

12-31-2014 ThU.S.$

12-31-2013 ThU.S.$

Colbún S.A.

96.505.760-9

Common director

Chile

Chilean pesos

Electrical Power

1,083

3,284

39,379

EKA Chile S.A.

99.500.140-3

Joint venture

Chile

Chilean pesos

Electrical Power

17,543

27,361

24,990

Stora Enso Arapoti Industria de Papel S.A.

—

Associate

Brasil

Brazilian Real

Wood

5,617

8,349

8,503

Forestal del Sur S.A.

79.825.060-4

Common director

Chile

Chilean pesos

Wood and chips

18,506

19,311

20,796

Forestal del Sur S.A.

79.825.060-4

Common director

Chile

Chilean pesos

Harvesting services

822

—

—

CMPC Celulosa S.A.

96.532.330-9

Common director

Chile

Chilean pesos

Wood

130

246

239

Cartulinas CMPC S.A.

96.731.890-6

Common director

Chile

Chilean pesos

Cellulose

—

679

—

Empresa Eléctrica Guacolda S.A.

96.635.700-2

Associate

Chile

Chilean pesos

Electrical Power

—

1,264

3,783

Forestal Mininco S.A.

91.440.000-7

Common director

Chile

Chilean pesos

Wood

311

—

11,425

Unilin Arauco Pisos Ltda.

—

Joint venture

Brasil

Brazilian Real

Wood

2,666

11,887

11,425

Other Transactions

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Transaction Descriptions

12-31-2015 ThU.S.$

12-31-2014 ThU.S.$

12-31-2014 ThU.S.$

Novo Oeste Gestao de Ativo Florestais S.A.

Subsidiary (1)

Brazil

Brazilian Real

Loans (Capital and interest)

41,091

151,519

—

(1) Since October 2015, the company is a subsidiary of Arauco, therefore, the transactions presented in this note are those made with this company until that month (see Note 14).

F-58

NOTE 14. CONSOLIDATED FINANCIAL STATEMENTS

Company mergers

On December 1, 2015 there was a merger among the affiliates Paneles Arauco S.A. (successor), Aserraderos Arauco S.A. and Arauco Distribución S.A. This transaction had no effect on results and was performed with a view to generate greater synergies, share best practices and achieve better results for our clients. There will be a progressive integration of the activities of sawmills, remanufacturing, plywood, panels and distribution under the same view, with products oriented to the furniture, construction, fitting and packaging industries.

Investments in Subsidiaries

In October 2015, the company acquired the remaining 51% of the interest ownership in Novo Oeste Gestao de Ativos Florestais S.A., in which it held, on December 31, 2015, a stake of 100% through Arauco’s subsidiaries in Brazil. Tables below show the acquired assets and liabilities at fair value, considerationpaid and effects generated through the transaction.

Novo Oeste Gestao de Ativos Florestais	10-27-2015 Th.U.S.$
Cash and cash equivalents		427
Inventories		3,747
Accounts receivable from related companies, Current		39,917
Other Assets, Current		154
Current Assets, Total		44,245
Accounts receivable from related companies, Non-current		12,439
Other Assets, Non Current		—
Property, plant and equipment		1,496
Biological assets, Non-current		87,580
Non Current Assets, Total		101,515
Assets, Total		145,760
Trade and other current payables, Current		238
Current tax liabilities		3,449
Accounts payable to related companies, current		10
Current Liabilities, Total		3,697
Accounts payable to related companies, Non-current		137,193
Deferred tax liabilities		16,051
Non Current Libilities, Total		153,244
Liabilities, Total		156,941

The interest previously held by Novo Oeste Gestao de Ativos Florestais S.A. was measured at fair value, recognizing a gain in the other income line of ThU.S.$15,268. The price paid for the 51% interest was ThU.S.$995, generating a goodwill of ThU.S.$6,697, for which Arauco decided to recognize in the results because of the Company’s accumulated losses. The impairment loss is presentes neto from the abovementioned gain.

F-59

On August 13, 2015, the company Arauco Middle East DMCC was incorporated with a single contribution from Inversiones Arauco Internacional Limitada of 3,673,000 Dirham (ThU.S.$1,000). The corporate purpose of this company is the promotion of products and the management of Arauco’s customer relations in the Middle East.

On January 26, 2015 Arauco, through its subsidiaries in North America, acquired a melamine-based paper treatment plant located in Biscoe, North Carolina. The price paid was ThU.S.$9,522. The attached table displays the acquired assets at fair value and the price paid under the transaction:

	Th.U.S$
Inventories		372
Lands		597
Buildings		1,723
Plant and equipment		6,830
Value Paid, Total		9,522

On March 27, 2014, the company Servicios Aereos Forestales Ltda was established with contributions from Inversiones Arauco Internacional Ltda ThU.S.$25,997 and Celulosa Arauco y Constitución S.A. ThU.S.$2.6. The Company’s main objective is the provision of air transportation services for passengers and cargo, forest patrol, photography, advertising, magnetic survey, using its own as well as third-party equipment and perform maintenance service on aircrafts.

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

F-60

NOTE 15. INVESTMENTS IN ASSOCIATES

At December 31, 2015 and 2014 there are no new investments in associates to report.

The following tables set forth information about Investments in associates.

Name	Puertos y Logística S.A.
Country	Chile
Functional Currency	U.S. Dollar
Corporate purpose	Docking and warehousing operations for proprietary and third party use, cargo of all classes of goods, as well, as warehousing and transport operations.
Ownership interest (%)	20.2767%
	12-31-2015	12-31-2014
Carrying amount	ThU.S.$58,922	ThU.S.$60,081
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%
	12-31-2015	12-31-2014
Carrying amount	ThU.S.$43,200	ThU.S.$40,088
Name	Servicios Corporativos Sercor S.A.
Country	Chile
Functional Currency	Chilean Pesos
Corporate purpose	Consulting services related to business management to Boards of Directors and Senior Management of all Arauco’s entities.
Ownership interest (%)	20.0000%
	12-31-2015	12-31-2014
Carrying amount	ThU.S.$ 179	ThU.S.$(2,850) (*)

(*) As of December 31, 2014 the Company recognized a loss generated by a recognized impairment of its subsidiary Olidata Chile S.A.

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%
	12-31-2015	12-31-2014
Carrying amount	ThU.S.$17,397	ThU.S.$26,029

F-61

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%
	12-31-2015	12-31-2014
Carrying amount	ThU.S.$16	ThU.S.$48
Name	Consorcio Tecnológico Bioenercel S.A.
Country	Chile
Functional Currency	Chilean Pesos
Corporate purpose	Developing of technologies which will promote the development of a biofuels 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%
	12-31-2015	12-31-2014
Carrying amount	ThU.S.$67	ThU.S.$214
Name	Novo Oeste Gestao de Ativos Florestais S.A.
Country	Brazil
Functional Currency	Real
Corporate purpose	Management of forestry activities and commercialization of wood and other products.
Ownership interest (%)	Subsidiary	48.9912%
	12-31-2015	12-31-2014
Carrying amount	ThU.S.$ -	ThU.S.$(25,290)
Name	Vale do Corisco S.A.
Country	Brazil
Functional Currency	Brazilian Real
Corporate purpose	Management of forestry activities.
Ownership interest (%)	49.0000%
	12-31-2015	12-31-2014
Carrying amount	ThU.S.$120,649	ThU.S.$174,782

F-62

Summarized Financial Information of Associates

12-31-2015	Puertos y Logística S.A. ThU.S.$			Inversiones Puerto Coronel S.A. ThU.S.$		Serv.Corporativos Sercor S.A. ThU.S.$			Stora Enso Arapoti Ind.de Papel S.A. ThU.S.$			Assets Novo Oeste Gestao  de Ativos Florestais S.A. ThU.S.$			Vale do Corisco S.A. ThU.S.$			Consorcio Tecnológico Bioenercel S.A. ThU.S.$			Genómica Forestal  S.A. ThU.S.$			Total ThU.S.$
Current		90,896			29		4,174			59,594			0			14,736			1			44			169,474
Non-current		472,638			86,453		664			33,284			0			322,598			345			146			916,128
Total		563,534			86,482		4,838			92,878			0			337,334			346			190			1,085,602
	Puertos y Logística S.A. ThU.S.$			Inversiones Puerto Coronel S.A. ThU.S.$		Serv.Corporativos Sercor S.A. ThU.S.$			Stora Enso Arapoti Ind.de Papel S.A. ThU.S.$			Liabilities Novo Oeste Gestao de Ativos Florestais S.A. ThU.S.$			Vale do Corisco S.A. ThU.S.$			Consorcio Tecnológico Bioenercel S.A. ThU.S.$			Genómica Forestal S.A. ThU.S.$			Total ThU.S.$
Current		41,784			82		3,136			13,648			0			9,098			7			7			67,762
Non-current		231,160			0		808			7,094			0			80,563			5			118			319,748
Equity		290,590			86,400		894			72,136			0			247,673			334			65			698,092
Total		563,534			86,482		4,838			92,878			0			337,334			346			190			1,085,602
Revenues		88,689			4,629		16,007			9,574			0			36,270			983			121			156,273
Expenses		(89,719	)		0		(5,163	)		(3,579	)		0			(19,674	)		(105	)		(1,229	)		(119,469	)
Profit or loss		(1,030	)		4,629		10,844			5,995			0			16,596			878			(1,108	)		36,804
12-31-2014	Puertos y Logística S.A. ThU.S.$			Inversiones Puerto Coronel S.A. ThU.S.$		Serv.Corporativos Sercor S.A. ThU.S.$			Stora Enso Arapoti Ind.de Papel S.A. ThU.S.$			Assets Novo Oeste Gestao de Ativos Florestais S.A. ThU.S.$			Vale do Corisco S.A. ThU.S.$			Consorcio Tecnológico Bioenercel S.A. ThU.S.$			Genómica Forestal S.A. ThU.S.$			Total ThU.S.$
Current		70,923			17		6,582			46,579			6,356			24,067			1,533			193			156,250
Non-current		363,444			80,243		272			84,451			119,137			460,554			2,097			253			1,110,451
Total		434,367			80,260		6,854			131,030			125,493			484,621			3,630			446			1,266,701
	Puertos y Logística S.A. ThU.S.$			Inversiones Puerto Coronel S.A. ThU.S.$		Serv.Corporativos Sercor S.A. ThU.S.$			Stora Enso Arapoti Ind.de Papel S.A. ThU.S.$			Liabilities Novo Oeste Gestao de Ativos Florestais S.A. ThU.S.$			Vale do Corisco S.A. ThU.S.$			Consorcio Tecnológico Bioenercel S.A. ThU.S.$			Genómica Forestal S.A. ThU.S.$			Total ThU.S.$
Current		19,447			83		20,355			16,791			25,587			17,773			1,937			13			101,986
Non-current		118,616			0		751			5,923			151,519			108,206			621			243			385,879
Equity		296,304			80,177		-14,252			108,316			(51,613	)		358,642			1,072			190			778,836
Total		434,367			80,260		6,854			131,030			125,493			484,621			3,630			446			1,266,701
Revenues		83,318			3,331		4,047			125,746			171			47,800			135			65			264,613
Expenses		(79,973	)		0		(16,854	)		(122,967	)		(27,032	)		(7,237	)		(571	)		(97	)		(254,731	)
Profit or loss		3,345			3,331		(12,807	)		2,779			(26,861	)		40,563			(436	)		(32	)		9,882

F-63

Reconciliation of Investment in Associates and Joint Ventures

	12-31-2015 ThU.S.$			12-31-2014 ThU.S.$
Opening balance as of January 1		326,045			349,412
Changes
Investments in associates, Additions		1,808			0
Disposals, Investments in associates		0			(3,400	)
Share of profit (loss) in investment in associates		5,573			6,958
Share of profit (loss) in investment in joint ventures		1,175			523
Dividends Received		(18,396	)		(11,696	)
Decrease in foreign exchange currency		(55,207	)		(27,717	)
Other increases		3,814			11,965
Total changes		(61,233	)		(23,367	)
Ending balance		264,812			326,045
	12-31-2015 ThU.S.$			12-31-2014 ThU.S.$
Carrying amount of associates accounted for using equity method		241,140			301,242
Carrying amount of joint ventures accounted for using equity method		23,672			24,803
Total investment accounted for using equity method		264,812			326,045

NOTE 16. INTERESTS IN JOINT ARRANGEMENTS

Investments and contributions made

As of December 31, 2015, Arauco, through its subsidiary Arauco Holanda Cooperatief U.A, has made capital contributions for a total of ThU.S.$82,943 (ThU.S.$398,545 as of December 31, 2014) to two Uruguayan joint operation entities in order to maintain its 50% of ownership in Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A.

The aforementioned contributions were invested in the construction of a state-of-the-art cellulose production plant, with a guaranteed annual capacity of 1.3 million tons, a port and an energy generation unit based on renewable resources, which is located in the town of Puerto Pereira, Province of Colonia, Uruguay.

The investments in Uruguay qualify as a joint operation. In relation to “other rights and contractual conditions”, the joint operation has the primary objective of providing the parties an output. As established in the “Pulp Supply Agreement”, both Arauco and its partner have the obligation to acquire 100% of the yearly pulp produced by the joint operation. Arauco has recognized the assets, liabilities, income and expenses associated with its interest ownership, as of January 1, 2013, pursuant to IFRS 11.

Furthermore, Arauco holds a 50% ownership interest in Unilin Arauco Pisos Laminados Ltda., a Brazilian company, and in Eka Chile S.A. (“Eka”), a company that sells sodium chlorate to cellulose plants in Chile. There is a contractual agreement with Eka whereby Arauco has engaged in an economic activity subject to common control, which is classified as a joint venture.

F-64

The following tables set forth summarized financial information of the more significant interests in joint arrangements, which qualify as joint operations:

	12-31-2015					12-31-2014
Celulosa y Energía Punta Pereira S.A. (Uruguay)	Assets ThU.S.$			Liabilities ThU.S.$		Assets ThU.S.$			Liabilities ThU.S.$
Current		173,499			167,067		82,708			248,825
Non-current		2,192,148			885,723		2,219,108			1,008,556
Equity					1,312,857					1,044,435
Total Joint Arrangement		2,365,647			2,365,647		2,301,816			2,301,816
Investment		656,429					522,218
	12-31-2015 ThU.S.$					12-31-2014 ThU.S.$
Income		720,499					260,934
Expenses		(612,101	)				(314,251	)
Joint Arrangement Net Income (Loss)		108,398					(53,317	)
	12-31-2015					12-31-2014
Forestal Cono Sur S.A. (consolidated) (Uruguay)	Assets ThU.S.$			Liabilities ThU.S.$		Assets ThU.S.$			Liabilities ThU.S.$
Current		23,267			21,495		26,034			21,790
Non-current		176,876			4,654		171,630			700
Equity					173,994					175,174
Total Joint Arrangement		200,143			200,143		197,664			197,664
Investment		86,997					87,587
	12-31-2015 ThU.S.$					12-31-2014 ThU.S.$
Income		10,821					9,200
Expenses		(12,000	)				(4,844	)
Joint Arrangement Net Income (Loss)		(1,179	)				4,356
	12-31-2015					12-31-2014
Eufores S.A. (consolidated) (Uruguay)	Assets ThU.S.$			Liabilities ThU.S.$		Assets ThU.S.$			Liabilities ThU.S.$
Current		158,735			187,311		132,001			193,615
Non-current		611,500			39,994		641,668			32,368
Equity					542,930					547,686
Total Joint Arrangement		770,235			770,235		773,669			773,669
Investment		271,465					273,843
	12-31-2015 ThU.S.$					12-31-2014 ThU.S.$
Income		292,534					202,814
Expenses		(297,291	)				(222,853	)
Joint Arrangement Net Income (Loss)		(4,757	)				(20,039	)
	12-31-2015					12-31-2014
Zona Franca Punta Pereira S.A. (Uruguay)	Assets ThU.S.$			Liabilities ThU.S.$		Assets ThU.S.$			Liabilities ThU.S.$
Current		11,582			71,202		4,971			28,093
Non-current		494,585			88,182		474,871			85,057
Equity					346,783					366,692
Total Joint Arrangement		506,167			506,167		479,842			479,842
Investment		173,392					183,346
	12-31-2015 ThU.S.$					12-31-2014 ThU.S.$
Income		19,079					20,885
Expenses		(41,988	)				(22,762	)
Joint Arrangement Net Income (Loss)		(22,909	)				(1,877	)

F-65

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

	12-31-2015					12-31-2014
Unilin Arauco Pisos Ltda.	Assets ThU.S.$			Liabilities ThU.S.$		Assets ThU.S.$			Liabilities ThU.S.$
Current		5,943			2,304		9,933			6,917
Non-current		3,544			37		4,942			63
Equity					7,146					7,894
Total Joint venturet		9,487			9,487		14,875			14,875
Investment		3,573					5,829
	12-31-2015 ThU.S.$					12-31-2014 ThU.S.$
Income		112					6,385
Expenses		(2,462	)				(6,378	)
Joint venture Net Income (Loss)		(2,350	)				7
	12-31-2015					12-31-2014
Eka Chile S.A.	Assets ThU.S.$			Liabilities ThU.S.$		Assets ThU.S.$			Liabilities ThU.S.$
Current		23,457			8,365		18,378			3,951
Non-current		30,203			5,097		28,792			5,272
Equity					40,198					37,947
Total Joint Venture		53,660			53,660		47,170			47,170
Investment		20,099					18,974
	12-31-2015 ThU.S.$					12-31-2014 ThU.S.$
Income		39,646					49,570
Expenses		(36,355	)				(48,530	)
Joint Venture Net Income (Loss)		3,291					1,040

F-66

NOTE 17. IMPAIRMENT OF ASSETS

In 2015, a provision for the deterioration of the Arapoti Sawmill in an amount of ThU.S.$2,428, was registered reducing the recoverable value for these assets to zero

Disclosure of Impairment Losses of Assets

Provisions for impairment of property, plant and equipment due to technical obsolescence have been recorded as of December 31, 2015 and 2014 respectively, as shown below:

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
	12-31-2015	12-31-2014
Information relevant to the sum of all impairment	ThU.S.$4,658	ThU.S.$4,938

This impairment provision is being analyzed to determine the definitive write-off corresponding to the related assets. In addition, the Company recognized an impairment derived from the purchase of the 51% ownership in Novo Oeste Gestao de Ativos Florestais S.A. See Note 14 – acquisition of subsidiaries.

Goodwill

Goodwill is allocated to the groups of cash-generating units that are expected to benefit from the synergies of the combination.

At the date of these consolidated financial statements, the balance of goodwill is ThU.S.$69,475 (ThU.S.$82,573, at December 31, 2014)

Of the total of goodwill, ThU.S.$39,631 (ThU.S.$40,023 as of December 31, 2014) are generated by the acquisition of “Flakeboard”, a company that, directly and/or through its subsidiaries, possesses and operates 7 panel plants, for which Arauco acquired and paid, on September 24, 2012, the price of ThU.S.$242,502 for the 100% interest ownerhip.

The recoverable amount for Flakeboard’s cash generating unit was determined based on the calculations of its value in use, and this calculation was made using cash flow projections covering a 5-year term, applying a discount real rate of 7.8% which reflects current market assessments for the Panels segment in North America.

The investment in the panel plant in Pien, Brazil generated a goodwill of ThU.S.$27,030 (ThU.S.$39,735 as of December 31, 2014).

The recoverable amount for the Pien plant’s cash generating unit was determined based on the calculations of its value in use, and this calculation was made using cash flow projections based on the operational plan approved by the Administration, covering a 5-year term, applying a 9% discount real rate that reflects current evaluations for the panel segment in Brazil.

As a result of the annual impairment test, the carrying value of the goodwilldoes not exceed their recoverable value, and therefore there is no need to recognize impairment losses.

Between December 31 2015 and 2014, the variation of the balance in goodwill is only due to the translation adjustments as explained in the accounting policies.

F-67

NOTE 18. PROVISIONS, CONTINGENT ASSETS AND CONTINGENT LIABILITIES

The contingent liabilities for outstanding litigations are as follows:

Celulosa Arauco y Constitución S.A.

1. On August 25, 2005, the Chilean Servicio de Impuestos Internos (the “Chilean IRS”) issued tax resolutions No. 184 and No. 185 of 2005, objecting to certain income tax returns made by Arauco on April 16, 2001 and October 31, 2001, and furthermore, requested reimbursement from the Company for the tax returnes made in respect of certain claimed tax losses as well as the modification of the tax balance of retained earnings. 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 resolutions No. 184 and 185 of 2005. The RAF was resolved on January 9, 2009 by the Chilean IRS, which resolution 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.

On September 26, 2014, Arauco requested the submission of this claim to the competent jurisdiction of the new Tax and Customs Courts. On October 10, 2014, Arauco’s request was granted. Currently the action is being considered by these new Courts under the Docket No. RUC 14-9-0002087-3. On March 20, 2015, the SII responded to the allegations submitted by Arauco against Liquidations No. 184 and 185 of 2005. As the date of these financial statements, this case is pending.

2. In conecction with Licancel Plant, on June 22, 2011, the Company 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. The case arose out of dead fish allegedly found in the Mataquito River on June 5, 2007 caused by the Licancel Plant. The plaintiffs are seeking compensation for alleged damages resulting from the abovementioned event. In particular, they are claiming effective damages, loss of profits and non-monetary damages resulting from alleged contractual liability.

On October 21, 2015 the Court issued a definitive first instance decision partially admitting the claim, sentencing Celulosa Arauco y Constitución S.A. to pay each claimant – as non-monetary damages – the sum of $5,000,000 plus adjustments, as per the variation of the CPI, calculated as from May 2007 until the month of the actual payment. On November 16, 2015 the defendant challenged the definitive decision through the submission of a cassation appeal based on formal aspects and an ordinary appeal. Pending. (Court of Appeals Docket No. 60-2016).

3. Through Res. Ex. N° 1 issued by the Superintendence of the Environment (“SMA”) on January 8, 2016, notified on January 14, 2016, the SMA formulated 11 charges against the Company, due to alleged breaches of certain Environmental Qualification Resolutions for the Valdivia Plant and of DS No. 90/2000. The 11 charges were classified as follows by the SMA: 1 critical, 5 severe, 5 minor.

On February 12, 2016, the Company submitted its defenses. The SMA shall now analyze and rule on the defenses, and it may request new information or open a term for providing evidence. Once these proceedings have been discharged, the SMA will issue a resolution that either absolves or sanctions the company. The resolutions issued by the SMA may be appealed before the Environmental Court.

F-68

4. Through Res. Ex. N° 1 of the SMA, dated February 17, 2016 notified on February 23, 2016, the SMA formulated 8 charges against the company due to alleged breaches of certain Environmental Qualification Resolutions for the Nueva Aldea Plant. The 8 charges were qualified by the SMA as follows: 7 severe and 1 minor.

On March 15, 2016, the company submitted, within the legal timeframe, a compliance program containing 30 actions and objectives associated with each of the 8 accused infractions. If the compliance program is approved by the SMA and satisfactorily executed, it would be possible to finalize the proceeding without the application of sanctions.

As of this date, the Company is within the time period granted to raise defenses, or alternatively, to propose a compliance program that, if approved and satisfactorily executed, would allow the termination of the proceedings without the imposition of sanctions. Should defenses be raised, the SMA will issue a resolution that either absolves or sanctions the Company. The SMA’s rulings may be challenged before the Environmental Court.

Arauco Argentina S.A. (Ex -Alto Paraná S.A.)

1. (i) On October 8, 2007, the Federal Administration of Internal Revenue (Administración Federal de Ingresos Públicos) (AFIP) initiated an ex oficio proceeding against our Argentine affiliate Arauco Argentina S.A. challenging its deduction from its income tax liability of certain expenses, interest payments and exchange rate differences generated by Private Negotiable Obligations which were issued by such company in 2001 and paid in 2007.

On November 20, 2007, Arauco Argentina S.A. submitted a counterclaim completely rejecting all of AFIP’s allegations and asserting legal arguments that justify its actions in the determination of its income tax.

On December 14, 2007, AFIP notified Arauco Argentina S.A. 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 Argentine Pesos $417,908,207 (ThU.S.$ 32,048 at December 31, 2015), compensatory interest, and fines for omission. On February 11, 2008, Arauco Argentina S.A. appealed the aforementioned ruling before the National Tax Court (“Tribunal Fiscal de la Nación”) (TFN).

On February 8, 2010, Arauco Argentina S.A. 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, Arauco Argentina S.A. appealed before the CACAF, making all necessary submissions with the purpose of attaining a revocation of the contested decision. Arauco Argentina S.A. paid litigation fees (tasa de justicia) in the amount of Argentine Pesos 5,886,053 (ThU.S.$451 at December 31, 2015).

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 Arauco Argentina S.A. until CACAF reaches a decision on APSA’s request for an injunction.

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On May 13, 2010, the CACAF decided to grant the injunction requested by Arauco Argentina S.A., 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, Arauco Argentina S.A. filed with the Appeal Court a surety policy issued by Zurich Argentina Cía. de Seguros S.A. On May 20, 2010, the CACAF asked Arauco Argentina S.A. to specify the areas covered by the surety insurance. On May 28, 2010 Arauco Argentina S.A. 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 Argentine Pesos 633,616,741 (equivalent to ThU.S.$48,590 as of December 31, 2015), 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 Arauco Argentina S.A. 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 1, 2013, Arauco Argentina S.A. received notice of the decision dated December 28, 2012, whereby the First 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 National Supreme Court of Justice 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 National Supreme Court of Justice. On May 6, 2013, Arauco Argentina S.A. was notified of the decision of the Court of Appeals that, as of April 23, 2013, granted the ordinary appeal to the National Supreme Court of Justice 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, Arauco Argentina S.A. 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, Arauco Argentina S.A. submitted a duly founded presentation in connection with the Appeal, which the Court subsequently ordered to be transferred to AFIP, a circumstance of which the company 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 these 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 Arauco Argentina S.A. to pay Argentine Pesos 10,447,705 (ThU.S.$801 at December 31, 2015) as payment of Tasa de Actuación (Litigation Fee) before the TFN. On August 14, 2008, Arauco Argentina S.A filed a petition with the court requesting that this order be reconsidered, or alternatively, rejected on the grounds that the requested amount was unreasonable. Arauco Argentina S.A provided evidence that it had paid Argentine Pesos 1,634,914 (ThU.S.$125 at December 31, 2015), considering that this was the actual amount due, pursuant to Law, for the Tasa de Actuación (Litigation Fee). On April 13, 2010, the First Chamber of the CACAF denied Arauco Argentina S.A.’s appeal. On April 26, 2010, Arauco Argentina S.A. filed an ordinary appeal against the latter decree before the National Supreme Court of 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, 2011, 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.

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The case file was returned to First Chamber of the National Appeals Court of Contentious Administrative Matters. On June 15, 2012, Arauco Argentina S.A. 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, Arauco Argentina S.A. 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, Arauco Argentina S.A. filed a presentation which expressed its interest to maintain the extraordinary appeal. On February 19, 2013, Arauco Argentina S.A. requested the Extraordinary Remedy to be dealt with, and that copy of the judgment passed in the main suit be attached thereto. On the same date Arauco Argentina S.A. lodged a Federal Extraordinary remedy on grounds that the judgment relating to the procedural tax discussed in this ancillary suit ought to be analyzed in consistency with that of the main suit. On April 8, 2013, the Chamber conferred upon AFIP a period to respond to Arauco Argentina S.A.’s Extraordinary Remedy. On November 26, 2013, Arauco Argentina S.A. was served with a ruling dated October 8, 2013 whereby the 1^st Chamber of the Appeals Department decided to deny Arauco Argentina S.A.’s May 6, 2010 Extraordinary Remedy, imposing upon Arauco Argentina S.A. the obligation to bear the court costs and fees. On November 18, 2014, the 1^st Chamber of the Appeals Department decided to dismiss Arauco Argentina S.A.’s second extraordinary remedy.

2. By way of Resolutions Nos. 952/2000 and 83/03, and within the context of the provisions of Law No. 25,080, the former Secretary for Agriculture, Ranching, Fishing and Foods approved the projects submitted by Arauco Argentina S.A. to build an MDF plant (boards) and a sawmill, along with the forestation of several hectares for supplying said industries.

In March of 2005, by way of Note No. 145/05, issued by the Undersecretary for Agriculture, Ranching and Forestation, the exemption to pay exportation duties granted to Arauco Argentina S.A. was suspended, as were the exemptions granted to all other companies benefited by this system under Law No. 25,080, a suspension which was implemented as a preventive measure, invoking the need to review the proceedings conducted in the respective case files. After the exhaustion of the administrative procedures, the measure is being argued by the company before the courts. In said context, on November 8, 2006, the V Chamber of the National Appeals Court for Adversarial Administrative and Federal Matters issued a ruling ordering that Arauco Argentina S.A. to continue to enjoy an exemption from paying the exportation duties, provided that it guarantee said duties by taking out warranty insurance. The judicial measure became effective beginning on March of 2007 by collateralization through the granting of bond (caución) policies for each shipment permits exempted from payment of export duty. Notwithstanding this ruling, the issuance of the ruling on the substantial issues of the matter is still pending. The company maintains an assignment of funds equivalent to ThU.S.$ 23,541 in connection to the aforementioned export duties, which is shown under not current provisions.

The export duties paid by the company while the benefit was suspended were allocated to the results of each financial year. As of this date, the company has submitted a claim against the National Government demanding the return of ThU.S.$6,555, plus interest accrued as from the serving of process of said claim, amount which corresponds to the Export Duties paid between March of 2005 and March of 2007 as a result of the benefit’s suspension.

In turn, during April of year 2005, the Secretary for Agriculture, Ranching, Fishing and Foods issued Resolution No. 260/2005, requiring that holders of any firms that had received the fiscal benefits granted under Law No. 25,080 should establish guarantees to cover the total amount of any such benefits, considering for such purposes all benefits that had been enjoyed until the date of their establishment. Arauco Argentina S.A. then proceeded to establish the required guarantees, which - as of the date of these financial statements - amount to Argentine Pesos 172,602,362 (equivalent to ThU.S.$13,296 at December 31, 2015).

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Arauco Argentina S.A. believes that it has complied with all of the obligations imposed upon it by the system set forth under Law No. 25,080.

3. On December 6, 2013, Arauco Argentina S.A. was served upon Resolution 803 issued by the Central Bank of the Republic of Argentina (BCRA) on November 22, 2013. By means of such resolution, the BCRA initiated Investigation No. 5581, whereby it is sought to determine the absence of currency inflow and liquidation, and the delayed inflow of currency arising from export operations.

On March 6, 2014, the BCRA notified Arauco Argentina S.A. that it had received the APSA’s response and was beginning the trial period. On June 18, 2014 the BCRA notified the company of the closure of the trial period. On June 26, 2014 APSA presented its answer. On October 6, 2014, the company was served with the ruling dated September 30, 2014, issued by the National Criminal and Economic Court No. 8, Secretary No. 16, through which it was notified that the court would analyze the case under Case File No. 1330/2014.

As of the date of issuance of these financial statements, in the opinion of the company´s legal advisors, the likelihood of obtaining a favorable outcome (that is to say, no fines being imposed) is high, given the solid defense arguments raised by Arauco Argentina S.A. and the precedents relating to infractions of a similar nature.

Arauco do Brasil S.A.

On November 8, 2012, the Brazilian tax authorities issued an Infringement Notice against one of our Brazilian subsidiaries, Arauco do Brasil S.A., for allegedly unpaid taxed owed by said company during the period from 2006 to 2010. Specifically, the tax authorities (i) objected to the deductibility of certain payments made, and expenses incurred (including the amortization of premiums, interest and litigation costs) by Arauco do Brasil between 2005 and 2010, and, (ii) argued that Arauco do Brasil made certain insufficient payments regarding the Brazilian Corporate Tax (“IRPJ”) and the Corporate Contribution over Net Profits (“CSLL”) during 2010.

On July 20, 2015, Arauco do Brasil was notified of the first-level administrative ruling which partially upheld the Infringement. Against this ruling, a Voluntary Appeal was filed seeking to revoke the Infringement Notice before the Brazilian Administrative Tax Council (Conselho Administrativo de Recursos Fiscais de Brasil or “CARF”), which is the second administrative level. As of the date of this report, the trial pertaining to this objection is still pending. The company believes that its challenge against the Infringement Notice is based on sound legal grounds and that a reasonable possibility exists that this matter will be resolved in favor of the company. However, if a favorable ruling is not obtained, it is possible that an obligation is generated in the aforementioned sums, plus interest and fines, up to the date on which the respective payment is made.

Forestal Arauco S.A. (ex Forestal Celco S.A.)

1. On October 26, 2012, Forestal Valdivia S.A., now Forestal Arauco S.A., was notified of a restitution suit filed by Mr. Nelson Vera Moraga, Attorney representing the estate 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 aforementioned estate is the sole and exclusive owner of two real estate properties whose total surface amounts to 1,210 hectares and are allegedly occupied by Forestal Valdivia S.A. On March 13, 2014, the Court issued a first instance ruling rejecting the claim.

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On March 31, 2014, the plaintiff appealed the first instance ruling through the submittal of a cassation appeal with regards to procedural aspects to the Court of Appeals of Temuco. On August 10, 2015, the Court of Appeals of Temuco issued a decision confirming the first instance decision with litigation costs. On August 28, 2015, the plaintiff filed a cassation appeal based on substantial and procedural grounds against the judgment of the Court of Appeals. On September 4, 2015, the Court of Appeals set outcome guaranty deposit (fianza de resultas) of 50,000,000 Chilean pesos. On September 10, 2015, the defendant requested that the guaranty deposit be set aside, or alternatively reduced to the amount of 300,000 Chilean Pesos. On September 16, 2015, the Court of Appeals decided to keep the guarantydeposit in the amount of 50 million Chilean pesos. On October 21, 2015, the cassation appeal was processed by the Supreme Court. On October 23, 2015, the petitioner formally became a party to the cassation proceedings. On November 3, 2015, the respondent formally became a party to the cassation proceedings. On November 6, 2015, Forestal Arauco S.A. filed a motion for the declaration of inadmissibility of the cassation appeal. On December 30, 2015, the Supreme Court summoned the parties to a hearing to be held on a date yet to be defined. Currently, the case is included in the appeal table awaiting its hearing. Pending. (Case Docket Supreme Court 595-2014).

2. On October 8, 2013, Bosques Arauco S.A., now Forestal Arauco S.A. was notified of a civil claim filed by Mr. Manuel Antonio Fren Casanova, requesting the court to declare the properties known as Cuyinco and Cuyinco Alto as two different properties and, therefore, to order the cancellation of the ownership registration in the name of Bosques Arauco S.A. found on N° 290 of page 266 of the Registry of Property kept by the Real Estate Registrar of Cuyinco Alto, on the grounds that, Bosques Arauco S.A. erroneously understood that its property, Cuyinco Alto of 4,600 hectares, would also encompass the land known as Cuyinco, which allegedly belongs to the claimant.

The claim was filed before the Civil Court of Lebu (Case File No. C-269-2013). On October 27, 2015, the Court passed a first instance definitive judgment, dismissing the claim in its entirety. On November 16, 2015, the plaintiff challenged the first instance judgment by means of a cassation appeal based on substantial and procedural grounds. Currently the case file is pending at the Court of Appeals, which shall proceed to entertain and decide upon such remedy. (Case Docket Court of Appeals No. 1956-2015). The Court of Appeals ruled that it would send the case to the first instance of judgment, so that the inferior court may rule on the witness disqualification that was not addressed in the decision, thereby completing the judgment.

3. Maquinarias y Equipos Klenner Limitada filed a civil damages claim before the First Civil Court of Valdivia, Case File number C-375-2015, against Forestal Arauco S.A. The claim seeks compensation for alleged damages brought as a result of the termination of a service provision contract that took place on February 9, 2010

On February 6, 2015, the claim was served on Mr. Cristián Durán Silva, on behalf of Forestal Arauco S.A. On February 12, 2015, the company appeared submitting a motion to void the service of process, since Mr. Cristian Durán Silva was not the legal representative of Forestal Arauco S.A., and because the requirements of article 44 of the Code of Civil Procedure had not been fulfilled in this service of process.

The Court granted the plaintiff the legal term to submit its arguments in this regard, issuing a resolution dated February 17 of 2015. Moreover, the company required that proceedings be suspended while this matter was pending decision. The Court gave the floor to the plaintiff with regard to this request. In view of the foregoing, on February 24, 2015, the company raised dilatory defenses, In view of the above, on February 24, 2015, the company filed dilatory defenses, which were dismissed by the Court on August 20, 2015. The decision whereby the defenses were dismissed was appealed by the defendant, and such appeal was ultimately dismissed by the Court of Appeals of Valdivia. On September 2,

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2015, Forestal Arauco S.A. answered the claim. Subsequently, the plaintiff filed a reply, and the defendant filed the rejoinder. On October 1, 2015, a settlement hearing took place without any results. Currently, the case is awaiting a ruling in connection with the motion to reconsider and the appeal filed in lieu of said motion, both with respect to the ruling opening the term for providing evidence issued by the Court.

4. On April 28, 2015, the company was notified of and answered the action for recovery submitted in ordinary proceedings by Mr. Rodrigo Huanquimilla Arcos and Mr. Mario Andrades Rojas, attorneys at law, on behalf of 24 members of the Arcos succession, who claiming to be owners of the estate that they identify as Hacienda Quivolgo, of 5,202 hectares, request that Forestal Celco S.A., currently Forestal Arauco S.A., be sentenced to return the abovementioned real property plus civil and natural fruits or revenues as well as any estates adhered to it, along with any damages that the real property may have suffered, with litigation costs. The company proceeded to answer the claim requesting that it be completely rejected, arguing that Forestal Celco S.A., currently Forestal Arauco S.A., is the sole and legitimate owner of the real property. The Court issued the ruling that opened the term for producing evidence and ordered a joinder of this case with case file No. C-54-2015, suspending the proceedings and ordering the plaintiffs to appoint a single and common attorney for the representation of both parties, notifying the parties through substituted service of process. The trial will continue once the common attorney has been appointed. Case file C-334-2014 of the Civil Court of Constitución.

5. On April 6, 2015, the company was notified through a rogatory letter regarding the claim submitted by Mr. Gustavo Andrés Ochagavía Urrutia, attorney at law, acting on behalf of 23 members of the Arcos succession, who claim to be the owners of the estate that they identify as Hacienda Quivolgo, of 5,202 hectares, requesting that Forestal Celco S.A., currently Forestal Arauco S.A., be ordered to return the abovementioned real property plus civil and natural fruits or revenues as well as any estates adhered to it, along with any damages that the real property may have suffered, with litigation costs. They base their claim in that Forestal Celco S.A., currently Forestal Arauco S.A., is allegedly in possession but does not own the real property in question. On April 28, 2014, the company proceeded to answer the claim requesting that it be completely rejected, arguing that Forestal Celco S.A., currently Forestal Arauco S.A., is the sole and legitimate owner of the real property.

On January 6, 2016, the plaintiff was notified the ruling which commences the trial period. On January 8, 2016, the defendant requested a consolidation of the proceedings with Case file 334-2014, as well as the suspension of the proceeding until this request is decided upon. On January 12, 2016, the Court served the plaintiff in respect of the consolidation request, suspending the proceeding in the meantime. The court ordered a joinder of this case with case file No. C-334-2014. Case file C-54-2015 of the Civil Court of Constitución.

No provisions have been recognized from the aforementioned contingencies. 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.

Provisions recorded as of December 31, 2015 and 2014 are as follows:

Classes of Provisions	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Provisions, Current		858		2,535
Provisions for litigations		404		1,765
Other provisions		454		770
Provisions, non-Current		34,541		64,529
Provisions for litigations		10,996		14,273
Other provisions		23,545		50,256
Total Provisions		35,399		67,064

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Provisions for litigations are related to labor and tax claims whose payment period is uncertain. Other provisions mainly include the recognition of a liability related to investments in associates and joint ventures accounted under the equity method with net asset deficiency at the end of the reporting period.

	12-31-2015
Movements in Provisions	Litigations ThU.S.$ (*)			Other Provisions ThU.S.$ (**)			Total ThU.S.$
Opening balance		16,038			51,026			67,064
Changes in provisions
Increase in existing provisions		2,555			1,429			3,984
Payments		(2,990	)		0			(2,990	)
Decrease in foreign currency exchange		(5,163	)		0			(5,163	)
Other Increases (Decreases)		960			(28,456	)		(27,496	)
Total Changes		(4,638	)		(27,027	)		(31,665	)
Closing balance		11,400			23,999			35,399

(*) The increase in legal claims is composed mainly of Th.U.S.S$1,558 from Brazilian subsidiaries in connection with civil and labor lawsuits, being the latter the most important. In addition there are ThU.S.$840 from Arauco Argentina in connection with labor lawsuits.

(**) The increase of Other Provisions comprises mainly an increase of Th.U.S$1,429 from Arauco Argentina for export duties. While in the Other Increases (Decreases), line item, the reverse of Negative Equity to Arauco Forest Brasil over Novo Oeste by Th.U.S.$ 25,290 and Forestal Cholguán over Sercor is reflected by Th.U.S.$2,850.

	12-31-2014
Movements in Provisions	Litigations ThU.S.$ (*)			Other Provisions ThU.S.$ (**)			Total ThU.S.$
Opening balance		18,406			15,457			33,863
Changes in provisions
Increase in existing provisions		9,585			16,782			26,367
Payments		(8,951	)		—			(8,951	)
Decrease in foreign currency exchange		(818	)		(3,324	)		(4,142	)
Other (Decreases) Increases		(2,184	)		22,111			19,927
Total Changes		(2,368	)		35,569			33,201
Closing balance		16,038			51,026			67,064

(*) In the increase of legal claims US$3.3 million corresponds to 50 % of trial provision with the supplier in the construction of the pulp mill in Uruguay SACEEM Zona Franca S.A. (joint agreement).

(**) The increase in Other Provisions, is comprised mainly of an increase of Th.U.S.$2,850 from the provision of Negative Equity of Forestal Cholguan over Sercor and Th.U.S.$ 13,162 of Arauco Forest Brasil over Novo Oeste.

Another increase in Other Provisions corresponds to the Th.U.S$ 21,549 for the provision of export duties.

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NOTE 19. INTANGIBLE ASSETS

	12-31-2015			12-31-2014
Classes of Intangible Assets, Net	ThU.S.$			ThU.S.$
Intangible assets, net		88,112			93,258
Computer software		21,251			18,224
Water rights		5,485			5,442
Customer		55,265			63,164
Other identifiable intangible assets		6,111			6,428
Classes of intangible Assets, Gross		142,704			137,041
Computer software		58,275			49,109
Water rights		5,485			5,442
Customer		70,676			74,432
Other identifiable intangible assets		8,268			8,058
Classes of accumulated amortization and impairment
Total accumulated amortization and impairment		(54,592	)		(43,783	)
Accumulated amortization and impairment, intangible assets		(54,592	)		(43,783	)
Computer software		(37,024	)		(30,885	)
Customer		(15,411	)		(11,268	)
Other identifiable intangible assets		(2,157	)		(1,630	)

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

	12-31-2015
Reconciliation of intangible assets	Computer Software ThU.S.$			Water Rights ThU.S.$			Customer ThU.S.$			Others ThU.S.$			TOTAL ThU.S.$
Opening Balance		18,224			5,442			63,164			6,428			93,258
Changes
Additions		9,638			66			—			690			10,394
Disposals		(73	)		—			—			(70	)		(143	)
Amortization		(6,448	)		(2	)		(4,819	)		(684	)		(11,953	)
Decrease related to foreign currency translation		(84	)		(21	)		(3,080	)		(253	)		(3,438	)
Other Decreases		(6	)		—			—			—			(6	)
Changes Total		3,027			43			(7,899	)		(317	)		(5,146	)
Closing Balance		21,251			5,485			55,265			6,111			88,112
	12-31-2014
Reconciliation of intangible assets	Computer Software ThU.S.$			Water Rights ThU.S.$			Customer ThU.S.$			Others ThU.S.$			TOTAL ThU.S.$
Opening Balance		17,004			5,422			70,054			7,171			99,651
Changes
Additions		9,956			—			—			145			10,101
Amortization		(6,699	)		—			(5,040	)		(736	)		(12,475	)
Decrease related to foreign currency translation		(2,037	)		20			(1,850	)		(152	)		(4,019	)
Changes Total		1,220			20			(6,890	)		(743	)		(6,393	)
Closing Balance		18,224			5,442			63,164			6,428			93,258

		Average
Computer Software	Years		5
Customer	Years		15

The amortization of customer and computer software is presented in the Consolidated Statements of profit or loss under the Administrative Expenses line item.

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NOTE 20. BIOLOGICAL ASSETS

Biological assets comprise forestry plantations, mainly radiata and taeda pine, and to a lesser extent eucalyptus. The plantations are located in Chile, Argentina, Brazil and Uruguay, with a total surface of 1.7 million hectares, out of which 1 million hectares are used for forestry planting, 406 thousand hectares are native forest, 186 thousand hectares are used for other purposes and 55 thousand hectares not yet planted.

As of December 31, 2015, the production volume of logs totaled 19.4 million cubic meters (19.9 million cubic meters as of December 31, 2014).

Measurements of fair value of Arauco’s biological assets are classified as Level 3, due to the fact that inputs are not observable. However, this information reflects the assumptions that market participants would use in pricing the asset, including assumptions about risk.

These unobservable inputs were developed using the best information available and includes internal data from Arauco. These unobservable inputs can be adjusted if the available information indicates that other market participants would use different information or there is something specific in Arauco that is not available to other market participants.

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

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

• Current forestry plantations are projected based on a net volume that will not decrease, with a minimum growth equivalent to the current supply demand.

• Future plantations are not considered.

• The harvest of forestry plantations supplies raw materials for all other products that Arauco produces and trade. By directly controlling the development of forests that will be processed, Arauco ensures 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 own industrial centers and sales to third parties at market prices. Sales margin of the different products that are harvested in the forest is also considered in the valuation. The changes in the value of the plantations pursuant to the criteria defined above are accounted for in the results for the fiscal year, as established in IAS 41. These changes are presented in the Statement of profit or loss under the line item Other income per function, which as of December 31, 2015 amounted to ThU.S.$210,479 (ThU.S.$284,497 and ThU.S.$269,671 as of December 31, 2014 and 2013). The appraisal of biological assets resulted in a greater cost of the lumber sold in comparison to the real incurred cost, which is presented in the cost of sales which as of December 31, 2015 amounted to ThU.S.$185,737 (ThU.S.$220,950 and 221.874 as of December 31, 2014 and 2013 ).

• Forestry plantations are harvested according to the needs of Arauco’s production plants.

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

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

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• 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		Uruguay
Pine		24		15		15		—
Eucalyptus		12		10		7		10

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		(116,485	)
	-0,5		123,707
Margins (%)	10		416,035
	-10		(416,035	)

Forestry plantations 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 forestry plantations, which in conjunction with the Company’s resources and an efficient protection measures for these forestry assets, allow financial and operational risks to be minimized.

Detail of Biological Assets Pledged as Security

As of December 31, 2015, there are no forestry plantations pledged as security.

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.

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Current and Non-Current Biological Assets

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

	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Current		272,037		307,551
Non-current		3,554,560		3,538,802
Total		3,826,597		3,846,353

Reconciliation of carrying amount of biological assets

Movement	12-31-2015 ThU.S.$
Opening Balance		3,846,353
Changes in Biological Assets
Additions through acquisition and costs of new plantations		215,557
Sales		(1,028	)
Harvest		(299,501	)
Gain (losses) arising from changes in fair value less costs to sale		210,479
Increases (decreases) in Foreign Currency Translation		(111,502	)
Loss of forest due to fires		(34,850	)
Other Increases (decreases)		1,089
Total Changes		(19,756	)
Closing Balance		3,826,597

Movement	12-31-2014 ThU.S.$
Opening Balance		3,892,203
Changes in Biological Assets
Additions through acquisition and costs of new plantations		132,969
Sales		(39,432	)
Harvest		(338,440	)
Gain (losses) arising from changes in fair value less costs to sale		284,497
Increases (decreases) in Foreign Currency Translation		(44,020	)
Loss of forest due to fires		(31,512	)
Other Increases (decreases)		(9,912	)
Total Changes		(45,850	)
Closing Balance		3,846,353

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

F-79

NOTE 21. ENVIRONMENTAL MATTERS

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.

F-80

Detail information of disbursements related to the environment

As of December 31, 2015 and 2014, Arauco has made and / or has committed the following disbursements by major environmental projects:

	12/31/2015	Disbursements undertaken 2015					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		32	Assets	Property, plant and equipment		220		2016
Arauco Do Brasil S.A.	Environmental improvement studies	In process		220	Expense	Administration expenses		699		2016
Celulosa Arauco Y Constitucion S.A.	Investment projects for the control and management of gas emissions from industrial process	In process		2,720	Assets	Property, plant and equipment		0
Celulosa Arauco Y Constitucion S.A.	Environmental improvement studies	In process		2,688	Assets	Property, plant and equipment		1,057		2016
Celulosa Arauco Y Constitucion S.A.	Environmental improvement studies	Finished		4,818	Assets	Property, plant and equipment		0
Celulosa Arauco Y Constitucion S.A.	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	Finished		244	Assets	Property, plant and equipment		0
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		6,668	Assets	Property, plant and equipment		113,321		2017
Celulosa Arauco Y Constitucion S.A.	Environmental improvement studies	Finished		27,868	Expense	Operating cost		0
Celulosa Arauco Y Constitucion S.A.	Expansion of solid industrial waste dumpsite for management of these in the future	In process		2,122	Assets	Property, plant and equipment		1,420		2016
Arauco Argentina S.A	Construction emisario	In process		0	Assets	Property, plant and equipment		805		2016
Arauco Argentina S.A	Expansion of solid industrial waste dumpsite for management of these in the future	In process		165	Assets	Property, plant and equipment		3,952		2016
Arauco Argentina S.A	Environmental improvement studies	Finished		117	Assets	Property, plant and equipment		0
Arauco Argentina S.A	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	In process		38	Assets	Property, plant and equipment		6,268		2016
Paneles Arauco S.A.	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	In process		1,627	Expense	Operating cost		109		2016
Paneles Arauco S.A.	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	In process		555	Assets	Property, plant and equipment		366		2016
Paneles Arauco S.A.	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	Finished		720	Assets	Property, plant and equipment		0
Paneles Arauco S.A.	Expansion of solid industrial waste dumpsite for management of these in the future	In process		355	Expense	Administration expenses		355		2016
Forestal Arauco S.A. (Ex-Forestal Celco S.A.)	Environmental improvement studies	In process		613	Expense	Administration expenses		783		2016
Forestal los Lagos S.A	Environmental improvement studies	In process		206	Expense	Operating cost		208		2016
		TOTAL		51,776				129,563

F-81

	12-31-2014	Disbursements undertaken 2014					Committed Disbursements
Company	Name of project	State of project	Amount Company		Name of project	State of project	Amount Company		Name of project
Arauco Do Brasil S.A.	Environmental improvement studies	In process		1,967	Assets	Property, plant and equipment		3,805		2015
Arauco Do Brasil S.A.	Environmental improvement studies	In process		1,507	Expense	Administration expenses		5,639		2015
Celulosa Arauco y Constitucion S.A.	Investment projects for the control and management of gas emissions from industrial process	In process		5,548	Assets	Property, plant and equipment		233		2015
Celulosa Arauco y Constitucion S.A.	Environmental improvement studies	In process		10,520	Assets	Property, plant and equipment		11,805		2015
Celulosa Arauco y Constitucion S.A.	Environmental improvement studies	Finished		85	Assets	Property, plant and equipment		0		—
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		6,474	Assets	Property, plant and equipment		3,412		2015
Celulosa Arauco y Constitucion S.A.	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	Finished		266	Assets	Property, plant and equipment		0		—
Celulosa Arauco y Constitucion S.A.	Environmental improvement studies	In process		37,540	Expense	Operating cost		0		—
Celulosa Arauco y Constitucion S.A.	Expansion of solid industrial waste dumpsite for management of these in the future	In process		2,551	Assets	Property, plant and equipment		11,712		2015
Alto Paraná S.A.	Construction emisario	In process		13	Assets	Property, plant and equipment		705		2015
Alto Paraná S.A.	Expansion of solid industrial waste dumpsite for management of these in the future	In process		776	Assets	Property, plant and equipment		4,148		2015
Alto Paraná S.A.	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	In process		3,282	Assets	Property, plant and equipment		6,452		2015
Paneles Arauco S.A.	Environmental improvement studies	In process		624	Assets	Property, plant and equipment		1,882		2015
Paneles Arauco S.A.	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	In process		1,471	Expense	Operating cost		0		—
Paneles Arauco S.A.	Expansion of solid industrial waste dumpsite for management of these in the future	In process		404	Expense	Administration expenses		0		—
Paneles Arauco S.A.	Environmental improvement studies	In process		5,751	Expense	Administration expenses		264		2015
Forestal Arauco S.A.	Environmental improvement studies	In process		817	Expense	Administration expenses		732		2015
Aserraderos Arauco S.A	Environmental improvement studies	In process		1,416	Assets	Property, plant and equipment		543		2015
Aserraderos Arauco S.A	Environmental improvement studies	Finished		84	Assets	Property, plant and equipment		0		—
Celulosa y Energía Punta Pereira S.A.	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	In process		463	Assets	Property, plant and equipment		600		2015
Forestal los Lagos S.A	Environmental improvement studies	In process		208	Expense	Operating cost		240		2015
		TOTAL		81,767				52,172

F-82

NOTE 22. NON-CURRENT ASSETS HELD FOR SALE

Arauco decided to sell assets in previous years corresponding mainly to sawmills in Chile and remains committed to its sales plan.

By the end of year 2015, Paneles Arauco S.A. decided to reclassify to Properties, plant and equipment an amount of ThU.S.$5,429, since the Escuadron, La Araucana and Remanufactura Lomas Coloradas plants were destined to use as warehouse for finished products. These assets consisted of buildings and saw mill equipment, which were shut down in preceding years.

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

	12-31-2015		12-31-2014
	ThU.S.$		ThU.S.$
Land		217		2,976
Buildings		1,122		3,798
Property, plant and equipment		1,855		1,214
Total		3,194		7,988

As of December 31, 2015 there was no effect related to the sale of held assets for sale results. (net loss of ThU.S.$486 at December 31, 2014).

F-83

NOTE 23. FINANCIAL INSTRUMENTS

23.1 Classification

Arauco’s financial instruments as of December 31, 2015 and 2014, are displayed in the table below. Regarding those instruments measured at an amortized cost, as estimation of their reasonable value is displayed for informational purposes.

	December 2015				December 2014
Financial Instruments Thousands of dollars	Carrying amount		Fair Value		Carrying amount		Fair Value
Fair value through profit or loss (held for trading) (1)		200,034		200,034		130,500		130,500
Forward		3,245		3,245		1,515		1,515
Mutual funds (2)		196,789		196,789		128,985		128,985
Loans and Accounts Receivables		1,054,952		1,054,952		1,761,300		1,761,300
Cash and cash equivalents		303,236		303,236		842,167		842,167
Cash		143,324		143,324		158,002		158,002
Time deposits		159,912		159,912		669,545		669,545
Agreements		—		—		14,620		14,620
Accounts Receivables (net)		748,592		748,592		762,909		762,909
Trades and other receivables		614,655		614,655		649,924		649,924
Lease receivable		15		15		153		153
Other receivables		133,922		133,922		112,832		112,832
Accounts receivable from related parties		3,124		3,124		156,224		156,224
Other Financial Assets (5)		29,545		29,545		11,141		11,141
Financial Liabilities at amortized cost (3)		4,895,594		5,099,467		5,714,872		6,088,948
Bonds issued denominated in U.S. dollars		2,317,216		2,409,538		2,686,994		2,834,364
Bonds issued denominated in U.F. (4)		863,118		923,775		971,333		1,038,908
Bank Loans in Dollars		953,898		1,004,792		1,220,359		1,373,857
Bank borrowing denominated in U.S. dollars		43,644		43,644		98,856		104,489
Financial Leasing		127,559		123,289		96,995		92,578
Government Loans		0		0		3,893		3,893
Trades and other Payables		583,018		583,018		630,406		630,406
Accounts payable to related parties		7,141		7,141		6,036		6,036
Financial liabilities at fair value through profit or loss		1,429		1,429		2,677		2,677
Forward		1,429		1,429		2,677		2,677
Hedging Liabilities		226,139		226,139		115,055		115,055

(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.

(5) Includes guarantee funds for derivatives which correspond to the collateral under swap agreements.

F-84

23.2 Fair Value Hierarchy of Financial Assets and Liabilities

The assets and liabilities measured at fair value in the consolidated statements of financial position as of December 31, 2015, 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: Securities or quoted prices 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).

Financial Instruments Thousands of dollars	Fair Value
	Level 1		Level 2		Level 3
Fair value through profit or loss (held for trading)
Forward				3,245
Mutual funds (2)		196,789
Other Financial Assets				29,545
Financial Liabilities at amortized cost
Bonds issued denominated in U.S. dollars				2,409,538
Bonds issued denominated in U.F. (4)				923,775
Bank Loans in Dollars				1,004,792
Bank borrowing denominated in U.S. dollars				43,644
Financial Leasing				127,559
Financial liabilities at fair value through profit or loss
Forward derivatives				1,429
Hedging Liabilities				226,139

F-85

23.3 Explanation of the valuation of Financial Instruments.

Cash and cash equivalent and accounts receivable

The carrying amount of trade and other receivables, trade and others payables, accounts payables related parties, cash and cash equivalents (including mutual funds), and other financial assets and liabilities approximate their fair value due to the short-term nature of such instruments.

Derivative financial instruments

Interest rate and currency swaps are valued under the cash flow discount method at the rate applicable according to the transaction’s risk, using an internal methodology based on the information obtained from Bloomberg l. In this particular case, given that cross currency swaps correspond to future flows in UF and future flows in Dollars, Arauco calculates the current value of such flows by using 2 discount curves: the UF zero coupon curve and the Dollar zero coupon.

The fair value of the interest rate swap contracts is calculated by reference to the rate differential between the agreed upon rate and the market rate as of the end date of these financial statements.

The fair value of the currency forward contracts is calculated by reference to the current forward exchange rates of contracts with similar maturity profiles.

For the case of zero cost collar, the Bloomberg terminal is used to value Fuel Oil No. 6 and Diesel options.

Financial Liabilities

The fair value of bonds issued was determined with reference to quoted market prices as they have standard terms and conditions.

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.

Disclosures of the fair value of financial liabilities at amortized cost are determined via the use of discounted cash flows, calculated over variables of the observable markets as of the date of informing the consolidated financial statements, and correspond to Level 2 of the fair value hierarchy.

F-86

The following table shows compliance with financial covenants (level of indebtedness, exposed on point 23.11.3) required by domestic (Chile) bond indentures:

	December 2015 ThU.S.$			December 2014 ThU.S.$
Financial debt, current		291,798			739,515
Financial debt, non-current		4,013,637			4,338,915
Total financial debt		4,305,435			5,078,430
Cash and cash equivalent		(500,025	)		(971,152	)
Net financial debt		3,805,410			4,107,278
Non-controlling interests		37,735			47,606
Equity attributable to owners of parent		6,608,710			6,767,130
Total equity		6,646,445			6,814,736
Debt to equity ratio		0.57			0.60

The following table sets forth a reconciliation between the financial liabilities and the statement of financial position as of December 31 2015 and 2014:

Thousands of dollars	December 2015
	Up to 90 days		From 91 days to 1 year		Other current financial liabilities, Total		From 13 months to 5 years		More than 5 years		Other non- current financial liabilities, Total		Total
Bonds obligations		49,357		5,836		55,193		1,179,558		1,945,583		3,125,141		3,180,334
Bank borrowing		126,795		72,948		199,743		648,017		149,782		797,799		997,542
Financial Leasing		9,301		27,561		36,862		90,697		—		90,697		127,559
Government loans		—		—		—		—		—		—		—
Swap and Forward		4,240		—		4,240		223,328		—		223,328		227,568
Other Financial Liabilities, Total (a)		189,693		106,345		296,038		2,141,600		2,095,365		4,236,965		4,533,003
Thousands of dollars	December 2015
	Up to 90 days		From 91 days to 1 year		Total Current		From 13 months to 5 years		More than 5 years		Total non- current		Total
Trades and other payables		583,018		—		583,018		—		—		—		583,018
Related party payables		7,141		—		7,141		—		—		—		7,141
Accounts Payable, Total (b)		590,159		—		590,159		—		—		—		590,159
Financial Liabilities, Total (a) + (b)		779,852		106,345		886,197		2,141,600		2,095,365		4,236,965		5,123,162
Thousands of dollars	December 2014
	Up to 90 days		From 91 days to 1 year		Other current financial liabilities, Total		From 13 months to 5 years		More than 5 years		Other non- current financial liabilities, Total		Total
Bonds obligations		52,575		377,871		430,446		966,131		2,261,750		3,227,881		3,658,327
Bank borrowings		139,916		133,554		273,470		797,628		248,117		1,045,745		1,319,215
Financial leasing		7,851		23,855		31,706		65,289		—		65,289		96,995
Government loans		—		3,893		3,893		—		—		—		3,893
Swap and Forward		2,828		—		2,828		114,904		—		114,904		117,732
Other Financial Liabilities, Total (a)		203,170		539,173		742,343		1,943,952		2,509,867		4,453,819		5,196,162
Thousands of dollars	December 2014
	Up to 90 days		From 91 days to 1 year		Total Current		From 13 months to 5 years		More than 5 years		Total non- current		Total
Trades and other payables		627,972		2,434		630,406		—		—		—		630,406
Related party payables		6,036		—		6,036		—		—		—		6,036
Accounts Payable, Total (b)		634,008		2,434		636,442		—		—		—		636,442
Financial Liabilities, Total (a) + (b)		837,178		541,607		1,378,785		1,943,952		2,509,867		4,453,819		5,832,604

F-87

23.4 Hedging Instruments

Hedging instruments recorded as of December 31, 2015 are cash flow hedges. Arauco uses derivatives for hedging purposes, such as cross currency swaps, currency forwards, interest rate swaps, and options. Depending on the fair value of each instrument, the position could be either an asset or a liability, and they are listed in the Statement of Financial Position under Other Non-current Financial Assets or Other Non-current Financial Liabilities, respectively. The effects for the period are presented under Equity as Other Comprehensive Income, net of differences in exchange rate of the hedged items and the deferred tax.

A summary of the hedging instruments included in the Financial Position Statement as of the end of this fiscal year, is presented bellow:

Financial Instruments	Fair Value ThU.S.$
Assets at fair value through profit or loss (held for trading)		3,245
Forward-Colombia		238
Forward-Argentina		2,828
Forward-Uruguay (1)		179
Financial liabilities at fair value through profit or loss		(1,429	)
Forward-Colombia		(21	)
Forward-Uruguay (1)		(1,408	)
Hedging Liabilities		(226,139	)
Cross Currency Swaps		(205,618	)
Forward-Uruguay (1)		(3,677	)
Zero Cost Collar		(16,844	)

(1) Include Swap and Forward from Uruguay tables.

(2) Interest Rate Swap from Uruguay by ThU.S.$211 are in “Other Financial Assets”.

23.4.1 Chile

23.4.1.1 Cross currency swaps

Arauco is exposed to the risk of variability in cash flows from changes in foreign exchange rates and inflation, mainly due to balances of assets denominated in U.S. Dollars and other currencies differente from the functional currency, which causes mismatches that could affect operating results.

F-88

Below are the cross currency swaps that Arauco has as of December 31, 2015 to cover the exposure to the exchange rate risk generated from bonds denominated in UF:

Bond	Institution	Amount U.S.$		Amount UF		Starting date		Ending date		Market Value U.S.$
F	Deutsche—England		43,618,307		1,000,000		10/30/2011		10/30/2021		(10,314,867.97	)
F	JP Morgan—N.A.		43,618,307		1,000,000		10/30/2011		10/30/2021		(10,171,083.83	)
F	Deutsche—England		37,977,065		1,000,000		04/30/2014		04/30/2019		(2,770,354.44	)
F	BBVA—Chile		38,426,435		1,000,000		10/30/2014		04/30/2023		(5,059,570.76	)
F	BBVA—Chile		38,378,440		1,000,000		10/30/2014		04/30/2023		(4,658,334.28	)
F	Santander—Chile		37,977,065		1,000,000		10/30/2014		04/30/2023		(4,121,806.04	)
F	BCI—Chile		37,621,562		1,000,000		10/30/2014		04/30/2023		(3,570,036.54	)
J	Corpbanca—Chile		42,864,859		1,000,000		09/01/2010		09/01/2020		(11,092,987.02	)
J	BBVA—Chile		42,864,859		1,000,000		09/01/2010		09/01/2020		(11,092,987.02	)
J	Deutsche—England		42,864,859		1,000,000		09/01/2010		09/01/2020		(11,198,926.21	)
J	Santander—Spain		42,873,112		1,000,000		09/01/2010		09/01/2020		(11,039,392.92	)
J	BBVA—Chile		42,864,257		1,000,000		09/01/2010		09/01/2020		(10,860,254.42	)
P	Corpbanca—Chile		46,474,122		1,000,000		05/15/2012		11/15/2021		(11,784,676.29	)
P	JP Morgan—N.A.		47,163,640		1,000,000		11/15/2012		11/15/2021		(11,412,576.23	)
P	BBVA—Chile		42,412,852		1,000,000		11/15/2013		11/15/2023		(7,916,506.13	)
P	Santander—Chile		41,752,718		1,000,000		11/15/2013		11/15/2023		(6,924,675.42	)
P	Deutsche—England		41,752,718		1,000,000		11/15/2013		11/15/2023		(6,894,263.33	)
R	Santander—Chile		128,611,183		3,000,000		10/01/2014		04/01/2024		(29,995,353.91	)
R	JP Morgan—England		43,185,224		1,000,000		10/01/2014		04/01/2024		(9,319,642.37	)
R	Corpbanca—Chile		43,277,070		1,000,000		10/01/2014		04/01/2024		(9,292,352.02	)
Q	BCI—Chile		43,185,224		1,000,000		10/01/2014		04/01/2021		(8,120,853.85	)
Q	BCI—Chile		43,196,695		1,000,000		10/01/2014		04/01/2021		(8,006,612.79	)
											(205,618,113.77	)

Because Arauco has a high percentage of its assets in U.S. dollars, it needs to minimize the risk of the exchange rate, as it holds debt in pesos, adjustable to reflect inflation. The objective of this position in the swap is to eliminate the uncertainty of the exchange rate, exchanging the flows derived from obligations expressed in adjustable pesos of the bonds described above, with flows in U.S. dollars (Arauco’s functional currency), at a fixed and determined exchange rate as of the agreement’s execution date.

Through an effectiveness test, and pursuant to IAS 39, we were able to validate that the aforementioned hedging instruments are highly effective within an acceptable range for Arauco, for the purposes of eliminating the uncertainty of the exchange rate in the commitments derived from the hedged object.

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23.5.1.2 Zero Cost Collars

Moreover, our results are exposed to changes the price of certain fuels. To minimize the risk we limited the volatility of future cash flows associated with the purchase of Fuel Oil No. 6 for year 2015 through zero cost collar contracts of this commodity. The Fuel Oil No. 6 is consumed in the process of pulp production.

Furthermore, we have indirect exposure to the price of Diesel due to contracts with forestry industry contractors, whose rates vary according to the price of this commodity, as well as other variables. To minimize this risk, we use financial instruments to cover the risk associated with the volatility of the cost of forestry contractor rates, from June 2015 until May 2016.

Contracts held by Arauco as of December 31, 2015 are presented in the following table:

Commodity

Institution

Amount U.S.$

Unit

Starting date hedge

Ending date

Market Value U.S.$

Fuel Oil N°6

JP Morgan—U.K.

674

Thousands Bbl.

01/01/2015

12/31/2015

(1,017,120.04

)

Diesel

JP Morgan—U.K.

29,465

Thousands Gall.

06/01/2015

05/31/2016

(9,236,461.58

)

Fuel Oil N°6

JP Morgan—U.K.

337

Thousands Bbl.

01/01/2016

06/30/2016

(6,590,670.24

)

(16,844,251.86

)

23.5.2 Colombia

Forward contracts that are in force and effect, executed by Arauco Colombia as of December 31, 2015, are detailed in the following table:

Exchange rate	Institution		Amount U.S.$		Starting date		Ending date		Market Value U.S.$
USDCOP		Corpbanca Colombia		4,000,000		11/11/2015		02/01/2016		237,637.31
USDCOP		BBVA Colombia		9,000,000		12/03/2015		03/01/2016		(20,544.32	)
										217,092.99

23.5.3. Argentina

Below, you will find the valuation of the forward contract in force and effect, as of December 31, 2015:

Exchange rate	Institution		Amount U.S.$		Starting date		Ending date		Market Value U.S.$
USDARG		BBVA Banco Frances		8,606,250		09/08/2015		05/31/2016		2,828,315
										2,828,315

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23.5.4. Uruguay

As of December 31, 2015, Arauco Uruguay maintains the following forward contracts in force and effect, for the purposes of ensuring an exchange rate for the sale of dollars:

					50%
Entity	Exchange rate	Institution	Notional		Market Value U.S.$
CEPP	USDUYU	Citibank Uruguay		4.500.000		(148,407.89	)
CEPP	USDUYU	Banco Santander Uruguay		33.000.000		(579,064.81	)
CEPP	USDUYU	JPMorgan Chase Bank, N.A.		2.000.000		3,941.83
EUFORES	USDUYU	Citibank U.K.		4.410.000		(43,501.67	)
EUFORES	USDUYU	HSBC Uruguay		14.350.000		(44,824.67	)
						(811,857.20	)

In addition, Arauco Uruguay maintains an Interest Rate Swap in force and effect, a derivative instrument which purpose is to set the interest rate of a variable rate debt in the same currency (USD). The valuation off this instrument as of December 31, 2015, is shown below:

						50%
Entity	Exchange rate		Institution	Notional		Market Value U.S.$
CEPP		USD	DNB Bank ASA		135,033,619		211,320.09

Arauco Uruguay’s profits and losses also face exposure to the price variation of certain fuels, as occurs with Fuel Oil N°6, which is used during the cellulose manufacturing process. In order to minimize this risk, the volatility of future flows associated to the purchase of Fuel Oil No. 6 for years 2015, 2016 and 2017 has been limited, through forwards of this commodity. The agreements that are in force and effect as of December 31, 2015 are detailed below:

					50%
Entity	Exchange rate	Institution	Notional		Market Value U.S.$
CEPP	Fuel Oil N°6	JPMorgan Chase Bank, N.A.		13,374,141		(3,056,747.52	)
CEPP	Fuel Oil N°6	DNB Bank ASA		5,770,950		(1,038,320.63	)
						(4,095,068.15	)

23.6 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”.

Loans and receivables are measured at amortized cost using the effective interest 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.

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	December 2015 ThU.S.$		December 2014 ThU.S.$
Loans and Accounts Receivables		1,054,952		1,761,300
Cash and cash equivalents		303,236		842,167
Cash		143,324		158,002
Time Deposits		159,912		669,545
Repurchase Agreements		0		14,620
Trade and other receivables (net)		751,716		919,133
Trades and Other receivables		614,670		650,077
Other receivables		133,922		112,832
Accounts receivable from related parties		3,124		156,224

23.6.1 Cash and Cash Equivalents

Includes cash on hand, bank checking accounts balances and time deposits and other short term highly liquid investments with an original maturity of three months or less. 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 composition of cash and cash equivalents (including the balance of mutual funds displayed in this note as valuation, instruments at fair value with profit or loss) at December 31, 2015 and 2014, classified by origin coins is as follow:

	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Cash and Cash Equivalents		500,025		971,152
US Dollar		388,818		877,418
Euro		2,501		8,114
Other currencies		65,228		62,381
Chilean pesos		43,478		23,239

23.6.2 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.

23.6.3 Trades and Other Receivables: These represent enforceable rights for Arauco resulting from the normal course of the business.

23.6.4 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 based on an analysis of the age of the portfolio and considering the insurance coverage on accounts receivable. Other conditions are assessed for example when there is objective evidence that Arauco will not receive payments under the original sale terms and when the customer is a party to a bankruptcy court agreement or cessation of payments, and is written-off when Arauco has exhausted all levels of recovery of the receivable in a reasonable time.

F-92

23.6.5 Accounts receivable from related parties: Represent enforceable rights for Arauco resulting from the normal course of business, calling normal to the line of business, activity or purpose of explotation and financing, and which Arauco owns a non-controlling ownership of the counterparty.

The following table sets forth trade and other current/non-current receivables classified by currencies as of December 31, 2015 and 2014:

	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Trades and other current receivables		733,322		731,908
US Dollar		507,032		464,219
Euros		27,595		72,353
Other currencies		75,082		98,130
Chilean pesos		123,056		96,241
U.F.		557		965
Accounts receivable from related parties, current		3,124		4,705
US Dollar		21		0
Other currencies		995		1,998
Chilean pesos		2,108		2,707
Trade and other non-current receivables		15,270		31,001
US Dollar		9,976		26,773
Chilean pesos		3,145		3,591
U.F.		1,420		637
Other currencies		729		0
Accounts receivable from related parties, non current		0		151,519
Others Currencies		0		151,519

23.7 Total Financial Liabilities

Arauco’s financial liabilities to the date of these consolidated financial statements are as follows :

Financial Liabilities	December 2015 ThU.S.$		December 2014 ThU.S.$
Total Financial Liabilities		5,123,162		5,832,604
Financial liabilities at fair value through profit or loss (held for trading)		1,429		2,677
Hedging Liabilities		226,139		115,055
Financial Liabilities Measured at Amortized Cost		4,895,594		5,714,872

The following table sets forth the current portion of the non-current bank borrowings and debt issued as of December 31, 2015 and 2014.

	December 2015 ThU.S.$		December 2014 ThU.S.$
Bank borrowings - current portion		85,885		53,284
Bonds issued - current portion		55,193		430,446
Total		141,078		483,730

F-93

23.8 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.

	Currency	12-31-2015		12-31-2014		12-31-2015		12-31-2014
		Amortized Cost ThU.S.$				Fair Value ThU.S.$
Total Financial Liabilities			4,895,594		5,714,872		5,099,467		6,088,948
Bonds Issued	U.S. Dollar		2,317,216		2,686,994		2,409,538		2,834,364
Bonds Issued	U.F.		863,118		971,333		923,775		1,038,908
Bank borrowings	U.S. Dollar		953,898		1,220,359		1,004,792		1,373,857
Bank borrowings	Other currencies		43,644		98,856		43,644		104,489
Government Loans	U.S. Dollar		0		3,893		0		3,893
Financial Leasing	Other currencies		113,580		93,540		113,580		93,540
Financial Leasing	Chilean pesos		13,979		3,449		13,979		3,449
Financial Leasing	U.S. Dollar		0		6		0		6
Trades and Other Payables	U.S. Dollar		174,469		188,074		174,469		188,074
Trades and Other Payables	Euro		8,808		44,887		8,808		44,887
Trades and Other Payables	Other currencies		70,303		62,162		70,303		62,162
Trades and Other Payables	Chilean pesos		324,361		332,948		324,361		332,948
Trades and Other Payables	U.F.		5,077		2,335		5,077		2,335
Related party payables	U.S. Dollar		962		1,612		962		1,612
Related party payables	Chilean pesos		6,179		4,424		6,179		4,424

The financial liabilities at amortized cost presented in the consolidated statements of financial positions as of December 31, 2015 and 2014 are as follows:

	December 2015
	Current ThU.S.$		Non Current ThU.S.$		Total
Other financial liabilities		291,798		4,013,637		4,305,435
Trade and other payables		583,018		—		583,018
Related Party Payables		7,141		—		7,141
Total Financial Liabilities Measured at Amortized Cost		881,957		4,013,637		4,895,594
	December 2014
	Current ThU.S.$		Non Current ThU.S.$		Total
Other financial liabilities		739,515		4,338,915		5,078,430
Trade and other payables		630,406		—		630,406
Related Party Payables		6,036		—		6,036
Total Financial Liabilities Measured at Amortized Cost		1,375,957		4,338,915		5,714,872

F-94

23.9 Cash Flow Hedges Reserve Reconciliation

The following table sets forth the reconciliation balances of cash flow hedges presented in Other Comprehensive Income:

	January - December
	2015			2014
	ThU.S.$			ThU.S.$
Opening balance		(53,022	)		(21,507	)
Fair value gains (losses) arising during the year		(113,021	)		(137,559	)
Exchange differences of bonds hedged		107,985			80,807
Finance costs		16,895			13,524
Settlements during the period		(16,122	)		949
Deferred taxes		1,889			10,764
Closing balance		(55,396	)		(53,022	)

23.10 Capital Disclosures

23.10.1 Information on Objectives, Policies and Processes applied by the Company regarding Capital Management

Arauco’s policies on capital management have the objective of:

a) Ensuring business continuity and normal operations in the long term;

b) Ensuring funding for new investments to achieve sustainable growth over time;

c) Keeping adequate capital structure considering all economic cycles that impact the business and the nature of the industry; and

d) Maximizing the Company’s value and providing an adequate return to shareholders.

23.10.2 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).

23.10.3 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:

Instrument	12-31-2015 Th.U.S.$		12-31-2014 Th.U.S.$		Interest coverage >= 2,0x		Debt level (1) <= 1,2x
Domestic (Chile) bonds		863,118		971,333		N/A	Ö
Bilateral BBVA Bank Loan		0		45,105	Ö		Ö
Other Credits		0		830,197		No reservations are required
Foreing bonds		0		2,686,994		No reservations are required
Flakeboard credit with Arauco warranty		0		149,613	Ö		Ö
Syndicate Loan		298,316		298,193	Ö		Ö

N/R: Not required for the financial obligation

(1) Debt to equity ratio (financial debt divided by equity plus non-controlling interests)

As of December 31, 2015 and 2014, Arauco has complied with all of its financial covenants.

F-95

The following table sets forth the credit ratings of our debt instruments as of December 31, 2015, are as follows:

Instrument	Standard & Poor’s		Fitch Ratings		Moody’s		Feller Rate
Local bonds		—		AA -		—		AA -
Foreign bonds		BBB -		BBB		Baa3		—

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.

The capitalization of Arauco as of December 31, 2015 amd 2014 is as follows:

Thousands of dollars	12-31-2015		12-31-2014
Equity		6,646,445		6,814,736
Bank borrowings		997,542		1,323,108
Financial leasing		127,559		96,995
Bonds issued		3,180,334		3,658,327
Capital		10,951,880		11,893,166

23.11 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 Corporate Finance Department. This department identifies, assesses and hedges financial risks in close collaboration with Arauco’s operational units.

23.11.1 Type of Risk: Credit Risk

Description

Credit risk refers to financial uncertainty at different periods of time relating to the fulfillment of obligations with 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, Celulosa Arauco y Constitución S.A., Paneles Arauco S.A., (previously Aserraderos Arauco S.A., Paneles Arauco S.A. and Arauco Distribución S.A.) Forestal Arauco S.A., Arauco Argentina S.A. and Arauco do Brasil S.A. as well as domestic sales Arauco México S.A. de C.V., Arauco Wood Inc., Arauco Colombia S.A., Arauco Perú S.A., Arauco Panels USA LLC,

F-96

Flakeboard Co Ltd., Flakeboard America Ltd., Arauco Argentina S.A., Celulosa Arauco y Constitución S.A, Paneles Arauco S.A (previously Aserraderos Arauco S.A., Paneles Arauco S.A. and Arauco Distribución S.A.) and Arauco do Brasil S.A. Arauco contracts its insurance policies with Continental Credit Insurance Company (rated AA- by credit agencies as Humphreys and Fitch Ratings on April 4, 2012). The insurance policies cover 90% of the amount invoiced with no deductible.

In order to secure a credit line or an advanced payment to a supplier approved by the Credit Committee, Arauco receives 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.

As of December 31, 2015 the total amount of guarantees given was U.S.$118.5 which is summarized in the following table. The procedure of guarantees is regulated by the Policies of Arauco’s Guarantees which aims to control the accounting, the maturity and the valuation of these.

Guarantees Arauco Group ( ThU.S$)
Guarantees Debtors (received from clients)	84,428	71	%
Certificate of deposits	8,871	11	%
Standby	5,427	6	%
Promissory notes	47,990	57	%
Finance	6,483	8	%
Mortgage	8,099	10	%
Pledge	2,158	3	%
Promissory notes	5,400	6	%
Guarantees Creditors (received from suppliers)	34,082	29	%
Pledge	2,887	8	%
Certificate of deposits	3,444	10	%
Mutuo	358	1	%
Standby	1,828	5	%
Deposit	6	0	%
Promissory notes	5,606	16	%
Finance	19,953	59	%
Total Guarantees	118,508	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 December 31, 2015, Arauco’s consolidated revenues from sales were ThU.S.$5,146,740 of which 62.99% correspond to credit sales, 29.36% to sales with letters of credit, and 7.65% to other classes of sales.

As of December 31, 2015, of the trade receivables balance of ThU.S.$625,201 that had agreed term of sales, 49.57% corresponded to credit sales, 49.12% to sales with letters of credit and 1.31% to other classes of sales, distributed among 2,277 customers. The customer with the largest open account outstanding did not exceed 4.06% 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 customer will be analyzed on a case by case basis and approved by the Corporate Finance Department.

F-97

The credit sales receivables covered by insurance or collateral were 99.3%. Therefore, Arauco’s credit risk exposure of its portfolio is 0.7%.

Secured Credit Sales Receivables	ThU.S.$		%
Total credit sales receivables		309,942		100.0
Secured Receivables (*)		307,773		99.3
Unsecured Receivables		2,170		0.7

(*) Secured receivables are defined as the amount of trade receivables that are covered by 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.

	December 2015 ThU.S.$		December 2014 ThU.S.$
Current Receivables
Trades receivables		614,623		649,892
Financial lease receivables		9		136
Other Debtors		118,690		81,880
Net subtotal		733,322		731,908
Trades receivables		625,201		660,352
Financial lease receivables		125		213
Other Debtors		127,856		89,863
Gross subtotal		753,182		750,428
Provision for doubtful trade receivables		10,578		10,460
Provision for doubtful lease receivables		116		77
Provision for doubtful other debtors		9,166		7,983
Subtotal Bad Debt		19,860		18,520
Non Current Receivables
Trades receivables		32		32
Financial lease receivables		6		17
Other Debtors		15,232		30,952
Net Subtotal		15,270		31,001
Trades receivables		32		32
Financial lease receivables		6		17
Other Debtors		15,232		30,952
Gross subtotal		15,270		31,001
Provision for doubtful trade receivables		—		—
Provision for doubtful lease receivables		—		—
Provision for doubtful other debtors		—		—
Subtotal Bad Debt		—		—

F-98

The following table sets forth the reconciliation of changes in the allowance for doubtful accounts as of December 31, 2015 and 2014:

	12-31-2015			12-31-2014
	ThU.S.$			ThU.S.$
Opening balance		18,520			15,839
Increase		3,072			2,940
Reversal of impairment losses		(1,732	)		(259	)
Closing balance		19,860			18,520

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

The Credit and Collections Department, which reports to the Treasury 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, in the Company’s Credit Policy.

For the approval and/or modification of the clients’ credit facilities, a procedure has been put in place, which must be followed by all of the companies of the Arauco group. The requests for credit facilities are entered into SAP, where all of the available information is analyzed, including the amount of the facility granted by the credit insurance company. Afterwards, the requests are approved or rejected by each of the internal committees of each company of the Arauco group, depending on the maximum amount authorized by the Credit Policy. If the credit facility exceeds such amount, it is then analyzed by the Corporate Committee. Credit facilities are renewed on a yearly basis, following this internal process.

Sales via letters of credit are executed mostly in the markets of Asia and the Middle East. Periodically, a credit assessment is conducted regarding the banks which issue the letters of credit, in order to obtain the risk rating granted by the main risk rating agencies, along with their country and global ranking and financial situation during the last 5 years. Pursuant to this evaluation, a decision is made on whether to approve the issuer bank or to request a confirmation of the letter of credit.

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.

December 31, 2015

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
ThU.S$		571,499			18,927			2,303			2,332			363			168			1,102			1,413			1,444			25,650			625,201
%		91.41	%		3.03	%		0.37	%		0.37	%		0.06	%		0.03	%		0.18	%		0.23	%		0.23	%		4.10	%		100	%
Financial deterioration 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
ThU.S$		-622			-319			-77			-23			-7			-335			16			-5			-112			-9,093			-10,578
%		5.88	%		3.02	%		0.73	%		0.22	%		0.06	%		3.17	%		-0.15	%		0.05	%		1.06	%		85.96	%		100	%

F-99

December 31, 2014

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
ThU.S.$		630,681			2,042			2,546			1,188			735			168			666			173			298			21,856			660,352
%		95.51	%		0.31	%		0.39	%		0.18	%		0.11	%		0.03	%		0.10	%		0.03	%		0.05	%		3.31	%		100.00	%
Financial deterioration 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
ThU.S.$		-26			0			0			-40			78			-432			0			-11			3			-10,031			-10,460
%		0.25	%		0.00	%		0.00	%		0.39	%		-0.75	%		4.13	%		0.00	%		0.11	%		-0.03	%		95.90	%		100.00	%

Arauco has recognized provisions for doubtful accounts on trade receivables for a total of ThU.S.$10,698 over the last four years which represents 0.046% of total revenues from sales during the same period.

Provisions for doubtful accounts of trade receivables as a percentage of total revenues from sales
	2015			2014			2013			2012			Last 4 years
Percentage of impairment losses		0.182	%		-0.010	%		0.008	%		0.001	%		0.046	%

The amount recovered through possession of collateral, credit insurance reimbursements or any other credit enhancement during the period amount to ThU.S.$440, which represents 5.48% of the total provisioned assets.

Explanation of any changes to risk exposure or changes in objectives, processes and policies regarding previous years’ risk management.

Arauco has implemented a Guarantee Policy in order to control accounting, valuation and expiration of these and a Corporate Credit Policy.

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 with adequate liquidity. Each instrument has defined classifications and limits, depending on duration and type of issuer.

F-100

Regarding intermediaries (such as banks, securities brokers and broker/dealers of mutual funds), a scoring methodology is used to determine the relative degree of risk of each intermediary based on their financial position and assign 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.

23.11.2 Type of Risk: 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.

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.

The following table detail Arauco’s liquidity analysis for its financial liabilities as of December 31, 2015. The tables have been drawn up based on the contractual undiscounted cash outflows and their remaining contractual maturities:

	Payments Due by Period
	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
	(in thousands of U.S. dollars)
Trade and other accounts payable		590,159								590,159
Debt obligations		181,988		1,206,158		1,184,271		2,429,344		5,001,761
Capital (finance) lease obligations		9,301		83,860		34,398				127,559
Total		781,448		1,290,018		1,218,669		2,429,344		5,719,479

F-101

December 31, 2015

				Maturity														Total
Tax ID	Name	Currency	Name - Country Loans with banks	Up to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 years ThU.S.$		2 to 3 years ThU.S.$		3 to 4 years ThU.S.$		4 to 5 years ThU.S.$		More than 5 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Effective rate			Nominal rate
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Scotiabank- Chile		—		25		4,638		301,770		—		—		—		25		306,408		1.53	%		Libor + 0,70	%
—	Arauco Argentina S.A.	Argentine Pesos	Banco Macro- Argentina		—		49		48		—		—		—		—		49		48		15.25	%		15.25	%
—	Arauco Argentina S.A.	Argentine Pesos	Banco Galicia- Argentina		—		307		—		—		—		—		—		307		—		15.25	%		15.25	%
—	Zona Franca Punta Pereira S.A.	U.S. Dollar	Interamerican Development Bank		1,163		1,023		2,450		2,396		2,343		2,289		6,514		2,186		15,992		Libor + 2,05	%		Libor + 2,05	%
—	Zona Franca Punta Pereira S.A.	U.S. Dollar	Interamerican Development Bank		166		2,777		6,076		5,934		5,794		5,652		—		2,943		23,456		Libor + 1,80	%		Libor + 1,80	%
—	Zona Franca Punta Pereira S.A.	U.S. Dollar	Banco Santander		20,013		—		—		—		—		—		—		20,013		—		Libor + 2,00	%		Libor + 2,00	%
—	Celulosa y Energia Punta Pereira S.A.	U.S. Dollar	Finnish Export Credit		25,810		20,354		52,288		51,368		50,477		49,694		118,826		46,164		322,653		3.20	%		3.20	%
—	Celulosa y Energia Punta Pereira S.A.	U.S. Dollar	Interamerican Development bank		4,706		4,126		9,900		9,680		9,460		9,242		26,298		8,832		64,580		Libor + 2,05	%		Libor + 2,05	%
—	Celulosa y Energia Punta Pereira S.A.	U.S. Dollar	Interamerican Development bank		675		11,220		24,566		23,991		23,417		22,843		—		11,895		94,817		Libor + 1,80	%		Libor + 1,80	%
—	Celulosa y Energia Punta Pereira S.A.	U.S. Dollar	Dnb Nor Bank		—		245		—		—		—		—		—		245		—		Libor + 2,00	%		Libor + 2,00	%
—	Eufores S.A.	U.S. Dollar	Banco BBVA - Uruguay		16,115		—		—		—		—		—		—		16,115		—		Libor + 2,00	%		Libor + 2,00	%
—	Eufores S.A.	U.S. Dollar	Banco Republica Oriental de Uruguay		16,689		18,555		—		—		—		—		—		35,244		—		Libor + 1,75	%		Libor + 1,75	%
—	Eufores S.A.	U.S. Dollar	Citibank		—		2,514		—		—		—		—		—		2,514		—		Libor + 2,00	%		Libor + 2,00	%
—	Eufores S.A.	U.S. Dollar	Banco HSBC - Uruguay		1,201		—		—		—		—		—		—		1,201		—		Libor + 2,00	%		Libor + 2,00	%
—	Eufores S.A.	U.S. Dollar	Banco Itau - Uruguay		5,065		5,004		—		—		—		—		—		10,069		—		Libor + 2,00	%		Libor + 2,00	%
—	Eufores S.A.	U.S. Dollar	Heritage		1,357		—		—		—		—		—		—		1,357		—		Libor + 2,00	%		Libor + 2,00	%
—	Arauco Do Brasil S.A.	Brazilian Real	Banco ABC		5		17		20		—		—		—		—		22		20		2.50	%		2.50	%
—	Arauco Do Brasil S.A.	U.S. Dollar	Banco Bradesco		831		—		—		—		—		—		—		831		—		1.80	%		1.80	%
—	Arauco Do Brasil S.A.	Brazilian Real	Banco Bradesco		3,960		1,256		—		—		—		—		—		5,216		—		8.75	%		8.75	%
—	Arauco Do Brasil S.A.	Brazilian Real	Banco do Brasil - Brasil		23		72		—		—		—		—		—		95		—		8.70	%		8.70	%
—	Arauco Do Brasil S.A.	Brazilian Real	Banco HSBC - Brasil		7,779		—		—		—		—		—		—		7,779		—		8.00	%		8.00	%
—	Arauco Do Brasil S.A.	Brazilian Real	Banco Itau - Brasil		47		43		—		—		—		—		—		90		—		8.43	%		8.43	%
—	Arauco Do Brasil S.A.	U.S. Dollar	Banco JP Morgan		7,912		4,356		—		—		—		—		—		12,268		—		1.71	%		1.71	%
—	Arauco Do Brasil S.A.	Brazilian Real	Banco Votorantim - Brasil		19		38		32		—		—		—		—		57		32		6.30	%		6.30	%
—	Arauco Do Brasil S.A.	Brazilian Real	Banco Santander		12,881		3		37		76		75		39		—		12,884		227		8.00	%		8.00	%
—	Arauco Do Brasil S.A.	Brazilian Real	Fundo de Desenvolvimiento Econom. - Brasil		7		27		7		—		—		—		—		34		7		0.00	%		0.00	%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Itau		3		6		8		1		—		—		—		9		9		2.50	%		2.50	%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Itau		12		31		43		43		3		—		—		43		89		3.50	%		3.50	%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Bradesco		11		27		37		37		31		—		—		38		105		6.00	%		6.00	%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Votorantim		—		14		—		—		—		—		617		14		617		5.00	%		5.00	%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Safra		19		55		73		73		18		—		—		74		164		6.00	%		5.00	%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Safra		6		17		23		23		23		24		9		23		102		10.00	%		10.00	%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Santander		4		24		27		27		27		13		—		28		94		9.22	%		9.22	%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco Bradesco		—		66		—		—		—		144		—		66		144		7.81	%		7.81	%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco Bradesco		307		—		—		—		—		—		—		307		—		12.11	%		12.11	%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco Itau - Brasil		9		13		—		86		14		—		—		22		100		5.52	%		5.52	%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco Votorantim - Brasil		—		285		—		—		—		1,474		546		285		2,020		9.31	%		9.31	%
—	Arauco Forest Brasil S.A.	U.S. Dollar	Banco Votorantim - Brasil		—		62		—		—		—		347		—		62		347		9.00	%		9.00	%
—	Arauco Forest Brasil S.A.	Brazilian Real	Bndes		—		3		—		—		—		—		757		3		757		4.61	%		4.61	%
—	Arauco Forest Brasil S.A.	U.S. Dollar	Bndes		—		4		—		—		—		6		289		4		295		10.80	%		10.80	%
0	Arauco Forest Brasil S.A.	Brazilian Real	Banco Santander		—		16		—		—		—		96		—		16		96		9.50	%		9.50	%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco John Deere		—		207		—		—		—		—		—		207		—		6.00	%		6.00	%
—	Mahal Emprendimientos Pat. S.A.	Brazilian Real	Bndes Subcrédito E-I		—		19		—		622		2,492		1,870		—		19		4,984		9.91	%		9.91	%
—	Mahal Emprendimientos Pat. S.A.	Brazilian Real	Bndes Subcrédito F-J		—		12		—		374		1,496		1,122		—		12		2,992		10.91	%		10.91	%
—	Mahal Emprendimientos Pat. S.A.	U.S. Dollar	Bndes Subcrédito G-K		—		61		—		511		2,037		1,528		—		61		4,076		6.99	%		6.99	%
—	Mahal Emprendimientos Pat. S.A.	Brazilian Real	Bndes Subcrédito H-L		—		15		—		444		1,646		1,233		—		15		3,323		12.11	%		12.11	%
			Total		126,795		72,948		100,273		397,456		99,353		97,616		153,856		199,743		848,554

F-102

December 31,2015				Maturity														Total
Tax ID	Name	Currency	Name - Country Bonds	Up to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 years ThU.S.$		2 to 3 years ThU.S.$		3 to 4 years ThU.S.$		4 to 5 years ThU.S.$		More than 5 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Effective rate			Nominal rate
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-F		—		1,771		10,625		10,625		32,403		31,438		239,473		1,771		324,564		4.24	%		4.25	%
93.458.000-2	Celulosa Arauco y Constitución S.A.	UF	Barau-J		1,939		—		5,818		5,818		5,818		186,141		—		1,939		203,595		3.23	%		3.22	%
93.458.000-3	Celulosa Arauco y Constitución S.A.	UF	Barau-P		—		913		7,147		7,147		7,147		7,147		229,723		913		258,311		3.96	%		3.96	%
93.458.000-3	Celulosa Arauco y Constitución S.A.	UF	Barau-Q		—		538		11,266		19,979		19,442		18,905		9,251		538		78,843		2.96	%		2.98	%
93.458.000-3	Celulosa Arauco y Constitución S.A.	UF	Barau-R		—		1,610		6,439		6,439		6,439		6,439		272,750		1,610		298,506		3.57	%		3.57	%
—	Arauco Argentina S.A.	U.S. Dollar	Bono 144 A - Argentina		—		1,004		277,869		—		—		—		—		1,004		277,869		6.39	%		6.38	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee Bonds 2019		15,205		—		36,250		36,250		533,483		—		—		15,205		605,983		7.26	%		7.25	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee Bonds 2a Emisión		2,734		—		134,257		—		—		—		—		2,734		134,257		7.50	%		7.50	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee 2021		8,889		—		20,000		20,000		20,000		20,000		406,108		8,889		486,108		5.02	%		5.00	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee 2022		11,215		—		23,750		23,750		23,750		23,750		527,255		11,215		622,255		4.77	%		4.75	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee 2024		9,375		—		22,500		22,500		22,500		22,500		590,928		9,375		680,928		4.52	%		4.50	%
			Total		49,357		5,836		555,921		152,508		670,982		316,320		2,275,488		55,193		3,971,219
December 31, 2015				Maturity														Total
Tax ID	Name	Currency	Name - Country Lease	Up to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 years ThU.S.$		2 to 3 years ThU.S.$		3 to 4 years ThU.S.$		4 to 5 years ThU.S.$		More than 5 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Effective rate			Nominal rate
85.805.200-9	Forestal Arauco S.A.	UF	Banco Santander		338		904		650		650		3,362		—		—		1,242		4,662		—			—
85.805.200-9	Forestal Arauco S.A.	UF	Banco Scotiabank		1,303		4,370		4,875		4,875		6,059		—		—		5,673		15,809		—			—
85.805.200-9	Forestal Arauco S.A.	UF	Banco Estado		361		1,160		1,471		1,471		1,957		—		—		1,521		4,899		—			—
85.805.200-9	Forestal Arauco S.A.	UF	Banco de Chile		4,026		11,489		11,301		11,301		12,650		—		—		15,515		35,252		—			—
85.805.200-9	Forestal Arauco S.A.	UF	Banco BBVA		1,814		5,344		4,490		4,490		3,374		—		—		7,158		12,354		—			—
85.805.200-9	Forestal Arauco S.A.	UF	Banco Credito e Inversiones		557		1,672		2,129		2,129		3,008		—		—		2,229		7,266		0.00	%		0.00	%
85.805.200-9	Forestal Arauco S.A.	Chilean Pesos	Banco Santander		172		517		575		576		—		—		—		689		1,151		—			—
85.805.200-9	Forestal Arauco S.A.	Chilean Pesos	Banco Chile		262		704		824		824		365		—		—		966		2,013		—			—
85.805.200-9	Forestal Arauco S.A.	Chilean Pesos	Banco Credito e Inversiones		468		1,401		1,834		1,834		3,623		—		—		1,869		7,291		—			—
			Total		9,301		27,561		28,149		28,150		34,398		0		0		36,862		90,697

As part of the policy of Arauco , it considers compliance with all Accounts Payable , whether with related (see Note 13) or third parties , within a period not exceeding 30 days.

F-103

December 31, 2014				Maturity														Total
Tax ID	Name	Currency	Name - Country Loans with banks	to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 years ThU.S.$		2 to 3 years ThU.S.$		3 to 4 years ThU.S.$		4 to 5 years ThU.S.$		More than 5 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Type Amortization		Effective rate	Nominal rate
—	Flakeboard Company Limited	U.S. Dollar	J.P.Morgan - United States		—		30,433		61,919		60,644		55		—		—		30,433		122,618		Maturity	Libor +1.35%	Libor +1.35%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Banco BBVA - United States		30,105		—		15,154		—		—		—		—		30,105		15,154		(i) semmiannual; (k) semmiannual from 2011	Libor 6 monthly + 0.2%	Libor 6 monthly + 0.2%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Bancoestado NY		9,063		9,000		9,000		—		—		—		—		18,063		9,000		(i) semmiannual; (k) semmiannual from 2011	Libor 6 monthly + 0.2%	Libor 6 monthly + 0.2%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Scotiabank- Chile		—		22		299,223		—		—		—		—		22		299,223		Maturity	1.42%	1.42%
—	Alto Parana S.A.	Argentine Pesos	Banco Macro- Argentina		—		75		—		146		—		—		—		75		146		Maturity	15.25%	15.25%
—	Alto Parana S.A.	Argentine Pesos	Banco Galicia- Argentina		—		469		468		—		—		—		—		469		468		Maturity	15.25%	15.25%
—	Zona Franca Punta Pereira	U.S. Dollar	Interamerican Development Bank		128		—		6,281		7,123		7,095		7,115		6,551		128		34,164		Maturity	Libor + 1.80%	Libor + 1.80%
—	Zona Franca Punta Pereira	U.S. Dollar	Interamerican Development Bank		2,189		—		5,096		4,866		4,637		4,407		15,324		2,189		34,330		Maturity	Libor + 2.05%	Libor + 2.05%
—	Celulosa y Energia Punta Pereira	U.S. Dollar	Finnish Export Credit		48,487		—		70,569		67,723		64,876		62,030		194,683		48,487		459,882		semmiannual	3.20%	3.20%
—	Celulosa y Energia Punta Pereira	U.S. Dollar	Interamerican Development bank		6,267		—		10,612		10,382		10,153		9,923		37,397		6,267		78,467		semmiannual	Libor + 2.05%	Libor + 2.05%
—	Celulosa y Energia Punta Pereira	U.S. Dollar	Interamerican Development bank		645		—		20,273		21,115		21,087		21,107		20,545		645		104,126		semmiannual	Libor + 1.80%	Libor + 1.80%
—	Celulosa y Energia Punta Pereira	U.S. Dollar	Dnb Nor Bank		324		—		—		—		—		—		—		324		—		Maturity	Libor + 2.05%	Libor + 2.05%
—	Eufores S.A.	U.S. Dollar	Banco BBVA - Uruguay		9,119		3,015		—		—		—		—		—		12,134		—		Maturity	Libor + 2.00%	Libor + 2.00%
—	Eufores S.A.	U.S. Dollar	Banco Republica Oriental de Uruguay		10,110		25,088		—		—		—		—		—		35,198		—		Maturity	Libor + 1.75%	Libor + 1.75%
—	Eufores S.A.	U.S. Dollar	Citibank		—		2,505		—		—		—		—		—		2,505		—		Maturity	Libor + 2.00%	Libor + 2.00%
—	Eufores S.A.	U.S. Dollar	Banco HSBC- Uruguay		1,201		—		—		—		—		—		—		1,201		—		Maturity	Libor + 2.00%	Libor + 2.00%
—	Eufores S.A.	U.S. Dollar	Banco Itau - Uruguay		5,062		5,003		—		—		—		—		—		10,065		—		Maturity	Libor + 2.00%	Libor + 2.00%
—	Eufores S.A.	U.S. Dollar	Heritage		—		1,356		—		—		—		—		—		1,356		—		Maturity	Libor + 2.00%	Libor + 2.00%
—	Eufores S.A.	U.S. Dollar	Banco Santander		—		20,111		—						—		—		20,111		—		Maturity	Libor + 2.00%	Libor + 2.00%
—	Arauco Do Brasil S.A.	Real	Banco ABC		32		—		1		62		—		—		—		32		63		Maturity	2.50%	2.50%
—	Arauco Do Brasil S.A.	Real	Banco Bradesco		101		—		—		—		—		—		—		101		—		Maturity	8.70%	8.70%
—	Arauco Do Brasil S.A.	Real	Banco Bradesco		2,266		3,220		—		—		—		—		—		5,486		—		Maturity	5.50%	5.50%
—	Arauco Do Brasil S.A.	Real	Banco do Brasil - Brasil		140		—		177		17		1		—		—		140		196		Maturity	8.70%	8.70%
—	Arauco Do Brasil S.A.	Real	Banco do Brasil - Brasil		—		6,473		—		—		—		—		—		6,473		—		Maturity	9.80%	9.80%
—	Arauco Do Brasil S.A.	Real	Banco HSBC- Brasil		37		—		—		—		—		—		—		37		—		Maturity	5.50%	5.50%
—	Arauco Do Brasil S.A.	Real	Banco HSBC- Brasil		136		—		11,319		—		—		—		—		136		11,319		Maturity	8.00%	8.00%
—	Arauco Do Brasil S.A.	Real	Banco Itau -Brasil		28		—		—		—		—		—		—		28		—		Monthly	4.50%	4.50%
—	Arauco Do Brasil S.A.	Real	Banco Itau -Brasil		26		—		6		—		—		—		—		26		6		Maturity	5.50%	5.50%
—	Arauco Do Brasil S.A.	Real	Banco Itau -Brasil		253		—		183		26		1		—		—		253		210		Maturity	8.70%	8.70%
—	Arauco Do Brasil S.A.	U.S. Dollar	Banco JP Morgan		—		8,972		—		—		—		—		—		8,972		—		Maturity	1.41%	1.41%
—	Arauco Do Brasil S.A.	Real	Banco Santander		166		—		18,865		—		—		—		—		166		18,865		Maturity	8.00%	8.00%
—	Arauco Do Brasil S.A.	Real	Banco Votorantim - Brasil		50		—		32		5		—		—		—		50		37		Maturity	8.70%	8.70%
—	Arauco Do Brasil S.A.	Real	Banco Votorantim - Brasil		62		—		14		114		—		—		—		62		128		Maturity	5.50%	5.50%
—	Arauco Do Brasil S.A.	Real	Fdo. Desenvolvimiento Econom. - Brasil		51		—		—		62		—		—		—		51		62		Monthly	0.00%	0.00%
—	Arauco Florestal Arapoti S.A.	Real	Banco Itau		12		—		1		1		26		—		—		12		28		Maturity	2.50%	2.50%
—	Arauco Florestal Arapoti S.A.	Real	Banco Itau		56		—		—		—		—		172		—		56		172		Maturity	3.50%	3.50%
—	Arauco Florestal Arapoti S.A.	Real	Banco Itau		7		—		—		—		—		23		—		7		23		Maturity	3.50%	3.50%
—	Arauco Florestal Arapoti S.A.	Real	Banco Bradesco		11,825		—		—		—		—		93		—		11,825		93		Maturity	5.50%	5.50%
—	Arauco Florestal Arapoti S.A.	Real	Banco Votorantim		—		6		107		78		14		—		463		6		662		Maturity	0.50%	0.50%
—	Arauco Florestal Arapoti S.A.	Real	Banco Safra		109		—		—		—		—		350		—		109		350		Maturity	0.60%	0.60%
—	Arauco Forest Brasil S.A.	Real	Banco Bradesco		—		7,430		—		—		—		—		—		7,430		—		Maturity	5.50%	5.50%
—	Arauco Forest Brasil S.A.	Real	Banco Bradesco		—		10,369		—		—		—		—		—		10,369		—		Maturity	6.50%	6.50%
—	Arauco Forest Brasil S.A.	Real	Banco Bradesco		70		—		—		429		—		316		—		70		745		Maturity	6.00%	6.00%
—	Arauco Forest Brasil S.A.	Real	Banco Itau -Brasil		158		—		13		41		—		—		—		158		54		Maturity	4.75%	4.75%
—	Arauco Forest Brasil S.A.	Real	Banco Votorantim - Brasil		46		—		107		78		14		2,508		—		46		2,707		Monthly	8.80%	8.80%
—	Arauco Forest Brasil S.A.	U.S. Dollar	Banco Votorantim - Brasil		6		—		12		5		—		403		—		6		420		Maturity	3.30%	3.30%
—	Arauco Forest Brasil S.A.	Real	Banco Votorantim - Brasil		—		6		107		78		14		—		311		6		510		Maturity	5.00%	5.00%
—	Arauco Forest Brasil S.A.	Real	Bndes Subcrédito A		—		2		276		276		276		276		1,318		2		2,424		Maturity	7.91%	7.91%
—	Arauco Forest Brasil S.A.	Real	Bndes Subcrédito B		—		1		187		187		187		187		853		1		1,601		Maturity	8.91%	8.91%
—	Arauco Forest Brasil S.A.	U.S. Dollar	Bndes Subcrédito C		4		—		89		89		89		89		555		4		909		Maturity	6.55%	6.55%
—	Arauco Forest Brasil S.A.	Real	Bndes Subcrédito D		1		—		235		235		235		235		1,032		1		1,974		Maturity	10.11%	10.11%
—	Arauco Forest Brasil S.A.	Real	Banco do Brasil - Brasil		1,145		—		—		—		—		—		—		1,145		—		Maturity	9.80%	9.80%
—	Arauco Forest Brasil S.A.	Real	Banco John Deere		305		—		—		—		—		—		—		305		—		Maturity	6.00%	6.00%
—	Mahal Emprendimientos Pat. S.A.	Real	Bndes Subcrédito E-I		24		—		537		537		537		537		8,912		24		11,058		Maturity	7.91%	7.91%
—	Mahal Emprendimientos Pat. S.A.	Real	Bndes Subcrédito F-J		17		—		363		363		363		363		5,469		17		6,919		Maturity	8.91%	8.91%
—	Mahal Emprendimientos Pat. S.A.	U.S. Dollar	Bndes Subcrédito G-K		61		—		172		172		172		172		4,589		61		5,276		Maturity	6.55%	6.55%
—	Mahal Emprendimientos Pat. S.A.	Real	Bndes Subcrédito H-L		22		—		457		457		457		457		6,240		22		8,069		Maturity	10.11%	10.11%
			Total		139,916		133,554		531,856		175,310		110,288		110,762		304,242		273,470		1,232,458

F-104

				Maturity														Total
Tax ID	Name	Currency	Name Country Bonds	To 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 Years ThU.S.$		2 to 3 Years ThU.S.$		3 to 4 Years ThU.S.$		4 to 5 Years ThU.S.$		More than 5 Years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Type Amortization	Effective Rate			Nominal Rate
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-F		—		1,992		11,949		11,949		11,949		36,494		305,191		1,992		377,534	(i) semmiannual; (k) maturity		4.24	%		4.25	%
93.458.000-2	Celulosa Arauco y Constitución S.A.	UF	Barau-J		2,181		—		9,160		9,160		9,160		9,160		211,959		2,181		248,599	(i) semmiannual; (k) maturity		3.23	%		3.22	%
93.458.000-3	Celulosa Arauco y Constitución S.A.	UF	Barau-P		—		1,027		8,038		8,038		8,038		8,038		262,316		1,027		294,469	(i) semmiannual; (k) maturity		3.96	%		3.96	%
93.458.000-3	Celulosa Arauco y Constitución S.A.	UF	Barau-Q		604		—		2,417		12,676		22,482		21,878		31,683		604		91,137	(i) semmiannual; (k) maturity		2.98	%		2.98	%
93.458.000-3	Celulosa Arauco y Constitución S.A.	UF	Barau-R		1,810		—		7,241		7,241		7,241		7,241		314,074		1,810		343,039	(i) semmiannual; (k) maturity		3.58	%		3.57	%
—	Alto Paraná S.A.	U.S. Dollar	Bono 144 A - Argentina		—		1,004		17,213		277,349		—		—		—		1,004		294,562	(i) semmiannual; (k) maturity		6.39	%		6.38	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee Bonds 2019		15,205		—		36,250		36,250		36,250		532,713		—		15,205		641,463	(i) semmiannual; (k) maturity		7.26	%		7.25	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee Bonds 2a Emisión		2,734		—		9,375		134,189		—		—		—		2,734		143,564	(i) semmiannual; (k) maturity		7.50	%		7.50	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee Bonds 6a Emisión		—		373,848		—		—		—		—		—		373,848		—	(i) semmiannual; (k) maturity		5.64	%		5.63	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee 2021		8,889		—		20,000		20,000		20,000		20,000		425,291		8,889		505,291	(i) semmiannual; (k) maturity		5.02	%		5.00	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee 2022		11,215		—		23,750		23,750		23,750		23,750		549,617		11,215		644,617	(i) semmiannual; (k) maturity		4.77	%		4.75	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollar	Yankee 2024		9,937		—		22,500		22,500		22,500		22,500		601,109		9,937		691,109	(i) semmiannual;(k) maturity		4.52	%		4.50	%
			Total		52,575		377,871		167,894		563,104		161,371		681,774		2,701,241		430,446		4,275,384
				Maturity														Total
Tax ID	Name	Currency	Name Country Other Loans	To 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 Years ThU.S.$		2 to 3 Years ThU.S.$		3 to 4 Years ThU.S.$		4 to 5 Years ThU.S.$		More than 5 Years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Type Amortization	Effective Rate			Nominal Rate
—	Flakeboard Company Limited	U.S. Dollar	Business New Brunswick		—		3,785		—		—		—		—		—		3,785		—	Maturity		—			4.30	%
—	Flakeboard Company Limited	U.S. Dollar	SSM EDC		—		108		—		—		—		—		—		108		—	Maturity		—			1.80	%
			Total		0		3,893		0		0		0		0		0		3,893		0

F-105

				Maturity														Total
Tax ID	Name	Currency	Name Country Lease	To 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 Years ThU.S.$		2 to 3 Years ThU.S.$		3 to 4 Years ThU.S.$		4 to 5 Years ThU.S.$		More than 5 Years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Type Amortization	Effective Rate		Nominal Rate
85.805.200-9	Forestal Celco S.A.	UF	Banco Santander		979		2,089		883		883		485		—		—		3,068		2,250	Monthly		—		—
85.805.200-9	Forestal Celco S.A.	UF	Banco Scotiabank		982		2,945		3,897		3,897		3,108		—		—		3,927		10,902	Monthly		—		—
85.805.200-9	Forestal Celco S.A.	UF	Banco Estado		259		777		1,024		1,024		1,789		—		—		1,036		3,836	Monthly		—		—
85.805.200-9	Forestal Celco S.A.	UF	Banco de Chile		3,241		9,904		9,011		9,011		7,097		—		—		13,145		25,119	Monthly		—		—
85.805.200-9	Forestal Celco S.A.	UF	Banco BBVA		2,102		7,325		6,822		6,822		7,187		—		—		9,427		20,830	Monthly		—		—
85.805.200-9	Forestal Celco S.A.	Chilean Pesos	Banco Santander		222		609		799		799		557		—		—		831		2,154	Monthly		—		—
85.805.200-9	Forestal Celco S.A.	Chilean Pesos	Banco Chile		66		200		88		88		23		—		—		266		198	Monthly		—		—
—	Arauco Colombia S.A.	U.S. Dollar	Banco BBVA		—		3				—		—		—		—		3		—	Monthly		—		—
85.805.200-9	Forestal Celco S.A.	UF	Banco Santander		—		3				—		—		—		—		3		—	Monthly		—		—
			Total		7,851		23,855		22,522		22,522		20,246		0		0		31,706		65,289

F-106

Guarantees

As of the date of these consolidated financial statements, Arauco has financial assets of approximately ThU.S.$49 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 December 31, 2015, the total assets pledged as an indirect guarantee were ThU.S.$853. 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 non-joint guarantee limited to 50% of the obligations of the Uruguayan companies (joint operation) 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
Celulosa Arauco y Constitución S.A.	Guarantee letter	—	Chilean Pesos	230	Directorate General of Maritime Territory and Merchant Marine
Celulosa Arauco y Constitución S.A.	Guarantee letter	—	Chilean Pesos	313	Directorate General of Maritime Territory and Merchant Marine
Celulosa Arauco y Constitución S.A.	Guarantee letter	—	Chilean Pesos	114	Directorate General of Maritime Territory and Merchant Marine
Arauco Forest Brasil S.A.	Equipment	Property plant and equipment	U.S. Dollar	246	Banco Itaú BBA S.A.
Arauco Forest Brasil S.A.	Endorsement of ADB + Guarantee Letter AISA	—	U.S. Dollar	2,306	Banco Votorantim S.A.
Arauco Forest Brasil S.A.	Endorsement of ADB	—	U.S. Dollar	768	Banco Votorantim S.A.
Arauco Forest Brasil S.A.	Mortgage Industrial Plant of Jaguariaíva of Arauco do Brasil	Property plant and equipment	U.S. Dollar	39,262	BNDES
Arauco Forest Brasil S.A.	Equipment	Property plant and equipment	U.S. Dollar	114	Banco Bradesco S.A.
Arauco Forest Brasil S.A.	Equipment	Property plant and equipment	U.S. Dollar	617	Banco John Deere S.A.
Arauco Forest Brasil S.A.	Equipment	Property plant and equipment	U.S. Dollar	117	Banco Santander S.A.
Arauco Forest Brasil S.A.	Endorsement of Arauco do Brasil	-	U.S. Dollar	768	Banco Votorantim S.A.
Arauco do Brasil S.A.	Equipamiento	Property plant and equipment	U.S. Dollar	136	Banco Votorantim S.A.
Arauco do Brasil S.A.	Equipamiento	Property plant and equipment	U.S. Dollar	853	Banco Itaú BBA S.A.
Arauco do Brasil S.A.	Equipamiento	Property plant and equipment	U.S. Dollar	379	Banco do Brasil S.A.
Arauco do Brasil S.A.	Equipamiento	Property plant and equipment	U.S. Dollar	168	Banco Votorantim S.A.
Arauco do Brasil S.A.	Equipamiento	Property plant and equipment	U.S. Dollar	327	Banco ABC Brasil S.A.
Arauco do Brasil S.A.	Equipamiento	Property plant and equipment	U.S. Dollar	177	Banco Santander S.A.
Arauco Florestal Arapoti S.A.	Equipamiento	Property plant and equipment	U.S. Dollar	171	Banco Itaú BBA S.A.
Arauco Florestal Arapoti S.A.	Equipment	Property plant and equipment	U.S. Dollar	329	Banco Safra S.A.
Arauco Florestal Arapoti S.A.	Equipment	Property plant and equipment	U.S. Dollar	768	Banco Votorantim S.A.
Arauco Bioenergía S.A.	Endorsement of Arauco do Brasil	—	Chilean Pesos	483	Minera Escondida Ltda.
Arauco Bioenergía S.A.	Guarantee letter	—	Chilean Pesos	221	Minera Spence S.A
Arauco Bioenergía S.A.	Guarantee letter	—	Chilean Pesos	121	CODELCO S.A.
		Total		48,988

INDIRECT
Subsidiary	Guarantee	Assets Pledged	Currency	ThU.S.$	Guarantor
Celulosa Arauco y Constitución S.A.	Suretyship not supportive and cumulative	—	U.S. Dollar	566,474	Joint Operation (Uruguay)
Celulosa Arauco y Constitución S.A.	Full Guarantee	—	U.S. Dollar	270,000	Arauco Argentina (bondholders)
Celulosa Arauco y Constitución S.A.	Guarantee Letter	—	Brazilian Real	16,419	Arauco Forest Brasil y Mahal (Brasil)
		Total		852,893

F-107

23.11.3 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 as of the date of these financial statements. 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 +/- 4.09% (equivalent to ThU.S.$ +/- 15,301), and +/- 0.13% of equity (equivalent to ThU.S.$ +/- 9.181).

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 as of the date of these financial statements. 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 +/- 0.43% (equivalent to ThU.S.$2,087) and a change on the equity of +/- 0.02% (equivalent to ThU.S.$1,252).

23.11.4 Type of Risk: 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.

F-108

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 December 31, 2015, 14.3% of the Company’s bonds and bank loans bear interest at variable rates. A change of +/- 10% in the interest rate is considered a possible range of fluctuation. Such market conditions would affect the income after tax at rate of +/- 0.013% (equivalent to ThU.S.$-/+ 48) and +/- 0.0004% (equivalent to ThU.S.$-/+ 29) on equity.

Thousands of dollars	December 2015		Total
Fixed rate		3,689,719		85.7	%
Bonds issued		3,180,334
Bank borrowings (*)		381,826
Government loans		0
Financial leasing		127,559
Variable rate		615,716		14.3	%
Bonds issued		—
Loans with Banks		615,716
Total		4,305,435		100.0	%
Thousands of dollars	December 2014		Total
Fixed rate		4,244,146		83.6	%
Bonds issued		3,658,327
Bank borrowings (*)		484,931
Government Loans		3,893
Financial leasing		96,995
Variable rate		834,284		16.4	%
Bonds issued		—
Loans with Banks		834,284
Total		5,078,430		100.0	%

(*) Includes variable rate bank borrowings changed by fixed rate swaps.

F-109

23.12.5 Type of Risk: 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 December 31 2015, revenue due to pulp sales accounted for 44.8% 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(1) annual variation of 15.72% (equivalent to MU.S.$215), on the income after tax and +/- 32.21% (equivalent to MU.S.$170) and +/- 1.47% (equivalent to MU.S.$102) on equity.

(1)Non gaap measure. Profit before financing cost, financial income, income taxes.

F-110

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.

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 seven plants, five in Chile, one in Argentina and one in Uruguay and they have a total production capacity of approximately 3.9 million tons per year. Pulp is sold in more than 45 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 17 industrial plants: 5 in Chile, 2 in Argentina, 2 in Brazil, and 8 plants around USA and Canada. The Company has a total annual production capacity of 6.6 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 3 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.

F-111

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, Brazil and Uruguay, reaching 1.6 million hectares, of which 1 million hectares are used for plantations, 395 thousand hectares for native forests, 183 thousand hectares for other uses and 53 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.

Arauco has no customers representing 10% or more of its revenues.

Below, please find summarized information concerning the assets, liabilities and profits and losses at the end of each period, by segments. The profit (loss) of each segment informed takes into consideration that taxes and financial income and costs were not allocated to the above mentioned segments, and are shown as part of the Corporate’s segment:

F-112

Year ended December 31, 2015	Pulp ThU.S.$		Sawn timber ThU.S.$		Forestry ThU.S.$		Panels ThU.S.$			Others ThU.S.$		Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Revenues from external customers		2,363,973		785,939		116,368		1,847,272			33,188		0			5,146,740			0			5,146,740
Revenues from transactions with other operating segments		43,414		343		491,703		10,330			32,543		0			578,333			(578,333	)		0
Finance income		0		0		0		0			0		50,284			50,284			0			50,284
Finance costs		0		0		0		0			0		(262,962	)		(262,962	)		0			(262,962	)
Net finance costs		0		0		0		0			0		(212,678	)		(212,678	)		0			(212,678	)
Depreciation and amortizations		231,916		30,133		18,211		109,313			3,913		6,659			400,145			0			400,145
Sum of significant income accounts		31		739		220,907		4,084			0		0			225,761			0			225,761
Sum of significant expense accounts		585		2,662		35,610		721			35		0			39,613			0			39,613
Profit (loss) of each reportable segment		455,190		89,142		137,829		175,317			1,815		(491,582	)		367,711			0			367,711
Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		0		0		0		0			0		5,572			5,572			0			5,572
Joint ventures		0		0		0		(470	)		0		1,646			1,176			0			1,176
Income tax expense		0		0		0		0			0		(129,694	)		(129,694	)		0			(129,694	)
Geographical information on revenues
Revenue – Chilean entities		1,913,303		724,705		68,986		601,280			597		0			3,308,871			0			3,308,871
Revenue – Foreign entities		450,670		61,234		47,382		1,245,992			32,591		0			1,837,869			0			1,837,869
Total Ordinary Income		2,363,973		785,939		116,368		1,847,272			33,188		0			5,146,740			0			5,146,740

F-113

Year ended December 31, 2015	Pulp ThU.S.$		Sawn timber ThU.S.$		Forestry ThU.S.$		Panels ThU.S.$		Others ThU.S.$		Corporate ThU.S.$		Sub Total ThU.S.$		Elimination ThU.S.$		Total ThU.S.$
Amounts of additions to non-current assets (*)
Acquisition of property,plant and equipment and biological assets		199,094		14,059		155,872		80,132		1,754		7,001		457,912		0		457,912
Acquisition and contribution of investments in associates and joint venture		0		0		814		0		0		0		814		0		814

Year ended December 31, 2015	Pulp ThU.S.$		Sawn timber ThU.S.$		Forestry ThU.S.$		Panels ThU.S.$		Others ThU.S.$		Corporate ThU.S.$		Sub Total ThU.S.$		Elimination ThU.S.$			Total ThU.S.$
Segment assets		5,172,095		125,446		5,471,322		2,248,688		31,679		806,219		13,855,449		(48,542	)		13,806,907
Segments assets (excluding deferred tax assets)		5,172,095		125,446		5,471,322		2,248,688		31,679		665,968		13,715,198		(48,542	)		13,666,656
Deferred tax assets		0		0		0		0		0		140,251		140,251		0			140,251
Investments accounted through equity method
Associates		0		0		121,359		0		0		119,781		241,140		0			241,140
Joint Ventures		0		0		0		3,573		0		20,099		23,672		0			23,672
Segment liabilities		318,880		25,334		147,432		244,629		11,526		6,412,661		7,160,462		0			7,160,462
Segments liabilities (excluding deferred tax liabilities)		0		0		0		0		0		4,657,133		4,657,133		0			4,657,133
Deferred tax liabilities		0		0		0		0		0		1,755,528		1,755,528		0			1,755,528
Geographical information on non-current assets (**)
Chile		2,565,307		945		3,536,372		757,991		30		207,280		7,067,925		(2,955	)		7,064,970
Foreign countries		1,782,286		14,902		1,348,177		721,022		23,406		200,224		4,090,017		0			4,090,017
Non-current assets, Total		4,347,593		15,847		4,884,549		1,479,013		23,436		407,504		11,157,942		(2,955	)		11,154,987

F-114

Year ended December 31, 2014	Pulp ThU.S.$		Sawn timber ThU.S.$		Forestry ThU.S.$		Panels ThU.S.$		Others ThU.S.$		Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Revenues from external customers		2,343,020		873,493		148,517		1,943,711		33,902		0			5,342,643			0			5,342,643
Revenues from transactions with other operating segments		50,015		3		457,527		10,065		34,327		0			551,937			(551,937	)		0
Finance income		0		0		0		0		0		30,772			30,772			0			30,772
Finance costs		0		0		0		0		0		(246,473	)		(246,473	)		0			(246,473	)
Net finance costs		0		0		0		0		0		(215,701	)		(215,701	)		0			(215,701	)
Depreciation and amortizations		185,121		31,842		14,145		109,745		3,901		8,680			353,434			0			353,434
Sum of significant income accounts		5,442		161		321,971		882		0		0			328,456			0			328,456
Sum of significant expense accounts		0		0		31,513		0		0		0			31,513			0			31,513
Profit (loss) of each reportable segment		440,367		154,525		177,974		150,323		13,885		(500,184	)		436,890			0			436,890
Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		0		0		0		0		0		6,958			6,958			0			6,958
Joint ventures		0		0		0		3		0		520			523			0			523
Income tax expense		0		0		0		0		0		(155,935	)		(155,935	)		0			(155,935	)
Geographical information on revenues
Revenue – Chilean entities		2,025,811		802,675		83,823		666,790		1,538		0			3,580,637			0			3,580,637
Revenue – Foreign entities		317,209		70,818		64,694		1,276,921		32,364		0			1,762,006			0			1,762,006
Total Ordinary Income		2,343,020		873,493		148,517		1,943,711		33,902		0			5,342,643			0			5,342,643

Year ended December 31, 2014	Pulp ThU.S.$		Sawn timber ThU.S.$		Forestry ThU.S.$		Panels ThU.S.$		Others ThU.S.$		Corporate ThU.S.$		Sub Total ThU.S.$		Elimination ThU.S.$		Total ThU.S.$
Amounts of additions to non-current assets
Acquisition of property,plant and equipment and biological assets		303,918		14,388		178,748		112,365		1,489		1,127		612,035		0		612,035
Acquisition and contribution of investments in associates and joint venture		0		0		0		1,882		0		0		1,882		0		1,882

F-115

Year ended December 31, 2014	Pulp ThU.S.$		Sawn timber ThU.S.$		Forestry ThU.S.$		Panels ThU.S.$		Others ThU.S.$		Corporate ThU.S.$		Sub Total ThU.S.$		Elimination ThU.S.$			Total ThU.S.$
Segment assets		5,206,856		597,204		5,436,050		2,151,687		34,344		1,362,947		14,789,088		(41,191	)		14,747,897
Segments assets (excluding deferred tax assets)		5,206,856		597,204		5,436,050		2,151,687		34,344		1,204,664		14,630,805		(41,191	)		14,589,614
Deferred tax assets		0		0		0		0		0		158,283		158,283		0			158,283
Investments accounted through equity method
Associates		0		0		174,782		5,830		0		126,460		307,072		0			307,072
Joint Ventures		0		0		0		0		0		18,973		18,973		0			18,973
Segment liabilities		341,498		69,491		171,951		233,063		13,385		7,103,773		7,933,161		0			7,933,161
Segments liabilities (excluding deferred tax liabilities)		341,498		69,491		171,951		233,063		13,385		5,346,624		6,176,012		0			6,176,012
Deferred tax liabilities		0		0		0		0		0		1,757,149		1,757,149		0			1,757,149
Geographical information on non-current assets (**)
Chile		2,633,773		294,317		3,480,005		598,526		80		205,774		7,212,475		74			7,212,549
Foreign countries		1,796,802		16,433		1,288,915		842,288		25,535		424,660		4,394,633		0			4,394,633
Non-current assets, Total		4,430,575		310,750		4,768,920		1,440,814		25,615		630,434		11,607,108		74			11,607,182

F-116

Below, please find data regarding the cash flows per segment, which data is presented in a supplemental manner, as follow-up pursuant to local requirements:

Year ended December 31, 2015	Pulp ThU.S.$			Sawn timber ThU.S.$			Forestry ThU.S.$			Panels ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$		Total ThU.S.$
Segment Cash Flows
Cash Flows from (used in) Operating Activities		605,756			135,322			252,702			255,262			2,722			(398,114	)		853,650			0		853,650
Cash flows (used in) investing activities		(202,473	)		(12,645	)		(142,879	)		(84,671	)		(1,790	)		(33,322	)		(477,780	)		0		(477,780	)
Cash flows from (used in) Financing Activities		(60,395	)		0			(2,003	)		(151,395	)		0			(598,383	)		(812,176	)		0		(812,176	)
Net increase (decrease) in Cash and Cash Equivalents		342,888			122,677			107,820			19,196			932			(1,029,819	)		(436,306	)		0		(436,306	)

Year ended December 31, 2014	Pulp ThU.S.$			Sawn timber ThU.S.$			Forestry ThU.S.$			Panels ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$		Total ThU.S.$
Segment Cash Flows
Cash Flows from (used in) Operating Activities		588,293			185,276			296,349			211,018			6,527			(302,288	)		985,175			0		985,175
Cash flows (used in) investing activities		(310,125	)		(4,997	)		(78,409	)		(113,321	)		(1,489	)		(146,817	)		(655,158	)		0		(655,158	)
Cash flows from (used in) Financing Activities		(52,631	)		0			83,975			11,623			0			(50,852	)		(7,885	)		0		(7,885	)
Net increase (decrease) in Cash and Cash Equivalents		225,537			180,279			301,915			109,320			5,038			(499,957	)		322,132			0		322,132

F-117

Information required by geographic area:

	Geographical area
2015	Local country	Foreign country
	Chile	Argentina	Brazil	USA/Canada	Uruguay	Total
Disclosure of geographical areas	ThU.S.$	ThU.S.$	ThU.S.$	ThU.S.$	ThU.S.$	ThU.S.$
Revenues	3,308,870	481,881	378,719	787,037	190,233	5,146,740
Revenues quarter October-December 2015	760,259	134,715	68,643	183,506	59,666	1,206,789
Non-current Assets at 12-31-2015 other than tax deferred	6,986,237	978,285	872,378	364,889	1,812,948	11,014,737
	Geographical area
2014	Local country	Foreign country
	Chile	Argentina	Brazil	USA/Canada	Uruguay	Total
Disclosure of geographical areas	ThU.S.$	ThU.S.$	ThU.S.$	ThU.S.$	ThU.S.$	ThU.S.$
Revenues	3,580,637	436,524	481,275	774,805	69,402	5,342,643
Revenues quarter October -december 2014	918,978	108,846	118,440	178,306	59,704	1,384,274
Non-current Assets at 12-31-2014 other than tax deferred	7,133,974	977,784	1,245,162	352,862	1,739,117	11,448,899

F-118

NOTE 25. OTHER NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES

Current non-financial assets	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Roads to amortize current		47,731		77,359
Prepayment to amortize (insurance + others)		20,398		23,407
Recoverable taxes (Relating to purchases)		62,468		71,834
Other current non-financial assets		3,359		5,128
Total		133,956		177,728
Non current non-financial assets	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Roads to amortize, non current		111,319		91,871
Guarantee values		2,635		3,489
Recoverable taxes		7,767		3,102
Other non current non-financial assets		3,795		2,632
Total		125,516		101,094
Current non-financial liabilities	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
Provision of minimum dividend (1)		102,305		99,160
ICMS tax payable		6,172		19,020
Other tax payable		19,442		15,297
Other Current non-financial liablilities		3,804		2,839
Total		131,723		136,316

(1) Provision includes a minimum dividend of subsidiary minority.

Non current non-financial liabilities	12-31-2015 ThU.S.$		12-31-2014 ThU.S.$
ICMS tax payable		45,365		56,815
Other non-current non financial liablilities		1,876		5,181
Total		47,241		61,996

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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 distributable 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.

The deferred taxes associated with the amounts described in 1) and 2) above are also excluded.

The following table details the adjustments made for the determination of distributable net income as December 31, 2015 and 2014 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 12-31-2015		362,689
Adjustments:
Biological Assets
Unrealized gains/losses		(205,527	)
Realized gains/losses		203,730
Deferred income taxes		(3,889	)
Total adjustments		(5,686	)
Distributable Net Income at 12-31-2015		357,003

	Distributable Net  Inceme ThU.S.$
Net income attributable to owners of parent at 12-31-2014		139,803
Adjustments
Biological Assets
Unrealized		(278,884	)
Realized		237,272
Deferred income taxes		9,354
Total Biological Assets (net)		(32,258	)
Deferred Tax effect of tax rate change (attributable to owners of parent) (*)		292,155
Total adjustments		259,897
Distributable Net Income at 12-31-2014		399,700

(*) The Superintendency of Securities and Insurance (SVS), issued Circular No. 856 on October 17, 2014 which instructs regulated entities to record in its statutory financial statements differences in deferred taxes arising as a direct effect of the increase in the tax rate to equity as stated by Law 20,780. The impact of this circular has been incorporated in the statutory financial statements which are used to determine the distributable income. This circular differs from International Financial Reporting Standards (IFRS) which require the impact to be recorded as part of the income statement.

In the attached financial statements prepared in accordance with IFRS, the effect of the change in the tax rate of first category in assets and liabilities relating to deferred taxes results in a expense of ThU.S.$292,717 (ThU.S.$292,155 attributable to owners of parent) reclassified to the income statement.

Therefore, as a result of the impact of the changes of the regulatory framework, the increase of the first category tax rate on the treatment of deferred taxes did not impact the determination of Arauco’s distributable net income.

F-120

	Distributable Net  Income ThU.S.$
Net income attributable to owners of parent at 12-31-2013		385,657
Adjustments:
Biological Assets
Unrealized gains/losses		(269,671	)
Realized gains/losses		221,874
Deferred income taxes		9,170
Total adjustments		(38,627	)
Distributable Net Income at 12-31-2013		347,030

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.

As of December 31, 2015, in the Classified Statement of Financial Position, under the line item Other Ordinary Non-Financial Liabilities, for an amount of ThU.S.$131,723, there are a total of ThU.S.$99,211 which correspond to a provision for the minimum dividend for the parent company for the 2015 period, after discounting the distribution of a provisional dividend of ThU.S.$43,580, paid to shareholders in December 2015.

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-December
	2015		2014
	ThU.S.$		ThU.S.$
Profit or loss attributable to ordinary equity holder of parent		362,689		139,803
Weighted average of number of shares		113,159,655		113,159,655
Basic earnings per share (in U.S.$ per share)		3.21		1.24

NOTE 27. SUBSEQUENT EVENTS

The authorization for the issuance and publication of these consolidated financial statements for the period ended December 31, 2015 was approved by the Board of Directors of Arauco on April 26, 2016.

Subsequent to December 31, 2015 and until the date of issuance of these consolidated financial statements, there have been no events, other than those discussed above, that could materially affect the presentation of these financial statements.

F-121