UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of October 2019

Commission File Number 33-99720

ARAUCO AND CONSTITUTION PULP INC.

(translation of registrant’s name into English)

El Golf 150

Fourteenth Floor

Santiago, Chile

(address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

TABLE OF CONTENTS

Management’s Discussion and Analysis of Financial Condition and Results of Operation	1
Unaudited Interim Consolidated Financial Statements as of and for the Six-Month Periods Ended June 30, 2018 and 2019	13

i

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion is based on, and should be read in conjunction with, our unaudited interim consolidated financial statements as of and for the six-month periods ended June 30, 2018 and 2019, included in this Form 6-K. Our unaudited interim consolidated financial statements are prepared in US dollars in accordance with IFRS.

This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth under “Risk Factors” in our annual report on Form 20-F for the year ended December 31, 2018, filed with the U.S. Securities and Exchange Commission on April 17, 2019 (our “2018 Form 20-F”).

Overview

We believe that we are one of Latin America’s largest forest plantation owners and one of the world’s largest producers of bleached and unbleached softwood kraft pulp, bleached hardwood kraft pulp and wood products in terms of production capacity. We have industrial operations in Chile, Argentina, Brazil, Mexico, the United States and Canada. We also have industrial operations in Uruguay through our 50% share in Montes del Plata and in Spain, Portugal, Germany and South Africa through our 50% share in Sonae Arauco. As of June 30, 2019, we had more than 1.0 million hectares of plantations in Chile, Argentina, Brazil and Uruguay combined.

During 2018 and the six-month period ended June 30, 2019, (i) we sold 3.7 million and 1.8 million metric tonnes of pulp, respectively, in the form of hardwood bleached pulp, softwood bleached pulp, softwood unbleached pulp and fluff pulp; (ii) we sold 8.2 million and 4.2 million cubic meters of wood products, respectively, including sawn timber (green and kiln-dried lumber), remanufactured wood products, plywood and fiberboard panels; and (iii) we harvested 22.3 million and 10.1 million cubic meters of sawlogs and pulplogs, respectively. In 2018 and the six-month period ended June 30, 2019, export sales constituted approximately 67.8% and 63.8% of our total revenue, respectively. During 2018, sales in Asia, South and Central America and North America accounted for 40.1%, 23.4% and 24.8% of our total revenue for such year, respectively.

As of June 30, 2019, our planted forests consisted of approximately 64.3% radiata, taeda and elliottii pine and approximately 33.4% eucalyptus. We seek to manage our forestry resources sustainably, in a way that ensures that the annual growth of our forests is equal to or greater than the volume of resources harvested each year. In 2018 and the six-month period ended June 30, 2019, we planted a total of 85,243 and 32,189 hectares, respectively, and harvested a total of 65,441 and 23,050 hectares, respectively, in Chile, Argentina, Brazil and Uruguay.

We operate our forestry business through three main divisions: pulp, wood products and forestry products. During 2018 and the six-month period ended June 30, 2019, (i) our pulp revenues were US$2,955 million and US$1,227 million, respectively, representing 49.6% and 44.8% of our total revenue for such respective periods; (ii) our wood products revenues were US$2,762 million and US$1,424 million, respectively, representing 46.4% and 52.0% of our total revenue for such respective periods and (iii) our forestry products revenues (from sales to third parties) were US$107.4 million and US$61.1 million, respectively, representing 1.8% and 2.2% of our total revenue for such respective periods.

Factors Affecting Our Results of Operations

Our results of operations are affected by numerous factors. Our profitability is highly sensitive to changes in sales volumes and prices, one of the primary drivers of which is demand in our principal export markets. Demand levels are highly dependent on cyclical and structural changes in the world economy, changes in industry capacity, output levels and customer inventory levels. As with many commodities, pulp is subject to significant cyclical price fluctuations determined by global supply and demand, and, accordingly, our results of operations are subject to cyclical fluctuations. Prices for wood products and forestry products also fluctuate significantly. 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 of operations.

Because many of these factors are beyond our control, and certain of these factors have historically been volatile, our past performance is not necessarily indicative of our future performance which is difficult to predict with any degree of certainty.

1

Exchange Rate Fluctuations

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

The Chilean peso has been subject to devaluation in the past and could be subject to significant fluctuations in the future. During 2018, the value of the Chilean peso relative to the US dollar decreased by 14.0% in nominal terms. During the six-month period ended June 30, 2019, the value of the Chilean peso relative to the US dollar decreased 2.2% in nominal terms. The observed exchange rate on June 30, 2019, as published in the Official Gazette on July 1, 2019, was Ch$679.15 to US$1.00. For information regarding historical rates of exchange in Chile from January 1, 2012, see “Item 3. Key Information—Exchange Rates” in our 2018 Form 20-F.

The effect of exchange rate fluctuations is partially offset by the fact that certain of our operating expenses are denominated in US dollars (such as our freight costs, chemicals, spare parts, and others, as well as our selling expenses in the form of commissions paid to our sales agents abroad) and a significant part of our indebtedness is denominated in US dollars. As of June 30, 2019, our US dollar-denominated indebtedness was US$5.7 billion. In addition, as the US dollar appreciates against the legal currency in any of our export markets, we must from time to time price our sales in the legal currency of the relevant jurisdiction to compete effectively.

Exchange rate fluctuations (as well as other economic, political and regulatory developments) in the Chilean, Argentine, Brazilian, Uruguayan, Canadian and Mexican economies may impair our ability to execute our business 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 our 2018 Form 20-F.

Prices for our Products

Price volatility in our markets is a principal factor affecting our results of operation. The prices for each of our pulp, wood products and forestry products depend on conditions in 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.

The following table presents average unit prices of our main products for the periods indicated (based on internally collected data).

	Year ended December 31,						Six months ended June 30,
Product	2016		2017		2018		2018		2019
Pulp(1)
Bleached pulp	US$	549.5	US$	619.7	US$	795.6	US$	797.0	US$	683.5
Unbleached pulp		592.4		659.0		846.7		848.6		730.9
Wood Products(2)
Fiberboard panels		322.6		337.7		318.9		326.4		318.3
Plywood		402.4		420.5		480.7		477.7		448.0
Sawn timber		246.8		258.5		272.7		272.1		259.7
Remanufactured wood products		556.1		582.8		577.1		571.3		595.6
Forestry Products(2)
Logs		35.3		32.7		28.3		29.5		26.6

(1) Prices are shown in US dollars per tonne. Each category of product contains different grades and types and the shipping terms vary with the product and customer.

(2) Prices are shown in US dollars per cubic meters. We generally quote our prices in US dollars for export sales and in Chilean pesos, Argentine pesos, Brazilian reals, or Mexican pesos, as applicable, for domestic sales.

2

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” in our 2018 Form 20-F.

Prices for bleached grades of hardwood pulp, including eucalyptus, generally follow the same cyclical pattern as prices for NBSK (as defined below), which is the benchmark for bleached softwood kraft 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. Based on information published by Hawkins Wright Ltd., unbleached softwood market pulp represents approximately 3.6% 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 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”) or bleached hardwood kraft pulp (pulp made from eucalyptus or birch which is sold in Europe and is the benchmark for Bleached Eucalyptus Kraft Pulp, or “BEKP”). In 2015, a new pulp mill entered the short fiber pulp market with an annual production capacity of 1.3 million tonnes. During the first half of 2015 the short fiber market remained stable, with a peak price of US$811.2 per tonne in October 2015. Following the October 2015 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 US$788.9 per tonne. Expectations of new supply during 2016 and especially in 2017 continued to pressure prices down, reaching their lowest level for 2016 in December 2016, at US$652.58 per tonne. A new pulp mill located in Indonesia began its ramp-up in November 2016. With an annual capacity of 2.8 million tonnes, it is currently one of the largest pulp mills worldwide. Throughout 2015 and the first half of 2016, NBSK prices followed a downward trend, reaching US$789.2 per tonne at the end of April 2016. For the remainder of the year, prices slightly recovered and stabilized, finishing the year at US$808.83 per tonne.

During 2017, average prices of BEKP and NBSK followed an upward trend, with NBSK reaching US$999.63 per tonne at the end of the year, the highest level since 2011. BEKP prices increased significantly during 2017 reaching US$979.31 at the end of the year (the rise in this type of fiber has reduced the gap between both fibers). Prices increased mainly because the actual capacity of the mill located in Indonesia was lower than the expected capacity for the next three to four years and the lower production of other existing mills due to operational problems. Average prices of Norscan bleached softwood kraft market pulp sold in China (“NBSK (China)”) and bleached hardwood kraft pulp sold in China (“BEKP (China)”) also increased in 2017 reaching US$886.35 per tonne and US$768.57 per tonne, respectively, at the end of 2017. Demand had a steady rise during 2017, which also drove prices to reach higher levels.

During 2018, average prices of NBSK, BEKP, NBSK (China) and BEKP (China) followed an upward trend, slightly decreasing in the last part of the year, with NBSK, BEKP, NBSK (China) and BEKP (China) reaching US$1,200.02 per tonne, US$1,025.73 per tonne, US$723.07 per tonne and US$652.51 per tonne, respectively. The positive trend during most of the year was mainly due to strong demand and stable capacity levels, while the slight decrease at the end of 2018 was mainly driven by trade tensions between China and the United States. Inventory levels increased in 2018, with inventories held by pulp producers and consumers reaching approximately 7.4 million tonnes and 3.5 million tonnes, respectively, in December 2018, compared to 5.5 million tonnes and 4.2 million tonnes, respectively, in December 2017.

During the six-month period ended June 30, 2019, average prices of NBSK, BEKP, NBSK (China) and BEKP (China) declined to US$1,000.31 per tonne, US$902.24 per tonne, US$593.97 per tonne and US$547.55 per tonne, respectively, due to a decrease at the end of June. This decrease in average prices was primarily due to escalating trade tensions between the

3

United States and China, which generated lower paper demand and historically high inventory levels, which, in turn, resulted in lower pulp demand. Inventories held by pulp producers and consumers reached approximately 8.1 million tonnes and 3.0 million tonnes, respectively, in June 3019. With respect to production capacity, no new capacity entered the market during this period, and no events that could limit the total production capacity occurred.

Prices of NBSK

The following table sets forth the prices for NBSK as of the dates indicated, as well as the variation with respect to the previous period, as listed on the NBSK index for the periods indicated:

As of	Price		Change
	(US$)		%
December 31, 2016		808.83		0.7
December 31, 2017		999.63		23.6
December 31, 2018		1,200.02		20.0
June 30, 2019		1,000.31		(16.6	)

Source: RISI

Prices of BEKP

The following table sets forth the prices for BEKP as of the dates indicated, as well as the variation with respect to the previous period, as listed on the BEKP index for the periods indicated:

As of	Price		Change
	(US$)		%
December 31, 2016		652.58		(17.3	)
December 31, 2017		979.31		50.1
December 31, 2018		1,025.73		4.7
June 30, 2019		902.24		(12.4	)

Source: RISI

Prices of NBSK (China)

The following table sets forth the prices for NBSK (China) as of the dates indicated, as well as the variation with respect to the previous period, as listed on the NBSK (China) index for the periods indicated:

As of	Price		Change
	(US$)		%
December 31, 2016		607.32		1.1
December 31, 2017		886.35		45.9
December 31, 2018		723.07		(18.4	)
June 30, 2019		593.97		(17.9	)

Source: RISI

Prices of BEKP(China)

The following table sets forth the prices for BEKP(China) as of the dates indicated, as well as the variation with respect to the previous period, as listed on the BEKP(China) index for the periods indicated:

As of	Price		Change
	(US$)		%
December 31, 2016		528.06		(9.7	)
December 31, 2017		768.57		45.5
December 31, 2018		652.51		(15.1	)
June 30, 2019		547.55		(16.1	)

Source: RISI

4

Prices of UKP

The following table sets forth the market price of UKP (long fiber raw pulp) as of the dates indicated, as well as the variation with respect to the previous period:

As of	Price		Change
	(US$)		%
December 31, 2016		573.82		(4.6	)
December 31, 2017		768.03		33.8
December 31, 2018		853.77		11.2
June 30, 2019		675.33		(20.9	)

Source: Internally collected data

Wood Products Prices

During 2016, average prices for our fiberboard panels and sawn timber (which for 2016 includes plywood and remanufactured products) declined 0.7% and 2.7% respectively, in each case compared to 2015. Sales volumes decreased compared to 2015, with fiberboard panels sales volume dropping 3.3% and sawn timber sales volume (which for 2016 includes plywood and remanufactured products) dropping 4.6% in 2016. Argentine markets continued to be pressured during 2016, and opportunities to export to other countries were limited. Brazilian markets followed a similar trend, although there were higher export opportunities, where the depreciation of their local currency against the US dollar made costs more competitive. These export opportunities were mainly to North America, where higher supply volumes entered the market, partially offset by healthy demand throughout the year. Our new commercial sales office in the Middle East also enabled us to reach new customers in 2016 and increase our presence in those markets.

During 2017, average prices for our wood products division increased 5.1% compared to 2016. The fiberboard panels market increased in average prices and sales volume by 4.7% and 2.4%, respectively, in 2017 compared to 2016. Our sawn timber average prices increased 4.7% in 2017 compared to 2016, partially offset by a decrease of 5.3% in sales volume. North American market demand improved in 2017 fueled by the construction and retail sectors. The Brazilian market has been recovering slowly after the economic and political crisis. The Argentine market improved in sales volume in 2017. Despite the new medium-density fiberboard (“MDF”) mills in Brazil and Mexico that increased competition, we were able to maintain and increase prices in those markets. With the acquisition of the assets of Masisa in Brazil, we expect to consolidate our position in the market.

During 2018, average prices of our wood products decreased 1.7% compared to 2017. In 2018, average prices for our fiberboard panels decreased 5.6% while sales volumes increased 11.2%, in each case compared to 2017. The downward trend in average prices was explained by an oversupply mainly from Brazil, Chile, the United States and Asia and seasonality in the northern hemisphere. Average prices for our sawn timber increased 5.5% in 2018, partially offset by a 2.9% decrease in sales volume, which was mainly explained by lower demand from China, which in turn was related to the uncertainty surrounding the trade tensions between China and the United States.

During the six-month period ended June 30, 2019, average prices for our wood products decreased 3.5%, and sales volume increased by 3.3%, in each case compared to the same period in 2018. Average prices for our fiberboard panels and sawn timber decreased 2.5% and 4.6%, respectively, during the six-month period ended June 30, 2019 compared to the same period in 2018. The decrease in prices in both fiberboard panels and sawn timber was primarily due to an oversupply from Brazil, Chile, the United States and Asia and lower demand from China, respectively. The downward trend seen in the six-month period ended June 30, 2019 was primarily attributable to escalating trade tensions between China and the United States.

5

Results of Operations

The following table provides a breakdown of our results of operations and sales volumes for the periods indicated. Both 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, 2016, 2017 and 2018 and our unaudited consolidated interim financial statements as of June 30, 2019 and for the six-month periods ended June 30, 2018 and 2019. Our audited and unaudited consolidated financial statements are prepared in US dollars and in accordance with IFRS.

	For the year ended December 31,																					For the six-month period ended June 30,
	2016							2017							2018							2018							2019
	Millions of US$			%		Volume		Millions of US$			%		Volume		Millions of US$			%		Volume		Millions of US$			%		Volume		Millions of US$			%		Volume
Revenue:
Pulp(1)
Bleached		1,780.6			37.4		3,240.8		2,062.4			39.4		3,327.8		2,536.9			42.6		3,188.6		1,289.1			42.6		1,617.5		1,066.4			38.9		1,560.4
Unbleached		260.5			5.5		439.7		293.3			5.6		445.1		418.4			7.0		494.2		213.1			7.0		251.1		160.8			5.9		220,0
Total pulp		2,041.1			42.9		3,680.4		2,355.7			45.0		3,772.9		2,955.3			49.6		3,682.7		1,502.2			49.7		1,868.6		1,227.2			44.8		1,780.4
Wood Products (2)
Fiberboard panels		1,533.6			32.2		4,753.9		1,643.3			31.4		4,866.2		1,725.1			29.0		5,410.0		866.5			28.7		2,654.5		897.7			32.8		2,820.2
Plywood		226.9			4.8		563.9		238.2			4.5		566.5		255.5			4.3		531.6		132.5			4.4		277.3		102.6			3.7		229.0
Sawn timber		479.8			10.1		1,943.8		476.1			9.1		1,841.6		487.7			8.2		1,788.4		240.0			7.9		882.1		236.7			8.6		911.6
Remanufactured wood		245.5			5.2		441.4		259.3			5.0		445.0		252.6			4.2		437.7		128.0			4.2		224.1		125.0			4.6		209.9
Total wood products		2,485.8			52.2		7,703.2		2,616.9			50.0		7,719.3		2,721.0			45.7		8,167.8		1,367.1			45.2		4,038.1		1,362.0			49.7		4,170.8
Forestry(2)
Logs (net)		63.1			1.3		1,787.5		72.6			1.4		2,223.7		71.9			1.2		2,540.0		37.7			1.2		1,276.0		42.1			1.5		1,585.2
Chips		20.8			0.4		366.2		25.2			0.5		443.4		31.4			0.5		546.0		18.5			0.6		249.1		17.9			0.7		210.1
Other		6.1			0.1		7.8		8.2			0.1		5.2		4.1			0.1		0.1		1.9			0.1		0.1		1.1			0.0		0.4
Total forestry		90.0			1.9		2,161.4		106.0			2.0		2,672.3		107.4			1.8		3,086.1		58.1			1.9		1,525.2		61.1			2.2		1,795.7
Energy		103.4			2.2		—		93.8			1.8		—		86.7			1.5		—		53.5			1.8		—		30.8			—		—
Other		41.1			0.9		—		65.9			1.2		—		84.4			1.4		—		43.2			1.4		—		58.6			—		—
Total revenue		4,761.4			100.0				5,238.3			100				5,954.8			100				3,024.0			100				2,739.8			100
Cost of sales:
Timber		(736.4	)		—		—		(725.1	)		—		—		(691.1	)		—		—		(355.8	)		—		—		(395.5	)		—		—
Forestry labor costs		(600.3	)		—		—		(631.3	)		—		—		(672.2	)		—		—		(332.0	)		—		—		(280.5	)		—		—
Maintenance costs		(313.5	)		—		—		(262.8	)		—		—		(280.7	)		—		—		(130.6	)		—		—		(139.4	)		—		—
Chemical costs		(479.3	)		—		—		(517.5	)		—		—		(560.2	)		—		—		(276.2	)		—		—		(278.8	)		—		—
Depreciation		(378.0	)		—		—		(389.8	)		—		—		(377.6	)		—		—		(192.3	)		—		—		(234.6	)		—		—
Other costs of sales		(991.4	)		—		—		(1,048.0	)		—		—		(1,140.9	)		—		—		(571.1	)		—		—		(577.1	)		—		—
Total cost of sales		(3,498.9	)		—		—		(3,574.5	)						(3,722.7	)						(1,858.1	)						(1,905.9	)
Gross profit		1,262.5			26.5		—		1,663.8			31.8				2,232.1			37.5				1,165.9			38.6				833.9			30.4
Other income		257.9			—		—		111.5			—		—		124.3			—		—		66.5			—		—		132.0			—		—
Distribution costs		(496.5	)		—		—		(523.3	)		—		—		(556.8	)		—		—		(267.7	)		—		—		(288.2	)		—		—
Administrative expenses		(474.5	)		—		—		(521.3	)		—		—		(561.3	)		—		—		(282.5	)		—		—		(287.5	)		—		—
Other expenses		(77.4	)		—		—		(240.1	)						(95.9	)						(33.6	)						(50.0	)
Other income (loss)		—			—		—		—			—		—		14.2			—		—					—		—					—		—
Finance income		29.7			—		—		19.6			—		—		20.9			—		—		7.3			—		—		14.8			—		—
Finance costs		(258.5	)		—		—		(287.9	)		—		—		(214.8	)		—		—		(103.1	)		—		—		(126.9	)		—		—
Share of profit (loss) of associates and joint ventures accounted for using equity method		23.9			—		—		17.0			—		—		17.2			—		—		24.0			—		—		9.7			—		—
Exchange rate differences		(3.9	)		—		—		0.1			—		—		(26.5	)		—		—		(16.2	)		—		—		(7.2	)		—		—
Profit before income tax		263.2			—		—		239.4			—		—		953.5			—		—		560.6			—		—		230.5			—		—
Income tax		(45.6	)		—		—		31.0			—		—		(226.8	)		—		—		(124.7	)		—		—		(47.0	)		—		—
Net profit		217.6			—		—		270.4			—		—		726.8			—		—		435.9			—		—		183.5			—		—

(1) Volumes measured in thousands of tonnes. It does not include subproduct sales (i.e. energy and chemicals) which are presented in the pulp reportable segment in Note 25 to our unaudited interim consolidated financial statements.

(2) Volumes measured in thousands of cubic meters. It does not include subproduct sales (i.e. energy and chemicals) which are presented in the wood products reportable segment in Note 25 to our unaudited interim consolidated financial statements.

6

Six-Month Period Ended June 30, 2018 Compared to Six-Month Period Ended June 30, 2019

Revenue

Our revenue decreased 9.4% in the six-month period ended June 30, 2019, from US$3,024.0 million for the six-month period ended June 30, 2018 to US$2,739.8 million for the same period in 2019, primarily as a result of a decrease of 18.3%, or US$275.0 million, in revenue from pulp and 0.4%, or US$5.1 million, in revenue from wood products, which was partially offset by an increase of 5.2%, or US$3.0 million, in revenue from forestry products.

Pulp

Revenue from sales of bleached and unbleached pulp decreased 18.3% in the six-month period ended June 30, 2019, from US$1,502.2 million in the six-month period ended June 30, 2018 to US$1,227.2 million in the same period of 2019. This decrease was primarily attributable to a decrease in average pulp prices and sales volume of 14.3% and 4.7%, respectively, in the six-month period ended June 30, 2019. Revenue from bleached pulp decreased 17.3% in the six-month period ended June 30, 2019, from US$1,289.1 million in the six-month period ended June 30, 2018 to US$1,066.4 million in the same period of 2019, mainly due to a decrease of 14.2% and 3.5% in average prices and sales volume in the six-month period ended June 30, 2019, respectively. Revenue from unbleached pulp decreased 24.5% in the six-month period ended June 30, 2019, from US$213.1 million in the six-month period ended June 30, 2018 to US$160.8 million in the same period of 2019, mainly due to a decrease of 13.9% and 12.4% in average prices and sales volume in the six-month period ended June 30, 2019, respectively.

Pulp prices (for both NBSK and BEKP indexes) reached historically high levels in the first half of 2018 and decreased at the end of 2018 and through the first half of 2019. During the six-month period ended June 30, 2019, NBSK and BEKP indexes average prices were US$1,000.31 and US$902.24 per tonne, respectively, compared to US$1,199.99 and US$1,050.00 per tonne, respectively in the same period in 2018. This decrease in average prices was primarily attributable to escalating trade tensions between the United States and China in 2019, which affected paper and packaging demand and production, which in turn negatively affected pulp demand primarily from China, exerting significant downward pressure on pulp prices and sales volumes. As a result of this decrease in pulp demand, pulp inventories increased at ports and competitors’ warehouses, further intensifying the decrease in pulp prices in the six-month period ended June 30, 2019.

Wood Products

Revenue from wood products decreased 0.37% in the six-month period ended June 30, 2019, from US$1,367.1 million during the six-month period ended June 30, 2018 to US$1,362.0 million during the same period in 2019. This slight decrease was primarily attributable to a 22.5% decrease in revenue from plywood, offset by a 3.6% increase in revenue from fiberboard panels.

Revenue from fiberboard panels increased 3.6% in the six-month period ended June 30, 2019, from US$866.5 million in the six-month period ended June 30, 2018 to US$897.7 million during the same period in 2019. This increase was primarily attributable to a 6.2% increase in sales volume, partially offset by a 2.5% decrease in average prices. Sales volume of particleboard (“PBO”) increased 13.3% in the six-month period ended June 30, 2019 compared to the same period in 2018, primarily as a result of (i) the acquisition of our Mexican subsidiaries in January 2019 that increased our sales and (ii) higher demand in the US and Canada. Medium-density fiberboard (“MDF”) sales volume remained stable in the six-month period ended June 30, 2019, increasing only 0.6% in such period compared to the same period in 2018. Prices of MDF and PBO decreased 2.0% and 1.1% in the six-month period ended June 30, 2019, respectively, mainly attributable to Latin American demand being affected by slow economies, particularly in Brazil and Argentina. In addition, MDF oversupply from Brazil was exported to some Latin American countries, which resulted in downward pressure on MDF prices. MDF demand in North America remained stable.

Revenue from plywood decreased 22.6% in the six-month period ended June 30, 2019, from US$132.5 million in the six-month period ended June 30, 2018 to US$102.6 million during the same period in 2019. This decrease was primarily attributable to a decrease of 17.4% and 6.2% in sales volume and average prices in the six-month period ended June 30, 2019. This decrease in plywood average prices was primarily driven by a combination of lower demand and oversupply particularly from Brazil, Chile and China.

Revenue from sawn timber decreased 1.4% in the six-month period ended June 30, 2019, from US$240.0 million in the six-month period ended June 30, 2018 to US$236.7 million during the same period in 2019. This decrease was primarily attributable to a 4.6% decrease in average prices, partially offset by a 3.3% increase in sales volume in the six-month period ended June 30, 2019. The decrease in average prices of sawn timber was mainly attributable to oversupply from Brazil, Europe and Canada.

7

Revenue from remanufactured wood products decreased 2.3% in the six-month period ended June 30, 2019, from US$128.0 million in the six-month period ended June 30, 2018 to US$125 million during the same period in 2019. This decrease was primarily attributable to a 6.3% decrease in sales volume, partially offset by a 4.2% increase in average prices primarily attributable to lower supply and healthy demand from the United States.

Forestry Products

Revenue from forestry products increased 5.2% in the six-month period ended June 30, 2019, from US$58.1 million during the six-month period ended June 30, 2018 to US$61.1 million during the same period in 2019. This increase was primarily attributable to an increase of 53.7% and 5.5% in revenue from pulplogs and sawlogs, respectively, as a result of higher sales volume.

Other

Revenue from other sources, consisting primarily of sales of energy and chemicals, decreased 7.6% in the six-month period ended June 30, 2019, from US$96.7 million in the six-month period ended June 30, 2018 to US$89.4 million for the same period in 2019. This decrease was primarily attributable to a 42.5% decrease, or US$22.7 million, in revenue from the sale of energy, due to lower third parties sales. This decrease in revenues from the sale of energy was partially offset by a 46.5% increase, or US$11.2 million, in revenues from sales of chemicals.

Cost of Sales

The following table shows the breakdown of our cost of sales for the six-month periods ended June 30, 2018 and 2019.

	For the six–month period ended June 30, (unaudited)
	2018		2019		2018/2019
	(in thousands of US dollars)				% change
Timber		355,838		395,485		11.1
Forestry labor costs		332,029		280,481		(15.5	)
Depreciation and amortization		192,343		198,138		3.0
Depreciation for the right of use		—		36,470		—
Maintenance costs		130,622		139,417		6.7
Chemical costs		276,166		278,775		0.9
Sawmill services		77,309		76,268		(1.3	)
Other raw materials		109,720		105,251		(4.1	)
Indirect costs		90,980		81,265		(10.7	)
Energy and fuel		97,225		105,743		8.8
Cost of electricity		20,923		18,258		(12.7	)
Wages and salaries		174,907		190,320		8.8
Total		1,858,062		1,905,871		2.6

Cost of sales increased 2.6% in the six-month period ended June 30, 2019, from US$1,858.0 million for the six-month period ended June 30, 2018 to US$1,905.9 million for the same period of 2019. This increase was primarily as a result of (i) an 11.1% increase, or US$39.7 million, in timber cost, mainly due to a higher timber purchase volume and the ramp-up of our Grayling mill in the United States; and (ii) an increase of US$36.5 million in depreciation for the right of use pursuant to operational leases with a term exceeding 12 months (which we now register as assets, in accordance with IFRS 16 which became effective on January 1, 2019). These increases were offset by a 15.5%, or US$51.5 million, decrease in forestry labor costs in the six-month period ended June 30, 2019 compared to the same period in 2018, primarily attributable to lower sales volume.

8

Gross Profit

Our gross profit decreased from US$1,165.9 million for the six-month period ended June 30, 2018 to US$833.9 for the same period in 2019, primarily attributable to a 9.4% decrease in our revenue, mainly explained by the decrease in pulp revenue described above. As a percent of total revenues, our gross profit decreased from 38.6% for the six-month period ended June 30, 2018 to 30.4% for the same period in 2019, primarily attributable to lower revenues.

Other Income

Other income increased 98.5% in the six-month period ended June 30, 2019, from US$66.5 million in the six-month period ended June 30, 2018 to US$132.0 million in the same period in 2019. This increase was primarily attributable to an increase of US$40.8 million in gain on sales of associates due to our sale of shares of Puertos y Logística S.A. in April 2019 and an increase of 43.3%, or US$22.5 million, in gain of change in fair value of biological assets.

Distribution Costs

Distribution costs increased 7.7% in the six-month period ended June 30, 2019, from US$267.7 million in the six-month period ended June 30, 2018 to US$288.1 million in the same period in 2019, primarily as a result of a 17.4%, or US$34.6 million, increase in freight costs, mainly driven by higher freight rates.

The following table shows the breakdown of our distribution costs for the six-month periods ended June 30, 2018 and 2019.

	For the six–month period ended June 30, (unaudited)
	2018		2019		2018/2019
	(in thousands of US dollars)				% change
Selling costs		15,805		20,074		27.0
Commissions		7,627		6,593		(13.6	)
Insurance		2,185		2,242		2.6
Provision for doubtful accounts receivable		10		652		6,420.0
Other selling costs		5,983		10,587		77.0
Shipping and freight costs		251,900		268,104		6.4
Port services		13,859		16,321		17.8
Freights		199,277		233,873		17.4
Other shipping and freight costs		38,764		17,910		(53.8	)
Total		267,705		288,178		7.7

Administrative Expenses

Administrative expenses increased 1.8% in the six-month period ended June 30, 2019, from US$282.5 million in the six-month period ended June 30, 2018 to US$287.5 million in the same period in 2019, primarily as a result of a 96.7%, or US$5.6 million, increase in marketing and advertising, and a 28.5%, or US$4.4 million, increase in computer licensing expenses.

9

The following table shows the breakdown of our administrative expenses for the six-month periods ended June 30, 2018 and 2019.

	For the six-month period ended June 30, (unaudited)
	2018		2019		2018/2019
	(in thousands of US dollars)				% change
Wage and salaries		122,467		121,977		(0.4	)
Marketing, advertising, promotion and publicity expenses		5,750		11,311		96.7
Insurance		7,437		9,552		28.4
Depreciation and amortization		13,703		13,762		0.4
Depreciation for the right of use		—		3,287
Computer services		15,302		19,668		28.5
Lease rentals (offices, warehouses and machinery)		7,262		4,575		(37.0	)
Donations, contributions, scholarships		5,814		5,911		1.7
Fees (legal and technical advisories)		26,888		23,352		(13.2	)
Property taxes, patents and municipality rights		9,884		8,979		(9.2	)
Other administrative expenses		67,960		65,130		(4.2	)
Total		282,467		287,504		1.8

Other Expenses

Other expenses increased 48.8% in the six-month period ended June 30, 2019, from US$33.6 million in the six-month period ended June 30, 2018 to US$50.0 million for the same period in 2019, primarily as a result of an increase in our provision for forestry losses due to fire, from US$0.6 million in the six-month period ended June 30, 2018 to US$6.2 million in the same period of 2019.

Finance Costs

Finance costs increased 23.1% in the six-month period ended June 30, 2019, from US$103.1 million in the six-month period ended June 30, 2018 to US$126.9 million in the same period in 2019, primarily as a result of a US$8.5 million increase in our bond interest expense associated with our international bond issuance in April 2019 and a US$6.4 million increase in leasing interest expense (due to interest costs relating to leases, which we now register as lease liabilities in accordance with IFRS 16 that became effective on January 1, 2019).

Exchange Rate Differences

We recorded a 55.6% decrease in exchange rate difference in the six-month period ended June 30, 2019, from a loss of US$16.2 million for the six-month period ended June 30, 2018 to a loss of US$7.2 million for the same period in 2019, primarily as a result of the depreciation of the average Argentine peso against the US dollar of approximately 90.0% and a depreciation of approximately 10.4% of the average Chilean peso against the US dollar, both of which had the effect of reducing the amount of our Argentine and Chilean peso-denominated cash and cash equivalents when converted to US dollars.

Income Tax

We recorded an income tax expense of US$47.0 million in the six-month period ended June 30, 2019, which represented a decrease of 62.3% compared to US$124.7 million in income tax expense for the six-month period ended June 30, 2018, primarily as a result of lower profit before tax in the six-month period ended June 30, 2019.

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.

We also have access to two committed credit facility lines aggregating approximately US$318.5 million. The first line has an available amount of UF 2,885,000, or approximately US$118.5 million, based on the exchange rates as of June 30, 2019 and is scheduled to expire on January 29, 2020. The second line has a maximum available amount of US$200.0 million and is scheduled to expire on March 27, 2020. To date, we have not utilized either of these credit facilities.

10

Cash Flow from Operating Activities

Our net cash flow provided by operating activities decreased 72.6% in the six-month period ended June 30, 2019, from US$481.9 million in the six-month period ended June 30, 2018 to US$132.0 million in the same period in 2019, primarily as a result of a US$203.2 million increase in income tax paid in 2019, associated to higher profit before tax in 2018, which is the base for the annual income tax paid in April, 2019.

Cash Flow Used in Investing Activities

Our net cash used in investing activities increased 64.6% in the six-month period ended June 30, 2019, from US$376.2 million for the six-month period ended June 30, 2018 to US$619.2 million for the same period in 2019, primarily due to a 78.0% increase, or US$194.5 million, in purchase of property, plant and equipment associated to the MAPA Project. Additionally, cash flow used in investing activities was affected by our acquisition of the Mexican subsidiaries for US$160.0 million in January 2019. This increase in cash used in investing activities was partially offset by the cash inflow from the sale of our shares of Puertos y Logística S.A. for US$102.1 million in April 2019.

Cash Flow from Financing Activities

Our net cash from financing activities increased 746.8% in the six-month period ended June 30, 2019, from US$101.4 million used in the six-month period ended June 30, 2018 to US$655.6 million in the same period of 2019, primarily as a result of a US$989.5 million increase in outstanding debt due to our issuance of an international bond in April 2019. This increase in outstanding debt was partially offset by a 92.8% decrease, or US$186.0 million, in incurrence of short-term debt.

Contractual Obligations

In accordance with customary practice in the pulp industry, we generally do not enter into long-term sales contracts with our customers. Instead, we generally prefer to maintain long-term relationships with certain customers with whom we reach agreements from time to time on specific volumes and prices.

The following table sets forth certain of our contractual obligations as of June 30, 2019 and the period in which such contractual obligations are scheduled to come due.

	Payments due by Period (unaudited)
	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
	(in thousands of US dollars)
Debt obligations(1)		461,223		1,233,498		930,860		5,120,698		7,746,279
Purchase obligations(2)		412,145		706,739		—		—		1,118,884
Lease obligations		98,954		148,824		71,764		72,176		391,718
Total		972,322		2,089,061		1,002,624		5,192,874		9,256,881

(1) Includes estimated interest payments related to long-term debt obligations based on market values as of June 30, 2019. In the case of floating rate debt, interest rate is calculated using the current index setting in place as of June 30, 2019, and assuming no changes in the year-end index for any future periods. The interest rate on our floating rate debt is determined principally by reference to the London inter-bank offered rate (LIBOR), and, as of June 30, 2019, the average spread for our US dollar floating rate debt over six-month LIBOR was 1.55%. Approximately 10.5% of our total debt is floating rate debt as of June 30, 2019.

(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.

11

Financial Debt

As of June 30, 2019, the scheduled amortization our financial debt was as follows:

	2019		2020		2021		2022		2023		2024		2025		2026		2027		2028		2029		2030 (and sub.)
	(in millions of US dollars)
Bank debt		197		185		166		154		307		263		44		8		8		8		8		0
Outstanding notes		249		244		171		299		45		539		45		243		533		164		527		1,359
Total		446		429		337		453		352		802		89		251		541		172		535		1,359

Investment Activities

During the six-month period ended June 30, 2019, our main investment activities were as follows:

• US$215.8 million relating to the MAPA Project;

• US$115.0 million relating to investments in biological assets;

• US$56.9 million relating to investments in our Dissolving Pulp Project; and

• US$30.2 million relating to investments in the construction of our particleboard plant in Grayling, Michigan, United States.

Financing Activities

During the six-month period ended June 30, 2019, our main financing activities were as follows:

• On April 1, 2019, we entered into an Export Credit Agreement (ECA) for a total of € 555.0 million.

• On April 30, 2019, we issued two bonds in the international market: (i) US$500 million principal amount of 4.25% Notes due 2029 and (ii) US$500 million principal amount of 5.50% Notes due 2049. We used part of the proceeds from the issuance of such notes to repurchase a portion of our outstanding 7.250% Notes due 2019 and 5.000% Notes due 2021.

As of June 30, 2019, we had US$196.8 million of short-term bank debt, of which 96.6% was US dollar-denominated, and US$757.9 million of long-term bank debt, of which 90.8% was US dollar-denominated. In addition, as of June 30, 2019, we guaranteed US$363.3 million of obligations of our Montes del Plata joint operation in Uruguay.

As of June 30, 2019, we had US$4,417.6 million of outstanding bonds (including the current portion of such debt), of which 66.7% was US dollar-denominated and 33.3% was UF-denominated swapped to US dollars.

The interest rate on our variable rate debt is determined mainly by reference to the London inter-bank offered rate (LIBOR), and, as of June 30, 2019, the average interest rate for our US dollar floating rate debt over six-month LIBOR was 1.55%. As of June 30, 2019, the average interest rate for our US dollar fixed rate debt was 4.19%. These average rates do not reflect the effect of swap agreements and subsequent unwinds effective as of June 30.

The instruments and agreements governing our bank loans and local bonds contain certain financial covenants that limit our incurrence of debt and other liabilities. The main financial covenants contained in our bank loan agreements are that our (i) debt to equity ratio must not exceed 1.2 to 1 and (ii) net interest coverage ratio must not be less than 2.0 to 1. The main financial covenant contained in our local bond agreements is that our debt to equity ratio must not exceed 1.2 to 1.

Off-Balance Sheet Arrangements

At June 30, 2019, we did not have any material off-balance sheet arrangements.

12

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018 AND 2019

Unaudited Interim Consolidated Statements of Financial Position	14
Unaudited Interim Consolidated Financial Statements of Profit or Loss	16
Unaudited Interim Consolidated Statements of Comprehensive Income	17
Unaudited Interim Consolidated Statements of Changes in Equity	18
Unaudited Interim Consolidated Statements of Cash Flows	19
Unaudited Notes to the Interim Consolidated Financial Statements	20

13

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	Note		06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Assets
Current Assets
Cash and cash equivalents		5-23		1,250,863		1,075,942
Other current financial assets		23		1,027		497
Other current non-financial assets		25		192,934		129,854
Trade and other current receivables		23		851,994		839,184
Accounts receivable from related companies		13		4,445		7,324
Current inventories		4		1,153,685		1,030,196
Current biological assets		20		308,589		315,924
Current tax assets				60,723		36,513
Total Current Assets other than assets or disposal groups classified as held for sale				3,824,260		3,435,434
Non-Current Assets or disposal groups classified as held for sale		22		5,668		5,726
Non-Current Assets or disposal groups classified as held for sale or as held for distribution to owners				5,668		5,726
Total Current Assets				3,829,928		3,441,160
Non-Current Assets
Other non-current financial assets		23		49,165		20,346
Other non-current non-financial assets		25		114,187		86,948
Trade and other non-current receivables		23		11,334		15,149
Accounts receivable from related companies, non-current		13		—		481
Investments accounted for using equity method		15-16		304,971		358,053
Intangible assets other than goodwill		19		96,720		90,093
Goodwill		17		66,299		65,851
Property, plant and equipment		7		7,810,175		7,174,693
Non-current biological assets		20		3,374,596		3,336,339
Deferred tax assets		6		6,203		4,635
Total Non-Current Assets				11,833,650		11,152,588
Total Assets				15,663,578		14,593,748

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

14

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)

	Note	06-30-2019 ThU.S.$			12-31-2018 ThU.S.$
Equity and Liabilities
Liabilities
Current Liabilities
Other current financial liabilities	23		544,377			537,596
Trade and other current payables	23		696,657			659,618
Accounts payable to related companies	13-23		8,099			10,229
Other current provisions	18		1,279			413
Current tax liabilities	6		7,196			153,642
Current provisions for employee benefits	10		5,973			5,656
Other current non-financial liabilities	25		118,320			212,610
Total Current Liabilities other than assets included in disposal groups classified as held for sale			1,381,901			1,579,764
Total Current Liabilities			1,381,901			1,579,764
Non-Current Liabilities
Other non-current financial liabilities	23		5,191,161			4,044,279
Non-current payables			2,591			2,230
Other non-current provisions	18		34,114			33,884
Deferred tax liabilities	6		1,389,959			1,417,658
Non-current provisions for employee benefits	10		68,968			64,895
Other non-current non-financial liabilities	25		120,347			112,067
Total Non-Current Liabilities			6,807,140			5,675,013
Total Liabilities			8,189,041			7,254,777
Equity
Issued capital	3		353,618			353,618
Retained earnings			7,925,144			7,824,045
Other reserves			(841,900	)		(875,884	)
Equity attributable to parent company			7,436,862			7,301,779
Non-controlling interests			37,675			37,192
Total Equity			7,474,537			7,338,971
Total Equity and Liabilities			15,663,578			14,593,748

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

15

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

INTERIM CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

			January-June						April-June
			2019			2018			2019			2018
	Note		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Statements of profit or loss
Revenue		9		2,739,756			3,023,991			1,351,570			1,559,337
Cost of sales		3		(1,905,871	)		(1,858,062	)		(965,993	)		(936,471	)
Gross profit				833,885			1,165,929			385,577			622,866
Other income		3		131,952			66,459			86,413			29,227
Distribution costs		3		(288,178	)		(267,705	)		(143,282	)		(135,305	)
Administrative expenses		3		(287,504	)		(282,467	)		(146,224	)		(140,942	)
Other expense		3		(50,006	)		(33,619	)		(27,689	)		(16,792	)
Profit from operating activities				340,149			648,597			154,795			359,054
Finance income		3		14,845			7,345			8,099			2,563
Finance costs		3		(126,940	)		(103,081	)		(69,549	)		(51,419	)
Share of profit of associates and joint ventures accounted for using equity method		3-15		9,657			24,009			5,294			18,164
Exchange rate differences				(7,219	)		(16,230	)		(9,346	)		(17,279	)
Profit before income tax				230,492			560,640			89,293			311,083
Income tax expense		6		(46,965	)		(124,696	)		(31,865	)		(72,855	)
Net Profit				183,527			435,944			57,428			238,228
Net profit attributable to
Net profit attributable to Parent company				183,159			436,235			57,323			238,429
Net profit attributable to Non-controlling interests				368			(291	)		105			(201	)
Net Profit				183,527			435,944			57,428			238,228
Basic and diluted earnings per share (in U.S.$ per share)
Basic and diluted earnings per share from continuing operations				1.6186			3.8550			0.5066			2.1070
Basic and diluted earnings per share				1.6186			3.8550			0.5066			2.1070

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

16

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AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

			January-June						April-June
			2019			2018			2019			2018
	Note		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Net profit				183,527			435,944			57,428			238,228
Components of other comprehensive income that will not be reclassified to profit or loss before tax:
Other comprehensive income before tax actuarial gain (losses) on defined benefit plans		10		499			(1,685	)		(312	)		(1,367	)
Share of other comprehensive income of associates and joint ventures accounted for using equity method that will not be reclassified to profit or loss before tax				8,162			(508	)		7,570			(2,202	)
Other Comprehensive Income that will not be reclassified to profit or loss before tax				8,661			(2,193	)		7,258			(3,569	)
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		13,479			(167,860	)		22,101			(162,335	)
Other Comprehensive Income before tax exchange differences on translation				13,479			(167,860	)		22,101			(162,335	)
Cash flow hedges
Gains (losses) on cash flow hedges, before tax		23		32,398			51,391			37,221			25,550
Recycle of cash flow hedges to profit or loss before tax		23		(12,907	)		(6,120	)		(10,759	)		(4,220	)
Other Comprehensive Income before tax Cash flow hedges				19,491			45,271			26,462			21,330
Other Comprehensive income that will be reclassified to profit or loss before tax				32,970			(122,589	)		48.563			(141,005	)
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				(135	)		455			64			370
Income tax relating to share of other comprehensive income of associates and joint ventures accounted for using equity method that will not be reclassified to profit or loss				(2,171	)		(1,522	)		(2,034	)		(1,099	)
Income tax relating to components of other comprehensive Income that will not be reclassified to profit or loss before tax				(2,306	)		(1,067	)		(1,970	)		(729	)
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		(5,159	)		(12,292	)		(8,877	)		(5,888	)
Income tax relating to components of other comprehensive income that will be reclassified to profit or loss				(5,159	)		(12,292	)		(8,877	)		(5,888	)
Other comprehensive income (loss)				34,166			(138,141	)		44,974			(151,191	)
Comprehensive income (loss)				217,693			297,803			102,402			87,037
Comprehensive Income (loss) attributable to
Comprehensive income (loss), attributable to Owners of parent company				217,143			302,211			101,867			91,041
Comprehensive income (loss), attributable to Non-controlling interests				550			(4,408	)		535			(4,004	)
Total comprehensive income (loss)				217,693			297,803			102,402			87,037

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

17

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AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

06-30-2019	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 ThU.S.$			Non - controlling interests ThU.S.$			Total Equity ThU.S.$
Opening balance at 01-01-2019		353,618		(872,395	)		13,395		(17,571	)		687			(875,884	)		7,824,045			7,301,779			37,192			7,338,971
Increase (decrease) for changes in accounting policies		—		—			—		—			—			—			(107	)		(107	)		—			(107	)
Restated opening balance		353,618		(872,395	)		13,395		(17,571	)		687			(875,884	)		7,823,938			7,301,672			37,192			7,338,864
Changes in Equity:
Comprehensive income
Net profit		—		—			—		—			—			—			183,159			183,159			368			183,527
Other comprehensive income, net of tax		—		13,297			14,332		364			5,991			33,984			—			33,984			182			34,166
Comprehensive income		—		13,297			14,332		364			5,991			33,984			183,159			217,143			550			217,693
Dividends		—		—			—		—			—			—			(80,992	)		(80,992	)		(91	)		(81,083	)
Increase (decrease) from transfers and other changes		—		—			—		—			—			—			(961	)		(961	)		24			(937	)
Changes in equity		—		13,297			14,332		364			5,991			33,984			101,206			135,190			483			135,673
Closing balance at 06-30-2019		353,618		(859,098	)		27,727		(17,207	)		6,678			(841,900	)		7,925,144			7,436,862			37,675			7,474,537
06-30-2018	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 ThU.S.$			Non - controlling interests ThU.S.$			Total Equity ThU.S.$
Opening balance at 01-01-2018		353,618		(691,772	)		4,752		(18,926	)		2,168			(703,778	)		7,425,133			7,074,973			41,920			7,116,893
Increase (decrease) for changes in accounting policies		—		—			—		—			—			(1,918	)		(1,956	)		(3,874	)		—			(3,874	)
Restated opening balance		353,618		(691,772	)		2,834		(18,926	)		2,168			(705,696	)		7,423,177			7,071,099			41,920			7,113,019
Changes in Equity:
Comprehensive income
Net profit		—		—			—		—			—			—			436,235			436,235			(291	)		435,944
Other comprehensive income, net of tax		—		(163,743	)		32,979		(1,230	)		(2,030	)		(134,024	)		—			(134,024	)		(4,117	)		(138,141	)
Comprehensive income		—		(163,743	)		32,979		(1,230	)		(2,030	)		(134,024	)		436,235			302,211			(4,408	)		297,803
Dividends		—		—			—		—			—			—			(189,546	)		(189,546	)		(54	)		(189,600	)
Increase (decrease) from transfers and other changes		—		—			—		—			—			—			(171	)		(171	)		(33	)		(204	)
Changes in equity		—		(163,743	)		32,979		(1,230	)		(2,030	)		(134,024	)		246,518			112,494			(4,495	)		107,999
Closing balance at 06-30-2018		353,618		(855,515	)		35,813		(20,156	)		138			(839,720	)		7,669,695			7,183,593			37,425			7,221,018

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

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AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the six months ended June 30,
	2019 ThU.S.$			2018 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		2,926,536			2,924,236
Other cash receipts from operating activities		200,672			207,165
Classes of cash payments
Payments to suppliers for goods and services		(2,258,263	)		(2,116,940	)
Payments to and on behalf of employees		(327,293	)		(295,463	)
Other cash payments from operating activities		(84,321	)		(134,239	)
Interest paid		(111,297	)		(85,882	)
Interest received		12,136			3,959
Income taxes paid		(222,651	)		(19,455	)
Other inflows (outflows) of cash, net		(3,484	)		(1,511	)
Net Cash flow from Operating Activities		132,035			481,870
Cash flows from (used in) Investing Activities
Cash flow from loss of control of subsidiaries and other businesses		102,080			—
Cash flow used in obtaining control of subsidiaries or other businesses, net of cash acquired		(150,862	)		(16,551	)
Cash used for the purchase of non-controlling interests		(470	)		(732	)
Proceeds from sale of property, plant and equipment		6,322			5,578
Purchase of property, plant and equipment		(443,637	)		(249,185	)
Purchase of intangible assets		(8,788	)		(472	)
Proceeds from sales of other long-term assets		2,304			763
Purchase of other non-current assets		(133,051	)		(118,490	)
Dividends received		6,705			2,910
Other inflows (outflows) of cash, net		168			(47	)
Cash flows from (used in) Investing Activities		(619,229	)		(376,226	)
Cash flows from (used in) Financing Activities
Total borrowings obtained		1,088,036			284,474
Debt obtained in long-term		1,073,536			84,000
Debt obtained in short-term		14,500			200,474
Repayments of borrowings		(201,730	)		(267,871	)
Payments of lease liabilities		(43,040	)		(2,761	)
Dividends paid		(182,109	)		(114,442	)
Other outflows of cash, net		(5,554	)		(763	)
Cash flows from (used in) Financing Activities		655,603			(101,363	)
Net increase (decrease) in Cash and Cash Equivalents before effect of exchange rate changes		168,409			4,281
Effect of exchange rate changes on cash and cash equivalents		6,512			(22,341	)
Net increase (decrease) of Cash and Cash Equivalents		174,921			(18,060	)
Cash and cash equivalents, at the beginning of the period		1,075,942			589,886
Cash and cash equivalents, at the end of the period		1,250,863			571,826

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

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2019 AND 2018 AND DECEMBER 31, 2018

NOTE 1. PRESENTATION OF INTERIM 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 Chilean Commission for the Financial Market (“CMF”) 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.

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

Arauco is principally engaged in the production and sale of products related to the forestry and timber industries. Its main operations are focused on business areas of pulp, wood products and forestry.

As of June 30, 2019, Arauco is controlled by Empresas Copec S.A., tax identification number 90,690,000-9, 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 CMF.

Moreover, Empresas Copec S.A. is controlled by the public corporation AntarChile S.A., tax identification number 96,556,310-5, which owns 60.8208% of Empresas Copec S.A. Furthermore, the ultimate shareholders of AntarChile S.A. and, consequently, of Empresas Copec S.A., are Mrs. María Noseda Zambra de Angelini, Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi. It is noted in this regard, that Mrs. María Noseda Zambra de Angelini passed away on April 15, 2018, and the effective possession of her property is in process.

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

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AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Presentation of Interim Consolidated Financial Statements

The Interim Consolidated Financial Statements presented by Arauco are comprised by the following:

• Interim Consolidated Statements of Financial Position as of June 30, 2019 and December 31, 2018.

• Interim Consolidated Statements of Profit or Loss for the periods ended June 30, 2019 and 2018.

• Interim Consolidated Statements of Comprehensive Income for the periods ended June 30, 2019 and 2018.

• Interim Consolidated Statements of Changes in Equity for the periods ended June 30, 2019 and 2018.

• Interim Consolidated Statements of Cash Flows for the periods ended June 30, 2019 and 2018.

• Explanatory disclosures (notes)

Period Covered by the Interim Consolidated Financial Statements

Six month period ended June 30, 2019 and 2018.

Date of Approval of the Interim Consolidated Financial Statements

These interim consolidated financial statements were approved by the Board of Directors of the Company (the “Board”) at the Extraordinary Meeting No. 615 on August 19, 2019.

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

UTA - Annual Tax Unit

ICMS - Tax movement of inventories and services (Brazil)

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 to a large extent related or indexed to the U.S. Dollar.

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

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AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

In relation to the cost of sales, although 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.

The currency used to finance operations is mainly the U.S. Dollar.

The presentation currency of the interim consolidated financial statements is the U.S. Dollar. Figures on these interim consolidated financial statements are presented in thousands of U.S. Dollar (ThU.S.$).

Summary of significant accounting policies

a) Basis for preparation of the interim consolidated financial statements

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

The interim consolidated financial statements have been prepared on a historical cost basis, except for biological assets and certain derivative financial instruments which are measured at revalued amounts or 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 interim 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 interim 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 makes 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.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

- 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. The aforementioned 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.

c) Consolidation

The interim 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 the 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 the 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 participates if the facts and circumstances indicate that changes have occurred in one or more of the three elements of control mentioned above.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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 interim consolidated 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 these interim consolidated financial statements and non-controlling interest is presented in the interim consolidated statement of financial position within equity, separately from the equity of the owners of the parent company.

The interim 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, Argentine Pesos, Canadian Dollars 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 as indicated in Note 1 (e) (ii).

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

d) Segments

Arauco has defined its reportable 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 personnel responsible for making such decisions are the Executive Vice-president and the Chief Executive Officer who are the highest authorities for making decisions and are supported by the Corporate Managing Directors of each segment.

Based on the aforementioned process, the Company has established reportable segments according to the following business units:

• Pulp

• Wood products

• Forestry

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

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

e) Functional currency

(i) Functional currency

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

(ii) Translation to the presentation currency of Arauco

For the purposes of presenting interim 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.

(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 statements of profit or loss, 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-on-hand, deposits held on demand at financial entities 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

Initial classification

Arauco classifies its financial assets into the following categories: fair value through profit or loss and amortized cost.

Arauco does not have financial assets at fair value through other comprehensive income.

The classification is based on the business model used to manage the assets and the characteristics of their contractual cash flows.

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Management determines the classification of its financial assets at the time of their initial recognition.

(a) Financial assets at fair value through profit or loss: these instruments are initially measured at fair value. Net income and losses, including any income from interest or dividends, are registered in the profit or loss of the period. Financial assets are classified in the category of financial assets at fair value through profit or loss when they are maintained for negotiation or designated in their initial registration as assets at fair value through profit or loss. A financial asset can be classified in this category if it is acquired mainly for the purposes of being sold in the short-term. Gain or losses of assets held for negotiations are registered in the consolidated statements of Profit or Loss, and the related interest is registered independently as financial income. Derivatives are classified as acquired for negotiation also unless they are designated as hedging instruments.

(b) Assets measured at amortized cost: they are initially registered at the fair value of the transaction, adding or subtracting the transaction costs that are directly attributable to the issuance of the financial asset or financial liability. The financial asset is maintained within a business model, the objective of which is to maintain financial assets to obtain contractual cash flows and the contractual conditions of the asset give rise, on specified dates, to cash flows that are solely payments of principal and interests (“SPPI”) over the amount of the outstanding principal.

Subsequent measurement

Financial instruments are subsequently measured at fair value through profit or loss or amortized cost.

The classification is based on two criteria: i) the Company’s business model for the management of financial instruments, and ii) whether the contractual cash flows related to the financial instruments represent “Solely Payments of Principal and Interests”.

a) Financial assets at fair value through profit or loss: these instruments are subsequently measured at fair value. Net earnings and losses, including income from interests and dividends, are registered as profits or losses for the period. These instruments are held for negotiation and they are mainly acquired to be sold in the short term. Derivatives are also classified as held for negotiation, unless they are registered as hedging instruments. Financial instruments of this type are classified as Other Current and Non-Current Financial Assets. They are subsequently valuated by determining their fair value, registering changes in value in the interim consolidated statements of Profit or Loss, in the items of Financial Income or Financial Costs.

b) Financial assets measured at amortized cost: These instruments are subsequently measured at amortized cost minus accumulated amortizations, using the effective interest method and adjusted by loss allowance and volume discounts, in the case of financial assets. Financial income and expenses, foreign exchange income and losses, and impairment are registered in results. Any earnings or losses due to initial or subsequent reductions of the value of the asset are registered in the statement of profit or loss of the period. Loans and receivables are non-derivative financial instruments with fixed or determinable payments not traded in any active market. They are registered at amortized cost, registering accrued conditions directly in profit or loss.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Arauco measures accumulated losses in a quantity equivalent to expected credit losses during the lifelong commitment. Expected credit losses are based on contractual cash flow differences based on the allowance of each contract and the cash flows that Arauco expects. The difference is then discounted based on an approximation of the asset’s original effective interest rate. The asset’s carrying value is reduced as the allowance is used, and the loss is recognized in sales expenses in the financial statements. When an account receivable cannot be collected, it is regularized against the allowance account for receivables. Subsequent recoveries of previously impaired amounts are recognized as a debit in distribution costs.

Derivative financial instruments are explained in Note 1 h).

Financial liabilities

Arauco classifies its financial liabilities as follows: fair value through profit or loss, derivatives designated as effective hedging instruments and amortized costs.

Management determines the classification of its financial liabilities upon initial recognition. Financial liabilities are derecognized when the obligation is cancelled, settled or expired. When an existing financial liability is replaced with another of the same provider under substantially different terms, or where the terms of an existing liability are substantially amended, such exchange or modification is treated as a write-off of the original liability, with a new liability being recognized, and the difference between the respective carrying amounts is recognized in the interim consolidated statement of profit or loss.

Financial liabilities are initially recognized at fair value, and in the case of loans, they include the costs directly attributable to the transaction. The subsequent measurement of the financial liabilities depends on their classification:

Financial Liabilities at fair value through profit or loss

Financial liabilities are included in the category of financial liabilities at fair value through profit or loss when they are held for trading or originally designated at fair value through profit or loss. Income and losses from liabilities held for trading are recognized in profit or loss. This category includes non-designated derivatives for hedging accounting.

Financial Liabilities at amortized cost

Other financial liabilities are subsequently valued at their amortized cost based on the effective interest rate method. The amortized cost is calculated taking into account any premium or acquisition discount, and includes the costs of transactions that are an integral part of the effective interest rate. This category includes Commercial Accounts Payable and Other Accounts Payable, lease liabilities, as well as the loans included in Other Current and Non-Current Financial Liabilities.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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’s policy is to enter into derivatives contracts only for economic hedging purposes and there are no instruments with speculation objectives.

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, 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 - 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.

-Cash flow hedges - 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 interim 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.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

i) Inventories

Inventories are measured at the lower of cost or 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.

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 interim consolidated statements of financial position are the subject of active sale efforts which are estimated to be highly probable.

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.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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 acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree 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 IFRS 9.

A parent will present non-controlling interests in the interim 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 acquirer’s identifiable net assets. The choice is made on a transaction-by-transaction basis.

Arauco measures the fair value of the acquired company in the business combination achieved in each stage (“step acquisition”), recognizing the effects of remeasurement of previously held equity in the acquiree in the statements of profit or loss.

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.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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 the portion corresponding to the statement of profit or loss or to the statement of 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.

If the acquisition cost is lower than the fair value of the net assets of the associate acquired, the difference is recognized directly in statement of profit or loss in line Other gains (losses).

Investments in associates and joint ventures are presented in the interim 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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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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 interest in the acquired company, and the fair value of the acquirer’s previously held equity interest in the acquired company (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 statements of profit or loss.

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 acquired company 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.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Goodwill recognized in subsidiaries Arauco Canada Ltd., Arauco do Brasil S.A. and Arauco Argentina S.A., generated on subsidiaries acquisitions whose functional currency is different from the functional currency of the parent company and presentation of these financial statements, are translated into U.S. Dollars at the closing exchange rate.

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 IFRS 16 for recognizing leases in a manner consistent with contracts with similar features and akin circumstances.

At the beginning of a contract, Arauco assesses whether the contract is, or if it contains, a lease. A contract is, or contains, a lease if it transfers the right to control the use of a given asset for a certain period of time, in exchange for consideration.

As of the initial date for recording a lease, Arauco, as lessee, recognizes an asset by the right of use at cost.

The cost of the asset for right of use comprises:

- The amount of the initial measurement of the lease liability. This measurement is at present value of the payments for leases that have not been disbursed as of that date. Payments for leases are discounted using the incremental interest rate for financial loans;

- Payments for leases performed prior to or as of the initiation date, minus the lease incentives that have been received;

- The initial direct costs incurred by the lessee; and

- An estimation of the costs to be incurred by the lessee when dismantling and eliminating the underlying asset, restoring the location where the same is located, or restoring the underlying asset to the condition required under the terms and conditions of the lease, unless such costs are incurred in order to produce

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

inventories. The lessee assumes obligations stemming from such costs either at the commencement date, or as a result of having used the underlying asset during a specific period.

After the initial recognition date (January 1, 2019), Arauco, as lessee, recognizes its asset for right of use by applying the cost model, minus the accumulated depreciation and impairment losses, and adjusted for remesurement of the lease liability.

At the beginning, Arauco in the capacity of lessee, recognizes the lease liability at present value of the lease payments that have not been disbursed as of that date. Lease payments are discounted using the incremental interest rate for financial loans.

After the initial recognition date (January 1, 2019), Arauco, as lessee, recognizes a liability for leases by increasing the book value, so as to reflect the interest over the liability for lease, reducing the amount in order to reflect the payments for leases that have been performed and once again recognizing the book value, so as to reflect the remeasurement and also to reflect the essential fixed payments for leases that have been revised.

Arauco presents the assets by right of use in the Interim Consolidated Statement of Financial Position, within Properties, Plants and Equipment, and are further disclosed in Note 7. Likewise, lease liabilities are included in the Interim Consolidated Statement of Financial Position within Other Current and Non-Current Financial Liabilities, and further disclosed as Lease liabilities in note 23.

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 interim consolidated statement of profit or loss.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

r) Income taxes

The tax liabilities are recognized in the interim 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.

Deferred taxes are recognized in accordance with the standards established in IAS 12 - Income Tax.

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, under which, it is probable that an outflow of resources will be required to settle the obligation; and when 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.

t) Revenue recognition

Revenues are valued at fair value of the consideration received or to be received, derived from them.

Arauco analyses and takes under consideration all relevant facts and circumtances to apply the five-step model established under IFRS 15 to customer contracts: (i) identify the contract, (ii) identify the performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price, and (v) recognise revenue. Aditionally, Arauco evaluates the incremental costs of obtaining a contract and the costs incurred to comply with a contract.

Arauco recognizes revenues when the steps established in IFRS have been satisfactorily complied with.

Accounts receivable are recognized when control over goods or services has been transferred to the customer, because at this point of the time collection is unconditional and the passage of time is only needed to receive payment.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

(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 committed 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. Revenue from the sale of goods are recognized when there is no obligation unsatisfied that could affect the customer’s acceptance of the product. The delivery is effective when the products are sent to the specific location, the risks of obsolescence and loss have been transferred to the customer and when Arauco has objective evidence that all acceptance criteria have been satisfied.

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. 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 they have 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

Revenue from the rendering of services is recognized as long as the performance obligation have been satisfied.

Revenue is recognized considering the stage of completion of the transaction at the date of the reporting period, when Arauco has the enforceable right of payment from the rendering of the services.

There is no significant financing component, given that sales are made with a reduced average collection period, which is in line with market practice.

Arauco mainly provides power supply services which are transacted principally in the spot market of the Sistema Eléctrico Nacional (SEN) (“National Electrical System”). According to current regulations, the prices on that market called “Marginal Costs” are calculated by the Coordinador Eléctrico Nacional (CEN) (“National Electrical Coordinator”) and are generally recognized in the period in which the services are rendered.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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 SEN.

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

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

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

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 interim consolidated 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 interim 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.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

w) Impairment

Non-financial Assets

The recoverable amount of property, plant and equipment and other long-term assets with finite useful lives are measured whenever there are 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.

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 are 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.

A cash-generating unit, for which goodwill has been allocated, is tested for impairment annually or more frequently when there are circumstances 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.

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

Financial Assets

At the end of each reporting period, an 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.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

An allowance for doubtful accounts is established based on a measurement of expected losses using a simplified approach.

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.

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.

These obligations are related to post-employee benefits in accordance with current standards.

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 line item “Trade and Other current payables” in the interim consolidated statements of financial position.

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AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

z) Recent accounting pronouncements

a) Standards, interpretations and amendments that are mandatory for the first time for annual periods beginning on January 1, 2019:

Standards and    interpretations	Content	Mandatory application for annual periods   beginning on or after
IFRS 16	Leases The standard provides a single lessee accounting model, requiring lessees to recognize 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
IFRIC 23	Uncertain tax positions It clarifies the method for applying the acknowledgment and measurement requirements of IAS 12 when there is uncertainty regarding the fiscal treatments.	January 1, 2019

Amendments and    improvements	Content	Mandatory application for annual periods   beginning on or after
IAS 19	Employee Benefits Prescribe the accounting and disclosure for employee benefits, requiring an entity to recognise a liability where an employee has provided service and an expense when the entity consumes the economic benefits of employee service.	January 1, 2019
IAS 28	Investments in associates and joint ventures It clarifies that an entity applies IFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied.	January 1, 2019
IFRS 9	Financial instruments Allows assets to be measured at amortised cost.	January 1, 2019
IFRS 3	Business Combinations Clarifies that when an entity obtains control of a business that is a joint operation, it is a business combination achieve by steps.	January 1, 2019
IFRS 11	Joint Arrangements Clarifies that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.	January 1, 2019
IAS 12	Income taxes Clarifies the income tax consequences of dividends from financial instruments at amortized cost should be recognized according to the past transactions or events that generated distributable profits.	January 1, 2019
IAS 23	Borrowing Costs Clarifies that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the general borrowings.	January 1, 2019

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

The adoption of the standards, amendments and interpretations described above do not have a significant impact on Arauco’s Interim Consolidated Financial Statements during its initial application period, with exception of the following paragraphs related to IFRS 16.

IFRS 16 - Leases

Arauco has decided to apply IFRS 16 for the first time, starting on January 1, 2019.

IFRS 16 introduces a single lessee accounting model. The lessee is required to recognize an asset a right of use representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. There are recognition exceptions for short-term leases or low-value leases. Accounting for lessors remains similar to IAS 17, that means, lessors continue classifiying the leases as financial or operational.

Entities can apply IFRS 16 using either a full retrospective or a modified retrospective approach for leases. If the company applies the modified retrospective approach it is not required to restate the comparative financial information and the cumulative effect of the initial application of IFRS 16 must be presented as an adjustment to the opening balances of retained earnings.

Arauco has adopted to recognize the cumulative effect of the initial application of the standard as an adjustment to the opening balance of retained earnings as of January 1, 2019. Given this alternative, it is not required to restate the comparative information

The following table shows the initial effects of the adoption of IFRS 16 as of January 1, 2019 on the Arauco Interim Consolidated Financial Statements:

	January 1, 2019 ThU.S.$
Right of use assets		286,387
Advances granted		(4,308	)
Sublease		1,540
Lease liabilities		283,619

Advances granted are presented net in the line of other financial liabilities.

Sublease has a net impact on the Acumulated earnings on January 1, 2019 of ThU.S.$ 107.

	January 1, 2019 ThU.S.$
Operating lease commitments as at December 31, 2018		110,922
Discounted using the lessee’s incremental borrowing rate of at the date of initial application		88,628
Finance lease liabilities recognised as at December 31, 2018		68,187
Lease liabilities recognised due to IFRS 16 implementation		194,991
Lease liability recognised as at January 1, 2019		351,806

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

b) Standards, interpretations and amendments, the application of which is not yet mandatory, which have not been adopted in advance:

Standards and    interpretations	Content	Mandatory application for annual periods   beginning on or after
IFRS 17	Insurance Contracts Supersedes IFRS 4. It changes mainly the accounting for insurance contracts and inverstments contracts.	January 1, 2021
Amendments and    improvements	Content	Mandatory application for annual periods beginning on or after
IFRS 10 y IAS 28- Amendments	Sale or Contribution of assets among an Investor and its Associates or Joint Ventures.	Indeterminate
IAS 1 y IAS 8	Presentation of Financial Statementes and Accounting Policies, Changes in Accounting Estimates and Errors. Clarifies the definition of material and align the definition used in the Conceptual Framework and the standards themselves.	January 1, 2020
IFRS 3	Definition of a Business Narrows the definitions of a business	January 1, 2020

Arauco estimates that the adoption of the standards, amendments and interpretations described above do not have a significant impact on Arauco’s Interim Consolidated Financial Statements during its initial application period.

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 2. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES

Changes to accounting policies

Arauco has decided to apply IFRS 16 Leases, in accordance with the transition options of this standard, retroactively with the accumulated effect of the initial application, recognized on January 1, 2019, without re-expressing its comparative financial statements as of December 31, 2018.

Arauco has adopted IFRS 16, recognizing liabilities in connection with leases that had been previously classified as operating leases under IAS 17 – Leases.

The lease liabilities under IFRS 16 were measured at the present value of the remaining payments for leases, discounted using the average incremental rate of 3.99%, applied as of January 1, 2019.

The assets by right of use were measured by an amount equivalent to the lease liability, adjusted by the amount of any lease payment that was prepaid or accumulated, in connection with the lease recognized in the balance sheet as of December 31, 2018.

As a consequence of the adoption of IFRS 16, Properties, Plants and Equipment increased by ThU.S.$286,387 and Other Financial Liabilities by ThU.S.$283,619 on January 1, 2019. The following table shows a reconciliation between both amounts.

	January 1, 2019 ThU.S.$
Right of use assets		286,387
Advances granted		(4,308	)
Sublease		1,540
Lease liabilities		283,619

Advances granted are presented net in the line of other financial liabilities.

Sublease has a net impact on the Acumulated earnings on January 1, 2019 of ThU.S.$ 107.

Upon applying IFRS 16, Arauco chose not to apply the requirements for recognizing a liability and an asset for right of use for the leases which term expires within the 12 months following January 1, 2019 and for those where the underlying asset had insignificant value. The payments related to those leases are recognized on a straight-line basis as an expense in the interim consolidated statement of profit or loss.

Changes to accounting estimates

As of June 30, 2019, there have been no changes regarding the accounting estimates with respect to the 2018 financial year.

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 3. DISCLOSURE OF OTHER INFORMATION

a) Disclosure of information on Issued Capital

At the date of these interim consolidated financial statements the share capital of Arauco is ThU.S.$353,618.

100% of Capital corresponds to ordinary shares.

	06-30-2019	12-31-2018
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
	06-30-2019	12-31-2018
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 December 2018 was equivalent to 20% of the distributable net profit calculated as of the end of September 2018 and was considered a decrease in the interim consolidated statements of changes in equity.

The final dividend paid each year in May corresponds to the difference between the 40% of the prior year distributable net profit and the amount of the interim dividend paid, which is considered a decrease to the interim dividend already paid.

The amount of ThU.S.$80,992 (ThU.S.$ 189,546 as of June 30, 2018) presented in the interim consolidated statements of changes in equity correspond to the minimum dividend provision recorded for the period 2019.

In the interim consolidated statements of cash flows, the Dividends Paid line shows an amount of ThU.S.$ 182,109 as of June 30, 2019 (ThU.S.$ 114,442 as of June 30, 2018), of which ThU.S.$ 182,040 (ThU.S.$ 113,773 as of June 30, 2018) correspond to the payment of dividends of the Parent Company.

The following are the dividends paid and the corresponding per share amounts during the periods 2019 and 2018:

Detail of Dividend Paid, Ordinary Shares
Dividend Paid	Final Dividend
Type of Shares for which there is a Dividend Paid	Ordinary Shares
Date of Dividend Paid	05-08-2019
Amount of Dividend	ThU.S.$ 182,040
Number of Shares for which Dividends are Paid	113,159,655
Dividend per Share	U.S.$ 1.60870

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CELULOSA ARAUCO Y CONSTITUCION S.A.

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Detail of Dividend Paid, Ordinary Shares
Dividend Paid	Interim Dividend
Type of Shares for which there is a Dividend Paid	Ordinary Shares
Date of Dividend Paid	12-12-2018
Amount of Dividend	ThU.S.$ 142,256
Number of Shares for which Dividends are Paid	113,159,655
Dividend per Share	U.S.$ 1.25712

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	05-10-2018
Amount of Dividend	ThU.S.$113,773
Number of Shares for which Dividends are Paid	113,159,655
Dividend per Share	U.S.$ 1.00542

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.

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

The hedging reserve includes the cash flow hedge reserve and the costs of hedging reserve. The cash flow hedge reserve is used to recognise the effective portion of gains or losses on derivatives that are designated and qualify as cash flow hedges.

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.

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CELULOSA ARAUCO Y CONSTITUCION S.A.

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

d) Other items in the Interim Consolidated Statements of Profit or Loss

The table below sets forth other income, other expenses, finance income, finance costs and share of profit (loss) of associates and joint ventures for the periods ended June 30, 2019 and 2018 are as follows:

	January - June						April - June
	2019 ThU.S.$			2018 ThU.S.$			2019 ThU.S.$			2018 ThU.S.$
Classes of Other Income
Other Income, Total		131,952			66,459			86,413			29,227
Gain from changes in fair value of biological assets (See note 20)		74,410			51,876			37,429			22,301
Net income from insurance compensation		1,154			1,259			446			1,228
Revenue from export promotion		680			2,076			322			1,037
Lease income		1,314			1,012			694			299
Gain on sales of assets		9,355			6,577			5,087			1,779
Access easement		—			145			—			60
Compensations received		60			509			27			507
Gain on sales of associates		40,842			—			40,842			—
Other operating results		4,137			3,005			1,566			2,016
Classes of Other Expenses by activity
Total of Other Expenses by activity		(50,006	)		(33,619	)		(27,689	)		(16,792	)
Depreciation		—			(239	)		—			(116	)
Legal expenses		(3,224	)		(1,529	)		(1,886	)		(760	)
Impairment provision for property, plant and equipment and others		(8,801	)		(8,418	)		(6,174	)		(1,403	)
Operating expenses related to plants stoppage		(4,325	)		(988	)		(612	)		(458	)
Expenses related to projects		(9,078	)		(4,572	)		(1,746	)		(2,934	)
Loss of asset sales		(4,392	)		(1,951	)		(2,981	)		(1,429	)
Loss and repair of assets		(511	)		(216	)		(477	)		(192	)
Loss of forest due to fires		(6,209	)		(629	)		(6,209	)		(620	)
Other Taxes		(7,789	)		(8,319	)		(4,052	)		(4,983	)
Research and development expenses		(1,659	)		(1,296	)		(1,072	)		(998	)
Fines, readjustments and interests		(645	)		(536	)		(548	)		(356	)
Other expenses		(3,373	)		(4,926	)		(1,932	)		(2,543	)
Classes of financing income
Financing income, total		14,845			7,345			8,099			2,563
Financial income from mutual funds - term deposits		10,192			5,032			5,333			2,658
Financial income resulting from swap - forward instruments		168			67			168			(570	)
Other financial income		4,485			2,246			2,598			475
Classes of financing costs
Financing costs, Total		(126,940	)		(103,081	)		(69,549	)		(51,419	)
Interest expense, Banks loans		(16,349	)		(14,594	)		(9,048	)		(7,441	)
Interest expense, Bonds		(80,040	)		(71,592	)		(44,343	)		(35,923	)
Interest expense, other financial instruments		(12,576	)		(7,074	)		(6,349	)		(3,696	)
Interest expence for right-of-use		(6,368	)		—			(3,499	)		—
Other financial costs		(11,607	)		(9,821	)		(6,310	)		(4,359	)
Share of profit (loss) of associates and joint ventures accounted for using equity method
Total		9,657			24,009			5,294			18,164
Investments in associates		1,144			1,523			882			1,352
Joint ventures		8,513			22,486			4,412			16,812

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AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

The analysis of expenses by nature contained in these interim consolidated financial statements is presented below:

	January - June				April - June
Cost of sales (*)	2019 ThU.S.$		2018 ThU.S.$		2019 ThU.S.$		2018 ThU.S.$
Timber		395,485		355,838		211,243		177,407
Forestry labor costs and other services		280,481		332,029		147,478		173,443
Depreciation and amortization		198,138		192,343		101,489		97,320
Depreciation for right of use		36,470		—		17,932		—
Maintenance costs		139,417		130,622		65,376		65,543
Chemical costs		278,775		276,166		137,558		144,216
Sawmill Services		76,268		77,309		39,724		38,870
Other Raw Materials		105,251		109,720		47,901		53,067
Other Indirect costs		81,265		90,980		41,498		42,137
Energy and fuel		105,743		97,225		51,205		48,482
Cost of electricity		18,258		20,923		9,491		9,799
Wages and salaries		190,320		174,907		95,098		86,187
Total		1,905,871		1,858,062		965,993		936,471

(*) Total amount is composed by the cost of inventory sales for ThU.S.$ 1,880,586 (ThU.S.$1,820,460 at June 30, 2018) and by cost of rendering services for ThU.S.$ 25,285 (ThU.S.$ 37,602 as of June 30, 2018)

	January - June				April - June
Distribution cost	2019 ThU.S.$		2018 ThU.S.$		2019 ThU.S.$		2018 ThU.S.$
Selling costs		20,074		15,805		10,423		8,026
Commissions		6,593		7,627		3,217		3,912
Insurance		2,242		2,185		1,325		1,207
Provision for doubtful accounts		652		10		860		2
Other selling costs		10,587		5,983		5,021		2,905
Shipping and freight costs		268,104		251,900		132,859		127,279
Port services		16,321		13,859		8,624		5,967
Freights		233,873		213,390		114,627		109,380
Depreciation for right of use		920		—		920		—
Other shipping and freight costs (internation, warehousing, stowage, customs and other costs)		16,990		24,651		8,688		11,932
Total		288,178		267,705		143,282		135,305

	January - June				April - June
Administrative expenses	2019 ThU.S.$		2018 ThU.S.$		2019 ThU.S.$		2018 ThU.S.$
Wages and salaries		121,977		122,467		62,628		56,643
Marketing, advertising, promotion and publications expenses		11,311		5,750		4,684		3,077
Insurances		9,552		7,437		4,616		3,809
Depreciation and amortization		13,762		13,703		6,733		6,758
Depreciation for right of use		3,287		—		1,156		—
Computer services		19,668		15,302		11,642		11,191
Lease rentals (offices, other property and vehicles)		4,575		7,262		793		3,147
Donations, contributions, scholarships		5,911		5,814		2,485		2,554
Fees (legal and technical advisors)		23,352		26,888		12,514		13,395
Property taxes, city permits and rights		8,979		9,884		4,993		5,338
Cleaning services, security services and transportation		11,437		12,658		5,535		6,207
Third-party variable services (maneuvers, logistics)		20,461		22,994		9,987		11,430
Basic services (electricity, telephone)		4,640		4,941		2,381		2,424
Maintenance and repair		3,254		3,470		1,892		1,717
Seminars, courses, training materials		1,329		1,276		742		773
Other administration expenses (travels, clothing and safety equipment, enviromental expenses, audits and others)		24,009		22,621		13,443		12,479
Total		287,504		282,467		146,224		140,942

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 4. INVENTORIES

Components of Inventory	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Raw materials		160,267		111,483
Production supplies		124,006		122,794
Work in progress		62,208		66,432
Finished goods		622,414		554,933
Spare Parts		184,790		174,554
Total Inventories		1,153,685		1,030,196

Inventories recognized as cost of sales at June 30, 2019 were ThU.S.$1,880,586 (ThU.S.$1,820,460 at June 30, 2018).

In order to have the inventories recorded at net realizable value at June 30, 2019, a net decrease of inventories was recognized associated with a higher provision of obsolescence of ThU.S.$5,808 (ThU.S.$491 at June 30, 2018). As of June 30, 2019, the amount of obsolescence provision is ThU.S.$32,111 (ThU.S.$26,303 at December 31, 2018).

At June 30, 2019, there were inventory write-offs of ThU.S.$1,166 (ThU.S.$ 851 at June 30, 2018)

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 interim consolidated financial statements, there are no inventories pledged as security to report.

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 5. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, bank checking account balances, time deposits 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 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 interim consolidated financial statements, there are no amounts of cash and cash equivalents with restrictions on use.

Components of Cash and Cash Equivalents	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Cash on hand		163		126
Bank checking account balances		313,469		327,006
Time deposits		643,042		478,775
Mutual funds		294,189		270,035
Total		1,250,863		1,075,942

The risk classification of the Company’s mutual funds as of June 30, 2019 and December 31, 2018 is shown below.

	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
AAAfm		291,990		268,237
No classification		2,199		1,798
Total Mutual Funds		294,189		270,035

Changes in Financial Liabilities

	Opening balance 01-01-2019 ThU.S.$		Increase (decrease) for changes in accounting policies ThU.S.$		Re- expressed opening balance ThU.S.$		Cash Flow
							Borrowings obtained ThU.S.$		Borrowings paid ThU.S.$			Interest paid ThU.S.$			Accrued interest ThU.S.$		Inflation adjustment ThU.S.$		Non-cash movements ThU.S.$			Closing balance 06-30-2019 ThU.S.$
Borrowings from banks		940,435		—		940,435		95,466		(80,230	)		(17,195	)		16,735		750		(1,274	)		954,687
Hedging liabilities		71,599		—		71,599		—		—			(9,973	)		9,973		—		(41,756	)		29,843
Bonds and promissory notes		3,501,654		—		3,501,654		992,570		(121,499	)		(77,900	)		83,722		51,811		(12,810	)		4,417,548
Lease liabilities (IFRS 16)		68,187		283,619		351,806		—		(43,041	)		(6,229	)		6,234		3,790		20,900			333,460
Total		4,581,875		283,619		4,865,494		1,088,036		(244,770	)		(111,297	)		116,664		56,351		(34,940	)		5,735,538

	Opening balance 01-01-2018 ThU.S.$		Cash Flow																Closing balance 12-31-2018 ThU.S.$
			Borrowings obtained ThU.S.$		Borrowings paid ThU.S.$			Interest paid ThU.S.$			Accrued interest ThU.S.$		Inflation adjustment ThU.S.$			Non-cash movements ThU.S.$
Borrowings from banks		858,457		534,474		(453,789	)		(28,397	)		30,133		761			(1,204	)		940,435
Hedging liabilities		5,393		—		—			(803	)		—		(138	)		67,147			71,599
Bonds and promissory notes		3,302,685		329,077		(21,495	)		(143,080	)		144,116		(112,773	)		3,124			3,501,654
Total		4,166,535		863,551		(475,284	)		(172,280	)		174,249		(112,150	)		69,067			4,513,688

49

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 6. INCOME TAXES

The tax rates applicable in the countries in which Arauco operates are 27% in Chile, 30% in Argentina, 34% in Brazil, 25% in Uruguay and 21% in the United States (federal tax).

On December 22, 2017, a new law was enacted in the United States that amended several articles of the Income Tax Act. The most relevant amendments of this law include the reduction of the income tax rate, from 35% as to 21% by 2018 fiscal year. This amendment generated a benefit of ThU.S.$ 17,600 for Arauco’s subsidiaries in that country as of December 31, 2017, as a result of the reduction of the net deferred liabilities generated by the reduction of the federal income tax rate.

On December 29, 2017, Law No. 27,430 was enacted in the Official Gazette of Argentina, which amended several articles of the Income Tax Act. The most relevant amendments include the reduction of the federal income tax rate from 35% to 30% by 2018 and 2019 fiscal years, and 25% by 2020. This amendment generated a benefit of ThU.S$ 62,677 for Arauco’s subsidiaries in that country as of December 31, 2017, as a result of the reduction of the net deferred liabilities generated by the reduction of the federal income tax rate.

On March 25, 2019, the subsidiary Arauco Argentina S.A. chose to conduct the Tax Reappraisal set forth in Title X – Chapter 1 of Law No. 27,430. The option was exercised for all Properties, Plants and Equipments included in the category of amortizable movable assets, pursuant to the income tax law, which were adjusted to inflation using the coefficients published in that law for the purposes of calculating the aforementioned tax. The effect of the special tax in the presentation is to $122,835,595 argentinian pesos (equivalent to ThU.S.$2,892 as of June 30, 2019), which was paid in five instalments during year 2019. Additionally, the increase of the value of these tax assets, arising from this adjustment, generated a decrease of the liabilities for deferred taxes as of June 30, 2019 of to approximately ThU.S.$16,177. Both the loss for the special tax as well as the profits for the decrease of the deferred tax, are shown in the Income tax line.

50

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Deferred Tax Assets

The following table sets forth the deferred tax assets as of the dates indicated:

Deferred Tax Assets	06-30-2019 ThU.S.$			12-31-2018 ThU.S.$
Deferred tax Assets relating to Provisions		6,201			6,105
Deferred tax Assets relating to Accrued Liabilities		6,987			10,906
Deferred tax Assets relating to Post-Employment benefits		20,279			19,072
Deferred tax Assets relating to Property, Plant and equipment		8,999			10,125
Deferred tax Assets relating to Financial Instruments		24,046			9,761
Deferred tax Assets relating to Tax Loss Carryforward		136,956			109,320
Deferred tax Assets relating to Inventories		6,552			5,532
Deferred tax Assets relating to Provisions for Income		7,702			7,443
Deferred tax Assets relating to Allowance for Doubtful Accounts		5,210			5,001
Intangible revaluation differences		7,871			7,651
Deferred tax Assets relating to Other Deductible Temporary Differences		38,414			21,108
Total Deferred Tax Assets		269,217			212,024
Offsetting presentation		(263,014	)		(207,389	)
Net Effect		6,203			4,635

Certain subsidiaries of Arauco mainly in Chile, Brazil and Uruguay, as of the date of these interim 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.$491,260 (ThU.S.$ 368,938 at December 31, 2018), which are mainly originated by operational and financial losses.

In addition, as of the closing date of these interim consolidated financial statements there are ThU.S.$144,787 (ThU.S.$ 183,162 at December 31, 2018) of non-recoverable tax losses from companies in Uruguay as joint operations based on the participation of Arauco and subsidiaries in USA, for which deferred tax assets have not been recognized. The estimated recovery period exceeds the expiry date of such tax losses.

Deferred Tax Liabilities

The following table sets forth the deferred tax liabilities as of the dates indicated:

Deferred Tax Liabilities	06-30-2019 ThU.S.$			12-31-2018 ThU.S.$
Deferred tax Liabilities relating to Property, Plant and Equipment		846,203			829,288
Deferred tax Liabilities relating to Financial Instruments		21,363			14,225
Deferred tax Liabilities relating to Biological Assets		646,470			661,582
Deferred tax Liabilities relating to Inventory		43,673			39,025
Deferred tax Liabilities relating to Prepaid Expenses		45,934			37,897
Deferred tax Liabilities relating to Intangible		20,921			20,240
Deferred tax Liabilities relating to Other Taxable Temporary Differences		28,409			22,790
Total Deferred Tax Liabilities		1,652,973			1,625,047
Offsetting presentation		(263,014	)		(207,389	)
Net Effect		1,389,959			1,417,658

The effect of changes in current and deferred tax liabilities related to financial hedging instruments corresponds to a debit of ThU.S.$5,159 as of June 30, 2019 (compared to a credit of ThU.S.$ 12,292 for the period ended June 30, 2018), which is presented net in Reserves for Cash Flow Hedges in the Interim Consolidated Statement of Changes in Equity.

51

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Reconciliation of deferred tax assets and liabilities

	Opening Balance 01-01-2019		Deferred tax Expenses (Income)			Deferred tax of items charged to other comprehensive income			Increase (decrease) through business combinations		Increase (decrease) Net exchange differences			Closing balance 06-30-2019
Deferred Tax Assets	ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$		ThU.S.$			ThU.S$
Deferred tax Assets relating to Provisions		6,105		(171	)		—			244		23			6,201
Deferred tax Assets relating to Accrued Liabilities		10,906		(4,197	)		—			197		81			6,987
Deferred tax Assets relating to Post-Employment benefits		19,072		1,172			(133	)		150		18			20,279
Deferred tax Assets relating to Property, Plant and equipment		10,125		(1,126	)		—			—		—			8,999
Deferred tax Assets relating to Financial Instruments		9,761		17,184			(2,898	)		—		(1	)		24,046
Deferred tax Assets relating to Tax Loss Carryforward		109,320		25,737			—			1,505		394			136,956
Deferred tax Assets relating to Inventories		5,532		740			—			279		1			6,552
Deferred tax Assets relating to Provisions for Income		7,443		132			—			112		15			7,702
Deferred tax Assets relating to Allowance for Doubtful Accounts		5,001		131			—			68		10			5,210
Intangible revaluation differences		7,651		163			—			—		57			7,871
Deferred tax Assets relating to Other Deductible Temporary Differences		21,108		16,566			—			731		9			38,414
Total Deferred Tax Assets		212,024		56,331			(3,031	)		3,286		607			269,217
	Opening Balance 01-01-2019 IAS 39		Deferred tax Expenses (Income)			Deferred tax of items charged to other comprehensive income			Increase (decrease) through business combinations		Increase (decrease) Net exchange differences			Closing balance 06-30-2019
Deferred Tax Liabilities	ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$		ThU.S.$			ThU.S$
Deferred tax Liabilities relating to Property, Plant and Equipment		829,288		12,633			—			4,234		48			846,203
Deferred tax Liabilities relating to Financial Instruments		14,225		7,138			—			—		—			21,363
Deferred tax Liabilities relating to Biological Assets		661,582		(16,001	)		—			—		889			646,470
Deferred tax Liabilities relating to Inventory		39,025		4,602			—			—		46			43,673
Deferred tax Liabilities relating to Prepaid Expenses		37,897		7,966			—			69		2			45,934
Deferred tax Liabilities relating to Intangible		20,240		484			—			—		197			20,921
Deferred tax Liabilities relating to Other Taxable Temporary Differences		22,790		4,968			—			182		469			28,409
Total Deferred Tax Liabilities		1,625,047		21,790			—			4,485		1,651			1,652,973

	Opening Balance 01-01-2018 IAS 39		Amounts restated		Opening Balance 01-01-2018 IFRS 9		Deferred tax Expenses (Income)			Deferred tax of items charged to other comprehensive income			Increase (decrease) Net exchange differences			Closing balance 12-31-2018
Deferred Tax Assets	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S$
Deferred tax Assets relating to Provisions		7,433				7,433		(1,015	)		—			(313	)		6,105
Deferred tax Assets relating to Accrued Liabilities		11,267				11,267		(361	)		—			—			10,906
Deferred tax Assets relating to Post-Employment benefits		19,276				19,276		297			(504	)		3			19,072
Deferred tax Assets relating to Property, Plant and equipment		11,657				11,657		(1,532	)		—			—			10,125
Deferred tax Assets relating to Financial Instruments		4,348		709		5,057		(507	)		5,211			—			9,761
Deferred tax Assets relating to Tax Loss Carryforward		62,706				62,706		53,103			—			(6,489	)		109,320
Deferred tax Assets relating to Inventories		5,941				5,941		(378	)		—			(31	)		5,532
Deferred tax Assets relating to Provisions for Income		21,354				21,354		(13,910	)		—			(1	)		7,443
Deferred tax Assets relating to Allowance for Doubtful Accounts		5,149		918		6,067		(843	)		—			(223	)		5,001
Intangible revaluation differences		10,389				10,389		(1,244	)		—			(1,494	)		7,651
Deferred tax Assets relating to Other Deductible Temporary Differences		27,364				27,364		(3,838	)		—			(2,418	)		21,108
Total Deferred Tax Assets		186,884		1,627		188,511		29,772			4,707			(10,966	)		212,024
	Opening Balance 01-01-2018 IAS 39		Amounts restated		Opening Balance 01-01-2018 IFRS 9		Deferred tax Expenses (Income)			Deferred tax of items charged to other comprehensive income			Increase (decrease) Net exchange differences			Closing balance 12-31-2018
Deferred Tax Liabilities	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S$
Deferred tax Liabilities relating to Property, Plant and Equipment		860,498		—		860,498		(23,428	)		—			(7,782	)		829,288
Deferred tax Liabilities relating to Financial Instruments		12,684		—		12,684		1,542			—			(1	)		14,225
Deferred tax Liabilities relating to Biological Assets		676,876		—		676,876		2,060			—			(17,354	)		661,582
Deferred tax Liabilities relating to Inventory		32,580		—		32,580		6,445			—			—			39,025
Deferred tax Liabilities relating to Prepaid Expenses		41,600		—		41,600		(3,703	)		—			—			37,897
Deferred tax Liabilities relating to Intangible		22,014		—		22,014		(562	)		—			(1,212	)		20,240
Deferred tax Liabilities relating to Other Taxable Temporary Differences		17,731		—		17,731		6,450			—			(1,391	)		22,790
Total Deferred Tax Liabilities		1,663,983		—		1,663,983		(11,196	)		—			(27,740	)		1,625,047

52

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Temporary Differences

The following tables summarize the deductible and taxable temporary differences:

	06-30-2019						12-31-2018
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		132,261						102,704
Deferred Tax Assets - Tax loss carryforward		136,956						109,320
Deferred Tax Liabilities					1,652,973						1,625,047
Total		269,217			1,652,973			212,024			1,625,047
	January - June						April - June
Detail of Temporary Difference Income and Loss Amounts	2019 ThU.S.$			2018 ThU.S.$			2019 ThU.S.$			2019 ThU.S.$
Deferred Tax Assets		30,594			(23,456	)		11,299			(9,150	)
Deferred Tax Assets - Tax loss carryforward		25,737			17,774			8,601			8,270
Deferred Tax Liabilities		(21,790	)		5,059			(20,300	)		(62	)
Total		34,541			(623	)		(400	)		(942	)

Income Tax Expense

Income tax expense consists of the following:

	January - June						April - June
Income Tax composition	2019 ThU.S.$			2018 ThU.S.$			2019 ThU.S.$			2018 ThU.S.$
Current income tax expense		(81,699	)		(123,709	)		(34,874	)		(71,354	)
Tax benefit arising from unrecognized tax assets previously used to reduce current tax expense		3,771			2,714			3,771			2,714
Prior period current income tax adjustments		(2,871	)		(1,766	)		(56	)		(2,412	)
Other current benefit tax (expenses)		(707	)		(1,312	)		(306	)		(861	)
Current Tax Expense, Net		(81,506	)		(124,073	)		(31,465	)		(71,913	)
Deferred tax expense relating to origination and reversal of temporary differences		8,804			(18,397	)		(9,001	)		(9,212	)
Tax benefit arising from previously unrecognized tax loss carryforward		25,737			17,774			8,601			8,270
Total deferred Tax benefit (expense), Net		34,541			(623	)		(400	)		(942	)
Income Tax benefit (expense), Total		(46,965	)		(124,696	)		(31,865	)		(72,855	)

53

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

The following table presents the current income tax expense detailed by foreign and domestic (Chile) companies at June 30, 2019 and 2018:

	January - June						April - June
	2019 ThU.S.$			2018 ThU.S.$			2019 ThU.S.$			2018 ThU.S.$
Foreign current income tax expense		(17,336	)		(12,667	)		(8,033	)		(3,790	)
Domestic current income tax expense		(64,170	)		(111,406	)		(23,432	)		(68,123	)
Total current income tax expense		(81,506	)		(124,073	)		(31,465	)		(71,913	)
Foreign deferred tax benefit (expense)		32,098			(1,749	)		12,237			(5,893	)
Domestic deferred tax benefit (expense)		2,443			1,126			(12,637	)		4,951
Total deferred tax benefit (expense)		34,541			(623	)		(400	)		(942	)
Total income tax benefit (expense)		(46,965	)		(124,696	)		(31,865	)		(72,855	)

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

The reconciliation of income tax expense is as follows:

	January - June						April - June
Reconciliation of Income tax from Statutory Rate to Effective Tax Rate	2019 ThU.S.$			2018 ThU.S.$			2019 ThU.S.$			2018 ThU.S.$
Statutory domestic (Chile) income tax rate		27.0	%		27.0	%		27.0	%		27.0	%
Tax Expense at statutory tax rate		(62,233	)		(151,373	)		(24,109	)		(83,993	)
Tax effect of foreign tax rates		858			2,827			306			2,830
Tax effect of revenues exempt from taxation		44,451			31,185			5,989			12,562
Tax effect of not deductible expenses		(44,235	)		(9,414	)		(20,463	)		(3,049	)
Tax rate effect of tax loss carry forwards		—			374			—			126
Tax effect of Previously Unrecognized Tax Benefit in the Income Statement		—			108			—			108
Tax effect of a new evaluation of assets for deferred not recognized taxes		16,041			—			4,488			—
Tax rate effect of adjustments for current tax of prior periods		(2,871	)		(1,766	)		(56	)		(2,412	)
Other tax rate effects		1,024			3,363			1,980			973
Total adjustments to tax expense at applicable tax rate		15,268			26,677			(7,756	)		11,138
Tax benefit (expense) at effective tax rate		(46,965	)		(124,696	)		(31,865	)		(72,855	)

Current tax assets and liabilities

The current tax assets and liabilities balances are as follow:

Current tax Liabilities	06-30-2019 ThU.S.$			12-31-2018 ThU.S.$
Monthly Provisional Payments (MPP)		85,236			1,662
Income tax receivable		27,023			19,538
Provision tax income		(63,901	)		(1,371	)
Other tax receivables		12,365			16,684
Total		60,723			36,513
Current tax Liabilities	06-30-2019 ThU.S.$			12-31-2018 ThU.S.$
Provision tax income (First category)		11,850			260,538
Monthly Provisional Payments (MPP)		(6,067	)		(107,023	)
Other tax payables		1,413			127
Total		7,196			153,642

54

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

	06-30-2019		12-31-2018
Property, Plant and Equipment	ThU.S.$		ThU.S.$
Property, Plant and Equipment		7,473,712		7,174,693
Property, Plant and Equipment by right of use		336,463		—
Total		7,810,175		7,174,693

Property, Plant and Equipment

	06-30-2019			12-31-2018
Property, Plant and Equipment, Net	ThU.S.$			ThU.S.$
Construction work in progress		1,281,658			1,030,730
Land		982,975			972,143
Buildings		2,127,157			2,062,887
Plant and equipment		2,913,716			2,921,462
Information technology equipment		21,584			23,292
Fixtures and fittings		10,137			15,906
Motor vehicles		13,983			14,916
Other property, plant and equipment		122,502			133,357
Total Net		7,473,712			7,174,693
Property, Plant and Equipment, Gross
Construction work in progress		1,281,658			1,030,730
Land		982,975			972,143
Buildings		4,092,962			3,959,186
Plant and equipment		6,567,255			6,388,843
Information technology equipment		89,474			86,558
Fixtures and fittings		41,649			44,694
Motor vehicles		54,379			53,507
Other property, plant and equipment		141,246			157,301
Total Gross		13,251,598			12,692,962
Accumulated depreciation and impairment
Buildings		(1,965,805	)		(1,896,299	)
Plant and equipment		(3,653,539	)		(3,467,381	)
Information technology equipment		(67,890	)		(63,266	)
Fixtures and fittings		(31,512	)		(28,788	)
Motor vehicles		(40,396	)		(38,591	)
Other property, plant and equipment		(18,744	)		(23,944	)
Total		(5,777,886	)		(5,518,269	)

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

As of June 30, 2019, there are no significant assets pledged as collateral to be disclosed in these interim consolidated financial statements.

Disbursements commitments for the acquisition of property, plant and equipment and disbursements for property, plant and equipment under construction.

	06-30-2019		12-31-2018
	ThU.S.$		ThU.S.$
Amount committed for the acquisition of property, plant and equipment		994,626		798,631

55

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Reconciliation of Property, Plant and Equipment

The following tables set forth the reconciliation of the carrying amount of property, plant and equipment as of June 30, 2019 and December 31, 2018:

Reconciliation of Property, Plant and Equipment	Construction work in progress ThU.S.$			Land ThU.S.$			Buildings ThU.S.$			Plant and equipment 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 01-01-2019		1,030,730			972,143			2,062,887			2,921,462			23,292			15,906			14,916			133,357			7,174,693
Increase (decrease) for changes in accounting policies		—			—			—			(55,015	)		—			—			—			(17,237	)		(72,252	)
Restated opening balance		1,030,730			972,143			2,062,887			2,866,447			23,292			15,906			14,916			116,120			7,102,441
Changes
Additions		442,398			6,821			2,362			9,594			466			213			1,499			9,145			472,498
Acquisitions through business combinations		12,839			3,865			22,431			80,355			168			197			1			6,272			126,128
Disposals		—			(1,109	)		(4,455	)		(1,352	)		—			(4	)		(4	)		—			(6,924	)
Withdrawals		(4,888	)		(499	)		(1,401	)		(7,013	)		(1	)		(1	)		(11	)		(1,589	)		(15,403	)
Depreciation		—			—			(62,876	)		(147,866	)		(3,108	)		(1,301	)		(2,067	)		(599	)		(217,817	)
Impairment loss recognized in profit or loss		—			—			(7	)		(1	)		—			(9	)		—			—			(17	)
Increase (decrease) through net exchange differences		(1,038	)		1,097			6,324			5,655			56			12			56			(311	)		11,851
Reclassification to assets held for sale		—			—			—			(101	)		—			—			—			—			(101	)
Increase (decrease) through transfers from construction in progress		(198,383	)		657			101,892			106,952			711			(4,876	)		(417	)		(6,536	)		—
Reclassification of assets from leasing		—			—			—			1,046			—			—			10			—			1,056
Total changes		250,928			10,832			64,270			47,269			(1,708	)		(5,769	)		(933	)		6,382			371,271
Closing balance 06-30-2019		1,281,658			982,975			2,127,157			2,913,716			21,584			10,137			13,983			122,502			7,473,712
Reconciliation of Property, Plant and Equipment	Construction work in progress ThU.S.$			Land ThU.S.$			Buildings ThU.S.$			Plant and equipment 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 01-01-2018		597,351			1,008,310			2,135,201			3,112,755			22,665			12,297			15,959			129,761			7,034,299
Changes
Additions		660,918			3			6,949			42,467			1,125			1,146			2,352			15,516			730,476
Acquisitions through business combinations		—			3,900			—			4,887			—			—			—			—			8,787
Disposals		(1,994	)		(448	)		(770	)		(702	)		(42	)		—			(129	)		(528	)		(4,613	)
Withdrawals		(6,269	)		(4,466	)		(1,656	)		(17,680	)		(42	)		(28	)		(84	)		(5,599	)		(35,824	)
Depreciation		—			—			(125,407	)		(316,118	)		(5,791	)		(2,870	)		(3,920	)		(3,660	)		(457,766	)
Impairment loss recognized in profit or loss		—			—			(654	)		(356	)		(5	)		(20	)		—			—			(1,035	)
Increase (decrease) through net exchange differences		(4,115	)		(34,204	)		(15,444	)		(42,059	)		(175	)		(210	)		(217	)		(6,332	)		(102,756	)
Reclassification to assets held for sale		—			(2,193	)		(5	)		5,323			—			—			—			—			3,125
Increase (decrease) through transfers from construction in progress		(215,161	)		1,241			64,673			132,945			5,557			5,591			955			4,199			—
Total changes		433,379			(36,167	)		(72,314	)		(191,293	)		627			3,609			(1,043	)		3,596			140,394
Closing balance 12-31-2018		1,030,730			972,143			2,062,887			2,921,462			23,292			15,906			14,916			133,357			7,174,693

56

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

The depreciation expense for the period ending June 30, 2019 and 2018 is as follows:

	January - June				April - June
Depreciation for the year	2019 ThU.S.$		2018 ThU.S.$		2019 ThU.S.$		2018 ThU.S.$
Cost of sales		198,138		192,343		101,489		97,320
Administrative expenses		7,520		7,769		3,663		3,860
Other expenses		766		680		429		333
Total		206,424		200,792		105,581		101,513

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:

	Years of 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.

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Property, Plant and Equipment by Right of Use

	06-30-2019
	ThU.S.$
Property, Plant and Equipment by right of use, Net
Land		67,106
Buildings		18,113
Plant and equipment		91,686
Information technology equipment		246
Fixtures and fittings		1,383
Motor vehicles		141,231
Other property, plant and equipment		16,698
Total Net		336,463
Property, Plant and Equipment by right of use, Gross
Land		70,480
Buildings		20,837
Plant and equipment		108,784
Information technology equipment		315
Fixtures and fittings		1,595
Motor vehicles		159,483
Other property, plant and equipment		17,489
Total Gross		378,983
Accumulated depreciation and impairment by right of use
Land		(3,374	)
Buildings		(2,724	)
Plant and equipment		(17,098	)
Information technology equipment		(69	)
Fixtures and fittings		(212	)
Motor vehicles		(18,252	)
Other property, plant and equipment		(791	)
Total		(42,520	)

Reconciliation of Property, Plant and Equipment by Right of Use

The following tables set forth the reconciliation of the carrying amount of property, plant and equipment by right of use as of June 30, 2019:

Reconciliation of Property, Plant and Equipment by right of use	Land ThU.S.$			Buildings ThU.S.$			Plant and equipment 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 01-01-2019		—			—			—			—			—			—			—			—
Increase (decrease) for changes in accounting policies		65,363			20,837			111,537			308			—			143,361			17,233			358,639
Restated opening balance		65,363			20,837			111,537			308			—			143,361			17,233			358,639
Changes
Additions		4,264			51			817			—			1,595			16,062			1,893			24,682
Withdrawals		—			—			(4,652	)		—			—			—			—			(4,652	)
Depreciation		(3,374	)		(2,724	)		(17,098	)		(69	)		(212	)		(18,252	)		(1,377	)		(43,106	)
Increase (decrease) through net exchange differences		853			41			(291	)		7			—			60			5			675
Increase (decrease) through others		—			(92	)		1,373			—			—			—			—			1,281
Reclassification of assets from leasing		—			—			—			—			—			—			(1,056	)		(1,056	)
Total changes		1,743			(2,724	)		(19,851	)		(62	)		1,383			(2,130	)		(535	)		(22,176	)
Closing balance 06-30-2019		67,106			18,113			91,686			246			1,383			141,231			16,698			336,463

58

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

The following table set forth the composition of the initial impact of the IFRS 16 enactment on Property, Plant and Equipment by right of use:

	January 01, 2019
	ThU.S.$
Assets by right of use under IFRS 16		286,387
Assets from leasings under IAS 17		72,252
Increase (decrease) for changes in accounting policies		358,639

The depreciation expense for the period ending June 30, 2019 Property, Plant and Equipment by right of use is as follows:

	January - June		April - June
	2019		2019
Depreciation for the period	ThU.S.$		ThU.S.$
Cost of sales		36,470		17,932
Distribution costs		920		920
Administrative expenses		3,287		1,156
Total		40,677		20,008

Additionally, Arauco has recognized directly in the interim consolidated statement of profit or loss, the following leases concepts excluded from the application of IFRS 16:

	January - June
	2019
Depreciation for the year	ThU.S.$
Expenses from payments of variable leases		53,534
Expenses from low value leases		293
Expenses from short-term leases		11,667
Total		65,494

59

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 8. LEASES

Arauco acting as lessee

Arauco has adopted IFRS 16 - Leases, the effects of initial application of the standard have been disclosed in Note 2 - Changes in policies and accounting estimates. Assets by rights of use and lease liabilities have been included in Notes 7 and 23, respectively.

Arauco acting as lessor

IFRS 16 substantially maintains the accounting requirements of the lessor of IAS 17. Consequently, Arauco has continued to classify its leases as operating or financial.

Reconciliation of Financial Lease Minimum Payments:

	06-30-2019
	Gross		Interest		Present Value
Periods	ThU.S.$		ThU.S.$		ThU.S.$
Less than one year		1,252		24		1,228
Between one and five years		427		—		427
More than five years		—		—		—
Total		1,679		24		1,655
	12-31-2018
	Gross		Interest		Present Value
Periods	ThU.S.$		ThU.S.$		ThU.S.$
Less than one year		1,180		49		1,131
Between one and five years		837		—		837
More than five years		—		—		—
Total		2,017		49		1,968

Financial lease receivables are presented in the interim consolidated statements 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 financial 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.

60

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 9. REVENUE

	January - June				April - June
Classes of revenue	2019 ThU.S.$		2018 ThU.S.$		2019 ThU.S.$		2018 ThU.S.$
Revenue from sales of goods		2,704,086		2,965,069		1,332,833		1,527,190
Revenue from rendering of services		35,670		58,922		18,737		32,147
Total		2,739,756		3,023,991		1,351,570		1,559,337

The reportable segments revenues by business area and by geographical area are presented in Note 24.

NOTE 10. EMPLOYEE BENEFITS

Classes of Benefits and Expenses by Employee

	January - June				April - June
	2019 ThU.S.$		2018 ThU.S.$		2019 ThU.S.$		2018 ThU.S.$
Employee expenses		332,933		307,945		173,702		165,159
Wages and salaries		323,567		291,897		168,960		160,480
Severance indemnities		9,366		16,048		4,742		4,679

	06-30-2019			12-31-2018
Discount rate		5.91	%		5.91	%
Inflation		3.00	%		3.00	%
Annual rate of wage growth		5.22	%		5.22	%
Mortality rate (1)		RV-2014			RV-2014

(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 (currently Chilean Commission for the Financial Market). The most recent table is the RV-2014, which is based on Chilean pensioner experience from 2006-2013 (SP & SVS, 2013). The mortality tables distinguish between males and females.

Sensitivities to assumptions	ThU.S.$
Discount rate
Increase in 100 bps		(5,327	)
Decrease in 100 bps		5,830
Wage growth rates
Increase in 100 bps		5,259
Decrease in 100 bps		(4,644	)

61

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

The following tables set forth the balances and the reconciliation of the present value of severance indemnities obligations as of June 30, 2019 and December 31, 2018:

	06-30-2019 ThU.S.$			12-31-2018 ThU.S.$
Current		5,973			5,656
Non-current		68,968			64,895
Total		74,941			70,551
Reconciliation of the present value of severance indemnities obligations	06-30-2019 ThU.S.$			12-31-2018 ThU.S.$
Opening balance		70,551			71,763
Bussines combinations		462			—
Current service cost		2,774			5,201
Interest cost		2,125			3,723
(Gains) losses from changes in actuarial assumptions		—			(172	)
Actuarial gains and losses arising from experience		(543	)		(1,685	)
Benefits paid		(1,973	)		(4,773	)
Costs from past services		—			4,710
Increase (decrease) for foreign currency exchange rates changes		1,545			(8,216	)
Closing balance		74,941			70,551

62

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 11. BALANCES IN FOREIGN CURRENCY AND FOREIGN CURRENCY EXCHANGE RATE IMPACT IN PROFIT OR LOSS.

	06-30-2019		12-31-2018
	ThU.S.$		ThU.S.$
Total Current Assets		3,829,928		3,441,160
Cash and Cash Equivalents		1,250,863		1,075,942
U.S Dollar		937,839		834,513
Euros		18,838		8,295
Brazilian Real		44,493		44,605
Argentine Pesos		3,016		2,854
Mexican Pesos		5,944		1,461
Other currencies		2,734		3,914
Chilean Pesos		237,999		180,300
Other current financial assets		1,027		497
U.S Dollar		1,027		497
Other current non-financial assets		192,934		129,854
U.S Dollar		86,124		49,170
Euros		100		125
Brazilian Real		14,637		19,018
Argentine Pesos		6,992		5,855
Mexican Pesos		703		42
Other currencies		7,073		5,283
Chilean Pesos		77,305		50,361
Trade and other current receivables		851,994		839,184
U.S Dollar		611,077		631,047
Euros		4,213		7,399
Brazilian Real		65,450		66,500
Argentine Pesos		21,660		15,044
Mexican Pesos		42,822		8,576
Other currencies		8,655		6,882
Chilean Pesos		94,217		99,950
U.F.		3,900		3,786
Accounts receivable from related companies		4,445		7,324
U.S Dollar		814		591
Brazilian Real		231		83
Chilean Pesos		2,833		6,169
U.F.		567		481
Current Inventories		1,153,685		1,030,196
U.S Dollar		1,038,778		957,529
Brazilian Real		81,524		72,667
Mexican Pesos		33,383		—
Current biological assets		308,589		315,924
U.S Dollar		245,953		253,672
Brazilian Real		62,636		62,252
Current tax assets		60,723		36,513
U.S Dollar		11,717		16,042
Euros		25		262
Brazilian Real		7,464		4,978
Mexican Pesos		1,802		102
Other currencies		2,604		1,399
Chilean Pesos		37,111		13,730
Non-current assets or disposal groups classified as held for sale		5,668		5,726
U.S Dollar		5,039		5,152
Brazilian Real		580		574
Mexican Pesos		49		—

63

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

	06-30-2019		12-31-2018
	ThU.S.$		ThU.S.$
Total Non Current Assets		11,833,650		11,152,588
Other non-current financial assets		49,165		20,346
U.S Dollar		49,165		20,346
Other non-current non-financial assets		114,187		86,948
U.S Dollar		106,688		79,615
Brazilian Real		5,005		4,946
Argentine Pesos		1,262		1,427
Mexican Pesos		897		640
Other currencies		90		90
Chilean Pesos		245		230
Trade and other non-current receivables		11,334		15,149
U.S Dollar		3,612		7,733
Brazilian Real		612		1,040
Other currencies		25		27
Chilean Pesos		3,445		3,267
U.F.		3,640		3,082
Accounts receivable from related companies, non-current		—		481
U.F.		—		481
Investments accounted for using equity method		304,971		358,053
U.S Dollar		75,511		135,805
Euros		184,084		177,548
Brazilian Real		42,526		42,052
Chilean Pesos		2,850		2,648
Intangible assets other than goodwill		96,720		90,093
U.S Dollar		94,480		87,729
Brazilian Real		2,112		2,364
Mexican Pesos		128		—
Goodwill		66,299		65,851
U.S Dollar		42,762		42,573
Brazilian Real		23,537		23,278
Property, plant and equipment		7,810,175		7,174,693
U.S Dollar		7,147,472		6,675,290
Brazilian Real		540,308		498,993
Mexican Pesos		121,992		—
Chilean Pesos		403		410
Non-current biological assets		3,374,596		3,336,339
U.S Dollar		2,955,059		2,924,266
Brazilian Real		419,537		412,073
Deferred tax assets		6,203		4,635
U.S Dollar		4,916		4,558
Brazilian Real		537		36
Mexican Pesos		750		41

64

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

	06-30-2019						12-31-2018
	Up to 90 days ThU.S.$		From 91 days to 1 year ThU.S.$		Total ThU.S.$		Up to 90 days ThU.S.$		From 91 days to 1 year ThU.S.$		Total ThU.S.$
Total Liabilities, current		1,114,676		267,225		1,381,901		1,160,815		418,949		1,579,764
Other current financial liabilities		300,049		244,328		544,377		121,606		415,990		537,596
U.S Dollar		279,275		136,414		415,689		110,329		334,747		445,076
Euros		19		39		58		—		—		—
Brazilian Real		3,297		9,618		12,915		1,880		4,948		6,828
Mexican Pesos		136		150		286		—		—		—
Other currencies		38		98		136		—		—		—
Chilean Pesos		9,103		27,166		36,269		1,334		3,683		5,017
U.F.		8,181		70,843		79,024		8,063		72,612		80,675
Bank Loans		83,490		113,281		196,771		84,778		130,271		215,049
U.S Dollar		81,705		108,361		190,066		82,898		125,323		208,221
Euros		—		21		21		—		—		—
Brazilian Real		1,785		4,899		6,684		1,880		4,948		6,828
Financial Leases		20,511		61,614		82,125		7,265		23,651		30,916
U.S Dollar		3,730		13,011		16,741		—		—		—
Euros		19		18		37		—		—		—
Brazilian Real		1,512		4,719		6,231		—		—		—
Mexican Pesos		136		150		286		—		—		—
Other currencies		38		98		136		—		—		—
Chilean Pesos		9,103		27,166		36,269		1,334		3,683		5,017
U.F.		5,973		16,452		22,425		5,931		19,968		25,899
Other Loans		196,048		69,433		265,481		29,563		262,068		291,631
U.S Dollar		193,840		15,042		208,882		27,431		209,424		236,855
U.F.		2,208		54,391		56,599		2,132		52,644		54,776
Trade and other current payables		689,026		7,631		696,657		659,618		—		659,618
U.S Dollar		169,112		2		169,114		184,989		—		184,989
Euros		12,297		328		12,625		7,450		—		7,450
Brazilian Real		75,628		5,526		81,154		64,873		—		64,873
Argentine Pesos		11,273		—		11,273		15,590		—		15,590
Mexican Pesos		29,569		1,775		31,344		1,378		—		1,378
Other currencies		7,865		—		7,865		8,272		—		8,272
Chilean Pesos		351,156		—		351,156		348,886		—		348,886
U.F.		32,126		—		32,126		28,180		—		28,180
Accounts payable to related companies		8,099		—		8,099		10,229		—		10,229
U.S Dollar		378		—		378		1,777		—		1,777
Chilean Pesos		7,721		—		7,721		8,452		—		8,452
Other current provisions		1,279		—		1,279		413		—		413
U.S Dollar		464		—		464		413		—		413
Mexican Pesos		815		—		815		—		—		—
Current tax liabilities		6,835		361		7,196		152,994		648		153,642
U.S Dollar		—		—		—		88		—		88
Euros		—		—		—		7		—		7
Brazilian Real		263		—		263		—		—		—
Argentine Pesos		5,198		—		5,198		16,730		—		16,730
Mexican Pesos		1,374		—		1,374		102		—		102
Chilean Pesos		—		361		361		136,067		648		136,715
Current provisions for employee benefits		5,945		28		5,973		4,923		733		5,656
Brazilian Real		5		—		5		51		—		51
Other currencies		9		—		9		—		—		—
Chilean Pesos		5,931		28		5,959		4,872		733		5,605
Other current non-financial liabilities		103,443		14,877		118,320		211,032		1,578		212,610
U.S Dollar		87,632		636		88,268		187,740		606		188,346
Euros		163		—		163		49		—		49
Brazilian Real		1,549		14,239		15,788		12,340		—		12,340
Argentine Pesos		2,337		—		2,337		3,037		—		3,037
Mexican Pesos		3,081		—		3,081		2,761		—		2,761
Other currencies		4,113		—		4,113		1,343		—		1,343
Chilean Pesos		4,568		2		4,570		3,762		972		4,734

65

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

	06-30-2019								12-31-2018
	From 13 months to 3 years ThU.S.$		From 3 years to 5 years ThU.S.$		More than 5 years ThU.S.$		Total ThU.S.$		From 13 months to 3 years ThU.S.$		From 3 years to 5 years ThU.S.$		More than 5 years ThU.S.$		Total ThU.S.$
Total non-current liabilities		1,897,883		704,154		4,205,103		6,807,140		1,806,879		699,808		3,168,326		5,675,013
Other non-current financial liabilities		987,151		630,165		3,573,845		5,191,161		752,080		699,808		2,592,391		4,044,279
U.S Dollar		613,982		524,049		2,450,384		3,588,415		440,252		601,052		1,573,044		2,614,348
Euros		8		—		65,363		65,371		—		—		—		—
Brazilian Real		10,909		3,600		20,069		34,579		6,612		1,215		—		7,827
Other currencies		179		24		—		203		—		—		—		—
Chilean Pesos		53,739		10,508		381		64,629		5,354		467		—		5,821
U.F.		308,334		91,984		1,037,648		1,437,965		299,862		97,074		1,019,347		1,416,283
Bank Loans		176,620		515,933		65,363		757,916		177,504		348,558		199,324		725,386
U.S Dollar		172,844		515,094		—		687,938		170,892		347,343		199,324		717,559
Euros		—		—		65,363		65,363		—		—		—		—
Brazilian Real		3,776		839		—		4,615		6,612		1,215		—		7,827
Financial Leases		105,070		24,592		121,673		251,335		26,296		10,975		—		37,271
U.S Dollar		23,505		8,955		98,947		131,407		—		—		—		—
Euros		8		—		—		8		—		—		—		—
Brazilian Real		7,133		2,761		20,069		29,964		—		—		—		—
Other currencies		179		24		—		203		—		—		—		—
Chilean Pesos		53,739		10,508		381		64,629		5,354		467		—		5,821
U.F.		20,506		2,344		2,276		25,125		20,942		10,508		—		31,450
Other Loans		705,461		89,640		3,386,809		4,181,910		548,280		340,275		2,393,067		3,281,622
U.S Dollar		417,633		—		2,351,437		2,769,070		269,360		253,709		1,373,720		1,896,789
U.F.		287,828		89,640		1,035,372		1,412,840		278,920		86,566		1,019,347		1,384,833
Other non-current payables		2,591		—		—		2,591		2,230		—		—		2,230
U.S Dollar		2,244		—		—		2,244		2,230		—		—		2,230
Mexican Pesos		347		—		—		347		—		—		—		—
Other non-current provisions		34,114		—		—		34,114		33,884		—		—		33,884
U.S Dollar		9		—		—		9		9		—		—		9
Brazilian Real		6,428		—		—		6,428		5,839		—		—		5,839
Argentine Pesos		27,675		—		—		27,675		28,035		—		—		28,035
Chilean Pesos		2		—		—		2		1		—		—		1
Deferred tax liabilities		785,742		31,502		572,715		1,389,959		841,723		—		575,935		1,417,658
U.S Dollar		692,494		31,502		572,715		1,296,711		751,356		—		575,935		1,327,291
Brazilian Real		91,150		—		—		91,150		90,367		—		—		90,367
Mexican Pesos		2,098		—		—		2,098		—		—		—		—
Non-current provisions for employee benefits		68,968		—		—		68,968		64,895		—		—		64,895
Mexican Pesos		562		—		—		562		159		—		—		159
Chilean Pesos		68,406		—		—		68,406		64,736		—		—		64,736
Other non-current non-financial liabilities		19,317		42,487		58,543		120,347		112,067		—		—		112,067
U.S Dollar		21		—		—		21		19		—		—		19
Brazilian Real		19,262		42,487		58,543		120,292		111,841		—		—		111,841
Argentine Pesos		26		—		—		26		29		—		—		29
Chilean Pesos		8		—		—		8		178		—		—		178

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
Arauco Industria de Paineis Ltda.	Brazil	Brazilian Real
Empreendimentos Florestais Santa Cruz Ltda.	Brazil	Brazilian Real
Mahal Empreendimentos e Participacoes S.A.	Brazil	Brazilian Real
Novo Oeste Gestao de Ativos Florestais S.A.	Brazil	Brazilian Real
Consorcio Protección Fitosanitaria Forestal S.A.	Chile	Chilean Pesos
Forestal Nuestra Señora del Carmen S.A.	Argentina	Argentine pesos
Forestal Talavera S.A.	Argentina	Argentine pesos
Greenagro S.A.	Argentina	Argentine pesos
Leasing Forestal S.A.	Argentina	Argentine pesos
Savitar S.A.	Argentina	U.S. Dollar
Arauco Industria de Mexico, S.A. de C.V. (ex Maderas y Sintéticos de México, S.A. de C.V.)	Mexico	Mexican pesos
Araucomex Servicios, S.A. de C.V. (ex Maderas y Sintéticos Servicios, S.A. de C.V.)	Mexico	Mexican pesos
Arauco Serviquimex, S.A. de C.V. (ex Masisa Manufactura, S.A. de C.V.)	Mexico	Mexican pesos
Arauco Quimica S.A. de C.V. (ex Masnova Química, S.A. de C.V.)	Mexico	Mexican pesos
Arauco Canada Ltd. (ex Flakeboard Company Ltd.)	Canada	Canadian Dollar

66

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

The table below shows a detail per company of the effect in the period of the Reserve of Exchange Differences on translation:

	January - June						April - June
	2019			2018			2019		2018
	ThU.S.$			ThU.S.$			ThU.S.$		ThU.S.$
Arauco do Brasil S.A.		4,523			(68,312	)		6,850		(64,908	)
Arauco Forest Brasil S.A.		4,101			(63,442	)		6,427		(61,210	)
Arauco Florestal Arapoti S.A.		1,028			(16,424	)		1,537		(15,140	)
Sonae Arauco S.A.		(1,057	)		(5,904	)		2,382		(10,131	)
Arauco Argentina S.A.		683			(5,199	)		1,013		(4,935	)
Arauco Canada Ltd.		4,532			(4,391	)		3,228		(2,027	)
Others		(513	)		(71	)		234		(181	)
Total reserve of exchange differences on translation		13,297			(163,743	)		21,671		(158,532	)

Effect of foreign exchange rates changes

	January - June						April - June
	2019			2018			2019			2018
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Exchange differences recognized in profit or loss, except for those arising on financial instruments measured at fair value through profit or loss		(7,219	)		(16,230	)		(9,346	)		(17,279	)
Reserve of exchange differences on translation (with Non-controlling interests)		13,479			(167,860	)		22,101			(162,335	)

NOTE 12. BORROWING COSTS

Arauco capitalizes interest at effective rate on current investment projects.

At the date of issuance of these interim consolidated financial statements, Arauco has capitalized financial interest related to the modernization and extension of Planta Arauco (MAPA) project in Chile and to the Grayling project in the United States.

	January - June						April - June
	2019			2018			2019			2018
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Property, plant and equipment capitalized cost
Property, plant and equipment capitalized interest cost rate		4.26	%		3.90	%		4.07	%		4.42	%
Amount of the capitalized interest cost, property, plant and equipment		12,535			7,578			5,830			3,782

67

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 13. RELATED PARTIES

Related Party Disclosures

Related parties are those entities defined in IAS 24 and under the rules of the Chilean Commission for the Financial Market 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 interim consolidated financial statements, the main transactions with related parties are related to fuel purchases with Compañía de Petróleos de Chile S.A. and sodium chlorate purchases at EKA Chile S.A.

As of the date of these interim 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, direct and indirectly, are Mrs. Maria Noseda Zambra de Angelini (who passed away on April 15, 2018), Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi.

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

Empresas Copec S.A.

Compensation to Key Management Personnel

Compensation to key management personnel, including directors, managers and deputy managers, consist of a fixed monthly salary, and managers and deputy managers also receive 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

Transactions carried out with related parties are intended to contribute to the corporate interest, are adjusted in price, terms and conditions to those prevailing in the market at the time of approval, and meet the requirements and procedures set forth in the law.

68

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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

			Functional	% Ownership interest 06-30-2019						% Ownership interest 12-31-2018
ID N°	Company Name	Country	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.	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 Canada Ltd. (ex Flakeboard Company Ltd.)	Canada	Canadian Dollar		—		99.9990		99.9990		—		99.9990		99.9990
-	Arauco Colombia S.A.	Colombia	U.S. Dollar		1.4778		98.5204		99.9982		1.4778		98.5204		99.9982
-	Arauco do Brasil S.A.	Brazil	Brazilian Real		1.0681		98.9309		99.9990		1.0681		98.9309		99.9990
-	Arauco Europe Cooperatief U.A.	Netherlands	U.S. Dollar		0.5561		99.4429		99.9990		0.5689		99.4301		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		9.7714		90.2278		99.9992		9.7714		90.2278		99.9992
-	Arauco Industria de Paineis Ltda.	Brazil	Brazilian Real		—		99.9990		99.9990		—		99.9990		99.9990
-	Arauco Middle East DMCC	Dubai	U.S. Dollar		—		99.9990		99.9990		—		99.9990		99.9990
-	Arauco North America, Inc. (ex Flakeboard America Ltd.)	USA	U.S. Dollar		0.0001		99.9989		99.9990		0.0001		99.9989		99.9990
76620842-8	Arauco Nutrientes Naturales SPA	Chile	U.S. Dollar		—		99.9484		99.9484		—		99.9484		99.9484
-	Arauco Perú S.A.	Peru	U.S. Dollar		0.0013		99.9977		99.9990		0.0013		99.9977		99.9990
-	Arauco Wood (China) Company Limited	China	U.S. Dollar		—		99.9990		99.9990		—		99.9990		99.9990
-	Araucomex S.A. de C.V.	Mexico	U.S. Dollar		0.0005		99.9985		99.9990		0.0005		99.9985		99.9990
96657900-5	Consorcio Protección Fitosanitaria Forestal S.A.	Chile	Chilean Pesos		—		57.0831		57.0831		—		57.0831		57.0831
-	Empreendimentos Florestais Santa Cruz Ltda.	Brazil	Brazilian Real		—		99.9985		99.9985		—		99.9985		99.9985
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		—		98.5611		98.5611		—		98.5479		98.5479
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	Argentine pesos		—		99.9805		99.9805		—		99.9805		99.9805
-	Forestal Talavera S.A.	Argentina	Argentine pesos		—		99.9942		99.9942		—		99.9942		99.9942
-	Greenagro S.A.	Argentina	Argentine pesos		—		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	Argentine pesos		—		99.9801		99.9801		—		99.9801		99.9801
96510970-6	Maderas Arauco S.A.	Chile	U.S. Dollar		99.0000		0.9995		99.9995		99.0000		0.9995		99.9995
-	Maderas Arauco Costa Rica S.A.	Costa Rica	U.S. Dollar		—		99.9990		99.9990		—		99.9990		99.9990
-	Arauco Industria de México, S.A.de C.V.(ex Maderas y Sintéticos de México, S.A. de C.V.)	Mexico	Mexican pesos		—		99.9990		99.9990		—		—		—
-	Araucomex Servicios, S.A. de C.V.(ex Maderas y Sintéticos Servicios, S.A. de C.V.)	Mexico	Mexican pesos		—		99.9990		99.9990		—		—		—
-	Mahal Empreendimentos e Participacoes S.A.	Brazil	Brazilian Real		—		99.9991		99.9991		—		99.9991		99.9991
-	Arauco Serviquimex, S.A. de C.V.(ex Masisa Manufactura, S.A. de C.V.)	Mexico	Mexican pesos		—		99.9990		99.9990		—		—		—
-	Arauco Química S.A. de C.V.(ex Masnova Química, S.A. de C.V.)	Mexico	Mexican pesos		—		99.9990		99.9990		—		—		—
-	Novo Oeste Gestao de Ativos Florestais S.A.	Brazil	Brazilian Real		—		99.9991		99.9991		—		99.9991		99.9991
-	Tablered Araucomex, S.A. de C.V. (ex Placacentro Masisa México, S.A. de C.V.)	Mexico	Mexican pesos		—		99.9990		99.9990		—		—		—
-	Savitar S.A.	Argentina	Argentine pesos		—		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

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.

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 - June				April - June
	2019		2018		2019		2018
	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Salaries and bonuses		33,525		34,975		17,328		17,346
Per diem compensation to members of the Board of Directors		1,225		1,326		608		656
Termination benefits		1,365		7,700		580		452
Total		36,115		44,001		18,516		18,454

69

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Related Party Receivables, Current

Name of Related Party	Tax ID No.	Nature of Relationship	Country	Currency	Maturity	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Forestal Mininco S.A.	91.440.000-7	Common Stockholder	Chile	Chilean pesos	30 days		4		14
Eka Chile S.A.	99.500.140-3	Joint Venture	Chile	Chilean pesos	30 days		1,796		2,362
Forestal del Sur S.A.	79.825.060-4	Associate of a subsidiary’s minority shareholder	Chile	Chilean pesos	30 days		—		3,740
Unilin Arauco Pisos Ltda.	—	Joint Venture	Brazil	Brazilian Real	30 days		231		83
Colbún S.A.	96.505.760-9	Common Stockholder	Chile	Chilean pesos	30 days		—		52
CMPC Maderas S.A.	95.304.000-K	Common Stockholder			—		1
CMPC Pulp S.A.	96.532.330-9	Common Stockholder	Chile	Chilean pesos	30 days		1		1
Fundación Educacional Arauco	71.625.000-8	Parent company is founder and contributor	Chile	Chilean pesos	30 days		730		—
Fundación Acerca Redes	65.097.218-K	Parent company is founder and contributor	Chile	U.S. Dollar	30 days		814		221
Parque Eólico Ovejera del Sur SpA.	76.839.949-2	Associate	Chile	Chilean pesos	30 days		12		—
Sonae Arauco Portugal S.A.	—	Subsidiary of a Joint Venture	Portugal	U.S. Dollar	—		—		370
Compañía Puerto de Coronel S.A.	79.895.330-3	Subsidiary of an Associate	Chile	U.F.	Jan-20		567		481
E2E S.A.	76.879.577-0	Associate	Chile	Chilean pesos	30 days		289
TOTAL							4,445		7,324

Related Party Receivables, Non-Current

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Maturity

06-30-2019 ThU.S.$

12-31-2018 ThU.S.$

Compañía Puerto de Coronel S.A.

79.895.330-3

Subsidiary of an Associate

Chile

U.F.

—

—

481

TOTAL

—

481

Related Party Payables, Current

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Maturity

06-30-2019 ThU.S.$

12-31-2018 ThU.S.$

Compañía de Petróleos de Chile S.A.

99.520.000-7

Common controlling parent

Chile

Chilean pesos

30 days

7,118

7,019

Abastible S.A.

91.806.000-6

Common controlling parent

Chile

Chilean pesos

30 days

475

601

Fundación Educacional Arauco

71.625.000-8

Parent company is founder and contributor

Chile

Chilean pesos

30 days

—

616

Red to Green S.A.

86.370.800-1

Common Stockholder

Chile

Chilean pesos

30 days

14

14

Forestal del Sur S.A.

79.825.060-4

Associate of a subsidiary’s minority shareholder

Chile

Chilean pesos

30 days

1

—

Empresa Nacional de Telecomunicaciones S.A.

92.580.000-7

Common Stockholder

Chile

Chilean pesos

30 days

63

123

Servicios Corporativos Sercor S.A.

96.925.430-1

Associate

Chile

Chilean pesos

30 days

16

11

Puerto Lirquén S.A.

96.959.030-1

Subsidiary of an associate

Chile

U.S. Dollar

30 days

—

1,003

Compañía Puerto de Coronel S.A.

79.895.330-3

Subsidiary of an associate

Chile

U.S. Dollar

30 days

378

772

Depósitos Portuarios Lirquén S.A.

96.871.870-3

Subsidiary of an associate

Chile

U.S. Dollar

30 days

—

2

Adm.Estaciones de Servicio Serco Ltda.

79.689.550-0

Common controlling parent

Chile

Chilean pesos

30 days

—

1

Adm. de Ventas al Detalle Arco Prime Ltda.

77.215.640-5

Common controlling parent

Chile

Chilean pesos

30 days

—

1

Empresa Distrib. Papeles y Cartones S.A.

88.566.900-k

Common Stockholder

Chile

Chilean pesos

30 days

—

8

Elemental S.A.

76.659.730-0

Associate of controlling parent

Chile

Chilean pesos

30 days

31

1

Woodtech S.A.

76.724.000-7

Associate of controlling parent

Chile

Chilean pesos

30 days

—

28

Orizon S.A.

96.929.960-7

Common controlling parent

Chile

Chilean pesos

30 days

—

1

Vía Limpia SPA

79.874.200-0

Common controlling parent

Chile

Chilean pesos

30 days

1

9

Air BP Copec

96.942.120-8

Joint venture of controlling parent

Chile

Chilean pesos

30 days

2

19

TOTAL

8,099

10,229

70

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Related Party Transactions

Purchases

Name of Related Party	Tax ID No.	Nature of Relationship	Country	Currency	Transaction Descriptions	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Abastible S.A.	91.806.000-6	Common controlling parent	Chile	Chilean pesos	Fuel		1,456		3,668
Compañía de Petróleos de Chile S.A.	99.520.000-7	Common controlling parent	Chile	Chilean pesos	Fuel and other		28,742		75,328
Compañía Puerto de Coronel S.A.	79.895.330-3	Subsidiary of the Associate	Chile	U.S. Dollar	Transport and stowage		5,318		10,607
Puerto Lirquén S.A.	96.959.030-1	Subsidiary of the Associate	Chile	U.S. Dollar	Port services		2,206		8,488
EKA Chile S.A.	99.500.140-3	Joint Venture	Chile	Chilean pesos	Sodium chlorate		19,371		47,209
Forestal del Sur S.A.	79.825.060-4	Associate of a subsidiary’s minority shareholder	Chile	Chilean pesos	Wood and ships		2,004		1,675
Portaluppi, Guzman y Bezanilla Asesorías Ltda.	78.096.080-9	Common director	Chile	Chilean pesos	Legal services		428		897
Empresa Nacional de Telecomunicaciones S.A.	92.580.000-7	Common Stockholder	Chile	Chilean pesos	Telephone services		181		617
CMPC Maderas S.A.	95.304.000-K	Common Stockholder	Chile	Chilean pesos	Wood and logs		86		644
Forestal Mininco S.A.	91.440.000-7	Common Stockholder	Chile	Chilean pesos	Wood and logs		—		261
Colbún Transmisión S.A.	76.218.856-2	Common director	Chile	Chilean pesos	Electrical Power		126		453
Woodtech S.A.	76.724.000-7	Indirect associate of controlling parent	Chile	Chilean pesos	Wood volumen measurement services		758		2,449
Inversiones Siemel S.A.	94.082.000-6	Common Stockholder	Chile	Chilean pesos	Rentals		132		326
Vía Limpia	79.874.200-0	Common controlling parent	Chile	Chilean pesos	Other purchases		121		257

Sales

Name of Related Party	Tax ID No.	Nature of Relationship	Country	Currency	Transaction Descriptions	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Colbún S.A.	96.505.760-9	Common director	Chile	Chilean pesos	Electrical Power		140		277
EKA Chile S.A.	99.500.140-3	Joint venture	Chile	Chilean pesos	Electrical Power		10,627		24,857
Forestal del Sur S.A.	79.825.060-4	Associate of a subsidiary’s minority shareholder	Chile	Chilean pesos	Harvesting services, Wood and chips		17,085		26,308
Unilin Arauco Pisos Ltda.	—	Joint venture	Brazil	Brazilian Real	Wood		1,548		1,474

71

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 14. CONSOLIDATED FINANCIAL STATEMENTS

On January 31, 2019, Arauco’s subsidiaries Inversiones Arauco Internacional Limitada and Araucomex, S.A. de C.V., closed the purchase of all of the shares of Masisa’s Mexican subsidiaries, namely Maderas y Sintéticos de México, S.A. de C.V., Maderas y Sintéticos Servicios, S.A. de C.V., Masisa Manufactura, S.A. de C.V., Placacentro Masisa México, S.A. de C.V. and Masnova Química, S.A. de C.V.

The provisional price of the transaction, in the amount of ThU.S.$160,000, was paid on that day.

The main assets acquired, consist of two industrial complexes located in Durango and Zitácuaro, that jointly have three Particleboard (PB) lines with an annual installed capacity of 339,000 m3; a MDF line of with an annual installed capacity of 220,000 m3; melamine (or TFL) lines with an annual total installed capacity of 309,000 m3 ; a chemical plant with an installed capacity of 60,000 tons of resins and 60,600 tons of formaldehyde; and impregnation lines with an aggregate annual installed capacity of 28.9 million of m2.

Arauco carried out the initial recognition of the acquisition of these companies based on the information available as of that date, performing a preliminary determination about the allocation of the fair values during the acquisition of the same. The amounts of acquired assets and liabilities are deemed to be provisional amounts and could be adjusted during the measurement period of this acquisition, in order to reflect new information obtained based on facts and circumstances that existed as of the acquisition date and which, if known, would have affected the measurement of the amounts recognized as of that date. The measurement period will not exceed the term of one year as from the acquisition date.

The table below shows the fair values of assets and liabilities at the date of the transaction:

Masisa Mexico Group	01-31-2019 ThU.S.$
Cash and cash equivalent		9,152
Other current non-		599
Trade and other current receivables		29,971
Accounts receivable from related companies		27,484
Inventories		31,692
Current tax assets		1,567
Investments accounted for using equity method		1,571
Intangible assets other than goodwill		223
Property, plant and equipment		120,013
Non-Current Assets or disposal groups classified as held for sale		49
Total assets		222,321
Trade and other current payables		45,650
Accounts payable to related companies		12,692
Other current provisions		902
Current tax liabilities		1,388
Deferred tax liabilities		1,227
Non-current provisions for employee benefits		462
Total liabilities		62,321
Total equity		160,000

72

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

The following table shows revenue and net profit recognized at the acquisition day:

Masisa Mexico Group	February 1, 2019 to June 30, 2019 ThU.S.$
Revenue		65,712
Net loss		(7	)

If the acquisition had occurred on January 1, 2019, consolidated pro-forma revenue and profit for the year ended June 30, 2019 would have been:

CELULOSA ARAUCO Y CONSTITUCIÓN S.A. AND SUBSIDIARIES	January-June 2019 (Pro-forma) ThU.S.$
Revenue		2,767,021
Net profit		177,813

On December 31, 2018, Arauco Wood Products Inc and Arauco Panels USA, LLC merged into Arauco North America, Inc (ex Flakeboard America Limited). This transaction had no effect on Arauco’s profit or loss.

On May 7, 2018, the company Maderas Arauco Costa Rica S.A. was created through the subsidiary Inversiones Arauco Internacional Ltda., with a capital of 10,000 colones (equivalent to U.S.$ 18). On December 24, 2018 Inversiones Arauco Internacional Ltda. made a capital contribution of ThU.S.$ 300 to the company Maderas Arauco Costa Rica S.A.

On August 3, 2018, the company Arauco Wood (China) Company Limited was created through the subsidiary Inversiones Arauco Internacional Ltda. with a capital of ThU.S.$ 500, out of which ThU.S.$100 have been paid to date.

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

73

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 15. INVESTMENTS IN ASSOCIATES

At June 30, 2019, there were no new investments in associates to report.

On April 5, 2019 Celulosa Arauco y Constitución S.A. sold its participation in Puertos y Logística S.A. to DP World Group for a total amount of ThU.S.$ 101,972. This operation generated a profit of ThU.S$ 18,875.

On May 2, 2018, the company E2E S.A. was incorporated through the subsidiary Maderas Arauco S.A., with a total capital of ThU.S.$ 6,000, under 50% ownership of Arauco. As of the date of these interim consolidated financial statements, ThU.S.$ 2,711 have been contributed.

On January 19, 2018, the company Parque Eólico Ovejera Sur SpA was incorporated through the subsidiary Arauco Bioenergía S.A., under 50% ownership of Arauco. The capital contributed by Arauco was ThU.S.$ 892.

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%
	06-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$ -	ThU.S.$ 62,511
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%
	06-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$53,262	ThU.S.$51,760
Name	Servicios Corporativos Sercor S.A.
Country	Chile
Functional Currency	Chilean Pesos
Corporate purpose	Consulting services related to business management to Boards of Directors and Senior Management of all Arauco’s entities.
Ownership interest (%)	20.0000%
	06-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$ 222	ThU.S.$ 193

74

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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%
	06-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$(2)	ThU.S.$(1)
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%
	06-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$7	ThU.S.$7
Name	Vale do Corisco S.A.
Country	Brazil
Functional Currency	Brazilian Real
Corporate purpose	Management of forestry activities.
Ownership interest (%)	49.0000%
	06-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$38,950	ThU.S.$38,497
Name	E2E S.A.
Country	Chile
Functional Currency	Chilean pesos
Corporate purpose	Development of construction solutions
Ownership interest (%)	50.0000%
	06-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$2,033	ThU.S.$2,044
Name	Parque Eólico Ovejera Sur SpA
Country	Chile
Functional Currency	Chilean pesos
Corporate purpose	Electrical power projects
Ownership interest (%)	50.0000%
	06-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$810	ThU.S.$597

75

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Summarized Financial Information of Associates

	Assets
06-30-2019	Puertos y Logística S.A. ThU.S.$			Inversiones Puerto Coronel S.A. ThU.S.$		Serv.Corporativos Sercor S.A. ThU.S.$			E2E S.A. ThU.S.$			Parque Eólico Ovejera del Sur SpA. 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		—			29		4,294			1,417			86			7,558			2			25			13,411
Non-current		—			108,344		955			3,240			1,246			106,221			36			19			220,061
Total		—			108,373		5,249			4,657			1,332			113,779			38			44			233,472
	Liabilities
	Puertos y Logística S.A. ThU.S.$			Inversiones Puerto Coronel S.A. ThU.S.$		Serv.Corporativos Sercor S.A. ThU.S.$			E2E S.A. ThU.S.$			Parque Eólico Ovejera del Sur SpA. 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		—			83		3,447			590			—			575			—			9			4,704
Non-current		—			—		694			—			—			26,516			5			42			27,257
Equity		—			108,290		1,108			4,067			1,332			86,688			33			(7	)		201,511
Total		—			108,373		5,249			4,657			1,332			113,779			38			44			233,472
06-30-2019
Revenues		42,362			—		2,656			28			—			3,512			—			—			48,558
Expenses		(42,350	)		2,989		(2,537	)		(653	)		(49	)		(1,595	)		—			(2	)		(44,197	)
Profit or loss (continuing operations)		12			2,989		119			(625	)		(49	)		1,917			—			(2	)		4,361
Other comprehensive income		7,540					—			—			—						—			—			7,540
Comprehensive income		7,552			2,989		119			(625	)		(49	)		1,917			—			(2	)		11,901
Dividends		6,060			—		—			—			—						—			—			6,060
	Assets
12-31-2018	Puertos y Logística S.A. ThU.S.$			Inversiones Puerto Coronel S.A. ThU.S.$		Serv.Corporativos Sercor S.A. ThU.S.$			E2E S.A. ThU.S.$			Parque Eólico Ovejera del Sur SpA. 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		97,866			29		22,870			680			1,246			4,295			2			25			127,013
Non-current		566,484			105,354		907			3,600			703			105,836			36			19			782,939
Total		664,350			105,383		23,777			4,280			1,949			110,131			38			44			909,952
	Liabilities
	Puertos y Logística S.A. ThU.S.$			Inversiones Puerto Coronel S.A. ThU.S.$		Serv.Corporativos Sercor S.A. ThU.S.$			E2E S.A. ThU.S.$			Parque Eólico Ovejera del Sur SpA. 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		28,938			82		22,192			192			754			81			—			7			52,246
Non-current		327,124			—		619			—			—			31,485			5			42			359,275
Equity		308,288			105,301		966			4,088			1,195			78,565			33			(5	)		498,431
Total		664,350			105,383		23,777			4,280			1,949			110,131			38			44			909,952
06-30-2018
Revenues		68,229			—		2,615			—			—			2,268			—			41			73,153
Expenses		(70,651	)		2,468		(2,318	)		—			—			(2,381	)		(2	)		(30	)		(72,914	)
Profit or loss (continuing operations)		(2,422	)		2,468		297			—			—			(113	)		(2	)		11			239
Other comprehensive income		3,099			—					—			—						—			—			3,099
Comprehensive income		677			2,468		297			—			—			(113	)		(2	)		11			3,338
Dividends		—			—		—			—			—			698			—			—			698

76

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Reconciliation of Investment in Associates and Joint Ventures

	06-30-2019 ThU.S.$			12-31-2018 ThU.S.$
Opening balance as of January 1		358,053			368,772
Changes
Investment in joint ventures, Additions		580			3,028
Disposals, investment in associates and joint ventures		(56,492	)		—
Share of profit (loss) in investment in associates		1,144			3,043
Share of profit (loss) in investment in joint ventures		8,513			14,203
Dividends Received, Investments in Associates		(6,557	)		(11,307	)
Increase (Decrease) in foreign exchange currency on translation of Associates and Joint Ventures		(582	)		(17,287	)
Other increase (decrease) in investment and associates and joint ventures		312			(2,399	)
Total changes		(53,082	)		(10,719	)
Closing balance		304,971			358,053

(*) Carrying amount of investment in Puertos y Logística S.A., which was sold on April 5, 2019.

	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Carrying amount of associates accounted for using equity method		95,284		155,609
Carrying amount of joint ventures accounted for using equity method		209,687		202,444
Total investment accounted for using equity method		304,971		358,053

NOTE 16. INTERESTS IN JOINT ARRANGEMENTS

Investments and contributions made

As of June 30, 2019 and December 31, 2018, Arauco has not carried out any contributions to Uruguayan companies Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A.

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.

Arauco holds a 50% interest in Sonae Arauco, which subsidiary produces and commercializes wood panels, of the type of MDF, PB and OSB, and sawn timber, through the operation of 2 panel plants and one sawmill in Spain; 2 panel plants and one resin plant in Portugal; 4 panel plants in Germany and 2 panel plants in South Africa.

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 these companies whereby Arauco has engaged in an economic activity subject to common control, which is classified as a joint venture.

77

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

The following tables set forth summarized financial information of the more significant interests in joint arrangements, which qualify as joint operations:

	06-30-2019				12-31-2018
Celulosa y Energía Punta Pereira S.A. (Uruguay)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		336,261		210,864		220,699		204,455
Non-current		2,182,395		519,236		2,044,534		441,010
Equity		—		1,788,556		—		1,619,768
Total Joint Arrangement		2,518,656		2,518,656		2,265,233		2,265,233
Investment		894,278				809,884

	06-30-2019 ThU.S.$			06-30-2018 ThU.S.$
Income		478,258			477,067
Expenses		(311,763	)		(322,092	)
Joint Arrangement Net Income (Loss)		166,495			154,975

	06-30-2019				12-31-2018
Forestal Cono Sur S.A. (consolidated)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		44,684		2,251		23,528		1,668
Non-current		157,579		7,523		170,443		1,957
Equity		—		192,489		—		190,346
Total Joint Arrangement		202,263		202,263		193,971		193,971
Investment		96,245				95,173

	06-30-2019 ThU.S.$			06-30-2018 ThU.S.$
Income		12,324			16,073
Expenses		(10,180	)		(11,115	)
Joint Arrangement Net Income (Loss)		2,144			4,958

	06-30-2019				12-31-2018
Eufores S.A. (consolidated)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		185,720		226,395		160,708		159,988
Non-current		818,242		149,237		638,832		8,282
Equity		—		628,330		—		631,270
Total Joint Arrangement		1,003,962		1,003,962		799,540		799,540
Investment		314,165				315,635

	06-30-2019 ThU.S.$			06-30-2018 ThU.S.$
Income		122,951			150,988
Expenses		(125,624	)		(136,420	)
Joint Arrangement Net Income (Loss)		(2,673	)		14,568

	06-30-2019				12-31-2018
Zona Franca Punta Pereira S.A. (Uruguay)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		6,739		112,659		5,482		106,676
Non-current		469,089		20,194		472,539		27,863
Equity		—		342,975		—		343,482
Total Joint Arrangement		475,828		475,828		478,021		478,021
Investment		171,488				171,741

	06-30-2019 ThU.S.$			06-30-2018 ThU.S.$
Income		9,086			8,905
Expenses		(9,593	)		(11,527	)
Joint Arrangement Net Income (Loss)		(507	)		(2,622	)

78

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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

	06-30-2019				12-31-2018
Unilin Arauco Pisos Ltda.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		6,427		3,861		6,165		3,591
Non-current		4,635		50		4,574		37
Equity		—		7,151		—		7,111
Total Joint Arrangement		11,062		11,062		10,739		10,739
Investment		3,576				3,556

	06-30-2019 ThU.S.$			06-30-2018 ThU.S.$
Income		7,742			7,285
Expenses		(7,641	)		(7,316	)
Joint Arrangement Net Income (Loss)		101			(31	)
Other comprehensive income		—			—
Comprehensive income		101			(31	)
Dividends		—			—

	06-30-2019				12-31-2018
Eka Chile S.A.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		19,670		3,596		19,840		4,443
Non-current		32,497		4,517		32,363		5,078
Equity		—		44,054		—		42,682
Total Joint Arrangement		52,167		52,167		52,203		52,203
Investment		22,027				21,341

	06-30-2019 ThU.S.$			06-30-2018 ThU.S.$
Income		23,185			25,526
Expenses		(20,821	)		(23,188	)
Joint Arrangement Net Income (Loss)		2,364			2,338
Other comprehensive income		—			—
Comprehensive income		2,364			2,338
Dividends		496			—

	06-30-2019				12-31-2018
Sonae Arauco S.A.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		248,179		240,383		272,030		221,393
Non-current		688,606		328,234		655,856		351,397
Equity		—		368,168		—		355,096
Total Joint Arrangement		936,785		936,785		927,886		927,886
Net assets		154,335				146,762
Net asset adjustment (Goodwill)		29,749				30,786
Investment		184,084				177,548

	06-30-2019 ThU.S.$			06-30-2018 ThU.S.$
Income		474,880			558,053
Expenses		(460,175	)		(515,323	)
Joint Arrangement Net Income (Loss)		14,705			42,730
Other comprehensive income		—			—
Comprehensive income		14,705			42,730
Dividends		—			—

79

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 17. IMPAIRMENT OF ASSETS

Provisions for impairment of property, plant and equipment due to technical obsolescence have been recorded as of June 30, 2019 and December 31, 2018, 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
	06-30-2019	12-31-2018
Provisions for impairment of property, plant and equipment	ThU.S.$18,447	ThU.S.$18,465

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 interim consolidated financial statements, the balance of goodwill is ThU.S.$66,299 (ThU.S.$ 65,851 at December 31, 2018), as shown below:

	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Arauco Canada Ltd. (Flakeboard Company Ltd)		40,748		40,661
Arauco do Brasil S.A. (Pien mill)		23,537		23,278
Arauco Argentina S.A. (Forestal Nuestra Señora del Carmen S.A.)		1,329		1,227
Forestal Arauco S.A. (Forestal Los Lagos S.A.)		685		685
Saldo final		66,299		65,851
Goodwill	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Opening balance at January 1		65,851		69,922
Increase (decrease) in foreign currency exchange		448		(4,071	)
Closing balance		66,299		65,851

Of the total of goodwill, ThU.S.$40,748 (ThU.S.$ 40,661 as of December 31, 2018) 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 ownership.

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 real discount rate of 6.7% which reflects current market assessments for the wood products segment in North America.

The investment in the panel plant in Pien, Brazil generated a goodwill of ThU.S.$23,537 (ThU.S.$ 23,278 as of December 31, 2018).

80

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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 7% real discount rate that reflects current evaluations for the panel segment in Brazil.

As of June 30, 2019 and December 31, 2018, the carrying value of the goodwill of the plants did not exceed their recoverable value, and therefore there was no need to recognize impairment losses.

81

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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, and objected certain income tax returns made by Arauco on April 16, 2001 and October 31, 2001, and furthermore, requested the reimbursement of the amounts returned in connection with tax losses, along with the amendment of the FUT (Tax Profits Fund) Registry balance. In consideration to the foregoing, the above mentioned tax resolutions ordered the restitution of the historical amount as of October 31, 2002 of $4,571,664,617 (equal to ThU.S.$6,731 as of June 30, 2019). 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 above mentioned tax resolutions No. 184 and 185 of 2005. The RAF was resolved on January 9, 2009 by the Chilean IRS, partially sustaining the Company’s request, granting a discount to the total amount of $1,209,399,164 (equal to ThU.S.$1,781 as of June 30, 2019), resulting in a total disputed amount of $3,362,265,453 (equal to ThU.S.$4,951 as of June 30, 2019) plus fines and interests. On February 19, 2010, the Court acknowledged receipt of the Company’s request.

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. On June 19, 2017, the Court issued the evidence production ruling, which resolution was notified via certified letter on July 23 of 2017. Arauco lodged a motion for reconsideration and a supplementary appeal, requesting the terms of the evidence production ruling be modified. On July 7, 2017, the Court upheld the motion for reconsideration. On September 20, 2017, the Court issued its first instance decision confirming the liquidations.

On October 12, 2017, Arauco challenged the decision through an appeal, requesting the Court of Appeals of Santiago to revoke the first instance decision and uphold Arauco’s claim instead. On June 29, 2018, the Court of Appeals of Santiago issued a ruling on appeal, confirming the first instance decision. On July 19, 2018, Arauco lodged a cassation appeal based on formal and substantial flaws before the Supreme Court. The case is pending.

On June 21, 2019, Celulosa Arauco y Constitución S.A. filed a claim before the Constitutional Court to declare the legal provision contemplated under section 53, paragraph 3 of the Tax Code unconstitutional and, as a consequence, inapplicable.

Currently, the case before the Supreme Court is suspended by order of the Constitutional Court, pending that the Constitutional Court decides on theadmissibility with respect to the requirement of inapplicability.

On July 30, 2019, the Constitutional Court declared admissible the appeal for inapplicability filed by Celulosa Arauco y Constitución S.A.

82

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore as of June 30, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

2. 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.

On December 15, 2017, the Superintendence of the Environment issued Exempted Resolution No. 1,487, closing the punitive administrative proceeding, absolving the company with regards to one of the charges and convicting for other 10 charges, applying a fine of 7,777 UTA (equal to ThU.S.$ 6,698 as of June 30, 2019). On December 22, 2017, the Company submitted a motion for reconsideration regarding Exempted Resolution No. 1,487, before the SMA, requesting that we be absolved of all infringements, with the exception of the charge specified under number 7 (late submission of the water quality report regarding the Cruces river). On March 23, 2018, the reconsideration appeal lodged by the company was rejected. On April 5, 2018, a judicial claim was submitted before the Third Environmental Court. On November 12, 2018, the case was in a state of agreement status, and Minister Sibel Villalobos Volpi was designated to draft the resolution. The case is pending.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company, and therefore as of June 30, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

3. Through Exempted Resolution No. 1/File F-031-2016, dated September 15, 2016, the SMA formulated three charges against the company due to certain alleged breaches of certain Environmental Qualification Resolutions of the Constitución Plant, and an alleged contravention of Law No. 19,300 resulting from a purported circumvention of the Environmental Assessment System. The SMA classified the three charges as follows: 1 severe and 2 minor.

On October 17, 2016, the company filed a Compliance Program containing 7 actions and objectives. On January 3, 2017, the SMA served its resolution approving the compliance program submitted by the Company. If the compliance program is executed satisfactorily, the proceedings would conclude without the application of any sanctions.

The final report regarding the Compliance Program was submitted on October 2, 2017, and further supplemented on December 11, 2017, evidencing the complete and comprehensive performance of all the actions and measures envisaged in said program. The SMA must issue its opinion regarding the satisfactory performance of the Compliance Program.

83

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Celulosa Arauco y Constitución S.A., Forestal Arauco S.A., Maderas Arauco S.A. y Servicios Logísticos Arauco S.A.

1. On August 13, 2018, Asociación Gremial de Dueños de Camiones de Constitución (ASODUCAM) filed a complaint seeking the performance of a contract and claiming compensation for damages against Forestal Arauco S.A., Servicios Logísticos Arauco S.A., Celulosa Arauco y Constitución S.A. and Maderas Arauco S.A. The complaint is based on alleged breaches of some agreements for the allocation, distribution and supply of cargo volumes for the years 2001 and 2005, initially executed by associates of ASODUCAM with Forestal Arauco S.A., and then, allegedly, with Servicios Logísticos Arauco S.A., in favor of the other two defendants, Celulosa Arauco and Constitución S.A. and Maderas Arauco S.A.

The complaint seeks to enforce the contract, plus $575,000,000 (equal to ThU.S.$ 847 as of June 30, 2019) in compensation for damages. In the alternative, it claims (a) $11,189,270,050 (equivalent to ThU.S.$ 16,475 as of June 30, 2019), for actual damages; (b) $ 11,189,270,050 monthly during the entire course of the trial, until the termination of the contract is declared in the final ruling, for loss of profits, and (c) $5,000,000,000 (equivalent to ThU.S.$ 7,362 as of June 30, 2019) for moral damages.

On August 28, 2018 the claim was served upon Celulosa Arauco y Constitución S.A., Forestal Arauco S.A. and Maderas Arauco S.A.; service is pending on Servicios Logísticos Arauco S.A. (Rol C-757-2018 with the Civil Court of Constitución).

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and, therefore, as of June 30, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

Forestal Arauco S.A.

1. 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 above mentioned 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., would be a supposed possessor and not owner of this estate.

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 ordered that this trial be joined with Case File C-54-2015.

On December 9, 2016, the Court summoned the parties for the issuance of the ruling. On February 24, 2017, the first instance final ruling was notified, which ruling dismissed the claim in its entirety.

84

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

On March 8, 2017, the claimant appealed against the first instance decision. On May 25, 2018, the first instance ruling was confirmed by the Court of Appeals, with litigation costs. (Court of Appeals of Talca Case File No. 949-2017).

On June 12, 2018, the plaintiff challenged the decision of the Court of Appeals, filing a cassation appeal based on substantial flaws before the Supreme Court. Pending case to be heard. (Case File 16,583-2018).

On August 1, 2019, the allegations of the case were made. The case is in agreement status.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

2. 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 above mentioned 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, 2015, 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 8, 2016, the defendant requested a consolidation of the proceedings with Case file 334-2014. The Court ordered the requested consolidation.

On February 24, 2017, the final ruling of the lower court was notified, completely dismissing the claim, with litigation costs.

On March 8, 2017, the plaintiff filed an appeal against the lower court final ruling. On May 25, 2018, the Court of Appeals of Talca upheld the first instance final ruling with litigation costs. (Court of Appeals of Talca Case File No. 949-2017).

On June 12, 2018, the plaintiff challenged the decision of the Court of Appeals, filing a cassation appeal based on substantial flaws before the Supreme Court. Pending case to be heard. (Case File 16,583-2018).

On August 1, 2019, the allegations of the case were made. The case is in agreement status.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

85

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

3. On July 11, 2017, the company was notified of a civil claim for recovery in ordinary proceedings, filed by Mrs. Carmen Muñoz Domínguez on behalf of Forestal Ezrece S.A. The plaintiff argues that its client would be the rightful owner – as a result of an assignment and sale – of 87.5% of the hereditary rights in the rural real estate property called “Pino Huacho,” located in the boroughs of Los Alamos and of Cañete, province of Lebu, Eighth Region, for a surface area amounting to 5,144.22 hectares, which actions would be under the possession of Forestal Arauco S.A. The claimant has requested the court to order Forestal Arauco S.A. to be sentenced to restitute these actions and rights. Forestal Arauco S.A. answered the claim, requesting its total dismissal, with litigation costs, and further filing a counterclaim based on the ordinary prescription and, in lieu thereof, based on extraordinary prescription.

On July 30, 2019, the final ruling was issued down rejecting both the main and the reconventional lawsuits in all its parts. The service of process to the plaintiff is pending. (Case File C-109-2017 First Instance and Guarantee Court of Lebu).

On August 12, 2019, the plaintiff filed an appeal against the final ruling, pending its referral to the Court of Appeals.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

4. Mrs. Estela Jaramillo, filed a lawsuit in a special indigenous procedure, before the First Civil Court of Osorno (Case C-2540-2018), requesting the absolute nullity of the contract of sale signed in 1999, by which Consorcio Forestal S.A. sold to Forestal Valdivia S.A., today Forestal Arauco S.A., 1,505.6 hectares under the name of Fundo San Nicolás Dos Lote Uno Norte. It also demands compensation for damages for the exploitation and use of indigenous lands against Forestal Arauco S.A.

On November 10, 2018, Forestal Arauco SA was notified of the lawsuit. On January 16, 2019, the Court dismissed the lawsuit regarding Consorcio Forestal S.A., who was not notified of the complaint.

On March 18, 2019, the answer and settlement hearing took place, and, during such hearing, the court decided to proceed to the production of evidence stage. Currently, the term for the production of evidence has expired, and the only pending act is the submission of a report by the Court regarding the debated issue by the National Institute of Indigenous Development (Corporación Nacional de Desarrollo Indígena) for an emission of a legal, technical, social and economic report about the matter.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

5. Inversiones Forestales Los Alpes Limitada and Forestal Neltume-Carrasco S.A. filed a claim against Forestal Arauco S.A. before the Civil Court of Angol (C-502-2015), in which they request that Forestal Arauco S.A. restitute the material possession of 1,855.9 hectares, which would be part of their property “Resto del Fundo Los Alpes”, which would have an area of approximately 2,700 hectares. Likewise, they requested that it be declared that the property is the exclusive domain of the actors, the restitution of the civil and natural fruits, in addition to the deteriorations that the property would have experienced, with litigation costs.

86

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

On May 29, 2019, the lawsuit was answered and the counterclaim of the acquisitive prescription was filed.

Currently the discussion period is over, and is awaiting the Court to summon the parties to a conciliation hearing.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

6. On August 2, 2019, the company was notified of a lawsuit for termination of contract and compensation for damages filed by “Sociedad Recuperadora de Fibra S.A.” before the First Court of Valdivia (Role C-2215-2019). In the lawsuit, the plantiff questions the anticipated termination of a contract by Forestal Arauco.

It also claims that the company would have breached various contractual obligations regarding to 2 groups of contracts:

A. (i) Aggregates Transport Contract and (ii) Production, Cargo, Storage and Construction Management Contract for Platforms and flooring.

B. (i) Contract for the Production of Aggregates, (ii) Contract for Long Freight Services for Aggregates and (iii) Contract for Construction Services for Granular floor and Short Freight for Aggregates.

Based on the foregoing, it requests payment of compensation for an amount of $3,486,187,431 (equivalent to ThU.S.$ 5,133 as of June 30, 2019).

Currently, the answer to the lawsuit is pending.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

87

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Arauco Argentina S.A.

Pursuant to law No. 25,080, the former Secretary of Agriculture, Livestock, Fishing and Foodstuffs, the enforcement agency referred to in the law approved, by Res. No. 952/2000, the forestry and industrial-forestry projects submitted by Arauco Argentina S.A. In the context of these projects, the Company afforested: 1) 4,777 hectares during 2000, in observance of its committed yearly plan; and 2) 23,012 hectares between 2000 and 2006 as a part of the multi-year afforestation plan. Likewise, a sawmill was built with installed capacity to produce 250,000 m3 of sawn timber per year.

On January 11, 2001, Arauco Argentina S.A. submitted an expansion for the approved industrial-forestry project. The expansion was approved via Res. No. 84/03 issued by the former Secretary of Agriculture, Livestock, Fishing and Foodstuffs. In accordance with the assumed obligations, the Company built a MDF board (panels) plant and afforested 8,089 hectares between 2001 and 2006.

Additionally, the Company has filed yearly forestry plans between years 2007 and 2017 for its local operations in the Provinces of Misiones and Buenos Aires.

On March 25, 2019, the Secretary of Agriculture, Livestock and Fishing approved the resolution No. 2019-55-APN-SECAGYP # MPYT, approving the annual forestry plan for 2007. For this reason, Arauco Argentina S.A. may compute the exemption in the income tax related to the forest appraisal on 7,836 hectares planted in that year as of this period.

In March 2005, Note No. 145/05 of the Undersecretary of Agriculture, Livestock and Afforestation suspended the benefit that exempted Arauco Argentina S.A. from paying export duties under Law No. 25,080. This measure is currently under discussion by the Company. On November 8, 2006, the V Chamber of the National Appeals Court for Adversarial Administrative and Federal Matters issued a ruling ordering Arauco Argentina S.A. to continue to enjoy an exemption from paying the exportation duties, in the same manner and scope it had prior to the suspension ordered by Note No. 145/05, if the clearance of merchandise is performed pursuant to the guarantee regime established in article 453, subsection a) of the Customs Code, for the exempted tax obligation. 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. The company maintains an assignment of funds equivalent to $997,408,288 Argentine Pesos (ThU.S.$ 23,463 as of June 30, 2019) for guaranteed export duties, which appears under not current provisions. Additionally, the Company filed a restitution claim for a total amount of US$6,555,207, plus interests accrued from the service of the claim, corresponding to export duties between March 2005 and March 2007, as a result of the application of Note 145/05 issued by the Undersecretary of Agriculture, Livestock and Afforestation. Both the underlying issue and the restitution claim have yet to be resolved.

On the other hand, in April 2016, the Secretary of Agriculture, Livestock and Fishing issued Resolution No.154 – E/2016, that requires that the holders of enterprises that have received the fiscal benefits envisaged by Law No. 25,080, establish collateral to cover a third of the duration of the project, with a minimum term of five years. During May of 2018, the Company modified the duly established collateral in accordance to the terms of said Resolution, for which reason the security was ultimately established at an amount of $384,317,563 Argentine Pesos (ThU.S.$9,501 as of June 30, 2019).

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.

88

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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, at the estimated amount of R$164,159,000 (ThU.S.$42,836 as of June 30, 2019). 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. The CARF’s decision was issued on May 16, 2017, and took into consideration certain arguments presented by the Company regarding the premium, but preserving other charges. On September 27, 2018, Arauco do Brasil was notified of the CARF’s decision, representing the final amount of this case R$57,556,262 (ThU.S.$ 15,019 as of June 30, 2019) and interests and readjustments will be added to that value until the discussion is over. Arauco do Brasil S.A. filed an appeal for declaration embargoes, to elicit clarifications from the CARF regarding certain points of the decision. On January 25, 2019, the CARF ruled that there were no clarifications or omissions to be made and, consequently, granted a term for filing the last remedy within the administrative realm. This Special Remedy was submitted before the Upper Chamber of Fiscal Remedies of the CARF (CSRF) on February 11, 2019, reiterating the Company’s defense allegations regarding the matters and charges that remained in such process; we are currently expecting the decision on such Special Remedy.

Based on the last decision of the declaratory liens, the CARF submitted that the current value under discussion would amount to R$58,059,580.30 (ThU.S.$ 15,150 as of June 30, 2019), with basis as of January 31, 2019. Interests and adjustments must be added to the aforesaid amount as from January 31, 2019 and until the discussion concludes.

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. Otherwise, as the next step, the Company will discuss the Infringement Notice before the Brazilian Justice Courts.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

At the closing date, there are no other contingencies in which the Companies act as obligor, that may significantly affect their financial, economic or operational conditions.

89

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Provisions recorded as of June 30, 2019 and December 31, 2018 are as follows:

Classes of Provisions	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Provisions, Current		1,279		413
Provisions for litigations		1,275		413
Other provisions		4		—
Provisions, non-Current		34,114		33,884
Provisions for litigations		10,614		10,384
Other provisions		23,500		23,500
Total Provisions		35,393		34,297

	06-30-2019
Movements in Provisions	Litigations (*) ThU.S.$			Other Provisions (**) ThU.S.$		Total ThU.S.$
Opening balance		10,797			23,500		34,297
Changes in provisions
Increase in existing provisions		1,033			—		1,033
Increase through business combinations		815			—		815
Used provisions		(324	)		—		(324	)
Increase (decrease) in foreign currency exchange		(492	)		—		(492	)
Other Increases (Decreases)		60			4		64
Total Changes		1,092			4		1,096
Closing balance		11,889			23,504		35,393

(*) The increase in legal claims is composed mainly of ThU.S.$552 and ThU.S.$481 (Brazilian and Argentine subsidiaries respectively) in connection with civil and labor lawsuits.

(**) Increase through business combinations is due to Maderas y sintéticos de México S.A. ThU.S.$ 815 where there is a resolution against the company for a lawsuit related to trademark.

	12-31-2018
Movements in Provisions	Litigations (*) ThU.S.$			Other Provisions (**) ThU.S.$			Total ThU.S.$
Opening balance		13,172			25,564			38,736
Changes in provisions
Increase in existing provisions		1,660			2			1,662
Used provisions		(887	)		—			(887	)
Increase (decrease) in foreign currency exchange		(5,262	)		—			(5,262	)
Other Increases (Decreases)		2,114			(2,066	)		48
Total Changes		(2,375	)		(2,064	)		(4,439	)
Closing balance		10,797			23,500			34,297

(*) The increase in legal claims is composed mainly of ThU.S.$886 and ThU.S.$776 (Brazilian and Argentine subsidiaries respectively) in connection with civil and labor lawsuits.

(**) The decrease in Other Increases (Decreases) in Other provisions is due to legal claims from Arauco Industrias de Paineis which were classified as Other provisions in 2017 and were included as Litigations in December 2018

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, and the constitution of provision for the lawsuit of export duties (see Arauco Argentina’s contingent liability set forth in this note).

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 19. INTANGIBLE ASSETS

Classes of Intangible Assets, Net	06-30-2019 ThU.S.$			12-31-2018 ThU.S.$
Intangible assets, net		96,720			90,093
Computer software		24,454			26,545
Water rights		5,966			5,966
Customer		39,730			41,634
Other identifiable intangible assets		26,570			15,948
Classes of intangible Assets, Gross		201,144			185,895
Computer software		91,632			88,177
Water rights		5,966			5,966
Customer		72,297			71,443
Other identifiable intangible assets		31,249			20,309
Classes of accumulated amortization and impairment
Total accumulated amortization and impairment		(104,424	)		(95,802	)
Accumulated amortization and impairment, intangible assets		(104,424	)		(95,802	)
Computer software		(67,178	)		(61,632	)
Customer		(32,567	)		(29,809	)
Other identifiable intangible assets		(4,679	)		(4,361	)

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

	06-30-2019
Reconciliation of intangible assets	Computer Software ThU.S.$			Water Rights ThU.S.$		Customer ThU.S.$			Others ThU.S.$			TOTAL ThU.S.$
Opening Balance		26,545			5,966		41,634			15,948			90,093
Changes
Additions		1,129			—		—			9,780			10,909
Additions through business combination		242			—		—			—			242
Disposals		(17	)		—		—			—			(17	)
Amortization		(3,677	)		—		(2,385	)		(180	)		(6,242	)
Increase (Decrease) related to foreign currency translation		232			—		481			(167	)		546
Other Increases (Decreases)		—			—		—			1,189			1,189
Changes Total		(2,091	)		—		(1,904	)		10,622			6,627
Closing Balance		24,454			5,966		39,730			26,570			96,720
	12-31-2018
Reconciliation of intangible assets	Computer Software ThU.S.$			Water Rights ThU.S.$		Customer ThU.S.$			Others ThU.S.$			TOTAL ThU.S.$
Opening Balance		26,747			5,697		47,144			9,027			88,615
Changes
Additions		6,369			269		—			7,424			14,062
Disposals		(1	)		—		—			—			(1	)
Amortization		(7,132	)		—		(4,808	)		(409	)		(12,349	)
Increase (Decrease) related to foreign currency translation		(287	)		—		(702	)		(31	)		(1,020	)
Other Increases (Decreases)		849			—		—			(63	)		786
Changes Total		(202	)		269		(5,510	)		6,921			1,478
Closing Balance		26,545			5,966		41,634			15,948			90,093

	Years of Useful life (Average)
Computer Software		5
Customer		15
Brands		7

The amortization of customer and computer software is presented in the Interim Consolidated Statements of Profit or Loss under the “Administrative Expenses” line item.

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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 1.8 million hectares as of June 30, 2019 out of which 1 million hectares are used for forestry planting, 437 thousand hectares are native forest, 199 thousand hectares are used for other purposes and 114 thousand hectares not yet planted.

For the period ended June 30, 2019, the production volume of logs totaled 10.5 million m3 (11.1 million m3 as of June 30, 2018).

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 trades. 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 Interim Consolidated Statements of Profit or Loss under the line item Other income per function, which as of June 30, 2019 amounted to ThU.S.$74,410 (ThU.S.$ 51,876 as of June 30, 2018). The appraisal of biological assets resulted in a greater cost of the lumber sold in comparison to the real incurred cost, which is presented included in the cost of sales which as of June 30, 2019 amounted to ThU.S.$95,056 (ThU.S.$ 104,201 as of June 30, 2018).

• Forestry plantations are harvested according to the needs of Arauco’s production plants.

• The discount rates used are 6.4% in Chile, 7.9% Brazil, 10.5% in Argentina and 6.9% in Uruguay.

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June 30, 2019

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

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

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

• The average crop age by species and country is:

	Chile		Argentina		Brazil		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		(131,041	)
	-0,5		138,895
Margins (%)	10		387,524
	-10		(387,524	)

The adjustment to fair value of biological assets is recorded in the Interim Consolidated Statements of Profit or Loss, under the line item Other Income or Other Expenses, depending on whether it corresponds to profits or losses.

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, allow risks to be minimized.

Detail of Biological Assets Pledged as Security

As of June 30, 2019, there are no forestry plantations pledged as security.

Detail of Biological Assets with Restricted Ownership

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

No significant government grants have been received.

Current and Non-Current Biological Assets

As of the date of these interim consolidated financial statements, the Current and Non-current biological assets are as follows:

	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Current		308,589		315,924
Non-current		3,374,596		3,336,339
Total		3,683,185		3,652,263

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Reconciliation of carrying amount of biological assets

	06-30-2019
Movement	Current ThU.S.$			Non-current ThU.S.$			Total ThU.S.$
Opening Balance		315,924			3,336,339			3,652,263
Changes in real incurred cost		10,434			43,806			54,240
Additions through acquisition and costs of new plantations		6,452			108,732			115,184
Sales		—			(568	)		(568	)
Harvest		(63,460	)		—			(63,460	)
Increases (decreases) in Foreign Currency Translation		973			4,457			5,430
Loss of forest due to fires		—			(2,529	)		(2,529	)
Transfers from non-current to current		66,469			(66,469	)		—
Other Increases (decreases)		—			183			183
Changes in fair value		(17,769	)		(5,549	)		(23,318	)
Gain (losses) arising from changes in fair value minus sale costs		(3,295	)		77,705			74,410
Sales		—			(1,281	)		(1,281	)
Harvest		(92,767	)		—			(92,767	)
Loss of forest due to fires		—			(3,680	)		(3,680	)
Transfers from non-current to current		78,293			(78,293	)		—
Total Changes		(7,335	)		38,257			30,922
Closing balance		308,589			3,374,596			3,683,185
	12-31-2018
Movement	Current ThU.S.$			Non-current ThU.S.$			Total ThU.S.$
Opening Balance		307,796			3,459,146			3,766,942
Changes in real incurred cost		34,684			(27,174	)		7,510
Additions through acquisition and costs of new plantations		2,105			205,353			207,458
Sales		(52	)		(315	)		(367	)
Harvest		(117,729	)		—			(117,729	)
Increases (decreases) in Foreign Currency Translation		(5,424	)		(76,672	)		(82,096	)
Loss of forest due to fires		—			(8,702	)		(8,702	)
Transfers from non-current to current		155,789			(155,789	)		—
Other Increases (decreases)		(5	)		8,951			8,946
Changes in fair value		(26,556	)		(95,633	)		(122,189	)
Gain (losses) arising from changes in fair value minus sale costs		(8,684	)		93,160			84,476
Sales		—			(445	)		(445	)
Harvest		(203,164	)		—			(203,164	)
Loss of forest due to fires		—			(3,056	)		(3,056	)
Transfers from non-current to current		185,292			(185,292	)		—
Total Changes		8,128			(122,807	)		(114,679	)
Closing balance		315,924			3,336,339			3,652,263

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

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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.    

These investments are reflected in the Interim Consolidated Financial Statements as Properties, Plants and Equipment when they refer to disbursements in major works executed and are reflected in Expenses when they refer to improvements or management not directly associated with investment projects.

Detail information of disbursements related to the environment

As of June 30, 2019, and December 31, 2018 Arauco has made and / or has committed the following disbursements by major environmental projects:

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

06-30-2019		Disbursements undertaken 2019					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		3,849	Assets	Property, plant and equipment		9,883		2019
Celulosa Arauco y Constitución S.A.	Investment projects for the control and management of gas emissions from industrial process	In process		92	Assets	Property, plant and equipment		2,231		2019
Celulosa Arauco y Constitución S.A.	Environmental improvement studies	In process		13,933	Assets	Property, plant and equipment		76,371		2019
Celulosa Arauco y Constitución S.A.	Investment projects for the control and management of gas emissions from industrial process	In process		231	Expense	Operating cost		223		2019
Celulosa Arauco y Constitución S.A.	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	In process		2,941	Assets	Property, plant and equipment		6,242		2019
Celulosa Arauco y Constitución S.A.	Environmental improvement studies	In process		8,495	Expense	Operating cost		6,008		2019
Celulosa Arauco y Constitución S.A.	Expansion of solid industrial waste dumpsite for management of these in the future	In process		342	Assets	Property, plant and equipment		3,445		2019
Celulosa Arauco y Constitución S.A.	Expansion of solid industrial waste dumpsite for management of these in the future	In process		3,548	Expense	Operating cost		4,132		2019
Arauco Argentina S.A.	Construction emisario	In process		25	Assets	Property, plant and equipment		697		2019
Arauco Argentina S.A.	Expansion of solid industrial waste dumpsite for management of these in the future	In process		821	Assets	Property, plant and equipment		659		2019
Arauco Argentina S.A.	Investment projects for the control and management of gas emissions from industrial process	In process		158	Assets	Property, plant and equipment		1,172		2019
Maderas Arauco S.A.	Expansion of solid industrial waste dumpsite for management of these in the future	In process		127	Expense	Operating cost		127		2019
Maderas Arauco S.A.	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	In process		372	Expense	Operating cost		372		2019
Maderas Arauco S.A.	Environmental improvement studies	In process		275	Assets	Property, plant and equipment		16		2019
Forestal Arauco S.A.	Environmental improvement studies	In process		366	Expense	Administration expenses		590		2019
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		58	Assets	Property, plant and equipment		2,998		2019
Celulosa y Energía Punta Pereira S.A.	Expansion of solid industrial waste dumpsite for management of these in the future	In process		65	Assets	Property, plant and equipment		435		2019
Celulosa y Energía Punta Pereira S.A.	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	Finished		412	Assets	Property, plant and equipment		—
Forestal Los Lagos S.A.	Environmental improvement studies	In process		99	Expense	Operating cost		173		2019
		TOTAL		36,209				115,774
12-31-2018		Disbursements undertaken 2018					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		5,055	Assets	Property, plant and equipment		6,724		2019
Celulosa Arauco y Constitucion S.A.	Investment projects for the control and management of gas emissions from industrial process	In process		6,467	Assets	Property, plant and equipment		8,271		2019
Celulosa Arauco y Constitucion S.A.	Environmental improvement studies	In process		29,419	Assets	Property, plant and equipment		63,035		2019
Celulosa Arauco y Constitucion S.A.	Investment projects for the control and management of gas emissions from industrial process	Finished		563	Expense	Operating cost		—
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		21,978	Assets	Property, plant and equipment		9,233		2019
Celulosa Arauco y Constitucion S.A.	Environmental improvement studies	Finished		25,684	Expense	Operating cost		—
Arauco Argentina S.A.	Construction emisario	In process		1,454	Assets	Property, plant and equipment		797		2019
Maderas Arauco S.A.	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	In process		499	Expense	Operating cost		—
Maderas Arauco S.A.	Expansion of solid industrial waste dumpsite for management of these in the future	In process		1,471	Expense	Operating cost		—
Maderas Arauco S.A.	Environmental improvement studies	In process		—	Assets	Property, plant and equipment		291		2019
Forestal Arauco S.A.	Environmental improvement studies	In process		1,547	Expense	Administration expenses		1,957		2019
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		52	Assets	Property, plant and equipment		3,266		2019
Celulosa y Energía Punta Pereira S.A.	Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants	Finished		281	Assets	Property, plant and equipment		—
Forestal Los Lagos S.A.	Environmental improvement studies	In process		236	Expense	Operating cost		273		2019
		TOTAL		94,706				93,847

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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.

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

	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Land		2,442		2,352
Buildings		1,256		1,284
Property, plant and equipment		1,970		2,090
Total		5,668		5,726

As of June 30, 2019, and December 31, 2018, there were no significant effects on results related to the sale of assets held for sale.

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 23. FINANCIAL INSTRUMENTS

23.1 Classification

Arauco’s financial instruments as of June 30, 2019 and December 31, 2018, are displayed in the table below. Regarding those instruments valued at an amortized cost, a estimation of their fair value is displayed for informational purposes.

Financial Instruments Thousands of dollars	June 2019				December 2018
	Carrying amount		Fair Value		Carrying amount		Fair Value
Financial assets at fair value through profit or loss (held for trading)		294,328		294,328		270,110		270,110
Derivatives (1)		139		139		75		75
Mutual funds (2)		294,189		294,189		270,035		270,035
Financial assets at amortized cost		1,824,452		1,824,452		1,669,587		1,669,587
Cash and cash equivalents (amortized cost)		956,674		956,674		805,907		805,907
Cash		313,632		313,632		327,132		327,132
Time deposits		643,042		643,042		478,775		478,775
Accounts Receivable (net)		863,328		863,328		854,333		854,333
Trade and other receivables		762,517		762,517		751,158		751,158
Lease receivable		1,655		1,655		1,968		1,968
Other receivables		99,156		99,156		101,207		101,207
Accounts receivable due from related parties		4,445		4,445		7,805		7,805
Other financial assets		5		5		1,542		1,542
Hedging assets		50,048		50,048		19,226		19,226
Financial liabilities at amortized cost (3)		6,413,042		6,921,868		5,182,353		5,206,334
Bonds issued denominated in U.S. Dollars		2,948,108		3,136,801		2,062,044		1,948,482
Bonds issued denominated in U.F. (4)		1,469,440		1,730,565		1,439,610		1,544,813
Bank Loans in U.S. Dollars		878,004		937,012		925,780		962,866
Bank borrowing denominated in U.S. Dollars		76,683		76,683		14,655		14,655
Lease liabilities		333,460		333,460		68,187		63,441
Trade and other payables		699,248		699,248		661,848		661,848
Accounts payable to related parties		8,099		8,099		10,229		10,229
Financial liabilities at fair value through profit or loss		165		165		289		289
Hedging Liabilities		29,678		29,678		71,310		71,310

(1) The derivatives are presented in the line item “other financial assets” in the consolidated statements of financial position.

(2) Although mutual funds are measured at fair value through profit or loss for purposes of the consolidated statements 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”, “Accounts payable to related parties” and derivatives are presented in the consolidated statements of financial position in the line item “Other financial liabilities” as current and non-current based on their maturity.

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

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

23.2 Fair Value Hierarchy of Financial Assets and Liabilities

The assets and liabilities measured at fair value in the interim consolidated statements of financial position as of June 30, 2019, have been measured based on the valuation methodologies provided in IFRS 13. 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).

Fair Value	June 2019 ThU.S.$		Level 1 ThU.S.$		Level 2 ThU.S.$		Level 3 ThU.S.$
Financial assets at fair value
Derivatives		139				139
Mutual Funds		294,189		294,189
Hedging assets		50,048				50,048
Financial liabilities at fair value through profit or loss		165				165
Hedging liabilities		29,678				29,678

23.3 Explanation of the valuation of Financial Instruments.

Cash and cash equivalent and accounts receivable

The carrying amount of accounts receivable, 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 and counterparties’s risk, using an internal methodology based on the information obtained from Bloomberg. In this particular case, given that cross currency swaps correspond to future flows in UF, U.S. dollars and Euros, Arauco calculates the current value of such flows by using discount curves: the UF zero coupon curve, Dollar zero coupon and the Euro 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.

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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 and lease liabilities (the latter one with respect to 2018 figures), was 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 interim consolidated financial statements, and correspond to Level 2 of the fair value hierarchy.

100

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

The following table sets forth a reconciliation between the financial liabilities and the consolidated statements of financial position as of June 30, 2019 and December 31, 2018:

Thousands of dollars	June 2019
	Up to 90 days		From 91 days to 1 year		Other current financial liabilities, Total		From 13 months to 3 years		From 3 years to 5 years		More than 5 years		Other non-current financial liabilities, Total		Total
Bonds obligations		195,019		69,433		264,452		676,647		89,640		3,386,809		4,153,096		4,417,548
Bank borrowing		83,490		113,281		196,771		176,620		515,933		65,363		757,916		954,687
Lease liabilities		20,511		61,614		82,125		105,070		24,592		121,673		251,335		333,460
Swap and Forward		1,029		—		1,029		28,814		—		—		28,814		29,843
Other Financial Liabilities, Total (a)		300,049		244,328		544,377		987,151		630,165		3,573,845		5,191,161		5,735,538
Thousands of dollars	June 2019
	Up to 90 days		From 91 days to 1 year		Total Current		From 13 months to 3 years		From 3 years to 5 years		More than 5 years		Total non-current		Total
Trades and other payables		689,026		7,631		696,657		2,591		—		—		2,591		699,248
Accounts payable to related companies		8,099		—		8,099		—		—		—		—		8,099
Accounts Payable, Total (b)		697,125		7,631		704,756		2,591		—		—		2,591		707,347
Financial Liabilities, Total (a) + (b)		997,174		251,959		1,249,133		989,742		630,165		3,573,845		5,193,752		6,442,885
Thousands of dollars	December 2018
	Up to 90 days		From 91 days to 1 year		Other current financial liabilities, Total		From 13 months to 3 years		From 3 years to 5 years		More than 5 years		Other non-current financial liabilities, Total		Total
Bonds obligations		27,803		262,068		289,871		478,441		340,275		2,393,067		3,211,783		3,501,654
Bank borrowings		84,778		130,271		215,049		177,504		348,558		199,324		725,386		940,435
Lease liabilities		7,265		23,651		30,916		26,296		10,975		—		37,271		68,187
Swap and Forward		1,760		—		1,760		69,839		—		—		69,839		71,599
Other Financial Liabilities, Total (a)		121,606		415,990		537,596		752,080		699,808		2,592,391		4,044,279		4,581,876
Thousands of dollars	December 2018
	Up to 90 days		From 91 days to 1 year		Total Current		From 13 months to 3 years		From 3 years to 5 years		More than 5 years		Total non-current		Total
Trades and other payables		659,618		—		659,618		2,230		—		—		2,230		661,848
Accounts payable to related companies		10,229		—		10,229		—		—		—		—		10,229
Accounts Payable, Total (b)		669,847		—		669,847		2,230		—		—		2,230		672,077
Financial Liabilities, Total (a) + (b)		791,453		415,990		1,207,443		754,310		699,808		2,592,391		4,046,509		5,253,952

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

23.4 Derivative Instruments

Hedging instruments recorded as of June 30, 2019 are cash flow hedges. Arauco uses derivatives for hedging purposes, such as cross currency swaps, currency and commodity 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 Statements 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 or the Statements of Comprehensive Income as Finance Income or Finance Costs, net of differences in exchange rate of the hedged items and the deferred tax.

A summary of the derivative financial instruments included in the interim statements of financial position as of the end of this period, is presented below:

Financial Instruments	June 2019 Fair Value ThU.S.$			December 2018 Fair Value ThU.S.$
Assets at fair value through profit or loss (held for trading)		139			75
Derivatives (1)		139			75
Hedging Assets		50,049			19,226
Derivatives (1)		1,119			1,357
Cross Currency Swaps		48,930			17,869
Financial liabilities at fair value through profit or loss		(165	)		(289	)
Forward (2)		(109	)		(2	)
Derivatives (1)		(56	)		(287	)
Hedging Liabilities		(29,679	)		(71,310	)
Cross Currency Swaps		(28,703	)		(69,086	)
Derivatives (1)		(976	)		(2,224	)

(1) Includes Swap and Forward from Uruguay tables.

(2) Includes Forwards from Colombia and Chile.

23.4.1. Chile

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 different from the functional currency, which causes mismatches that could affect operating results.

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Below are the cross currency swaps that Arauco has as of June 30, 2019 and December 31, 2018 to cover the exposure to the exchange rate risk generated from bonds denominated in U.F.:

Bond	Institution	Amount U.S.$		Amount U.F.		Starting date		Ending date		June 2019 Fair Value ThU.S.$			December 2018 Fair Value ThU.S.
F	Deutsche - England		41,635,657		954,545		10-30-2011		10-30-2021		(1,567	)		(3,105	)
F	JP Morgan - N.A.		41,635,657		954,545		10-30-2011		10-30-2021		(1,513	)		(3,039	)
F	Deutsche - England		—		—		04-30-2014		04-30-2019		—			1,707
F	Scotiabank - Chile		36,679,778		954,545		10-30-2014		04-30-2023		3,579			2,041
F	Scotiabank - Chile		36,633,966		954,545		10-30-2014		04-30-2023		3,791			2,273
F	Santander - Chile		36,250,835		954,545		10-30-2014		04-30-2023		4,229			2,715
F	BCI - Chile		35,911,491		954,545		10-30-2014		04-30-2023		4,652			3,148
F	Banco de Chile - Chile		36,250,835		954,545		04-30-2019		10-30-2029		3,352			155
J	Corpbanca - Chile		42,864,859		1,000,000		09-01-2010		09-01-2020		(1,865	)		(3,289	)
J	Scotiabank - Chile		42,864,859		1,000,000		09-01-2010		09-01-2020		(1,865	)		(3,289	)
J	Deutsche - England		42,864,859		1,000,000		09-01-2010		09-01-2020		(1,898	)		(3,313	)
J	Santander - Spain		42,873,112		1,000,000		09-01-2010		09-01-2020		(1,855	)		(3,273	)
J	Scotiabank - Chile		42,864,257		1,000,000		09-01-2010		09-01-2020		(1,795	)		(3,197	)
P	Corpbanca - Chile		46,474,122		1,000,000		05-15-2012		11-15-2021		(3,749	)		(4,978	)
P	JP Morgan - N.A.		47,163,640		1,000,000		11-15-2012		11-15-2021		(3,979	)		(5,102	)
P	Scotiabank - Chile		42,412,852		1,000,000		11-15-2013		11-15-2023		678			(882	)
P	Santander - Chile		41,752,718		1,000,000		11-15-2013		11-15-2023		1,505			(89	)
P	Deutsche - England		41,752,718		1,000,000		11-15-2013		11-15-2023		1,380			(92	)
Q	BCI - Chile		21,592,612		500,000		10-01-2014		04-01-2021		(692	)		(1,679	)
Q	BCI - Chile		21,598,348		500,000		10-01-2014		04-01-2021		(677	)		(1,655	)
R	Santander - Chile		128,611,183		3,000,000		10-01-2014		04-01-2024		(2,272	)		(7,016	)
R	JP Morgan - England		43,185,224		1,000,000		10-01-2014		04-01-2024		(484	)		(1,996	)
R	Corpbanca - Chile		43,277,070		1,000,000		10-01-2014		04-01-2024		(499	)		(2,015	)
S	Santander - Chile		201,340,031		5,000,000		11-15-2016		11-15-2026		13,654			5,830
W	Goldman Sachs		40,521,750		1,000,000		10-10-2018		10-10-2028		(940	)		(2,392	)
W	Scotiabank - Chile		40,537,926		1,000,000		10-10-2018		10-10-2028		(449	)		(2,294	)
W	Goldman Sachs		40,066,555		1,000,000		10-10-2018		10-10-2028		(370	)		(1,861	)
X	Santander - Chile		118,400,504		3,000,000		10-10-2018		10-10-2038		6,518			(7,976	)
X	Santander - Chile		97,971,786		2,500,000		10-10-2018		10-10-2038		5,591			(6,554	)
											22,460			(51,217	)

Additionally, as of June 30, 2019, Arauco maintains cross currency swaps contracts to cover the exposure to the risk of the exchange rate for bank contracts in Euro, as shown in the following table:

Institution	Amount U.S.$		Amount EUR		Starting date		Ending date		June 2019 Fair Value ThU.S.$			December 2018 Fair Value ThU.S.
Santander - Chile		118,670,000		100,000,000		06-15-2021		12-15-2029		(399	)		—
Banco de Chile		59,335,000		50,000,000		06-15-2021		12-15-2029		(176	)		—
MUFG - N.A.		118,670,000		100,000,000		06-15-2021		12-15-2029		(338	)		—
JP Morgan - N.A.		237,340,000		200,000,000		06-15-2021		12-15-2029		(1,011	)		—
HSBC - N.A.		59,335,000		50,000,000		06-15-2021		12-15-2029		(309	)		—
										(2,233	)

Arauco needs to minimize the risk of the exchange rate, as it holds debt in other currencies different from U.S. dollars. 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 other currencies of the liabilities 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 IFRS 9, 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.

103

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

23.4.2. Colombia

Forward contracts that are in force and effect, executed by Arauco Colombia as of June 30, 2019 and December 31, 2018, are detailed in the following table:

Exchange rate	Institution		Amount ThU.S.$		Starting date		Ending date		June 2019 Fair Value ThU.S.$
USDCOP		Corpbanca Colombia		2,000		04-11-2019		07-09-2019		(104	)
USDCOP		Corpbanca Colombia		2,000		05-23-2019		08-12-2019		(3	)
USDCOP		Corpbanca Colombia		2,100		06-21-2019		09-11-2019		(2	)
										(109	)
Exchange rate	Institution		Amount ThU.S.$		Starting date		Ending date		December 2018 Fair Value ThU.S.$
USDCOP		Corpbanca Colombia		1,500		10-31-2018		01-09-2019		(2	)
USDCOP		Corpbanca Colombia		1,700		11-26-2018		02-12-2019		—
USDCOP		Corpbanca Colombia		1,600		12-20-2018		03-12-2019		—
										(2	)

23.4.3. Uruguay

Forward

As of June 30, 2019 and December 31, 2018, Arauco through its subsidiaries as a joint operation (50%) in Uruguay maintains the following forward contracts in force and effect for the purposes of ensuring an exchange rate for sale of dollars:

Exchange rate	Institution	Notional ThU.S.$		June 2019 Fair Value ThU.S.$
UYUUSD	Banco Santander Uruguay		9,925		(314	)
UYUUSD	HSBC Uruguay		11,875		(207	)
UYUUSD	Citibank U.K.		4,900		(171	)
UYUUSD	Banco Itaú Uruguay		1,580		(66	)
EURUSD	Citibank U.K.		1,966		12
					(746	)
Exchange rate	Institution	Notional ThU.S.$		December 2018 Fair Value ThU.S.$
UYUUSD	Banco Santander Uy		14,880		(586	)
UYUUSD	HSBC Uruguay		11,610		(56	)
UYUUSD	Citibank U.K.		4,425		29
					(613	)

Arauco Uruguay’s profits and through its subsidiaries as a joint operation (50%), 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 2018, 2019 and part of 2020 has been limited, through forwards of this commodity. The agreements that are in force and effect as of June 30, 2019 and December 31, 2018, are detailed below:

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Commodity	Institution	Notional ThU.S.$		June 2019 Fair Value ThU.S.$
Fuel Oil N°6	JPMorgan Chase Bank, N.A.		7,052		483
Fuel Oil N°6	Citibank U.K.		241		47
Fuel Oil N°6	DNB Bank ASA		4,570		349
					879
Commodity	Institution	Notional ThU.S.$		December 2018 Fair Value ThU.S.$
Fuel Oil N°6	JPMorgan Chase Bank, N.A.		6,189		(800	)
Fuel Oil N°6	Citibank U.K.		401		(34	)
Fuel Oil N°6	DNB Bank ASA		4,837		(568	)
					(1,402	)

Interest Rate Swap

In addition, Arauco through its subsidiaries as a joint operation (50%) in 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 June 30, 2019 and December 31, 2018 is shown below:

Exchange rate	Institution	Notional ThU.S.$		June 2019 Fair Value ThU.S.$
USD	DNB Bank ASA		37,978		93
Exchange rate	Institution	Notional ThU.S.$		December 2018 Fair Value ThU.S.$
USD	DNB Bank ASA		42,198		936

23.5 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 interim 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 accounts receivable from related parties

As of June 30, 2019, and December 31, 2018, there are provisions for impairment for ThU.S.$ 16,102 and ThU.S.$ 15,147, respectively.

105

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

	June 2019 ThU.S.$		December 2018 ThU.S.$
Financial assets at amortized cost		1,824,452		1,669,587
Cash and cash equivalents		956,674		805,907
Cash		313,632		327,132
Time Deposits		643,042		478,775
Trade and other receivables (net)		867,773		862,138
Trade and other receivables		762,517		751,158
Lease receivable		1,655		1,968
Other receivables		99,156		101,207
Accounts receivable from related parties		4,445		7,805
Other financial assets		5		1,542

23.5.1. Cash and Cash Equivalents

Includes cash on hand, bank checking account 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 June 30, 2019 and December 31, 2018, classified by origin coins is as follows:

	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Cash and Cash Equivalents		1,250,863		1,075,942
U.S. Dollars		937,839		834,513
Euro		18,838		8,295
Mexican pesos		5,944		1,461
Other currencies		50,243		51,373
Chilean pesos		237,999		180,300

23.5.2 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.

23.5.3 Trade and Other Receivables: These represent enforceable rights for Arauco resulting from the normal course of the business.

23.5.4 Other Receivables: These correspond to receivables from sales, services or loans that are not considered within the normal course of the business.

The allowance 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.

106

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

23.5.5 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 exploitation 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 June 30, 2019 and December 31, 2018:

	06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Trades and other current receivables		851,994		839,184
U.S. Dollars		611,077		631,047
Euros		4,213		7,399
Mexican pesos		42,822		—
Other currencies		95,765		97,002
Chilean pesos		94,217		99,950
U.F.		3,900		3,786
Accounts receivable from related parties, current		4,445		7,324
U.S. Dollars		814		591
Other currencies		231		83
Chilean pesos		2,833		6,169
U.F.		567		481
Trade and other non-current receivables		11,334		15,149
U.S. Dollars		3,612		7,733
Other currencies		637		1,067
Chilean pesos		3,445		3,267
U.F.		3,640		3,082
Accounts receivable from related parties, non-current		—		481
U.F.		—		481

23.6 Financial Liabilities

Arauco’s financial liabilities to the date of these interim consolidated financial statements are as follows:

Financial Liabilities	June 2019 ThU.S.$		December 2018 ThU.S.$
Total Financial Liabilities		6,442,885		5,253,952
Financial liabilities at fair value through profit or loss (held for trading)		165		289
Hedging Liabilities		29,678		71,310
Financial Liabilities Measured at Amortized Cost		6,413,042		5,182,353

The following table sets forth the current portion of the non-current bank borrowings and debt issued as of June 30, 2019 and December 31, 2018.

	June 2019 ThU.S.$		December 2018 ThU.S.$
Bank borrowings - current portion		99,489		99,397
Bonds issued - current portion		89,705		81,060
Total		189,194		180,457

107

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

23.7 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.

At the end of each reporting period, Arauco includes in this category bank borrowings, bonds issued denominated in U.S. Dollars and in U.F., lease liabilities, and trade and other payables.

	Currency		06-30-2019 ThU.S.$		12-31-2018 ThU.S.$		06-30-2019 ThU.S.$		12-31-2018 ThU.S.$
			Amortized Cost				Fair Value
Total Financial Liabilities				6,413,042		5,182,353		6,921,868		5,206,334
Bonds Issued		U.S. Dollar		2,948,108		2,062,044		3,136,801		1,948,482
Bonds Issued		U.F.		1,469,440		1,439,610		1,730,565		1,544,813
Bank borrowings		U.S. Dollar		878,004		925,780		937,012		962,866
Bank borrowings		Euro		65,384		—		65,384
Bank borrowings		Other currencies		11,299		14,655		11,299		14,655
Lease liabilities		U.F.		3,360		57,349		3,360		53,593
Lease liabilities		Chilean pesos		138,932		10,838		138,932		9,848
Lease liabilities		Mexican pesos		896		—		896		—
Lease liabilities		U.S. Dollar		156,484		—		156,484		—
Lease liabilities		Euro		39		—		39		—
Lease liabilities		Other currencies		33,749		—		33,749		—
Trades and Other Payables		U.S. Dollar		171,358		187,219		171,358		187,219
Trades and Other Payables		Euro		12,625		7,450		12,625		7,450
Trades and Other Payables		Mexican pesos		31,691		—		31,691		—
Trades and Other Payables		Other currencies		100,292		90,113		100,292		90,113
Trades and Other Payables		Chilean pesos		351,156		348,886		351,156		348,886
Trades and Other Payables		U.F.		32,126		28,180		32,126		28,180
Accounts payable to related parties		U.S. Dollar		378		1,777		378		1,777
Accounts payable to related parties		Chilean pesos		7,721		8,452		7,721		8,452

The financial liabilities at amortized cost presented in the interim consolidated statements of financial positions as of June 30, 2019 and December 31, 2018 are as follows:

	June 2019
	ThU.S.$
	Current		Non Current		Total
Other financial liabilities		543,348		5,162,347		5,705,695
Trade and other payables		696,657		2,591		699,248
Accounts payable to related parties		8,099		—		8,099
Total Financial Liabilities Measured at Amortized Cost		1,248,104		5,164,938		6,413,042
	December 2018
	ThU.S.$
	Current		Non Current		Total
Other financial liabilities		535,836		3,974,440		4,510,276
Trade and other payables		659,618		2,230		661,848
Accounts payable to related parties		10,229		—		10,229
Total Financial Liabilities Measured at Amortized Cost		1,205,683		3,976,670		5,182,353

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

23.8 Cash Flow Hedges Reserve Reconciliation

The following table sets forth the reconciliation balances of cash flow hedges presented in the interim consolidated statements of comprehensive income:

	2019
	January - June			April - June
	ThU.S.$			ThU.S.$
Opening balance		13,395			10,142
Gains (losses) on cash flow hedges		32,398			37,221
Recycle of cash flow hedges to profit or loss		(12,907	)		(10,759	)
Income tax		(5,159	)		(8,877	)
Recycle of income tax		—			—
Closing balance		27,727			27,727

	2018
	January - June			April - June
	ThU.S.$			ThU.S.$
Opening balance - Calculated under IAS 39 and IFRS 9, respectively		4,752			20,371
Amounts restated through Reserve of cash flow hedges		(1,918	)		—
Opening balance - Calculated in accordance with IFRS 9		2,834			20,371
Gains (losses) on cash flow hedges		51,391			25,550
Recycle of cash flow hedges to profit or loss		(6,120	)		(4,220	)
Income tax		(13,945	)		(7,028	)
Recycle of income tax		1,653			1,140
Closing balance		35,813			35,813

23.9 Capital Disclosures

23.9.1 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.

23.9.2 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).

23.9.3 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	June 2019 ThU.S.$		December 2018 ThU.S.$		Interest coverage >= 2,0x	Debt level (1) <= 1,2x
Domestic bonds (Chile)		1,469,440		1,439,610	N/A	✓
Syndicate Loan Scotiabank		200,906		200,563	✓	✓
Syndicate Loan Banco Estado - Grayling		300,660		287,565	✓	✓
Syndicate ECA Banco BNP Paribas		65,384		—	✓	✓

N/R: Not required for the financial obligation

(1) Debt to equity ratio (financial debt divided by equity plus non-controlling interests)

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

As of June 30, 2019 and December 31, 2018, Arauco has complied with all of its financial covenants.

The following table sets forth the credit ratings of our debt instruments as of June 30, 2019 and December 31, 2018, 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 June 30, 2019 and December 31, 2018 is as follows:

	June 2019 ThU.S.$		December 2018 ThU.S.$
Equity		7,474,537		7,338,971
Bank borrowings		954,687		940,435
Lease liabilities		333,460		68,187
Bonds issued		4,417,548		3,501,654
Capitalization		13,180,232		11,849,247

23.10 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.

23.10.1 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.

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June 30, 2019

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

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.

Accounts exposed to credit risk are: trade receivable, financial lease debtors and other debtors.

Arauco does not have a securitized portfolio.

	June 2019		December 2018
	ThU.S.$		ThU.S.$
Current Receivables
Trade receivables		759,237		747,258
Financial lease receivables		1,228		1,131
Other debtors		91,529		90,795
Net subtotal		851,994		839,184
Trade receivables		768,029		755,809
Financial lease receivables		1,228		1,131
Other debtors		95,046		93,370
Gross subtotal		864,303		850,310
Provision for doubtful trade receivables		8,792		8,551
Provision for doubtful lease receivables		—		—
Provision for doubtful other debtors		3,517		2,575
Subtotal Bad Debt		12,309		11,126
Non-Current Receivables
Trade receivables		3,280		3,900
Financial lease receivables		427		837
Other debtors		7,627		10,412
Net Subtotal		11,334		15,149
Trade receivables		7,073		7,921
Financial lease receivables		427		837
Other debtors		7,627		10,412
Gross subtotal		15,127		19,170
Provision for doubtful trade receivables		3,793		4,021
Provision for doubtful lease receivables		—		—
Provision for doubtful other debtors		—		—
Subtotal Bad Debt		3,793		4,021

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

The Credit and Collections Sub-Division, dependent from the Treasury Division, is the area entrusted with minimizing the credit risk of the accounts receivable, supervising the delinquency of the accounts. The regulations and procedures applicable for the control and administration of the Arauco Group can be found in the Corporate Credit Policy.

As of June 30, 2019, Arauco’s balance for commercial Debtors was ThU.S.$ 775,102 of which, according to the agreed sales conditions, 58.76% corresponded to sales on credit (open account), 40.35% to sales with letters of credit and 0.89% to other types of sales, distributed in 2,778 debtors. The client with the largest Open Account debt represented 3.52% of the total accounts receivable as of that date.

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June 30, 2019

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

Below we provide detail regarding accounts receivable, classified in tranches:

June 30, 2019
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.$		715,764			44,197			1,315			1,221			75			83			35			21			14			12,377			775,102
%		92.34	%		5.70	%		0.17	%		0.16	%		0.01	%		0.01	%		0.01	%		0.00	%		0.00	%		1.60	%		100	%
December 31, 2018
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.$		688,024			59,844			854			36			111			43			141			127			69			14,481			763,730
%		90.09	%		7.84	%		0.11	%		0.00	%		0.01	%		0.01	%		0.02	%		0.02	%		0.01	%		1.89	%		100	%

Arauco applies the simplified approach regarding the expected losses from commercial debtors, which allows for the use of an estimate of expected credit losses over the instrument’s lifespan for all commercial accounts receivable. In order to establish this estimate, the commercial debtors have been grouped in relation to the corresponding risks for sales conditions as well as for tranches, including clients that are up-to-date or in default.

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
Letters of credit		307,062			5,653			—			—			—			—			1			5			—			21			312,742
Loss allowance provision		—			—			—			—			—			—			—			—			—			—			—
Expected loss rate		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Credit line		406,652			37,188			1,024			1,162			42			54			24			8			4			9,280			455,438
Loss allowance provision		—			—			10			116			10			12			6			8			4			9,280			9,446
Expected loss rate		0.00	%		0.00	%		0.99	%		10.00	%		23.00	%		23.00	%		23.00	%		100.00	%		100.00	%		100.00	%
Others		2,050			1,356			291			59			34			29			9			8			10			3,076			6,922
Loss allowance provision		—			—			3			6			17			14			5			8			10			3,076			3,139
Expected loss rate		0.00	%		0.00	%		0.99	%		10.00	%		50.00	%		50.00	%		50.00	%		100.00	%		100.00	%		100.00	%
Trade receivables, total (ThU.S.$)		715,764			44,197			1,315			1,221			76			83			34			21			14			12,377			775,102
Allowance for doubtful accounts, total (ThU.S.$)		—			—			13			122			27			26			11			16			14			12,356			12,585

Arauco does not conduct rescheduling or renegotiations with its clients that imply an amendment to the maturity of the invoices and, should it be necessary, any debt renegotiation with a client shall be analyzed on a case-by-case basis and subjected to the approval of the Corporate Finance Division.

Regarding the loss allowance provision for trade receivables and others, below we provide detail for the movements as of June 30, 2019 and December 31, 2018:

	June 2019			December 2018
	ThU.S.$			ThU.S.$
Opening balance at January 1 - under IAS 39		(15,147	)		(17,785	)
Amounts restated through opening retained earnings		—			(2,875	)
Opening loss allowance as at January 1, 2018 - under IFRS 9		(15,147	)		(20,660	)
Increase in loan loss allowance recognised in profit or loss during the year		(1,610	)		(5,027	)
Receivables written off during the year as uncollectible		34			8,620
Unused amount reversed		621			1,920
Closing balance		(16,102	)		(15,147	)

Currently there is a policy for provisions for doubtful accounts receivable under IFRS for all the Arauco group companies.

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Explanation regarding the Sales Risk with Letters of Credit

The sales with letters of credit mainly occur in markets in Asia and the Middle East. Periodically, a credit assessment is conducted regarding the banks that issue the letters of credit with the purpose of obtaining their score over the basis of risk-qualification ratings, country-specific risk and financial statements. The decision of approving the issuing bank or asking for confirmation of the letter of credit is made in consideration to this assessment.

Explanation of the Sales Risk with Credit Line

Sales on credit are subject to the credit limit for each customer. The approval or rejection of a credit limit for all term sales is conducted by the Corporate Credit Sub-Division, as well as by the Credit and Collections area for North America, Brazil and Argentina, which report to the Corporate Finance Division. The regulations and procedures applicable for the correct control and risk management over the sales on credit are ruled by the Credit Policy.

A procedure that must be applied by all the companies of the Arauco group has been established for the approval and/or modification of client credit lines. Credit line requests are entered to the SAP that analyzes all available information. Afterwards, the same are either approved or rejected in each one of the internal committees of each company belonging to the Arauco group, depending on the maximum amount authorized by the Credit Policy. Lines of credit are renewed during this internal process on a yearly basis.

All sales are automatically controlled by a credit verification system, which has been configured to block any orders from clients who are delinquent in a given percentage of a debt and/or from clients whose line of credit, as of the time of the product’s shipping, has been exceeded or is overdue.

In order to minimize the credit risk for term or Open Account sales, it is Arauco’s policy to take out insurance to cover the export sales of companies Celulosa Arauco y Constitución S.A., Maderas Arauco S.A., Forestal Arauco S.A., and Arauco do Brasil S.A., as well as the domestic sales of Arauco México S.A. de C.V., Arauco Colombia S.A., Arauco Perú S.A., Arauco North America, Inc., Arauco Canada Limited, Celulosa Arauco y Constitución S.A., Maderas Arauco S.A., Arauco Florestal Arapoti, Arauco Forest Brasil S.A., Arauco do Brasil S.A., Arauco Industria de Paineis Ltda. and Arauco Nutrientes S.P.A., Arauco works with credit insurance company Euler Hermes World Agency (Aa3 rating, as per risk rating companies Moody’s and AA by S&P). The company grant a 90% coverage over the amount of each invoice, without deductibles, for registered clients and of 90% for non-registered clients (*).

(*) Non-registered clients are those whose lines are under ThU.S.$ 100 (equivalent currency of their invoicing) of the local sales of companies Arauco Perú S.A., Arauco Colombia S.A., Arauco México S.A. de C.V., Arauco Do Brasil S.A., Arauco Argentina S.A. and Maderas Arauco S.A. Lines in excess of the aforesaid amounts correspond to registered clients.

As another way of minimizing risk and supporting a line of credit approved by the Credit Committee, Arauco holds guarantees such as mortgages, pledges, Standby letters of credit, bank performance bonds, checks, promissory notes, loans or any other that could be required under the laws of each country. The total amount held in guarantees amounts to ThU.S.$71,997, effective as of June 2019, as summarized in the following chart. The procedure for guarantees is regulated by Arauco’s Policy on Guarantees, whose purpose is to control their accounting, due date and custody.

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Guarantees Arauco Group (ThU.S.$)
Guarantees Debtors (received from clients)
Certificate of deposits	7,107	9.9	%
Standby	9,230	12.8	%
Promissory notes	42,619	59.2	%
Finance	5,396	7.5	%
Mortgage	4,024	5.6	%
Pledge	2,221	3.1	%
Promissory notes	1,400	1.9	%
Total Guarantees	71,997	100.0	%

The maximum exposure to credit risk is limited to the value at amortized cost of the Debtors’ account for sales registered as of the date of this report, minus the percentage of sales insured by the aforementioned credit insurance companies and the guarantees granted in favor of Arauco.

In summary, the open account debt covered by the various insurance policies and guarantees amounts to 92.3% and, therefore, Arauco’s portfolio exposure amounts to 7.7%.

Secured Open Accounts Receivable	ThU.S.$		%
Total open accounts receivable		455,438		100.0	%
Secured receivables (*)		420,369		92.3	%
Unsecured receivables		35,069		7.7	%

(*) Insured Debt is deemed to be the portion of accounts receivable that is covered by a credit company or by guarantees such as standby letters of credit, mortgages, performance bonds, among others

Investment Policy:

Arauco has an Investment Policy which identifies and limits the financial instruments and the entities into which the Arauco companies, in particular Celulosa Arauco y Constitucion S.A., are authorized to invest. 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 apply to short and long-term debt, and will be for 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.

Regarding intermediaries (such as banks, securities brokers and dealers of mutual funds that are bank affiliates), 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 Superintendence of Banks and Financial Institutions (Fitch Ratings Chile, Humphreys and Feller Rate).

Any necessary exceptions regarding investment limits in each particular instrument or entity must have the authorization from Arauco’s Chief Financial Officer.

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June 30, 2019

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

23.10.2 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 tables detail Arauco’s liquidity analysis for its financial liabilities as of June 30, 2019 and December 31, 2018. The tables have been drawn up based on the contractual undiscounted cash outflows and their remaining contractual maturities:

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June 30, 2019

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

June 30, 2019					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. Dollars	Scotiabank - Chile		1,991		—		6,601		6,601		6,601		202,216		—		1,991		222,019		3.70%		Libor + 1,10%
—	Celulosa Arauco y Constitución S.A.		Euro	BNP Paribas /ECA		—		21		763		726		644		555		66,828		21		69,516		1.06%		1.06%
—	Arauco Argentina S.A.		U.S. Dollars	BBVA		10,066		—		—		—		—		—		—		10,066		—		5.25%		5.25%
—	Zona Franca Punta Pereira		U.S. Dollars	Interamerican Development Bank		1,172		1,038		2,347		2,259		2,169		1,050		—		2,210		7,825		4.73%		Libor + 2,05%
—	Zona Franca Punta Pereira		U.S. Dollars	Interamerican Development Bank		2,907		2,793		2,815		—		—		—		—		5,700		2,815		4.48%		Libor + 1,80%
—	Celulosa y Energía Punta Pereira		U.S. Dollars	Banco Interamericano de Desarrollo		4,686		4,189		9,460		9,099		8,351		4,247		—		8,875		31,157		4.73%		Libor + 2,05%
—	Celulosa y Energía Punta Pereira		U.S. Dollars	Banco Interamericano de Desarrollo		11,700		11,283		11,367		—		—		—		—		22,983		11,367		4.48%		Libor + 1,80%
—	Celulosa y Energía Punta Pereira		U.S. Dollars	Finnish Export Credit		24,780		21,907		48,551		47,570		47,486		—		—		46,687		143,607		3.20%		3.20%
—	Eufores S.A.		U.S. Dollars	Banco Republica Oriental de Uruguay		—		27,055		—		—		—		—		—		27,055		—		3.89%		Libor + 1,3%
—	Eufores S.A.		U.S. Dollars	BBVA		—		14,004		—		—		—		—		—		14,004		—		3.52%		Libor + 1,3%
—	Eufores S.A.		U.S. Dollars	Citibank		—		4,505		—		—		—		—		—		4,505		—		3.56%		Libor + 1,25%
—	Eufores S.A.		U.S. Dollars	Banco Itau - Uruguay		—		12,505		—		—		—		—		—		12,505		—		4.17%		Libor + 1,75%
—	Eufores S.A.		U.S. Dollars	Heritage		1,352		—		—		—		—		—		—		1,352		—		4.30%		Libor + 1,75%
—	Eufores S.A.		U.S. Dollars	Scotiabank- Chile		—		2,508		—		—		—		—		—		2,508		—		3.80%		Libor + 1,3%
—	Eufores S.A.		U.S. Dollars	Banco Santander		20,244		5,020		—		—		—		—		—		25,264		—		4.00%		Libor + 1,3%
—	Arauco do Brasil S.A.		Brazilian Real	Banco Santander		21		64		11		3		—		—		—		85		14		9.50%		9.50%
—	Arauco do Brasil S.A.		Brazilian Real	Banco Alfa		17		49		64		37		—		—		—		66		101		10.01%		Tljp+2%+ spread 1,75%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Bradesco		9		3		—		—		—		—		—		12		—		6.00%		6.00%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Votorantim		30		—		—		314		314		—		—		30		628		5.00%		5.00%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Safra		6		17		21		—		—		—		—		23		21		10.00%		10.00%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Santander		4		79		130		130		66		—		—		83		326		7.76%		7.76%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Santander		32		32		44		44		22		—		—		64		110		10.28%		10.28%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Santander		4		11		15		6		1		—		—		15		22		10.18%		10.18%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Bradesco		6		18		25		25		2		—		—		24		52		10.06%		10.06%
—	Arauco Forest Brasil S.A.		U.S. Dollars	Banco Alfa		2		7		9		—		—		—		—		9		9		8.61%		Cesta+2%+spread 1,8%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Alfa		5		15		20		—		—		—		—		20		20		10.06%		Tljp+2%+Spread 1,8%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Votorantim - Brazil		77		—		—		278		278		—		—		77		556		7.92%		Tljp+1,8%+Spread 2%
—	Arauco Forest Brasil S.A.		U.S. Dollars	Banco Votorantim - Brazil		11		—		—		—		—		—		—		11		—		8.29%		Cesta+1,3%+spread 2%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Bndes Subcrédito A-B-D		3		—		299		399		99		—		—		3		797		10.08%		Tljp + 2,91%
—	Arauco Forest Brasil S.A.		U.S. Dollars	Banco Bndes Subcrédito C		5		—		96		145		48		—		—		5		289		7.72%		Cesta+2,91%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Santander		35		40		52		52		1		—		—		75		105		10.23%		10.23%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Santander		8		65		122		119		56		—		—		73		297		7.95%		Tljp+2%+Spread 1,75%
—	Mahal Empreendimentos e Participacoes S.A.		Brazilian Real	Bndes Subcrédito E-I		668		1,972		658		—		—		—		—		2,640		658		9.17%		Tljp + 2,91%
—	Mahal Empreendimentos e Participacoes S.A.		Brazilian Real	Bndes Subcrédito F-J		401		1,183		394		—		—		—		—		1,584		394		10.17%		Tljp + 3,91%
—	Mahal Empreendimentos e Participacoes S.A.		U.S. Dollars	Bndes Subcrédito G-K		517		1,528		679		—		—		—		—		2,045		679		7.72%		Cesta + 2,91%
—	Mahal Empreendimentos e Participacoes S.A.		Brazilian Real	Bndes Subcrédito H-L		447		1,315		439		—		—		—		—		1,762		439		11.37%		Tljp + 5,11%
—	Mahal Empreendimentos e Participacoes S.A.		Brazilian Real	Banco Santander		6		18		24		12		—		—		—		24		36		10.36%		Tljp+2%+Spread 2%
—	Mahal Empreendimentos e Participacoes S.A.		U.S. Dollars	Banco Santander		3		10		12		6		—		—		—		13		18		8.81%		Cesta+2%+Spread 2%
—	Novo Oeste Gestao de Ativos Florestais S.A.		Brazilian Real	Banco Santander		6		18		25		14		—		—		—		24		39		10.26%		Tljp+2%+Spread 2%
—	Novo Oeste Gestao de Ativos Florestais S.A.		U.S. Dollars	Banco Santander		4		9		13		7		—		—		—		13		20		8.63%		Tljp+2%+Spread 2%
—	Arauco North America, Inc.		U.S. Dollars	Banco del Estado de Chile		2,265		—		26,712		40,836		39,665		231,911		—		2,265		339,124		3.00%		Libor + 1,65%
				Total		83,490		113,281		111,768		108,682		105,803		439,979		66,828		196,771		833,060

June 30, 2019				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		—		20,073		25,841		25,066		24,292		23,517		109,494		20,073		208,210		4.24	%		4.24	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-F		—		8,029		10,359		10,046		9,734		9,422		44,430		8,029		83,991		4.25	%		4.21	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-J		2,208		—		208,669		—		—		—		—		2,208		208,669		3.96	%		3.22	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-P		—		1,040		8,043		17,381		26,170		25,439		187,526		1,040		264,559		3.96	%		3.96	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-Q		—		20,849		21,258		—		—		—		—		20,849		21,258		2.96	%		2.98	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-R		—		1,833		7,246		7,246		7,246		7,246		284,268		1,833		313,252		3.57	%		3.57	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-S		—		626		4,845		4,845		4,845		4,845		210,425		626		229,805		2.43	%		2.39	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-W		—		579		2,545		2,545		2,545		2,545		131,023		579		141,203		2.12	%		2.09	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	UF	Barau-X		—		1,362		5,991		5,991		5,991		5,991		334,204		1,362		358,168		2.70	%		2.68	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2019		174,747		—		—		—		—		—		—		174,747		—		7.26	%		7.25	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2021		2,984		—		141,509		—		—		—		—		2,984		141,509		5.02	%		5.00	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2022		5,705		—		12,153		266,219		—		—		—		5,705		278,372		4.77	%		4.75	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2024		9,375		—		22,500		22,500		22,500		22,500		516,374		9,375		606,374		4.52	%		4.50	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2027		—		3,175		19,375		19,375		19,375		19,375		555,600		3,175		633,100		3.90	%		3.88	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2047		—		3,606		22,000		22,000		22,000		22,000		910,502		3,606		998,502		5.50	%		5.50	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2029		—		3,601		21,250		21,250		21,250		21,250		596,033		3,601		681,033		4.27	%		4.25	%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2049		—		4,660		27,500		27,500		27,500		27,500		1,173,991		4,660		1,283,991		5.51	%		5.50	%
					195,019		69,433		561,084		451,964		193,448		191,630		5,053,870		264,452		6,451,996

116

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

June 30, 2019					Maturity														Total
Tax ID	Name	Currency		Underlying asset class	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.$
85.805.200-9	Forestal Arauco S.A.		UF	Motor vehicles		485		1,520		2,129		1,861		1,454		705		948		2,005		7,097
85.805.200-9	Forestal Arauco S.A.		UF	Other properties, plant and equipment		6,052		15,502		12,474		6,452		1,589		—		—		21,554		20,515
85.805.200-9	Forestal Arauco S.A.		Chilean pesos	Lands		—		18		18		18		18		18		226		18		298
85.805.200-9	Forestal Arauco S.A.		Chilean pesos	Other properties, plant and equipment		1,785		3,875		2,948		437		160		—		—		5,660		3,545
—	Arauco Argentina S.A.		U.S. Dollars	Buildings and constructions		116		348		463		253		—		—		—		464		716
—	Arauco Argentina S.A.		U.S. Dollars	Other properties, plant and equipment		96		288		384		384		192		—		—		384		960
—	Arauco Argentina S.A.		U.S. Dollars	Motor vehicles		198		492		211		—		—		—		—		690		211
—	Arauco Industria de Paineis S.A.		Brazilian Real	Buildings and constructions		19		59		41		18		3		—		—		78		62
—	Arauco Industria de Paineis S.A.		Brazilian Real	Motor vehicles		184		552		643		661		—		—		—		736		1,304
—	Arauco Forest Brasil S.A.		Brazilian Real	Information technology equipment		2		5		6		—		—		—		—		7		6
—	Arauco Forest Brasil S.A.		Brazilian Real	Lands		916		2,748		3,358		3,664		3,664		3,664		11,905		3,664		26,255
—	Novo Oeste Gestao de Ativos Florestais S.A.		Brazilian Real	Lands		626		1,879		835		—		—		—		—		2,505		835
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Information technology equipment		4		13		16		1		—		—		—		17		17
—	Arauco do Brasil S.A.		Brazilian Real	Buildings and constructions		125		374		457		404		396		330		—		499		1,587
93.458.000-1	Celulosa Arauco y Constitución S.A.		UF	Buildings and constructions		442		1,326		1,739		1,668		1,594		379		—		1,768		5,380
93.458.000-1	Celulosa Arauco y Constitución S.A.		UF	Motor vehicles		227		664		822		652		502		178		177		891		2,331
93.458.000-1	Celulosa Arauco y Constitución S.A.		Chilean pesos	Buildings and constructions		21		65		81		77		58		—		—		86		216
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Other properties, plant and equipment		—		1,612		1,612		—		—		—		—		1,612		1,612
93.458.000-1	Celulosa Arauco y Constitución S.A.		Chilean pesos	Motor vehicles		5,292		15,874		21,166		21,166		16,558		1,359		—		21,166		60,249
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Motor vehicles		45		136		181		121		—		—		—		181		302
—	Arauco North America, Inc.		U.S. Dollars	Lands		25		74		98		99		9		—		—		99		206
—	Arauco North America, Inc.		U.S. Dollars	Buildings and constructions		336		969		1,258		1,205		1,178		1,208		4,005		1,305		8,854
—	Arauco North America, Inc.		U.S. Dollars	Motor vehicles		10		47		29		79		1		—		—		57		109
—	Arauco Canada Limited		Canadian dollars	Buildings and constructions		36		91		111		64		—		—		—		127		175
—	Arauco Canada Limited		Canadian dollars	Motor vehicles		11		26		49		29		70		—		—		37		148
—	Celulosa y Energía Punta Pereira		U.S. Dollars	Other properties, plant and equipment		301		903		953		615		528		530		10,571		1,204		13,197
—	Eufores S.A.		U.S. Dollars	Lands		1,251		4,015		4,936		4,847		4,703		4,523		35,700		5,266		54,709
—	Eufores S.A.		U.S. Dollars	Other properties, plant and equipment		1,975		5,816		7,548		7,063		6,884		6,377		8,419		7,791		36,291
96.510.970-6	Maderas Arauco S.A.		Chilean pesos	Motor vehicles		4,193		12,580		16,304		13,903		9,909		2,585		—		16,773		42,701
96.510.970-6	Maderas Arauco S.A.		UF	Motor vehicles		146		417		505		383		247		38		19		563		1,192
96.510.970-6	Maderas Arauco S.A.		UF	Lands		—		5		5		5		5		4		65		5		84
—	Arauco Colombia S.A.		U.S. Dollars	Buildings and constructions		10		32		32		—		—		—		—		42		32
—	Arauco Colombia S.A.		U.S. Dollars	Fixed installations and accesories		140		420		840		—		—		—		—		560		840
—	Arauco Europe Cooperatief U.A.		Euro	Buildings and constructions		18		17		—		—		—		—		—		35		—
—	Arauco Europe Cooperatief U.A.		Euro	Motor vehicles		5		5		11		—		—		—		—		10		11
—	Araucomex S.A.		Mexican Pesos	Buildings and constructions		169		179		—		—		—		—		—		348		—
—	Araucomex S.A.		U.S. Dollars	Buildings and constructions		124		371		82		—		—		—		—		495		82
96.637.330-K	Servicios Logisticos Arauco S.A.		UF	Motor vehicles		24		73		97		75		50		—		—		97		222
79.990.550-7	Bioforest S.A.		UF	Lands		—		24		24		24		24		24		141		24		237
79.990.550-7	Bioforest S.A.		UF	Motor vehicles		33		98		92		38		34		12		—		131		176
				Total		25,442		73,512		82,558		66,266		49,830		21,934		72,176		98,954		292,764

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.

117

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

December 31, 2018					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. Dollars	Scotiabank- Chile		—		1,930		7,951		7,951		7,951		206,584		—		1,930		230,437		3.70%		Libor + 1.10%
—	Arauco Argentina S.A.		U.S. Dollars	Banco Bice		5,040		—		—		—		—		—		—		5,040		—		2.10%		2.10%
—	Arauco Argentina S.A.		U.S. Dollars	Banco Macro		10,054		—		—		—		—		—		—		10,054		—		6.00%		6.00%
—	Arauco Argentina S.A.		U.S. Dollars	BBVA		—		13,071		—		—		—		—		—		13,071		—		5.90%		5.90%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	Interamerican Development Bank		1,184		1,032		2,435		2,335		2,233		2,126		—		2,216		9,129		4.62%		Libor + 2.05%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	Interamerican Development Bank		2,940		2,786		5,701		—		—		—		—		5,726		5,701		4.37%		Libor + 1.80%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	BBVA		—		14,103		—		—		—		—		—		14,103		—		4.06%		Libor + 1.30%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	Citibank		—		4,517		—		—		—		—		—		4,517		—		4.19%		Libor + 1.25%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	Scotiabank		—		2,509		—		—		—		—		—		2,509		—		4.39%		Libor + 1.50%
—	Celulosa y Energia Punta Pereira S.A.		U.S. Dollars	Banco Interamericano de Desarrollo		4,770		4,179		9,826		9,411		9,008		8,605		—		8,949		36,850		4.62%		Libor + 2.05%
—	Celulosa y Energia Punta Pereira S.A.		U.S. Dollars	Banco Interamericano de Desarrollo		11,871		11,274		23,035		—		—		—		—		23,145		23,035		4.37%		Libor + 1.80%
—	Celulosa y Energia Punta Pereira S.A.		U.S. Dollars	Finnish Export Credit		24,850		21,578		49,484		47,930		47,207		23,562		—		46,428		168,183		3.20%		3.20%
—	Eufores S.A.		U.S. Dollars	Banco Republica Oriental de Uruguay		8		27,073		—		—		—		—		—		27,081		—		4.12%		Libor + 1.3%
—	Eufores S.A.		U.S. Dollars	Citibank		3		—		—		—		—		—		—		3		—		3.43%		Libor + 2%
—	Eufores S.A.		U.S. Dollars	Banco Itau -Uruguay		24		12,511		—		—		—		—		—		12,535		—		4.17%		Libor + 1.75%
—	Eufores S.A.		U.S. Dollars	Heritage		1,352		—		—		—		—		—		—		1,352		—		4.30%		Libor + 1.75%
—	Eufores S.A.		U.S. Dollars	Banco Santander		20,235		5,021		—		—		—		—		—		25,256		—		3.86%		Libor + 1.3%
—	Arauco Do Brasil S.A.		Brazilian Real	Banco Santander		21		64		48		6		—		—		—		85		54		9.50%		9.50%
—	Arauco Do Brasil S.A.		Brazilian Real	Banco Alfa		17		48		64		64		5		—		—		65		133		10.35%		Tljp+2%+ spread 1.75%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Itau		3		—		—		—		—		—		—		3		—		7.00%		3.50%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Bradesco		9		22		—		—		—		—		—		31		—		6.00%		6.00%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Votorantim		14		—		—		310		310		—		—		14		620		5.00%		5.00%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Safra		18		—		—		—		—		—		—		18		—		6.00%		6.00%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Safra		6		17		23		10		—		—		—		23		33		10.00%		10.00%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Santander		3		14		136		44		44		—		—		17		224		8.38%		8.38%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Santander		34		33		50		129		129		—		—		67		308		10.32%		10.32%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Santander		4		11		14		11		2		—		—		15		27		10.47%		10.49%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Bradesco		21		23		24		24		14		—		—		44		62		9.00%		9.00%
—	Arauco Forest Brasil S.A.		U.S. Dollars	Banco Alfa		2		7		9		5		—		—		—		9		14		17.00%		Cesta+2%+spread 1.8%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Alfa		5		14		19		10		—		—		—		19		29		0.22%		Tljp+2%+Spread 1.8%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Votorantim - Brazil		162		198		—		276		276		—		—		360		552		16.00%		Tljp+1.8%+Spread 2%
—	Arauco Forest Brasil S.A.		U.S. Dollars	Banco Votorantim - Brazil		34		45		—		—		—		—		—		79		—		10.40%		Cesta+1.3%+spread 2%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Bndes Subcrédito A-B-D		3		—		98		394		295		—		—		3		787		21.78%		Tljp + 2.91%
—	Arauco Forest Brasil S.A.		U.S. Dollars	Banco Bndes Subcrédito C		5		—		24		145		120		—		—		5		289		15.22%		Cesta+2.91%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Santander		43		58		181		173		138		—		—		101		492		8.67%		8.67%
—	Mahal Emprendimientos Pat. S.A.		Brazilian Real	Bndes Subcrédito E-I		663		1,946		1,946		—		—		—		—		2,609		1,946		19.78%		Tljp + 2.91%
—	Mahal Emprendimientos Pat. S.A.		Brazilian Real	Bndes Subcrédito F-J		399		1,167		1,167		—		—		—		—		1,566		1,167		21.78%		Tljp + 3.91%
—	Mahal Emprendimientos Pat. S.A.		U.S. Dollars	Bndes Subcrédito G-K		520		1,528		1,697		—		—		—		—		2,048		1,697		15.22%		Cesta + 2.91%
—	Mahal Emprendimientos Pat. S.A.		Brazilian Real	Bndes Subcrédito H-L		444		1,297		1,297		—		—		—		—		1,741		1,297		24.18%		Tljp + 5.11%
—	Mahal Emprendimientos Pat. S.A.		Brazilian Real	Banco Santander		6		18		23		23		—		—		—		24		46		21.96%		Tljp+2%+Spread 2%
—	Mahal Emprendimientos Pat. S.A.		U.S. Dollars	Banco Santander		3		9		13		12		—		—		—		12		25		17.40%		Cesta+2%+Spread 2%
—	Novo Oeste Gestao de Ativos Florestais S.A.		Brazilian Real	Banco Santander		5		18		24		24		2		—		—		23		50		21.96%		Tljp+2%+Spread 2%
—	Novo Oeste Gestao de Ativos Florestais S.A.		U.S. Dollars	Banco Santander		3		9		13		13		2		—		—		12		28		17.40%		Tljp+2%+Spread 2%
—	Flakeboard Company Ltd.		U.S. Dollars	Banco del Estado de Chile		—		2,141		13,164		41,497		40,184		38,872		203,906		2,141		337,623		3.00%		Libor + 1.65%
				Total		84,778		130,271		118,466		110,797		107,920		279,749		203,906		215,049		820,838

December 31, 2018					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.		U.F.	Barau-F		—		19,425		25,413		24,656		23,899		23,143		116,673		19,425		213,784		4.24%		4.21%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-F		—		7,770		10,189		9,884		9,579		9,274		47,339		7,770		86,265		4.25%		4.21%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-J		2,132		—		204,731		—		—		—		—		2,132		204,731		3.23%		3.22%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-P		—		1,004		7,857		7,857		25,713		24,999		193,697		1,004		260,123		3.96%		3.96%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-Q		—		20,207		20,576		10,398		—		—		—		20,207		30,974		2.96%		2.98%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-R		—		1,770		7,079		7,079		7,079		7,079		278,892		1,770		307,208		3.57%		3.57%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-S		—		592		4,733		4,733		4,733		4,733		204,991		592		223,923		2.44%		2.40%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-W		—		559		2,487		2,487		2,487		2,487		127,578		559		137,526		2.12%		2.09%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-X		—		1,317		5,853		5,853		5,853		5,853		326,508		1,317		349,920		2.70%		2.68%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee Bonds 2019		6,168		202,643		—		—		—		—		—		208,811		—		7.26%		7.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2021		4,422		—		10,013		204,527		—		—		—		4,422		214,540		5.02%		5.00%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2022		5,705		—		12,153		12,153		259,785		—		—		5,705		284,091		4.77%		4.75%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2024		9,375		—		22,500		22,500		22,500		22,500		527,024		9,375		617,024		4.52%		4.50%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2027		—		3,175		19,375		19,375		19,375		19,375		77,500		3,175		155,000		3.90%		3.88%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2047		—		3,607		22,000		22,000		22,000		22,000		528,000		3,607		616,000		5.50%		5.50%
				Total		27,802		262,069		374,959		353,502		403,003		141,443		2,428,202		289,871		3,701,109

December 31, 2018					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.$
85.805.200-9	Forestal Arauco S.A.		U.F.	Banco Santander		148		410		599		599		—		—		—		558		1,198
85.805.200-9	Forestal Arauco S.A.		U.F.	Banco Scotiabank		1,288		3,158		2,368		2,368		478		478		—		4,446		5,692
85.805.200-9	Forestal Arauco S.A.		U.F.	Banco Estado		639		1,885		989		989		—		—		—		2,524		1,978
85.805.200-9	Forestal Arauco S.A.		U.F.	Banco de Chile		1,998		8,891		3,618		3,618		1,556		1,556		—		10,889		10,348
85.805.200-9	Forestal Arauco S.A.		U.F.	Banco BBVA		545		273		—		—		—		—		—		818		—
85.805.200-9	Forestal Arauco S.A.		U.F.	Banco Credito e Inversiones		1,313		5,351		2,897		2,897		3,220		3,220		—		6,664		12,234
85.805.200-9	Forestal Arauco S.A.		Chilean pesos	Banco Chile		284		690		520		520		—		—		—		974		1,040
85.805.200-9	Forestal Arauco S.A.		Chilean pesos	Banco Credito e Inversiones		679		2,036		1,484		1,484		—		—		—		2,715		2,968
85.805.200-9	Forestal Arauco S.A.		Chilean pesos	Banco Scotiabank		371		957		673		673		233		234		—		1,328		1,813
				Total		7,265		23,651		13,148		13,148		5,487		5,488		—		30,916		37,271

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.

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June 30, 2019

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

Guarantees

As of the date of these interim consolidated financial statements, Arauco has financial assets of approximately MU.S.$52 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 June 30, 2019, the total assets pledged as an indirect guarantee were MU.S.$590. 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 ventures) Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A., under the IDB Facility Agreement in the amount of up to MU.S.$454 and the Finnevera Guaranteed Facility Agreement in the amount of up to MU.S.$900. 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		488	Directorate General of Maritime Territory and Merchant Marine
Celulosa Arauco y Constitución S.A.		Guarantee letter	—	Chilean Pesos		209	Directorate General of Maritime Territory and Merchant Marine
Celulosa Arauco y Constitución S.A.		Guarantee letter	—	Chilean Pesos		120	National Customs Service
Forestal Arauco S.A		Guarantee letter	—	Chilean Pesos		5,341	Transelec S.A.
Arauco Forest Brasil S.A.		Mortgage Industrial Plant of Jaguariaíva of Arauco do Brasil	Property plant and equipment	Brazilian Real		40,006	BNDES
Arauco Forest Brasil S.A.		Endorsement of ADB + Guarantee Letter AISA	—	Brazilian Real		3,055	Bank Votorantim S.A.
Arauco Forest Brasil S.A.		Endorsement of Arauco do Brasil	—	Brazilian Real		556	Bank Votorantim S.A.
Arauco Forest Brasil S.A.		Equipment	Property plant and equipment	Brazilian Real		194	Bank Santander S.A.
Arauco Forest Brasil S.A.		Equipment	Property plant and equipment	Brazilian Real		98	Bank Bradesco S.A.
Arauco do Brasil S.A.		Equipment	Property plant and equipment	Brazilian Real		181	Bank Santander S.A.
Arauco do Brasil S.A.		Equipment	Property plant and equipment	Brazilian Real		178	Bank Alpha S.A.
Arauco Florestal Arapoti S.A.		Endorsement of Arauco do Brasil	—	Brazilian Real		628	Bank Votorantim S.A.
Arauco Florestal Arapoti S.A.		Equipment	Property plant and equipment	Brazilian Real		200	Bank Santander S.A.
			Total			51,797
INDIRECT
Subsidiary	Guarantee		Assets Pledged	Currency	ThU.S.$		Guarantor
Celulosa Arauco y Constitución S.A.		Suretyship not supportive and cumulative	—	U.S. Dollar		279,175	Joint Ventures (Uruguay)
Celulosa Arauco y Constitución S.A.		Full Guarantee	—	U.S. Dollar		300,000	Arauco Forest Brasil y Mahal (Brasil)
Celulosa Arauco y Constitución S.A.		Guarantee letter	—	U.S. Dollar		3,017	Arauco Forest Brasil y Mahal (Brasil)
Celulosa Arauco y Constitución S.A.		Guarantee letter	—	Brazilian Real		8,279	Arauco Forest Brasil y Mahal (Brasil)
			Total			590,471

23.10.3 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.

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Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

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 effect of this variable on equity and net result.

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 year after tax +/- 2.4% (equivalent to ThU.S.$ -/+ 8,792), and +/- 0.07% of equity (equivalent to ThU.S.$ -/+ 5,275).

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 +/- 15.48% (equivalent to ThU.S.-/+$56,834) and a change on the equity of +/- 0.76% (equivalent to ThU.S. -/+$56,834).

23.10.4 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.

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 June 30, 2019, 10.6% our financial debt accrues 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 +/- 0.31% (equivalent to ThU.S.$-/+ 1,145) and +/- 0.01% (equivalent to ThU.S.$-/+ 687) on equity.

120

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Thousands of dollars	June 2019 ThU.S.$		Total
Fixed rate		5,101,180		89.4	%
Bonds issued		4,417,548
Bank borrowings (*)		350,172
Lease liabilities		333,460
Variable rate		604,515		10.6	%
Bonds issued		—
Loans with Banks		604,515
Total		5,705,695		100.0	%
Thousands of dollars	December 2018 ThU.S.$		Total
Fixed rate		3,807,932		84.4	%
Bonds issued		3,501,654
Bank borrowings (*)		238,091
Lease liabilities		68,187
Variable rate		702,344		15.6	%
Bonds issued		—
Loans with Banks		702,344
Total		4,510,276		100.0	%

(*) Includes variable rate bank borrowings changed by fixed rate swaps.

23.10.5 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 June 30, 2019, revenue due to pulp sales accounted for 45% 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 a variation of +/- 24.02% (equivalent to ThU.S.$-/+ 88,169) on the income for the year after tax and +/- 0.71% (equivalent to ThU.S.$52,901) on equity.

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 24. REPORTABLE SEGMENTS

The main products that generate revenue for each reportable segment are described as follows:

• Pulp: The main products sold by this reportable segment are long fiber bleached pulp (BSKP), short fiber bleached pulp (BHKP), long fiber raw pulp (UKP), and pulp fluff.

• Wood products: The range of products sold by this reportable segment are plywood panels, MDF panels (medium density fiberboard), Hardboard Panels, PB Panels (agglomerated) different sizes of sawn wood and remanufactured products such as moldings, precut pieces and finger joints.

• Forestry: This reportable 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 reportable segment.

Pulp

The Pulp reportable 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 (50% property of Arauco) and they have a total production capacity of approximately 4 million tons per year. Pulp is sold in more than 33 countries, mainly in Asia and Europe.

122

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Wood products

The Panels area produces a wide range of panel products and several kinds of moldings aimed at the furniture, decoration and construction industries. It consists of 21 industrial plants: 4 in Chile, 2 in Argentina, 4 in Brazil, 2 in Mexico, and 9 plants around USA and Canada. The Company has a total annual production capacity of 8.7 million cubic meters of PBO, MDF, Hardboard, plywood and moldings.

Through the joint venture Sonae Arauco (see note 16), Arauco produces and sells wood panels, of the type of MDF, PB and OSB, and sawn timber, through the operation of 2 panel plants and one sawmill in Spain; 2 panel plants and one resin plant in Portugal; 4 panel plants in Germany and 2 panel plants in South Africa. In total, Sonae Arauco’s production capacity is approximately 1.5 million m3 of MDF, 2.3 million m3 of PB, 516,000 m3 of OSB and 50,000 m3 of sawn lumber.

Including Sonae Arauco at 50%, Arauco totalize a capacity of 4.8 million m3 of MDF, 5.1 million m3 of PB and 258,000 m3 of OSB in its plants.

The Sawn Timber area 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 8 saw mills in operation (7 in Chile and 1 in Argentina), the Company has a production capacity of 2.8 million m3 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.

Forestry

The Forestry reportable 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 1.8 million hectares as of June 30, 2019, of which 1 million hectares are used for plantations, 437 thousand hectares for native forests, 199 thousand hectares for other uses and 114 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 income and financial costs have not been allocated to the various segments, and are shown as part of the Corporate’s segment:

123

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Period ended June 30, 2019	Pulp 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 goods sale		1,203,936		61,436		1,423,571		15,142		—			2,704,085						2,704,085
Revenues from services sale		31,271		4,039		144		217		—			35,671						35,671
Revenues from external customers		1,235,207		65,475		1,423,715		15,359		—			2,739,756						2,739,756
Revenues from transactions with other operating segments		20,374		545,301		15,563		18,596		—			599,834			(599,834	)		—
Finance income		—		—		—		—		14,845			14,845						14,845
Finance costs		—		—		—		—		(126,940	)		(126,940	)					(126,940	)
Net finance costs		—		—		—		—		(112,095	)		(112,095	)					(112,095	)
Depreciation and amortizations		129,641		27,631		89,561		1,856		4,654			253,343						253,343
Sum of significant income accounts		4,421		80,583		4,974		906		41,068			131,952						131,952
Sum of significant expense accounts		11,939		13,157		18,634		363		5,913			50,006						50,006
Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		—		—		—		—		1,144			1,144						1,144
Joint ventures		—		—		—		—		8,513			8,513						8,513
Income tax expense		—		—		—		—		(46,965	)		(46,965	)					(46,965	)
Profit (loss) of each reportable segment		308,607		9,543		48,175		2,982		(185,780	)		183,527						183,527
Geographical information on revenues
Revenue – Chilean entities		894,421		32,985		384,995		217					1,312,618						1,312,618
Revenue – Foreign entities		340,786		32,490		1,038,720		15,142					1,427,138						1,427,138
Total Ordinary Income		1,235,207		65,475		1,423,715		15,359					2,739,756						2,739,756
Period ended June 30, 2019	Pulp 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		343,084		148,535		91,569		819		1,469			585,476			—			585,476
Acquisition and contribution of investments in associates and joint venture		—		—		—		—		151,332			151,332			—			151,332

Period ended June 30, 2019	Pulp 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		5,586,939		5,322,477		3,189,908		49,063		1,590,318		15,738,705		(54,871	)		15,683,834
Segments assets (excluding deferred tax assets)		5,586,939		5,322,477		3,189,908		49,063		1,584,115		15,732,502		(54,871	)		15,677,631
Deferred tax assets										6,203		6,203					6,203
Investments accounted through equity method
Associates		—		38,951						56,333		95,284					95,284
Joint Ventures		—		—		187,660				22,027		209,687					209,687
Segment liabilities		228,219		194,883		438,954		14,973		7,312,012		8,189,041					8,189,041
Segment liabilities (excluding deferred tax liabilities)		228,219		194,883		438,954		14,973		5,922,053		6,799,082					6,799,082
Deferred tax liabilities		—		—		—		—		1,389,959		1,389,959					1,389,959
Geographical information on non-current assets
Chile		3,007,551		3,273,979		672,745		20,228		337,473		7,311,976		(3,799	)		7,308,177
Foreign countries		1,624,828		1,419,944		1,393,982		16,624		90,352		4,545,730					4,545,730
Non-current assets, Total		4,632,379		4,693,923		2,066,727		36,852		427,825		11,857,706		(3,799	)		11,853,907

124

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Quarter April - June 2019	Pulp 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 goods sale		566,064		32,801			725,790		7,873		—			1,332,528						1,332,528
Revenues from services sale		16,928		1,927			144		43		—			19,042						19,042
Revenues from external customers		582,992		34,728			725,934		7,916					1,351,570						1,351,570
Revenues from transactions with other operating segments		10,562		272,440			7,877		9,410					300,289			(300,289	)		—
Finance income		—		—			—		—		8,099			8,099						8,099
Finance costs		—		—			—		—		(69,549	)		(69,549	)					(69,549	)
Net finance costs		—		—			—		—		(61,450	)		(61,450	)					(61,450	)
Depreciation and amortizations		62,580		12,947			49,885		723		2,524			128,659						128,659
Sum of significant income accounts		1,538		41,162			2,389		507		40,817			86,413						86,413
Sum of significant expense accounts		7,853		10,807			5,752		250		3,027			27,689						27,689
Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		—		—			—		—		882			882						882
Joint ventures		—		—			—		—		4,412			4,412						4,412
Income tax expense		—		—			—		—		(31,865	)		(31,865	)					(31,865	)
Profit (loss) of each reportable segment		130,369		(6,296	)		24,053		1,785		(92,483	)		57,428						57,428
Geographical information on revenues
Revenue – Chilean entities		412,181		18,421			193,138		43					623,783						623,783
Revenue – Foreign entities		170,811		16,307			532,796		7,873					727,787						727,787
Total Ordinary Income		582,992		34,728			725,934		7,916					1,351,570						1,351,570
Quarter April - June 2019	Pulp 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		232,783		68,777			39,008		275		1,316			342,159						342,159
Acquisition and contribution of investments in associates and joint venture		—		—			—		—		38			38						38

Period ended June 30, 2018	Pulp 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 goods sale		1,502,912		57,527			1,386,546		18,085					2,965,070						2,965,070
Revenues from services sale		54,005		4,379			—		537					58,921						58,921
Revenues from external customers		1,556,917		61,906			1,386,546		18,622					3,023,991						3,023,991
Revenues from transactions with other operating segments		22,076		517,606			3,428		19,012					562,122			(562,122	)		—
Finance income		—		—			—		—		7,345			7,345						7,345
Finance costs		—		—			—		—		(103,081	)		(103,081	)					(103,081	)
Net finance costs		—		—			—		—		(95,736	)		(95,736	)					(95,736	)
Depreciation and amortizations		118,781		14,271			68,520		1,663		3,491			206,726						206,726
Sum of significant income accounts		3,746		57,023			4,642		670		378			66,459						66,459
Sum of significant expense accounts		12,825		8,416			8,317		171		3,890			33,619						33,619
Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		—		—			—		—		1,523			1,523						1,523
Joint ventures		—		—			—		—		22,486			22,486						22,486
Income tax expense		—		—			—		—		(124,696	)		(124,696	)					(124,696	)
Profit (loss) of each reportable segment		623,740		(33,319	)		119,972		3,478		(277,927	)		435,944						435,944
Geographical information on revenues
Revenue – Chilean entities		1,166,791		30,792			661,167		537					1,859,287						1,859,287
Revenue – Foreign entities		390,126		31,114			725,379		18,085					1,164,704						1,164,704
Total Ordinary Income		1,556,917		61,906			1,386,546		18,622					3,023,991						3,023,991
Period ended June 30, 2018	Pulp 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		98,843		131,435			136,399		177		1,293			368,147			—			368,147
Acquisition and contribution of investments in associates and joint venture		—		—			—		—		17,283			17,283			—			17,283

125

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Period ended June 30, 2018	Pulp 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		5,252,765		5,114,163			2,905,670		49,588			1,317,041			14,639,227			(45,479	)		14,593,748
Segments assets (excluding deferred tax assets)		5,252,765		5,114,163			2,905,670		49,588			1,312,406			14,634,592			(45,479	)		14,589,113
Deferred tax assets		—		—			—		—			4,635			4,635						4,635
Investments accounted through equity method
Associates		—		38,497			—		—			117,112			155,609						155,609
Joint Ventures		—		—			181,103		—			21,341			202,444						202,444
Segment liabilities		396,332		180,259			405,551		13,727			6,258,908			7,254,777						7,254,777
Segments liabilities (excluding deferred tax liabilities)		396,332		180,259			405,551		13,727			4,841,250			5,837,119						5,837,119
Deferred tax liabilities		—		—			—		—			1,417,658			1,417,658						1,417,658
Geographical information on non-current assets
Chile		2,667,179		3,259,801			806,253		20,382			120,231			6,873,846			(3,842	)		6,870,004
Foreign countries		1,657,532		1,304,390			1,247,008		19,507			54,147			4,282,584			—			4,282,584
Non-current assets, Total		4,324,711		4,564,191			2,053,261		39,889			174,378			11,156,430			(3,842	)		11,152,588
Quarter April – June 2018	Pulp 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 goods sale		794,262		29,936			693,857		9,135						1,527,190						1,527,190
Revenues from services sale		29,795		1,946			—		406						32,147						32,147
		824,057		31,882			693,857		9,541						1,559,337						1,559,337
Revenues from external customers
Revenues from transactions with other operating segments		10,979		264,122			1,802		9,897						286,800			(286,800	)		—
Finance income		—		—			—		—			2,563			2,563						2,563
Finance costs		—		—			—		—			(51,419	)		(51,419	)					(51,419	)
Net finance costs		—		—			—		—			(48,856	)		(48,856	)					(48,856	)
Depreciation and amortizations		60,493		7,378			33,999		863			1,678			104,411						104,411
Sum of significant income accounts		1,005		24,836			2,784		375			227			29,227						29,227
Sum of significant expense accounts		3,130		4,860			5,229		(70	)		3,643			16,792						16,792
Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		—		—			—		—			1,352			1,352						1,352
Joint ventures		—		—			—		—			16,812			16,812						16,812
Income tax expense		—		—			—		—			(72,855	)		(72,855	)					(72,855	)
Profit (loss) of each reportable segment		344,363		(19,367	)		64,155		2,322			(153,245	)		238,228						238,228
Geographical information on revenues
Revenue – Chilean entities		615,723		18,019			331,846		405						965,993						965,993
Revenue – Foreign entities		208,334		13,863			362,011		9,136						593,344						593,344
Total Ordinary Income		824,057		31,882			693,857		9,541						1,559,337						1,559,337
Quarter April – June 2018	Pulp 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		55,744		54,045			90,244		127			690			200,850						200,850
Acquisition and contribution of investments in associates and joint venture		—		—			—		—			1,365			1,365						1,365

The following table shows information related to cash flows by segments which is presented as a complementary information as required by our regulatory entities:

Period ended June 30, 2019	Pulp 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		326,150			60,021			87,958			991			(343,085	)		132,035			—		132,035
Cash flows (used in) investing activities		(333,291	)		(144,423	)		(91,830	)		(819	)		(48,866	)		(619,229	)		—		(619,229	)
Cash flows from (used in) Financing Activities		691,936			(21,675	)		4,327			(28	)		(18,957	)		655,603			—		655,603
Net increase (decrease) in Cash and Cash Equivalents		684,795			(106,077	)		455			144			(410,908	)		168,409			—		168,409

Period ended June 30, 2018	Pulp 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		403,182			8,411			129,907			5,495			(67,886	)		479,109			—		479,109
Cash flows (used in) investing activities		(96,566	)		(116,789	)		(153,434	)		(1,051	)		(8,386	)		(376,226	)		—		(376,226	)
Cash flows from (used in) Financing Activities		(39,272	)		—			(77	)		—			(59,253	)		(98,602	)		—		(98,602	)
Net increase (decrease) in Cash and Cash Equivalents		267,344			(108,378	)		(23,604	)		4,444			(135,525	)		4,281			—		4,281

126

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Quarter April – June 2019	Pulp 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		142,389			64,801			75,669			(27	)		(281,048	)		1,784				1,784
Cash flows (used in) investing activities		(231,491	)		(65,889	)		(89,571	)		(275	)		150,933			(236,293	)			(236,293	)
Cash flows from (used in) Financing Activities		691,936			(21,675	)		4,351			(28	)		55,767			730,351				730,351
Net increase (decrease) in Cash and Cash Equivalents		602,834			(22,763	)		(9,551	)		(330	)		(74,348	)		495,842				495,842

Quarter April – June 2018	Pulp 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		274,445			40,298			118,729			3,763			(41,561	)		395,674			—		395,674
Cash flows (used in) investing activities		(56,137	)		(41,730	)		(140,186	)		(709	)		40,772			(197,990	)		—		(197,990	)
Cash flows from (used in) Financing Activities		(60	)		—			(39	)		—			(97,981	)		(98,080	)		—		(98,080	)
Net increase (decrease) in Cash and Cash Equivalents		218,248			(1,432	)		(21,496	)		3,054			(98,770	)		99,604			—		99,604

127

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

Information required by geographic area:

	Geographical area
2019	Local country		Foreign country
	Chile		Argentina		Brazil		USA/Canada		Uruguay		Mexico		Total
Disclosure of geographical areas	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Revenues from sales of goods		1,278,074		198,212		245,959		697,100		227,580		57,160		2,704,085
Revenues from sales of services		34,544		—		—		—		1,052		75		35,671
Revenues at 06-30-2019		1,312,618		198,212		245,959		697,100		228,632		57,235		2,739,756
Revenues from sales of goods		605,359		98,654		119,121		360,894		114,858		33,642		1,332,528
Revenues from sales of services		18,424		—		—		—		543		75		19,042
Revenues at Quarter April – June 2019		623,783		98,654		119,121		360,894		115,401		33,717		1,351,570
Non-current Assets at 06-30-2019 other than deferred tax		7,282,950		812,931		1,030,395		837,801		1,740,966		122,404		11,827,447

	Geographical area
2018	Local country		Foreign country
	Chile		Argentina		Brazil		USA/Canada		Uruguay		Mexico		Total
Disclosure of geographical areas	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Revenues from sales of goods		1,814,777		246,930		248,790		406,496		248,077		—		2,965,070
Revenues from sales of services		44,510		—		—		—		14,411		—		58,921
Revenues at 06-30-2018		1,859,287		246,930		248,790		406,496		262,488		—		3,023,991
Revenues from sales of goods		941,056		122,811		116,295		210,506		136,522		—		1,527,190
Revenues from sales of services		24,937		—		—		—		7,210		—		32,147
Revenues at Quarter April – June 2018		965,993		122,811		116,295		210,506		143,732		—		1,559,337
Non-current Assets at 06-30-2018 other than deferred tax		6,851,616		931,792		1,007,304		649,219		1,664,674		—		11,104,605

NOTE 25. OTHER NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES

	06-30-2019		12-31-2018
Current non-financial assets	ThU.S.$		ThU.S.$
Roads to amortize current		45,228		41,456
Prepayment to amortize (insurance and others)		43,334		14,020
Recoverable taxes (GST and others)		96,108		67,778
Other current non-financial assets		8,264		6,600
Total		192,934		129,854

	06-30-2019		12-31-2018
Non-current non-financial assets	ThU.S.$		ThU.S.$
Roads to amortize, non-current		103,791		78,418
Guarantee values		4,429		3,295
Recoverable taxes		1,495		1,519
Other non-current non-financial assets		4,472		3,716
Total		114,187		86,948

	06-30-2019		12-31-2018
Current non-financial liabilities	ThU.S.$		ThU.S.$
Provision of minimum dividend (1)		83,986		182,890
ICMS tax payable		13,358		9,109
Other tax payable		20,070		14,034
Other Current non-financial liablities		906		6,577
Total		118,320		212,610

(1) Provision includes a minimum dividend of subsidiary minority.

	06-30-2019		12-31-2018
Non-current non-financial liabilities	ThU.S.$		ThU.S.$
ICMS tax payable		119,815		111,134
Other non-current non-financial liablities		532		933
Total		120,347		112,067

128

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 26. DISTRIBUTABLE NET PROFIT AND EARNINGS PER SHARE

Distributable net profit

As a general policy, the Board of Directors of Arauco agreed that the net profit 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 profit during the period such changes are made.

As a result of the foregoing, for purposes of determining the distributable net profit 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 profit 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 profit 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 profit 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 profit as of June 30, 2019 and 2018 in order to determine the provision of 40% of the distributable net profit for each period:

	Distributable Net Profit ThU.S.$
Net profit attributable to owners of parent at 06-30-2019		183,159
Adjustments:
Biological Assets
Unrealized gains/losses		(73,800	)
Realized gains/losses		98,222
Deferred income taxes		(5,099	)
Total adjustments		19,323
Distributable Net Profit at 06-30-2019		202,482

	Distributable Net Profit ThU.S.$
Net profit attributable to owners of parent at 06-30-2018		436,235
Adjustments:
Biological Assets
Unrealized gains/losses		(52,005	)
Realized gains/losses		103,213
Deferred income taxes		(13,578	)
Total adjustments		37,630
Distributable Net Profit at 06-30-2018		473,865

129

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

The Company expects to maintain its policy of distributing 40% of its net distributable profit as dividends for all future fiscal years, but will also consider the alternative of distributing a provisional dividend at year end.

As of June 30, 2019, in the interim consolidated statements of financial position, under the line item Other current non-financial liabilities, ThU.S.$80,992 correspond to a provision for the minimum dividend for the 2019 period of the Parent Company.

Basic and diluted earnings per share

Basic and diluted 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 - June				April - June
	2019		2018		2019		2018
	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Profit or loss attributable to ordinary equity holder of parent		183,159		436,235		57,323		238,429
Weighted average of number of shares		113,159,655		113,159,655		113,159,655		113,159,655
Basic and diluted earnings per share (in U.S.$ per share)		1.6186		3.8550		0.5066		2.1070

130

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2019

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

NOTE 27. SUBSEQUENT EVENTS

1) The authorization for the issuance and publication of these interim consolidated financial statements for the period ended June 30, 2019 was approved by the Board of Directors of Arauco at the Extraordinary Session No.615 held on August 19, 2019.

Subsequent to June 30, 2019 and until the date of issuance of these interim consolidated financial statements, there have been no events, other than those discussed above, that could materially affect the presentation of these financial statements.

131

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Celulosa Arauco y Constitución, S.A.
	(Registrant)
Date: October 17, 2019	By:	/s/ Matías Domeyko Cassel
	Name:	Matías Domeyko Cassel
	Title:	Chief Executive Officer