2006 ANNUAL REPORT
2006 ANNUAL REPORT
Disclaimer
It is expressly left on record that this document is merely for information and it has no legal purpose. Hence, it does not contain or intend to contain all the information included in the 2006 Annual Report of Masisa S.A.
INDEX
4 LETTER FROM THE PRESIDENT 6 BUSINESS STRATEGY 8 MAIN SHAREHOLDERS 10 ACTIVITIES AND BUSINESSES WOOD BOARD BUSINESS UNIT FORESTRY BUSINESS UNIT SOLID WOOD BUSINESS UNIT RETAIL BUSINESS UNIT PRODUCT MIX MARKETS HISTORY 20 OUR PERFORMANCE FINANCIAL SOCIAL AND ENVIRONMENTAL RESPONSIBILITY 26 CORPORATE GOVERNANCE CORPORATE STRUCTURE 32 GENERAL BACKGROUND LEGAL IDENTIFICATION INCORPORATION DOCUMENTS ADDRESSES BOARD OF DIRECTORS AND SENIOR MANAGEMENT BOARD REMUNERATION HEADCOUNT MAIN SUPPLIERS MAIN CLIENTS MAIN BANKS AUDITORS LEGAL ADVISORS INSURANCE CONTRACTS TRADEMARKS AND PATENTS RESEARCH AND DEVELOPMENT RISK FACTORS INVESTMENT AND FINANCING POLICY DISTRIBUTION OF NET INCOME DIVIDEND POLICY SHARE TRANSACTIONS SIGNIFICANT EVENTS 48 DIRECTORS’ COMMITTEE REPORT 49 DECLARATION OF RESPONSIBILITY CD CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED RATIO ANALYSIS CD INDIVIDUAL FINANCIAL STATEMENTS INDIVIDUAL RATIO ANALYSIS CD RELATED COMPANIES 4
We are a company with the scale to compete in global markets.
2006 was a year of growth and consolidation for Commensurate with this strategic review, all Masisa in each of its markets. the Company areas in all their markets are now There was growing demand for our furniture focused on the following objective: to continue to boards throughout Latin American during the be the leading board production and marketing year, which led to a sharp increase in sales. company in Latin America, creating innovative Nevertheless, this was in part offset by cost products that meet the needs of its customers pressures in the first half of the year arising and add value. from the cycle of high prices of supplies, mainly The Company’s other three business units, resins, wood and oil. Despite this, we were able i.e., Solid Wood, Forestry and Retail, will focus to address this challenge with a suitable price their strategies and future investments on strategy that enabled us to revert this situation, boosting the board business and generating and we managed to recover margins by the greater competitiveness. second half of the year. In 2006, Masisa purchased 7,841 hectares We focused on reviewing our business of land holdings in Argentina, Brazil and Chile strategy to become the Company we want, i.e., through its forestry business unit. This division a multinational company with a long-term vision planted a total of 9,422 hectares of pine and that assures the sustainable profitability of the eucalyptus in the four countries where it operates business. This is what we want and it is our main - Argentina, Brazil, Chile and Venezuela – striving challenge. Based on this analysis, the furniture to assure the current and long-term raw material and interior architecture board business was for board production in our plants. defined as our core business. The Solid Wood business unit had a good year in terms of sales with a consolidated increase of 18% on the previous year, despite the slowdown of the construction sector in the United States where this unit has a strong commercial presence. MASISA 2006 ANNUAL REPORT | 5
LETTER FROM THE PRESIDENT
Julio Moura President
The Retail business unit established new bases 2006 was also a good year in terms of public Commensurate with the Company’s opening- for the “Placacentros” distribution chain, which recognition of the Company’s performance in up and transparency philosophy, in 2006 we will enable the Company to have a sound the financial, social and environmental areas. adopted a more proactive attitude of proximity and effective commercial platform to carry on For example, recognition came from the World to investors and the financial sector, which was strengthening the Masisa brand. Wildlife Fund that awarded us the prize “Leaders reflected by the positioning attained in opinion It is important to highlight that in 2006 we for a Living Planet,” and in Argentina we were groups and by the increase in the share price. started to build a new MDF plant in the city acknowledged as one of the 50 best companies We really believe these steps confirm we of Cabrero in the south of Chile. The line will to work for, which ranked us in 17th place, and are working to deliver our shareholders and start up in mid-2007 and it will be Masisa’s awarded us the prize for the best export company stakeholders the results of a correct triple largest plant in Latin America with production for the sixth year running. bottom line performance. Hence, Masisa’s value of 340,000 m3 a year. This new production Masisa’s good practices of Corporate proposal, i.e., being a reliable brand, close to line will mainly supply foreign markets, the Governance have evolved in the right direction, our stakeholders, anticipating market needs and countries where the Company has operations, confirmed by the recognition we are starting to operating responsibly towards society and the and it will also allow us to explore new market receive from local and international bodies. Our environment, is happening. opportunities. corporate and risk management practices are I urge you to carry on participating in the The consolidated financial results in the year based on structured processes, on the principles evolution of Masisa, a leading company in its area. bear out we are on the right track. Masisa had of sustainable development, on individual and a large increase in sales, the Company is selling corporate ethical conduct in achieving our more, and this is reflected by the demand for our strategic objectives, and on transparency and products. In fact, we had total sales of U$$886.5 dialogue with our shareholders and stakeholders. million in 2006, which was a 19.2% increase on the previous year, with a net income of US$29.5 million, 11.8% up on 2005 despite a first helt that was down on that of the previous year. 6
Masisa’s value proposal is to be a reliable brand, close to its stakeholders, and anticipating market needs. MASISA 2006 ANNUAL REPORT | 7
BUSINESS STRATEGY
INNOVATION AND PROXIMITY TO CUSTOMERS TO EXPAND AND BOOST COMMITMENT THE DISTRIBUTION CHAIN TO SUSTAINABLE DEVELOPMENT Masisa S.A., hereinafter referred to as “Masisa,” the “Company” or the “Corporation,” has Masisa works closely with its customers to offer For an industry facing environmental and demonstrated its ability to swiftly create trust in them solutions for the problems they face and social challenges, Masisa is trusted by all its the markets it serves. The market recognizes to better meet their needs. The Company aims stakeholders due to its management strategy Masisa as the better service alternative and, to carry on developing Masisa’s “Placacentros” of sustainable results. Environmentally, this unlike its competitors, Masisa stands out from program in Chile, Brazil, Argentina, Peru, implies seeking more efficient uses of raw the pack due to the way it addresses its customer Mexico, Ecuador, Paraguay, Colombia, Venezuela materials and byproducts, and continuously relations, continually delivering innovative and Uruguay, and to extend the “Placacentro” improving the environmental impact of each products and services. This offering allows for concept to new countries. Moreover, the one of the Company’s affiliates. In regard to greater customer loyalty and interest, increasing Company plans to boost the product mix offered social responsibility, Masisa’s goal is for its the consumption of Masisa’s products. On the in its “Placacentros” network by adding solid operations and businesses to have a positive other hand, the channel strategy aims to develop wood and sawn lumber products, along with impact on the surrounding communities and on new sales points (“Placacentros”), which will other products and services for the furniture and direct and indirect collaborators. The aim of this enable the Company to develop the market, interior architecture industries. The distribution strategy is to reduce the environmental risk and diversify sales and generate the loyalty of a larger channels of Masisa USA Inc. are also used to sell allow the Company to manufacture and market number of customers. oriented strand boards (OSB), doors, and finger- products pursuant to international environmental joint and MDF mouldings. standards, which are increasingly in demand by TO LEVERAGE THE GROWTH final consumers. OPPORTUNITIES IN LATIN AMERICA
The Company deems the increasing use of boards in the Latin American furniture industry, along with the unmet housing demand Increase in Sales 886.5 in countries in the region, will drive future Millions of US$ 743.5 growth. Based on this growth outlook, Masisa 651.0 is appraising the construction of new industrial plants. The Company plans to take advantage 480.1 of the growth opportunities in the region with its differentiation strategy and its “Placacentros” (retail outlets) network to thereby consolidate its leading position in the furniture board industry in Latin America. 2003 2004 2005 2006
Source: Masisa S.A. 8
Masisa’s capital stock is divided into 5,695,247,813 shares.
MAIN SHAREHOLDERS The following are the 12 main shareholders as of December 31, 2006:
Name or Trade Name N° of Shares % Shareholding OTHERS GRUPONUEVA 16.06% 53.31% GRUPO NUEVA S.A. 1,762,466,482 31.10% INVERSIONES FORESTALES LOS ANDES S.A. 1,258,801,116 22.21%
AFP PROVIDA S.A. 411,989,693 7.27%
AFP HABITAT S.A. 381,074,587 6.72%
THE BANK OF NEW YORK PURSUANT TO CIRCULAR LETTER Nº1375 307,866,782 5.43% OF THE SUPERINTENDENCY OF SECURITIES & INSURANCE (SVS)
AFP CUPRUM S.A. 278,317,352 4.91%
AFP SANTA MARÍA S.A. 157,952,951 2.79%
CHILEAN PENSION FUND AFP BANSANDER S.A. 146,333,911 2.58% COMPANIES (AFPs) 25.21% Citibank Chile Cta. de Terceros Cap. XIV Res 104,146,278 1.84% PENTA CORREDORES DE BOLSA S.A. 50,771,902 0.90% ADRs BANCHILE CORREDORES DE BOLSA S.A. 39,365,452 0.69% 5.43% ULTRA FONDO DE INVERSIÓN 37,983,486 0.67%
* Inversiones Forestales Los Andes S.A. is 100% controlled by GrupoNueva S.A. **Chilean Pension Fund Companies (AFPs) include the A, B, C and D-type funds. MASISA 2006 ANNUAL REPORT | 9
MAIN SHAREHOLDERS
Masisa’s shares are traded on the New York GrupoNueva controls assets worth approximately Stock Exchange (NYSE), the Santiago Stock US$2,800 million, with annual sales of around Exchange, the Valparaiso Stock Exchange, and US$1,700 million, and it is present in 15 countries the Chilean Electronic Stock Exchange. in the Americas through the Masisa, Amanco* Masisa’s capital stock was divided into and Plycem groups. Amanco, with corporate 5,695,247,813 shares for the year ended headquarters in Sao Paulo, Brazil, is a leading December 31, 2006, of which there were Latin American company in the production 5,667,750,881 shares subscribed and paid and marketing of fluid conveyance solutions up. The main shareholders are GrupoNueva (its main business is Tubosistemas). Plycem, S.A., hereinafter referred to as GrupoNueva, a multinational company specialized in the investment companies, Chilean pension fund manufacture and sale of fiber cement products, companies (AFPs), foreign investors through the is a pioneer in responsible technology with one ADR system, and investment funds. of the widest product portfolios in the world. Its The largest shareholder of Masisa is corporate headquarters are in Cartago, Costa Rica. GrupoNueva, which directly owns 31.10% of Masisa’s common stock, and indirectly (*) GrupoNueva transferred 100% of its shareholding in Amanco in February 2007. owns 22.21% of the common stock through Inversiones Forestales Los Andes S.A., amounting to a shareholding of 53.31%. 10
The Company has an installed board manufacturing capacity of approximately 2.3 million m3. MASISA 2006 ANNUAL REPORT | 11 ACTIVITIES AND BUSINESSES
Growth in Board Demand1 Pine Management (1996-2005 CAGR2) Boards and Pulpable Saw Logs
PB MDF 50.1% Sawn Lumber and Moldings Chips for Boards 15.2% 15.4% 9.7% Doors 6.2% 5.2%
Latam (sur)1 Latam (norte)2 EEUU 1 South America. 2 Central America, the Caribbean and Mexico.
Masisa is a leading furniture and interior 1 BOARD BUSINESS UNIT 2. FORESTRY BUSINESS UNIT architecture board production and marketing Company in Latin America. The Company has Masisa is a leading furniture and interior The Company’s forest holdings are distributed an installed board manufacturing capacity of architecture board production and marketing throughout Chile, Argentina, Brazil and approximately 2.3 million m3 a year. It accounts Company in Latin America. Masisa’s value Venezuela. Land holdings cover an area of for around 20% of the total installed capacity proposal is to be a reliable brand, close to its 374,506 hectares, of which 240,511 hectares of the Particle Board (PB) and Medium Density stakeholders, anticipating market needs by means are forest plantations. The main species are Fiberboard (MDF) industries in Latin America. of product and service innovation, and operating coniferous, highlighting pines such as Radiata, The Company produces and markets solid wood responsibly towards society and the environment. Caribea, and Ellioti. products, such as finger-joint and MDF mouldings, The Company has industrial board production Environmental certification has become a sawn lumber and doors. These products are plants in Chile, Argentina, Brazil, Venezuela and differentiating factor in the industry in the last mainly exported to the United States. Mexico, all of which have the ISO 14.001 and few years. Many markets, and especially that in Masisa manages 240,511 hectares of forest OSHAS 18.001 certification, except Venezuela the United States, are driving or even compelling plantations distributed in Argentina, Brazil, Chile that will obtain certification in 2007. Masisa is producers wanting to remain in the market to and Venezuela. currently building an MDF plant in Cabrero, Chile, provide products with environmental certification. Lastly, Masisa has a distribution network called which will have a capacity of 340,000 m3 and will This means that renewable forest plantations are “Placacentros,” which are licensed outlets aimed mainly supply the export market. of vital importance in the industry. at the small and mid-sized furniture maker. The effective management of forest holdings As of December 2006, there were 300 outlets Source: FAOSTAT database (www.fao.org) is a key factor in the sustainable development of 1 Figures estimated by adding local production and imports, throughout Latin America. The “Placacentros” and subtracting exports in each area. the business and in maximizing profits. provide board cutting and design services to 2 Compound annual growth rate. The percentage use of the tree and the use make clients’ work more efficient. Among other each part of the tree is given depend on the things, this enables Masisa to make its clients particular characteristics of the forest from which loyal, to position the Masisa brand and increase it is harvested. the demand for its products. Masisa’s forest operations are Forest Stewardship Council (FSC) certified for sustainable forest management, and their environmental management complies with the ISO 14.001 standard. 12
Masisa offers the market high quality value-added pine products.
3 SOLID WOOD BUSINESS UNIT
Masisa markets sawn lumber products from pine Masisa has also recently become one of the and eucalyptus plantations, and high quality main suppliers of sawn lumber to Mexico through value-added products like finger-joint mouldings, its affiliates in such country. Mexico is a net MDF mouldings and solid wood doors. The importer of this type of product. following is a brief description of these: The domestic market in Venezuela is also : Sawn Lumber, mainly used in the pallet and important for sawn lumber sales, mainly for pallet packing industry and also for furniture making and packing producers, and the marketing through and the building industry. the “Placacentros” network is also a key factor. Finger-joint Mouldings, used for interior Masisa also has a significant positioning in the decoration and housing trims, such as sawn lumber market in Central American countries. windows, cornices and door frames. Masisa has industrial facilities in Chile, Brazil MDF Mouldings made from ultra light E1 and and Venezuela to produce sawn lumber. Finger- pre-painted MDF boards. joint mouldings are produced in Chile and Brazil, Solid Radiata Pine Doors, made in a variety of MDF mouldings in Chile and Argentina, and solid styles, sizes and formats. wood doors in Chile. To market these products, Masisa has a direct Masisa also leverages its market position and presence in the US market through its affiliate Masisa its industrial assets by acting as an intermediary USA Inc.1, where it has a large market share of doors, of sawn lumber and manufactured products. finger-joint mouldings and MDF mouldings. The US moulding market is highly competitive, 1 The Company decided to close its mouldings plant in the United States in February 2007 to improve its cost structure. and imports of these products account for around 50% of the total consumption. Countries such as Chile, Brazil, and Argentina are the most important in terms of their share of the imports of these products due to their highly competitive forest plantations. MASISA 2006 ANNUAL REPORT | 13
Number of “Placacentros” Breakdown of Sales by Product
300 MDF 275 Others 36.0% 21.1% 41 232 37 28 Colombia 21 21 155 31 21 10 Peru 22 19 47 7 42 Argentina Finger-joint 18 34 Mouldings 26 40 32 40 10.6% 26 Brazil
34 49 54 63 71 Mexico 25 5 9 7 Sawn 35 54 52 51 52 Chile Lumber Solid Wood 8.2% 1992 1995 2000 2003 2004 2005 2006 Doors 4.5% OSB Others MDF Mouldings 5.4% 6.7% 7.3%
4 RETAIL BUSINESS UNIT 5. PRODUCT MIX
Masisa started its “Placacentros” program in Masisa offers a diversified portfolio of products MDF Mouldings 1991 with the aim of expanding its distribution including the following: These are made from MDF boards and are channels, increasing demand for its products, PB mainly used in the construction industry, with and getting closer to the final consumer in the Particle Board is made from a mixture of the main market being the United States. furniture chain. wood chips, shavings, sawdust and adhesives, Finger-joint Mouldings “Placacentros” are commercial outlets and it is used in the construction industry These are made from small pieces of wood distributed throughout Latin America, which and for furniture making, and mainly those joined together. This product is mainly operate under a license or franchise agreement applications that require flat finishes. designed to meet the requirements of the US with the same brand and format. These stores, MDF market. These high-quality mouldings are mainly aimed at small and mid-sized furniture Medium Density Fiberboard is made from a marketed in a wide variety of designs and makers, offer a wide variety of boards, solid wood, mixture of fiber extracted from wood chips and formats, and are used for interior decoration accessories and services required by such industry. sawdust with adhesives. This product is used and trims in housing such as door and window The owners and operators of these stores to make all kinds of furniture due to the ease frames, dust guards and cornices. receive training and technical assistance from with which it can be molded and finished. Sawn Lumber Masisa, both regarding products and applications OSB This product is mainly used to make packing and sales point management and marketing Oriented Strand Board is made from a mixture and pallets, for furniture making and techniques, thereby increasing the return of of aligned and glued wood shavings. Unlike construction, and the Company mostly sells it the business and raising the productivity of the other boards made by the Company, OSB to the market in Mexico. carpenters and small contractors. is a structural board. This product is used in Solid Wood Doors “Placacentros” are a key element of Masisa’s the construction and packing industries due to These are made from Radiata pine, they are marketing strategy to increase the per capita its great resistance and rigidity. a high value-added product, and are specially consumption of its products, position its brand, aimed at the US market. and create competitive advantages. As of December 31, 2006, the Company had a network of 300 stores in 10 Latin American countries. 14
*
ARGENTINA
Forests 36 Th ha.
Plants 1
Boards 455 Th m3
Moldings & Doors 104,4 Th m3
Placacentros 47 PARAGUAY
Placacentros 3 BRAZIL
Forests 17 Th ha. PERU
Plants 2 Placacentros 21
Boards 590 Th m3 URUGUAY Sawmills 220 Th m3 Placacentros 1 Moldings & Doors 65 Th m3 EEUU Placacentros 40 Plants 1*
COLOMBIA Moldings & Doors 30 Th m3 Placacentros 28 VENEZUELA
CHILE Forests 101 Th ha. 87 Th ha. Forests Plants 2 7 Plants Boards 370 Th m3 730 Th m3 Boards Sawmills 150 Th m3 Sawmills 337 Th m3 Moldings & Doors 12 Th m3 217 Th m3 Moldings & Doors Placacentros 22 Placacentros 52 TOTAL
ECUADOR Forests 241 Th ha Placacentros 15 Plants 14
MEXICO Boards 2,265 Th m3
Plants 1 Sawmills 707 Th m3
Boards 120 Th m3 Moldings & Doors 428 Th m3 **
Placacentros 71 Placacentros 300
* The Company decided to close its mouldings plant in the United States in February 2007 to improve its cost structure. ** Mouldings include the capacity in the United States. MASISA 2006 ANNUAL REPORT | 15
Masisa has a commercial presence in nine countries in the Americas.
6 MARKETS
Masisa’s largest market is Latin America, which Venezuela accounted for 10.4% of the Market Diversification accounted for 72% of the Company’s total sales, Company’s sales as of December 2006. Masisa USA Brazil with the United States accounting for 26%, as of reaches this market through a network of 26.0% 16.4% December 2006. 31 independent distributors that serve the Brazil accounted for 16.4% of the sales as of construction industry. December 2006. Despite fierce local competition, Masisa Argentina is one of the most important Masisa has achieved an important position as an producers of MDF and Particle Board. Argentina MDF board supplier for the furniture industry in accounted for 7.9% of the Company’s global Chile the south of Brazil. Masisa is the country’s only sales as of December 2006. 16.3% OSB producer. The United States accounted for 26% of the Chile accounted for 16.3% of the Company’s Company’s sales. The main products sold in sales as of December 2006, and it is the third most this market are solid wood doors, finger-joint Others* important market. Boards are mainly sold in Chile, mouldings, MDF mouldings and OSB. 9.8% through a network of 150 independent distributors, The Company sells most of its products in the Mexico 13.2% including the “Placacentros,” which serve the United States through 60 distributors that mainly Argentina 7.9% Venezuela construction and furniture-making industries. serve the home construction industry and large 10.4% Mexico accounted for 13.2% of Masisa’s sales Homecenter-type retailers. as of December 2006. This country, which is a net *Include Colombia, Peru and Ecuador, among other countries. importer of forest products, is the Company’s top sawn lumber market. MDF and Particle Board are other important products for Masisa in this country. 16
7 History MASISA S.A. (POST MERGER)
Masisa S.A. (formerly called Terranova S.A.) 2006 2005 is the Company arising from the merger by The Company placed bonds worth UF 4.75 Masisa increases its stake in Forestal Tornagaleones absorption of former Masisa S.A. into and with million in the domestic market in January 2006. S.A. from 60.45% to 94.91% in November. Terranova S.A. on May 31, 2005. The proceeds were mainly allocated to paying the Forestal Tornagaleones increases its Company’s financial obligations. shareholding in Forestal Argentina S.A. from The Company’s new strategic plan to be 50.10% to 98.68% in October by purchasing carried out in the next few years is approved 48.58% for approximately US$24.3 million. in October. The key points agreed on are the Masisa successfully completes a capital definition of the core business, the establishment increase in late 2005 and early 2006, involving of a new competitive strategy, and a financing issuing 622.5 million new shares and obtains and investment plan in keeping with the plans proceeds of US$117.37 million. The main and objectives proposed. objectives of the capital increase were to finance the Company’s investment projects, principally the new MDF plant at Cabrero, in Region VIII, Chile.
TERRANOVA AND MASISA
2005 2004 The shareholders of Terranova S.A. and of The boards of directors of Terranova S.A. and former Masisa S.A. approve the merger of both Masisa S.A. agree to propose the merger to their companies by merging former Masisa S.A. into respective shareholders by incorporating Masisa and with Terranova S.A. The change of the S.A. into and with Terranova S.A. merged company name from Terranova S.A. to Masisa doubles its MDF moulding capacity in Masisa S.A. is approved. Argentina. An MDF moulding line with a capacity The merger takes place on May 31, and the of 36,000 m3 a year starts up in Chile,. As of that physical transfer of shares on August 5. As of date, the “Placacentros” network has more than the latter date, the ADRs of the merged company 230 outlets in 12 countries in Latin America. started to be traded on the New York Stock Exchange (NYSE). 2003 Early in the year, Terranova S.A. registers its Terranova S.A. becomes the legal successor ADR program on the US Securities and Exchange of Forestal Terranova S.A., Andinos S.A., and Commission (SEC). Sociedad Forestal Millalemu S.A. Masisa takes over the management of the operations of Fibranova C.A., a Venezuelan affiliate of Terranova with a Particle Board and MDF plant in Port Ordaz. That same year, four new countries are added to the “Placacentros” network (Colombia, Venezuela, Guatemala, and Uruguay). Masisa also starts up an MDF moulding line in Argentina that year. MASISA 2006 ANNUAL REPORT | 17
2002 2001 2000 Forestal Terranova S.A. sells its entire Terranova Venezuela’s construction projects The construction is completed of Terranova shareholding in its associated company were completed and the sawmill and board Brasil’s plant and of the moulding plant of Fibramold S.A. to Masonite International plant start up. Terranova Brazil starts up as of Terranova Forest Products Inc., and the start-up Corporation (former Premdor, Inc.). At the same January. Terranova Internacional S.A. purchases commences. In September, Forestal Terranova time, Terranova Internacional S.A. sold its whole the forest assets in Venezuela of the company S.A. sells its entire shareholding in the affiliate shareholding in its associated company Premdor Manufacturas de Papel S.A. (Mampa). Fibranova S.A. located in Cabrero to Masisa S.A. México S.A. de C.V. to the same company. Terranova Internacional S.A. establishes To comply with the agreement signed in January In July, Forestal Terranova S.A. acquires all the Forestal Terranova Guatemala S.A., 2001 with Masisa, Forestal Terranova S.A. gains shares that Maspanel S.A. held in Masisa S.A., Comercializadora T&T C.A. and Masnova de an 8.798% stake in that company. equivalent to 43.16% of the capital stock, by México S.A. de C.V. in 2001, Masisa acquires Fibranova S.A., a Chilean means of which Forestal Terranova increases its Masisa Argentina starts up its thin MDF plant MDF competitor (currently the Cabrero plant). stake in Masisa from 8.7% to 51.9%, becoming in October, with a capacity of 120,000 m3 a year. Masisa Brasil starts up its MDF plant with a the controlling shareholder of Masisa S.A. Masisa do Brasil starts up the largest and most capacity of 240,000 m3 a year in the new Ponta Masisa acquires a Particle Board plant in modern OSB plant in Latin America in October, Grossa industrial complex. Durango, Mexico, belonging to MacMillan with a capacity of 350,000 m3 a year. Guadiana S.A. de C.V. Masisa Partes y Piezas Ltda. is established to enhance the product mix with value-added alternatives, and Masisa Ecuador S.A. will market Masisa’s products in that country. Four new countries are added to the “Placacentros” network (Mexico, Ecuador, Panama and Paraguay). 18
1999 1997 The Company acquires 50% of the Mexican Maderas y Sintéticos del Perú S.A.C. is Company Premdor México S.A. de C.V. through established to market Masisa’s products in that its affiliate Terranova Internacional S.A. in country. order to gain access to the Latin American door Terranova de Venezuela C.A. and Terranova market. Brasil Ltda. are established to acquire forest Oxinova C.A. is established in Venezuela plantations and develop industrial projects. in September. Construction starts on the new sawmill of 1996 Andinos S.A. in Cabrero, Chile. Masisa starts to produce MDF in Chile at the industrial complex of Mapal in Region VIII. 1998 The affiliate Terranova Forest Products, Inc. Masisa acquires its Chilean Particle Board competitor, (hereinafter referred to as TFP) is created. Tableros Nobel S.A., an affiliate of Infodema S.A. Terranova Internacional S.A. is established in July (currently the Carlos Puschmann plant). 1996 to develop international projects related to TFP starts to develop a mouldings plant and the development and marketing of products from distribution center in Charleston, South Carolina, forest businesses. USA. The affiliates Andinos C.A. and Fibranova C.A. are established in Venezuela. The former starts to build a sawmill and drying plant. The Canadian Company Premdor Inc. (now Masonite International Corporation) enters Fibramold S.A. in December through its Chilean affiliate Premdor (Chile) S.A. Commercial affiliates are established in Mexico, Costa Rica and Colombia in late 1998. MASISA 2006 ANNUAL REPORT | 19
1995 1993 1968 Masisa do Brasil Ltda. is established, pushing on The Company’s shares begin trading on the New Masisa acquires its competitor Maderas with the expansion in Latin America. That same York Stock Exchange (NYSE) by means of its Aglomeradas Pinihue S.A. (this line is currently year, Forestal Argentina is created, an affiliate ADR program. part of the Chiguayante plant). of Forestal Tornagaleones S.A., expanding operations to that country. 1989 1967 The affiliate Fibramold S.A. is established to The affiliate Químicos Coronel is established to The affiliate Forestal Tornagaleones is established for create an industry to produce and market door supply adhesive resins. the plantation and management of forest holdings. faces moulded in high density fiberboard. 1984 1965 1994 Masisa acquires Maderas y Paneles S.A., a The Valdivia plant starts up, producing small Masisa launches its international expansion plan. leading Particle Board producer in Chile at that veneers, doors and large veneers. Masisa Argentina starts up its Particle Board time (this plant currently forms part of the Mapal plant, becoming pioneers in that country, and its industrial complex). 1960 MDF plant starts up one year later. The Company “Maderas Aglomeradas Ltda.” is Terranova, under the name of Forestal 1970 established, which is subsequently called Masisa, Terranova S.A., is established as the parent Masisa starts the listing process, and its shares the first Particle Board producer in Chile. company of three forestry companies and are traded on the Santiago stock market. managing the productive activities of Sociedad Forestal Millalemu S.A. (forests), Andinos S.A. (sawn lumber) and Fibranova S.A. (boards). Late that year, Compañía de Inversiones Suizandina S.A. gains a 45% stake in Terranova. 20
CONSOLIDATED SALES BY EXPORT COUNTRY OPERATING INCOME
2006 2005 2006 2005 Millions of US$ % Millions of US$ % Millions of US$ % Millions of US$ %
United States 230.2 26.0% 208.1 28.0% Net sales 886.5 100.0% 743.5 100.0% Brazil 145.7 16.4% 104.5 14.1% Sales costs -679.0 -76.6% -549.5 -73.9%
Chile 144.4 16.3% 122.4 16.5% Operating margin 207.6 23.4% 194.0 26.1%
Mexico 117.2 13.2% 111.8 15.0% Sales & administration expenses -124.0 -14.0% -112.6 -15.1% Venezuela 92.4 10.4% 62.0 8.3% Argentina 69.6 7.9% 56.3 7.6% Operating Income 83.6 9.4% 81.4 10.9% Colombia 25.2 2.8% 21.9 2.9% Peru 21.0 2.4% 16.2 2.2% Ecuador 10.0 1.1% 7.7 1.0% OPERATING CASH FLOW Others 30.8 3.5% 32.6 4.4% 2006 2005 Total 886.5 100.0% 743.5 100.0% Millions of US$ Millions of US$
Operating income 83.6 81.4
Depreciation 50.6 51.0 CONSOLIDATED SALES BY PRODUCT Intangible amortization 0.4 0.9
2006 2005 Depletion 19.2 24.6 Millions of US$ Thousands of m3 Millions of US$ Thousands of m3 Operating Cash Flow (OCF) 153.7 157.8 MDF 319.6 978.2 250.2 880.9 Particle Board 187.5 763.7 154.0 700.1 Finger-joint mouldings 94.1 190.4 83.1 180.0 Sawn lumber 72.9 343.4 66.6 327.8 MDF mouldings 65.2 157.9 47.3 113.7 OSB 48.3 219.9 49.7 261.1 Saw logs 42.7 1,426.4 30.1 1,197.0 Solid wood doors 39.6 42.5 32.8 35.7 Other products 16.8 995.3 19.5 582.7
Total 886.5 5,117.7 743.5 4,279.1 MASISA 2006 ANNUAL REPORT | 21
OUR PERFORMANCE
1 FINANCIAL
Consolidated Sales Operating Income Operating Cash Flow The Company’s consolidated sales amounted to The operating income was 2.7% up on 2005, The operating cash flow amounted to US$153.7 US$886.5 million for the year ended December amounting to US$83.6 million for the year ended million in 2006, 2.6% down on that of the 31, 2006, 19.2% higher than the previous year. December 31, 2006. This higher operating previous year, mainly due to lower depletion on The following are the main factors explaining this income is mainly explained by the following: account of a difference in the type of timber increase in sales: Higher sales, mainly driven by the increase in harvested in each period. 27.7% higher MDF board sales in all the Latin MDF board and Particle Board sales, which American markets, highlighting the increase in besides attaining greater volumes (11.0% and Non-Operating Income Brazil and Venezuela where sales were up by 9.1%, respectively) had higher prices (15.0% Non-operating income increased by US$4.5 43.2% and 51.8%, respectively. and 11%, respectively). million. The main factors explaining the change Higher Particle Board sales in all the markets Lower gross margin as a percentage of sales in non-operating income were: in Latin America, mainly in Chile, Venezuela due to cost increases of board production Increased financial income of US$4.8 million and Mexico where sales increased by 17.7%, (mainly resin and wood) and of solid wood due to the Company’s greater short-term 60.0% and 30.0%, respectively. product production (principally wood and investments in 2006. Sales increase of all the solid wood products personnel expenditures on account of the A drop in the financial expenditures of US$2.9 in the United States, highlighting the 37.7% appreciation of local currency). Due to the million due to a reduction in the Company’s increase in MDF moulding sales. Company’s successful commercial drive, it total financial debt. was able to transfer the bulk of such cost increases to prices. Lower sales and administration expenses as a proportion of sales due to the consolidation of the merger process, leading to more efficient performance. 22
2 SOCIAL AND ENVIRONMENTAL RESPONSIBILITY
Sustainable Development: ENVIRONMENTAL PERFORMANCE Triple Bottom Line Management Masisa continued its commitment to sustainable Ecoefficiency: the right environmental development, seeking to generate financial performance saves costs, for example by means value bearing in mind environmental and social of a lower waste disposal expense and greater values. We deem this business philosophy is a efficiency of using natural resources like water competitive advantage, especially in the forestry and energy. Recycling generates additional industry that is facing global concerns about its revenues and in the end leads to lower risks. social and environmental performance. 3 successful cases of ecoefficiency should be highlighted in 2006. The board plant in Brazil Risk Management reduced its water consumption by 25% and Masisa strives to reduce the risks in its improved its waste performance, which led to operations by complying with the law and savings of around US$300,000 a year. The board maintaining the “social license to operate,” plant in Argentina improved its waste and fuel construed as a fluent, transparent relationship of performance with savings of over US$600,000 mutual benefit with its stakeholders. This allows a year. The Mapal board plant in Chile closed the Company to operate its business without its water and effluent circuit with savings of interruptions and thereby lower the risks. US$300,000 a year. Masisa’s risk management system (SAR) encompasses business, social, health and safety, Environmental investments: the Company made and environmental issues. The risk performance environmental investments of US$5 million in of the operations in Mexico, Venezuela, Argentina 2006, mainly in the atmospheric control, and and Colombia was assessed in 2006, which effluent and waste control areas. detected the need of bolstering compliance with During the period, we managed to reduce the local legislation, safety practices for contractors, total water consumption by 28% and the generation the Company’s relationship with the surrounding of final waste by 3% in the plants and sawmills. communities and local authorities. The Company’s management and the internal audit area are in charge of controlling and following up on these aspects. MASISA 2006 ANNUAL REPORT | 23
The creation of financial value in Masisa also considers environmental and social values.
Certification: most of Masisa’s subsidiaries have The main energy consumption at Masisa is in the Biodiversity: Masisa was awarded the “Leaders three internationally-recognized standards: ISO industrial board and solid wood manufacturing for a Living Planet” prize in 2006 by the World 14001 for environmental management, OHSAS areas. 70% of the energy now consumed in these Wildlife Fund (WWF) in Chile. This is the first 18001 for industrial health and safety and the processes comes from renewable fuels and the time a Chilean company has received such Forest Stewardship Council (FSC) certification for biomass (wood), 25% from the consumption of acknowledgement, and it was awarded due to sustainable forest management of plantations. electrical power, and the remaining 5% from the the Company’s various conservation initiatives. The exceptions are the wood operations in Chile, use of fossil fuels (gas, diesel, gasoline). Moreover, Masisa was awarded the “Corporate which will obtain their ISO 14001 and OHSAS At Masisa we strive to be more efficient with Sustainable Standard-Setter” prize by the 18001 certifications in 2007, and the board energy use and reduce the consumption of fossil international organization, Rainforest Alliance. and wood operations in Venezuela and Forestal fuels and electrical power with a duel purpose: Masisa signed the global sustainability Argentina, which will obtain the OHSAS 18001 on the one hand, we seek to reduce costs as this agreement during a meeting of the International certification in 2007 and 2008, respectively. energy consumption accounts for a significant Council of Forest and Paper Associations (ICFPA) Masisa Brasil became the only wood panel percentage of the total production cost. On held in Rome, Italy. It is the first time leaders and manufacturing company in Brazil in 2006 to the other hand, we are committed to reducing representatives of the forestry and paper sector of offer products complying with five international greenhouse gas emissions from these fuels by the most important companies in the world have standards: E-1; ISO 9001; ISO 14001; OHSAS 6%. It is important to highlight that biomass voluntarily signed a commitment of this kind. 18001 and FSC. It also received recognition from emissions have a neutral effect, i.e., they add no the Wood Industry Union for obtaining the FSC CO2 to the atmosphere as they form part of the certification in the forestry area in connection natural carbon cycle. with the Ponta Grossa plant. Energy consumption increased by 7.6% in 2006, i.e., our consumption rose from 2.7 million Climate and energy change: Masisa is the first MWh in 2005 to 2.88 million MWh in 2006. This Chilean company to be admitted as a member increase was mainly due to the higher production of the Chicago Climate Exchange (CCX). This of the value-added processes in the board membership enables the Company to trade the business, such as the production of boards with surplus capture of greenhouse gases in the US melamine. We launched an aggressive emissions voluntary emissions market, and to guarantee the reduction program in 2007, based on which Company’s commitment of maintaining a positive we hope to improve the energy efficiency of the or neutral carbon balance, and of reducing its industrial operations. emissions by 6% by 2010. 24
SOCIAL PERFORMANCE
Occupational Health and Safety: the corporate Health and safety management system work accident frequency indicator for direct and (OHSAS 18001): the efficiency attained by our indirect employees was 3.21 in 2006, which was occupational health and safety management an 18% drop on 2005. Despite this, there were system has optimized endeavors to identify three fatal accidents in 2006 involving indirect and control risks. employees of our forestry operations, two in We will continue to implement the STOP Venezuela and one in Chile. program in 2007 in the forestry areas in Chile, The occupational health and safety management Argentina and Brazil, we will create the corporate was based on 4 core aspects in 2006: occupational health and safety committee, Management commitment: in 2006, Masisa’s and the medical check-up programs will be entire corporate management team was standardized to detect exposure to risky agents trained in the DuPont Safety Training present in our wood and board processes. Observation Program (STOP) as safety conduct observers. Generation of a self-care culture: the DuPont STOP program continued to be implemented, by means of which specially trained managers, supervisors and collaborators identify and correct risky behavior in the workplace. Safety indicator analysis to identify critical areas and draw up prevention and control activities. MASISA 2006 ANNUAL REPORT | 25
We bolstered dialogue in all the operations and the working relations with local authorities in 2006.
Businesses at the base of the pyramid: as part Masisa Chile and the DuocUC also developed the Prizes and acknowledgements: of its business strategy, Masisa strives to promote “sales management majoring in retail” distance- Masisa Argentina was awarded the Business business, offering opportunities to improve the learning program to professionalize the heads Environmental Excellence Prize for its “Zero quality of life of low-income social sectors and and owners of the “Placacentros” network. Effluents” program at the Concordia plant. that in turn enhances the Company’s profitability. Carpenters and furniture makers in Peru The Company was also selected as one of The target for 2008 is to get 10% of our sales and Venezuela graduated from the first small the top 50 companies to work for, according from this kind of business. entrepreneur specialization course. to the annual ranking published by the To such effect, we developed a basic furniture Apertura business magazine about the 50 top line for low-income housing, which is installed Relationship with neighboring communities and employers in Argentina. It was also awarded and/or sold through the social networks of local authorities: we strengthened dialogue in the “Argentine Export Prize” for the sixth year low-income groups. Besides helping to improve all the operations and the working relations with running, and the provincial government of Entre people’s quality of life, these kinds of initiatives local authorities in 2006. We made particular Ríos awarded it the 2005 Entreriano Export open up an important market in Latin America progress with the joint work with the communities Prize in the largest export volume category. for the Company. We made further progress with surrounding the forest operations in Chile where we Masisa Brazil was awarded the Fritz Müller these projects in Venezuela and Chile in 2006. have a respectful dialogue with various Mapuche Prize, which is a token of the environmental Masisa Brasil has developed a new more communities, although we have legitimate authority’s public acknowledgement of affordable housing solution for low-income differences with the neighbors on 6 of our plots. companies and institutions with outstanding sectors of Sao Paulo, i.e., the dry steel frame Masisa Venezuela received the first class environmental performance. construction, which is a structure of light Guaicaipuro Cacique Order medal, awarded by galvanized steel profiles and enclosed by OSB. the Indigenous Council of the Independencia City Hall of the state of Anzoátegui to institutions and bodies whose activities have helped to raise the quality of life of the Kariña indigenous communities. 26
Masisa has documented its critical business processes and key controls, and established an ongoing monitoring process for its internal control structure.
Masisa operates pursuant to a set of guidelines RISK MANAGEMENT AND INTERNAL CONTROL governing the relations between the Company’s channels and participants for the suitable and Risk management is an important element transparent management of the relationship with in Masisa’s corporate governance structure. its shareholders and stakeholders. Compliance Hence, processes, methodologies and standards with the vision, principles and Triple Bottom have been implemented to support the lines of Line strategy is promoted through practices of management for an effective administration of fairness, responsibility and honesty. Since Masisa business risks. The aim is to promote a culture of is a company with shares traded on the Santiago doing things well, with decision-making based on Stock Exchange in Chile and on the New York information, records and analysis, and not simply Stock Exchange, it must comply with Chilean and for the purpose of complying with controls or US law, particularly the Sarbanes-Oxley Act. applicable legislation. To meet such obligations, the responsibilities Risk management is thus a strategic, complete for the management, efficacy and efficiency of and integrated vision, not only to prevent threats all the facets of its operations are monitored. The but also to identify opportunities and competitive Company has documented its critical business advantages. processes and key controls, and established an The internal audit area of Masisa reports ongoing monitoring process for its internal control directly to the Audit Committee concerning the structure. The Directors’, Audit, Disclosure and main results of internal assessments carried out Compensation Committees provide governance in each of the operations. and support to Masisa’s board of directors. The objective of these assessments is to continuously monitor the existing control structure in each of the Company’s business processes. MASISA 2006 ANNUAL REPORT | 27
CORPORATE GOVERNANCE
Ethical Conduct TIERS OF CORPORATE GOVERNANCE BOARD COMMITTEES Masisa’s Declaration of Business Principles lays down the Company’s commitments regarding Board of Directors Directors’ Committee issues like compliance with the law, ethical Masisa’s current Board of Directors, which The Directors’ Committee was established in conduct, workers’ rights, and respect for the was elected on June 6, 2005, for a statutory April 2001. and its current members are Enrique natural and social environment. As part of Grupo three-year period, is the highest tier of the Seguel (President), Antonio Tuset and Juan Nueva (controlling shareholder of Masisa), Company’s senior management and represents Carlos Méndez (the first two directors mentioned Masisa signed the United Nations Global the interests of all the shareholders, irrespective were elected by the minority shareholders).This Compact (www.globalcompact.org), and this of who its directors have been elected by. The committee reviews the financial statements and responsibility is reinforced with this Declaration board is made up of seven directors elected by the reports of the external auditors, it proposes the of Principles. the Ordinary Shareholders’ Meeting, of which external auditors and risk rating agencies that are Rather than put forward a detailed list of five directors (including the president and vice elected in the shareholders’ meeting each year, it conduct or restrictions in the style of traditional president) were elected by GrupoNueva, and two assesses the transactions with related parties, as codes of ethics, Masisa has decided to define independent directors were elected by minority well as transactions where a director, officer, or general principles that govern the conduct of all shareholders, mainly Chilean pension fund top manager of the Company may have a conflict the Company’s collaborators. companies (AFPs). The independent directors of interest, and gives advice on the compensation The Principles are available in Spanish, have a very important role for Masisa, since plans for the Company’s top managers. Portuguese and English, the three official they have an absolute majority in the Directors’ languages of the countries in which we operate, Committee that has control faculties, and they Audit Committee and form part of the Company’s induction also participate in the Compensation and Audit The Audit Committee is made up of Antonio Tuset courses. They are also analyzed in detail with our Committees. Masisa’s Chief Executive Officer is (President), Enrique Seguel, Ronald Jean Degen direct and indirect collaborators in workshops appointed by the Board of Directors. and Patrick Nielson. The Audit Committee’s main called “Building the Future.” We have a functions are to assure the integrity of the financial procedure for any collaborator to ask, comment statements, to review the accounting policies, to or file a complaint about these Principles. It is safeguard the Company’s legal compliance, to the management’s responsibility for ensuring evaluate the external auditor’s performance each compliance with this Declaration of Principles year, its fees, independence and its qualifications, to analyze possible lawsuits and litigation and the strategies for addressing such risks.
28
Standing: Ronald Jean Degen, Enrique Seguel Morel, Patrick Nielson, Antonio Tuset Jorratt. Sitting: Juan Carlos Méndez González, Jorge Carey Tagle, Julio Moura, Enrique Cibié Bluth.
Compensation Committee Disclosure Committee Administration The Compensation Committee comprises Enrique The Disclosure Committee is made up the The administration has the primary Seguel (President), Antonio Tuset, Ronald Jean following executives of Masisa: Enrique responsibility for the design, dissemination, Degen and Patrick Nielson. Its functions are: to Cibié (Chief Executive Officer who chairs the follow-up, effectiveness and updating of the approve Masisa’s objectives in reference to the committee); Eugenio Arteaga (Chief Financial set of guidelines forming part of our Corporate compensation of the Chief Executive Officer; to Officer); Patricio Reyes (General Counsel); Governance Model. review the remuneration level of each second line Rodrigo Saldivia (Deputy Accounting Officer); It is assisted by the Corporate and Operative executive, along with the compensation structure; and Luis Zúñiga (Internal Control Officer). This functional levels in their respective areas of criteria for the payment of variable incentives; committee is in charge of assuring the board that responsibility; it provides leadership and sets the job position benefits; and other strategies to the financial information available to the public forth the parameters needed to assure an retain key personnel. is true, timely and suitable to have a complete environment of suitable and effective control at picture of the Company’s financial performance. all levels, getting directly involved to achieve the planned objectives. Such roles are carried out by means of appropriate internal control processes, which include periodical meetings with the key teams and visits to the countries and units where Masisa has operations. MASISA 2006 ANNUAL REPORT | 29 estructura corporativa
MASISA S.A.
60.00 % 25.12 % 94.91 % 100.00 % 50.00 %
INVERSIONES MASISA USA, INC. FORESTAL MASISA INVERSIONES INTERNACIONALES TORNAGALEONES S.A. OVERSEAS LTD. CALLE-CALLE S.A. TERRANOVA S.A. (CHILE) (CHILE) (CAYMAN ISLANDS) (CHILE)
74.88 % 98.68 %
99.99 % MASISA FORESTAL 98.00 % MASISA 2.00 % MADEIRAS LTDA. ARGENTINA S.A. ARGENTINA S.A. (BRAZIL) 1.6093 %
80.71 % MASISA 19.28 % 98.3907 % MASISA DO BRASIL LTDA. COLOMBIA S.A.
100.00 % FIBRANOVA C.A. 99.90 % MASISA ECUADOR S.A. 0.10 % (VENEZUELA)
100.00 % CORPORACIÓN 99.80 % MASISA PARTES Y 0.20 % FORESTAL IMATACA C.A. PIEZAS LTDA. (CHILE) (VENEZUELA)
100.00 % ANDINOS C.A. 99.11 % MADERAS Y SINTÉTICOS 0.89 % (VENEZUELA) DEL PERÚ S.A.C.
0.01 %
85.00 % CORPORACIÓN FORESTAL 99.00 % MADERAS Y SINTETICOS 1.00 % GUAYAMURE C.A. SERVICIOS S.A. DEL C.V. (VENEZUELA) (MEXICO) C.C. MAS S.A. DE C.V. (MEXICO) 99.99 % FORESTAL 0.01 % 99.9999 % MADERAS Y SINTETICOS 0.0001 % TERRANOVA DE MÉXICO S.A. DE C.V. MÉXICO S.A. DE C.V.
100.00 % TERRANOVA TERRANOVA DE 99.99 % PANAMÁ S.A. VENEZUELA S.A. 100.00 %
99.95 %
49.00 % OXINOVA C.A. * COFORVEN S.A. (VENEZUELA) (VENEZUELA)
50.00 % MASNOVA DE MÉXICO 50.00 % S.A. DE C.V. 30
OUTLOOK
Masisa is being acknowledged as a leading company in Latin America in the production and trade of wood boards for furniture and interior architecture. This is achieved by trying hard to be the best choice for our customers and by creating economic value within ethical as well as social and environmental responsibility principles, thus, achieving the greatest profitability in industry.
MISSION
Creating value for our shareholders, customers and society through commitment and team work, along with sustainable and efficient management of our forests and productive processes, and through nearness and transparency regarding our customers, communities and suppliers. Developing a reliable trademark which predicts the markets needs through innovation in products and services, which responsibly works in favour of environment and society, and also guarantees the sustainable development of business and creates a better lifestyle for present generations and those to come. MASISA 2006 ANNUAL REPORT | 31
VALUES
Our customers Our collaborators are constantly trying to foresee and meet the changing needs of our customers through our products and services and by working under world standards.
Our collaborators Respect underlies our collaborators’ relationships in our company; we promote team work with synergy between our collaborators and the Company. We offer and foster opportunities to develop themselves. We also offer healthy and safe working conditions. We do want our collaborators to be the true figures in the efforts of the Group aimed at the sustainable development.
Our communities We interact with our communities in Latin America in a responsible and ethical way and we work to improve the lifestyle of the present generations and those to come. Society offers us opportunities. That is why we dedicate our efforts and talents, in part, to the improvement of society. Our company promotes social and environmental responsibility which is the basis of all our actions and of all parties involved in our business. 32
Masisa is a leading furniture and interior architecture board production and marketing company in Latin America. MASISA 2006 ANNUAL REPORT | 33
GENERAL BACKGROUND
A LEGAL IDENTIFICATION B INCORPORATION DOCUMENTS
GENERAL INFORMATION Masisa S.A., formerly known as Terranova S.A., MASISA S.A.’S CORPORATE OBJECTIVES Company name: Masisa S.A. is the legal successor of the closed corporation Address: Av. Apoquindo 3650, Terranova Internacional S.A., arising from the Forestation or reforestation of land and the 10th floor, Las Condes, division of the latter on September 30, 2003. management, harvesting and development of Santiago, Chile. Subsequently, on October 31, 2003, Terranova natural and/or planted forests. Tax Code: 96.802.690-9 S.A. incorporated by merger its parent company Industrialization and marketing in Chile and/ Security Registry Nº: 825 Forestal Terranova S.A., becoming a publicly- or overseas of all types of forest and wood Telephone: 56 (2) 350 6000 traded corporation within the Terranova group of products, livestock and agricultural products, Fax: 56 (2) 350 6001 companies, and the legal successor of Forestal and all kinds of machinery or vehicles. E-mail: [email protected] Terranova S.A.. On May 31, 2005, it merged Capital investment in forest or agricultural Type of entity: Publicly-traded corporation with former Masisa S.A., with the latter being businesses, managing, establishing or External auditors: PricewaterhouseCoopers incorporated to Terranova S.A., and at which time participating in companies created to such effect. its company name was changed to Masisa S.A. Rendering of management consultancy services Masisa S.A. was established by public deed of a technical, financial and/or legal nature. on July 17, 1996, granted by the Santiago public notary of Mr. Félix Jara Cadot. An excerpt of such public deed was registered on sheet 19,525 Nº15.190 in the Commerce Registry of the Santiago Real Estate Registrar in 1996, and was published in the Official Gazette on August 10, 1996. 34
C ADDRESSES
ADMINISTRATIVE OFFICES
Argentina Peru Planta Chillan Buenos Aires Lima Panamericana Norte Km. 5, Chillán 25 de Mayo 359 Piso N°15 Av. Víctor Andrés Belaunde 147 Telephone (56-42) 207 300 (C1002ABG) Capital Federal, Buenos Aires Edificio Real 12, Oficina 103 Fax (56-42) 207 399 Telephone (54-11) 5550 6000 San Isidro, Lima-Perú Planta Ranco Fax (54-11) 5550 6402 Telephone 0051-1-7061400 J.M. Balmaceda 8050-8060-8350 Brazil Venezuela Casilla 40-A, Valdivia Curitiba Caracas Telephone (56-63) 214 451 Rua Visconde do Rio Branco, 1341 – 8o. andar Avenida Francisco de Miranda, Fax (56-63) 216 945 Centro Curitiba, Paraná, CEP: 80420-210 Edif. Parque Cristal Planta Carlos Puschmann Telephone (55-41) 3219 1850 Torre Oeste, Piso 10, Ofic 10-04 Av. España 1060 Fax (55-41) 3219 1870 Los Palos Grandes - Caracas Casilla 40-A, Valdivia Rio de Janeiro Teléfono (58-212) 6207043 Telephone (56-63) 341 010 Praia do Flamengo, Nº66, Fax (58-212) 2854217 Fax (56-63) 341 017 Bloco B, salas 719 e 720, Puerto Ordaz Planta Chiguayante Bairro Flamengo, CEP: 22.210-030 Calle Cuchiveros, Torre Balear, Piso 2, Manuel Rodríguez 1045 Rio de Janeiro – Rio de Janeiro Alta Vista Norte Casilla 1957, Chiguayante, Concepción Telephone (55-21) 2005-5253 Puerto Ordaz, Estado Bolívar Telephone (56-41) 236 2123 Chile Telephone (58-286) 965 1011 Fax (56-41) 236 2339 Santiago Fax (58-286) 965 1066 Planta Mapal Av. Apoquindo 3650, Piso 10 Camino a Coronel Km. 10 Las Condes, Santiago INDUSTRIAL PLANTS Coronel, Concepción Telephone (56-2) 350 6000 Telephone (56-41) 244 5200 Fax (56-2) 350 6001 Argentina Fax (56-41) 239 0028 Colombia Planta Concordia Planta Cabrero Div. Tableros Bogota Parque Industrial de Concordia Ruta Q-50 Km. 2,15 Calle 72 Nº5 – 83, Concordia, Provincia de Entre Ríos Casilla 17, Cabrero Edificio Avda. Chile, Piso 4, Oficina 402 Telephone (54-345) 429 0100 United States Telephone (57-1) 325 8700 Fax (54-345) 429 0110 Wando* Fax (57-1) 325 87 24 Brazil 2440 Clements Ferry Road Ecuador Planta Ponta Grossa Wando, SC 29492 Guayaquil Rodovia BR 376, N° 1690, Servidão A Telephone (1-843) 216 2100 Av. Víctor Emilio Estrada Nº1021 entre Hilanes y Ponta Grossa, Paraná, CEP 84045-610 Fax (1-843) 216 21 Jiguas Telephone (55-42) 3219-1500 Mexico Guayaquil, Ecuador Fax: (55-42) 3219-1600 Planta Durango Telephone (593 4) 2888244 / 2888249 / Planta Rio Negrinho Carretera Panamericana Km. 959 2888248 Rodovia BR-280, N°4116, Bairro Industrial Sul Durango Dgo. United States Río Negrinho, Santa Catarina, CEP 89295-000 C.P. 34304 Atlanta Telephone (55-47) 3641-3000 Telephone (52-618) 813 7544 900 Circle 75 Parkway, Suite 720 Fax (55-47) 3641-3038 Telephone (56-43) 400 800 Atlanta GA, 30339 Chile Fax (56-43) 400 801 Telephone (1-770) 405-2600 Planta Cabrero, Div. Tableros Venezuela Fax (1-770) 405-2601 Tucapel s/n, Cabrero Anzoategui Mexico Telephone (56-43) 404 100 Carretera Nacional Los Barrancos, Vía Palital, México D.F. Fax (56-43) 404 199 Zona Industrial Macapaima, Jaime Balmes #8, 2° piso, desp. 202, Col. Planta Cabrero, Div. Maderas Municipio Independencia. Estado Anzoátegui Los Morales, Deleg. Miguel Hidalgo Ruta Q-50 Km. 2,15 Telephone (58-286) 920 3031 México, D.F. C.P. 11510 Casilla 17, Cabrero Fax (58-286) 920 3031 Telephone (52 55) 91382300 Telephone (56-43) 404 100 Fax (52 55) 91382308 Fax (56-43) 404 199 *The Company decided to close its mouldings plant in the United States in February 2007 to improve its cost structure. MASISA 2006 ANNUAL REPORT | 35
DISTRIBUTION CENTERS/WAREHOUSES
Argentina Almagran S.A. Mexico Parque Industrial de Concordia, Cra. 50 # 17 – 89 Tamaulipas Concordia, Entre Ríos Telephone (57 1) 261 7804 Boulevard de los Ríos Km. 4.06 Telephone (54-345) 429 0100 Buenaventura Puerto Industrial Altamira, Fax (54-345) 429 0110 Calle 6 # 21 A – 16, Barrio Paloseco Altamira, Tamaulipas CP 89608 Brazil Telephone (57 1) 243 4310 Telephone (52-833) 260 2550 Ponta Grossa Endecolsa Durango Rodovia BR 376 Km. 503 N°1690, Autopista Norte Km 44 Vía Gachancipa Carretera Panamericana Km. 959, Ponta Grossa, Paraná, CEP 84045-610 Telephone (57 1) 857 8235 Durango, Dgo. CP 34304 Telephone (55-42) 3219 1594 Avenida 4A # 7N – 65, Zona Industrial Telephone (52-618) 829 9600 Fax (55-42) 3219 1600 Ecuador Fax (52-618) 829 9618 Porto Alegre Outsourcing Integración Logística del Ecuador S.A. México, D.F. Rua Dona Teodora, 1306 Cdla. Pradera 3, Av. Domingo Comín, Poniente 140 #840, Parque Industrial Porto Alegre, Rio Grande do Sul, CEP 90240-300 calle 11 y La Ría Col. Industrial Vallejo, Bodega Nº10 Telephone (55-51) 3362 3611 (former Timsa warehouses) México, D.F. C.P. 02300 Recife PBX (00593) 4 243-1007 Telephone (52-55) 53680497 Avenida Alfredo Lisboa, s/n 243-0671 243-0492 Peru Armazém 18, sala 09 United States Outsourcing Perú SAC Bairro Recife Wando* Av. Los Materiales 3049 Recife – Pernambuco, CEP 50.030-150 2440 Clements Ferry Road, Charleston Telephone 0051-1- 705 3030 Telephone (55- 081) 4009-7171 Wando, SC 29492 Venezuela Sao Paulo Telephone (1-843) 216 2100 Macapaima Rua Jussara, Nº 1250 Fax (1-843) 216 2160 Fibranova Sala 06, Jardim Santa Cecília Baltimore Carretera Nacional Los Barrancos, Barueri – São Paulo, CEP 06.465-070 Kramer Logistics, Inc. cruce con Vía Palital, Telephone (55-11) 4195-1090 1100 E. Patapsco Ave. Zona Industrial Macapaima, Estado Anzoátegui Chile Baltimore, MD 21225 Telephone (58-286) 920 3031 Antofagasta Telephone (1-410) 354 9501 Fax (58-286) 920 3031 Calle 5 Norte s/n, Sector La Chimba, Pasadena Puerto Cabello Telephone (56-55) 211 465 Fax (56-55) 211 316 Bryan Logistics Company, LL C Almacén Albatroz Santiago 9600 New Century Drive, Texas Avenida Andrés Eloy Blanco, Camino Lo Ruiz 3200, Renca Pasadena TX 77507 Zona Industrial la Elvira, Telephone (56-2) 646 4179 Telephone (1-281) 872 7771 sector La Flecha Concepcion Oakland Puerto Cabello, Estado de Carabobo Camino a Coronel Km.10, Coronel PCC Logistics Telephone (58-242) 364 9520 Telephone (41) 239168 Fax (41) 239 170 2099 Seventh Street Fax (58-242) 364 9992 Valdivia Oakland, Ca 94607 Carabobo J.M. Balmaceda 6555 510-763-8991 Almacén Transporte Intermundial S.A. Telephone (63) 217 885 Fax (63) 217 862 Port Wentworth Carretera Vieja Los Guayos-Guacara, frente a la Colombia Ocean Link 1080 Godley Road bomba Cucuta Port Wentworth, Ga 31407 PDV al lado de la Concretera Caracas. Bodega Merco Cargo Ltda. 912-963-9898 Estado Carabobo Av. 4ª A Nº7 N-60, Cúcuta Compton Telephone (58-245) 581 3897 Telephone (57-7) 578 25 09 – 568 12 69 Pacer Distribution Almagran S.A. 220 West Manville Street *The Company decided to close its mouldings plant in the United States in February 2007 to improve its cost structure. Diagonal 18 Nº37-63, Cúcuta Compton, Ca 90220 Telephone (57-1) 269 4687 310-518-8888 36 MASISA 2006 ANNUAL REPORT | 37
D BOARD OF DIRECTORS & SENIOR MANAGEMENT
BOARD OF DIRECTORS
President Julio Moura Mechanical engineer, Swiss Institute of Technology, Zürich (ETH), Switzerland. MBA, M.I.T. Sloan Management School, United States of America. Tax Code: 21.814.616-3
Vice President Ronald Jean Degen Electrical engineer, Mauá Engineering School, Sao Paulo, Brazil. Master in Operations Research, Swiss Institute of Technology, Zürich (ETH), Switzerland. MBA, University of Michigan, United States of America. Tax Code: 21.727.243-2
Directors Jorge Carey Tagle Attorney, Catholic University of Chile. Master’s degree in comparative jurisprudence, New York University, School of Law, United States. Tax Code: 4.103.027-5
Juan Carlos Méndez González Agronomist, Catholic University of Chile. Master’s degree in agricultural economics, Catholic University of Chile. Master’s degree in economics and PhD candidate, University of Chicago, United States of America. Tax Code: 4.402.519-1
Patrick Nielson B.A. in Political Science, Lewis & Clark College, Portland, Oregon, United States of America. Attorney, California University, Hastings, United States of America. Tax Code: 21.724.459-5
Enrique Seguel Morel Army General (retired). MBA , ESADE, Barcelona, Spain. Tax Code: 3.116.588-1
Antonio Tuset Jorratt B.A. in business administration and accountant, University of Chile. Diploma in philosophy, Los Andes University. Tax Code: 4.566.169-5 38
MASISA’S CORPORATE SENIOR MANAGEMENT Chief Human Resources Officer Chief Executive Officer Leo Schlesinger Grandi Enrique Cibié Bluth Psychologist, Gabriela Mistral University, Chile. B.A. in business administration, Catholic University of Chile. Master in business administration (MBA), London Business School, MBA, Stanford University, United States of America. London, United Kingdom. Tax Code: 6.027.149-6 Tax Code: 11.741.889-8 Chief Officer Boards Unit Chief Audit Officer Jaime Valenzuela Fernández Luis Zúñiga Medina B.A. in business administration, accountant, and statistician, University of Chile. B.A. in business administration, Santiago University of Chile. Postgraduate degree in Advanced Management Program, The Wharton Postgraduate degree in finance, University of Chile. School, University of Pennsylvania. MBA, Santiago University of Chile. Tax Code: 6.773.073-0 Tax Code: 8.752.932-0 Chief Officer Retail Business Unit and Chief Commercial Officer Wood Boards Business Unit ARGENTINA Alejandro Espinosa Carey Director Manager Civil electrical engineer, University of Chile. Alfredo Gili Canadell DPA – business administration, Adolfo Ibáñez University. Forestry engineer, Austral University of Chile. Tax Code: 7.481.963-K Tax Code: 8.519.945-5 Chief Officer Solid Wood Business Unit Tomás Morales Jaureguiberry BRAZIL Forestry engineer, Austral University of Chile. Chief Executive Officer MBA, Harvard Business School. Jorge Hillmann Tax Code: 7.106.266-K Metallurgical engineer and B.A. in business administration, Universidad Chief Officer Forestry Business Unit Federal do Río Grande do Sul. Jorge Correa Drubi Postgraduate degree in marketing, ESPM. Forestry engineer, University of Chile. B.A. in public administration, Universidad Federal do Río Grande do Sul. Tax Code: 5.545.576-7 MBA in finance IBEMEC. Chief Financial Officer RG: 800.052.345-9 Eugenio Arteaga Infante B.A. in business administration, accountant, Catholic University of Chile. CHILE MBA, Catholic University of Chile. Chief Executive Officer Tax Code: 6.374.575-8 Gastón Urmeneta Krarup Chief Sustainable Development Officer Mechanica naval engineer, Naval Academy, Chile. María Emilia Correa Master’s degree in economics and business administration, ESEADE. Attorney, Los Andes University, Bogotá, Colombia. Tax Code: 8.816.997-2 Master’s degree in sociology (MA), The New School for Social Research, New York, United States of America. COLOMBIA Tax Code: 21.667.056-6 Chief Executive Officer Chief Corporate Development Officer Luis Guillermo Velásquez Matías Mackenna García-Huidobro B.A. in business administration (BA), specializing in finance and Civil engineer, Catholic University of Chile. marketing, Universidad EAFIT, Colombia. MBA, Babson College, United States of America. Identity Card Nº: 8.311.018 Tax Code: 10.579.653-6 General Counsel and Secretary to the Board UNITED STATES* Patricio Reyes Urrutia Chief Executive Officer Attorney, Catholic University of Chile. George MacConnell Tax Code: 10.740.512-7 B.A. in business administration and economics, Northeastern University, Chief Corporate Communications and Image Officer United States of America.
Ignacio González Guzmán * The Company decided to close its mouldings plant in the United States in February 2007 to improve its cost B.A. in business administration, University of Chile. structure. Due to this restructuring process, it appointed Mr. Dan R. Schmidt to replace George MacConnell as Specialization in marketing, San Andrés University, Argentina. the Chief Executive Officer of Masisa USA, Inc. Tax Code: 9.424.121-9 MASISA 2006 ANNUAL REPORT | 39
MEXICO VENEZUELA Chief Executive Officer Chief Executive Officer Claudio Cerda Herreros Miguel Oneto Rosales Industrial civil engineer, Catholic University of Chile. B.A. in business administration, Santiago University of Chile. MSc in management, Stanford University. Postgraduate degree in human relations and psychology, Catholic Tax Code: 10.514.213-7 University of Chile. Tax Code: 7.411.246-3 PERU/ECUADOR Chief Executive Officer Roberto Heskia Tornquist B.A. in business administration, Catholic University of Chile. Tax Code: 10.978.789-2
E BOARD OF DIRECTORS REMUNERATION
The Ordinary Shareholders’ Meeting of Masisa S.A., held on April 19, 2006, the aforementioned variable remuneration for a proportion equivalent agreed to establish an annual remuneration for the board for the period to the number of days of the 2006 period which he has worked. If the May 2006 through April 2007 (inclusive) of US$60,000 for directors, board of directors appoints a replacement, such replacement shall be US$120,000 for the Vice President, and US$180,000 for the President, entitled to the corresponding variable remuneration, applying the same paid in monthly installments. proportion, i.e., the number of days in 2006 the replacement director has This remuneration shall be paid per month due within the first 5 worked. This remuneration shall only be paid when the consolidated and business days of each month. A variable remuneration was also proposed individual financial statements of Masisa S.A. audited for the year ended of 1.5% of the Company’s consolidated net income for the year ended December 31, 2006, have been sent to the Superintendency of Securities December 31, 2006, to be shared among the directors in equal portions, and Insurance. Remuneration received by directors, even when this is except for the Vice President, who shall receive double the amount of expressed in dollars, shall be paid in Chilean pesos, legal tender, at the the directors, and for the President, who shall receive five times the exchange rate of the day prior to payment. sum paid to each director. The maximum limit for this remuneration The board incurred no consultancy or other expenses in the 2006 period. shall be US$40,000, US$80,000 and US$200,000 respectively. Should The table below shows the remuneration received by directors in 2005 a director, including the President and Vice President, resign or no and 2006 for attendance fees, and these are expressed in US dollars for longer be a director during the 2006 period, he shall only be entitled to the year ended December 31 of each year:
Expressed in US$
Attendance Fee Profit Sharing Directors’ Committee Attendance Fee Audit Committee Compensation Committee Attendance Fee ttendance Fee
Director 2006 2005 2006 2005 2006 2005 2006 2005 2006 (*) 2005
Julio Moura 180,000 130,000 143,642.95 16,906 0 0 0 0 0 0 Ronald Jean Degen 120,000 82,500 57,457.18 8,453 0 0 3,600 0 400 0 Patrick Nielson 60,000 47,500 28,728.59 8,453 0 1,800 3,600 0 400 0 Juan Carlos Méndez 60,000 47,500 28,728.59 8,453 4,800 4,200 0 0 0 0 Jorge Carey Tagle 60,000 47,500 28,728.59 6,654 0 0 0 0 0 0 Enrique Seguel Morel 60,000 47,500 28,728.59 6,654 8,400 4,200 3,600 0 400 0 Antonio Tuset Jorratt 60,000 35,000 28,728.59 0 4,800 2,400 7,200 0 400 0 Michel Stuart-Smith 0 0 0 8,607 0 0 0 0 0 0 Ignacio García Reyes 0 0 0 1,799 0 0 0 0 0 0 René Reyes Schifferli 0 0 0 1,799 0 0 0 0 0 0 Carlos Marín Olalla 0 5,000 0 0 0 0 0 0 0 0
TOTAL 600,000 442,500 344,743.08 67,776 18,000 12,600 18,000 0 1,600 0
* 2006 accrued annual payment payable in 2007 40
On July 3, 2006, the Company informed the Superintendency of Securities G MAIN SUPPLIERS OF MASISA S.A. and Insurance about an adjustment that affected the financial statements already audited for the year ended December 31, 2005, which meant argentina acknowledging a lower accumulated income of US$1.9 million. Due to this, the directors returned the Company their 2005 profit sharing proportion RAW MATERIAL OR SERVICE SUPPLIER affected by this adjustment, and this figure amounted to US$29,000. Sea freight agency MSC Masisa’s officers and senior management received total remunerations Sanding strips SIA Ltda. of ThUS$5,355.2 in 2006. Wax emulsion Isogama Industria Química Ltda. The Company’s directors and officers, who worked as directors and Paper Schattdecor managers of Masisa’s affiliates, received no remuneration for such office. Impress Diseño Iberia S.A. Officers and senior management received severance indemnities of Lamigraf S.A. ThUS$240.0 in 2006. MD Papéis Ltda. Masisa has a short-term incentive system (annual bonus), which is Resins Resinas Concordia applicable to the senior management and collaborators, and job positions Port Terminal Terminal Zárate that in the Company’s opinion are eligible for participation. The aim of this system is to motivate collaborators with an incentive system that rewards individual performance and the Economic Value Added (EVA) in a BRAzIL sustainable and ongoing way over time. The main components of this instrument are the Company’s results, the RAW MATERIAL OR SERVICE SUPPLIER achievement of objectives and individual performance, which are agreed on Adhesives and resins Hexion Química e Indústria e Comércio and evaluated each year by means of Masisa’s performance evaluation system. Synteko Produtos Químicos S/A By means of this system, the Company awards an annual bonus of a Dynea Brasil S/A facultative, discretional, variable and non-contractual nature, which is Resinas Interacionais Ltda. calculated based on the degree of achievement of individual and corporate Bayer S/A goals and on the results of the period. The Company has no incentive Housekeeping Tsg Ltda. – Tecnología em Servicos systems like payment in shares or Company share purchase options. Wax emulsions Isogama Industria Química Ltda. Freight Gordo Transportes Ltda. Impregnated sheets Dynea Brasil S/A F HEADCOUNT Coveright Surfaces do Brasil Logistics Rodo Mar Veiculos e Máquinas Ltda The following is the breakdown of the headcount at Masisa S.A. and its Imbau Transportes e Serviços Ltda. affiliates for the year ended December 31, 2006, according to the different Internal wood movement Rafter Serviços Ltda. organizational levels: Raw paper MD Papéis Ltda. Lamigraf S.A. Executives Professionals Workers Total Schattdecor do Brasil Industria
Masisa USA 3 22 39 64 Health plan Unimed Masisa Venezuela 21 128 285 434 Masisa Chile 76 493 2,291 2,860 COLOMBIA Masisa Argentina 14 74 448 536 Masisa Brazil 8 166 933 1,107 RAW MATERIAL OR SERVICE SUPPLIER Masisa Peru/Ecuador 3 9 12 Warehousing Coexport Ltda. Almagran S.A. Masisa Mexico 4 84 127 215 Logistics Cronos S.A. Masisa Colombia 3 3 4 10 Transport Transportes Sánchez Polos S.A.
TOTAL 132 979 4,127 5,238 Servitransa Cordicargas Customs Intermediation Merco Representaciones S.A. SIA MASISA 2006 ANNUAL REPORT | 41
CHILE MeXICO
RAW MATERIAL OR SERVICE SUPPLIER RAW MATERIAL OR SERVICE SUPPLIER Electricity Empresa Nacional de Electricidad S.A. Customs agent Despachos Aduanales Castañeda S.C. Soc. Austral de Electricidad S.A. Despachos Aduanales Castañeda S.C. Metallic structures Zanella Eng. Ind. de Máquinas Ltda. Logistic dispatch & storage Alta Cargo S.A. de C.V. Wood raw material Forestal Mininco S.A. Sea freight Naviera Chilena del Pacífico Aserraderos Arauco S.A. Electricity Comisión Federal de Electricidad Forestal Bío-Bío S.A. Sawn lumber Productos Forestales S.A. de C.V. Forestal Santa Elena Ltda. Juan Balerio S.A. Forestal del Sur S.A. Forestal Tromen S.A. Promasa S.A. Impregnated paper Coveright CMPC Maderas S.A. Resin DYNEA México S.A. de C.V. Chemicals raw material Derquim S.A. MDF board Aconcagua Timber Machinery & spare parts Metso Panelboard AB Siempelkamp Maschinen Kontra Anlagentechnik GmbH Anthon GmbH Maschinen & Anlagenbau PeRu Paper Lamigraf S.A. Resins Georgia Pacific Resinas Ltda. RAW MATERIAL OR SERVICE SUPPLIER Construction services Ing. y Const. Quezada y Boetsch S.A. Logistic services Outsourcing Perú S.A.C. Machinery services Servicios Forestales El Bosque S.A. Advertising material Aza Graphic Perú S.A.C. Assembly services Empresa Constructora Tecsa S.A. Commercial services Kintos S.A. Advertising services Diseint E.I.R.L. Management services Espinoza & Asociados S.C. ECUADOR
RAW MATERIAL OR SERVICE SUPPLIER VENEZUELA Logistic services Outsourcing Integración Logística del Ecuador S.A. Commercial services Hermaprove S.A. RAW MATERIAL OR SERVICE SUPPLIER Transport & logistics Empresa Naviera Greendandes Ecuador Equipment leasing Servicios y Mantenimiento Macapaima C.A. Management Services Management & Goods S.A. Crane leasing Serviequipos Roraima, C.A. Forestry harvesting and transport Corporación Venezolana de Sum. y Serv. S.A. Outsourcing services Servicios Madereros Carmen, C.A. UNITED STATES Construcciones 2e-b, C.A. Housekeeping and maintenance Servicios Evcaven, C.A. RAW MATERIAL OR SERVICE SUPPLIER Telecommunications Teléfonos de Venezuela (CANTV) Customs Agent Samuel Sharipo Co. Wood transport Transporte El Pinar, C.A. Insurance broker Marsh USA, Inc. Methane gas PDVSA-GAS S.A. Logistics & warehousing Kramer Logistics, Inc. Electricity CVG Electrificación del Carona C.A. Paint for MDF mouldings Valspar Industries, Inc. Forest fire protection Técnicas Forestales y Agroambientales RTBR, C.A. Transport General Freight Services, Inc. Transport of goods Transporte Sánchez Polo de Venezuela, C.A. Lowcountry Cartage Co. Wood transport Consorcio Vettor, C.A. Kramer Logistics, Inc. Staff transport Transporte At Mantis, C.A. River transport of personnel Orinoco Express, C.A. 42
H MAIN CLIENTS OF MASISA S.A.
ARGENTINA COLOMBIA PERU Cencosud S.A. Dist-plex S.A. Distribuidora Centro de Carpintero Distribuidora Aglolam S.A. Enchapados de Colombia S.A. Kintos S.A. Distribuidora Argentina de Chapas S.A. Espinoza Pérez Hebert Maviplac S.A. Distribuidora Placasur S.A. Gutiérrez Sonia Mireya y/o Distripl Melamina y Accesorios SAC Dolinsky S.A. Industria de Muebles del Valle S.A. Negociación Comercial San Pedro Maderas Amiano S.R.L. Madetableros Ltda. Pisopak Perú SAC Madergold S.A. Maficol Ltda. Representaciones Martín SRL NBC Maderas S.R.L. Triplex de Colombia Ltda. Tricol Sodimac Perú S.A. Sacheco S.A. Taru Parq S.R.L. ECUADOR VENEZUELA Economía del Maestro Aserradero El Sol C.A. BRAZIL Madervas S.A. Casamanía Ferretería C.A. Argo Fine Imports Maduespacio Cía. Ltda. Grupo Imeca C.A. Bertolini S/A Rodrigo Figueroa La Casa del Contraenchapado C.A. Chapecomp Distribuidora de Produtos Sergio Augusto Guarnizo Lamindos Jamx C.A. Empire Wholesale Lumber Madenova C.A. Formatus Moveis Ltda. UNITED STATES Italsofa Bahía Ltda. Alexandria Moulding, Inc. Leo Madeiras, Maq e Ferrag Ltda. Blue Linx Corporation Luis Ricardo Altoe & Cía. Ltda. Builders First Source Ramuth & Ramuth Ltda. Jim White Lumber Sales, Inc. Riberplak Com. De Compensados Ltda. Masonite International Co. Romanzza Moveis Ltda. Orepac Todeschini S/A Industria e Comercio MEXICO CHILE Aglomerados y Triplay Vic, S.A. de C. CMPC Celulosa Diego Mariño Morales Comercial Viñuela S.A. Formosa Prosonic USA Inc. Construmart Grupo Comercial de Maderas Dimad S.A. Grupo Marubher Easy Grupo Triplay Market Electrocom Losifra S.A. de C.V. Forestal Mininco Maderas y Empaques para Cada Uso Maderama Maderería Nasa S.A. de C.V. Maderas Imperial Mexicana Pacific S.A. de C.V. Mafor Productora de Tarimas del Sur Paneles Arauco Productos Maderables Gole Polincay Export Ltda. Promotora Grocer S.A. de C.V. Silva y Cía. Ltda. RAMPE S.A. de C.V. Sodimac Rodríguez Gamboa Francisco Javier Youseff Comercial Limitada Triplay Alameda S.A. de C.V. Triplay Tableros de Ecatepec S.A. Triplay y Laminados Pega Unipallet S.A. de C.V. VTP de México S.A. de C.V. MASISA 2006 ANNUAL REPORT | 43
I MAIN NATIONAL AND FOREIGN BANKS K LEGAL ADVISORS
ARGENTINA UNITED STATES ARGENTINA ABN Amro Bank HSBC Bank USA N.A. Estudio Blardone y Asociados (Masisa Argentina S.A.) Banco de Chile Wachovia N.A. Estudio Moltedo (Forestal Argentina S.A.) Bank Boston BBVA Banco Francés MEXICO BRAZIL BCI Banamex Xavier, Bernardes, Bragança, Sociedad de Rabobank Banco Santander Mexicano Advogados (Asuntos Corporativos) Hapner Kröetz Advogados S/C Ltda. BRAZIL PERU ABN Amro Bank Banco de Crédito del Perú CHILE Banco Bradesco Carey y Cía. Banco do Brasil VENEZUELA Banco Dresdner Latinamerika ABN Amro Bank ECUADOR Banco Itau BBA ABN Amro Bank-Venezuela Pérez Bustamante & Ponce Bank Boston Banco BBVA (Chile) HSBC Bank Brasil Banco Crédito e Inversiones UNITED STATES Banco de Venezuela Jones Day, Reavis & Pogue CHILE Banco del Desarrollo Horten CC ABN-Amro Bank Banco del Estado de Chile Banco BBVA Banco Mercantil CAYMAN ISLANDS Banco BICE Banco Santander Central Hispano W.S. Walker & Company Banco Crédito e Inversiones Banco Santander-Chile Banco de Chile Banco Security MEXICO Banco del Estado de Chile Citibank Venezuela Estudio Sesma & McNeese, S.C. Banco Santander Santiago Corbanca Venezuela C.A. Banco Security Corpbanca C.A. PERU BankBoston Kreditanstalt für Wiederaufbau Rodrigo Elías & Medrano, Attorneys Citibank WestLB Corpbanca VENEZUELA HSBC Bank Chile Rodner, Martínez & Asociados Kreditanstalt für Wiederaufbau J AUDITORS Rabobank Scotiabank Masisa S.A. WestLB PricewaterhouseCoopers
COLOMBIA Argentina, Brazil, Chile, Colombia, Ecuador, ABN Amro Bank United States, Mexico, Peru, Venezuela: Banco de Bogotá PricewaterhouseCoopers Banco de Crédito
ECUADOR Banco Pichincha Banco Produbanco 44
L INSURANCE
The Company recognizes the importance of managing and minimizing the O RESEARCH AND DEVELOPMENT risks to which all its assets, both material and human, are exposed. For this reason, it is continually concerned about identifying, evaluating, controlling Masisa S.A. focuses its global development policy on those areas, activities and transferring risk. and processes where it has sustainable competitive advantages, such as Masisa S.A., its affiliates and associated companies have insurance the cultivation of forest plantations, the processing of high value-added that covers a variety of risks, such as fire, damage as a result of natural solid wood, and the use of waste that can be pulped to manufacture disasters, loss and damage due to machine downtime, machinery failure, reconditioned boards. and loss of profits. Various projects have been developed due to the constant need for Regarding human resources, many members of staff have life insurance, innovation. These have led to large growth in terms of production volume, and employees sent abroad also have accident coverage. quality improvements, and lower operating costs. The table below shows the level of coverage for the main insurance items by country. Colombia and Peru both have civil liability insurance of US$500,000 each. P RISK FACTORS There is also an additional amount insured for civil liability of US$9,500,000 for operations in Latin America. Business development involves various risk factors in different areas in which the Company operates, and the following are the most significant: Financial and exchange rate risks Item Chile Argentina Brazil Mexico Venezuela USA The Company’s assets and liabilities are exposed to fluctuations in the Plantations 374.6 54.2 102.3 - - - value of currencies other than the US dollar, which is the currency the Physical Goods 199.6 180.7 193.0 39.5 235.2 25.0 Company uses for accounting purposes. The existence of assets and Civil Liability 0.5 0.5 0.5 0.5 0.5 42.0 liabilities in other currencies is mainly due to the Company’s overseas Total 574.7 235.4 295.8 40.0 235.7 67.0 operations, exports, investments in imported assets, and securing external (figures in millions of US$) financing. The administration establishes policies to manage financial risk by using hedging instruments such as swaps, forwards or currency options, so as to hedge exchange rate risks and interest rate fluctuations. M CONTRACTS The Company does not use hedging instruments derivatives for speculative purposes. One of Masisa’s most important contracts is between Fibranova C.A. and Interest rate risk Oxinova C.A. to supply the Fibranova plant in Venezuela with resin over a Bank credit liabilities are generally subject to the risk of increases in the period of 15 years. The companies also have three other contracts in which interest rates agreed on. To protect itself from fluctuations that could have an Fibranova C.A. provides administration and financial services, human undesirable impact, the administration uses hedging mechanisms, like swaps. resources, and legal advice to Oxinova C.A. Market risk The group in Venezuela has other important contracts with CVG y CVG There is always the risk of new players or greater competition in the Proforca. The most important one is the wood sale contract, which by markets the Company operates in. In the light of this situation, endeavors means of the right to use forestry resources provides raw materials to the have been focused on greater cost-effectiveness, improvements in product Venezuelan companies, thus allowing the normal development of industrial quality and supply, and a distribution chain that gets Masisa as close as operations. possible to end clients. One of Masisa’s key contracts is that signed with Georgia Pacific Corp. Masisa has also established a strategy of expanding its productive and in 1998 to supply the productive plants with chemical resins over a 20-year commercial operations to other countries, especially those with competitive period, and the contract lays down the quality standards and costs. advantages or large development potential. Supply risk To address those risks inherent to the supply of raw materials, especially N TRADEMARKS AND PATENTS those that are essential for the manufacture of its products, such as wood, resins, etc., Masisa and its affiliates have long-term agreements with the Masisa S.A. has its trademarks, labels, advertising slogans and logos suppliers of these raw materials. distinguishing its products, services and commercial outlets registered Disaster risk and valid both in Chile and overseas. The MASISA and PLACACENTRO The Company’s policy is to identify risks inherent to productive and MASISA trademarks are specially protected, which along with FACILPLAC, commercial activities – such as disasters in plants, warehouse losses, ECOPLUS, ECOPLAC, NATURA, among others, make up its portfolio of damage to third parties, and legal contingencies, among others. This is trademarks that are monitored and renewed from time to time. to avoid such occurrences, minimize the potential adverse effects, and/or cover the possible losses these disasters might cause with insurance. MASISA 2006 ANNUAL REPORT | 45
Competition risk Dividends paid per share in the last 5 years Masisa S.A. deems it has a sound position in those markets in which it Year Type and Nº of dividend CLP/share US$/share operates, thereby enabling it to maintain profitable operations and steady growth. However, the Company cannot ensure that these conditions will 2001 Possible definitive N°7 1.00000 0.00169 not change in the future with the arrival of new players to the market or 2002 Definitive compulsory minimum N°8 1.86564 0.00284 greater existing competition in its markets. To address such risks, the 2003 No dividends paid - - Company focuses its efforts on maintaining its cost leadership, keeping up 2004 No dividends paid - - a strong distribution chain, constantly improving its product offering and 2005 Definitive compulsory minimum N°10 2.37361 0.00409 maintaining good customer relations. 2005 Additional dividend N°10 0.66193 0.00114 Masisa’s research and development endeavors do not involve significant 2006 Minimum dividend Nº11 0.62467 0.00121 expenditure, as these are mainly supported in the technology and 2006 Additional dividend N°11 0.41645 0.00081 proprietary equipment or that purchased from foreign companies.
T SHARE TRANSACTIONS Q INVESTMENT AND FINANCING POLICY Quarterly statistics of the volume, total amounts and average price of The main investments envisaged by the Company and their possible shares traded on the Santiago, Valparaíso and Electronic stock markets financing are evaluated by professionals in each area and submitted to the over the last three years are shown below: Company’s board of directors for approval. Units Amount Average Price The parent Company and/or its affiliates have guaranteed or secured (millions) (millions of Ch$) (Ch$) credits from different banks or financial institutions, which consider compliance with certain commitments that are listed in the corresponding 2004 notes to the financial statements. 1st Quarter 7.47 2,340.42 313.15 2nd Quarter 30.97 4,740.42 153.05 R DISTRIBUTION OF NET INCOME 3rd Quarter 114.51 12,162.76 106.22 4th Quarter 63.84 9,011.12 141.13 The distribution of net income for the year ended December 31, 2006, is 2005 determined in the following way: 1st Quarter 33.36 4,775.08 143.15 2nd Quarter 45.18 6,170.72 136.58 Distributable Net Income 2006 2005 ThUS$ ThUS$ 3rd Quarter 266.36 35,796.03 134.39 Net income 29,485 26,369 4th Quarter 410.87 43,465.38 105.79 Accumulated deficit for the development period 0 0 2006 Negative goodwill investment amortization -4,552 -3,388 1st Quarter 659.91 68,728.61 104.15 Subtotal 24,933 22,981 2nd Quarter 493.73 45,916.19 93.00 Distributable net income 24,933 22,981 3rd Quarter 344.25 29,914.88 86.90 4th Quarter 686.75 67,152.35 97.78
Note: Because of the merger by incorporation of former Masisa into Terranova S.A. (currently Masisa S.A.) in S DIVIDEND POLICY May 2005, there was an exchange of shares, by means of which each share of the former Masisa was exchan- ged for 2.56 shares of the merged Company. This share exchange became effective on the stock markets as of August 6, 2005. On March 23, 2006, the Board agreed to propose the following dividend policy to the Ordinary Shareholders’ Meeting, held on April 19, 2006, In August 2006, Enrique Cibié Bluth, the CEO of Masisa, purchased which accepted such proposal: in various transactions as a financial investment 3,455,191 Company Distribute a sum, to be defined by the Ordinary Shareholders’ Meeting, shares amounting to Ch$289.9 million through the Company Asesorías e of not less than 30% or more than 50% of the consolidated net income for Inversiones Mater Ltda. at an average weighted unit price of Ch$83.9 per the period without the payment of interim dividends. share*. With the exception of such operation, no directors, executives or other administrative staff carried out any Company or related Company share transactions.
* Enrique Cibié Bluth transferred one million shares of Masisa amounting to Ch$124.5 million at a unit price of Ch$124.5 per share through the Company Asesorías e Inversiones Mater Ltda. on March 7, 2007. 46
U SIGNIFICANT EVENTS IN THE PERIOD
The following is an overview of the significant events that took place in Masisa S.A. in the January-December 2006 period, and which the administration deems should be made known to the shareholders.
January 11, 2006 The preemptive right period ended to January 12, 2006 subscribe the capital increase agreed on in 2 To summon a Bond Holders’ Meeting to The Company informed the Superintendency of the Extraordinary Shareholders’ Meeting, held be held on the same date as the meeting Securities and Insurance and the stock markets on August 29, 2005. There were 622,503,068 mentioned in the foregoing point 1 for it of the following: subscribed and paid-up shares out of a total of to approve the following modifications to 1 Bonds amounting to UF2,750,000 of the E 650,000,000, which increased the Company’s the issuance contract of the bond line Series were placed today, January 12, 2006, paid-in capital by ThUS$117,365. registered in the securities registry of that charged to line Nº439, with maturity of 21 An Extraordinary Shareholders’ Meeting, held Superintendency as Nº439, dated November years and 1 year’s grace, at a rate of 4.79%. on January 11, 2006, agreed on the following: 14, 2005, and the E Series bonds to be 2 Bonds amounting to UF2,000,000 of the D placed on January 12, 2006, were issued and Series were placed today, January 12, 2006, 1 To summon a Bond Holders’ Meeting in charged to that line. charged to line Nº440, with maturity of 7 years March 2006 for it to approve the following a To modify Nº14 of the 4th clause of the and 2 years’ grace, at a rate of 4.59%. modifications to the issuance contract of the issuance contract, replacing the third pa- The proceeds from the foregoing placements will bond line registered in the securities registry ragraph of such number with the following: pay the financial obligations of the Company and/ of that Superintendency as Nº440, dated “The bonds shall be redeemed - except or of its affiliates. November 15, 2005, and the D Series bonds in the case of the E Series bonds of the to be placed on January 12, 2006, were first issue charged to the line that shall be April 20, 2006 issued and charged to that line. governed by what is set forth in Nº8 of the The Company informed the Superintendency of a To modify Nº14 of the 4th clause of the 7th clause of this contract - at a value equi- Securities and Insurance and the stock markets issuance contract, replacing the third pa- valent to the outstanding capital balance, of the payment of a compulsory minimum final ragraph of such number with the following: plus the accrued interest in the period from dividend and of an additional final dividend, “The bonds shall be redeemed - except the day after the maturity date of the last charged to net income for the year ended in the case of the D Series bonds of the interest installment paid and the establis- December 31, 2005. The total dividend to be first issue charged to the line that shall be hed redemption date.” distributed amounted to ThUS$11,491, which governed by what is set forth in Nº8 of the b To modify Nº8 of the 7th clause of the was equivalent to 50% of the distributable net 7th clause of this contract - at a value equi- issuance contract issuing the E Series and income of the 2005 period. This dividend was valent to the outstanding capital balance, charging these to the line, replacing it with paid on May 16, 2006, in Chilean pesos pursuant plus the accrued interest in the period from the following: “Eight/advance redemption. to the “observed dollar” exchange rate published the day after the maturity date of the last The D Series bonds may be redeemed as in the Official Gazette on May 12, 2006. interest installment paid and the establis- of April 15, 2008, as laid down in the 4th hed redemption date.” clause Nº18 of this instrument. Such bonds b To modify Nº8 of the 7th clause of the shall be redeemed at a value equivalent to issuance contract: “Eight/advance redemp- the current value of discounting the bond’s tion. The D Series bonds may be redeemed future flows of the outstanding capital as of April 15, 2008, as laid down in Nº14 balance plus interest at a compound rate of of the 4th clause of this instrument. Such 4.4% a year calculated based on the same bonds shall be redeemed at a value equi- 180-day semi-annual periods.” valent to the current value of discounting the bond’s future flows of the outstanding capital balance plus interest at a compound rate of 4.0% a year, calculated based on the same 180-day semi-annual periods.” MASISA 2006 ANNUAL REPORT | 47
November 17, 2006 July 3, 2006 September 5, 2006 The Superintendency of Securities and Insurance The Company informed the Superintendency The Company informed the Superintendency was informed of the agreements reached in an of Securities and Insurance of the following of Securities and Insurance of the following Extraordinary Board Meeting of Masisa S.A., held significant event: significant event: on November 16, 2006, in which the following “On June 30, 2006, the Company filed A Company board meeting, held on September was agreed on: its financial statements to the Securities and 4, 2006, approved the hiring and incorporation To reach agreement with Banco de Chile, as Exchange Commission (SEC) according to US of Mr. Eugenio Arteaga Infante as the new the representative of the bond holders, about generally accepted accounting principles (US Chief Financial Officer of Masisa S.A., who certain modifications to the noncompliance GAAP) for the year ended December 31, 2005. A started working in the Company effective as of events in the bond line issuance contract financial statement based on Chilean principles September 25, 2006. Mr. Arteaga previously registered in the securities registry of that was used to draw up these financial statements, worked as the General Financial Director of PPL Superintendency as N0356, dated November 10, which states a lower net income of US$1.9 Global América Latina, the controlling group of 2003 (the “Issuance Contract”), to make uniform million than that reported in the uniformly Empresas Emel S.A., among other companies. and match the reasons with those obligations coded statistical record (FECU) of that period, By mutal agreement of the parties, Mr. Masisa has in effect with its other bond issues. submitted to the Superintendency of Securities Alejandro Droste Bertolo, the Company’s curent To empower Masisa’s administration to issue and Insurance (SVS) on March 1, 2006. Chief Financial Officer, stepped down and left and place a bond series focused on the domestic This lower income was due to a missing Masisa S.A. as of September 8, 2006. market, charged to the bond line included inventory affecting the balance of the packing in the issuance contract of up to 2,500,000 materials account and arose from an error in “Unidades de Fomento” in total. The proceeds the parameters of the rates used to value the of these bonds will finance investments and/ consumption of these materials in the cost or the payment or pre-payment of the financial system used by the Company. obligations of Masisa and/or its affiliates. That On using sound criteria to assess the impact Superintendency will be duly informed of the of this error on the financial statements, it was main features of the bonds, such as amounts, concluded that the amount of this error was not maturity and probable interest rate, when the significant. Nevertheless, as this was detected series of bonds charged to the issuance contract after issuing the financial statements according are registered. to Chilean principles (March 1, 2006) but before Apart from what is outlined above, it should be releasing the financial statements of the 20-F highlighted that there were no other significant according to US principles (June 30, 2006), events concerning the Company in the January- this error was entered in the base financial September 2006 period which, pursuant to what statements reported to the SEC, pursuant to what is set forth in Article 9 and subparagraph 2 of is laid down in the current regulation. Article 10 of Law 18.045, the administration Bearing in mind that this was not a material deems necessary to inform of or disclose. error and pursuant to accounting practices and criteria applied in Chile, the Company will acknowledge the accumulated effect of US$1.9 million for the year ended December 31, 2005, charged to the accumulated income of the Company’s shareholders’ equity, and the effect of US$67,000 for the January through March 2006 period, credited to the net income of this period. Both adjustments will be stated in the financial statements as of March 31, 2006, which are the latest financial statements reported by the Company, and for which the respective FECUs will be re-filed.” 48
DIRECTORS’ COMMITTEE REPORT
During its office, the Director’s Committee carried out the following functions laid down in article 50 of Law Nº 18.046 and Circular Letter Nº1.526 of the Superintendency of Securities and Insurance, and the general terms of these can be found in the Company’s book of minutes:
1 Review of the Company’s consolidated, individual, and quarterly financial statements, and especially for the year ended December 31, 2006. 2 Review of the Company auditing plans with the external auditors. 3 Proposal of external auditors. 4 Analysis and examination of the events relating to the application of articles 44 and 89 of the Stock Corporation Law, distinguishing between those that are recurring and inherent to the Company’s line of business, and those that are non-recurring. 5 Study of the remuneration systems and compensation plans for the Company’s officers and senior management.
The Directors’ Committee incurred no expenses for consultancy or others in the 2006 period. MASISA 2006 ANNUAL REPORT | 49
DECLARATION OF RESPONSIBILITY
The undersigned declare under oath that the information contained in this annual report is true, and for which we assume the corresponding legal liability.
Julio Moura Juan Carlos Méndez G. President Director Tax Code: 21.814.616-3 Tax Code: 4.402.519-1
Ronald Jean Degen Enrique Seguel M. Vice President Director Tax Code: 21.727.243-2 Tax Code: 3.116.588-1
Patrick Nielson Antonio Tuset J. Director Director Tax Code: 21.724.459-5 Tax Code: 4.566.169-5
Jorge Carey T. Enrique Cibié B. Director Gerente General Tax Code: 4.103.027-5 Tax Code: 6.027.149-6 50 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 51
CONSOLIDATED FINANCIAL STATEMENTS 52 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 53
REPORT OF THE INDEPENDENT AUDITORS
REPORT OF THE INDEPENDENT AUDITORS
Santiago, February 28, 2007
Messrs Shareholders and Directors of MASISA S.A.
We have audited the consolidated balance sheets of Masisa S.A. and affiliates for the years ended December 31, 2006 and 2005, and the related consolidated statements of income and of cash flows for the years ended on those dates. These financial statements (including the related notes) are the responsibility of the management of Masisa S.A.. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards in Chile. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Company’s management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the mentioned consolidated financial statements present fairly, in all material respects, the financial standing of Masisa S.A. and affiliates for the years ended December 31, 2006 and 2005, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles in Chile.
Pedro Pelen De G. Tax Code: 7.137.062-3 54
CONSOLIDATED BALANCE SHEET
ASSETS For the years ended December 31, 2006 and 2005
2006 2005 ThUS$ ThUS$ TOTAL CURRENT ASSETS 475,351 526,650
Cash 16,705 11,987 Time deposits 29,388 82,906 Marketable securities (net) 956 2,424 Accounts receivable (net) 125,107 100,072 Notes receivable (net) 10,130 13,165 Other receivables (net) 18,814 20,371 Notes and accounts receivable from related companies 7,378 5,296 Inventories (net) 185,777 222,465 Recoverable taxes 62,237 52,585 Prepaid expenses 6,504 8,036 Deferred taxes 9,876 2,138 Other current assets 2,479 5,205 Leasing contracts (net) 0 0 Assets for leasing (net) 0 0
TOTAL FIXED ASSETS 1,557,348 1,455,997
Lands 142,758 132,130 Buildings and infrastructure 220,140 210,582 Machinery and equipment 849,262 839,037 Other fixed assets 757,249 641,686 Negative goodwill from technical reappraisal of fixed assets 7,390 7,390 Depreciation (less) -419,451 -374,828
TOTAL OTHER ASSETS -16,365 -16,726
Investments in related companies 4,651 4,060 Investments in other companies 206 207 Goodwill 1,165 1,249 Negative goodwill (less) -58,352 -53,460 Long-term receivables 4,113 4,901 Long-term notes and accounts receivable from related companies 1,406 0 Long-term deferred taxes 0 0 Intangible assets 267 122 Amortization (less) -41 -22 Others 30,220 26,217 Long-term leasing contracts (net) 0 0
TOTAL ASSETS 2,016,334 1,965,921 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 55
LIABILITIES For the years ended December 31, 2006 and 2005
2006 2005 ThUS$ ThUS$ TOTAL CURRENT LIABILITIES 267,348 475,767
Due to banks and financial institutions, short-term 65,529 115,121 Long-term due to banks and financial institutions, short-term portion 52,787 76,032 Bonds payable (promissory notes) 0 0 Bonds payable, short-term portion (bonds) 32,937 185,286 Long-term bonds payable with one-year maturity 0 1 Dividends payable 473 323 Accounts payable 52,260 52,441 Notes payable 707 881 Other payables 2,069 1,406 Notes and accounts payable to related companies 5,451 3,450 Provisions 31,742 21,574 Withholdings 14,244 11,324 Income tax 8,823 7,455 Unearned income 279 231 Deferred taxes 0 0 Other current liabilities 47 242
TOTAL LONG-TERM LIABILITIES 542,069 333,806
Due to banks and financial institutions 170,944 135,524 Long-term bonds payable (bonds) 274,112 137,961 Long-term notes payable 0 0 Long-term accounts payable 74 244 Long-term notes and accounts payable to related companies 0 0 Long-term provisions 1,662 1,418 Long-term deferred taxes 77,957 38,694 Other long-term liabilities 17,320 19,965 MINORITY INTEREST 20,562 60,116
TOTAL SHAREHOLDERS’ EQUITY 1,186,355 1,096,232
Paid-in capital 812,880 769,834 Capital price-level readjustment reserve 0 0 Own share sale premium 0 0 Other reserves 219,494 188,477 Retained earnings (sum of codes 5.24.51.00 to 5.24.56.00) 153,981 137,921 Reserves for future dividends 51,424 51,424 Accumulated earnings 73,072 60,128 Accumulated losses (less) 0 0 Net income (loss) for the period 29,485 26,369 Interim dividends (less) 0 0 Development period accumulated deficit 0 0
TOTAL LIABILITIES 2,016,334 1,965,921 56
STATEMENT OF INCOME
For the years ended December 31, 2006 and 2005
2006 2005 ThUS$ ThUS$ OPERATING INCOME 83,579 81,393
Operating margin 207,551 193,987 Revenues 886,507 743,488 Operating costs (less) -678,956 -549,501 Sales and administration expenses (less) -123,972 -112,594
Non-Operating Income -45,997 -50,481
Financial Income 8,716 3,939 Investment earnings in related companies 613 720 Other non-operating income 6,898 2,799 Equity in loss of related companies (less) 0 0 Amortization of goodwill (less) -85 -791 Financial expenses (less) -35,371 -38,251 Other non-operating disbursements (less) -15,883 -8,489 Price-level restatement 628 555 Exchange rate differences -11,513 -10,963
INCOME BEFORE INCOME TAX AND EXTRAORDINARY ITEMS 37,582 30,912 INCOME TAX -23,344 -13,621 EXTRAORDINARY ITEMS NET INCOME (LOSS) BEFORE MINORITY INTEREST 14,238 17,291 MINORITY INTEREST 10,695 5,690 NET INCOME (LOSS) 24,933 22,981 Amortization of negative goodwill 4,552 3,388 NET INCOME (LOSS) FOR THE PERIOD 29,485 26,369 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 57
CONSOLIDATED STATEMENT OF CASH FLOW - DIRECT
For the years ended December 31, 2006 and 2005
2006 2005 ThUS$ ThUS$ NET CASH FLOW FROM OPERATING ACTIVITIES 132,035 103,762
Proceeds from trade accounts receivable 1,230,899 879,940 Interest received 36,851 2,592 Dividends and other distributions received 0 0 Other income received 29,742 31,001 Cash paid to suppliers and employees (less) -1,053,794 -748,178 Interest paid (less) -78,138 -27,764 Income tax paid (less) -11,346 -11,550 Other expenses paid (less) -2,229 -4,305 V.A.T. and others paid (less) -19,950 -17,974 NET CASH FLOW FROM FINANCING ACTIVITIES -32,963 36,610
Placement of cash shares 44,012 75,383 Proceeds from loans 242,536 125,121 Bonds 162,965 0 Related companies’ secured loans 0 0 Other loans obtained from related companies 73 1,396 Other financing sources 0 0 Dividends paid (less) -11,491 -52,111 Capital distribution (less) 0 0 Loans repaid (less) -291,108 -82,901 Bonds paid (less) -178,338 -26,594 Payment of related companies’ secured loans (less) 0 0 Payment of other related companies’ loans (less) -709 -71 Stock issuance and placement expenses (less) -903 -3,613 Bond issuance and placement expenses (less) 0 0 Other financing disbursements (less) 0 0 NET CASH FLOW FROM INVESTMENT ACTIVITIES -149,868 -101,044
Proceeds from sale of fixed assets 1,565 2,193 Proceeds from sale of permanent investments 0 0 Proceeds from sale of other investments 1,698 0 Proceeds from secured loans to related companies 0 0 Proceeds from other loans to related companies 0 0 Other investment income 2,877 0 Incorporation of fixed assets (less) -121,843 -67,289 Capitalized interest repaid (less) -6,936 -5,877 Permanent investments (less) -27,229 -29,890 Investments in financial instruments (less) 0 0 Secured loans to related companies (less) 0 0 Other loans to related companies (less) 0 0 Other investment disbursements (less) 0 -181 Total net cash provided for the year -50,796 39,328 Effect of inflation on cash and cash equivalents -13 0 Net variation of cash and cash equivalents -50,809 39,328 Cash and cash equivalents at beginning of year 97,858 58,530 CASH AND CASH EQUIVALENTS AT END OF YEAR 47,049 97,858 58
CASH FLOW TO NET INCOME RECONCILIATION
For the years ended December 31, 2006 and 2005
2006 2005 ThUS$ ThUS$
NET INCOME (LOSS) FOR THE PERIOD 29,485 26,369
INCOME FROM SALE OF ASSETS -31 -60
(Profit) loss on sales of fixed assets -31 -767 Profit on sales of investments (less) 0 0 Loss on sales of investments 0 0 (Profit) loss on sales of other assets 0 707
CHARGES (CREDITS) TO INCOME NOT AFFECTING CASH FLOW 82,808 87,599
Depreciation for the period 50,563 50,952 Amortization of intangible assets 439 874 Write-offs and provisions 5,995 3,085 Accrued income from investment in related companies (less) -613 -720 Accrued loss from investment in related companies 0 0 Amortization of goodwill 85 791 Amortization of negative goodwill (less) -4,552 -3,388 Net price-level restatement -628 -555 Net exchange rate difference 11,513 10,963 Other credit to income not affecting cash flow (less) -64 -30 Other charges to income not affecting cash flow 20,070 25,627
CHANGES IN ASSETS AFFECTING CASH FLOW INCREASES (DECREASES) 26,857 -15,139
Trade accounts receivable -1,825 8,034 Inventories 45,892 -25,363 Other assets -17,210 2,190
CHANGES IN LIABILITIES AFFECTING CASH FLOW (INCREASES) DECREASES 3,611 10,683
Accounts payable related to operating income -19,545 5,572 Interest payable 2,434 -3,160 Net income tax payable 3,185 5,467 Other accounts payable related to non-operating income 6,715 332 Net value added tax and similar payable 10,822 2,472
PROFIT (LOSS) OF MINORITY INTEREST -10,695 -5,690
NET CASH FLOW FROM OPERATING ACTIVITIES 132,035 103,762 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: REGISTRY IN THE SECURITIES REGISTRY in different currencies have been stated in US dollars at the rates of exchange prevailing at each year-end. The exchange rate differences Masisa S.A. is a publicly-traded corporation and is registered in the were stated in income. securities registry of the Superintendency of Securities and Insurance The following US dollar exchange rates were applicable for the under number 0825 (03/24/04) and is subject to regulation by such years ended December 31, 2006 and 2005. body. Its stock is listed on the US stock market and it is therefore regulated by the Securities and Exchange Commission. 2006 2005 per US$ per US$ Chilean pesos 532.3900 512.5000 NOTE 2: ACCOUNTING POLICIES Real 2.1380 2.3364 Bolivares 2,150.0000 2,150.0000 a) Accounting Period Argentine pesos 3.0620 3.0250 The consolidated balance sheets cover the period January 1 through Colombian pesos 2,238.7900 2,284.2200 December 31, 2006 and 2005, respectively. Mexican pesos 10.8755 10.6108 Euro 0.7886 0.8470 b) Preparation Bases The consolidated financial statements have been drawn up in accordan- Unidad de Fomento 0.0290 0.0285 ce with generally accepted accounting principles in Chile and pursuant to the regulations of the Superintendency of Securities and Insurance, g) Time deposits and marketable securities and should there be any discrepancies, the latter shall prevail. Time deposits were stated with their accrued interest, and readjust- ment if applicable, at year-end. Marketable securities corresponding c) Presentation Bases to mutual fund quotas were stated at the redemption value of the These financial statements were stated in US dollars, and no updating fac- quota in effect at year-end. tor was therefore applied to the comparative figures of the previous period. Some reclassification of the 2005 period has been made for a better h) Inventories interpretation of these financial statements. • Inventories of products in process and finished products were stated at the production cost, according to the cost by absorption system. d) Consolidation Bases • Standing timber was stated at the forest appraisal value of the plan- These consolidated financial statements fully include assets, lia- tations, which are estimated will be developed the following year. bilities, income and the cash flow of the parent company and its • Pulpable and rustic saw logs were stated at the average production affiliates. The effect of transactions and unrealized income among cost or purchase value, if applicable. consolidated companies has been eliminated, and the participation of • Materials, spare parts, supplies and others were carried at the the minority investors was stated in the minority interest item. average purchase cost. • Imports in transit were stated at the purchase cost. e) Price-level Restatement The Company’s policy is to establish provisions for obsolescence of The consolidated financial statements of affiliates with accounting in materials and spare parts and for the lower value of finished products pesos have been restated by price-level restatement standards so as when certain aspects are met, such as: to express the effects of the variation in the purchasing power curren- • Replacement of old machinery or spare parts of idle machinery. cy in the respective period. • Little alternative use of materials or spare parts with a low stock turnover. To such effect, the current regulations have been applied laying • Possible loss of commercial value of finished products due to down that non-monetary assets and liabilities must be restated and deterioration in prolonged storage, regarding the standards required charged to income. The index used was the consumer price index by the market. released by the National Statistics Institute, which had a variation of The cost of inventories does not exceed their estimated net realizable 2.1% in 2006 (3.6% in 2005) with a one-month misalignment. or replacement value, if applicable. f) Foreign Currency Translation i) Allowance for Doubtful Accounts The parent company and its direct affiliates are authorized to state It is the company’s policy to make provisions for all doubtful accounts their figures in US dollars. Such currency is used as a common subject to collection and establish specific provisions for accounts measurement unit and the balances of assets and liabilities expressed with some reasonable risk of non-collection. 60
j) Fixed Assets n) Goodwill and Negative Goodwill FOREST PLANTATIONS This is the difference between the investment purchase value and the Forest plantations were stated according to the appraisal made by equity method value of such investment at the time of purchase. Such forestry engineers. The negative goodwill determined on the book va- differences are amortized in the terms stated in the negative goodwill lue, which includes the financing cost during the growth period, has and goodwill note. been credited to the forest reserve fund in the shareholders’ equity item. The appraisal values have been determined based on a growth o) Reverse Re-Sale Agreement Financing Operations cost value for seedlings and on the estimated commercial value of Purchases of financial instruments with a reverse re-sale agreement standing timber for adult plantations. were carried at their net value, calculated according to the discount rate The age at which a plantation is considered to be adult depends on used to determine the price of each instrument when they were purcha- its vegetative growth in each country. sed and were classified in Current Assets in the item Other Assets. The plantations, which it is estimated will be harvested the following year based on the production plan, were stated in the item Inventories in p) Bonds Payable current assets. Bonds payable are bond placements made in Chile by Masisa S.A. and FIXED ASSETS EXCLUDING PLANTATIONS overseas by its affiliate Masisa Overseas Ltd., which were stated at their Fixed assets were stated at their cost of purchase, construction or tech- face value plus readjustment and accrued interest at each year-end. nical re-appraisal, as the case may be, and included the financing cost The difference between the initial face value and the placement value during the construction and main renovation and improvement period. was recorded as a deferred asset. This asset is being amortized using Maintenance and repair expenditures were charged to the income in the the straight-line method over the period of the obligation. period they were carried out. Fixed assets that are temporally idle at year-end were stated in the q) Income Tax and Deferred Taxes item Other Fixed Assets. The Company and its affiliates acknowledge their tax obligations Fixed assets that are idle and available for sale were stated in the item according to current legal provisions. Others in Other Assets and were stated at their estimated realization value. The effects of deferred taxes arising from temporary differences TECHNICAL RE-APPRAISAL between the financial balance sheet and the tax balance sheet were The technical re-appraisals were recorded as and when laid down in recorded considering the income tax that would be applicable on the es- circular letters Nº1529, 1571 and 428 of the Superintendency of Securi- timated reverse date, pursuant to what is set forth in Technical Bulletin ties and Insurance. There were no new technical re-appraisals recorded. Nº60 of the Chilean Association of Accountants. The effects of deferred taxes existing on the implementation date of the mentioned Technical k) Fixed Asset Depreciation Bulletin (January 2000) and not recognized beforehand were deferred The fixed asset depreciation cost is amortized based on the straight- and amortized charged to income in the estimated reversal term of the line depreciation method, considering the estimated life of the goods. accounting item causing the temporary difference.
l) Intangibles r) Severance Indemnities The company’s intangible assets, mainly water rights, were stated at their The company established provisions for the year ended December purchase cost. The amortization period is 40 years, pursuant to what is set 31, 2006, to cover the obligation existing with some unions, which forth in Technical Bulletin Nº55 of the Chilean Association of Accountants. have an agreement on guaranteed indemnity benefits for retirement. The provision was calculated based on the current value according to m) Investments in Related Companies the accrued cost of the benefit at an annual interest rate of 7% and Investments in related companies that are not consolidated were based on the years of service in the Company. stated using the equity method (V.P.P.), determined based on their respective financial statements at each year-end. s) Operating Income Investments abroad were adjusted to generally accepted accoun- Operating income is recognized when transferring goods or rendering ting principles in Chile and were translated to the functional currency services, and it corresponds to sales of own and third-party manufac- used by the Company, pursuant to what is laid down in Technical tured products. Sales prices were determined by the conditions pre- Bulletin Nº64 of the Chilean Association of Accountants. sent in the export market and were stated net of tax, price discounts Investments in national affiliates with accounting in Chilean pesos and others affecting their calculation. were controlled in such currency and expressed in US dollars at each year-end. Differences arising from conversion to US dollars other than income were adjusted to the reserve equity account due to conversion differences in the item Other Reserves. CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 61
t) Hedging Contracts The Company has interest rate and exchange rate hedging swap contracts with financial institutions. These contracts were defined as an expected accounting item hedging and were recorded according to what is set forth in Technical Bulletin Nº57 of the Chilean Association of Accountants. The fair value of these instruments was stated in the item Other Assets or Other Liabilities, according to whether these were payable to or receivable from the respective financial institution. The unrealized income of current accounting item contracts in force was stated in the item Other Liabilities and the income already obtained was stated in Financial Expenses or Exchange Rate Differen- ce, depending on the nature of the swap hedging. For those cases in which the hedging was not efficient, the con- tracts were treated as investment instruments. u) Software The software currently used by the Company was purchased from the Company SAP Chile S.A., and it consists of the SAP R/3, version 4.6 C system, for which a 4-year amortization period was established. v) Research and Development Expenses The research and development expenses were charged to the net inco- me of the period in which they occurred. No significant disbursements have been made for these since the establishment of the Company. w) Statement of Cash Flow Cash equivalents were deemed to be those short-term investments with a minimum risk of significant loss of value, which are carried out as part of the usual management of cash surpluses and can be quic- kly converted into known cash amounts, and there is the intention of making such conversion in a term of no more than 90 days. Under cash flows arising from operating activities were all those cash flows related to the company’s line of business, including interest paid and received, dividends received, and generally all those flows that were not defined as investment or financing. It should be highlighted that the operating concept used in this financial statement was wider than that considered in the statement of income. x) Share Issuance Cost According to the instructions in Circular Letter Nº1370 of the Superin- tendency of Securities and Insurance and its subsequent modification (Circular Letter Nº1736), the share issuance and placement costs were recorded in a “Share Issuance and Placement Costs” account and were stated discounting the reserves in the item shareholders’ equity. 62
COMPANIES INCLUDED IN THE CONSOLIDATION
Share Percentage 12-31-2006 12-31-2005 Tax Code Nº Company Name Direct Indirect Total Total
99537270-3 INVERSIONES INTERNACIONALES TERRANOVA S.A. 60.0000 0.0000 60.0000 60.0000 81507700-8 FORESTAL TORNAGALEONES S.A. 94.9061 0.0000 94.9061 94.9061 79959070-0 MASISA INVERSIONES LIMITADA 0.0000 0.0000 0.0000 100.0000 79616940-0 MASISA CONCEPCIÓN LIMITADA 0.0000 0.0000 0.0000 100.0000 79554560-3 INVERSIONES CORONEL LIMITADA 0.0000 0.0000 0.0000 100.0000 77790860-K MASISA PARTES Y PIEZAS LIMITADA 99.8000 0.2000 100.0000 100.0000 0-E MASISA OVERSEAS LIMITED 100.0000 0.0000 100.0000 100.0000 0-E MADERAS Y SINTÉTICOS DEL PERÚ S.A.C. 99.0114 0.8897 99.9011 99.9011 0-E MASISA USA, INC. 25.1200 44.9280 70.0480 70.0480 0-E MADERAS Y SINTÉTICOS SERVICIOS S.A. DE C.V. 99.0000 1.0000 100.0000 100.0000 0-E MASISA ECUADOR S.A. 99.9000 0.1000 100.0000 100.0000 0-E MASISA DO BRASIL LTDA. 98.3907 1.6093 100.0000 100.0000 0-E MADERAS Y SINTÉTICOS MÉXICO S.A. DE C.V. 99.9999 0.0001 100.0000 100.0000 0-E TERRANOVA PANAMÁ S.A. 0.0000 60.0000 60.0000 60.0000 0-E TERRANOVA DE VENEZUELA S.A. 0.0000 60.0000 60.0000 60.0000 0-E COFORVEN S.A. 0.0000 59.9700 59.9700 59.9700 0-E FORESTAL TERRANOVA MÉXICO S.A. DE C.V. 0.0000 59.9940 59.9940 59.9940 0-E CORPORACIÓN FORESTAL GUAYAMURE C.A. 0.0000 51.0000 51.0000 51.0000 0-E MASISA MADEIRAS LTDA. 0.0000 59.9940 59.9940 59.9940 0-E MASISA COLOMBIA S.A. 0.0000 59.9940 59.9940 59.9940 0-E CORPORACIÓN FORESTAL IMATACA C.A. 0.0000 60.0000 60.0000 60.0000 0-E ANDINOS C.A. 0.0000 60.0000 60.0000 60.0000 0-E FORESTAL ARGENTINA S.A. 0.0000 93.6530 93.6530 30.2874 0-E MASISA ARGENTINA S.A. 98.0000 2.0000 100.0000 100.0000 0-E FIBRANOVA C.A. 0.0000 60.0000 60.0000 60.0000 0-E MASNOVA DE MÉXICO S.A. DE C.V. 0.0000 80.0000 80.0000 80.0000 0-E CC MAS S.A DE C.V. 0.0000 100.0000 100.0000 0.0000
NOTE 3: ACCOUNTING CHANGES NOTE 4: SHORT AND LONG-TERM TRADE ACCOUNTS RECEIVABLES
There were no significant changes in the application of accounting The following is the breakdown of the trade accounts receivables by principles, in an accounting estimate or in the informing body for the the country of the Company with the receivable: year ended December 31, 2006, compared with the previous period that might significantly affect the interpretation of these financial statements. 2006 2005 ThUS$ ThUS$
Chile 32,194 25,628 Venezuela 12,287 7,578 Brazil 23,586 15,924 Argentina 5,744 4,419 Mexico 28,289 24,706 Colombia 2,889 3,441 United States 16,419 15,601 Ecuador 1,465 1,698 Peru 2,234 1,077
Total 125,107 100,072 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 63
SHORT AND LONG-TERM TRADE ACCOUNTS RECEIVABLES Expressed in ThUS$
CURRENT LONG-TERM ITEM Up to 90 days More than 90 days Subtotal Total Current (net) up to 1 year 12-31-2006 12-31-2005 12-31-2006 12-31-2005 12-31-2006 12-31-2006 12-31-2005 12-31-2006 12-31-2005
Trade Accounts Receivables 115,764 92,231 14,955 12,136 130,719 125,107 100,072 1,971 1,101 Allowance for doubtful accounts 0 0 0 0 5,612 0 0 0 0 Notes receivable 10,085 11,717 595 2,440 10,680 10,130 13,165 751 0 Allowance for doubtful accounts 0 0 0 0 550 0 0 0 0 Other receivables 15,986 14,328 3,136 6,349 19,122 18,814 20,371 1,391 3,800 Allowance for doubtful accounts 0 0 0 0 308 0 0 0 0
Total LONG-TERM TRADE ACCOUNTS RECEIVABLES 4,113 4,901
NOTE 5: BALANCES AND TRANSACTIONS WITH RELATED COMPANIES
The table below shows the accounts receivable from related compa- The commercial accounts payable and receivable were subject to nies, mainly for sale of products, and the amounts are expressed in normal market conditions. US dollars.
NOTES AND ACCOUNTS RECEIVABLE Expressed in ThUS$
Tax Code Nº Company Short-term Long-term 12-31-2006 12-31-2005 12-31-2006 12-31-2005
0-E OXINOVA C.A 6,151 4,862 0 0 0-E AMANCO TUBOSISTEMAS HONDURAS 279 112 0 0 0-E AMANCO BRASIL LIMITADA 221 0 1,406 0 0-E PLYCEM CONSTRUSISTEMAS COSTA RICA S.A. 517 140 0 0 0-E PLYCEM CONSTRUSISTEMAS EL SALVADOR 51 55 0 0 0-E PLYCEM CONSTRUSISTEMAS GUATEMALA S.A. 77 117 0 0 0-E PLYCEM CONSTRUSISTEMAS NICARAGUA 82 10 0 0
TOTAL 7,378 5,296 1,406 0
NOTES AND ACCOUNTS PAYABLE Expressed in ThUS$
Tax Code Nº Company Short-term Long-term 12-31-2006 12-31-2005 12-31-2006 12-31-2005
0-E OXINOVA C.A 4,628 3,033 0 0 0-E TEK BOARD OVERSEAS, INC 823 417 0 0
TOTAL 5,451 3,450 0 0 64
TRANSACTIONS Expressed in ThUS$
Company Tax Type of Transaction Description Code Nº Relationship 12-31-2006 12-31-2005 Amount Effect on Amount Effect on income income (change/credit) (change/credit)
OXINOVA C.A 0-E RELATED CO. ADMINISTRATION SERVICES 72 72 82 82 0-E RELATED CO. PURCHASE OF RAW MATERIAL 20,448 -20,448 18,230 -18,230 0-E RELATED CO. LAND LEASING 12 12 14 14 0-E RELATED CO. SALE OF PRODUCTS 1,427 433 0 0 PLYCEM CONSTRUSISTEMAS GUATEMALA S.A. 0-E COMMON PARENT CO. SALE OF PRODUCTS 544 212 278 106 PLYCEM CONSTRUSISTEMAS COSTA RICA S.A. 0-E COMMON PARENT CO. SALE OF PRODUCTS 1,062 340 798 279 PLYCEM CONSTRUSISTEMAS HONDURAS S.A. 0-E COMMON PARENT CO. SALE OF PRODUCTS 51 6 0 0 PLYCEM CONSTRUSISTEMAS NICARAGUA S.A. 0-E COMMON PARENT CO. SALE OF PRODUCTS 361 119 82 29 PLYCEM CONSTRUSISTEMAS EL SALVADOR S.A. 0-E COMMON PARENT CO. SALE OF PRODUCTS 424 153 95 35
NOTE 6: INVENTORIES
The inventories for the years ended December 31, 2006 and 2005, c) The following was the amount of income tax generated by each country: included the following:
2006 2005 Country 2006 2005 ThUS$ ThUS$ ThUS$ ThUS$
Products finished and in process 107,395 141,528 Chile (3,790) 5,652 Standing timber 33,526 30,857 Argentina (8,295) (6,261) Raw materials, materials and spare parts 44,856 50,080 Brazil(*) (8,344) (9,246) TOTAL 185,777 222,465 United States (1,465) (775) Peru (796) (671) Inventories were net of provisions amounting to ThUS$ 6,366 (ThUS$ Colombia (1,313) (885) 5,376 in 2005). Others 659 (1,435)
NOTE 7: DEFERRED TAXES AND INCOME TAX Total (23,344) (13,621)
(*) The income tax of Brazilian companies is heavily influenced by the Real exchange rate variation against a) Income Tax the US dollar, which led to an exchange rate difference of its local accounting on revaluing ThUS$ 150,000 of The parent company made no first category income tax provision for liabilities in US dollars. The Real exchange rate variation was 8.66% in the period (11.82% in 2005). accumulated tax losses amounting to ThUS$ 196,959 for the year ended December 31, 2006 (ThUS$ 292,235 for the year ended Dec- ember 31, 2005).
b) Deferred Taxes Pursuant to what is set forth in Technical Bulletin Nº60, 68, 69 and 71 of the Chilean Association of Accountants and in Circular Letter Nº1.466 of the Superintendency of Securities and Insurance, the Company stated the deferred taxes arising from temporary differen- ces, tax losses and other events leading to differences between the accounting base and tax base of assets and liabilities, which are outlined in the table enclosed. CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 65
DEFERRED TAXES Expressed in ThUS$
ITEMS 12-31-2006 12-31-2005 Asset Deferred Taxes Liability Taxes Asset Deferred Taxes Liability Deferred Taxes Short-term Long-term Short-term Long-term Short-term Long-term Short-term Long-term
TEMPORARY DIFFERENCES
Allowance for doubtful accounts 1,544 0 0 42 1,173 0 0 0 Unearned income 48 0 0 0 0 130 0 0 Vacation provision 835 0 0 0 656 0 0 0 Amortization of intangibles 0 0 0 0 0 0 0 0 Leased assets 0 0 0 0 0 0 0 0 Manufacturing expenses 0 0 980 0 0 0 1,115 0 Fixed asset depreciation 0 0 0 34,374 0 0 0 31,769 Severance indemnity 7 48 0 0 18 0 0 6 Other events 2,467 1,882 0 2,214 1,231 2,444 18 451 Pre-paid expenses 0 0 68 103 0 0 130 60 Fixed asset provision 0 1,451 0 0 0 1,049 0 0 Obsolescence provision 660 0 0 0 340 0 0 0 Other provisions 0 0 0 16,715 0 0 0 10,251 Forest reserve 0 0 0 59,590 0 0 0 48,682 Tax losses 7,555 80,733 0 0 504 99,044 0 0 Activated financing cost 0 0 0 6,149 0 0 0 7,021 Unearned income provision 675 205 0 0 0 346 422 0 Activated expenses in plantations 0 0 1,005 15,445 0 0 64 17,730
OtHERS
Complementary accounts-net of amortization 0 1,110 0 27,093 35 1,469 0 28,584 Valuation provision 1,862 53,627 0 0 0 52,852 0 0
Total 11,929 29,582 2,053 107,539 3,887 48,692 1,749 87,386
INCOME TAX Expressed in ThUS$
Item 12-31-2006 12-31--2005
Current tax expense (tax provision) -13,154 -11,240 Tax expense adjustement (previous period) -213 -954 Assets and liabilities effect due to period deferred tax -5,623 -4,371 Tax credit for tax losses -434 -16,545 Amortization effect of deferred assets and liabilities complementary accounts -950 -1,442 Effect on deferred tax assets or liabilities due to valuation provision changes -2,637 19,192 Other account charges or credits -333 1,739
Total -23,344 -13,621 66
NOTE 8: FIXED ASSETS
Fixed assets were recorded according to what is stated in note 2 and the following is a breakdown of them:
2006 2005 Book Value Accum. Depreciaton Net Fixed Assets Book Value Accum. Depreciaton Net Fixed Assets ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Lands 142,758 - 142,758 132,130 - 132,130 Building and infrastructure 220,140 (74,650) 145,490 210,582 (67,469) 143,113 Machinery and equipment 849,262 (299,521) 549,741 839,037 (262,286) 576,751 Other Fixed Assets 757,249 (40,973) 716,276 641,686 ( 40,795) 600,891 Plantations 630,042 - 630,042 564,236 - 564,236 Other fixed assets 127,207 (40,973) 86,234 77,450 (40,795) 36,655
NEGATIVE GOODWILL
Technical re-appraisal 7,390 (4,307) 3,083 7,390 (4,278) 3,112 Land 2,672 - 2,672 2,672 - 2,672 Building and infrastructure 4,718 (4,307) 411 4,718 (4,278) 440
Total 1,976,799 (419,451) 1,557,348 1,830,825 (374,828) 1,455,997
PERIOD DEPRECIATION 2006 2005 Forest Rebates: ThUS$ ThUS$ The forest rebates received by Masisa S.A. and affiliates were credited to the forest rebate account, which was stated minus the plantations EFFECT ON INCOME item and amounted to ThUS$ 5,305 for the year ended December 31, Operating 45,578 46,065 2006 (ThUS$ 5,686 in 2005). Administration expenses 3,928 3,974 Valuation provisions and idle goods: Non-operating 797 652 The Company had a provision to adjust the book value of one of its ACTIVATED Particle Board lines, as the projections of its operation indicated that the net flows this line would generate in the future will not cover the Plantation negative goodwill 260 261 respective depreciation charges. This provision was re-appraised and Total 50,563 50,952 adjusted this period, whose effect on income was ThUS$ 3,038 and it was stated net of the assets giving rise to it. Plantations: Furthermore, the parent company in Chile and its affiliates had The book value included the forest appraisals made by forestry provisions for idle goods in some of their plants, and their deprecia- engineers. This value was distributed between plantations in the item tion was stated in the item Other Non-operating Disbursements. Fixed Assets and standing timber classified as Inventories. Regarding this, provisions were established in the 2006 period to The Company and its affiliates with forest plantations acknowled- reflect the market value of a mouldings plant in Venezuela, whose ged the negative goodwill of these assets credited to the forest reserve effect on income was ThUS$ 2,150, which was stated in the item stated in the item Shareholders’ Equity. This negative goodwill was Other Non-operating Disbursements in the income statement. determined by comparing the valuation outlined in Note 2. The negative goodwill of fixed assets due to the real financial costs related to the financing of the plantations, according to what is stated in note 2, amounted to ThUS$ 6,936 for the year ended December 31, 2006 (ThUS$ 5,182 in 2005). Moreover, there was a de-activation of the exchange rate difference of ThUS$ 402 (activation of ThUS$ 1,275 in 2005). CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 67
NOTE 9: INVESTMENT IN RELATED COMPANIES
To determine the book value of investments, the unrealized net inco- • On June 10, 2005, the affiliate Inversiones Coronel Ltda. sold, as- me of operations with associated companies has been eliminated. signed and transferred all its shares in Sociedad Forestal Calle Calle The Company associated liabilities in “Unidades de Fomento” S.A. to Puertos del Pacífico S.A. for US$1. amounting to U.F. 1,108,969 to its investment in Forestal Tornagaleo- The equity method was discounted from these companies, as their nes S.A., pursuant to what is set forth in Technical Bulletin Nº64 of shareholders’ equity was negative and for which income was ack- the Chilean Association of Accountants, which generated an accu- nowledged to cover the investment. Hence, the value of this sale was mulated conversion adjustment of ThUS$ 11,853 for the year ended fully stated in income without causing significant effects thereon. December 31, 2006 (ThUS$ 12,553 in 2005).
Sale of Investments • On June 10, 2005, the affiliate Masisa Inversiones Ltda. sold, assig- ned and transferred all its shares in Inversiones Industriales S.A. to Puertos del Pacífico S.A. for $10,000. INVESTMENT BREAKDOWN Expressed in ThUS$ Tax Company Country of Investment Nº of shares Code Nº Origin control currency Share percentage Companies’ equity Period income 12-31-2006 12-31-2005 12-31-2006 12-31-2005 12-31-2006 12-31-2005 0-E OXINOVA S.A. VENEZUELA US DOLLAR 1,963,564 49 49 9,492 8,285 1,250 1,493 TOTALES
INVESTMENT BREAKDOWN (Cont.) Expressed in ThUS$ Companies’ fair Fair value Accrued income Equity Method Unrealized income Investment Book Value value equity period income 12-31-2006 12-31-2005 12-31-2006 12-31-2005 12-31-2006 12-31-2005 12-31-2006 12-31-2005 12-31-2006 12-31-2005 12-31-2006 12-31-2005 0 0 0 0 613 720 4,651 4,060 0 0 4,651 4,060 TOTAL 4,651 4,060 0 0 4,651 4,060
NOTE 10: INVESTMENT IN OTHER COMPANIES NOTE 11: GOODWILL AND NEGATIVE GOODWILL
This corresponds to shares of other companies and was stated at cost. Goodwill The purchase of the affiliate Masisa Cabrero S.A. created goodwill for the Company, which is amortized in a 20-year term, considering the 2006 2005 operating return of such affiliate. ThUS$ ThUS$
NaTional Negative Goodwill The purchase of 43.16% of former Masisa S.A. in July 2002 and Unión El Golf S.A. 92 92 0.544% in June 2003 generated negative goodwill for the Company, C.Plagas Forestales 26 26 which is amortized in a 15-year term, considering that this company’s Copelec Ltda. 20 20 assets are mostly industrial and that they have an average life that is similar to the foregoing term. Cooperativa Forestal 4 4 The purchase of 40.00% of Terranova S.A. in October 2003 gene- Other investments 21 22 rated negative goodwill, which is amortized in a 20-year term. 165 166 The participation of former Masisa S.A. in the capital increase of Forestal Tornagaleones S.A. on June 27, 2002, generated negative OVERSEAS goodwill, which is amortized in a 20-year term. Furthermore, Club Italo 38 3 8 Masisa S.A. bought 9,987,400 shares equivalent to 34.35% of that Club Portuguez 3 3 company on November 15, 2005, increasing the negative goodwill. This new negative goodwill is amortized in the remaining term of the 41 41 20 years originally established. Total 206 207 In January 2006, Forestal Tornagaleones S.A. purchased 22,406,455 shares equivalent to 48.6% of Forestal Argentina S.A., generating negative goodwill that is amortized in a 20-year term. 68
GOODWILL Expressed in ThUS$ Tax Code Nº Company 12-31-2006 12-31-2005 Amount amortized in Goodwill balance Amount amortized in Goodwill balance the period the period 96623490-3 MASISA CABRERO S.A. 85 1,165 85 1,249 0-E MASISA USA, INC 0 0 706 0 TOTAL 85 1,165 791 1,249
NEGATIVE GOODWILL Expressed in ThUS$ Tax Code Nº Company 12-31-2006 12-31-2005 Amount amortized in Negative goodwill Amount amortized in Negative goodwill the period balance the period balance 81507700-8 FORESTAL TORNAGALEONES S.A. 855 12,622 163 13,480 92257000-0 MASISA S.A. (FORMER) 2,766 29,301 2,766 32,067 96802690-9 TERRANOVA S.A. 335 5,703 335 6,039 0-E CORPORACIÓN FORESTAL GUAYAMURE C.A. 124 1,751 124 1,874 0-E FORESTAL ARGENTINA S.A. 472 8,975 0 0 TOTAL 4,552 58,352 3,388 53,460
NOTE 12: INTANGIBLES NOTE 13: OtHERS (ASSETS)
The balance of Other Assets for the years ended December 31, 2006 2006 2005 and 2005, respectively, was as follows: ThUS$ ThUS$
SAP License 160 - 2006 2005 Masisa brand renewal overseas 24 - ThUS$ ThUS$ Water rights 53 122 Market value of FX and interest rate swap 5,842 2,370 Others 30 - Bond placement goodwill (1) 5,080 7,443 Bond issuance and placement costs (1) 5,918 2,416 Total 267 122 Goods for sale (1) 1,047 657 Amortization (41) (22) Idle goods 273 - Operating rights (2)(3) 10,321 10,759 Total NET INTANGIBLES 226 100 Others 1,739 2,572 TOTAL 30,220 26,217 (1) Net of amortization. (2) The affiliate Terranova Venezuela S.A. made an advance payment for the leasing of a CVG-Proforca sawmill in May 1997 amounting to US$ 10 million to enter the forestry business in Venezuela. As the leasing of such sawmill was critical to negotiate the purchase contracts of 59,000 hectares of Caribbean-type timber and to gain access to the forest business in Venezuela, the Company’s management classified the leasing paid in advance as a forest development right. This is amortized based on the cubic meters (m3) of forest product obtained out of an estimated total of 13,168,000 m3. (3) The Company Terranova de Venezuela S.A. acquired the rights to develop 236,000 m3 of timber a year and a sawmill of ThUS$3,324 from its affiliate Coforven S.A. for the year ended December 31,2000. The development rights are amortized based on the quantity of m3 of forest product the forest produces to supply the plants. The goodwill balance in Coforven S.A. recorded on the books amounted to ThUS$ 987 at the purchase date, which was included as part of the development right cost, as Terrano- va de Venezuela S.A. acquired a significant portion of the productive assets of Coforven S.A. The value of the assets and development rights were transferred to reasonable market values and the unrealized income was eliminated. CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 69
NOTE 14: DUE TO BANKS AND FINANCIAL INSTITUTIONS, SHORT-TERM Expressed in ThUS$ TYPE OF CURRENCY AND ADJUSTMENT INDEX Tax Code Nº Bank or Financial Institution US Dollars Euros Yen Other foreign UF Non-readjustable $ TOTALES currencies
12-31 12-31 12-31 12-31 12-31 12-31 12-31 12-31 31-12 12-31 12-31 12-31 12-31 12-31 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 Short-term (code 5.21.10.10) 97041000-7 BANKBOSTON N.A. 0 23,143 00000000000 23,143
97023000-9 BANCO CORPBANCA 0 9,064 00000000000 9,064
97004000-5 BANCO DE CHILE 0 5,030 00000000000 5,030
97051000-1 BANCO DEL DESARROLLO 0 3,042 00000000000 3,042
97008000-7 CITIBANK N.A. 0 13,372 00000000000 13,372
97919000-K ABN AMRO BANK 3,701 8,046 0 0 0 0 0 5,102 0 0 0 0 3,701 13,148
0-E BANCO BBVA 0 3,022 00000000000 3,022
0-E BANCO ITAU BBA S.A. 615 00000000000 615 0
0-E HSBC BANK USA 0 4,668 00000000000 4,668
0-E BANCO MERCANTIL 0 0 0 0 0 0 26,835 16,339 0 0 0 0 26,835 16,339
0-E BANCO PROVINCIAL 0 0 0 0 0 0 8,423 0 0 0 0 0 8,423 0
0-E BANCO DE VENEZUELA 0 0 0 0 0 0 19,370 24,293 0 0 0 0 19,370 24,293
0-E CITIBANK VENEZUELA 0 0 0 0 0 0 6,585 0 0 0 0 0 6,585 0
Others 00000000000000
TOTAL 4,316 69,387 0 0 0 0 61,213 45,734 0 0 0 0 65,529
PRINCIPAL OWED 3,729 68,800 0 0 0 0 59,472 45,456 0 0 0 0 63,201
Annual avrg. Interest rate 2.63% 4.64% 10.86% 14.28% Long-term (code 5.21.10.20) 97006000-6 BANCO DE CRÉDITO E INVERSIONES 8,383 6,938 0 0 0 0 0 0 0 3,056 0 0 8,383 9,994
97030000-7 BANCO DEL ESTADO DE CHILE 6,662 4,456 0 0 0 0 0 0 0 0 0 0 6,662 4,456
97053000-2 BANCO SECURITY 2,584 1,905 0 0 0 0 0 0 0 0 0 0 2,584 1,905
97023000-9 BANCO CORPBANCA 16,546 9,771 0 0 0 0 0 0 0 0 0 0 16,546 9,771
97039000-6 BANCO SANTANDER 5,044 5,900 0 0 0 0 0 0 0 0 0 0 5,044 5,900
96658480-7 RABOINVESTMENTS CHILE S.A. 2,166 833 0 0 0 0 0 0 0 0 0 0 2,166 833
97032000-8 BANCO BBVA 2,235 1,521 0 0 0 0 0 0 0 0 0 0 2,235 1,521
0-E CORPBANCA VENEZUELA 0 0 0 0 0 0 0 3,889 0 0 0 0 0 3,889
0-E ABN AMRO BANK 37 00000000000 37 0
0-E WESTDEUTSCHE LANDESBANK 1,827 2,960 0 0 0 0 0 0 0 0 0 0 1,827 2,960
0-E CITIBANK N.A: 84 00000000000 84 0
0-E COMERICA BANK 0 4,357 00000000000 4,357
0-E BANCO CHILE NEW YORK 0 4,410 00000000000 4,410
0-E THE BANK OF NOVA SCOTIA 84 7,996 0 0 0 0 0 0 0 0 0 0 84 7,996
0-E RABOBANK NEDERLAND 3,076 2,571 0 0 0 0 0 0 0 0 0 0 3,076 2,571
0-E KREDITANSTALT FUR WIEDERAUFBAU 4,059 13,458 0 0 0 0 0 0 0 0 0 0 4,059 13,458
0-E BANCO ITAU BBA 0 2,011 00000000000 2,011
Others 00000000000000
TOTAL 52,787 69,087 0 0 0 0 0 3,889 0 3,056 0 0 52,787 76,032
PRINCIPAL OWED 50,886 66,320 0 0 0 0 0 3,844 0 2,990 0 0 50,886 73,154
Annual avrg. Interest rate 6.21% 4.02% 15.01% 6.70%
Percentage of liabilities in foreign currency (%) 48.2600
Percentage of liabilities in national currency (%) 51.7400 70
NOTE 15: DUE TO BANKS AND FINANCIAL INSTITUTIONS, LONG-TERM
The loans granted by Masisa Inversiones Limitada (Company which were recorded in “Bank Credit Certificates - Res. 2770” in absorbed by Masisa S.A. in June 2006) to the affiliate Masisa do favor of Banco Itaú BBA S.A., considering that the mentioned docu- Brasil Limitada through Banco Itaú BBA S.A. amounting to ments for these operations can be paid off by merely notifying the US$ 104,523,218.88, which were recorded in “Notes” issued by bank in the due advance set forth in the respective documents. Banco Itaú BBA S.A, of which Masisa S.A. is the bearer, were stated Moreover, and as a consequence of the foregoing, the interest discounting the corresponding debts for the same amount that the generated by the “Notes” and the “Bank Credit Certificates - Res. affiliate Masisa do Brasil Limitada has with Banco Itaú BBA S.A., 2770” were stated net in the statement of income. Expressed in ThUS$ Maturity Years Current period closing date Previous period closing date
Tax Code Nº Bank or Financial Institution More than More than More than More than More than 10 years Total long-term at Total long-term at 1 up to 2 up to 3 up to 5 up to Amount Term the close of finan- Annual avrg. the close of financial Readjust.Index Currency 2 years 3 years 5 years 10 years cial statements interest rate statements 97006000-6 BANCO DE CRÉDITO E INVERSIONES Dollar 5,278 2,778 1,388 0 0 9,444 6.56% 14,723 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 96658480-7 RABOINVESTMENTS CHILE S.A. Dollar 1,500 1,500 3,500 4,000 0 10,500 6.3% 12,500 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 97030000-7 BANCO DEL ESTADO DE CHILE Dollar 4,233 0 0 0 0 4,233 6.5% 8,464 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 97036000-K BANCO SANTANDER Dollar 2,923 0 0 0 0 2,923 6.49% 3,479 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 97023000-9 BANCO CORPBANCA Dollar 8,011 0 0 0 0 8,011 6.48% 18,386 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 97053000-2 BANCO SECURITY Dollar 1,166 0 0 0 0 1,166 6.48% 2,331 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 97032000-8 BANCO BBVA Dollar 1,252 0 0 0 0 1,252 6.5% 2,890 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 0-E COMERICA BANK Dollar 0 0 0 0 0 0 2,143 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 71
(Cont.) Valores en MUS$ Maturity Years Current period closing date Previous period closing date Tax Code Nº Bank or Financial Institution More than More than More than More than More than 10 years Total long-term at Total long-term at 1 up to 2 up to 3 up to 5 up to Amount Term the close of finan- Annual avrg. the close of financial Readjust.Index Currency 2 years 3 years 5 years 10 years cial statements interest rate statements 0-E BANCO CHILE NEW YORK Dollar 0 0 0 0 0 0 4,260 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 0-E THE BANK OF NOVA SCOTIA Dollar 0 4,950 19,800 0 0 24,750 5.8% 13,750 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 0-E CORP BANCA VENEZUELA Dollar 0 0 0 0 0 0 4,155 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 0-E CITIBANK N.A. Dollar 0 4,950 19,800 0 0 24,750 5.8% 0 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 0-E RABOBANK NEDERLAND Dollar 3,040 7,810 23,390 1,620 0 35,860 6% 13,969 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 0-E KREDITANSTALT FUR WIEDERAUFBAU Dollar 3,800 3,800 1,900 0 0 9,500 7.58% 26,620 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 0-E WESTDEUTSCHE LANDESBANK Dollar 1,741 5,821 7,425 12,375 0 27,362 7.57% 7,864 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 0-E BANCO BBVA Dollar 193 0 0 0 0 193 6.52% 0 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 0-E ABN AMRO BANK Dollar 0 2,200 8,800 0 0 11,000 5.67% 0 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non reajust. $ 0 0 0 0 0 0 0 Others currencies 0 0 0 0 0 0 0 TOTALES 33,137 33,809 86,003 17,995 0 170,944 135,524
Foreign currency liability percentage (%) 0.0000
National currency liability percentage (%) 100.0000 72
NOTE 16: SHORT AND LONG-TERM BONDS PAYABLE (PROMISSORY NOTES AND BONDS)
The current bonds payable are: The Company placed two new bond lines on January 12, 2006, which C1 Series Bonds are registered in the securities registry of the Superintendency of Se- These are 1,000 bearer bonds of US$ 10,000 and C2 Series Bonds curities and Insurance under numbers 439 and 440, dated November of 200 bearer bonds of US$ 100,000; the capital payment shall be 14, 2005 and November 15, 2005, respectively. Their breakdown is made on June 15, 2008. They accrue compound interest due of as follows: 5.00% a year, calculated based on the same 180-day semi-annual periods as of December 15, 2003. E Series Bond Bonds of UF 2,750,000 were placed charged to line Nº439 with a 21- A Series Bonds year maturity and 1-year grace period at a rate of 4.79%. These are 5,000 bearer bonds of UF 500 each with a final maturity of 7 years with a two-year grace period for the capital amortization. They D Series Bond accrue compound interest due of 5.00% a year, calculated based on Bonds of UF 2,000,000 were placed charged to line Nº440 with a the same 180-day semi-annual periods as of December 15, 2003, 7-year maturity and 2-year grace period at a rate of 4.59%. with semi-annual payment on June 15 and December 15 each year. The A and D series bonds were partially hedged for dollar exchan- The capital is amortized is ten semi-annual, successive and equal ge rate exposure against the “Unidad de Fomento” by taking out installments as of June 15, 2006. swaps with Citibank N.A., Agency in Chile, Morgan Stanley Capital Services Inc. and Banco Santander Santiago (according to note 27), B Series Bonds and they were valued pursuant to what is laid down in paragraph 11 These are 1,404 bearer bonds of UF 500 each with a final maturity of of Technical Bulletin Nº57 of the Chilean Association of Accountants. 21 years with a seven-year grace period for the capital amortization. The affiliate Masisa Overseas Ltd. has bonds (“Private Placement”) They accrue compound interest due of 6.25% a year, calculated in force for a capital of ThUS$ 18,000, which were acquired by US fi- based on the same 180-day semi-annual periods as of December 15, nancing funds and insurance companies. ThUS$ 9,000 of the capital 2003, with semi-annual payment on June 15 and December 15 each is due annually on May 15 each year, ending in 2008. The interest is year. The capital is amortized is twenty-eight semi-annual, successive due semi-annually in May and November each year. and equal installments as of June 15, 2011.
BONDS Expressed in ThUS$ Instrument Series Current face Bond read- Interest Final term Periodicity Par value Placement Registry N° amount just. unit rate in Chile or placed overseas Interest payment Amortization 12-31-2006 12-31-2005 payment Long-term bonds - short-term portion 336 A SERIES 3,500 U.F. 5.00% – SEMI-ANNUAL 2005 0 123,007 NATIONAL 336 B SERIES 1,000 U.F. 6.00% – SEMI-ANNUAL 2009 0 35,160 NATIONAL 336 C SERIES 0 USD 4.92% – SEMI-ANNUAL 2008 62 62 NATIONAL 356 A SERIES 500 U.F. 4.94% – SEMI-ANNUAL 2006 17,362 17,716 NATIONAL 355 B SERIES 0 U.F. 6.16% – SEMI-ANNUAL 2011 62 63 NATIONAL 440 D SERIES 0 U.F. 4.21% – SEMI-ANNUAL 2008 604 0 NATIONAL 439 E SERIES 137 U.F. 4.7% – SEMI-ANNUAL 2007 5,662 0 NATIONAL PRIVATE PLACEMENT B SERIES 9,000 USD 8.06% – SEMI-ANNUAL 2007 9,185 9,278 OVERSEAS SHORT-TERM porTION TOTAL 32,937 185,286 Bonos largo plazo 336 C SERIES 30,000 USD 4.94% – SEMI-ANNUAL 2008 30,000 30,000 NATIONAL 356 A SERIES 1,500 U.F. 4.94% – SEMI-ANNUAL 2006 52,666 65,340 NATIONAL 355 B SERIES 702 U.F. 6.16% – SEMI-ANNUAL 2011 24,178 24,621 NATIONAL 440 D SERIES 2,000 U.F. 4.21% – SEMI-ANNUAL 2008 67,957 0 NATIONAL 439 E SERIES 2,612 U.F. 4.70% – SEMI-ANNUAL 2007 90,311 0 NATIONAL PRIVATE PLACEMENT B SERIES 9,000 USD 8.06% – SEMI-ANNUAL 2008 9,000 18,000 NATIONAL LONG-TERM TOTAL 274,112 137,961 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 73
NOTE 17: PROVISIONS AND WRITE-OFFS NOTE 18: STAFF SEVERANCE INDEMNITY
LONG-TERM PROVISIONS The following was the staff severance indemnity movement: 2006 2005 2006 2005 ThUS$ ThUS$ ThUS$ ThUS$
RELATED TO STAFF Balance as of January 1 21 13 Vacation 6,356 5,254 Period provision 280 8 Allowance 804 709 Period payments (21) - Other indemnities 341 10 Balance as of December 31 280 21 Staff incentive bonuses 4,406 1,578 Other benefits 2,666 369 Charges to income for this item amounted to ThUS$ 280 in the period (ThUS$ 8 in 2005). OTHER PROVISIONS
Board participation 672 1,010 NOTE 19: OTHER LONG-TERM LIABILITIES Consultancy and auditing services 763 458 The following is a breakdown of the balance for the year ended Other consultancy and services 1,460 485 December 31. Major repairs and maintenance 98 1,356 Maturity Amounts Import and export expenses 588 1,168 2008 2009 2010 2006 2005 Commissions 1,664 1,508 (thousands of US dollars) Goods and services receivable 2,617 1,813 Long-term ICMS 5,494 3,197 2,699 11,390 13,734 Contingent liabilities 1,624 1,835 tax payable Fixed asset stripping loss (*) 635 - Unearned income from 3,776 -- 3,776 3,588 existing accounting item Other taxes 6,219 3,358 hedging operations Other provisions 829 663 Exchange and interest 2,154 -- 2,154 2,643 TOTAL 31,742 21,574 rate swap market value TOTAL 11,424 3,197 2,699 17,320 19,965 LONG-TERM PROVISIONS 2006 2005 ThUS$ ThUS$
Escrow provision - 397 Proforca provision (**) 1,123 1,000 Seniority bond provision 259 - Severance indemnity provision 280 21
TOTAL 1,662 1,418
PROVISIONS STATED NET OF THE ASSETS ON WHICH THEY ARE BASED 2006 2005 ThUS$ ThUS$
Allowance for doubtful accounts 6,470 5,593 Inventory provision 6,366 5,376 Fixed asset provision 12,086 14,353
(*) Estimated loss on fixed assets of Masisa Partes y Piezas Ltda., and such assets are therefore being stripped. (**) Estimated cost of reforesting 7,500 hectares that must be delivered to CVG Proforca C.A. on the expiry of the beneficial interest contract that Masisa S.A. has with such company, whose expiry date is in 2027. 74
NOTE 20: MINORITY INTEREST
The following is the breakdown of the minority interest acknowledged by the Company as liabilities and income:
LIABILITIES PERIOD NET INCOME 2006 2005 2006 2005 ThUS$ ThUS$ ThUS$ ThUS$ Forestal Tornagaleones S.A. 7,044 6,602 (155) (1,165) Forestal Argenina S.A 1,031 35,373 (32) (1,769) Maderas y Sinteticos de Perú S.A 5 3 - (2) Corporación Forestal Guayamure C.A. 1,963 1,946 109 13 Invers. Internacionales Terranova S.A. 10,511 16,186 10,773 8,613 Masisa Madeiras Ltda. 8 6 - - Corporación Forestal de Venezuela C.A - - - -
Total 20,562 60,116 10,695 5,690
NOTE 21: CHANGES IN SHAREHOLDERS’ EQUITY
a) Paid-in Capital The subscribed and paid-in capital amounted to US$ 812,879,756 In an Extraordinary Shareholders’ Meeting of the Company, held on for the year ended December 31, 2006, equivalent to 5,667,750,881 August 29, 2005, the shareholders agreed to increase the capi- non-par-value shares. tal stock by US$ 150,000,000 by issuing, subscribing and paying An Extraordinary Shareholders’ Meeting of former Masisa S.A. and 650,000,000 non-par-value cash shares of a same and single series former Terranova S.A., held on April 12 and 13, 2005, respectively, without debentures. To date, 622,503,068 shares have been subscri- agreed on the merger by absorption of former Masisa S.A. into former bed and paid, amounting to US$ 117,364,938. Terranova S.A. An Extraordinary Shareholders’ Meeting of former Terranova S.A. b) Distribution of Net Income agreed on an increase of the capital stock from ThUS$ 583,739 The dividend policy of Masisa S.A. is to distribute to the shareholders divided into 3,918,427,856 non-par-value shares of a same and each year not less than 30% or more than 50% of the consolidated net single series and without debentures to ThUS$ 696,481, divided into income of each annual balance sheet without paying interim dividends. 5,049,060,017 non-par-value shares of a same and single series The following is a breakdown of the dividends per share that the without debentures by issuing 1,130,632,161 new non-par-value Shareholders’ Meeting agreed on in 2006 and 2005, which were shares of a same and single series without debentures, that were fully stated in US dollars as of the payment date: allocated to the shareholders of former Masisa S.A. in the proportion corresponding to them according to the exchange ratio agreed on.
In 2006:
DivideND MONTH OF PAYMENT DiviDEND PER SHARE US$ QUANTITY OF THIRT-PARTY SHARES
Compulsory Nº 11 year 2005 May 2006 0.001216508 5,667,750,881 Additional Nº 11 year 2005 May 2006 0.000811005 5,667,750,881 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 75
IN 2005, PAID BY FORMER MASISA S.A.:
DivideND MONTH OF PAYMENT DiviDEND PER SHARE US$ QUANTITY OF THIRT-PARTY SHARES
Possible Nº 36 year 2004 May 2005 0.026894326 441,653,188 Additional Nº 35 year 2004 May 2005 0.031263070 441,653,188 Final Nº 34 year 2004 April 2005 0.013398459 441,653,188
In 2005, PAID BY FORMER TERRANOVA S.A.:
DivideND MONTH OF PAYMENT DiviDEND PER SHARE US$ QUANTITY OF THIRT-PARTY SHARES
Additional Nº 10 year 2004 April 2005 0.001141276 3,918,427,856 Final Nº 10 year 2004 April 2005 0.004092497 3,918,427,856 c) The Other Reserves item is broken down as follows: e) Former Period Income Adjustment FOREST RESERVE: The Company detected missing inventory this period, which affected The Forest Reserve, amounting to ThUS$ 208,292 (ThUS$ 174,962 the balance of the Packing Materials account, and arose as a result of in 2005), was the difference between the forest plantation apprai- an error with the parameters of the rates used to value the consump- sal value and its respective historical cost, which included the real tion of these materials in the cost system used by the Company. This financing cost. The forest reserve was stated net of deferred tax, error, which mainly arose in the 2005 period, was stated against according to what is set forth in Technical Bulletins Nº60 and Nº69 of accumulated income in the Company’s shareholders’ equity and the Chilean Association of Accountants. amounted to ThUS$ 1,935. OTHER RESERVES: The Other Reserves arose from converting to US dollars the share- holders’ equity of some affiliates and associated companies that had or have accounting in Chilean pesos amounting to ThUS$ 15,618 (ThUS$ 17,028 in 2005) to establish a legal reserve in affiliates over- seas of ThUS$ 100 (ThUS$ 100 in 2005). The share issuance and placement costs of the last capital increase of ThUS$ 4,516 (ThUS$ 3,613 in 2005) were also deducted from Other Reserves. d) Own Issued Shares The following was considered to quantify the number of shares in the table “Own Share Purchase and Holding”: • Withdrawal right: The 2,121,766 shares of former Masisa S.A., purchased from those shareholders that exercised their withdrawal right, were multiplied by the 2.56 exchange factor, resulting in 5,431,721 shares. Part of the total own issued shares the Company held due to the merger with former Masisa S.A. was placed to new shareholders and the rest was reduced to capital, pursuant to what is laid down in Law 18.046 on Stock Corporations, as the tables enclosed to this Note show. The Company currently has no own issued shares. 76
Expressed in ThUS$
CHANGES IN SHAREHOLDERS’ EQUITY
12-31-2006 12-31-2005 Item Paid-in Capital Share sale Other Reserves Accumulated Interim Development Period net Paid-in capital Capital Share sale Other reserves Reserves for Accumulated Interim Development Period net capital price-level premium reserves for future income dividends period deficit income price-level premium future income dividends period deficit income readjust. dividends readjust. reserve dividends reserve
INITIAL BALANCE 769,834 0 0 188,477 51,424 60,128 0 0 26,369 583,739 0 0 122,643 0 14,979 0 0 56,778
Previous period income distribution 0 0 0 0 0 26,369 0 0 -26,369 0 0 0 0 26,425 30,353 0 0 -56,778 Previous period final dividend 0 0 0 0 0 -11,490 0 0 0 0 0 0 0 -38,304 -13,807 0 0 0 Capital increase with cash shares issue 44,012 0 0 0 0 0 0 0 0 73,353 0 0 0 0 0 0 0 0 Reserves and/or income capitalization 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Development period accumulated 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 deficit Conversion difference adjustment 0 0 0 -1,410 0 0 0 0 0 0 0 0 3,202 0 0 0 0 0 Forest reserve 0 0 0 33,330 0 0 0 0 0 0 0 0 32,842 0 0 0 0 0 Legal reserve (affiliates overseas) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Merger effects on shareholders’equity 0 0 0 0 0 0 0 0 0 112,742 0 0 33,403 63,303 28,603 0 0 0 Share issuance and placement cost 0 0 0 -903 0 0 0 0 0 0 0 0 -3,613 0 0 0 0 0 Adjustment to previous period net 0 0 0 0 0 -1,935 0 0 0 0 0 0 0 0 0 0 0 0 income Capital decrease due to legal term end -966 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Own capital price-level readjustment 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Net income of the period 0 0 0 0 0 0 0 0 29,485 0 0 0 0 0 0 0 0 26,369 Interim dividends 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
FINAL BALANCE 812,880 0 0 219,494 51,424 73,072 0 0 29,485 769,834 0 0 188,477 51,424 60,128 0 0 26,369
UPDATED BALANCES 769,834 0 0 188,477 51,424 60,128 0 0 26,369
NUMBER OF SHARES
SerieS Nº OF SUBSCRIBED SHARES Nº OF PAID-UP SHARES Nº OF VOTING SHARES
SINGLE 5,667,750,881 5,667,750,881 5,667,750,881
AMOUNT IN ThUS$
SerieS SUBSCRIBED Capital PAID-IN Capital
SINGLE 812,880 812,880 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 77
Expressed in ThUS$
CHANGES IN SHAREHOLDERS’ EQUITY
12-31-2006 12-31-2005 Item Paid-in Capital Share sale Other Reserves Accumulated Interim Development Period net Paid-in capital Capital Share sale Other reserves Reserves for Accumulated Interim Development Period net capital price-level premium reserves for future income dividends period deficit income price-level premium future income dividends period deficit income readjust. dividends readjust. reserve dividends reserve
INITIAL BALANCE 769,834 0 0 188,477 51,424 60,128 0 0 26,369 583,739 0 0 122,643 0 14,979 0 0 56,778
Previous period income distribution 0 0 0 0 0 26,369 0 0 -26,369 0 0 0 0 26,425 30,353 0 0 -56,778 Previous period final dividend 0 0 0 0 0 -11,490 0 0 0 0 0 0 0 -38,304 -13,807 0 0 0 Capital increase with cash shares issue 44,012 0 0 0 0 0 0 0 0 73,353 0 0 0 0 0 0 0 0 Reserves and/or income capitalization 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Development period accumulated 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 deficit Conversion difference adjustment 0 0 0 -1,410 0 0 0 0 0 0 0 0 3,202 0 0 0 0 0 Forest reserve 0 0 0 33,330 0 0 0 0 0 0 0 0 32,842 0 0 0 0 0 Legal reserve (affiliates overseas) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Merger effects on shareholders’equity 0 0 0 0 0 0 0 0 0 112,742 0 0 33,403 63,303 28,603 0 0 0 Share issuance and placement cost 0 0 0 -903 0 0 0 0 0 0 0 0 -3,613 0 0 0 0 0 Adjustment to previous period net 0 0 0 0 0 -1,935 0 0 0 0 0 0 0 0 0 0 0 0 income Capital decrease due to legal term end -966 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Own capital price-level readjustment 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Net income of the period 0 0 0 0 0 0 0 0 29,485 0 0 0 0 0 0 0 0 26,369 Interim dividends 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
FINAL BALANCE 812,880 0 0 219,494 51,424 73,072 0 0 29,485 769,834 0 0 188,477 51,424 60,128 0 0 26,369
UPDATED BALANCES 769,834 0 0 188,477 51,424 60,128 0 0 26,369 78
OWN SHARE PURCHASE AND HOLDING
REASON FOR SHARE REPURCHASE SHARE REPURCHASE SHARE REPURCHASE DATE Nº of Shares Series Amount ThUS$ MERGER 07-01-2003 87,871,054 SINGLE 16,828 WITHDRAWAL RIGHT 12-26-2003 13,538,394 SINGLE 1,550 FORMER TERRANOVA S.A. WITHDRAWAL RIGHT 05-27-2005 12,647,263 SINGLE 3,202 FORMER MASISA S.A. WITHDRAWAL RIGH 05-27-2005 5,431,721 SINGLE 1,379
OWN SHARE PORTFOLIO TRANSFERS AND DECREASES
REASON DATE Portfolio decrease
Nº of Shares Amount ThUS$ 3: Capital Decrease 10-31-2004 87,871,054 16,828 3: Capital Decrease 12-26-2004 13,538,394 1,550 2: Preemptive Issue 12-12-2005 10,806,939 2,738 2: Preemptive Issue 01-06-2006 3,459,841 877 3: Capital Decrease 05-27-2006 3,812,204 966
NOTE 22: OTHER NON-OPERATING INCOME AND DISBURSEMENTS
The following is the breakdown of non-operating income and OTHER NON-OPERATING DISBURSEMENTS disbursements for the years ended December 31, 2006 and 2005: 2006 2005 ThUS$ ThUS$ OTHER NON-OPERATING INCOME Amortization and depreciation 969 1,181 2006 2005 Venezuela moulding plant provision 2,150 - ThUS$ ThUS$ Write-offs and others 1,405 - Gain on sale of assets and services 1,280 2,149 Temporary plant shutdown expenses 570 1,019 Fixed asset impairment re-appraisal (1) 3,038 - Sawmill indemnity and repair (2) 4,804 - Tax return 884 - Contingent readjustment and interest 446 - Reverse of fixed asset-related provisions 433 - Loss from sale of goods and services 821 996 Others 1,263 650 Loss from fixed assets stripping provision 635 -
Total 6,898 2,799 Loss from sale of own issued shares 227 707 Taxes and commissions 542 962 Fire loss provision 1,356 288 Donations 445 118 Extraordinary bonds and indemnities 539 449 OtHERS 974 2,769
Total 15,883 8,489
(1) In 2006, the Company re-appraised the future flows of the Particle Board plant operating in Valdivia, deciding to reduce the provision originally established. (2) An agreement was reached with Proforca in Venezuela to repair and return a sawmill under lease, and a wood supply contract was settled. This settlement involved paying an indemnity of ThUS$ 1,096 and making sawmill repair expenditures of ThUS$ 3,708, which are stated in Other Non-operating Disbursements on the statement of income. CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 79
NOTE 23: PRICE-LEVEL RESTATEMENT Expressed in ThUS$ (Cont.) ASSETS (CHARGES) / CREDITS Readjustability 12-31-2006 12-31-2005 ASSETS (CHARGES) / CREDITS Currency Amount index 12-31-2006 12-31-2005 INVENTORIES NOTES RECEIVABLE BOLIVARES -2 -618 FIXED ASSETS CPI 2,115 2,574 OTHER RECEIVABLE CHILEAN PESO -66 486 INVESTMENTS IN RELATED CPI 1,414 1,094 OTHER RECEIVABLE BOLIVARES 23 -366 COMPANIES OTHER RECEIVABLE ARGENTINE PESO -19 0 OTHER NON-MONETARY ASSETS CPI -362 845 OTHER RECEIVABLE MEXICAN PESO 10 0 EXPENSE AND COSTS ACCOUNTS 0 OTHER RECEIVABLE OTHER CURRENCIES 104 15 TOTAL (CHARGES) CREDITS 3,167 4,513 OTHER RECEIVABLE REAL 178 770 INVENTORY MEXICAN PESO 10 4 LIABILITIES (CHARGES)/CREDITS Readjustability 12-31-2006 12-31-2005 INVENTORY REAL -254 -175 index INVENTORY OTHER CURRENCIES -3 -1 SHAREHOLDERS’ EQUITY CPI -2,539 -3,958 RECOVERABLE TAXES ARGENTINE PESO -61 11 RECOVERABLE TAXES CHILEAN PESO -637 1,225 NON-MONETARY LIABILITIES RECOVERABLE TAXES MEXICAN PESO -200 23 REVENUE ACCOUNTS RECOVERABLE TAXES REAL 1,249 281 TOTAL (CHARGES) CREDITS -2,539 -3,958 RECOVERABLE TAXES BOLIVARES -4 -1,713 PRICE-LEVEL RESTATEMENT 628 555 RECOVERABLE TAXES OTHER CURRENCIES 26 44 (LOSS) INCOME PRE-PAID EXPENSES CHILEAN PESO -105 34 PRE-PAID EXPENSES ARGENTINE PESO -1 0 NOTE 24: EXCHANGE RATE DIFFERENCES PRE-PAID EXPENSES BOLIVARES 0 -2 Expressed in ThUS$ PRE-PAID EXPENSES REAL 30 27 ASSETS (CHARGES) / CREDITS Currency Amount PRE-PAID EXPENSES OTHER CURRENCIES -1 0 12-31-2006 12-31-2005 OTHER CURRENT ASSETS CHILEAN PESO -10 32 OTHER CURRENT ASSETS MEXICAN PESO -9 -1 CASH ARGENTINE PESO -88 6 OTHER CURRENT ASSETS REAL -12 77 CASH CHILEAN PESO -1,159 421 OTHER CURRENT ASSETS OTHER CURRENCIES 0 2 CASH MEXICAN PESO -90 108 LONG-TERM RECEIVABLES CHILEAN PESO 144 11 CASH REAL 219 760 LONG-TERM RECEIVABLES REAL 180 245 CASH BOLIVARES -192 -196 INTANGIBLES REAL 17 0 CASH OTHER CURRENCIES -364 -53 OTHER ASSETS MEXICAN PESO -2 0 TIME DEPOSITS OTHER CURRENCIES 45 0 OTHER ASSETS ARGENTINE PESO 1 1 TIME DEPOSITS CHILEAN PESO -4,892 0 OTHER ASSETS CHILEAN PESO -628 415 MARKETABLE SECURITIES BOLIVARES 0 -44 OTHER ASSETS REAL 72 0 MARKETABLE SECURITIES CHILEAN PESO 348 -6 OTHER ASSETS OTHER CURRENCIES 97 0 MARKETABLE SECURITIES REAL 1,267 0 TRADE ACCOUNTS RECEIVABLES ARGENTINE PESO 22 8 TOTAL (CHARGES) CREDITS -2,821 7,454 TRADE ACCOUNTS RECEIVABLES CHILEAN PESO 59 -158 TRADE ACCOUNTS RECEIVABLES MEXICAN PESO 10 2 TRADE ACCOUNTS RECEIVABLES REAL 1,742 1,547 TRADE ACCOUNTS RECEIVABLES BOLIVARES 0 -11 TRADE ACCOUNTS RECEIVABLES OTHER CURRENCIES 285 266 NOTES RECEIVABLE CHILEAN PESO 110 2,403 NOTES RECEIVABLE ARGENTINE PESO -41 2 NOTES RECEIVABLE REAL 0 53 NOTES RECEIVABLE MEXICAN PESO -229 1,519 80
(Cont.) LIABILITIES (CHARGES) / CREDITS Amount Monto LIABILITIES (CHARGES) / CREDITS Currency Amount
12-31- 12-31- 12-31- 12-31- 2006 2005 2006 2005
DUE TO BANKS & FINANCIAL INSTITUTIONS, CHILEAN PESO -30 -2,746 PROVISIONS MEXICAN PESO -66 -7 SHORT-TERM WITHHOLDINGS BOLIVARES 5 363 DUE TO BANKS & FINANCIAL INSTITUTIONS, OTRAS MONEDAS -4 -5 WITHHOLDINGS CHILEAN PESO 0 121 SHORT-TERM WITHHOLDINGS ARGENTINE PESO -28 0 DUE TO BANKS & FINANCIAL INSTITUTIONS, BOLIVARES -10,249 1,646 SHORT-TERM INCOME TAX CHILEAN PESO 94 -211
DUE TO BANKS & FINANCIAL INSTITUTIONS, CHILEAN PESO -411 -2,092 INCOME TAX REAL -1,040 -37 LONG-TERM INCOME TAX OTHER CURRENCIES -33 0
DUE TO BANKS & FINANCIAL INSTITUTIONS, BOLIVARES 0 271 TAX PAYABLE CHILEAN PESO 0 122 LONG-TERM TAX PAYABLE ARGENTINE PESO 76 0 BONDS PAYABLE U.F. 6,207 -116 TAX PAYABLE MEXICAN PESO 37 275 ACCOUNTS PAYABLE ARGENTINE PESO 55 -4 TAX PAYABLE OTHER CURRENCIES -20 -59 ACCOUNTS PAYABLE MEXICAN PESO -23 -491 OTHER CURRENT LIABILITIES CHILEAN PESO -88 1,724 ACCOUNTS PAYABLE CHILEAN PESO 55 -74 OTHER CURRENT LIABILITIES REAL -1,641 203 ACCOUNTS PAYABLE REAL -449 -1,545 OTHER LONG-TERM LIABILITIES OTHER CURRENCIES 0 -3 ACCOUNTS PAYABLE BOLIVARES -359 137 OTHER CURRENT LIABILITIES MEXICAN PESO 0 -2 ACCOUNTS PAYABLE EURO 0 -80 OTHER CURRENT LIABILITIES ARGENTINE PESO -55 0 ACCOUNTS PAYABLE OTHER CURRENCIES -45 -2 LONG-TERM BONDS PAYABLE U.F. -577 -9,309 NOTES PAYABLE REAL -15 20 OTHER LONG-TERM LIABILITIES BOLIVARES 0 -4,065 OTHER PAYABLES CHILEAN PESO -10 -20 OTHER LONG-TERM LIABILITIES CHILEAN PESO 50 465 OTHER PAYABLES ARGENTINE PESO -5 0 OTHER LONG-TERM LIABILITIES MEXICAN PESO 24 0 OTHER PAYABLES REAL -6 -6 OTHER LONG-TERM LIABILITIES ARGENTINE PESO 43 0 OTHER PAYABLES BOLIVARES 0 141 OTHER LONG-TERM LIABILITIES REAL -18 -2,596 OTHER PAYABLES OTHER CURRENCIES 15 119
PROVISIONS CHILEAN PESO 155 96 Total (Charges) Credits -8,692 -18,417
PROVISIONS BOLIVARES -1 115 Exchange rate difference (loss) earnin -11,513 -10,963 PROVISIONS ARGENTINE PESO 32 0
PROVISIONS REAL -367 -765 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 81
NOTE 25: EXPENSES INCURRED IN ISSUING AND PLACING STOCK CERTIFICATES AND BONDS
Placement of bonds Placement of shares The expenses incurred in issuing bonds are being amortized using The following were the expenses incurred in issuing and placing shares: the straight-line method in the obligation period, and the following is the breakdown: 2006 2005 ThUS$ ThUS$ 2006 2005 ThUS$ ThUS$ Financial consultancy 3,027 2,860 Placement commission 352 352 Stamp tax 7,560 4,145 Publication 641 184 Placement commission 598 112 Legal consultancy 426 149 Bond auction commission 285 322 Printing expenses and others 70 68 Risk rating agency consultancy 231 116 Registry and record fees 42 22 TOTAL EXPENSES 4,516 3,613 Legal consultancy 28 14 Printing expenses 19 13 This amount was stated discounting the item Other Reserves in the Other expenses 421 88 shareholders’ equity.
TOTAL EXPENSES 9,184 4,832 NOTE 26: STATEMENT OF CASH FLOWS
ACCUMULATED AMORTIZATION (2,356) (1,744) The Uniformly Coded Statistical Record (FECU) 5.50.30.55 other charges or credits to income that do not represent cash flow was BALANCE TO BE AMORTIZED 6,828 3,088 made up of the following items:
These expenses were stated in Current Assets in Other Current Assets 2006 2005 in regard to the short-term portion of ThUS$ 910 (ThUS$ 672 in 2005) ThUS$ ThUS$ and in Long-term Assets in Others for the long-term portion of Depletion-Argentina 1,288 2,837 ThUS$ 5,918 (ThUS$ 2,416 in 2005). Depletion-Brazil 5,562 7,278 Depletion-Chile 9,011 10,335 Depletion-Venezuela 3,307 4,157 Other income 902 1,020
Total 20,070 25,627 82
NOTE 27: HEDGING CONTRACTS
1. The Company and its affiliates have the following hedging swap contracts:
A) EXCHANGE RATE HEDGING SWAP CONTRACTS
Receivable Payable Currency Amount Rate Currency Amount Rate
Banco Citibank N.A. UF 561,295 4.940% ThUS$ 18,621 7.06% Morgan Stanley Capital Services UF 1,122,589 4.939% ThUS$ 37,243 7.09% Banco Citibank N.A. UF 1,000,000 4.2058% ThUS$ 33,523 5.75% Banco Santander Santiago UF 1,000,000 4.2058% ThUS$ 33,523 5.60% J. P. Morgan UF 441,612 4.6948% ThUS$ 15,000 6.59%
B) INVESTMENT CONTRACT
Receivable Payable Currency Amount Rate Currency Amount Rate Morgan Stanley Capital Services ThUS$ 16,000 6.20% MXN 183,200 11.75%
The Company uses hedging contracts to reduce exchange rate fluc- US$ 130 million, which generated earnings of ThUS$ 5,135. These tuation risks and establish interest rates. The Company sold certain earnings were stated as non-operating income, discounting the exchange exchange rate contracts in September 2005 amounting to approximately rate difference losses.
DESCRIPTION OF CONTRACTS BOOK ACCOUNTS AFFECTED Purchase Protected item of Protected Type of Type of Contract Maturity /Sale transaction item value Hedging Contract Value expiry item Specific item position Assets / Libialities Efect on Income Name Amount Name Amount Realized Unrealized ThUS$ ThUS$ ThUS$ ThUS$ S CCPE 23,277 Q4-2010 EXCHANGE RATE P BONDS 18,621 19.331 OTHERS LONG- 780 -437 413 IN UF TERM ASSETS S CCPE 46,553 Q4-2010 EXCHANGE RATE P BONDS 37,243 38.663 OTHERS LONG- 1,493 -891 509 IN UF TERM ASSETS S CCPE 33,523 Q4-2012 EXCHANGE RATE P BONDS 33,523 34.441 OTHERS LONG- 1,498 -455 1,367 IN UF TERM ASSETS S CCPE 33,523 Q4-2012 EXCHANGE RATE P BONDS 33,523 34.441 OTHERS LONG- 1,531 -405 1,413 IN UF TERM ASSETS S CCPE 15,000 Q4-2026 EXCHANGE RATE P BONDS 15,000 15.209 OTHERS LONG- 540 -194 74 IN UF TERM ASSETS S CI 20,000 Q4-2010 EXCHANGE RATE P FUTURE 16,000 16.965 OTHERS LONG- 2,155 -2,155 0 FLOWS TERM LIABILITIES CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 83
NOTE 28: CONTINGENCIES AND RESTRICTIONS
The current contingencies and commitments in force at year-end are grace period on January 12, 2006. The bond placement imposes shown below: the following obligations on the Company, among others: • Maintaining continually and without interruption the company’s re- a) Restrictions on the operation, guarantees or limit of financial indicators. gistry in the securities registry of the Superintendency of Securities All the company’s restrictive indicators had been met as of the release and Insurance. of these financial statements. • Maintaining insurance with reasonable protection of the operating assets, according to the usual corporate practices of the Company’s Masisa S.A. nature and line of business. • Bond issuance and placement in the domestic market. • Undertaking operations between related parties in market conditions. The contract of the bond issuance and placement carried out in • Maintaining a minimum forest plantation of 30,000 hectares of Ra- December 2003 by former Masisa S.A. in the domestic market of diata pine forests in Chile with an average age of more than 8 years. ThUF 2,500 with a 7-year term and a 2-year grace period, and of • Maintaining an indebtedness level (account 5.21.00.00 plus ac- ThUF 702 with a 21-year term and a 7-year grace period sets forth count 5.22.00.00 less account 5.11.10.10 less account 5.11.10.20 certain obligations for the Company (today undertaken by Masisa less account 5.11.10.30 less investments in reverse re-sale S.A.) and/or its affiliates that are normal for these kinds of opera- commitment agreements and current long-term deposits, other than tions, including the following in the specific terms and conditions those considered in account 5.11.10.10 account 5.11.10.20 and laid down in the respective bond issuance contract: account 5.11.10.30 of the FECU) to shareholders’ equity (account • Insurance of the main assets, according to industry standards. 5.23.00.00 plus account 5.24.00.00 of the FECU) ratio, also known • Dispatch of the quarterly and annual individual and consolidated as leverage, at a consolidated and individual level not exceeding financial statements, of the issuer and affiliates governed by the 0.90 times March 31, 2006 through the bond maturity. regulations on publicly-traded corporations, and copies of the risk rating reports to the representative of the bond holders. Masisa Overseas Ltd. • Maintain up-to-date the accounting books of the parent company Masisa S.A., and the affiliates Masisa Argentina S.A. and Masisa Do and its subsidiaries. Brasil Ltda., have guaranteed loans obtained by the affiliate Masisa • Undertake transactions with affiliates in market conditions. Overseas Ltd. These envisage meeting certain obligations that are • Ban on granting financing to any entity of the business group that is normal in these kinds of operations and that are outlined below. The not the issuer or any of its affiliates or associated companies. obligations concerning financial indexes must be calculated based on • Maintain an indebtedness level in its quarterly financial statements, the consolidated financial statements of Masisa S.A. as of the financial statements for the year ended December 31, • Private Placement 2003, defined as the current liabilities to shareholders’ equity ratio, Due to obtaining private loans overseas through the affiliate Masisa based on the figures of its individual and consolidated financial Overseas Ltd., Masisa S.A. is subject to meeting certain obligations statements, not exceeding 0.9 times, according to the terms and that are normal for these kinds of operations, including the following, conditions set forth in the respective bond issuance contract. among others, in the specific terms and conditions laid down in the • Masisa S.A. (former Terranova S.A.) placed bullet-type bonds of respective loan contracts: compliance with the legal regulations; main- ThUS$ 30,000 with a 5-year term on August 13, 2003. The bond taining insurance; maintaining real estate; meeting certain financial placement imposes the following obligations on the Company, indexes, including a debt to shareholders’ equity ratio (leverage) not among others: exceeding 1; a consolidated tangible net shareholders’ equity of no • Maintaining continually and without interruption the Company’s re- less than ThUS$ 193,236; and a financial expense index of no less gistry in the securities registry of the Superintendency of Securities than 1.5 (net income of the period before financial expenses and and Insurance. Maintaining insurance with reasonable protection of taxes on financial expenses); maintaining 100% of the equity share of the operating assets, according to the usual corporate practices of Masisa Overseas Ltd. and 66.6% of Masisa Argentina S.A.; the ban on the Company’s nature and line of business. certain transactions with related parties; extending to the bond holders • Undertaking operations between related parties in market conditions. the new guarantees that Masisa S.A. and/or its affiliates establish in • Maintaining a minimum forest plantation of 60,000 hectares of Ra- favor of third parties to guarantee new debt or that existing as of the diata pine forests in Chile with an average age of more than 8 years. contract date. There are several exceptions, including those that must • Maintaining a current liabilities (account 5.21.00.00 plus account be granted due to the normal course of business, those that must be 5.22.00.00 of the FECU) to shareholders’ equity (account 5.23.00.00 granted to guarantee the price balance of new acquisitions and those plus account 5.24.00.00 of the FECU) ratio, also known as leverage, concerning letters of credit, among others. at a consolidated and individual level not exceeding 0.85 times. • Rabobank Syndicated Loan • Masisa S.A. placed bonds of ThUF 2,000 with a 7-year term and The syndicated loan contract signed on December 20, 2005, with 2-year grace period, of ThUF 2,750 with a 21-year term and 1-year Banco Rabobank Curacao N.V., Banco West LB AG, New York 84
Branch, The Bank of Nova Scotia, Banco Citibank N.A. Nassau, Ba- Inversiones Internacionales Terranova S.A. hamas Branch, and ABN Amro Bank N.V., means that Masisa S.A. • West LB as the underwriter must meet certain obligations, mainly concerning The loan contract signed by Inversiones Internacionales Terranova complying with the legal regulations, maintaining insurance, main- S.A. with the German bank West LB means that Masisa S.A. as taining real estate, and complying with certain financial indicators underwriter must meet certain obligations, mainly regarding not signi- based on its consolidated financial statements, such as: ficantly altering its activities, delivering financial information periodica- • Minimum installed board production capacity: 1,200,000 m3 per annum. lly, maintaining up-to-date its obligations contracted with third parties, • Interest rate hedging greater than 3.0. obtaining prior consent from such banks to dispose, transfer or sell a • Net tangible equity exceeding US$ 980 million. substantial part of its assets or to grant a guarantee thereon. • Net debt to equity ratio not exceeding 0.9. Fibranova C.A., Andinos C.A. and Masisa Madeiras Ltda. Masisa Argentina S.A. • The syndicated loan contract signed on February 2, 2001, by The parent company has guaranteed loans obtained by the affiliate the overseas affiliates Andinos C.A., Fibranova C.A. and Masisa Masisa Argentina S.A. These envisage meeting certain obligations that Madeiras Ltda. (former Terranova Brasil Ltda.), with the Chilean are normal in these kinds of operations, including the following, among banks Banco Santander-Chile, Banco del Estado and Banco BBVA others, in the specific terms and conditions laid down in the respective means that Masisa S.A. as underwriter must meet certain obli- loan contracts. The obligations concerning financial indexes must be gations, mainly regarding not significantly altering its activities, calculated based on the consolidated financial statements. delivering financial information periodically, maintaining up-to-date • Rabobank Nederland its obligations contracted with third parties, obtaining prior consent The loan granted by Cooperatieve Centrale Raiffeisen-Boerenleen- from such banks to dispose, transfer or sell a substantial part of its bank B.A. (Rabobank Nederland) to Masisa Argentina S.A. sets for- assets or to grant a guarantee thereon. The mentioned syndicated th certain obligations for the parent company Masisa S.A. and/or its loan also binds the Company to meet certain financial indicators affiliates that are normal for these kinds of operations, including the based on its consolidated financial statements: following, among others, in the specific terms and conditions laid • Maximum indebtedness ratio: 0.85 down in the respective loan contract: maintaining the company’s • Maximum financial debt to cash generation ratio: 5.5 (2004); 5.0 current line of business and its legal existence; maintaining the (2005); 4.5 (2006); 4.0 (2007). necessary real estate for the company’s ordinary line of business; • Minimum cash generation to financial expenses ratio: 2.5 (2004); complying with the applicable laws and regulations; timely dispatch 2.65 (2005); 3.0 (2006); 3.25 (2007). of the company’s financial information; taking out and maintaining • Minimum net tangible equity: ThUS$ 700,000 insurance that adequately covers the risks that are normal in the industry; maintaining an indebtedness level not exceeding 0.9 Fibranova C.A. and Andinos C.A. times; maintaining financial expense hedging of not less than 3; • The loan contract signed on February 26, 2004, by the overseas maintaining a consolidated shareholders’ equity of not less than affiliates Fibranova C.A. and Andinos C.A., de Venezuela, with the US$ 345 million; ban on encumbering assets, except in the terms German bank KfW means that Masisa S.A. as underwriter must agreed on in the contract; undertaking operations with related meet certain obligations, mainly regarding not significantly altering parties at market prices; ban on granting financing to any entity of its activities, maintaining indirect control of both debtors, delivering the business group other than the issuer or any of its affiliates or financial information periodically, maintaining up-to-date its obli- associated companies. gations contracted with third parties, obtaining prior consent from • Banco de Crédito e Inversiones such bank to dispose, transfer or sell a substantial part of its assets The loan granted by Banco de Crédito e Inversiones to Masisa Argen- or to grant a guarantee thereon. tina S.A. sets forth certain obligations for the parent company Masisa S.A. and/or its affiliates that are normal for these kinds of operations, Fibranova C.A. including the following, among others, in the specific terms and • The syndicated loan contract signed on April 15, 2002, by the over- conditions laid down in the respective loan contract: maintaining the seas affiliate Fibranova C.A., de Venezuela with the Chilean banks company’s current line of business; timely dispatch of the company’s Banco Santander-Chile, Banco de Crédito e Inversiones, Banco Cor- financial information; taking out and maintaining insurance that ade- pbanca and Banco Security means that Masisa S.A. as underwriter quately covers the risks that are normal in the industry; maintaining must meet certain obligations, mainly regarding not significantly an indebtedness level not exceeding 0.9 times; maintaining financial altering its activities, delivering financial information periodically, expense hedging of not less than 3; maintaining a consolidated share- maintaining up-to-date its obligations contracted with third parties, holders’ equity of not less than US$ 345 million; ban on encumbering obtaining prior consent from such banks to dispose, transfer or assets, except in the terms agreed on in the contract. sell a substantial part of its assets or to grant a guarantee thereon. CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 85
The aforementioned syndicated loan also binds the Company to • Corporate civil liability insurance, including coverage for personal acci- meet certain financial indicators based on its consolidated financial dents and damage to third parties, amounting to ThUS$ 10,000. statements: • Insurance of the plantations of its affiliates in Brazil amounting to • Maximum indebtedness ratio: 0.85 ThUS$ 102,289, to ThUS$ 193,009 for physical goods and inventories • Maximum financial debt to cash generation ratio: 5.5 (2004); 5.0 and to ThUS$ 83,566 for fixed costs in the case of plant shutdown. (2005); 4.5 (2006); 4.0 (2007). • The companies in Venezuela have taken out insurance for physical • Minimum cash generation to financial expenses ratio: 2.5 (2004); goods and inventories amounting to ThUS$ 235,204 and ThUS$ 2.65 (2005); 3.0 (2006); 3.25 (2007). 46,138 for fixed costs in the case of plant shutdown. These compa- • Minimum net tangible equity: ThUS$ 700,000 nies in Venezuela have no insurance for their plantations as there is no forest insurance market in that country. Forestal Argentina S.A. • The affiliates in Mexico have insurance for physical goods and in- • On September 2, 2005, Masisa S.A. became a joint and several ventories amounting to ThUS$ 39,521 and ThUS$ 19,362 for fixed co-debtor and co-signer in favor of Banco Cooperatieve Centrale costs in the case of plant shutdown. Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland) for the • The companies in Argentina have a contract for the following loan granted by such bank in the same year to the affiliate Forestal insurance: for forest plantations amounting to ThUS$ 54,228, for Argentina S.A. The proceeds of such loan were allocated to refinan- physical goods and inventories amounting to ThUS$ 180,677 and to cing its financial debt. Hence, the loan contract sets forth certain ThUS$ 39,322 for fixed costs in the case of plant shutdown. normal obligations for these kinds of operations for Masisa S.A. • The affiliate in the United States has insurance for physical goods as underwriter. Moreover, the aforementioned loan contract binds and inventories amounting to ThUS$ 24,970 and to ThUS$ 3,000 Masisa S.A. to comply with certain financial indicators based on its for fixed costs in the case of plant shutdown. consolidated financial statements: • Minimum installed board production capacity: 1,200,000 m3 per annum. d) Other contingencies • Maximum indebtedness level: 0.9 • The Chilean Internal Revenue Service informed the Company by • Minimum interest rating hedging: 3 means of Resolution Nº203, dated August 26,2003, that it is not ad- • Minimum forest asset hedging: 1.5 missible to acknowledge in Chile the income of some of its foreign • Minimum net tangible equity: ThUS$ 700,000 agencies for the effects of determining its first category taxable net income. According to the information the Company has, Resolution Forestal Tornagaleones S.A. Nº203 will have an effect on losses, for which the Company has • Forestal Tornagaleones S.A. signed a credit with Rabobank recorded US$ 39.2 million for deferred tax, recoverable taxes and Investments Chile S.A. on October 15, 1998. Due to this obligation, tax losses already used. such company mortgaged plantations and lands for the term of The Company appealed the content of Resolution Nº203, pursuant the loan requested. This loan was renewed on August 9, 2005. At to the procedure laid down in articles 123 and following of the Tax the close of these financial statements, these goods amounted to Code. Based on the information the Company has, the opinion of its ThUS$ 35,372, which is broken down into plantations of legal advisors and the administrative jurisprudence of the Internal ThUS$ 28,689 and lands of ThUS$ 6,683. Revenue Service affecting the decision in Resolution Nº203, it is es- timated there is a remote likelihood of the final verdict of the appeal b) Deferred customs duties having a negative impact on deferred tax, recoverable taxes and tax The Company owed deferred customs duties of ThUS$ 18 losses of U$ 39.2 million recorded in the accounts by the Company. (ThUS$ 117 in 2005) for the year ended December 31, 2006. e) Purchase and sale of shares and shareholders’ agreement MATURITY thUS$ • Due to the establishment of the indirect affiliate Oxinova C.A. in the Republic of Venezuela, the affiliate Inversiones Internacionales 2007 18 Terranova S.A. signed a shareholders’ agreement with the com- Total 18 pany Oxiquim S.A., mainly involving restricting the sale of shares, not constituting a pledge or encumbering any share it owns and of c) Insurance taken out maintaining control of the company Fibranova C.A., either directly The following was the main insurance taken out by the parent com- or through Masisa S.A. pany and its affiliates for the year ended December 31, 2006: • The Chilean affiliate Inversiones Internacionales Terranova S.A. • Insurance of national affiliate plantations amounting to ThUS$ 374,609. signed a shareholders’ pact on May 23, 2002, with the autonomous • Insurance of physical goods and inventories of national affiliates of state body Corporación Venezolana de Guayana (CVG) to regulate approximately ThUS$ 199,626 and ThUS$ 130,974 for fixed costs the principles, rights and obligations of the parties in a Venezuelan in the case of plant shutdown. stock corporation that will be established to build, manage and Receivable Assets committed Outstanding balances at Discharge of Guarantees
Guarantee Creditor Type of guarantee financial statements closing
Name Relationship Type Book Value 12-31-2006 12-31-2005 12-31-2007 Assets 12-31-2008 Assets 12-31-2009 Assets
86
operate a river port on the northern bank of the River Orinoco, h) Beneficial interest contract of 30,000 hectares Macapaima, Venezuela. The affiliate Terranova de Venezuela S.A. signed a contract with CVG As of the closing date of these financial statements, the aforementio- Proforca C.A. in May 1997, by means of which the latter handed over ned company has still not been established for various reasons. the rights to use and benefit from a lot of 30,000 hectares, which is one of two lots included in the wood purchase contract. f) Wood purchase contract This contract has a 30-year term, however the use and benefit At year-end, the affiliate Terranova de Venezuela S.A. (“TDVSA”) had rights shall cease after TDVSA has developed all the forest resources a Caribbean pine purchase contract signed in May 1997. The plan- as of the twentieth year. As consideration, TDVSA shall transfer to tation subject matter of the contract has a total of 59,000 hectares CVG Proforca C.A. the legal title of those forest resources planted at in the state of Monagas in Venezuela made up of two lots of 30,000 its expense, which shall not be younger than ten years on a surface hectares and 29,000 hectares. The term for developing such forest of no less than 7,500 hectares and no fewer than 400 Caribbean pine plantations is 30 years and the unused resources will be returned to seedlings per hectare. CVG Proforca C.A.. TDVSA bound itself to the following, among others: The contract lays down the following conditions: • To reforest at its cost and for its benefit (except for the aforemen- 1. The lots where the plantations are located belong to the company tioned consideration to CVG Proforca C.A.) the parts of the land CVG Proforca C.A. and do not form part of the sale. harvested by TDVSA in the first twenty years of this contract. 2. The proceedings, obtainment and costs of future permits it requi- • To constitute a performance bond of ThUS$ 300 for the obligations res shall be at TDVSA’s cost. undertaken under this contract in favor of CVG Proforca C.A.. 3. CVG Proforca C.A. shall indemnify TDVSA, should the latter incur expenses and costs for breach by CVG Proforca C.A. as the owner, holder and operator of the mentioned goods. 4. TDVSA binds itself to comply with the environmental protection regulations to prevent fires, those concerning hygiene and industrial safety, standing timber development and maintenance of the project feasibility and infrastructure; and to carry out the risk analyses to prevent fires and to draw up an operative firefighting plan. 5. TDVSA shall take out insurance policies to cover third-party expen- ses with CVG Proforca C.A. as the beneficiary. Terranova Venezuela reached an agreement with CVG Proforca on March 20, 2006, to make a contribution to the latter amounting to ThUS$ 740 to boost efforts to deal with fires that might affect the plantations.
g) Uverito sawmill leasing contract The affiliate Terranova de Venezuela S.A. signed a contract with CVG Proforca C.A. in May 1997 to lease a sawmill by means of a single payment of ThUS$ 10,000 for a 15-year term as of 1997. On March 20, 2006, Terranova de Venezuela S.A. and CVG Proforca agreed on the following: • To terminate the Uverito sawmill leasing contract in advance, without CVG Proforca having to repeat or make any payment for early contract termination. • Terranova de Venezuela S.A. bound itself to carry out a series of activities outlined in a schedule that forms part of this agreement to return the sawmill to the same operative condition as when it was received in 1997. • Once the refurbishment has been completed, Terranova de Vene- zuela S.A. shall deliver a 4-month equipment operation warranty, which does not include equipment misuse or normal wear and tear, or mean that Terranova de Venezuela S.A. does not have to comply with the refurbishment activities. Receivable Assets committed Outstanding balances at Discharge of Guarantees
Guarantee Creditor Type of guarantee financial statements closing
Name Relationship Type Book Value 12-31-2006 12-31-2005 12-31-2007 Assets 12-31-2008 Assets 12-31-2009 Assets
CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 87
INDIRECT GUARANTEES Expressed in ThUS$ Outstanding balances at Type of financial statements Guarantee Creditor Receivable guarantee Assets committed closing Discharge of Guarantees Name Relationship Type Book 12-31 12-31 12-31 Assets 12-31 Assets 12-31 Assets Value 2006 2005 2007 2008 2009 BANCO BBVA ANDINOS C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 758 758 2,617 469 0 289 0 0 0 BANCO DEL ESTADO DE CHILE ANDINOS C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 1,458 1,458 2,005 903 0 556 0 0 0 BANCO SANTANDER ANDINOS C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 2,742 2,742 2,088 1,697 0 1,044 0 0 0 BANCO SANTIAGO ANDINOS C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 1,672 0 0 0 0 0 0 ABN AMRO BANK ANDINOS C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 1,444 0 0 0 0 0 0 BANQUE EUROPEENNE POUR AM ANDINOS C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 2,673 0 0 0 0 0 0 CITIBANK VENEZUELA ANDINOS C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 2,234 2,234 1,732 2,234 0 0 0 0 0 WESTDEUTSCHE LANDESBANK ANDINOS C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 1,059 1,059 0 1,059 0 0 0 0 0 KREDITANSTALT FUR WIEDERAUFBAU ANDINOS C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 1,356 1,356 1,710 406 0 380 0 380 0 RABOBANK NEDERLAND FORESTAL ARGENTINA S.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 5,289 5,289 5,419 429 0 540 360 0 ABN AMRO BANK FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 7,976 0 0 0 0 0 0 BANCO PROVINCIAL FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 8,423 8,423 0 8,423 0 0 0 0 0 BANCO BBVA FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 2,528 2,528 2,901 1,565 0 963 0 0 0 BANCO CORPBANCA FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 24,556 24,556 21,218 16,546 0 8,011 0 0 0 BANCO DE CRÉDITO E INVERSIONES FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 8,037 8,037 8,922 5,537 0 2,500 0 0 0 BANCO DE VENEZUELA S.A. FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 19,370 19,370 23,178 19,370 0 0 0 0 0 BANCO DEL ESTADO DE CHILE FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 8,678 8,678 9,955 5,372 0 3,306 0 0 0 BANCO MERCANTIL FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 26,835 26,835 16,420 26,835 0 0 0 0 0 BANCO SANTANDER FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 3,804 3,804 10,454 2,621 0 1,183 0 0 0 BANQUE EUROPEENNE POUR AM FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 6,527 0 0 0 0 0 0 SECURITY BANK FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 2,917 0 0 0 0 0 0 BANCO SECURITY FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 3,750 3,750 1,240 2,584 1,167 0 0 0 CITIBANK VENEZUELA FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 579 579 0 579 0 0 0 0 0 WESTDEUTSCHE LANDESBANK FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 16,517 16,517 0 13,440 0 3,077 0 0 0 BNP PARIBAS FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 7,539 7,539 7,350 7,539 0 0 0 0 0 CORPBANCA VENEZUELA FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 1,440 0 0 0 0 0 0 KREDITANSTALT FUR WIEDERAUFBAU FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 12,204 12,204 15,390 3,654 0 3,420 0 3,420 0 BANCO CORPBANCA FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 2,738 0 0 0 0 0 0 BANCO DE CRÉDITO E INVERSIONES MASISA ARGENTINA S.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 9,790 9,790 12,722 2,846 0 2,778 0 2,778 0 RABOBANK NEDERLAND MASISA ARGENTINA S.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 8,813 8,813 12,708 2,563 0 2,500 0 2,500 0 ABN AMRO BANK MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 11,037 11,037 0 37 0 0 0 2,200 0 CITIBANK N.A. MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 24,834 24,834 118 84 0 0 0 4,950 0 RABOBANK NEDERLAND MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 24,834 24,834 0 84 0 0 0 4,950 0 THE BANK OF NOVA SCOTIA MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 24,834 24,834 21,476 84 0 0 0 4,950 0 BANCO CHILE NEW YORK BRANK MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 10,942 0 0 0 0 0 0 WESTDEUTSCHE LANDESBANK MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 24,834 24,834 0 84 0 0 0 4,950 0 PRIVATE PLACEMENT MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 18,185 18,185 27,840 9,185 0 9,000 0 0 0 COMERICA BANK MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 8,751 0 0 0 0 0 0 BANCO BBVA MASISA MADEIRAS LIMITADA AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 394 394 578 201 0 193 0 0 0 BANCO DEL ESTADO DE CHILE MASISA MADEIRAS LIMITADA AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 757 757 1,111 386 0 370 0 0 0 BANCO ITAU BBA MASISA MADEIRAS LIMITADA AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 4,000 0 0 0 0 0 0 BANCO SANTANDER MASISA MADEIRAS LIMITADA AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 1,423 1,423 2,088 727 0 696 0 0 0 WESTDEUTSCHE LANDESBANK INVERSIONES INTERNACIONALES TERRANOVA AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 4,355 4,355 7,044 1,743 0 1,741 0 871 0 KREDITANSTALT FUR WIEDERAUFBAU INVERSIONES INTERNACIONALES TERRANOVA AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 27,664 0 0 0 0 0 0 BANCO BBVA INVERSIONES INTERNACIONALES TERRANOVA AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 1,407 0 0 0 0 0 0 BANCO DEL DESARROLLO INVERSIONES INTERNACIONALES TERRANOVA AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 3,035 0 0 0 0 0 0 CITIBANK VENEZUELA TERRANOVA VENEZUELA S.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 3,773 3,773 0 3,733 0 0 0 0 0 WESTDEUTSCHE LANDESBANK TERRANOVA VENEZUELA S.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 10,282 10,282 0 8,367 0 1,915 0 0 0 BANQUE EUROPEENNE POUR AM TERRANOVA VENEZUELA S.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 498 0 0 0 0 0 0 CORPBANCA VENEZUELA TERRANOVA VENEZUELA S.A. AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 426 0 0 0 0 0 0 BANCO DE CHILE OXINOVA C.A. ASSOCIATED CO. CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 4,900 4,900 0 4,900 0 0 0 0 0 HSBC MASISA USA INC AFFILIATE CO-SIGNER SURETY SHAREHOLDERS’ EQUITY 0 0 4,527 0 0 0 0 0 0 88
NOTE 29: THIRD-PARTY GUARANTEES NOTE 30: NATIONAL AND FOREIGN CURRENCY
ASSETS Expressed in ThUS$ Guarantees of ThUS$ 9,132 (ThUS$ 3,054 in 2005), consisting of ITEM CURRENCY AMOUNT pledges, mortgages, loan insurance policy endorsements, special mandates, guarantees and joint and several co-debts were received 12-31 12-31 at the close of these financial statements to guarantee the payment 2006 2005 and compliance with client obligations related to operations of the CASH CHILEAN PESO 970 654 company’s line of business. CASH US DOLLAR 3,786 2,232 CASH ARGENTINE PESO 381 182 CASH BRAZILAN REAL 4,116 2,945 CASH MEXICAN PESO 6,612 1,947 CASH BOLIVARES 397 3,752 CASH OTHER CURRENCY 437 249 CASH EURO 6 26 TIME DEPOSITS US DOLLAR 20,312 69,694 TIME DEPOSITS EURO 71 0 TIME DEPOSITS BOLIVARES 931 2,073 TIME DEPOSITS BRAZILAN REAL 6,198 11,139 TIME DEPOSITS OTRAS MONEDAS 1,876 0 MARKETABLE SECURITIES CHILEAN PESO 956 2,229 MARKETABLE SECURITIES OTHER CURRENCY 0 195 TRADE ACCOUNTS RECEIVABLES CHILEAN PESO 25,960 23,561 TRADE ACCOUNTS RECEIVABLES EURO 245 46 TRADE ACCOUNTS RECEIVABLES US DOLLAR 62,165 32,529 TRADE ACCOUNTS RECEIVABLES ARGENTINE PESO 3,593 2,689 TRADE ACCOUNTS RECEIVABLES BRAZILAN REAL 473 16,818 TRADE ACCOUNTS RECEIVABLES BOLIVARES 11,978 5,534 TRADE ACCOUNTS RECEIVABLES OTHER CURRENCY 2,889 3,441 TRADE ACCOUNTS RECEIVABLES MEXICAN PESO 17,804 15,454 NOTES RECEIVABLE CHILEAN PESO 3,236 5,166 NOTES RECEIVABLE US DOLLAR 2,077 2,856 NOTES RECEIVABLE ARGENTINE PESO 2,594 2,934 NOTES RECEIVABLE OTHER CURRENCY 0 4 NOTES RECEIVABLE BRAZILAN REAL 0 7 NOTES RECEIVABLE MEXICAN PESO 2,223 2,198 OTHER RECEIVABLES CHILEAN PESO 4,918 4,594 OTHER RECEIVABLES US DOLLAR 5,018 4,938 OTHER RECEIVABLES BOLIVARES 2,929 3,082 OTHER RECEIVABLES EURO 0 288 OTHER RECEIVABLES ARGENTINE PESO 871 1,070 OTHER RECEIVABLES BRAZILAN REAL 2,880 2,452 OTHER RECEIVABLES MEXICAN PESO 1,279 3,429 OTHER RECEIVABLES OTHER CURRENCY 919 518 RELATED COMPANIES’ NOTES & US DOLLAR 7,378 5,296 ACCOUNTS RECEIVABLE INVENTORIES US DOLLAR 185,777 222,465 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 89
ASSETS (Cont.) Expressed in ThUS$ ASSETS (Cont.) Expressed in ThUS$
ITEM CURRENCY AMOUNT ITEM CURRENCY AMOUNT 12-31 12-31 12-31 12-31 2006 2005 2006 2005 RECOVERABLE TAXES CHILEAN PESO 34,849 19,908 INTANGIBLES US DOLLAR 267 122 RECOVERABLE TAXES US DOLLAR 2,387 3,220 AMORTIZATION (LESS) US DOLLAR -41 -22 RECOVERABLE TAXES ARGENTINE PESO 3,630 5,117 OTHERS CHILEAN PESO 396 2,183 RECOVERABLE TAXES BRAZILAN REAL 6,061 7,355 OTHERS U.F. 10,708 6,824 RECOVERABLE TAXES MEXICAN PESO 461 3,269 OTHERS ARGENTINE PESO 84 45 RECOVERABLE TAXES BOLIVARES 12,486 12,909 OTHERS US DOLLAR 17,562 16,044 RECOVERABLE TAXES OTHER CURRENCY 2,363 807 OTHERS BRAZILAN REAL 1,183 1,008 PRE-PAID EXPENSES CHILEAN PESO 1,027 2,885 OTHERS OTHER CURRENCY 161 0 PRE-PAID EXPENSES US DOLLAR 2,696 2,554 OTHERS MEXICAN PESO 126 113 PRE-PAID EXPENSES BOLIVARES 670 279 TOTAL ASSETS PRE-PAID EXPENSES BRAZILAN REAL 1,066 1,582 CHILEAN PESO 72,312 64,677 PRE-PAID EXPENSES MEXICAN PESO 226 55 US DOLLAR 1,826,380 1,775,175 PRE-PAID EXPENSES U.F. 336 0 ARGENTINE PESO 11,364 12,225 PRE-PAID EXPENSES OTRAS MONEDAS 328 493 BRAZILAN REAL 25,354 44,407 DEFERRED TAXES DÓLARES 9,876 2,138 MEXICAN PESO 28,860 26,467 OTHER CURRENT ASSETS OTHER CURRENCY 13 105 BOLIVARES 29,391 27,629 OTHER CURRENT ASSETS CHILEAN PESO 0 707 OTHER CURRENCY 9,019 5,852 OTHER CURRENT ASSETS US DOLLAR 26 2,086 EURO 322 360 OTHER CURRENT ASSETS ARGENTINE PESO 23 0 U.F. 13,332 9,129 OTHER CURRENT ASSETS MEXICAN PESO 129 2 OTHER CURRENT ASSETS U.F. 2,288 2,305
FIXED ASSETS
FIXED ASSETS US DOLLAR 1,557,348 1,455,997
OTHER ASSETS
INVESTMENT IN RELATED US DOLLAR 4,651 4,060 COMPANIES INVESTMENT IN RELATED CHILEAN PESO 0 7 COMPANIES INVESTMENT IN RELATED US DOLLAR 173 160 COMPANIES INVESTMENT IN RELATED OTHER CURRENCY 33 40 COMPANIES GOODWILL US DOLLAR 1,165 1,249 NEGATIVE GOODWILL US DOLLAR -58,352 -53,460 LONG-TERM RECEIVABLES US DOLLAR 2,109 1,017 LONG-TERM RECEIVABLES CHILEAN PESO 0 2,783 LONG-TERM RECEIVABLES ARGENTINE PESO 33 0 LONG-TERM RECEIVABLES BRAZILAN REAL 1,971 1,101 RELATED COMPANIES’ NOTES & BRAZILAN REAL 1,406 ACCOUNTS RECEIVABLE 90
CURRENT LIABILITIES Expressed in ThUS$
ITEM Currency Up to 90 days 90 days to 1 year
12-31-2006 12-31-2005 12-31-2006 12-31-2005
Amount Annual avrg. Amount Annual avrg. Amount Annual avrg. Amount Annual avrg. int. rate int. rate int. rate int. rate
DUE TO BANKS & FINANCIAL INSTITUTIONS - SHORT-TERM CHILEAN PESO 0 16 0 0 0
DUE TO BANKS & FINANCIAL INSTITUTIONS - SHORT-TERM US DOLLAR 3,702 58,655 4.02% 613 10,732 4.02%
DUE TO BANKS & FINANCIAL INSTITUTIONS - SHORT-TERM BOLIVARES 0 61,214 45,718 14.50%
DUE TO BANKS & FINANCIAL INSTITUTIONS - SHORT-TERM PORTION U.F. 0 1,562 6.70% 0 1,494 6.70%
DUE TO BANKS & FINANCIAL INSTITUTIONS - SHORT-TERM PORTION US DOLLAR 1,747 9,372 3.83% 51,040 59,715 3.83%
DUE TO BANKS & FINANCIAL INSTITUTIONS - SHORT-TERM PORTION BOLIVARES 0 0 3,889 17.25%
BONDS PAYABLE - SHORT-TERM PORTION (BONDS) U.F. 0 23,690 175,946 5.02%
BONDS PAYABLE - SHORT-TERM PORTION (BONDS) US DOLLAR 0 9,247 9,340 8.05%
LONG-TERM LIABILITIES WITH 1-YEAR MATURITY US DOLLAR 0 1 0 0
DIVIDENDS PAYABLE CHILEAN PESO 0 323 0 0
DIVIDENDS PAYABLE US DOLLAR 473 0 0
ACCOUNTS PAYABLE U.F. 83 0 0
ACCOUNTS PAYABLE CHILEAN PESO 0 21,461 0 0
ACCOUNTS PAYABLE US DOLLAR 16,722 17,337 0 0
ACCOUNTS PAYABLE ARGENTINE PESO 2,931 1,300 0 0
ACCOUNTS PAYABLE BRAZILIAN REAL 8,293 5,965 0 0
ACCOUNTS PAYABLE BOLIVARES 912 1,595 0 0
ACCOUNTS PAYABLE MEXICAN PESO 1,035 3,193 0 0
ACCOUNTS PAYABLE EURO 701 167 0 0
ACCOUNTS PAYABLE OTHER CURRENCY 21,583 1,423 0 0
NOTES PAYABLE PESO CHILENO 0 6 0 0
NOTES PAYABLE ARGENTINE PESO 707 875 0 0
OTHER PAYABLES CHILEAN PESO 0 36 0 0
OTHER PAYABLES US DOLLAR 1,618 1,250 0 0
OTHER PAYABLES ARGENTINE PESO 0 57 0 0
OTHER PAYABLES MEXICAN PESO 7 19 0 0
OTHER PAYABLES BOLIVARES 62 0 0 0
OTHER PAYABLES EURO 360 0 0 0
OTHER PAYABLES OTHER CURRENCY 22 44 0 0
RELATED COMPANIES’ NOTES & ACCOUNTS PAYABLE US DOLLAR 0 417 5,451 3,033
PROVISIONS CHILEAN PESO 0 4,726 0 0
PROVISIONS US DOLLAR 8,090 5,341 1,068 1,068
PROVISIONS ARGENTINE PESO 5,835 4,102 0 0
PROVISIONS BOLIVARES 4,829 1,634 0 0
PROVISIONS BRAZILIAN REAL 4,094 3,011 0 0
PROVISIONS MEXICAN PESO 809 1589 0 0
PROVISIONS OTHER CURRENCY 6,720 103 297 0 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 91
CURRENT LIABILITIES (Cont.) Expressed in ThUS$
ITEM Currency Up to 90 days 90 days to 1 year
12-31-2006 12-31-2005 12-31-2006 12-31-2005
Amount Annual avrg. Amount Annual avrg. Amount Annual avrg. Amount Annual avrg. int. rate int. rate int. rate int. rate
WITHHOLDINGS CHILEAN PESO 0 2,412 0 0
WITHHOLDINGS US DOLLAR 3,336 816 18 21
WITHHOLDINGS BOLIVARES 1,086 1,148 0 0
WITHHOLDINGS ARGENTINE PESO 996 748 0 0
WITHHOLDINGS BRAZILIAN REAL 6,047 5,029 0 0
WITHHOLDINGS MEXICAN PESO 2,656 1,104 0 0
WITHHOLDINGS OTHER CURRENCY 105 46 0 0
INCOME TAX CHILEAN PESO 0 0 0 1,227
INCOME TAX US DOLLAR 1,556 0 0 461
INCOME TAX ARGENTINE PESO 0 0 5,495 3,493
INCOME TAX BOLIVARES 106 0 148 0
INCOME TAX BRAZILIAN REAL 192 0 0 0
INCOME TAX MEXICAN PESO 37 286 6 946
INCOME TAX OTHER CURRENCY 1,431 894 0 0
UNEARNED INCOME CHILEAN PESO 0 16 0 0
UNEARNED INCOME US DOLLAR 255 0 0 0
UNEARNED INCOME BOLIVARES 8 0 0 0
UNEARNED INCOME ARGENTINE PESO 0 175 0 0
UNEARNED INCOME MEXICAN PESO 0 40 0 0
UNEARNED INCOME OTHER CURRENCY 16 0 0 0
OTHER CURRENT LIABILITIES US DOLLAR 47 0 0 0
OTHER CURRENT LIABILITIES ARGENTINE PESO 0 97 0 0
OTHER CURRENT LIABILITIES MEXICAN PESO 0 145 0 0
TOTAL CURRENT LIABILITIES
CHILEAN PESO 0 28,996 0 1,227
US DOLLAR 37,546 93,189 67,437 84,370
BOLIVARES 7,003 4,525 61,214 49,607
U.F. 83 1,562 23,690 177,440
ARGENTINE PESO 10,469 7,354 5,495 3,493
BRAZILIAN REAL 18,626 14,005 0 0
MEXICAN PESO 3,728 4,728 6 946
EURO 1,061 167 0 0
OTHER CURRENCY 29,877 2,510 297 0
MEXICAN PESO 816 1,648 0 0 92
CURRENT PERIOD LONG-TERM LIABILITIES Expressed in ThUS$ ITEM Currency 1 to 3 years 3 to 5 years 5 to 10 years More than 10 years Amount Annual Amount Annual Amount Annual Amount Annual average average average average interest rate interest rate interest rate interest rate
DUE TO BANKS & FINANCIAL US DOLLARS 66,946 6.02% 86,003 6.02% 17,995 6.02% 0 INSTITS., L-T LONG-TERM BONDS PAYABLE U.F. 107,693 5.28% 40,112 5.17% 32,443 5.15% 54,864 5.08% (BONDS) LONG-TERM BONDS PAYABLE US DOLLARS 39,000 6.53% 0 0 0 (BONDS) LONG-TERM OTHER PAYABLES US DOLLARS 74 0 0 0 LONG-TERM PROVISIONS US DOLLARS 259 0 280 0 LONG-TERM PROVISIONS BOLIVARES 0 0 0 1,123 LONG-TERM DEFERRED TAXES US DOLLARS 41,000 0 27,853 0 LONG-TERM DEFERRED TAXES ARGENTINE PESO 1,165 2,456 1,989 1,942 LONG-TERM DEFERRED TAXES MEXICAN PESO 67 0 0 0 LONG-TERM DEFERRED TAXES BOLIVARES 1,350 0 0 0 LONG-TERM DEFERRED TAXES REALES 135 0 0 0 OTHER LONG-TERM LIABILITIES US DOLLARS 5,930 0 0 0 OTHER LONG-TERM LIABILITIES REALES 0 0 11,390 0
TOTAL LONG-TERM LIABILITIES
US DOLLARS 153,209 86,003 46,128 0
U.F. 107,693 40,112 32,443 54,864
BOLIVARES 1,350 0 0 1,123
ARGENTINE PESO 1,165 2,456 1,989 1,942
MEXICAN PESO 67 0 0 0
REALES 135 0 11,390 0 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 93
PREVIOUS PERIOD LONG-TERM LIABILITIES 12-31-2005 Expressed in ThUS$ ITEM Currency 1 to 3 years 3 to 5 years 5 to 10 years More than 10 years Amount Annual Amount Annual Amount Annual Amount Annual average average average average interest rate interest rate interest rate interest rate
DUE TO BANKS & FINANCIAL US DOLLARS 95,934 3.83% 26,378 3.83% 9,060 3.83% 0 INSTITS., L-T DUE TO BANKS & FINANCIAL BOLIVARES 4,152 17.25% 0 0 0 INSTITS., L-T BONDS PAYABLE - LONG-TERM U.F. 32,668 5.24% 32,672 5.24% 8,793 5.24% 15,828 5.24% (BONDS) BONDS PAYABLE - LONG-TERM US DOLLARS 48,000 5.00% 0 0 0 (BONDS) LONG-TERM PAYABLES CHILEAN PESO 28 0 0 0 LONG-TERM PAYABLES US DOLLARS 216 0 0 0 LONG-TERM PROVISIONS CHILEAN PESO 4 0 21 0 LONG-TERM PROVISIONS US DOLLARS 0 0 0 1,000 LONG-TERM PROVISIONS BRAZILIAN REAL 393 0 0 0 LONG-TERM DEFERRED TAXES US DOLLARS 0 0 457 38,237 OTHER LONG-TERM LIABILITIES CHILEAN PESO 1,682 633 316 0 OTHER LONG-TERM LIABILITIES BRAZILIAN REAL 10,097 3,637 0 0 OTHER LONG-TERM LIABILITIES US DOLLARS 3,600 0 0 0
TOTAL LONG-TERM LIABILITIES
US DOLLARS 147,750 26,378 9,517 39,237
BOLIVARES 4,152 0 0 0
U.F. 32,668 32,672 8,793 15,828
CHILEAN PESO 1,714 633 337 0
BRAZILIAN REAL 10,490 3,637 0 0 94
NOTE 31: SANCTIONS NOTE 33: ENVIRONMENT
The Company and its directors or managers received no sanctions by The Company’s environmental management is focused on the fo- the Superintendency of Securities and Insurance or other administrative llowing two aspects: authorities in the period covered by these financial statements. 1. Legal Aspect NOTE 32: SUBSEQUENT EVENTS This area addresses everything concerning permit applications, authorizations and certificates related to the environmental area, and 1,171 hectares of planted forests belonging to the Company Masisa the regularization of aspects that might be outstanding. S.A. (1,065 hectares) and to Forestal Tornagaleones S.A. (106 hec- tares) and located in Chile’s Region 8 were affected by forest fires in 2. Environmental Management and Ecoefficiency January 2007. The affected land of both companies was covered by Based on the concept that each process can be improved with responsi- insurance policies, which are in the process of being settled. ble and correct environmental management, the Company has endea- The Company’s board of directors made the decision in January vored to assess and develop projects that reduce costs, lower process 2007 to close down the operations of the productive plant in the Uni- losses to attain the efficient use of resources, and lastly to implement ted States, which started in early February and involved discharging internationally-certified environmental management systems. approximately 35 Company workers. The management deems that The Company has committed and made investments in the ope- a part of the productive assets can be redeployed in other countries rative areas related to the environmental management system. The with productive activity and that the assets that are finally stripped will following are the amounts invested in the Company and affiliates: have no material effect on the Company’s income in the future. The net book value of the productive plant amounted to ThUS$ 2,386 for Company 2006 2006 Invested the year ended December 31, 2006. Accumulated Accumulated in the 2006 No significant events have occurred as of December 31 and the Budget ThUS$ Investment period ThUS$ release date of these financial statements to change the Company’s ThUS$ financial standing or income. Masisa S.A. 4,155 6,303 2,609 Masisa Argentina S.A. 1,776 1,688 831 Masisa do Brasil Ltda. 2,254 1,871 327 Maderas y Sintéticos México S.A. de CV 996 1,033 47 Forestal Argentina S.A. 90 208 53 Forestal Tornagaleones S.A. 638 907 109 Masisa Madeiras Ltda. 286 138 - Terranova de Venezuela S.A 290 3,081 1,086
CONSOLIDATED TOTAL 10,485 15,229 5,062 CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 95
CONSOLIDATED FINANCIAL STATEMENTS RATIO ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2006 ACTIVITY INDEXES 2006 2005 (Expressed in thousands of US$) Jan-Dec Jan-Dec A. COMPARATIVE ANALYSIS OF THE MAIN TRENDS 1. Total Assets 2,016,334 1,965,921 Investments in the period LIQUIDITY INDEXES 2006 2005 Jan-Dec Jan-Dec - In fixed assets 121,843 67,289 Current Ratio 1.78 1.11 Transfers Acid Ratio 0.06 0.03 - Sale of fixed assets 1,565 2,193 2. Inventory turnover 3.33 2.62 Current assets dropped by approximately 9.74%, explained by the lower 3. Inventory permanence 108.23 137.22 short-term financial investments and inventories. The former was due to disbursements to build a new plant in Chile, and the latter to a higher 4. Accounts payable turnover 12.97 10.22 turnover of inventories on account of the greater sales in the period. 5. Accounts payable permanence 27.76 32.23 Current liabilities fell by 43.75%, mainly explained by restructuring 6. Accounts receivable turnover 6.16 5.34 the bond debt from the short term to the long term. 7. Accounts receivable permanence 58.41 67.33 INDEBTEDNESS INDEXES 2006 2005 Jan-Dec Jan-Dec Expressed in ThUS$ Leverage (times) 0.65 0.72 INCOME INDEXES 2006 2005 Jan-Dec Jan-Dec Short-term debt/total debt 33.04% 58.77% Long-term debt/total debt 66.94% 41.23% Operating earnings 886,507 743,488 Financial expenses coverage (times) 2.06 1.81 - Domestic market 816,439 682,826 - Foreign market 70,068 60,662 The change in the leverage ratio was mainly due to the capital Operating costs (678,956) (549,501) increase of US$ 44 million carried out as of the first quarter of 2006, - Domestic market (625,292) (524,551) the increase in the income in the period and other shareholder equity increases, mainly the forest reserve. The level of debt (current liabi- - Foreign market (53,664) (24,950) lities and long-term liabilities) remained at the same level between Operating income 83,579 81,393 both periods. Financial expenses (35,371) (38,251) The increase in the hedging index was largely due to a higher net Non-operating income (45,997) (50,481) income before tax and minority interest in the 2006 period compared with the previous period, as explained below in this section. R.B.M.T.D.A.G.I. 124,040 121,780 Net income (loss) after tax 24,933 22,981
Operating earnings increased by 19.24% in the 2006 period on 2005, and the operating margin rose by 6.99%. The following is the breakdown of depletion for the periods analyzed:
Expressed in ThUS$ 2006 2005 Jan-Dec Jan-Dec Argentina 1,288 2,837 Brazil 5,562 7,278 Chile 9,011 10,335 Venezuela 3,307 4,157
TotaL 19,168 24,607 96
PROFITABILITY INDEXES 2006 2005 The incorporation of fresh resources due to the capital increase com- Jan-Dec Jan-Dec pleted in January 2006, the restructuring of liabilities ending up with the placement of a bond in UF in January 2006, and the payment 1. Return on shareholders’ equity 2.58% 2.81% of dividends of US$ 11.4 million in 2006, and of US$ 52.1 million in 2. Return on assets 1.48% 1.37% 2005, can be highlighted regarding cash flows. 3. Return on operating assets 4.13% 4.11% C. BOOK AND ECONOMIC VALUES OF ASSETS AND LIABILITIES 4. Earnings per share (US dollars) 0.0052 0.0047 The Company’s key assets are its productive plants in Chile and its 5. Return on dividends 1.01% 2.79% investments overseas, in countries like Argentina, Brazil, the United States, Venezuela and Mexico, which are valued according to genera- The profitability indexes reflected the drop in income commented on above. lly accepted accounting principles. The studies the Company normally carries out to analyze the economic value of its productive plants have B. DESCRIPTION AND ANALYSIS OF THE MAIN NET CASH FLOW revealed that such values exceed the respective book values, and for COMPONENTS those cases deemed necessary and based on evidence provisions are Expressed in ThUS$ established to adjust such value to market values. 2006 2005 D. ANALYSIS OF THE MOST SIGNIFICANT CHANGES IN THE PERIOD Jan-Dec Jan-Dec The Company does business in various markets, mainly focused on Positive net cash flow from operating 132,035 103,762 Chile, the United States, Brazil, Mexico, Argentina and Venezuela. activities Due to this, the Company’s sales and financial income are exposed to - Collection of trade accounts receivables 1,230,899 879,940 the conditions prevailing in each market. The table below shows the - Payment to suppliers and employees (1, 053,794) (748,178) breakdown of sales by export market. - Others (45,070) (28,000) Net cash flow from financing activities (32,963) 36,610 2006 2005 Jan-Dec Jan-Dec - Placement of cash shares 44,012 75,383 - Proceeds from loans 242,536 125,121 EE.UU. 26.0% 28.0% - Bonds 162,965 - Chile 16.3% 16.5% - Dividends paid (11,491) (52,111) México 13.2% 15.0% - Payment of loans (291,108) (82,901) Brazil 16.4% 14.0% - Payments of bonds (178,338) (26,594) Venezuela 10.4% 8.3% - Others (1,539) (2,288) Argentina 7.9% 7.6% Net cash flow from investment activities (149,868) (101,044) Others 9.8% 10.6% - Proceeds from sale of fixed assets 1,565 2,193 Total 100.0% 100.0% - Incorporation of fixed assets (121,843) (67,289) - Others (29,590) (35,948) Total net cash flow provided for the year (50,796) 39,328 Masisa S.A. has increased the diversification of its market risk in the last few years by expanding its productive and commercial operations Inflation effect (12) - to other countries. Hence, it currently has plants in Chile, Argentina, CASH AND CASH EQUIVALENTS AT THE 97,857 58,530 Brazil, the United States, Venezuela and Mexico. The Company also has BEGINNING OF THE YEAR its own commercial operations in Colombia, Peru and Ecuador and it ex- ports to a host of countries in America, Asia and Europe. The Company CASH AND CASH EQUIVALENTS AT THE END 47,049 97,858 thereby avoids the risk exposure of a particular market. OF THE YEAR The Company also faces the risk in its markets of possible tougher competition or the entry of new players in the board, wood and forest product market. Masisa S.A. deems it has a sound position in each mar- ket in which it participates directly, which enables it to maintain profitable and growing operations. However, the Company can not assure these conditions will not change in the future with the entry of new players or tougher competition in the market in which it participates. To address CONSOLIDATED FINANCIAL STATEMENTS 2006 MASISA | 97
such risks, the Company focuses on maintaining its cost leadership, • Operational risk: keeping up a strong distribution chain, constantly enhancing its offe- Masisa S.A. faces raw material supply risks during the normal cour- ring of products, and obtaining brand recognition, among others. se of business, especially chemical resins and wood that are key The Company’s assets and liabilities are exposed to foreign elements used to produce its products. To minimize such risk, the exchange rate fluctuations or those of different currencies than the Company has long-term agreements with chemical resin suppliers. functional accounting currency (US dollars). The presence of assets In addition to the forests and plantations the Company owns directly and liabilities in currencies other than the US dollar is mainly due in Chile, it is also the main shareholder of Forestal Tornagaleones to the Company’s operations in domestic markets, to domestic sales S.A., which has plantations in Chile and Argentina. Moreover, it has activities, to investment in assets purchased in the domestic market a policy of diversifying its wood residue supply, thereby reducing the and to securing internal financing. The following were the balances dependence on individual suppliers. in non-US dollar currencies and/or expressed in a different currency During the normal course of business, the Company may face risks from the functional currency in the periods analyzed: of damage to its plants, the risk of warehouse loss, damage to third parties, legal contingencies, commercial risks and others. The SUMMARY OF ASSETS AND LIABILITIES IN NON-US DOLLAR CURRENCIES expressed in ThUS$ Company management strives to identify such risks to prevent them 2006 2005 from happening, minimize the potential adverse effects and/or cover Jan-Dec Jan-Dec the possible losses from such disasters with insurance.
Assets 190,197 189,113 Liabilities 419,306 407,689 Active (passive) standing (229,109) (218,576)
The Company deploys hedging to reduce the exchange rate fluctua- tion risks, as shown in the respective hedging note. Based on market conditions, the Company’s management establis- hes policies to secure loans, invest in time deposits and marketable securities with a reverse re-sale agreement and the use of hedging instruments. Depending on the amounts, the board also approves these transactions before they are carried out. The new long-term financing to finance new investment or refinance existing liabilities must be approved by the Company’s board of directors. The local management in those countries where Masisa S.A. has operations can secure new short-term loans for their working capital needs in the normal course of business.
E. RISK ANALYSIS Analysis of Risk Factors The Company faces various market, financial and operational risk factors during the normal course of business. • Financial and exchange rate risk: The Company management establishes policies to address the financial risk by using hedging instruments like swaps, forwards, options or futures to hedge the exchange rate and interest rate fluctuation risks. The Company does not use hedging instruments for speculative purposes. 98 INDIVIDUAL FINANCIAL STATEMENTS 2006 MASISA | 99
INDIVIDUAL FINANCIAL STATEMENTS 100 Individual financial statements 2006 MASISA | 101
REPORT OF THE INDEPENDENT AUDITORS
REPORT OF THE INDEPENDENT AUDITORS
Santiago, February 28, 2007
Messrs Shareholders and Directors of MASISA S.A.
1 We have audited the balance sheets of Masisa S.A. for the years ended December 31, 2006 and 2005, and the corresponding statements of income and of cash flows for the years ended on those dates. These financial statements (including the related notes) are the responsibility of the management of Masisa S.A. Our responsibility is to express an opinion on these financial statements based on our audits.
2 We conducted our audits in accordance with generally accepted auditing standards in Chile. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Company’s management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
3 The aforementioned financial statements have been prepared to reflect the individual financial standing of Masisa S.A., based on the criteria described in Note 2, before proceeding to the line-by-line consolidation of the financial statements of affiliates detailed in Note 11. Hence, for an adequate interpretation, these individual financial statements should be read and analyzed in conjunction with the consolidated financial statements of Masisa S.A. and its affiliates, which are required by generally accepted accounting principles.
4 In our opinion, the mentioned individual financial statements present fairly, in all material respects, the financial standing of Masisa S.A. and affiliates for the years ended December 31, 2006 and 2005, and the results of their operations and their cash flows for the years then ended, in conformity with the principles stated in Note 2.
Pedro Pelen De G. Tax Code: 7.137.062-3 102
INDIVIDUAL BALANCE SHEET
ASSETS For the years ended December 31, 2006 and 2005
2006 2005 ThUS$ ThUS$
TOTAL CURRENT ASSETS 522,851 544,525
Cash 1,895 735 Time deposits 2,827 46,753 Marketable securities (net) 956 2,229 Accounts receivable (net) 30,574 24,270 Notes receivable (net) 3,381 4,937 Other receivables (net) 6,823 8,491 Notes and accounts receivable from related companies 369,507 358,259 Inventories (net) 65,230 70,793 Recoverable taxes 34,618 19,843 Pre-paid expenses 1,272 3,449 Deferred taxes 1,957 0 Other current assets 3,811 4,766 Leasing contracts (net) 0 0 Assets for leasing (net) 0 0
TOTAL FIXED ASSETS 570,585 431,922
Lands 55,306 52,882 Buildings and infrastructure 89,678 65,281 Machinery and equipment 245,641 103,284 Other fixed assets 388,007 316,616 Negative goodwill from technical re-appraisal of fixed assets 7,390 7,390 Depreciation (less) -215,437 -113,531
TOTAL OTHER ASSETS 569,918 589,227
Investments in related companies 391,580 524,598 Investments in other companies 158 160 Goodwill 1,165 1,249 Negative goodwill (less) -47,626 -51,586 Long-term receivables 1,358 1,137 Long-term notes and accounts receivable from related companies 101,433 101,066 Long-term deferred taxes 0 0 Intangible assets 267 121 Amortization (less) -41 -21 Others 121,624 12,503 Long-term leasing contracts (net) 0 0
TOTAL ASSETS 1,663,354 1,565,674 Individual financial statements 2006 MASISA | 103
LIABILITIES For the years ended December 31, 2006 and 2005 2006 2005 ThUS$ ThUS$ TOTAL CURRENT LIABILITIES 165,304 325,448 Due to banks and financial institutions, short-term 3,702 58,671 Long-term due to banks and financial institutions, short-term portion 0 4,274 Bonds payable (promissory notes) 0 0 Bonds payable, short-term portion (bonds) 23,752 176,008 Long-term bonds payable with one-year maturity 0 0 Dividends payable 473 323 Accounts payable 21,058 21,658 Notes payable 0 6 Other payables 1,731 1,091 Notes and accounts payable to related companies 98,362 50,435 Provisions 12,378 6,905 Withholdings 980 2,260 Income tax 227 0 Unearned income 16 16 Deferred taxes 0 191 Other current liabilities 2,625 3,610 TOTAL LONG-TERM LIABILITIES 311,695 143,994 Due to banks and financial institutions 0 3,510 Long-term bonds payable (bonds) 265,112 119,961 Long-term notes payable 0 0 Long-term accounts payable 18 117 Long-term notes and accounts payable to related companies 0 0 Long-term provisions 15,866 9,842 Long-term deferred taxes 24,769 4,333 Other long-term liabilities 5,930 6,231 MINORITY INTEREST 0 0
TOTAL SHAREHOLDERS’ EQUITY 1,186,355 1,096,232 Paid-in capital 812,880 769,834 Capital price-level readjustment reserve 0 0 Own share sale premium 0 0 Other reserves 219,494 188,477 Retained earnings (sum of codes 5.24.51.00 to 5.24.56.00) 153,981 137,921 Reserves for future dividends 51,424 51,424 Accumulated earnings 73,072 60,128 Accumulated losses (less) 0 0 Net income (loss) for the period 29,485 26,369 Interim dividends (less) 0 0 Development period accumulated deficit 0 0 TOTAL LIABILITIES 1,663,354 1,565,674 104
STATEMENT OF INCOME
For the years ended December 31, 2006 and 2005
2006 2005 ThUS$ ThUS$ OPERATING INCOME 16,346 17,752 Operating margin 62,160 52,748 Revenues 301,719 236,897 Operating costs (less) -239,559 -184,149 Sales and administration expenses (less) -45,814 -34,996 Non-Operating income 11,294 -2,965 Financial income 32,178 17,612 Investment earnings in related companies 27,474 30,493 Other non-operating income 4,058 1,586 Equity in loss of related companies (less) -31,649 -16,619 Amortization of goodwill (less) -85 -85 Financial expenses (less) -20,862 -22,755 Other non-operating disbursements (less) -1,958 -1,523 Price-level restatement 0 0 Exchange rate differences 2,138 -11,674
INCOME BEFORE INCOME TAX AND EXTRAORDINARY ITEMS 27,640 14,787
INCOME TAX -2,111 8,318
EXTRAORDINARY ITEMS 0 0
NET INCOME (LOSS) BEFORE MINORITY INTEREST 25,529 23,105
MINORITY INTEREST 0 0
NET INCOME (LOSS) 25,529 23,105
Amortization of negative goodwill 3,956 3,264
NET INCOME (LOSS) FOR THE PERIOD 29,485 26,369 Individual financial statements 2006 MASISA | 105
STATEMENT OF INCOME INDIVIDUAL STATEMENT OF CASH FLOW - DIRECT
For the years ended December 31, 2006 and 2005 2006 2005 ThUS$ T h U S $ NET CASH FLOW FROM OPERATING ACTIVITIES 56,145 36,583 Proceeds from trade accounts receivable 329,538 249,444 Interest received 29,452 8,638 Dividends and other distributions received 0 0 Other income received 23,636 24,621 Cash paid to suppliers and employees (less) -306,417 -228,356 Interest paid (less) -19,852 -17,619 Income tax paid (less) 0 0 Other expenses paid (less) -212 -145 V.A.T. and others paid (less) 0 0 NET CASH FLOW FROM FINANCING ACTIVITIES -37,032 70,690 Placement of cash shares 44,012 75,383 Proceeds from loans 34,499 79,929 Bonds 162,965 0 Related companies’ secured loans 0 0 Other loans obtained from related companies 0 0 Other financing sources 0 0 Dividends paid (less) -11,491 -52,111 Capital distribution (less) 0 0 Loans paid (less) -96,776 -11,304 Bonds paid (less) -169,338 -17,594 Payment of related companies’ secured loans (less) 0 0 Payment of other related companies’ loans (less) 0 0 Stock issuance and placement expenses (less) -903 -3,613 Bond issuance and placement expenses (less) 0 0 Other financing disbursements (less) 0 0 NET CASH FLOW FROM INVESTMENT ACTIVITIES -63,361 -86,258 Proceeds from sale of fixed assets 1,527 660 Proceeds from sale of permanent investments 0 0 Proceeds from sale of other investments 12 0 Proceeds from secured loans to related companies 0 0 Proceeds from other loans to related companies 67,651 0 Other investment income 13,411 0 Incorporation of fixed assets (less) -68,279 -29,570 Capitalized interest repaid (less) -1,461 -1,401 Permanent investments (less) 0 -29,890 Investments in financial instruments (less) 0 0 Secured loans to related companies (less) 0 0 Other loans to related companies (less) -76,222 -26,057 Other investment disbursements (less) 0 0 Total net cash flow provided for the year -44,248 21,015 Effect of inflation on cash and cash equivalents 0 0 Net variation of cash and cash equivalents -44,248 21,015 Cash and cash equivalents at beginning of year 49,926 28,911 CASH AND CASH EQUIVALENTS AT END OF YEAR 5,678 49,926 106
CASH FLOW TO NET INCOME RECONCILIATION
For the years ended December 31, 2006 and 2005
2006 2005 ThUS$ ThUS$ NET INCOME (LOSS) FOR THE PERIOD 29,485 26,369
INCOME FROM SALE OF ASSETS -27 -21
(Profit) loss on sales of fixed assets -27 -728 Profit on sales of investments (less) 0 0 Loss on sales of investments 0 0 (Profit) loss on sales of other assets 0 707
CHARGES (CREDITS) TO INCOME NOT AFFECTING CASH FLOW 17,503 13,361
Depreciation for the period 12,211 9,853 Amortization of intangible assets 0 0 Write-offs and provisions 364 515 Accrued income from investment in related companies (less) -27,474 -30,493 Accrued loss from investment in related companies 31,649 16,619 Amortization of goodwill 85 85 Amortization of negative goodwill (less) -3,956 -3,264 Net price-level restatement 0 0 Net exchange rate difference -2,138 11,674 Other credit to income not affecting cash flow (less) 0 0 Other charges to income not affecting cash flow 6,762 8,372
CHANGES IN ASSETS AFFECTING CASH FLOW (INCREASES) DECREASES -2,733 -7,939
Accounts receivable -1,653 -9,725 Inventories 15,717 -8,702 Other assets -16,797 10,488
CHANGES IN LIABILITIES AFFECTING CASH FLOW (INCREASES) DECREASES 11,917 4,813
Accounts payable related to operating income 1,952 -3,422 Interest payable 1,010 5,136 Net income tax payable 2,159 -2,285 Other accounts payable related to non-operating income 6,796 5,384 Net value added tax and similar payable 0 0
PROFIT (LOSS) OF MINORITY INTEREST 0 0
NET CASH FLOW FROM OPERATING ACTIVITIES 56,145 36,583 Individual financial statements 2006 MASISA | 107
CASH FLOW TO NET INCOME RECONCILIATION NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS
NOTE 1: REGISTRY IN THE SECURITIES REGISTRY
Masisa S.A. is a publicly-traded corporation and is registered in the The following US dollar exchange rates were applicable for the years securities registry of the Superintendency of Securities and Insurance ended December 31, 2006 and 2005. under number 0825 (03/24/04) and is subject to regulation by such body. Its stock is listed on the US stock market and it is therefore 2006 2005 regulated by the Securities and Exchange Commission. per US$ per US$ Chilean pesos 532,3900 512,5000 NOTE 2: ACCOUNTING POLICIES Unidad de Fomento 0,0290 0,0285
a) Accounting Period The individual balance sheets cover the period January 1 through e) Time deposits and marketable securities December 31, 2006 and 2005, respectively. Time deposits were stated with their accrued interest, and readjust- ment if applicable, at year-end. Marketable securities corresponding b) Preparation Bases to mutual fund quotas were stated at the redemption value of the The individual financial statements have been drawn up in accor- quota in effect at year-end. dance with generally accepted accounting principles in Chile and pursuant to the regulations of the Superintendency of Securities and f) Inventories Insurance, and should there be any discrepancies, the latter shall • Inventories of products in process and finished products were prevail. The exception is the investments in affiliates, which are re- stated at the production cost, according to the cost by absorption ported on a single line on the balance sheet at their equity value, and system. have therefore not been consolidated line-by-line. This treatment does • Standing timber was stated at the forest appraisal value of the plan- not modify the net income for the year or the shareholders’ equity. tations, which are estimated will be developed the following year. These financial statements have only been issued for purposes of • Pulpable and rustic saw logs were stated at the average production making an individual analysis of the Company, and should therefore be cost or purchase value, if applicable. read in conjunction with the consolidated financial statements, which • Materials, spare parts, supplies and others were carried at the are required by generally accepted accounting principles in Chile. average purchase cost. • Imports in transit were stated at the purchase cost. c) Presentation Bases The value of inventories does not exceed its estimated net realizable These financial statements were stated in US dollars, and no upda- or replacement value, if applicable. ting factor was therefore applied to the comparative figures of the The company’s policy is to establish provisions for obsolescence previous period. of materials and spare parts and for the lower value of finished Some reclassification has been made for the 2005 period for a products when certain aspects are met, such as: better interpretation of these financial statements. • Replacement of old machinery or spare parts of idle machinery. • Little alternative use of materials or spare parts with a low stock d) Foreign Currency Translation turnover. The parent company and its direct affiliates are authorized to state • Possible loss of commercial value of finished products due to dete- their figures in US dollars. Such currency is used as a common mea- rioration in prolonged storage, regarding the standards required by surement unit and the balances of assets and liabilities expressed in the market. different currencies have been translated into US dollars at the rates of exchange prevailing at each year-end. The exchange rate differen- g) Allowance for Doubtful Accounts ces are stated in income. It is the company’s policy to make provisions for all doubtful accounts subject to collection and establish specific provisions for accounts with some reasonable risk of non-collection. 108
h) Fixed Assets income were adjusted to the reserve equity account due to conversion FOREST PLANTATIONS differences in the item Other Reserves. Forest plantations were stated according to the appraisal made by forestry engineers. The negative goodwill determined on the book va- l) Goodwill and Negative Goodwill lue, which includes the financing cost during the growth period, has This is the difference between the investment purchase value and been credited to the forest reserve fund in the shareholders’ equity the equity method of such investment at the time of purchase. Such item. The appraisal values have been determined based on a growth differences are amortized in the terms stated in the negative goodwill cost value for seedlings and on the estimated commercial value of and goodwill note. standing timber for adult plantations. The plantations, which it is estimated will be harvested the fo- m) Reverse Re-Sale Agreement Financing Operations llowing year based on the production plan, were stated in the item Purchases of financial instruments with a reverse re-sale agreement Inventories in current assets. core registered at their present value calculated according to the FIXED ASSETS EXCLUDING PLANTATIONS discount rate used to determine the price of each instrument when Fixed assets were stated at their cost of purchase, construction or te- they were purchased and are classified in Current Assets under the chnical re-appraisal, as the case may be, and included the financing item Other Assets. cost during the construction and main renovation and improvement period. Maintenance and repair expenditures were charged to the n) Bonds Payable income in the period they were carried out. Bonds payable are bond placements made in Chile, which were Spare parts of greater relative value are depreciated over the valued at their face value plus readjustment and interest accrued expected life of the main good to which they are related, and those at each year-end. The difference between the initial face value and of periodical consumption are charged to production costs when they the placement value was recorded as a deferred asset. This asset are used. is being amortized using the straight-line method over the period of Fixed assets that are idle and available for sale have been stated in the obligation. the item Others in Other Assets and were stated at their estimated realization value. o) Income Tax and Deferred Taxes TECHNICAL RE-APPRAISAL The Company acknowledge its tax obligations according to current The technical re-appraisals were recorded as and when laid down legal provisions. in circular letters Nº1529, 1571 and 428 of the Superintendency of The effects of deferred taxes arising from temporary differences Securities and Insurance. There were no new technical re-apprai- between the financial balance sheet and the tax balance sheet were sals recorded. recorded considering the income tax that would be applicable on the estimated reverse date, pursuant to what is set forth in Technical Bu- i) Fixed Asset Depreciation lletin Nº60 of the Chilean Association of Accountants. The effects of The fixed asset depreciation cost is amortized based on the straight- deferred taxes existing on the implementation date of the mentioned line depreciation method, considering the estimated life of the goods. Technical Bulletin (January 2000) and not recognized beforehand were deferred and amortized charged to income in the estimated re- j) Intangibles versal term of the accounting item causing the temporary difference. The company’s intangible assets, mainly water rights, were stated at their purchase cost. The amortization period is 40 years, pursuant to p) Severance Indemnities what is set forth in Technical Bulletin Nº55 of the Chilean Association The Company established provisions for the year ended December of Accountants. 31, 2006, to cover the obligation existing with some unions, which have an agreement on guaranteed indemnity benefits for retirement. k) Investments in Related Companies The provision was calculated based on the current value according to Investments in related companies were stated using the equity me- the accrued cost of the benefit at an annual interest rate of 7% and thod (V.P.P.), determined based on their respective financial state- based on the years of service in the Company. ments at each year-end. Investments abroad were adjusted to generally accepted accoun- ting principles in Chile and were translated to the functional currency used by the Company, pursuant to what is laid down in Technical Bulletin Nº64 of the Chilean Association of Accountants. Investments in national affiliates with accounting in Chilean pesos were controlled in such currency and expressed in US dollars at each year-end. Differences arising from conversion to US dollars other than Individual financial statements 2006 MASISA | 109
q) Operating Income v) Share Issuance Cost Operating income is recognized when transferring goods or rendering According to the instructions in Circular Letter Nº1370 of the services and it corresponds to sales of own and third-party manu- Superintendency of Securities and Insurance and its subsequent factured products. Sales prices were determined by the conditions modification (Circular Letter Nº1736), the share issuance and present in the export market and are stated net of tax, price discounts placement costs were recorded in a “Share Issuance and Placement and others affecting their calculation. Costs” account and were stated discounting the reserves in the item shareholders’ equity. r) Hedging Contracts The Company has interest rate and exchange rate hedging swap contracts with financial institutions. These contracts were defined as NOTE 3: ACCOUNTING CHANGES an expected accounting item hedging and were recorded according to what is set forth in Technical Bulletin Nº57 of the Chilean Association There were no significant changes to the application of accounting of Accountants. principles, to an accounting estimate or changes in the informing The fair value of these instruments was stated in the item Other body for the year ended December 31, 2006, compared with the Assets or Other Liabilities, according to whether these were payable to previous period that might significantly affect the interpretation of or receivable from the respective financial institution. these financial statements. The unrealized income of current accounting item contracts in force was stated in the item Other Liabilities and the income already obtained was stated in Financial Expenses or Exchange Rate Differen- NOTE 4: MARKETABLE SECURITIES ce, depending on the nature of the swap hedging. For those cases in which the hedging was not efficient, the con- Expressed inThUS$ tracts were treated as investment instruments. INSTRUMENTS BOOK VALUE s) Software 12-31-2006 12-31-2005 The software currently used by the Company was purchased from the Shares 0 0 company SAP Chile S.A., and it consists of the SAP R/3, version 4.6 C system, for which a 4-year amortization period was established. Bonds 0 0 Mutual fund quotas 956 2,229 t) Research and Development Expenses Investment fund quotas 0 0 The research and development expenses were charged to the net Public offering promissory notes 0 0 income of the period in which they occurred. No significant disbur- sements have been made for these since the establishment of the Mortgage bills 0 0 Company. MARKETABLE SECURITIES TOTAL 956 2,229 u) Statement of Cash Flow Cash equivalents were deemed to be those short-term investments with a minimum risk of significant loss of value, which are carried out NOTE 5: SHORT AND LONG-TERM TRADE ACCOUNTS RECEIVABLES as part of the usual management of cash surpluses and can be quickly converted into known cash amounts, and there is the intention of TRADE ACCOUNTS RECEIVABLES BY MARKET making such conversion in a term of no more than 90 days. Under cash flows arising from operating activities are considered all BREAKDOWN 2006 2005 those cash flows related to the Company’s line of business, including ThUS$ ThUS$ interest paid and received, dividends received and generally all those National 23,963 21,504 flows that were not defined as investment or financing. It should be Export 6,611 2,766 highlighted that the operating concept used in this financial statement was wider than that considered in the statement of income. 30,574 24,270 110
Expressed inThUS$ ITEM CURRENT LONG-TERM Up to 90 days More than 90 days up to 1 year Subtotal Total Current (net) 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2006 31-12-2005 31-12-2006 31-12-2005
Accounts Receivables 25,018 22,320 6,639 2,200 31,657 30,574 24,270 0 0 Allowance for doubtlful accounts 1,083 Notes receivable 3,352 4,861 335 725 3,687 3,381 4,937 0 0 Allowance for doubtlful accounts 306 Other receivables 5,637 8,028 1,262 539 6,899 6,823 8,491 1,358 1,137 Allowance for doubtlful accounts 76
Total LONG-TERM TRADE ACCOUNTS RECEIVABLES 1,358 1,137
NOTE 6: BALANCES AND TRANSACTIONS WITH RELATED COMPANIES
The accounts receivable from related companies were mainly for finan- The payment terms were conditioned to the cash generation of the cing allocated to affiliates to develop their activities, which expressed in respective companies. US dollars and in some cases accrued interest equivalent to the 180- The commercial accounts receivable and payable were subject to day LIBOR rate plus a market spread for these kinds of operations. normal market conditions.
NOTES AND ACCOUNTS RECEIVABLE Expressed in ThUS$ TAX CODE Company SHORT-TERM LONG-TERM 31-12-2006 31-12-2005 31-12-2006 31-12-2005 99537270-3 INVERSIONES INTERNATIONALES TERRANOVA S.A. 263,433 214,076 76,433 76,433 79959070-0 MASISA INVERSIONES LTDA. 0 85,249 0 0 77790860-K MASISA PARTES Y PIEZAS LTDA. 3,564 3,491 0 0 81507700-8 FORESTAL TORNAGALEONES S.A. 31,318 0 0 4,545 94323000-5 GRUPO NUEVA S.A. 3 0 0 0 0-E MADERAS Y SINTÉTICOS MÉXICO S.A. DE C.V. 26,924 20,438 0 20,088 0-E MASISA USA INC. 16,457 17,407 0 0 0-E MASISA ECUADOR S.A. 3,576 5,081 0 0 0-E MADERAS Y SINTETICOS DEL PERÚ S.A.C. 2,826 3,330 0 0 0-E FORESTAL TERRANOVA MÉXICO S.A. DE C.V. 6,989 5,726 0 0 0-E MASISA DO BRASIL LTDA. 9,525 1,386 25,000 0 0-E TERRANOVA VENEZUELA S.A. 621 615 0 0 0-E FIBRANOVA C.A. 548 536 0 0 0-E PLYCEM CONSTRUSISTEMAS COSTA RICA 410 140 0 0 0-E MASISA COLOMBIA S.A. 682 590 0 0 0-E PLYCEM CONSTRUSISTEMAS GUATEMALA 77 117 0 0 0-E PLYCEM CONSTRUSISTEMAS NICARAGUA 82 10 0 0 0-E PLYCEM CONSTRUSISTEMAS EL SALVADOR 51 55 0 0 0-E ANDINOS C.A. 519 12 0 0 0-E FORESTAL ARGENTINA S.A. 146 0 0 0 0-E MASNOVA DE MÉXICO S.A. DE C.V. 1,745 0 0 0 0-E MASISA MADEIRAS LTDA 11
TOTAL 369,507 358,259 101,433 101,066 Individual financial statements 2006 MASISA | 111
NOTES AND ACCOUNTS PAYABLE Expressed in ThUS$ TAX CODE Company SHORT-TERM LONG-TERM 31-12-2006 31-12-2005 31-12-2006 31-12-2005
79616940-0 MASISA CONCEPCIÓN LTDA. 0 29,095 0 0 79554560-3 INVERSIONES CORONEL LTDA. 0 16,204 0 0 0-E MASISA OVERSEAS LTD. 98,312 4,515 0 0 0-E MASISA MADEIRAS LIMITADA 0 555 0 0 0-E MASISA ARGENTINA S.A. 50 66 0 0
TOTAL 98,362 50,435 0 0
TRANSACTIONS Expressed in ThUS$ Company TAX CODE RELATIONSHIP TRANSACTIONS DESCRIPTION 31-12-2006 31-12-2005 Effect on income Effect on income Amount (charge)/credit) Amount (charge)/credit)
ANDINOS C.A 0-E INDIRECT AFFILIATE Sales of Materials 218 42 0 0 FIBRANOVA C.A. 0-E INDIRECT AFFILIATE Sales of Materials 11 2 257 77 FORESTAL ARGENTINA S.A. 0-E INDIRECT AFFILIATE Commission Charge 147 147 0 0 FORESTAL TORNAGALEONES S.A. 81507700-8 AFFILIATE Product Purchases 0 0 1,405 0 FORESTAL TORNAGALEONES S.A. 81507700-8 AFFILIATE Interest Charged 1,572 1,572 200 200 FORESTAL TORNAGALEONES S.A. 81507700-8 AFFILIATE Products Sales 0 0 254 41 INVERSIONES CORONEL LTDA. 79554560-3 AFFILIATE Plant Leasing 0 0 5,003 -4,203 INVERSIONES CORONEL LTDA. 79554560-3 AFFILIATE Adm. Services Provided 0 0 45 0 INVERSIONES INTERNATIONALES TERRANOVA S.A. 99537270-3 AFFILIATE Interest Charged 23,413 23,413 16,379 16,379 MADERAS Y SINTÉTICOS DE MÉXICO S.A. DE C.V. 0-E AFFILIATE Interest Charged 631 631 533 533 MADERAS Y SINTÉTICOS DE MÉXICO S.A. DE C.V. 0-E INDIRECT AFFILIATE Sales 12,715 3,179 0 0 MADERAS Y SINTÉTICOS DE PERÚ S.A.C. 0-E AFFILIATE Products Sales 13,181 2,900 9,465 473 MASISA DO BRASIL LTDA. 0-E INDIRECT AFFILIATE Interest Charged 8,049 8,049 0 0 MASISA COLOMBIA S.A. 0-E INDIRECT AFFILIATE Products Sales 1,699 442 1,261 378 MASISA CONCEPCIÓN LTDA. 79616940-0 AFFILIATE Plant Leasing 0 0 9,660 -8,114 MASISA CONCEPCIÓN LTDA. 79616940-0 AFFILIATE Adm. Services Provided 0 0 45 0 MASISA ECUADOR S.A. 0-E INDIRECT AFFILIATE Products Sales 3,056 367 1,832 220 MASISA PARTES Y PIEZAS LTDA. 77790860-K AFFILIATE Products Purchases 0 0 1,965 0 MASISA PARTES Y PIEZAS LTDA. 77790860-K AFFILIATE Inventory Sale 2,236 433 2,110 338 MASISA USA INC. 0-E INDIRECT AFFILIATE Products Sales 95,092 23,773 68,864 9,641 PLYCEM CONSTRUSISTEMAS COSTA RICA S.A. 0-E PARENT Company Products Sales 1,062 340 798 279 PLYCEM CONSTRUSISTEMAS EL SALVADOR S.A. 0-E PARENT Company Products Sales 424 170 95 35 PLYCEM CONSTRUSISTEMAS GUATEMALA S.A. 0-E PARENT Company Products Sales 544 250 278 106 PLYCEM CONSTRUSISTEMAS NICARAGUA 0-E PARENT Company Products Sales 361 152 82 29 FORESTAL TERRANOVA DE MÉXICO S.A. DE C.V. 0-E INDIRECT AFFILIATE Products Sales 16,353 3,164 26,332 3,686 112
NOTE 7: INVENTORIES NOTE 8: DEFERRED TAXES AND INCOME TAX
The inventories for the years ended December 31, 2006 and 2005, a) Income Tax included the following: The parent company made no first category income tax provision for accumulated tax losses amounting to ThUS$196,959 for the year 2006 2005 ended December 31, 2006 (ThUS$292,235 for the year ended Dec- ThUS$ ThUS$ ember 31, 2005).
Finished products 30,389 35,485 b) Deferred Taxes Standing timber 19,467 17,887 Pursuant to what is set forth in Technical Bulletin Nº60, 68, 69 and Raw materials, materials and spare parts 15,374 17,421 71 of the Chilean Association of Accountants and in Circular Letter Nº1.466 of the Superintendency of Securities and Insurance, the Total 65,230 70,793 Company stated the deferred taxes arising from temporary differen- ces, tax losses and other events leading to differences between the accounting base and tax base of assets and liabilities, which are Inventories were net of provisions and amounted to ThUS$975 outlined in the table enclosed. (ThUS$848 in 2005). The charges or credits to income for deferred taxes and income tax for each period were also listed.
DEFERRED TAXES Expressed in ThUS$
ITEMS 31-12-2006 31-12-2005 Active Deferred Tax Pasive Deferred Tax Active Deferred Tax Pasive Deferred Tax SHORT-TERM LONG-TERM SHORT-TERM LONG-TERM SHORT-TERM LONG-TERM SHORT-TERM LONG-TERM
TemporarY DIFFERENCES
Allowance for doubtful accounts 603 0 0 0 165 0 0 0 Unearned income 0 0 0 0 0 0 0 0 Vacation provision 546 0 0 0 474 0 0 0 Amortization of intangibles 0 0 0 0 0 0 0 0 Leased assets 0 0 0 0 0 0 0 0 Manufacturing expenses 0 0 980 0 0 0 1,115 0 Fixed asset depreciation 0 0 0 13,169 0 0 0 14,523 Severance indemnity 0 48 0 0 0 0 0 6 Other events 955 44 0 1,157 675 0 18 401 Pre-paid expenses 0 0 8 0 0 0 94 0 Fixed asset provision 0 1,451 0 0 0 2,035 0 0 Unrealized sales provision 675 0 0 0 0 107 422 0 Obsolescence provision 166 0 0 0 144 0 0 0 Activated expenses in plantations 0 0 0 15,445 0 0 0 17,261 Other provisions 0 0 0 0 0 0 0 0 Tax losses 0 33,618 0 0 0 49,680 0 0 Forest reserve 0 0 0 20,662 0 0 0 15,591 Others Complementary accounts-net of amortization 0 0 0 14,745 0 0 0 15,869 Valuation provision 0 24,242 0 24,242 0
Total 2,945 10,919 988 35,688 1,485 27,580 1,649 31,913 Individual financial statements 2006 MASISA | 113
INCOME TAX Expressed in ThUS$
Item 31-12-2006 31-12-2005
Current tax expense (tax provision) 0 0 Tax expense adjustment (previous period) 0 0 Assets and liabilities effect due to period deferred tax 3,969 -4,116 Tax credit for tax losses -5,236 -127 Amortization effect of deferred assets and liabilities complementary accounts -1,124 -1,276 Effect on deferred tax assets or liabilities due to valuation provision changes 0 11,382 Other account charges or credits 280 2,455
Total -2,111 8,318
NOTE 9: OTHER CURRENT ASSETS
2006 2005 ThUS$ ThUS$ Interest from long-term deposits 1,498 Bond issuance and placement expenses 910 672 Bonds placement goodwill 1,378 1,633 Reverse re-sale commitment agreements - 209 Hedging operations (*) - 385 Own issued shares (**) - 1,842 Others 25 25
Total 3,811 4,766
(*) This is the unrealized loss due to the interest rate swap contracts, which have been defined by the Company as hedging. (**) This is the balance of own issued shares, bought from shareholders that exercised their withdrawal right during the merger between former Masisa S.A. and former Terranova S.A.
NOTE 10: FIXED ASSETS
Fixed assets were stated according to what is set forth in note 2 and the following is a breakdown of them:
2006 2005 Book Accumulated Net Fixed Book Accumulated Net Fixed Value Depreciation Assets Value Depreciation Assets ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Lands 55,306 - 55,306 52,882 - 52,882 Building and infrastructure 89,678 ( 42,029) 47,649 65,281 ( 27,626) 37,655 Machinery and equipment 245,641 (146,759) 98,882 103,284 ( 58,060) 45,224 Other fixed assets 388,007 ( 22,342) 365,665 316,616 ( 23,567) 293,049 Plantations 305,187 - 305,187 278,445 - 278,445 Other fixed assets 82,820 ( 22,342) 60,478 38,171 ( 23,567) 14,604 Negative goodwill re-appraisal 7,390 ( 4,307) 3,083 7,390 ( 4,278) 3,112 Lands 2,672 - 2,672 2,672 - 2,672 Building and infrastructure 4,718 ( 4,307) 411 4,718 ( 4,278) 440 Total 786,022 (215,437) 570,585 545,453 (113,531) 431,922 114
PERIOD DEPRECIATION 2006 2005 Forest Rebates: ThUS$ ThUS$ The forest rebates received by Masisa S.A. and affiliates were credited to the forest rebate account, which was stated minus the plantations Effect On Income item and amounted to ThUS$2,061 for the year ended December 31, Operating 10,146 7,768 2006 (ThUS$2,362 in 2005). Administration expenses 1,719 1,792 Non-operating 235 138 Valuation provisions and idle goods: The Company has a provision to adjust the book value of one of its Activated Particle Board lines, as the projections of its operation indicated that Plantation negative goodwill 111 155 the net flows this line would generate in the future will not cover the respective depreciation charges. This provision was re-appraised and Total 12,211 9,853 adjusted this period and it was stated net of the assets giving rise to it. The balance of the fixed assets provision amounted to ThUS$5,003 The companies Inversiones Coronel Ltda. with net fixed assets of in 2006 (ThUS$8,969 in 2005). ThUS$23,934 and the Company Masisa Concepción Ltda. with Furthermore, the Company had provisions for idle goods in some net fixed assets of ThUS$3,523 were absorbed by Masisa S.A. in of its plants, and their depreciation was stated in the item Other Non- June 2006. Due to this absorption, Masisa S.A. had to assign to operating Disbursements. the respective fixed assets the balance of the unrealized income (ThUS$36,773), which was generated by transferring these goods to such affiliates in the 2003 period.
Plantations: The book value included the forest appraisals made by forestry engineers. This value was distributed between plantations in the item Fixed Assets and standing timber classified as Inventories. The Company and its affiliates with forest plantations acknowled- ged the negative goodwill of these assets credited to the forest reserve stated in the item Shareholders’ Equity. This negative goodwill was determined by comparing the valuation outlined in Note 2. The negative goodwill of fixed assets due to the real financial costs related to the financing of the plantations, according to what is stated in note 2, amounted to ThUS$1,460 for the year ended December 31, 2006 (ThUS$1,401 in 2005). Moreover, there was a de-activation of the exchange rate difference of ThUS$402 (activation of ThUS$1,275 in 2005). Individual financial statements 2006 MASISA | 115
NOTE 11: INVESTMENT IN RELATED COMPANIES a) Income in related companies The following is the breakdown of the items Return on investment in related companies and loss of investment in related companies at each year-end by Company:
Company Accrued income Unrealized (loss) income Book value 2006 2005 2006 2005 2006 2005 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Masisa Inversiones Ltda. 9,570 18,935 - 1,050 9,570 19,985 Forestal Tornagaleones S.A. 2,894 2,931 (602) (377) 2,292 2,554 Inversiones Coronel Ltda. 788 11,865 (4,206) (6,102) (3,418) 5,763 Masisa Concepción Ltda. (546) 1 - (3,405) (546) (3,404) Masisa Partes y Piezas Ltda. (1,587) (428) - - (1,587) (428) Inv.Int. Terranova S.A. (16,159) (12,919) (540) 4,320 (16,699) (8,599) Masisa USA Inc. 595 318 - - 595 318 Masisa do Brasil Limitada 1,638 - (1,553) (152) 85 (152) Mad.y Sint. México S.A. 3,561 - (344) - 3,217 - Mad.y Sint. Servicios S.A. 42 2 - - 42 2 Mad.y Sint. del Perú S.A.C. 2,026 1,494 (394) - 1,632 1,494 Masisa Overseas Ltd. (6,491) (3,659) (75) - (6,566) (3,659) Masisa Ecuador S.A. 578 - (100) - 478 - Masisa Argentina S.A. 5,781 - 949 - 6,730 -
Total 2,690 18,540 (6,865) (4,666) (4,175) 13,874
The figures stated in the columns “Unrealized Income (Loss)” in the • On June 21, 2006, Masisa S.A. acquired from its affiliate Masisa above table reflect the effect on income of each year by operations Overseas Ltd. the corporate rights the latter held in Inversiones between companies of the group, which must be adjusted in such Coronel Ltda., now holding 100% control of this affiliate, and hence periods (2006 and 2005). Although the column “Unrealized Income” leading to the wind-up of Inversiones Coronel Ltda. As Inversiones in the table “Breakdown of Investments” is generated by operations Coronel, jointly with Masisa S.A., were the only partners of Masisa between companies of the group, it corresponds to the outstanding Concepción Ltda, and due to the aforementioned absorption, Masi- balances of each year-end and will affect the Company’s income in sa S.A. also held 100% control of Masisa Concepción Ltda., hence future periods. also giving rise to the wind-up of Masisa Concepción Ltda. • On June 23, 2006, Masisa S.A. acquired from its affiliate Masisa b) Investment purchases and sale Overseas Ltd. the corporate rights the latter held in Masisa Inversio- Masisa S.A. purchased 9,987,400 shares equivalent to 34.35% of nes Ltda., now holding 100% control of this affiliate, and therefore Forestal Tornagaleones S.A. on November 15, 2005, which along with leading to the wind-up of Masisa Inversiones Ltda. the 60.45% it already held increases its shareholding to 94.91%. • On June 21, 2006, Masisa S.A. transferred to its affiliate Masisa c) Investment-related liabilities Overseas Ltd. the corporate rights in the following companies: The Company’s investment in Forestal Tornagaleones S.A. led to liabi- • 0.000146% of the stake in Maderas y Sintéticos Mexico S.A. de C.V. lities in “Unidades de Fomento” amounting to UF1,108,969, pursuant • 1.00% of the stake in Maderas y Sintéticos Servicios S.A. de C.V. to what is set forth in Technical Bulletin Nº64 of the Chilean Asso- • 0.10% of the stake in Masisa Ecuador S.A. ciation of Accountants, which generated an accumulated conversion adjustment of ThUS$11,853 for the year ended December 31, 2006 (ThUS$12,553 in 2005). 116
INVESTMENT BREAKDOWN
TAX CODE Company Country of Investment Nº of shares Percentage share Companies’ equity Period net income Companies’ fair value equity Period fair value net income Accrued income Equity Method Unrealized income Investment book value origin control currency 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005
79959070-0 MASISA INVERSIONES LTDA, CHILE US DOLLAR 0.00000 99.00000 245,081 18,936 9,570 18,935 245,076 -1,138 0 246,214
81507700-8 FORESTAL TORNAGALEONES S.A. CHILE CHILEAN PESOS 27,512,338 94.00000 94.00000 138,259 129,603 3,050 4,096 2,894 2,931 131,216 123,001 477 736 130,739 122,265
79554560-3 INVERSIONES CORONEL LTDA. CHILE US DOLLAR 0.00000 99.00000 84,097 5,767 788 11,865 84,084 0 0 84,084
79616940-0 MASISA CONCEPCIÓN LTDA. CHILE US DOLLAR 0.00000 0.00000 31,850 8,703 -546 1 3 -38,347 0 38,350
0-E MASISA ARGENTINA S.A. ARGENTINA US DOLLAR 117,210,344 98.00000 0.00000 140,157 9,948 0 5,781 137,354 388 136,966 0
77790860-K MASISA PARTES Y PIEZAS LIMITADA CHILE US DOLLAR 99.00000 99.00000 -2,563 -1,062 -1,590 -430 -1,587 -428 0 0
92257000-0 MASISA S.A. CHILE US DOLLAR 0.00000 0.00000 0 0
99537270-3 INV.INTERNATIONALES TERRANOVA S.A. CHILE US DOLLAR 52,722,633 60.00000 60.00000 26,279 40,466 -26,932 -21,532 -16,159 -12,919 15,768 24,280 1,559 14,209 24,280
0-E MASISA USA INC. USA US DOLLAR 10,050 25.00000 25.00000 28,091 25,722 2,368 1,265 595 318 7,056 6,461 7,056 6,461
0-E MASISA DO BRASIL LTDA. BRAZIL US DOLLAR 0.00000 0.00000 72,744 67,269 5,090 3,167 1,638 71,574 1 -62 71,636 1
0-E MADERAS Y SINTÉTICOS SERVICIOS S.A. DE C.V. MEXICO US DOLLAR 1 0.00000 1.00000 372 453 -80 173 42 2 368 5 368 5
0-E MADERAS Y SINTÉTICOS MÉXICO S.A. DE C.V. MEXICO US DOLLAR 1 0.00000 0.00000 24,785 23,386 1,897 -1,014 3,561 24,785 24,785
0-E MADERAS Y SINTÉTICOS DEL PERÚ S.A.C. PERU US DOLLAR 39,060 99.00000 99.00000 5,014 2,968 2,046 1,509 2,026 1,494 4,964 2,938 4,964 2,938
0-E MASISA OVERSEAS LTD, CAYMAN ISLANDS US DOLLAR 100.00000 100.00000 -16,296 -9,805 -6,492 -3,659 -6,491 -3,659 0 0
0-E MASISA ECUADOR S,A, ECUADOR US DOLLAR 5 0.00000 0.00000 858 -127 985 738 578 857 857
TOTAL 393,942 485,849 2,362 -38,749 391,580 524,598
NOTE 12: GOODWILL AND NEGATIVE GOODWILL
Goodwill The purchase of 40.00% of Terranova S.A. by Forestal Terra- Masisa S.A.’s purchase of the affiliate Masisa Cabrero S.A., former Fi- nova S.A. (Company merged into the former Terranova S.A.) in branova S.A., created goodwill for the Company, which is amortized in October 2003 generated negative goodwill, which is amortized in a a 20-year term, considering the performance return of such affiliate. 20-year term. The participation of former Masisa S.A. in the capital increase of Negative Goodwill Forestal Tornagaleones S.A. on June 27, 2002, generated negative The purchase of 43.16% of former Masisa S.A. by Forestal Terra- goodwill, which is amortized in a 20-year term. Furthermore, Masisa nova S.A. (Company merged into the former Terranova S.A.) in July S.A. bought 9,987,400 shares equivalent to 34.35% of that Company 2002 and 0.544% in June 2003 generated negative goodwill for the on November 15, 2005, increasing the negative goodwill. This new Company, which is amortized in a 15-year term, considering that this negative goodwill is amortized in the remaining term of the 20 years Company’s assets are mostly industrial and that they have an average originally established. life that is similar to the foregoing term.
Goodwill Expressed in ThUS$ TAX CODE Nº Company 31-12-2006 31-12-2005 Amount amortized in the period Goodwill balance Amount amortized in the period Goodwill balance 96623490-3 MASISA CABRERO S.A. 85 1,165 85 1,249 TOTAL 85 1,165 85 1,249
NEGATIVE Goodwill Expressed in ThUS$ TAX CODE Nº Company 31-12-2006 31-12-2005 Amount amortized in the period Goodwill balance Amount amortized in the period Goodwill balance 92257000-0 MASISA S.A. 2,766 29,301 2,766 32,067 81507700-8 FORESTAL TORNAGALEONES S.A. 855 12,622 163 13,480 96802690-9 TERRANOVA S.A. 335 5,703 335 6,039 TOTAL 3,956 47,626 3,264 51,586 Individual financial statements 2006 MASISA | 117
INVESTMENT BREAKDOWN Expressed in ThUS$ TAX CODE Company Country of Investment Nº of shares Percentage share Companies’ equity Period net income Companies’ fair value equity Period fair value net income Accrued income Equity Method Unrealized income Investment book value origin control currency 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005 31-12-2006 31-12-2005
79959070-0 MASISA INVERSIONES LTDA, CHILE US DOLLAR 0.00000 99.00000 245,081 18,936 9,570 18,935 245,076 -1,138 0 246,214
81507700-8 FORESTAL TORNAGALEONES S.A. CHILE CHILEAN PESOS 27,512,338 94.00000 94.00000 138,259 129,603 3,050 4,096 2,894 2,931 131,216 123,001 477 736 130,739 122,265
79554560-3 INVERSIONES CORONEL LTDA. CHILE US DOLLAR 0.00000 99.00000 84,097 5,767 788 11,865 84,084 0 0 84,084
79616940-0 MASISA CONCEPCIÓN LTDA. CHILE US DOLLAR 0.00000 0.00000 31,850 8,703 -546 1 3 -38,347 0 38,350
0-E MASISA ARGENTINA S.A. ARGENTINA US DOLLAR 117,210,344 98.00000 0.00000 140,157 9,948 0 5,781 137,354 388 136,966 0
77790860-K MASISA PARTES Y PIEZAS LIMITADA CHILE US DOLLAR 99.00000 99.00000 -2,563 -1,062 -1,590 -430 -1,587 -428 0 0
92257000-0 MASISA S.A. CHILE US DOLLAR 0.00000 0.00000 0 0
99537270-3 INV.INTERNATIONALES TERRANOVA S.A. CHILE US DOLLAR 52,722,633 60.00000 60.00000 26,279 40,466 -26,932 -21,532 -16,159 -12,919 15,768 24,280 1,559 14,209 24,280
0-E MASISA USA INC. USA US DOLLAR 10,050 25.00000 25.00000 28,091 25,722 2,368 1,265 595 318 7,056 6,461 7,056 6,461
0-E MASISA DO BRASIL LTDA. BRAZIL US DOLLAR 0.00000 0.00000 72,744 67,269 5,090 3,167 1,638 71,574 1 -62 71,636 1
0-E MADERAS Y SINTÉTICOS SERVICIOS S.A. DE C.V. MEXICO US DOLLAR 1 0.00000 1.00000 372 453 -80 173 42 2 368 5 368 5
0-E MADERAS Y SINTÉTICOS MÉXICO S.A. DE C.V. MEXICO US DOLLAR 1 0.00000 0.00000 24,785 23,386 1,897 -1,014 3,561 24,785 24,785
0-E MADERAS Y SINTÉTICOS DEL PERÚ S.A.C. PERU US DOLLAR 39,060 99.00000 99.00000 5,014 2,968 2,046 1,509 2,026 1,494 4,964 2,938 4,964 2,938
0-E MASISA OVERSEAS LTD, CAYMAN ISLANDS US DOLLAR 100.00000 100.00000 -16,296 -9,805 -6,492 -3,659 -6,491 -3,659 0 0
0-E MASISA ECUADOR S,A, ECUADOR US DOLLAR 5 0.00000 0.00000 858 -127 985 738 578 857 857
TOTAL 393,942 485,849 2,362 -38,749 391,580 524,598
NOTE 13: OTHERS (ASSETS)
The following is the breakdown of other assets:
2006 2005 ThUS$ ThUS$ Time deposit capital (*) 104,523 - Bond placement goodwill (**) 5,080 7,443 Bond placement expenses (**) 5,918 2,416 Swap market value of currency 5,842 2,350 Other assets 261 294 TOTAL 121,624 12,503
(*) Loans granted by Masisa Inversiones Limitada (Company absorbed by Masisa S.A. in June 2006) to the affiliate Masisa do Brasil Limitada through Banco Itaú BBA S.A., which were recorded in “notes” issued by Banco Itaú BBA S.A., of which Masisa S.A. is the bearer. This amount, which was on the consolidated balance sheet, was stated discounting the corresponding debts of the same amount that the affiliate Masisa do Brasil Limitada has with Banco Itaú BBA S.A., which were recorded in “bank loan certificates - Res.2770” in favor of Banco Itaú BBA S.A., considering that the aforementioned documents for these operations can be paid off by merely notifying the bank in due advance laid down in the respective documents. Moreover, and as a consequence of the foregoing, the interest generated by the “notes” and “bank loan certificates - Res.2770” were stated as net on the statement of income. (**) Net of amortization 118
NOTE 14: DUE TO BANKS AND FINANCIAL INSTITUTIONS, SHORT-TERM
SHORT-TERM Expressed in ThUS$
TAX CODE Nº Banco o Institución Financiera US DOLLAR Euros Yen Oher foreign UF Non-readjustable $ TOTAL currencies 31-12 31-12 31-12 31-12 31-12 31-12 31-12 31-12 31-12 31-12- 31-12 31-12 31-12 31-12 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 Short-Term (code 5.21.10.10) 97919000-K BANCO ABN AMRO BANK 3,702 8,046 0 16 3,702 8,062 97023000-9 BANCO CORPBANCA 0 9,064 0 9,064 97041000-7 BANKBOSTON N.A. 0 23,143 0 23,143 97004000-5 BANCO DE CHILE 0 5,030 0 5,030 97008000-7 CITIBANK N.A. 0 13,372 0 13,372 Others
TOTAL 3,702 58,655 0 0 16 3,702 58,671 PRINCIPAL OWED 3,700 58,300 16 3,700 58,316 Annual average interest rate 5.25% 4.62% 5.76% Long-Term (code 5.21.10.20) 97006000-6 BANCO CRÉDITO E INVERSIÓN 0 0 0 3,057 3,057 OE WESTDEUTCHE LANDESBANK 0 1,217 1,217 Others TOTAL 0 1,217 3,057 4,274 PRINCIPAL OWED 0 1,170 2,990 4,160 Annual average interest rate 4.79% 4.82%
Percentage of liabilities in foreign currency (%) Percentage of liabilities in national currency (%) 100,0000
NOTE 15: DUE TO BANKS AND FINANCIAL INSTITUTIONS, LONG-TERM
LONG-TERM Expressed in ThUS$
Previous period Years of Maturity Current period closing date closing date TAX CODE Nº Bank or Financial Readjustment More than More than More than More than More than 10 Total long-term Annual average Total long-term Institution index currency 1 up to 2 2 up to 3 3 up to 5 5 up to 10 years at close of interest rate at close of financial financial statements statements Amount Term 0-E WESTDEUTSCHE LANDESBANK US DOLLAR 0 0 0 0 0 0 0 3,510 Euros 0 0 0 0 0 0 0 Yen 0 0 0 0 0 0 0 UF 0 0 0 0 0 0 0 Non-readjust.$ 0 0 0 0 0 0 0 Other currencies 0 0 0 0 0 0 0 TOTAL 0 0 0 0 0 3,510
Percentage of obligations in foreign currency (%) 0,0000 Percentage of obligations in national currency (%) 0,0000 Individual financial statements 2006 MASISA | 119
NOTE 16: SHORT AND LONG-TERM BONDS PAYABLE (PROMISSORY NOTES AND BONDS)
The current bonds payable are:
C1 Series Bonds 15 each year. The capital is amortized is twenty-eight semi-annual, • These are 1,000 bearer bonds of US$10,000 and C2 Series Bonds successive and equal installments as of June 15, 2011. of 200 bearer bonds of US$100,000; the capital payment shall be The Company placed two new bond lines on January 12, 2006, made on June 15, 2008. They accrue compound interest due of which are registered in the securities registry of the Superintenden- 5.00% a year, calculated based on the same 180-day semi-annual cy of Securities and Insurance under numbers 439 and 440, dated periods as of December 15, 2003. November 14, 2005 and November 15, 2005, respectively. Their breakdown is as follows: A Series Bonds • These are 5,000 bearer bonds of UF500 each with a final maturity E Series Bond of 7 years with a two-year grace period for the capital amortization. • Bonds of UF2,750,000 were placed charged to line Nº439 with a They accrue compound interest due of 5.00% a year, calculated 21-year maturity and 1-year grace period at a rate of 4.79%. based on the same 180-day semi-annual periods as of December 15, 2003, with semi-annual payment on June 15 and December 15 D Series Bond each year. The capital is amortized is ten semi-annual, successive • Bonds of UF2,000,000 were placed charged to line Nº440 with a and equal installments as of June 15, 2006. 7-year maturity and 2-year grace period at a rate of 4.59%. • The A and D series bonds were partially hedged for dollar exchan- B Series Bonds ge rate exposure against the “Unidad de Fomento” by taking • These are 1,404 bearer bonds of UF500 each with a final maturity out swaps with Citibank N.A., Agency in Chile, Morgan Stanley of 21 years with a seven-year grace period for the capital amortiza- Capital Services Inc. and Banco Santander Santiago (according to tion. They accrue compound interest due of 6.25% a year, calcula- note 23), and they were valued pursuant to what is laid down in ted based on the same 180-day semi-annual periods as of Decem- paragraph 11 of Technical Bulletin Nº57 of the Chilean Association ber 15, 2003, with semi-annual payment on June 15 and December of Accountants.
Instrument Series Current face Bond Interest Final Periodicity Par value Placement Registry N° amount placed readj.unit rate term in Chile or overseas Interest Amortization 31-12 31-12 payment payment 2006 2005 ThUS$ ThUS$ Long-term bonds - short-term portion 336 A SERIES 3,500 U.F. 5.00% SEMI-ANNUAL 2005 0 123,007 NATIONAL 336 B SERIES 1,000 U.F. 6.00% SEMI-ANNUAL 2009 0 35,160 NATIONAL 336 C SERIES 0 USD 4.92% SEMI-ANNUAL 2008 62 62 NATIONAL 356 A SERIES 500 U.F. 4.94% SEMI-ANNUAL 2006 17,362 17,716 NATIONAL 355 B SERIES 0 U.F. 6.16% SEMI-ANNUAL 2011 62 63 NATIONAL 440 D SERIES 0 U.F. 4.21% SEMI-ANNUAL 2008 604 0 NATIONAL 439 E SERIES 137 U.F. 4.7% SEMI-ANNUAL 2007 5,662 0 NATIONAL Short-term portion total 23,752 176,008 Long-term bonds 336 C SERIES 30,000 USD 4.94% SEMI-ANNUAL 2008 30,000 30,000 NATIONAL 356 A SERIES 1,500 U.F. 4.94% SEMI-ANNUAL 2006 52,666 65,340 NATIONAL 355 B SERIES 702 U.F. 6.16% SEMI-ANNUAL 2011 24,178 24,621 NATIONAL 440 D SERIES 2,000 U.F. 4.21% SEMI-ANNUAL 2008 67,957 0 NATIONAL 439 E SERIES 2,612 U.F. 4.7% SEMI-ANNUAL 2007 90,311 0 NATIONAL Long-term TOTAL 265,112 119,961 120
NOTE 17: PROVISIONS AND WRITE-OFFS
The following were the provisions for the years ended December 31, 2006 and 2005:
Short-term Provisions and Write-offs 2006 2005 Long-term Provisions and Write-offs 2006 2005 ThUS$ ThUS$ ThUS$ ThUS$
Related to staff: Investment negative equity: Vacations 3,212 2,643 Masisa Overseas Ltd. 15,327 8,761 Participation and others 3,361 1,824 Masisa Partes y Piezas Ltda. - 1,060 Other benefits 269 262 Severance indemnity provision 280 21 Other provisions: Seniority bonus provision 259 - Consultancy, services and others 1,601 638 Contractors 248 395 TOTAL 15,866 9,842 Idle goods provision 564 1,128 Investment in Masisa Partes y Piezas (1) 2,648 - Provisions stated net of the assets on 2006 2005 Other provisions 475 15 which they are based ThUS$ ThUS$
TOTAL 12,378 6,905 Allowance for doubtful accounts 1,465 975 (1) This was the provision for the negative shareholders’ equity of the affiliate Masisa Partes y Piezas, Inventory provision 975 848 which was classified in the short term as such company is in the process of selling off its assets and the investment is expected to be wound up in the short term. Fixed asset provision 5,003 8,969
NOTE 18: STAFF SEVERANCE INDEMNITY NOTE 19: CHANGES IN SHAREHOLDERS’ EQUITY
The following was the staff severance indemnity movement: a) Paid-in Capital The subscribed and paid-in capital amounted to US$812,879,756 for the year ended December 31, 2006, equivalent to 5,667,750,881 2006 2005 non-par-value shares. ThUS$ ThUS$ An Extraordinary Shareholders’ Meeting of former Masisa S.A. and former Terranova S.A., held on April 12 and 13, 2005, respectively, Balance as of January 1 21 13 agreed on the merger by absorption of former Masisa S.A. into former Period provision 280 8 Terranova S.A. Period payments (21) - An Extraordinary Shareholders’ Meeting of former Terranova S.A. agreed on an increase in the capital stock from ThUS$583,739, BALANCE AS OF DECEMBER 31 280 21 divided into 3,918,427,856 non-par-value shares of a same and single series and without debentures, to ThUS$696,481, divided into Charges to income for this item amounted to ThUS$280 in the period 5,049,060,017 non-par-value shares of a same and single series (ThUS$8 in 2005). without debentures, by issuing 1,130,632,161 new non-par-value shares of a same and single series without debentures, that were fully allocated to the shareholders of former Masisa S.A. in the proportion corresponding to them according to the exchange ratio agreed on. In an Extraordinary Shareholders’ Meeting of the Company, held on August 29, 2005, the shareholders agreed to increase the capital stock by US$150,000,000 by issuing, subscribing and paying 650,000,000 non-par-value cash shares of a same and single series without debentures. To date, 622,503,068 shares have been subscri- bed and paid up amounting to US$117,364,938. Individual financial statements 2006 MASISA | 121
b) Distribution of Net Income The dividend policy of Masisa S.A. is each year to distribute to the The following is a breakdown of the dividends per share that the shareholders no less than 30% or more than 50% of the conso- Shareholders’ Meeting agreed on in 2006 y 2005, which were stated lidated net income of each annual balance sheet without paying in US dollars as of the payment date: interim dividends.
In 2006:
Dividend MONTH OF DIVIDEND PER SHARE US$ QUANTITY OF THIRD- PAYMENT PARTY SHARES Mandatory Nº 11 2005 May 2006 0,001216508 5.667.750.881 Additional Nº 11 2005 May 2006 0,000811005 5.667.750.881
In 2005, paid by:
FORMER MASISA S.A.: Dividendo MONTH OF DIVIDEND PER SHARE US$ QUANTITY OF THIRD- PAYMENT PARTY SHARES Possible Nº 36 2004 May 2005 0,026894326 441.653.188 Additional Nº 35 2004 May 2005 0,031263070 441.653.188 Final Nº 34 2004 April 2005 0,013398459 441.653.188
Antigua Terranova S.A: Dividend MONTH OF DIVIDEND PER SHARE US$ QUANTITY OF THIRD- PAYMENT PARTY SHARES Additional Nº 10 2004 April 2005 0,001141276 3.918.427.856 Final Nº 10 2004 April 2005 0,004092497 3.918.427.856
c) The Other Reserves item is broken down as follows: d) Own Issued Shares FOREST RESERVE: The following was considered to quantify the number of shares in the The Forest Reserve, amounting to ThUS$208,292 (ThUS$174,962 table “Own Share Purchase and Holding”: in 2005), was the difference between the forest plantation apprai- • Withdrawal right: The 2,121,766 shares of former Masisa S.A., sal value and its respective historical cost, which included the real purchased from those shareholders that exercised their withdrawal financing cost. The forest reserve was stated net of deferred tax, right, were multiplied by the 2.56 exchange factor, resulting in according to what is set forth in Technical Bulletins Nº60 and Nº69 of 5,431,721 shares. the Chilean Association of Accountants. Part of the total own issued shares the Company held due to the OTHER RESERVES: merger with former Masisa S.A. was placed to new shareholders The Other Reserves arose from converting to US dollars the share- and the rest was reduced to capital, pursuant to what is laid down holders’ equity of some affiliates and associated companies that had in Law 18.046 on Stock Corporations, as the tables enclosed to this or have accounting in Chilean pesos amounting to ThUS$15,618 Note show. The Company currently has no own issued shares. (ThUS$17,028 in 2005) to establish a legal reserve in affiliates overseas of ThUS$100 (ThUS$100 in 2005). The share issuance e) Former Period Income Adjustment and placement costs of the last capital increase of ThUS$4,516 The Company detected missing inventory this period, which affected (ThUS$3,613 in 2005) were also deducted from Other Reserves. the balance of the Packing Materials account, and arose as a result of an error with the parameters of the rates used to value the consump- tion of these materials in the cost system used by the Company. This error, which mainly arose in the 2005 period, was stated against accumulated income in the Company’s shareholders’ equity and amounted to ThUS$1,935. 122
CHANGES IN SHAREHOLDERS’ EQUITY Expressed in ThUS$ ITEM Paid-in Capital price- Share sale Other Reserves Accumulated Interim Development Period net capital level readjust. premium reserves for future income dividends period deficit income reserve dividends Initial Balance 769,834 0 0 188,477 51,424 60,128 0 0 26,369 Previous period income distribution 0 0 0 0 0 26,369 0 0 -26,369 Previous period final dividend 0 0 0 0 0 -11,490 0 0 0 Capital increase with cash shares issue 44,012 0 0 0 0 0 0 0 0 Reserves and/or income capitalization 0 0 0 0 0 0 0 0 0 Development period accumulated deficit 0 0 0 0 0 0 0 0 0 Conversion difference adjustment 0 0 0 -1,410 0 0 0 0 0 Forest reserve 0 0 0 33,330 0 0 0 0 0 Legal reserve (affiliates overseas) 0 0 0 0 0 0 0 0 0 Merger effects on shareholders’equity 0 0 0 0 0 0 0 0 0 Share issuance and placement cost 0 0 0 -903 0 0 0 0 0 Adjustment to previous period net income 0 0 0 0 0 -1,935 0 0 0 Capital decrease due to legal term end -966 0 0 0 0 0 0 0 0 Own capital price-level readjustment 0 0 0 0 0 0 0 0 0 Net income of the period 0 0 0 0 0 0 0 0 29,485 Interim dividends 0 0 0 0 0 0 0 0 0 FINAL BALANCE 812,880 0 0 219,494 51.424 73,072 0 0 29,485 UPDATED BALANCES
CHANGES IN SHAREHOLDERS’ EQUITY (Continuation) ITEM Paid-in Capital price- Share sale Other Reserve Accumulated Interim Déficit Period net capital level readjust. premium reserves for future income dividends Período de income reserve dividends Desarrollo Initial Balance 583,739 0 0 122,643 0 14,979 0 0 56,778 Previous period income distribution 0 0 0 0 26,425 30,353 0 0 -56,778 Previous period final dividend 0 0 0 0 -38,304 -13,807 0 0 0 Capital increase with cash shares issue 73,353 0 0 0 0 0 0 0 0 Reserves and/or income capitalization 0 0 0 0 0 0 0 0 0 Development period accumulated deficit 0 0 0 0 0 0 0 0 0 Conversion difference adjustment 0 0 0 3,202 0 0 0 0 0 Forest reserve 0 0 0 32,842 0 0 0 0 0 Legal reserve (affiliates overseas) 0 0 0 0 0 0 0 0 0 Merger effects on shareholders’equity 112,742 0 0 33,403 63.303 28,603 0 0 0 Share issuance and placement cost 0 0 0 -3,613 0 0 0 0 0 Adjustment to previous period net income 0 0 0 0 0 0 0 0 0 Capital decrease due to legal term end 0 0 0 0 0 0 0 0 0 Own capital price-level readjustment 0 0 0 0 0 0 0 0 0 Net income of the period 0 0 0 0 0 0 0 0 26,369 Interim dividends 0 0 0 0 0 0 0 0 0 FINAL BALANCE 769,834 0 0 188,477 51,424 60,128 0 0 26,369 UPDATED BALANCES 769,834 0 0 188,477 51,424 60,128 0 0 26,369 Individual financial statements 2006 MASISA | 123
NUMBER OF SHARES NOTE 20: EXCHANGE RATE DIFFERENCES Series Nº of subscribed Nº of paid-up Nº of voting shares shares shares Expressed in ThUS$ SINGLE 5,667,750,881 5,667,750,881 5,667,750,881 ASSETS (CHARGES)/CREDIT Currency 31-12-2006 31-12-2005
CAPITAL CASH PESOS -1,170 553 DUE TO BANKS PESOS -4,892 -86 Series Subscribed Capital Paid-in Capital MARKETABLE SECURITIES PESOS 375 -34 SINGLE 812,880 812,880 TRADE ACCOUNTS RECEIVABLES PESOS 48 -112
OWN SHARE PURCHASE AND HOLDING NOTES RECEIVABLE PESOS -1,072 2,444 OTHER RECEIVABLES PESOS -66 562 Reason For Share Share Repurchase Repurchase RELATED COMPANIES’ PESOS -1,172 1,132 Date Share Repurchase ACCOUNTS RECEIVABLE Nº of Shares Series Amount RECOVERABLE TAXES PESOS -673 1,234 ThUS$ PRE-PAID EXPENSES PESOS -98 12 MERGER 01/07/2007 87,871,054 SINGLE 16,828 INVESTMENT IN RELATED PESOS 1,044 33 Company WITHDRAWAL RIGHT 26/12/2007 13,538,394 SINGLE 1,550 OTHER ASSETS PESOS -117 1,028 FORMER TERRANOVA S.A. 27/05/2009 12,647,263 SINGLE 3,202 WITHDRAWAL RIGHT LONG-TERM RECEIVABLES PESOS 108 13 FORMER MASISA S.A. 27/05/2009 5,431,721 SINGLE 1,379 OTHER CURRENT ASSETS PESOS -10 31 WITHDRAWAL RIGHT TOTAL (CHARGES) CREDITS -7,695 6,810
OWN SHARE PORTFOLIO TRANSFERS AND DECREASES LIABILITIES (CHARGES)/CREDITS Currency 31-12-2006 31-12-2005 Reason Date Portfolio decrease DUE TO BANKS AND FINANCIAL PESOS 0 7 Nº of Shares Amount INSTITUTIONS 3: Capital Decrease 31/10/2004 87,871,054 16,828 BONDS PAYABLE U.F. 6,207 -9,425 3: Capital Decrease 26/12/2004 13,538,394 1,550 ACCOUNTS PAYABLE PESOS 49 0 2: Preemptive Issue 12/12/2006 10,806,939 2,738 OTHER PAYABLES PESOS -10 20 2: Preemptive Issue 06/01/2006 3,459,841 877 RELATED COMPANIES’ ACCOUNTS PESOS 4,098 -4,801 3: Capital Decrease 27/05/2006 3,812,204 966 PAYABLE LONG-TERM BONDS PAYABLE U.F. -577 0 PROVISIONS PESOS 157 -88 INCOME TAX PESOS 39 -211 OTHER LONG-TERM LIABILITIES PESOS -1 397 OTHER CURRENT LIABILITIES PESOS -160 0 OTHER LONG-TERM FINANCIAL PESOS 31 -4,383 LIABILITIES
TOTAL (CHARGES) CREDITS 9,833 -18,484
EXCHANGE RATE DIFFERENCE 2,138 -11,674 (LOSS) EARNING 124
NOTE 21: EXPENSES INCURRED IN ISSUING AND PLACING Placement of shares STOCK CERTIFICATES AND BONDS The following were the expenses incurred in issuing and placing shares Placement of bonds The expenses incurred in issuing bonds are being amortized using 2006 2005 the straight-line method in the obligation period, and the following is ThUS$ ThUS$ the breakdown Financial consultancy 3,027 2,860 2006 2005 Placement commission 352 352 ThUS$ ThUS$ Publication 641 184 Stamp tax 7,560 4,145 Legal consultancy 426 149 Placement commission 598 112 Print expenses and others 70 68
Bond auction commission 285 322 Total EXPENSES 4,516 3,613 Risk rating agency consultancy 231 116 This amount was stated discounting the item Other Reserves in the Registry and record fees 42 22 shareholders’ equity. Legal consultancy 28 14 Printing expenses 19 13 NOTE 22: STATEMENT OF CASH FLOWS Other expenses 421 88 The Uniformly Coded Statistical Record (FECU) 5.50.30.55 other Total EXPENSES 9,184 4,832 charges or credits to income that do not represent cash flow was made up of the following: ACCUMULATED AMORTIZATION (2,356) (1,744)
BALANCE TO BE AMORTIZED 6,828 3,088 2006 2005 ThUS$ ThUS$ Depletion 6,762 8,372 These expenses were stated in Current Assets in Other Current Assets in regard to the short-term portion of ThUS$910 (ThUS$672 in 2005) and in Long-term Assets in Others for the long-term portion of ThUS$5,918 (ThUS$2,416 in 2005). Individual financial statements 2006 MASISA | 125
NOTE 23: HEDGING CONTRACTS
1. The Company and its affiliates have the following hedging swap contracts: a) Exchange rate hedging swap contracts: b) Investment Contract
Receivable Payable Receivable Payable
Currency Amount Rate Currency Amount Rate Currency Amount Rate Currency Amount Rate
Banco Citibank N.A. UF 561,295 4.940% ThUS$ 18,621 7.06% Morgan Stanley ThUS$ 16,000 6.20% MXN 183,200 11.75% Morgan Stanley UF 1,122,589 4.939% ThUS$ 37,243 7.09% Capital Services Capital Services Banco Citibank N.A. UF 1,000,000 4.2058% ThUS$ 33,523 5.75% Banco Santander UF 1,000,000 4.2058% ThUS$ 33,523 5.60% Santiago J. P. Morgan UF 441,612 4.6948% ThUS$ 15,000 6.59%
The Company uses hedging contracts to reduce exchange rate fluc- tuation risks and establish interest rates. The Company sold certain exchange rate contracts in September 2005 amounting to approxi- mately US$130 million, which generated earnings of ThUS$5,135. These earnings were stated as non-operating income, discounting the exchange rate difference losses.
Expressed in ThUS$ Type of Type of Hedging Contract DESCRIPTION OF CONTRACTS BOOK ACCOUNTS AFFECTED Contract Maturity or Specific item Purshase / Protected item or Protected Assets / Liabilities Effect on Income Value expiry term sale position transaction item value Name Amount Name Amount Realized Unrealized ThUS$ ThUS$ ThUS$ ThUS$
S CCPE 23,277 IV-2010 EXCHANGE RATE C BONDS IN UF 18,621 19,331 OTHER LONG-TERM 780 -437 413 ASSETS S CCPE 46,553 IV-2010 EXCHANGE RATE C BONDS IN UF 37,243 38,663 OTHER LONG-TERM 1,493 -891 509 ASSETS S CCPE 33,523 IV-2012 EXCHANGE RATE C BONDS IN UF 33,523 34,441 OTHER LONG-TERM 1,498 -455 1,367 ASSETS S CCPE 33,523 IV-2012 EXCHANGE RATE C BONDS IN UF 33,523 34,441 OTHER LONG-TERM 1,531 -405 1,413 ASSETS S CCPE 15,000 IV-2026 EXCHANGE RATE C BONDS IN UF 15,000 15,209 OTHER LONG-TERM 540 -194 74 ASSETS S CI 20,000 IV-2010 EXCHANGE RATE C FUTURE 16,000 16,965 OTHER LONG-TERM 2,155 -2,155 FLOWS LIABILITIES 126
NOTE 24: CONTINGENCIES AND RESTRICTIONS • Maintaining a current liabilities (account 5.21.00.00 plus ac- count 5.22.00.00 of the FECU) to shareholders’ equity (account The current contingencies and commitments at year-end are 5.23.00.00 plus account 5.24.00.00 of the FECU) ratio, also known shown below: as leverage, at a consolidated and individual level not exceeding 0.85 times. a) Restrictions on the operation, guarantees or limit of financial • Masisa S.A. placed bonds of ThUF2,000 with a 7-year term and indicators. 2-year grace period, of ThUF2,750 with a 21-year term and 1-year All the Company’s restrictive indicators had been met as of the relea- grace period on January 12, 2006. The bond placement imposes se of these financial statements. the following obligations on the Company, among others: • Maintaining continually and without interruption the Company’s re- Masisa S.A. gistry in the securities registry of the Superintendency of Securities • Bond issuance and placement in the domestic market. and Insurance. The contract of the bond issuance and placement carried out in • Maintaining insurance with reasonable protection of the operating December 2003 by former Masisa S.A. in the domestic market of assets, according to the usual corporate practices of the Company’s ThUF2,500 with a 7-year term and a 2-year grace period, and of nature and line of business. ThUF702 with a 21-year term and a 7-year grace period sets forth • Undertaking operations between related parties in market conditions. certain obligations for the Company (today undertaken by Masisa • Maintaining a minimum forest plantation of 30,000 hectares of Ra- S.A.) and/or its affiliates that are normal for these kinds of opera- diata pine forests in Chile with an average age of more than 8 years. tions, including the following in the specific terms and conditions • Maintaining an indebtedness level (account 5.21.00.00 plus ac- laid down in the respective bond issuance contract: count 5.22.00.00 less account 5.11.10.10 less account 5.11.10.20 • Insurance of the main assets, according to industry standards. less account 5.11.10.30 less investments in reverse re-sale • Dispatch of the quarterly and annual individual and consolidated commitment agreements and current long-term deposits, other than financial statements, of the issuer and affiliates governed by the those considered in account 5.11.10.10 account 5.11.10.20 and regulations on publicly-traded corporations, and copies of the risk account 5.11.10.30 of the FECU) to shareholders’ equity (account rating reports to the representative of the bond holders. 5.23.00.00 plus account 5.24.00.00 of the FECU) ratio, also known • Maintain up-to-date the accounting books of the parent Company as leverage, at a consolidated and individual level not exceeding and its subsidiaries. 0.90 times March 31, 2006 through the bond maturity. • Undertake transactions with affiliates in market conditions. • Ban on granting financing to any entity of the business group that is Masisa Overseas Ltd. not the issuer or any of its affiliates or associated companies. Masisa S.A., and the affiliates Masisa Argentina S.A. and Masisa Do • Maintain an indebtedness level in its quarterly financial statements, Brasil Ltda., have guaranteed loans obtained by the affiliate Masisa as of the financial statements for the year ended December 31, Overseas Ltd. These envisage meeting certain obligations that are 2003, defined as the current liabilities to shareholders’ equity ratio, normal in these kinds of operations and that are outlined below. The based on the figures of its individual and consolidated financial obligations concerning financial indexes must be calculated based on statements, not exceeding 0.9 times, according to the terms and the consolidated financial statements of Masisa S.A. conditions set forth in the respective bond issuance contract. • Private Placement • Masisa S.A. (former Terranova S.A.) placed bullet-type bonds of Due to obtaining private loans overseas through the affiliate Masisa ThUS$30,000 with a 5-year term on August 13, 2003. The bond Overseas Ltd., Masisa S.A. is subject to meeting certain obligations placement imposes the following obligations on the Company, that are normal for these kinds of operations, including the follo- among others: wing, among others, in the specific terms and conditions laid down • Maintaining continually and without interruption the Company’s re- in the respective loan contracts: compliance with the legal regulatio- gistry in the securities registry of the Superintendency of Securities ns; maintaining insurance; maintaining real estate; meeting certain and Insurance. Maintaining insurance with reasonable protection of financial indexes, including a debt to shareholders’ equity ratio the operating assets, according to the usual corporate practices of (leverage) not exceeding 1; a consolidated tangible net sharehol- the Company’s nature and line of business. ders’ equity of no less than ThUS$193,236; and a financial expense • Undertaking operations between related parties in market conditions. index of no less than 1.5 (net income of the period before financial • Maintaining a minimum forest plantation of 60,000 hectares of Ra- expenses and taxes on financial expenses); maintaining 100% of diata pine forests in Chile with an average age of more than 8 years. the equity share of Masisa Overseas Ltd. and 66.6% of Masisa Individual financial statements 2006 MASISA | 127
Argentina S.A.; the ban on certain transactions with related parties; • Banco de Crédito e Inversiones extending to the bond holders the new guarantees that Masisa S.A. The loan granted by Banco de Crédito e Inversiones to Masisa and/or its affiliates establish in favor of third parties to guarantee Argentina S.A. sets forth certain obligations for the parent Company new debt or that existing as of the contract date. There are several Masisa S.A. and/or its affiliates that are normal for these kinds of exceptions, including those that must be granted due to the normal operations, including the following, among others, in the specific course of business, those that must be granted to guarantee the terms and conditions laid down in the respective loan contract: price balance of new acquisitions and those concerning letters of maintaining the Company’s current line of business; timely dispatch credit, among others. of the Company’s financial information; taking out and maintaining • Rabobank Syndicated Loan insurance that adequately covers the risks that are normal in the in- The syndicated loan contract signed on December 20, 2005, with dustry; maintaining an indebtedness level not exceeding 0.9 times; Banco Rabobank Curacao N.V., Banco West LB AG, New York maintaining financial expense hedging of not less than 3; maintai- Branch, The Bank of Nova Scotia, Banco Citibank N.A. Nassau, Ba- ning a consolidated shareholders’ equity of not less than US$345 hamas Branch, and ABN Amro Bank N.V., means that Masisa S.A. million; ban on encumbering assets, except in the terms agreed on as the underwriter must meet certain obligations, mainly concerning in the contract. complying with the legal regulations, maintaining insurance, main- taining real estate, and complying with certain financial indicators Inversiones Internacionales Terranova S.A. based on its consolidated financial statements, such as: • West LB • Minimum installed board production capacity: 1,200,000 m3 The loan contract signed by Inversiones Internacionales Terranova per annum. S.A. with the German bank West LB means that Masisa S.A. as • Interest rate hedging greater than 3.0. underwriter must meet certain obligations, mainly regarding not • Net tangible equity exceeding US$980 million. significantly altering its activities, delivering financial information • Net debt to equity ratio not exceeding 0.9. periodically, maintaining up-to-date its obligations contracted with third parties, obtaining prior consent from such banks to dispose, Masisa Argentina S.A. transfer or sell a substantial part of its assets or to grant a guaran- The parent Company has guaranteed loans obtained by the affiliate tee thereon. Masisa Argentina S.A. These envisage meeting certain obligations that are normal in these kinds of operations, including the following, Fibranova C.A., Andinos C.A. and Masisa Madeiras Ltda. among others, in the specific terms and conditions laid down in • The syndicated loan contract signed on February 2, 2001, by the respective loan contracts. The obligations concerning financial the overseas affiliates Andinos C.A., Fibranova C.A. and Masisa indexes must be calculated based on the consolidated financial Madeiras Ltda. (former Terranova Brasil Ltda.), with the Chilean statements. banks Banco Santander-Chile, Banco del Estado and Banco BBVA • Rabobank Nederland means that Masisa S.A. as underwriter must meet certain obli- The loan granted by Cooperatieve Centrale Raiffeisen-Boerenleen- gations, mainly regarding not significantly altering its activities, bank B.A. (Rabobank Nederland) to Masisa Argentina S.A. sets for- delivering financial information periodically, maintaining up-to-date th certain obligations for the parent Company Masisa S.A. and/or its its obligations contracted with third parties, obtaining prior consent affiliates that are normal for these kinds of operations, including the from such banks to dispose, transfer or sell a substantial part of its following, among others, in the specific terms and conditions laid assets or to grant a guarantee thereon. The mentioned syndicated down in the respective loan contract: maintaining the Company’s loan also binds the Company to meet certain financial indicators current line of business and its legal existence; maintaining the based on its consolidated financial statements: necessary real estate for the Company’s ordinary line of business; • Maximum indebtedness ratio: 0.85 complying with the applicable laws and regulations; timely dispatch • Maximum financial debt to cash generation ratio: 5.5 (2004); 5.0 of the Company’s financial information; taking out and maintaining (2005); 4.5 (2006); 4.0 (2007). insurance that adequately covers the risks that are normal in the • Minimum cash generation to financial expenses ratio: 2.5 (2004); industry; maintaining an indebtedness level not exceeding 0.9 2.65 (2005); 3.0 (2006); 3.25 (2007). times; maintaining financial expense hedging of not less than 3; • Minimum net tangible equity: ThUS$700,000 maintaining a consolidated shareholders’ equity of not less than US$345 million; ban on encumbering assets, except in the terms agreed on in the contract; undertaking operations with related parties at market prices; ban on granting financing to any entity of the business group other than the issuer or any of its affiliates or associated companies. 128
Fibranova C.A. and Andinos C.A. Forestal Tornagaleones S.A. The loan contract signed on February 26, 2004, by the overseas Forestal Tornagaleones S.A. signed a credit with Rabobank affiliates Fibranova C.A. and Andinos C.A., de Venezuela, with the Investments Chile S.A. on October 15, 1998. Due to this obligation, German bank KfW means that Masisa S.A. as underwriter must meet such Company mortgaged plantations and lands for the term of certain obligations, mainly regarding not significantly altering its the loan requested. This loan was renewed on August 9, 2005. activities, maintaining indirect control of both debtors, delivering fi- At the close of these financial statements, these goods amounted nancial information periodically, maintaining up-to-date its obligations to ThUS$35,372, which is broken down into plantations of contracted with third parties, obtaining prior consent from such bank ThUS$28,689 and lands of ThUS$6,683. to dispose, transfer or sell a substantial part of its assets or to grant a guarantee thereon. b) Deferred customs duties The Company owed deferred custom duties of ThUS$18 (ThUS$117 Fibranova C.A. in 2005) for the year ended December 31, 2006. • The syndicated loan contract signed on April 15, 2002, by the over- seas affiliate Fibranova C.A., de Venezuela with the Chilean banks MATURITY ThUS$ Banco Santander-Chile, Banco de Crédito e Inversiones, Banco Cor- pbanca and Banco Security means that Masisa S.A. as underwriter 2007 18 must meet certain obligations, mainly regarding not significantly Total 18 altering its activities, delivering financial information periodically, maintaining up-to-date its obligations contracted with third parties, c) Insurance taken out obtaining prior consent from such banks to dispose, transfer or sell The following was the main insurance taken out by the parent Com- a substantial part of its assets or to grant a guarantee thereon. The pany and its affiliates for the year ended December 31, 2006: aforementioned syndicated loan also binds the Company to meet • Insurance of plantations of ThUS$293,186. certain financial indicators based on its consolidated financial state- • Insurance of physical goods and inventories of approximately ments: ThUS$199,626 and ThUS$130,974 for fixed costs in the case of • Maximum indebtedness ratio: 0.85 plant shutdown. • Maximum financial debt to cash generation ratio: 5.5 (2004); 5.0 • Corporate civil liability insurance, including coverage for personal (2005); 4.5 (2006); 4.0 (2007). accident and damage to third parties of ThUS$10,000. • Minimum cash generation to financial expenses ratio: 2.5 (2004); 2.65 (2005); 3.0 (2006); 3.25 (2007). d) Other Contingencies • Minimum net tangible equity: ThUS$700,000 • The Chilean Internal Revenue Service informed the Company by means of Resolution Nº203, dated August 26, 2003, that it is Forestal Argentina S.A. not admissible to acknowledge in Chile the income of some of its On September 2, 2005, Masisa S.A. became a joint and several co- foreign agencies for the effects of determining its first category debtor and co-signer in favor of Banco Cooperatieve Centrale Raiffei- taxable net income. According to the information the Company sen-Boerenleenbank B.A. (Rabobank Nederland) for the loan granted has, Resolution Nº203 will have an effect on losses, for which the by such bank in the same year to the affiliate Forestal Argentina S.A. Company has recorded US$39.2 million for deferred tax, recove- The proceeds of such loan were allocated to refinancing its financial rable taxes and tax losses already used. The Company appealed debt. Hence, the loan contract sets forth certain normal obligations the content of Resolution Nº203, pursuant to the procedure laid for these kinds of operations for Masisa S.A. as underwriter. Mo- down in articles 123 and following of the Tax Code. Based on the reover, the aforementioned loan contract binds Masisa S.A. to comply information the Company has, the opinion of its legal advisors and with certain financial indicators based on its consolidated financial the administrative jurisprudence of the Internal Revenue Service statements: affecting the decision in Resolution Nº203, it is estimated there is a • Minimum installed board production capacity: 1,200,000 m3 remote likelihood of the final verdict of the appeal having a negative per annum. impact on deferred tax, recoverable taxes and tax losses of U$39.2 • Maximum indebtedness level: 0.9 million recorded in the accounts by the Company. • Minimum interest rating hedging: 3 • Minimum forest asset hedging: 1.5 • Minimum net tangible equity: ThUS$700,000 Individual financial statements 2006 MASISA | 129
INDIRECT GUARANTEES Expressed in ThUS$
Guarantee Creditor Receivable Type of guarantee Assets committed
Name Relationship Type Book Value
BANCO BBVA ANDINOS C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 758 BANCO DEL ESTADO DE CHILE ANDINOS C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 1,458 BANCO SANTANDER ANDINOS C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 2,742 BANCO SANTIAGO ANDINOS C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 0 ABN AMRO BANK ANDINOS C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 0 BANQUE EUROPEENNE POUR AM ANDINOS C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY CITIBANK VENEZUELA ANDINOS C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 2,234 WESTDEUTSCHE LANDESBANK ANDINOS C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 1,059 KREDITANSTALT FUR WIEDERAUFBAU ANDINOS C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 1,356 RABOBANK NEDERLAND FORESTAL ARGENTINA S.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 5,289 ABN AMRO BANK FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY BANCO PROVINCIAL FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 8,423 BANCO BBVA FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 2,528 BANCO CORPBANCA FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 24,556 BANCO DE CRÉDITO E INVERSIONES FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 8,037 BANCO DE VENEZUELA S.A. FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 19,370 BANCO DEL ESTADO DE CHILE FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 8,678 BANCO MERCANTIL FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 26,835 BANCO SANTANDER FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 3,804 BANQUE EUROPEENNE POUR AM FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY SECURITY BANK FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY BANCO SECURITY FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 3.750 CITIBANK VENEZUELA FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 579 WESTDEUTSCHE LANDESBANK FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 16,517 BNP PARIBAS FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 7,539 CORPBANCA VENEZUELA FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 0 KREDITANSTALT FUR WIEDERAUFBAU FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 12,204 BANCO CORPBANCA FIBRANOVA C.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY BANCO DE CRÉDITO E INVERSIONES MASISA ARGENTINA S.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 9,790 RABOBANK NEDERLAND MASISA ARGENTINA S.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 8,813 ABN AMRO BANK MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 11,037 CITIBANK N.A. MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 24,834 RABOBANK NEDERLAND MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 24,834 THE BANK OF NOVA SCOTIA MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 24,834 BANCO CHILE NEW YORK BRANK MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 0 WESTDEUTSCHE LANDESBANK MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 24,834 PRIVATE PLACEMENT MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 18,185 COMERICA BANK MASISA OVERSEAS LIMITED AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 0 BANCO BBVA MASISA MADEIRAS LIMITADA AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 394 BANCO DEL ESTADO DE CHILE MASISA MADEIRAS LIMITADA AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 757 BANCO ITAU BBA MASISA MADEIRAS LIMITADA AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY BANCO SANTANDER MASISA MADEIRAS LIMITADA AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 1,423 WESTDEUTSCHE LANDESBANK INVERSIONES INTERNATIONALES TERRANOVA AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 4,355 KREDITANSTALT FUR WIEDERAUFBAU INVERSIONES INTERNATIONALES TERRANOVA AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY BANCO BBVA INVERSIONES INTERNATIONALES TERRANOVA AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY BANCO DEL DESARROLLO INVERSIONES INTERNATIONALES TERRANOVA AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY CITIBANK VENEZUELA TERRANOVA VENEZUELA S.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 3,773 WESTDEUTSCHE LANDESBANK TERRANOVA VENEZUELA S.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 10,282 BANQUE EUROPEENNE POUR AM TERRANOVA VENEZUELA S.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY CORPBANCA VENEZUELA TERRANOVA VENEZUELA S.A. AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY BANCO DE CHILE OXINOVA C.A. ASSOCIATED CO. CO-SIGNER SURETY S/HOLDERS’ EQUITY 4,900 HSBC MASISA USA INC AFFILIATE CO-SIGNER SURETY S/HOLDERS’ EQUITY 130
INDIRECT GUARANTEES (Continuation) Expressed in ThUS$ Guarantee Creditor Outstanding balances at financial statements closing Discharge of Guarantees 31-12-2006 31-12-2005 31-12-2007 Assets 31-12-2008 Assets 31-12-2009 Assets BANCO BBVA 758 2,617 469 289 0 BANCO DEL ESTADO DE CHILE 1,458 2,005 903 556 0 BANCO SANTANDER 2,742 2,088 1,697 1,044 0 BANCO SANTIAGO 0 1,672 ABN AMRO BANK 0 1,444 BANQUE EUROPEENNE POUR AM 2,673 CITIBANK VENEZUELA 2,234 1,732 2,234 0 0 WESTDEUTSCHE LANDESBANK 1,059 1,059 KREDITANSTALT FUR WIEDERAUFBAU 1,356 1,710 406 380 380 RABOBANK NEDERLAND 5,289 5,419 429 540 360 ABN AMRO BANK 7,976 BANCO PROVINCIAL 8,423 8,423 BANCO BBVA 2,528 2,901 1,565 963 0 BANCO CORPBANCA 24,556 21,218 16,546 8,011 BANCO DE CRÉDITO E INVERSIONES 8,037 8,922 5,537 2,500 BANCO DE VENEZUELA S.A. 19,370 23,178 19,370 BANCO DEL ESTADO DE CHILE 8,678 9,955 5,372 3,306 BANCO MERCANTIL 26,835 16,420 26,835 BANCO SANTANDER 3,804 10,454 2,621 1,183 BANQUE EUROPEENNE POUR AM 6,527 SECURITY BANK 2,917 BANCO SECURITY 3,750 1,240 2,584 1,167 CITIBANK VENEZUELA 579 579 0 0 WESTDEUTSCHE LANDESBANK 16,517 13,440 3,077 0 BNP PARIBAS 7,539 7,350 7,539 CORPBANCA VENEZUELA 0 1,440 KREDITANSTALT FUR WIEDERAUFBAU 12,204 15,390 3,654 3,420 3,420 BANCO CORPBANCA 2,738 BANCO DE CRÉDITO E INVERSIONES 9,790 12,722 2,846 2,778 2,778 RABOBANK NEDERLAND 8,813 12,708 2,563 2,500 2,500 ABN AMRO BANK 11,037 37 2,200 CITIBANK N.A. 24,834 118 84 4,950 RABOBANK NEDERLAND 24,834 84 4,950 THE BANK OF NOVA SCOTIA 24,834 21,476 84 4,950 BANCO CHILE NEW YORK BRANK 0 10,942 WESTDEUTSCHE LANDESBANK 24,834 84 4,950 PRIVATE PLACEMENT 18,185 27,840 9,185 9,000 0 COMERICA BANK 0 8,751 BANCO BBVA 394 578 201 193 0 BANCO DEL ESTADO DE CHILE 757 1,111 386 370 0 BANCO ITAU BBA 4,000 BANCO SANTANDER 1,423 2,088 727 696 0 WESTDEUTSCHE LANDESBANK 4,355 7,044 1,743 1,741 871 KREDITANSTALT FUR WIEDERAUFBAU 27,664 BANCO BBVA 1,407 BANCO DEL DESARROLLO 3,035 CITIBANK VENEZUELA 3,773 3,733 0 0 WESTDEUTSCHE LANDESBANK 10,282 8,367 1,915 0 BANQUE EUROPEENNE POUR AM 498 CORPBANCA VENEZUELA 426 BANCO DE CHILE 4,900 4,900 0 HSBC 4,527 Individual financial statements 2006 MASISA | 131
NOTE 25: THIRD-PARTY GUARANTEES
Guarantees of ThUS$8,662 (ThUS$3,054 in 2005), consisting of pledges, mortgages, loan insurance policy endorsements, special mandates, guarantees, joint and several co-debts, and other guarantees were received to guarantee the payment and compliance with customer obligations related to operations of the company’s line of business.
NOTE 26: NATIONAL AND FOREIGN CURRENCY
ASSETS Expressed in ThUS$ ASSETS (Continuation) Expressed in ThUS$
Item Currency Amount Amount Item Currency Amount Amount 31-12 31-12 31-12 31-12 2006 2005 2006 2005
CURRENT ASSETS OTHER CURRENT ASSETS PESOS 0 375 OTHER CURRENT ASSETS US DOLLAR 2,097 2,992 CASH PESOS 966 650 OTHER CURRENT ASSETS U.F. 1,714 1,399 CASH EURO 6 26 CASH US DOLLAR 923 59 FIXED ASSETS
TIME DEPOSITS EURO 71 0 FIXED ASSETS US DOLLAR 570,585 431,922 TIME DEPOSITS US DOLLAR 2,756 46,753 Other assets MARKETABLE SECURITIES PESOS 956 2,229 INVESTMENT IN RELATED US DOLLAR 392,550 524,598 TRADE ACCOUNTS RECEIVABLES PESOS 24,340 22,203 COMPANIESRELACIONADAS TRADE ACCOUNTS RECEIVABLES EURO 245 46 INVESTMENT IN OTHER COMPANIES US DOLLAR 158 160 TRADE ACCOUNTS RECEIVABLES US DOLLAR 5,989 2,021 GOODWILL US DOLLAR 1,165 1,249 NOTES RECEIVABLE PESOS 3,136 4,834 NEGATIVE GOODWILL US DOLLAR -47,626 -51,586 NOTES RECEIVABLE US DOLLAR 245 103 LONG-TERM RECEIVABLES US DOLLAR 1,358 1,137 OTHER RECEIVABLES U.F. 99 0 RELATED COMPANIES’ NOTES AND US DOLLAR 101,433 101,066 OTHER RECEIVABLES PESOS 4,518 3,726 ACCOUNTS RECEIVABLE OTHER RECEIVABLES EURO 0 288 INTANGIBLES US DOLLAR 267 121 OTHER RECEIVABLES US DOLLAR 2,206 4,477 AMORTIZATION US DOLLAR -41 -21 RELATED COMPANIES’ NOTES AND PESOS 3,564 3,491 OTHERS PESOS 293 1,390 ACCOUNTS RECEIVABLE OTHERS U.F. 10,708 6,824 RELATED COMPANIES’ NOTES AND US DOLLAR 365,943 354,768 OTHERS US DOLLAR 110,623 4,289 ACCOUNTS RECEIVABLE Total ASSETS INVENTORIES US DOLLAR 65,230 70,793 RECOVERABLE TAXES PESOS 34,618 19,843 PESOS 73,663 61,581 PRE-PAID EXPENSES US DOLLAR 0 609 EURO 322 360 PRE-PAID EXPENSES U.F. 0 0 US DOLLAR 1,577,818 1,495,510 PRE-PAID EXPENSES PESOS 1,272 2,840 U.F. 12,521 8,223 DEFERRED TAX US DOLLAR 1,957 0 132
CURRENT LIABILITIES Expressed in ThUS$
ITEM Currency Up to 90 days 90 days to 1 year 31-12-2006 31-12-2005 31-12-2006 31-12-2005 Amount Annual avrg. Amount Annual avrg. Amount Annual avrg. Amount Annual avrg. interest rate interest rate interest rate interest rate DUE TO BANKS AND FINANCIAL PESOS 16 4.80% INSTITUTIONS, SHORT-TERM DUE TO BANKS AND FINANCIAL US DOLLARS 3,702 58,655 4.63% INSTITUTIONS, SHORT-TERM DUE TO BANKS AND FINANCIAL U.F. 1,562 6.70% 1,495 6.70% INSTITUTIONS, LONG-TERM DUE TO BANKS AND FINANCIAL US DOLLARS 0 1,217 4.79% INSTITUTIONS, LONG-TERM BONDS PAYABLE-SHORT-TERM U.F. 23,690 4.90% 175,946 5.15% PORTION (BONDS) BONDS PAYABLE-SHORT-TERM US DOLLARS 62 5.00% 62 4.94% PORTION (BONDS) DIVIDENDS PAYABLE US DOLLARS 473 323 ACCOUNTS PAYABLE PESOS 15,044 20,520 ACCOUNTS PAYABLE EURO 701 ACCOUNTS PAYABLE U.F. 83 ACCOUNTS PAYABLE US DOLLARS 5,230 1,138 OTHER PAYABLES PESOS 35 OTHER PAYABLES EURO 360 OTHER PAYABLES US DOLLARS 1,371 1,056 NOTE PAYABLE PESOS 6 NOTES AND ACCOUNTS PAYABLE TO PESOS 98,362 45,299 RELATED COMPANIES NOTES AND ACCOUNTS PAYABLE TO US DOLLARS 5,136 RELATED COMPANIES PROVISIONS PESOS 6,483 4,315 PROVISIONS US DOLLARS 5,895 2,590 WITHHOLDINGS PESOS 980 2,260 INCOME TAX PESOS 227 DEFERRED TAXES PESOS 191 UNEARNED INCOME PESOS 16 16 OTHER CURRENT LIABILITIES US DOLLARS 2,625 3,610
TOTAL CURRENT LIABILITIES
PESOS 121,112 72,658 0 0
US DOLLARS 16,671 68,898 62 1,279
U.F. 83 1,562 23,690 177,441
EURO 1,061 0 0 0
US DOLLARS 2,625 3,610 0 0 Individual financial statements 2006 MASISA | 133
CURRENT PERIOD LONG-TERM LIABILITIES 12-31-2006 Expressed in ThUS$
ITEM Currency 1 to 3 years 3 to 5 years 5 to 10 years More than 10 years Amount Annual avrg. Amount Annual avrg. Amount Annual avrg. Amount Annual avrg. interest rate interest rate interest rate interest rate BONDS PAYABLE - LONG-TERM (BONDS) U.F. 107,693 4.75% 40,112 4.54% 32,443 5.15% 54,864 5.08% BONDS PAYABLE - LONG-TERM (BONDS) US DOLLARS 30,000 5.00% OTHER LONG-TERM RECEIVABLES US DOLLARS 18 LONG-TERM PROVISIONS US DOLLARS 259 280 15,327 LONG-TERM DEFERRED TAXES US DOLLARS 24,769 OTHER LONG-TERM LIABILITIES US DOLLARS 5,930
TOTAL LONG-TERM LIABILITIES
U.F. 107,693 40,112 32,443 54,864
US 36,207 0 25,049 15,327 DOLLARS
PASIVOS LARGO PLAZO PERÍODO Anterior 31-12-2005 Expressed in ThUS$
ITEM Currency 1 to 3 years 3 to 5 years 5 to 10 years More than 10 years Amount Annual avrg. Amount Annual avrg. Amount Annual avrg. Amount Annual avrg. interest rate interest rate interest rate interest rate DUE TO BANKS AND FINANCIAL US DOLLARS 1,170 4.79% 2,340 4.74% INSTITUTIONS, LONG-TERM BONDS PAYABLE - LONG-TERM (BONDS) U.F. 32,668 5.00% 32,672 5.00% 8,793 6.25% 15,828 6.25% BONDS PAYABLE - LONG-TERM (BONDS) US DOLLARS 30,000 5.00% OTHER LONG-TERM PAYABLES US DOLLARS 117 LONG-TERM PROVISIONS PESOS 22 LONG-TERM PROVISIONS US DOLLARS 9,820 LONG-TERM DEFERRED TAXES US DOLLARS 4,333 OTHER LONG-TERM LIABILITIES PESOS 1,682 633 316 OTHER LONG-TERM LIABILITIES US DOLLARS 3,600
TOTAL LONG-TERM LIABILITIES
US DOLLARS 34,887 2,340 14,153 0
U.F. 32,668 32.672 8,793 15,828
PESOS 1,682 633 338 0 134
NOTE 27: SANCTIONS
The Company and its directors or managers received no sanctions by BVQI is currently one of the most renowned certification bodies the Superintendency of Securities and Insurance or other administra- in the world, and it offers strategic solutions in the fields of quality tive authorities in the period covered by these financial statements. management, safety/health, environmental and social responsibility certification, and certification for products and services in all sectors of economic activity. NOTE 28: SUBSEQUENT EVENTS Masisa’s wood division also has the Forest Stewardship Council (FSC) certification, which is a green seal for sawn lumber, mouldings 1,065 hectares of planted forests belonging to companies located in and doors (additional chips and other byproducts). Chile’s Region 8 were affected by forest fires in January 2007. The The following were the disbursements for the January 1 to Decem- affected land were covered by insurance policies, which are in the ber 31, 2006 period: process of being settled. ThUS$ The Company’s board of directors made the decision in January 2007, to close down the operations of the productive plant in the Uni- Environment and certifications 1,138 ted States, which started in early February and involved discharging Effluent treatment plant 3 approximately 35 Company workers. The management deems that Boiler hose filters 75 a part of the productive assets can be redeployed in other countries Anti-stain bath improvement 12 with productive activity and that the assets that are finally stripped will Liquid and solid industrial residue treatment plant 966 have no material effect on the Company’s income in the future. No significant events have occurred as of December 31 and the release date of these financial statements to change the Company’s The following were the budgeted (balances) investment operations financial standing or income. and activities in 2006:
ThUS$ NOTE 29: ENVIRONMENT Environment and certifications 573 Effluent treatment plant 750 Integrated Management Systems have been implemented in all the Boiler hose filters 547 Company’s productive plants as part of its sustainable development Anti-stain bath improvement 118 policy. In some cases, these include the ISO 9001, ISO 14001 and Liquid and solid industrial residue treatment plant 2,299 OHSAS 18001 standards, which along with maximizing the profitabi- lity are focused on the efficiency of quality, environmental, safety and occupational health management. They include a host of activities Furthermore, Masisa’s Forestry Divison has an integrated manage- like danger determination and risk quantification, workplace analy- ment system, which includes the environment (ISO 14001) and safety sis, staff training, internal and external system audits, monitoring of and occupational health (OHSAS 18001) standards, and it covers all processes, products, the applicable legal regulation, environmental the company’s forest operations and is constantly being maintained variables, safety and occupational health, and continuous improve- and enhanced with internal and external audits. It also has forestry ment programs. management and chain of custody certification pursuant to the Forest Masisa S.A. terminated its relationship with the Company Det Stewardship Council (FSC). Norske Veritas (DNV) in June 2005, which had certified its integrated management systems for its board and wood divisions. The following were the disbursements in the 2006 period: This does not compromise the validity and effectiveness of all the integrated management systems implemented in the different ThUS$ productive units. Environment 168 The process of BVQI Chile S.A. certifying the environmental mana- gement systems in the forestry, board and wood divisions commenced The following were the budgeted disbursement activities and amounts in the fourth quarter of 2005. for the 2006 period: ThUS$ Certification and Environment 456 Individual financial statements 2006 MASISA | 135
INDIVIDUAL FINANCIAL STATEMENTS RATIO ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2006 (Expressed in thousands of US$)
A.COMPARATIVE ANALYSIS OF THE MAIN TRENDS
2006 2005 2006 2005 Jan-Dec Jan-Dec Jan-Dec Jan-Dec
Liquidity Indexes Activity Indexes Current Liquid Assets 3.16 1.67 1. Total Assets 1,663,354 1,565,674 Acid Ratio 0.01 0.00 Investments in the period - In fixed assets 68,279 29,570 Current assets fell by approximately 3.97%, mainly explained by the Transfers: drop in the item time deposits. Current liabilities were down 49.13% as a net effect of the lower financial obligations and an increase in - Sale of fixed assets 1,527 660 accounts payable to related companies. 2. Inventory turnover 3.67 2.60 3. Inventory permanence 102.21 103.05 2006 2005 4. Accounts payable turnover 11.22 12.03 Jan-Dec Jan-Dec 5. Accounts payable permanence 36.10 29.92 Indebtedness Indexes 6. Accounts receivable turnover 7.69 11.38 Indebtedness ratio (times) 0.38 0.41 7. Accounts receivable permanence 46.82 31.64 Short-term debt/total debt 34.65% 69.33% Long-term debt/total debt 65.35% 30.67% Financial expenses hedging (times) 2.32 1.65 Expressed in ThUS$ 2006 2005 The indebtedness ratio dropped on the same period of last year due Jan-Dec Jan-Dec to the lower financial liabilities and the increase in shareholders’ equi- ty, mainly on account of the capital increase of US$44 million. Income Indexes The debt breakdown reflects the restructuring of the Company’s Operating earnings 301,719 236,897 bonds from the short term to the long term, and the payment of - Domestic market 135,738 116,803 bank debts. The increase in the hedging index was largely due to a higher net - Foreign market 165,981 120,094 income before tax and minority interest in the 2006 period compared Operating costs (239,559) (184,149) with the previous period, as explained below in this section. - Domestic market (102,295) ( 82,541) - Foreign market ( 137,264) (101,608) Operating income 16,346 17,752 Financial expenses ( 20,862) ( 22,755) Non-operating income 11,294 ( 2,965) R.B.M.T.D.A.G.I. 60,798 47,480 Net income (loss) after tax 25,529 23,105 136
The increase in non-operating income was mainly explained by B. DESCRIPTION AND ANALYSIS OF THE MAIN NET CASH FLOW the higher income due to financial earnings and to the better COMPONENTS exchange rate difference effect, offset in part by the net loss of Expressed in ThUS$ investment in affiliates. The following is the breakdown of depletion for the periods analyzed: 2006 2005 Jan-Dec Jan-Dec
Positive net cash flow from operating activities 56,145 36,583 2006 Jan-Dec 2005 Jan-Dec - Proceeds from trade accounts receivables 329,538 249,444 Depletion 6,762 8,372 - Payment to suppliers and employees ( 306,417) ( 228,356) - Others 33,024 15,495 2006 Jan-Dec 2005 Jan-Dec Net cash flow from financing activities ( 37,032) 70,690 Profitability Indexes - Placement of cash shares 44,012 75,383 1. Return on shareholders’ equity 2.58% 2.81% - Proceeds from loans 34,449 79,929 2. Return on assets 1.83% 2.06% - Bonds 162,965 - 3. Return on operating assets 1.50% 1.82% - Dividends paid ( 11,491) ( 52,111) 4. Earnings per share (US dollars) 0.0052 0.0047 - Payment of loans ( 96,776) ( 11,304) 5. Return on dividends 1.01% 2.79% - Payments of bonds ( 169,338) ( 17,594) - Others ( 903) ( 3,613) The profitability indexes reflected the drop in income already com- Net cash flow from investment activities ( 63,361) ( 86,258) mented on. - Proceeds from sale of fixed assets 1,527 660 - Incorporation of fixed assets ( 68,279) ( 29,570) - Other related companies’ loans (8,571) ( 26,057) - Others 11,962 ( 31,291) Total net cash flow provided for the year ( 44,248) 21,015 Inflation effect -- Cash and cash equivalents at the beginning 49,926 28,911 of the year Cash and cash equivalents at the end of 5,678 49,926 the year
The incorporation of fresh resources due to the capital increase completed in January 2006, the restructuring of liabilities ending up with the placement of a bond in UF in January 2006, and payment of dividends of US$11.4 million in 2006, and of US$52.1 million in 2005, can be highlighted regarding cash flows.
C. BOOK AND ECONOMIC VALUES OF ASSETS AND LIABILITIES The company’s key assets are its productive plants in Chile and its investments overseas, in countries like Argentina, Brazil, the United States, Venezuela and Mexico, which are valued according to genera- lly accepted accounting principles. The studies the Company normally carries out to analyze the economic value of its productive plants have revealed that such values exceed the respective book values. Individual financial statements 2006 MASISA | 137
D. ANALYSIS OF THE MOST SIGNIFICANT CHANGES IN THE PERIOD The Company deploys hedging to reduce the exchange rate fluctua- The Company does business in various markets, mainly focused on tion risks, as shown in the respective hedging note. Chile, the United States, and Mexico. Due to this, the Company’s Based on market conditions, the Company’s management establis- sales and financial income are exposed to the conditions prevailing hes policies to secure loans, invest in time deposits and marketable in each market. The table below shows the breakdown of sales by securities with a reverse re-sale agreement and the use of hedging export market. instruments. Depending on the amounts, the board also approves these transactions before they are carried out. The new long-term 2006 Jan-Dec 2005 Jan-Dec financing to finance new investment or refinance existing liabilities Chile 44.98% 49.0% must be approved by the Company’s board of directors. Others 55.02% 51.0% Total 100.0% 100.0% E. RISK ANALYSIS Analysis of Risk Factors The Company faces various market, financial and operational risk Masisa S.A. has increased the diversification of its market risk in the factors during the normal course of business. last few years by expanding its productive and commercial operations • Financial and exchange rate risk: to other countries. Hence, it currently has plants in Chile, Argentina, The Company management establishes policies to address the Brazil, the United States(*), Venezuela and Mexico. The Company financial risk by using hedging instruments like swaps, forwards, also has own commercial operations in Colombia, Peru and Ecuador options or futures to hedge the exchange rate and interest rate and it exports to a host of countries in America, Asia and Europe. It fluctuation risks. thereby avoids the risk exposure of a particular market. The Company does not use hedging instruments for speculative The Company also faces the risk in its markets of possible tougher purposes. competition or the entry of new players in the board, wood and forest • Operational risk: product market. Masisa S.A. deems it has a sound position in each Masisa S.A. faces raw material supply risks during the normal cour- of the markets in which it participates directly, which enables it to se of business, especially chemical resins and wood that are key maintain profitable and growing operations. However, the Company elements used to produce its products. To minimize such risk, the can not assure these conditions will not change in the future with the Company has long-term agreements with chemical resin suppliers. entry of new players or tougher competition in the market in which it In addition to the forests and plantations the Company owns directly participates. To address such risks, the Company focuses on main- in Chile, it is also the main shareholder of Forestal Tornagaleones taining its cost leadership, keeping up a strong distribution chain, S.A., which has plantations in Chile and Argentina. Moreover, it has constantly enhancing its offering of products, and obtaining brand a policy of diversifying its wood residue supply, thereby reducing the recognition, among others. dependence on individual suppliers. The Company’s assets and liabilities are exposed to foreign During the normal course of business, the Company may face risks exchange rate fluctuations or those of different currencies than the of damage to its plants, the risk of warehouse loss, damage to third functional accounting currency (US dollars). The presence of assets parties, legal contingencies, commercial risks and others. The and liabilities in currencies other than the US dollar is mainly due Company management strives to identify such risks to prevent them to the Company’s operations in domestic markets, to domestic sales from happening, minimize the potential adverse effects and/or cover activities, to investment in assets purchased in the domestic market the possible losses from such disasters with insurance. and to securing internal financing. The following were the balances in non-US dollar currencies and/or expressed in a different currency from the functional currency in the periods analyzed:
Summary Of Assets And Liabilities In Non-us Dollar Currencies (Expressed In Thus$)
2006 Jan-Dec 2005 Jan-Dec Assets 87,416 70,023 Liabilities 383,683 349,404 Active (passive) standing (296,267) (279,381)
(*) The Company decided to close its mouldings plant in the United States in February 2007 to improve its cost structure. 138 RELATED COMPANIES 2006 MASISA | 139
RELATED COMPANIES 140 RELATED COMPANIES 2006 MASISA | 141
INFORMATION ABOUT AFFILIATES AND ASSOCIATED COMPANIES
For the year ended December 31, 2006
AFFILIATES 1 Inversiones Internacionales Terranova S.A. 2 Forestal Tornagaleones S.A. 3 Masisa Partes y Piezas Ltda. 4 Masisa USA Inc. 5 Masisa Overseas Limited 6 Terranova de Venezuela S.A. 7 Andinos C.A. 8 Fibranova C.A. 9 Consorcio Forestal Venezolano S.A. (Coforven) 10 Corporación Forestal Guayamure C.A. 11 Corporación Forestal Imataca C.A. 12 Masisa Madeiras Ltda. 13 Masisa do Brasil Ltda. 14 Forestal Terranova México S.A. de C.V. 15 Maderas y Sintéticos de México S.A. de C.V. 16 Maderas y Sintéticos Servicios S.A. de C.V. 17 CC MAS S.A. de C.V. 18 Masnova de México S.A. de C.V. 19 Masisa Argentina S.A. 20 Forestal Argentina S.A. 21 Masisa Colombia S.A. 22 Terranova Panamá S.A. 23 Maderas y Sintéticos del Perú S.A.C. 24 Masisa Ecuador S.A.
ASSOCIATED COMPANIES 25 Oxinova C.A. 26 Inversiones Calle Calle S.A.
COMPANIES ABSORBED BY Masisa S.A. IN 2006 27 Masisa Concepción Ltda. 28 Masisa Inversiones Ltda. 29 Inversiones Coronel Ltda.
The following is a brief outline of affiliates and associated compa- nies and an overview of the information contained in their financial statements. It should be highlighted that some of the directors or representatives of these related companies are in turn directors or hold positions in the parent company management. 142
1 INVERSIONES INTERNACIONALES TERRANOVA S.A.
Address: Av. Apoquindo 3650, Piso 10, Las Condes, Santiago Tax Code Nº: 99.537.270-3 Telephone: (56-2) 350 6000 Fax: (56-2) 350 6001
LEGAL CONSTITUTION CORPORATE PURPOSE Inversiones Internacionales Terranova S.A. is a Chilean closed To invest capital overseas, and it may also undertake this in Chile, corporation established by means of a public deed dated be this in the forestry and agricultural businesses and in industrial September 30, 2003, granted by the Santiago Notary of Mr. companies related to these lines of business; the development, Félix Jara Cadót, whose excerpt was registered in the 2003 trading and marketing of byproducts of such businesses or of any Commerce Registry of the Santiago Real Estate Registrar on other activity related to the current or future forestry line of business; sheet 32.145 N°24.205, and was published in the Official manage, promote, organize, constitute and participate in companies Gazette on October 20, 2003. or associations that develop the mentioned productive areas; provide management, technical, financial, consultancy, legal and other SUBSCRIBED AND PAID-IN CAPITAL services necessary for the better development of the companies of The subscribed and paid-in capital of Inversiones Internacio- which it is a shareholder or partner or of external companies. nales Terranova S.A. amounts to ThUS$194,472, divided into 87,871,055 non-par-value shares. Its shareholders are Masisa BOARD OF DIRECTORS S.A., which holds 60% of the shares, and GrupoNueva S.A. the President: Julio Moura remaining 40%. Directors: Patrick Nielson The investment in this company accounts for 0.78% of the Enrique Cibié Bluth company’s total consolidated assets. Eugenio Arteaga Infante Patricio Reyes Urrutia Chief Executive Officer: Enrique Cibié Bluth
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings - 0 Operating income -12 -2 Non-operating income -27,017 -21,690 Period net income -26,932 -21,532 Total assets 427,801 403,566 Total liabilities 401,523 363,100 Monetary interest - 0 Shareholders’ equity 26,279 40,466 Net cash flow for the period -2,540 -6,407
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE BEGINNING OF THE YEAR 2,548 8,955
CASH FLOW AND CASH FLOW EQUIVALENT AT THE END OF THE YEAR 8 2,548 RELATED COMPANIES 2006 MASISA | 143
2 FORESTAL TORNAGALEONES S.A.
Address: Av. Apoquindo 3650, Piso 10, Las Condes, Santiago Tax Code Nº: 81.597.700-8 Telephone: (56-2) 350 6000 Fax: (56-2) 350 6001
LEGAL CONSTITUTION Forestal Tornagaleones S.A. is a closed corporation, constituted in CORPORATE PURPOSE Valdivia by means of a public deed dated February 20, 1967, granted The management, handling and development of forests on own or by the public notary Mr. Aurelio Herrera Mardones, alternate notary of third-party lands for marketing with third parties, and in turn to supply the incumbent notary Mr. Roberto Goldenberg Godoy, whose excerpt the industrial plants of Masisa and its affiliates, as well as any kinds was registered on sheet 51 Nº13 of the Valdivia Commerce Registry in of investment in forestry businesses and their management, providing 1967, and published in the Official Gazette on March 3, 1967. technical forestry consultancy services and undertaking technology The Company bylaws were modified due to the capital increa- transfer operations, all of this in Chile and overseas. se agreed on in an Extraordinary Shareholders’ Meeting, held on April 18, 2002, registered in a public deed on May 2, 2002, in the BOARD OF DIRECTORS Santiago Notary of Mr. Iván Torrealba Acevedo, and whose excerpt President: Enrique Cibié Bluth was registered on sheet 170 N°119 of the Commerce Registry of Incumbent Directors: Eduardo Vial Ruiz-Tagle the Valdivia Real Estate Registrar in 2002, and published in the Cristián Valenzuela Rivera Official Gazette on May 17, 2002. Such capital increase amounted to Jaime Valenzuela Fernández $5,154,320,000, divided into 4,775,534 new common, registered, Patricio Reyes Urrutia non-par-value shares. Fernando Perramont Sánchez Chief Executive Officer: Jorge Correa Drubi SUBSCRIBED AND PAID-IN CAPITAL The subscribed and paid-in capital of Forestal Tornagaleones S.A. amounts to Th$44,682,170, divided into 28,989,000 non-par-value shares. For the effects and purposes of Chilean financial statements, the company’s outstanding stock amounted to Th$73,607,611. Its ma- jority shareholder is Masisa S.A., which holds 94.91% of the shares. The investment in this company accounts for 6.51% of the company’s total consolidated assets.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 10,835 12,042 Operating income 2,235 2,347 Non-operating income 367 1,811 Period net income 3,050 4,096 Total assets 199,158 153,190 Total liabilities 60,900 23,587 Monetary interest - - Shareholders’ equity 138,259 129,603 Net cash flow for the period -2 -332
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 4 336
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 2 4 144
3 MASISA PARTES Y PIEZAS LTDA.(*)
Address: Av. Apoquindo 3650, Piso 10, Las Condes, Santiago Tax Code Nº: 77.790-860-K Telephone: (56-2) 350 6000 Fax: (56-2) 350 6001
LEGAL CONSTITUTION CORPORATE PURPOSE Masisa Partes y Piezas Ltda. was established by means of a public The design and/or manufacture of any kinds of wooden parts, pieces deed granted on June 26, 2002, by the Santiago Notary of Mr. Iván and articles for the furniture and construction industries, be this itself Torrealba Acevedo. An excerpt of such deed was registered on sheet or through third parties, in all the technically feasible ways, and to 16.508, N°13.604, of the Commerce Registry of the Santiago Real provide services and consultancy to third parties; the manufacture of Estate Registrar in 2002, and published in the Official Gazette on export furniture; the marketing of any kinds of wooden products and July 8, 2002. other similar products in the domestic and foreign markets, either The last modification of this Company was registered in a public by own or third-party manufacture, and their import and export; the deed dated June 21, 2006, granted by the Santiago Notary of Mr. representation of any kinds of companies, partnerships, national or José Musalem Saffie, whose excerpt was registered on sheet 24.925, foreign natural or juristic persons in any kind of business or economic Nº17380 of the Santiago Commerce Registry in 2006, and published activity in Chile or overseas, be this as the representative, commis- in the Official Gazette on June 29, 2006. Such modification entailed sioning agent, agent or dealer; and any other activity related to the the change of a partner due to Inversiones Coronel Ltda. transferring corporate line of business the partners may agree on. all its rights in the Company to Masisa Overseas Ltd. MANAGEMENT SUBSCRIBED AND PAID-IN CAPITAL The management, representation and use of the Company is vested in The subscribed and paid-in capital of Masisa Partes y Piezas Masisa S.A. through the representatives it appoints by public deed. Ltda. amounts to $1,000,000. The outstanding stock amounted to US$1,684.07 for the year ended December 31, 2006. The former (*) During March 2007, the totality of the assets of Masisa Partes y Piezas Ltda. were partner Inversiones Coronel Ltda. transferred all its corporate rights to being sold . Masisa Overseas Ltd. on June 21, 2006. As of December 31, 2006, Masisa S.A. held 99.8% of the corpora- te rights, and Masisa Overseas Ltd. held the remaining 0.2%. The investment in this dompany accounts for 0.00% of the company’s total consolidated assets.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 3,462 3,512 Operating income -985 -186 Non-operating income -605 -244 Period net income -1,590 -430 Total assets 1,375 2,603 Total liabilities 4,027 3,665 Monetary interest - - Shareholders’ equity -2,652 -1,062 Net cash flow for the period -358 351
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 360 9
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 2 360 RELATED COMPANIES 2006 MASISA | 145
4 MASISA USA, INC.
Address: 900 Circle 75 Parkway, Suite 720, Atlanta, GA, Estados Unidos Telephone: (1-770) 405 2600 Fax: (1-770) 405 2601
LEGAL CONSTITUTION CORPORATE PURPOSE Masisa USA, Inc. is a closed corporation originally established in Masisa USA, Inc. is a commercial company, whose purpose is to 1993 under the name of Fibreform Andinos Corporation. Masisa market and distribute Masisa’s wood products in the US market. It is acquired 100% of the shareholding in January 1996, and it was then at present mainly focused on the promotion, sales and distribution of called Terranova Forest Products, Inc. The re-incorporation de Terra- industrial wood products, including finger-joint and MDF mouldings, nova Forest Products, Inc took place in October 2005, and it became solid pine doors and OSB. a publicly-traded corporation registered in the State of Washington, a publicly-traded corporation registered in the State of Delaware. The COMMERCIAL EQUITY name Terranova Forest Products, Inc. was also changed to Masisa The corporate offices and the sales team are located in the city of USA, Inc. Atlanta, Georgia. Its own distribution center, located near the port of Charleston, SUBSCRIBED AND PAID-IN CAPITAL South Carolina, is a complex of 9 hectares of land where its adminis- The subscribed and paid-in capital of Masisa USA, Inc. amounts to trative and logistics offices are also located. ThUS$25,100, divided into 10,000 shares. Its shareholders are Inver- siones Internacionales Terranova S.A. holding 74.88% of the shares and Masisa S.A. the remaining 25.12%. BOARD OF DIRECTORS The outstanding stock amounted to ThUS$28,091 for the year President: Julio Moura ended December 31, 2006. Directors: Roland Jean Degen The investment in this company accounts for 0.98% of the Patrick Nielson company’s total consolidated assets Enrique Cibié Bluth Tomás Morales Jaureguiberry Chief Executive Officer: George Mac Connell (*)
(*) Mr. George MacConnell stepped down in February 2007, and was replaced by Mr. Dan Schmidt.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 211,833 191,520 Operating income 3,567 1,996 Non-operating income 266 44 Period net income 2,368 1,265 Total assets 60,335 65,831 Total liabilities 32,244 40,109 Monetary interest - 0 Shareholders’ equity 28,091 25,722 Net cash flow for the period -3,712 2,111
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 6,268 4,020
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 2,556 6,131 146
5 MASISA OVERSEAS LIMITED
Address: Calpdonian House, PO BOX 1043 6T, Dr. Roy’s Drive, George Town, Gran Cayman Cayman Islands
LEGAL CONSTITUTION MANAGEMENT Masisa Overseas Limited was established in 1995 pursuant to the law The Company is managed by a board of directors made up of 5 direc- of the Cayman Islands. tors, who are elected in a Shareholders’ Meeting.
SUBSCRIBED AND PAID-IN CAPITAL The board of directors is currently made up of: The subscribed and paid-in capital of Masisa Overseas Ltd. amounts to Enrique Cibié Bluth US$50,000, divided into 50,000 par value shares of US$1 each. Eduardo Vial Ruiz-Tagle The company’s outstanding stock amounted to ThUS$-16,297 for Eugenio Arteaga Infante the effects of Chilean financial statements. Patricio Reyes Urrutia Cristian Valenzuela Rivera CORPORATE PURPOSE The corporate purpose is to undertake any kinds of business or acti- vity pursuant to the legislation of the Cayman Islands. Such activities mainly concern acting as an agent in certain exports of Masisa S.A. and of Masisa Argentina S.A., to secure financing and invest in pro- ductive activities outside Chile.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 1,212 1,081 Operating income -6,707 -3,675 Non-operating income 216 16 Period net income -6,491 -3,659 Total assets 112,299 54,410 Total liabilities 128,596 64,216 Monetary interest - - Shareholders’ equity -16,297 -9,806 Net cash flow for the period -10 -33
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 11 44
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 1 11 RELATED COMPANIES 2006 MASISA | 147
6 TERRANOVA DE VENEZUELA S.A.
Fiscal Address: Av. Francisco de Miranda, Edificio Parque Cristal, Torre Oeste Piso 10, Of. 10-4, Los Palos Grandes, Caracas Telephone: (58-212) 620 70 11 Fax: (58-212) 285 4217
Administrative Address: Calle Cuchiveros, Torre Balear, Piso 2, Alta Vista Norte, Puerto Ordaz, Estado Bolívar Telephone: (58-286) 965 10 11 Fax: (58-286) 965 1040 E-mail [email protected]
LEGAL CONSTITUTION Terranova de Venezuela S.A. is a closed corporation established on CORPORATE PURPOSE February 26, 1997, pursuant to the laws of the Bolivarian Republic The purchase, development and marketing of wood. of Venezuela. It is registered in the Fifth Commerce Registry of the Judicial Circumscription of the Federal District and State of Miranda, BOARD OF DIRECTORS under Nº28, tome 96-A-Qto. Incumbent Directors: Jaime Valenzuela Fernández (President) SUBSCRIBED AND PAID-IN CAPITAL Enrique Cibié Bluth The subscribed and paid-in capital of Terranova de Venezuela S.A. Julio Moura amounts to 11,755,120,000 bolivares, equivalent to 11,755,120 par Eugenio Arteaga Infante value shares of 1,000 bolivares each. Terranova de Panamá S.A. Miguel Oneto Rosales holds 100% of the capital stock. Alternate Directors: Eduardo Vial Ruiz Tagle The investment in this company accounts for 0.00% of the Patricio Reyes Urrutia company’s total consolidated assets. Iván Rubio Huerta Tomás Morales Jaureguiberry Jorge Correa Drubi Secretary: Gustavo Malavé Chief Executive Officer: Miguel Oneto Rosales
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 14,253 13,049 Operating income -465 -1,038 Non-operating income -6,232 -1,752 Period net income -6,697 -2,233 Total assets 90,161 83,891 Total liabilities 90,510 78,077 Monetary interest - 0 Shareholders’ equity -350 5,814 Net cash flow for the period -121 192
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 332 139
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 211 331 148
7 ANDINOS C.A.
Fiscal Address: Av. Francisco de Miranda, Edificio Parque Cristal, Torre Oeste Piso 10, Of. 10-4, Los Palos Grandes, Caracas Telephone: (58-212) 620 70 11 Fax: (58-212) 285 4217
Administrative Address: Calle Cuchiveros, Torre Balear, Piso 2, Alta Vista Norte, Puerto Ordaz, Estado Bolívar Telephone: (58-286) 965 1011 Fax: (58-286) 965 1040
LEGAL CONSTITUTION Andinos C.A. is a closed corporation established on January 20, CORPORATE PURPOSE 1999, pursuant to the laws of the Bolivarian Republic of Venezuela. It To undertake wood sawing operations, and purchase, develop and is registered in the Fifth Commerce Registry of the Judicial Circums- market wood. cription of the Federal District and State of Miranda, under Nº68, tome 276-A-Qto. BOARD OF DIRECTORS Incumbent Directors: Enrique Cibié Bluth (President) SUBSCRIBED AND PAID-IN CAPITAL Eduardo Vial Ruiz Tagle The subscribed and paid-in capital of Andinos C.A. amounts to Patricio Reyes Urrutia 6,867,758,000.00 bolivares, equivalent to ThUS$10,019, divided Jaime Valenzuela Fernández into 6,867,758 par value shares of 1,000 bolivares each. Inversiones Miguel Oneto Rosales Internacionales Terranova S.A. holds 100% of the capital stock. Alternate Directors: Jorge Correa Drubi The investment in this company accounts for 0.00% of the Tomás Morales Jaureguiberry company’s total consolidated assets. Iván Rubio Huerta Luis Guillermo Velázquez B. Eugenio Arteaga Infante Secretary: Gustavo Malavé Chief Executive Officer: Miguel Oneto Rosales
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 21,454 21,871 Operating income -2,274 821 Non-operating income -584 -1,634 Period net income -2,846 -1,155 Total assets 37,707 40,132 Total liabilities 50,968 50,547 Monetary interest - - Shareholders’ equity -13,262 -10,415 Net cash flow for the period -1,828 1,307
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 2,446 1,139
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 618 2,446 RELATED COMPANIES 2006 MASISA | 149
8 FIBRANOVA C.A.
Fiscal Address: Av. Francisco de Miranda, Edificio Parque Cristal, Torre Oeste Piso 10, Of. 10-4, Los Palos Grandes, Caracas Telephone: (58-212) 620 70 11 Fax: (58-212) 285 4217
Administrative Address: Calle Cuchiveros, Torre Balear, Piso 2, Alta Vista Norte, Puerto Ordaz, Estado Bolívar Telephone: (58-286) 965 1011 Fax: (58-286) 965 1040
LEGAL CONSTITUTION CORPORATE PURPOSE: Fibranova C.A. is a closed corporation established on August 12, 1998, The production and marketing of wood products and their bypro- pursuant to the laws of the Bolivarian Republic of Venezuela. It is registe- ducts, and any other legal commercial activity. red in the Fifth Commerce Registry of the Judicial Circumscription of the Federal District and State of Miranda, under Nº39, tome 238-A-Qto. BOARD OF DIRECTORS Alternate Directors: Enrique Cibie Bluth (President) SUBSCRIBED AND PAID-IN CAPITAL Eduardo Vial Ruiz Tagle The subscribed and paid-in capital of Fibranova C.A. amounts to Jaime Valenzuela Fernández 44,182,000,000 bolivares, equivalent to ThUS$63,900, divided into Patricio Reyes Urrutia 44,182,000 par value shares of 1,000 bolivares each. Inversiones Miguel Oneto Rosales Internacionales Terranova S.A. holds 100% of the capital stock. Alternate Directors: Luis Guillermo Velásquez B. The investment in this company accounts for 0.00% of the Tomas Morales Jaureguiberry company’s total consolidated assets. Eugenio Arteaga Infante Iván Rubio Huerta Jorge Correa Drubi Secretary Gustavo Malavé Chief Executive Officer Miguel Oneto Rosales
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 106,004 77,686 Operating income 9,067 3,738 Non-operating income -16,485 -13,158 Period net income -5,080 -10,342 Total assets 260,188 260,896 Total liabilities 297,619 293,248 Monetary interest - - Shareholders’ equity -37,431 -32,352 Net cash flow for the period -3,015 2,295
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 3,942 1,647
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 927 3,942 150
9 CONSORCIO FORESTAL VENEZOLANO S.A. (“COFORVEN”)
Fiscal Address: Avda. Francisco de Miranda, Edificio Parque Cristal, Torre Oeste, Piso 10, Of. 10-4, Los Palos Grandes, Caracas Telephone: (58-212) 620 70 11 Fax: (058-212) 285 4217 Administrative Address: Calle Cuchiveros, Torre Balear, Piso 2,Alta Vista Norte, Puerto Ordaz, Estado Bolívar Telephone: (58-286) 965 1011 Master. Fax: (58-286) 965 1040
LEGAL CONSTITUTION CORPORATE PURPOSE COFORVEN is a closed corporation established on August 5, 1991, The purchase, development and marketing of wood. pursuant to the laws of the Bolivarian Republic of Venezuela. It was registered on August 8, 1991, in the Civil, Commerce, Transport, BOARD OF DIRECTORS and Labor First Instance Court of the Judicial Circumscription of the Incumbent Directors: Jaime Valenzuela Fernández Federal District and State of Monagas, under Nº194, tome CHAB, and (President) registered in the Commerce Registry of the Judicial Circumscription of Enrique Cibié Bluth the Capital District and State of Miranda on May 31, 1999, where the Julio Moura registry currently is. Eugenio Arteaga Infante Miguel Oneto Rosales SUBSCRIBED AND PAID-IN CAPITAL Alternate Directors: Eduardo Vial Ruiz Tagle The subscribed and paid-in capital of COFORVEN amounts to Patricio Reyes Urrutia 2,719,129,000.00 bolivares, equivalent to ThUS$10,241, divided into Iván Rubio Huerta 2,465,995 shares. Terranova de Venezuela S.A. holds 99.95% of the Tomás Morales Jaureguiberry capital stock with a minority shareholder holding the remaining 0.05%. Jorge Correa Drubi The investment in this company accounts for 0.05% of the Secretary: Gustavo Malavé company’s total consolidated assets. Chief Executive Officer: Miguel Oneto Rosales
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings - - Operating income -8 -12 Non-operating income -6 -253 Period net income -13 -284 Total assets 2,237 2,076 Total liabilities 433 260 Monetary interest - - Shareholders’ equity 1,804 1,816 Net cash flow for the period - -
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 1 1
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 1 1 RELATED COMPANIES 2006 MASISA | 151
10 CORPORACIÓN FORESTAL GUAYAMURE C.A.
Fiscal Address: Av. Francisco de Miranda, Edificio Parque Cristal, Torre Oeste, Piso 10, Of. 10-4, Los Palos Grandes, Caracas Telephone: (58-212) 620 70 11 Fax: (58-212) 285 4217
LEGAL CONSTITUTION Corporación Forestal Guayamure C.A. is a closed corporation esta- CORPORATE PURPOSE blished on December 27, 1976, pursuant to the laws of the Bolivarian The sowing, maintenance, cutting and marketing of timber trees; pur- Republic of Venezuela. It is registered in the First Commerce Registry chase, processing, development and marketing of wood. of the Judicial Circumscription of the Federal District and State of Miranda, under Nº8, tome 150-A. BOARD OF DIRECTORS Incumbent Directors: Miguel Oneto Rosales (President) SUBSCRIBED AND PAID-IN CAPITAL Marco Brisso The subscribed and paid-in capital of Corporación Forestal Gua- Gustavo Malavé yamure C.A. amounts to Bs.11,388,913,000.00, equivalent to Ricaurte Leonett ThUS$11,095, divided into 11,388,913 par value shares of one Luis Salinas thousand bolivares each, not convertible to the bearer. Inversiones Alternate Directors: Enrique Cibié Bluth Internacionales Terranova S.A. holds 85% of the capital stock and Fernando Zamorano Corporación Venezolana de Guayana holds the remaining 15%. Kamel Alid The investment in this company accounts for 0.33% of the Ronal Ramírez company’s total consolidated assets. Julissa Balzán
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings - - Operating income -30 -28 Non-operating income -701 -57 Period net income -731 -85 Total assets 16,768 15,819 Total liabilities 3,679 2,845 Monetary interest - - Shareholders’ equity 13,088 12,974 Net cash flow for the period - -
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 1 1
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 1 1 152
11 CORPORACIÓN FORESTAL IMATACA C.A.
Fiscal Address: Avda. Francisco de Miranda, Edificio Parque Cristal, Torre Oeste Piso 10, Of. 10-40, Los Palos Grandes,Caracas Telephone: (58-212) 620 70 11 Fax: (58-212) 285 4217
LEGAL CONSTITUTION CORPORATE PURPOSE Corporación Forestal Imataca C.A. is a closed corporation established To sow, maintain, cut and market timber trees; purchase, process, on March 21, 1974, pursuant to the laws of the Bolivarian Republic develop and market wood. of Venezuela. It is registered in the First Commerce Registry of the Judicial Circumscription of the Federal District and State of Miranda, BOARD OF DIRECTORS under Nº77, tome 46-A. Incumbent Directors: Jaime Valenzuela Fernández (President) SUBSCRIBED AND PAID-IN CAPITAL Enrique Cibié Bluth The subscribed and paid-in capital of Corporación Forestal Ima- Julio Moura taca C.A. amounts to 6,402,068,000.00 bolivares, equivalent to Eugenio Arteaga Infante ThUS$19,681, divided into 6,402,068 shares of 1,000 bolivares Miguel Oneto Rosales. each. Inversiones Internacionales Terranova S.A. holds 100% of the Alternate Directors: Eduardo Vial Ruiz Tagle capital stock. Patricio Reyes Urrutia The investment in this company accounts for 0.63% of the Iván Rubio Huerta company’s total consolidated assets. Tomás Morales Jaureguiberry Jorge Correa Drubi Secretary: Gustavo Malavé Chief Executive Officer: Miguel Oneto Rosales.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings - - Operating income -29 -28 Non-operating income -340 -83 Period net income -369 -111 Total assets 25.395 24,234 Total liabilities 4,097 3,147 Monetary interest - - Shareholders’ equity 21,298 21,087 Net cash flow for the period 1 -1
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 2 3
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 3 2 RELATED COMPANIES 2006 MASISA | 153
12 MASISA MADEIRAS LTDA.
Address: Rodovia BR-280, N° 4116, Bairro Industrial Sul, Río Negrinho, Santa Catarina, Brasil Telephone: (55-47) 3641 3000 Fax: (55-47) 3641 3038
LEGAL CONSTITUTION CORPORATE PURPOSE Masisa Madeiras Ltda. is a limited liability company established on The marketing of raw material, flora products and byproducts; December 12, 1996, pursuant to the laws of the Republic of Brazil. consumption of firewood, chips and sawdust; the planning, handling, The company’s original name was Gridom Comercial Limitada, but cutting, and exploration of forest assets; wood harvesting; sawing, it became Terranova Brasil Limitada on May 16, 1997. On June 17, laminating, defoliation and slicing of wood; production of veneers 2005, the Company once again changed its name to Masisa Madeiras and plywood; use of wood preservatives; export of flora products and Ltda., which is the name it currently uses. byproducts; production of forestry seeds and seedlings; participation in other commercial and civil companies as a partner, shareholder or SUBSCRIBED AND PAID-IN CAPITAL quota holder. The subscribed and paid-in capital of Masisa Madeiras Ltda. amounts to Th$76,181 reales, equivalent to ThUS$52,500, divided into FOREST AND INDUSTRIAL EQUITY: 76,180,700 shares. Inversiones Internacionales Terranova S.A. holds It has 13,600 hectares of lands, of which 7,300 are pine plantations 99.99% of the capital stock, and the remaining 0.01% belongs to a and most of them are already harvestable. minority shareholder. Its industrial facilities, located on a 17-hectare site at Río Ne- The investment in this company accounts for 2.32% of the grinho, include a 42,000-m2 plant, a sawmill, a thermal plant to company’s total consolidated assets. generate power, and a remanufacturing plant for the production of blanks and mouldings.
Chief Executive Officer: Jorge Hillmann
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005 Operating earnings 44,568 36,696 Operating income 5,074 1,145 Non-operating income -1,811 -2,717 Period net income 3,501 -3,432 Total assets 148,967 116,039 Total liabilities 70,942 52,427 Monetary interest - - Shareholders’ equity 78,025 63,612 Net cash flow for the period 1,350 -872
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 78 950
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 1,428 78 154
13 MASISA DO BRASIL LTDA.
Fiscal Address: Rodovia BR-376, KM. 503, Sentido Sul, Servidão A, nº 1690, en la ciudad de Ponta Grossa, Paraná; Telephone: (42) 3219.1500 Fax: (42) 3219.1600
LEGAL CONSTITUTION CORPORATE PURPOSE Masisa do Brasil Ltda. is a limited liability company established on The industry, trade, import and export of wood panels; agricultural May 8, 1995, pursuant to the laws of the Republic of Brazil. activities and exploration of forests and forestry estates; forestry, wood and forestry byproduct trade; own or third-party management and SUBSCRIBED AND PAID-IN CAPITAL execution of forestry projects; own or third-party rendering of manage- The subscribed and paid-in capital of Masisa do Brasil Ltda. amounts ment services and execution of forestry projects; representation of to R$95,427,456. The outstanding stock amounted to ThUS$41,843 national and foreign companies in the wood industry; market and pro- for the year ended December 31, 2006. Its shareholders are Masisa duct studies and services in addition to other services complementing S.A. with 98.3907% of the capital stock and Masisa Argentina S.A. the wood industry. with the remaining 1.6093%. The investment in this company accounts for 3.55% of the MANAGEMENT company’s total consolidated assets. The Company is managed by one of more people, appointed by the shareholders accounting for the majority of the company’s capital stock, who as directors belong to the board of directors and are res- ponsible for managing the company’s business
Chief Executive Officer: Jorge Hillmann.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005 Operating earnings 32,294 121,611 Operating income 18,358 19,947 Non-operating income -4,686 -9,394 Period net income 5,090 3,167 Total assets 270,799 254,688 Total liabilities 198,054 187,419 Monetary interest - - Shareholders’ equity 72,744 67,269 Net cash flow for the period -3,691 12,127
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 14,005 1,879 CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 10,314 14,006 RELATED COMPANIES 2006 MASISA | 155
14 FORESTAL TERRANOVA MÉXICO S.A. DE C.V.
Address: Calle Jaime Balmes N°8, Piso 2, despacho 202, colonia Los Morales, delegación Miguel Hidalgo, México, Distrito Federal. Telephone: 52-55- 91382300 Fax: 52-55- 91382308
LEGAL CONSTITUTION CORPORATE PURPOSE Forestal Terranova México S.A. de C.V. is a closed variable capital The corporate purpose of Forestal Terranova México S.A. de C.V. is corporation established on December 16, 1998, by means of public to buy, import, export, process, transform and market all forms of deed Nº64.899, granted by Mr. Armando Gálvez Pérez Aragón, the wood products and those for the building and furniture industries; the incumbent notary of public notary Nº103 of the Federal District, re- purchase, sale, exchange, import, export, distribution, and gene- gistered in the Public Commerce Registry of Mexico, Federal District, ral marketing in the Republic of Mexico and overseas of materials, under commerce folio Nº244012, dated March 1, 1999, pursuant raw materials, products, byproducts, be these semi-manufactured, to the laws of the Republic of Mexico. The establishment of Forestal reconstructed, renewed or reconditioned; the representation and Terranova México S.A. de C.V. was authorized by the Foreign Affairs commercial agency of national or foreign natural or juristic persons, Secretariat of the Government of Mexico on November 17, 1998, whose aim is to produce or market the aforementioned materials, raw permit N°09038662, record N°9809037776, with folio N°39215. materials, products and goods; and the marketing, distribution and representation in and outside Mexico of products and byproducts of SUBSCRIBED AND PAID-IN CAPITAL its industrial operations, be this directly or through intermediates. The subscribed and paid-in capital of Forestal Terranova México S.A. de C.V. amounts to MX$7,191,000.00, divided into 7,191 shares Commercial Equity of MX$1,000.00 each. Amanco México S.A. sold is shareholding in It has a distribution and warehousing center located at Boulevard de Forestal Terranova México S.A. de C.V. to Terranova Panamá S.A. on los Ríos Km. 4.6, Colonia Puerto Industrial, C.P. 89608, Altamira, November 22, 2006. As of December 31, 2006, the shareholders of Tamaulipas. Forestal Terranova México S.A. de C.V. are Inversiones Internacionales Terranova S.A., holding 99.99% of the shares, and Terranova Panamá CONSEJO DE ADMINISTRACIÓN S.A. the remaining 0.01%. Incumbent: Alternates: The outstanding stock amounted to US$1,696,551.36 for the year Enrique Cibié Bluth Eugenio Arteaga Infante ended December 31, 2006. Patricio Reyes Urrutia Carlos Sesma Mauleón The investment in this company accounts for 0.05% of the Claudio Cerda Herreros company’s total consolidated assets. Chief Executive Officer: Claudio Cerda Herreros
FINANCIAL STATEMENTS For the years ended December 31, THOUSANDS OF US DOLLARS 2006 2005 Operating earnings 45,477 51,681 Operating income 2,221 2,281 Non-operating income -115 505 Period net income 1,370 2,011 Total assets 24,410 25,800 Total liabilities 22,714 25,474 Monetary interest - - Shareholders’ equity 1,696 326 Net cash flow for the period 1,489 68
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 1,455 1,387 CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 2,944 1,455 156
15 MADERAS Y SINTETICOS DE MÉXICO S.A. DE C.V.
Address: Calle Jaime Balmes N°8, Piso 2, despacho 202, colonia Los Morales, delegación Miguel Hidalgo, México, Distrito Federal. Telephone: 52-55- 91382300 Fax: 52-55- 91382308
LEGAL CONSTITUTION The outstanding stock amounted to US$24,784,721 for the year Maderas y Sintéticos de México S.A. de C.V. is a variable capital closed ended December 31, 2006. corporation, established by public deed Nº3,776, dated August 23, The investment in this company accounts for 1.23% of the 2001, granted by Mr. Adolfo Llorente Martínez, incumbent notary of company’s total consolidated assets. public notary Nº205 of the Federal District, registered in the Public Commerce Registry of Mexico, Federal District, under commerce folio CORPORATE PURPOSE Nº282,079, on November 30, 2001, pursuant to the laws of the Repu- The corporate purpose of Maderas y Sintéticos de México S.A. de C.V. blic of Mexico. The establishment of Maderas y Sintéticos de México is the purchase, sale, import, export and maufacture of any kinds of S.A. de C.V. was authorized by the Secretariat of External Affairs of the wood boards, and their distribution and marketing. Its line of busi- Mexican Government on August 17, 2001, according to permit number ness, among others, includes, the planting, development and transfer 09041700, record 0109041700, folio 24453. of any kinds of forests, investment in any kinds of chattels and real estate and the rendering of related services. SUBSCRIBED AND PAID-IN CAPITAL The subscribed and paid-in capital of Maderas y Sintéticos de México CONSEJO DE ADMINISTRACIÓN S.A. de C.V. amounts to MX$342,422,000.00, divided into 684,844 Incumbent: Alternates: registered par value shares of MX$500.00 each. On June 21, 2006, Enrique Cibié Bluth Sergio Manzanarez Martínez Masisa S.A. sold its stake in Maderas y Sintéticos de México S.A. de Patricio Reyes Urrutia Silvia Esquivel Rocha C.V. to Masisa Overseas Limited. Subsequently, due to the de jure Claudio Cerda Herreros Carmen Patricia Rico A. dissolution of Masisa Inversiones Ltda. on June 23, 2006, all its rights in Maderas y Sintéticos de México S.A. de C.V. were vested in Masisa Chief Executive Officer: S.A. Its shareholders are Masisa S.A. with 99.9999% of the shares Claudio Cerda Herreros and Masisa Overseas Limited with the remaining 0.0001%.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 73,017 64,229 Operating income 4,455 -1,093 Non-operating income -1,966 -500 Period net income 1,897 -1,014 Total assets 59,275 70,434 Total liabilities 34,490 47,048 Monetary interest - - Shareholders’ equity 24,785 23,386 Net cash flow for the period 1,995 425
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 1,309 884
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 3,304 1,309 RELATED COMPANIES 2006 MASISA | 157
16 MADERAS Y SINTETICOS SERVICIOS S.A. DE C.V.
Address: Calle Jaime Balmes N°8, Piso 2, despacho 202, Colonia Los Morales, Delegación Miguel Hidalgo, México, Distrito Federal. Telephone: 52-55- 91382300 Fax: 52-55- 91382308
LEGAL CONSTITUTION CORPORATE PURPOSE Maderas y Sintéticos Servicios S.A. de C.V., is a variable capital The corporate purpose of Maderas y Sintéticos Servicios S.A. de C.V. closed corporation, established by public deed Nº3.775, dated Au- is to render any kinds of services, including, among others, con- gust 23, 2001, granted by Mr. Adolfo Llorente Martínez, incumbent sultancy, administrative, professional, technical, human resources, notary of the public notary Nº205 of the Federal District, registered operative, management, marketing, programming, sales and advisory in the Public Commerce Registry of Mexico, Federal District, under services. Its line of business includes, among others, setting up plants commerce folio Nº282,080, dated November 30, 2001, pursuant to or warehouses, the representation of companies, the issuance of the laws of the Republic of Mexico. The company’s constitution was credit instruments and the granting of guarantees. authorized by the Secretariat of External Affairs of the Mexican Gover- nment on August 17, 2001, according to permit Nº09041696, record CONSEJO DE ADMINISTRACION 0109041696, folio 24446. Incumbent: Alternates: Enrique Cibié Bluth Sergio Manzanarez Martínez SUBSCRIBED AND PAID-IN CAPITAL Patricio Reyes Urrutia Silvia Esquivel Rocha The subscribed and paid-in capital of Maderas y Sintéticos Servicios Claudio Cerda Herreros Carmen Patricia Rico A. S.A. de C.V. amounts to MX$50,000.00, divided into 100 registered par value shares of MX$500.00 each. Its shareholders are Masisa Chief Executive Officer: S.A. with 99.00% and Masisa Overseas Limited with the remaining Claudio Cerda Herreros 1.00%. The outstanding stock amounted to US$372,399 for the year ended December 31, 2006. The investment in this company accounts for 0.02% of the company’s total consolidated assets.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 6,323 6,443 Operating income 98 220 Non-operating income -153 6 Period net income -80 173 Total assets 990 1,280 Total liabilities 618 827 Monetary interest - - Shareholders’ equity 372 453 Net cash flow for the period 101 -11
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 21 32
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 122 21 158
17 CC MAS S.A. DE C.V.
Address: Calle Jaime Balmes N°8, Piso 2, despacho 202, Colonia Los Morales, Delegación Miguel Hidalgo, México, Distrito Federal. Telephone: 52-55- 91382300 Fax: 52-55- 91382308
LEGAL CONSTITUTION CORPORATE PURPOSE CC Mas S.A. de C.V., is a variable capital closed corporation, establis- The corporate purpose of CC Mas S.A. de C.V. is the purchase, sale, hed by public deed Nº 116,894, dated August 22, 2006, granted by import, export, marketing, distribution and supply to national or Mr. Armando Gálvez Pérez Aragón, incumbent notary of the public foreign persons by any legal system, be this freely or by means of a notary Nº103 of the Federal District, registered in the Public Com- franchise system or other similar, of any kinds of primary or comple- merce Registry of Mexico, Federal District, under commerce folio mentary products for the construction industry, and generally any Nº355042, dated September 26, 2006. The establishment of CC kinds of products. Mas S.A. de C.V. was authorized by the Secretariat of External Affairs of the Mexican Government on June 7, 2006, according to permit BOARD OF DIRECTORS Nº3702, 140, record 200637001956, folio number A01ELT91. Incumbent: Alternates: Alejandro Espinosa Carey Sergio Manzanarez Martinez SUBSCRIBED AND PAID-IN CAPITAL Claudio Cerda Herreros Silvia Esquivel Rocha The subscribed and paid-in capital of CC Mas S.A. de C.V. amounts Patricio Reyes Urrutia Carmen Patricia Rico Arreola to MX$50,000.00, divided into 50,000 registered par value shares of MX$1.00 each. Its shareholders are Maderas y Sintéticos de México Chief Executive Officer: S.A. de C.V. with 99.99% of the shares and Maderas y Sintéticos Claudio Cerda Herreros Servicios S.A. de C.V. with the remaining 0.01%. The outstanding stock amounted to US$1,036.87 for the year ended December 31, 2006. The investment in this company accounts for 0.00% of the company’s total consolidated assets.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 16 - Operating income 1 - Non-operating income 0 - Period net income 1 - Total assets 43 - Total liabilities 42 - Monetary interest - - Shareholders’ equity 1 - Net cash flow for the period - -
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR - -
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR - - RELATED COMPANIES 2006 MASISA | 159
18 MASNOVA DE MÉXICO S.A. de C.V.
Address: Calle Jaime Balmes N°8, Piso 2, despacho 202, Colonia Los Morales, Delegación Miguel Hidalgo, México, Distrito Federal. Telephone: 52-55- 91382300 Fax: 52-55- 91382308
LEGAL CONSTITUTION CORPORATE PURPOSE Masnova de México S.A. de C.V. is a variable capital closed corpora- The corporate purpose of Masnova de México S.A. de C.V. is the tion, established by public deed Nº3.996, dated December 14, 2001, acquisition, purchase, sale, import, export, storage of any kinds of granted by Mr. Arturo Llorente Martínez, incumbent notary of the wood or wood board goods and products, or any other item in any of public notary Nº205 of the Federal District, registered in the Public its forms, directly or through third parties. Commerce Registry of Mexico, Federal District, under commerce folio Nº282.672, dated January 7, 2002, pursuant to the laws of the Repu- BOARD OF DIRECTORS blic of Mexico. The establishment of Masnova de México S.A. de C.V. Incumbent: Alternates: was authorized by the Secretariat of External Affairs of the Mexican Enrique Cibié Bluth Carlos Sesma Minvielle Government on August 28, 2001, according to permit Nº09043122, Patricio Reyes Urrutia Silvia Esquivel Rocha record 0109043122, folio number 25323. Claudio Cerda Herreros Carmen Patricia Rico A. Jaime Valenzuela Fernández Eugenio Arteaga Infante SUBSCRIBED AND PAID-IN CAPITAL The subscribed and paid-in capital of Masnova de México S.A. de Chief Executive Officer: C.V. amounts to MX$50,000.00, divided into 50,000 registered par Claudio Cerda Herreros value shares of MX$1.00 each. Its shareholders are Inversiones Internacionales Terranova S.A. with 50% of the shares and Maderas y Sintéticos Servicios S.A. de C.V. with the remaining 50%. The outstanding stock amounted to US$1,501,821.40 for the year ended December 31, 2006. The investment in this company accounts for 0.00% of the company’s total consolidated assets.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings - - Operating income -3 -25 Non-operating income 25 -113 Period net income 22 -138 Total assets 244 Total liabilities 1,746 1,524 Monetary interest - - Shareholders’ equity -1,502 -1,524 Net cash flow for the period - -
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR - -
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR - - 160
19 MASISA ARGENTINA S.A.
Address: 25 DE MAYO 359 Piso 15 Capital Federal - Argentina Telephone: 54-11-5550-6000 Fax: 54-11-5550-6402
LEGAL CONSTITUTION Masisa Argentina S.A. is a closed corporation established in the city CORPORATE PURPOSE of Buenos Aires, Republic of Argentina, on July 24, 1992, pursuant to The corporate purpose of Masisa Argentina is the own or third-party a public deed signed before the notary Mr. Alvaro Gutiérrez Zaldívar. or independent or third-party related manufacture and marketing of Particle Boards in all their technically feasible forms and procedures SUBSCRIBED AND PAID-IN CAPITAL in the Republic of Argentina; the planning, development and/or pur- The subscribed and paid-in capital of Masisa Argentina S.A. amounts chase and sale of forests, any kind of acquisition and transfer, import to AR$119,602,392, divided into 119,602,392 par value shares and export of carved or rustic, processed or manufactured wood, and of AR$1 each. The company’s outstanding stock amounted to the industrialization, transformation and marketing of wood of any ThUS$140,157 for the year ended December 31, 2006. In May 2006, kind and its byproducts, and any activity that is similar or in keeping Masisa Overseas Ltd. increased its shareholding by 2%, and in June with this corporate purpose. 2006 the entire shareholding of Masisa Inversiones Ltda. was trans- ferrred directly to Masisa S.A., and this therefore led to the de jure BOARD OF DIRECTORS dissolution of Masisa Inversiones Ltda. due to all its company rights President: Aldo Tomás Blardone being vested in Masisa S.A. Managing Director: Jaime Valenzuela F. Masisa Argentina S.A.’s shareholders are Masisa S.A holding 98% Incumbent Director: Gerardo Ourracariet of the shares and Masisa Overseas Ltd. the remaining 2%. Chief Executive Officer: Alfredo Gili C. The investment in this company accounts for 6.95% of the company’s total consolidated assets.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 115,629 99,734 Operating income 20,823 15,984 Non-operating income -2,653 (2,864) Period net income 9,948 6,859 Total assets 187,689 190,353 Total liabilities 47,532 46,465 Monetary interest - - Shareholders’ equity 140,157 143,888 Net cash flow for the period 6,583 8,106
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 9,148 1,042
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 15,731 9,148 RELATED COMPANIES 2006 MASISA | 161
20 FORESTAL ARGENTINA S.A.
Address: 25 de Mayo 359 - Piso 15 Capital Federal - Argentina Telephone: 54-11-5550-6000
LEGAL CONSTITUTION Forestal Argentina S.A. is a closed corporation established on Dec- CORPORATE PURPOSE ember 15, 1995, and registered in the Public Commerce Registry on The company’s corporate purpose is to forest, reforest, and plant February 14, 1996, under General Justice Registry N°1.615.432. forests and market their products.
SUBSCRIBED AND PAID-IN CAPITAL BOARD OF DIRECTORS The subscribed and paid-in capital of Forestal Argentina S.A. President of the Board: Jaime Valenzuela Fernández amounts to ThAR$46,123, divided into 46,123,155 ordinary registe- Directors: Sergio Boccadoro red shares with a par value of AR$1 each. Javier Busch The company’s outstanding stock amounted to ThUS$78,060 for Gastón Urmeneta Krarup the year ended December 31, 2006. Jorge Correa Drubi Forestal Argentina S.A.’s shareholders are Forestal Tornagaleones S.A. holding 98.68% of the shares, and minority shareholders holding the remaining 1.32%. The investment in this company accounts for 3.58% of the company’s total consolidated assets.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 6,791 8,728 Operating income 2,600 3,533 Non-operating income -82 12 Period net income 2,443 3,545 Total assets 84,936 79,704 Total liabilities 6,877 8,816 Monetary interest - - Shareholders’ equity 78,060 70,888 Net cash flow for the period -912 -472
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 996 1,468
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 84 996 162
21 MASISA COLOMBIA S.A.
Address: Calle 72 No. 5-83 Oficina 402, Bogotá, Colombia Telephone: (57-1) 3 25 87 00 Fax: (57-1) 3 25 87 24
LEGAL CONSTITUTION CORPORATE PURPOSE Masisa Colombia S.A. is a closed corporation established on Novem- The purchase, import, export, processing, transformation and mar- ber 20, 1998, pursuant to the laws of the Republic of Colombia, by keting of all forms of wood products and related to the construction means of public deed N°5317, issued in Notary 31 of Santa Fe de and furniture industries; the representation and commercial agency Bogotá, Colombia. of national and foreign natural and juristic persons, whose purpose is to produce or market the aforementioned materials, raw materials, SUBSCRIBED AND PAID-IN CAPITAL products and goods; technical consultancy to third parties on the The subscribed and paid-in capital of Masisa Colombia S.A. amounts marketing, distribution and representation of such products. to Th$5,761,073 Colombian pesos, equivalent to ThUS$2,139, divided into 5,761,073 shares. Masisa Colombia S.A.’s shareholders BOARD OF DIRECTORS are Inversiones Internacionales Terranova S.A. with 80.71% of the President: Luis Guillermo Velásquez B. shares, Fibranova C.A. with 19.28% and minority shareholders with Incumbent Director: Iván Rubio Huerta the remaining 0.10%. Incumbent Director: Carlos Urdaneta The investment in this company accounts for 0.20% of the Chief Executive Officer: Luis Guillermo Velásquez B. company’s total consolidated assets
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 25,218 22,358 Operating income 3,371 2,179 Non-operating income 470 285 Period net income 2,527 1,579 Total assets 12,875 9,527 Total liabilities 4,490 3,669 Monetary interest - - Shareholders’ equity 8,385 5,858 Net cash flow for the period 1,866 -641
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 444 1,085
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 2,310 444 RELATED COMPANIES 2006 MASISA | 163
22 TERRANOVA PANAMA S.A.
Address: Calle 50, Edificio Global Plaza Telephone: (507) 2130033 Fax: (07) 264 24 98
LEGAL CONSTITUTION CORPORATE PURPOSE Terranova Panamá S.A. is a closed corporation established on Fe- To establish, manage and generally undertake all the areas of the fi- bruary 4, 1997, pursuant to the laws of the Republic of Panama, in nancing, investment and brokerage business; to participate directly or the fifty notary of the Panama Circuit of Mr. Mario Velásquez Chizmar, indirectly in the constitution of other partnerships, companies or firms and registered in the Public Registry of Panama on February 6, 1997, of any kind, class, type or nature; to establish, manage and undertake under record number 32625 1, roll 52936, image 0075. the export, import, agent, distribution and commissioner business of any kinds of goods to and from anywhere in the world. SUBSCRIBED AND PAID-IN CAPITAL The subscribed and paid-in capital of Terranova Panamá S.A. BOARD OF DIRECTORS amounts to US$24,270,000.00, divided into 242,700 registered sha- President: Rolando Candanedo Navarro res with a par value of US$100.00 each. Inversiones Internacionales Secretary: María del Mar Pimentel Terranova S.A. holds 100% of the shares. Treasurer: Rolando Candanedo Deneken The investment in this company accounts for 0.00% of the Legal Representative: Rolando Candanedo Navarro company’s total consolidated assets
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings - - Operating income - 20 Non-operating income -5,936 -1,692 Period net income -5,936 -1,672 Total assets 15,519 26,289 Total liabilities 20,901 26,269 Monetary interest - - Shareholders’ equity -5,383 20 Net cash flow for the period -1 -
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 2 2
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 1 2 164
23 MADERAS Y SINTETICOS DEL PERÚ S.A.C.
Address: Av. Víctor Andrés Belaunde 147, Edificio Real 12, Of. 103, San Isidro, Lima, Perú Telephone: (51-1) 706 14 00
LEGAL CONSTITUTION CORPORATE PURPOSE Maderas y Sintéticos del Perú S.A.C. is a closed corporation established The company’s corporate purpose is to manufacture and market boards pursuant to the laws of the Republic of Peru by means of a public deed and wood products in all their forms and procedures. Its line of business dated July 31, 1997, and granted by the public notary of the city of includes planting and developing plots for agricultural use, the import Lima, Mr. Ricardo Ortiz de Zevallos Villagrán. and export of carved or rustic wood, the transformation and marketing of any kinds of wood and its byproducts, and the import, export, proces- SUBSCRIBED AND PAID-IN CAPITAL sing, manufacture, distribution and marketing of any kinds of chemicals The subscribed and paid-in capital of Maderas y Sintéticos del Perú used in the industry in general; and it may make financial investments S.A.C. amounts to PE$39,450 (New Soles), divided into 39,450 of any kind. registered shares with a par value of PE$1.00 (New Soles) each. The company’s outstanding stock amounts to ThUS$15. MANAGEMENT The shareholders of Maderas y Sintéticos del Perú S.A.C. are Chief Executive Officer: Masisa S.A. with 99.11% of the shares and Masisa Overseas Ltd. with Roberto Heskia T. the remaining 0.89%. The investment in this company accounts for 0.25% of all the company’s total consolidated assets.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 20,992 16,227 Operating income 2,811 2,219 Non-operating income 31 -39 Period net income 2,046 1,509 Total assets 8,130 6,884 Total liabilities 3,116 3,916 Monetary interest - - Shareholders’ equity 5,014 2,968 Net cash flow for the period 127 -20
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 347 367
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 462 347 RELATED COMPANIES 2006 MASISA | 165
24 MASISA ECUADOR S.A.
Address: Av. Víctor Emilio Estrada 1021, entre Hilanes y Jiguas Guayaquil, Ecuador Telephone: (593-4) 288 8244
LEGAL CONSTITUTION CORPORATE PURPOSE Masisa Ecuador S.A. is a closed corporation established on October The corporate purpose of Masisa Ecuador S.A. is the manufactu- 23, 2002, in the city of Quito, Republic of Ecuador, by means of a re and marketing of boards and wood products in all their feasibly public deed granted by the public notary Mr. Ramiro Dávila Silva. technical forms and procedures. This purpose includes the planting, development and/or purchase and sale of chattels, including plots for SUBSCRIBED AND PAID-IN CAPITAL agricultural use, the acquisition and transfer of goods in any way, the The subscribed and paid-in capital of Masisa Ecuador S.A. amounts import and export of carved or unprocessed, processed or manufactu- to ThUS$5,000, divided into 5,000 registered, fully subscribed, and red wood, the industrialization, transformation and marketing of wood paid-up shares upon establishment of the comany. On June 21, of any kinds and its byproducts. Commensurate with its corporate 2006, Masisa S.A. sold its shareholidng in Masisa Ecuador S.A. to purpose, the Company may intervene as a partner in establishing Masisa Overseas Ltd. Subsequently, due to the de jure dissolution of partnerships of companies, provide capital to them or acquire, have Masisa Inversiones Ltda. on June 23, 2006, all its rights in Masisa and hold for itself shares, obligations or participations from other Ecuador S.A. were vested in Masisa S.A. companies; the Company may generally undertake any kinds of acts, The shareholders of Masisa Ecuador S.A. are Masisa S.A. with 99.9% contracts, operations allowed by Ecuadorian laws that are in keeping of the shares and Masisa Overseas Ltd. with the remaining 0.1%. with its corporate purpose and necessary and fitting to meet such The investment in this company accounts for 0.04% of the corporate purpose. company’s total consolidated assets. MANAGEMENT Chief Executive Officer: Roberto Heskia T.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings 10,011 7,979 Operating income 1,319 903 Non-operating income 3 102 Period net income 985 738 Total assets 5,068 5,516 Total liabilities 4,210 5,643 Monetary interest - - Shareholders’ equity 858 - 127 Net cash flow for the period -266 315
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR 608 293
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR 342 608 166
ASSOCIATED COMPANIES
25 OXINOVA C.A. 26 INVERSIONES CALLE CALLE S.A.
Fiscal Address: Avda. Francisco de Miranda, LEGAL CONSTITUTION Edificio Parque Cristal, Torre Oeste Inversiones Calle Calle S. A. is a closed corporation established Piso 10, Of. 10-4, on December 9, 2002, by means of a public deed granted by the Los Palos Grandes, Caracas Santiago Notary Mr. Iván Torrealba Acevedo. Telephone: (58-212) 620 7011 Fax: (58-212) 285 4217 SUBSCRIBED AND PAID-IN CAPITAL The subscribed and paid-in capital of Inversiones Calle Calle S.A. Administrative Address: Calle Cuchiveros, Torre Balear, Piso 2, amounts to $200,000, divided into 200,000 non-par-value shares of a Alta Vista Norte, same and single series. Puerto Ordaz, Estado Bolívar The shareholders of Inversiones Calle Calle S.A. are Masisa S.A. Telephone: (58286) 965 1011 with 50% of the shares and Inversiones Industriales S.A. with the Fax: (58286) 965 1040 remaining 50%. Email: [email protected] CORPORATE PURPOSE LEGAL CONSTITUTION The corporate purpose of Inversiones Calle Calle S.A. is to carry out Oxinova C.A. is a closed corporation established on October 6, 1999, any kinds of profitable and long-term investments, including the pur- pursuant to the laws of the Bolivarian Republic of Venezuela, and it chase, sales, transfer and any kinds of transactions regarding shares, is registered in the Fifth Commerce Registry of the Judicial Circums- company rights, bonds, debentures, bearer securities and bills of cription of the Federal District and State of Miranda under N°76, tome exchange in general, and the purchase, sale, transfer and any kinds 353-A-Qto. of transactions regarding real estate or rights thereon, and all this in Chile and overseas; and the investment in any kinds of companies, SUBSCRIBED AND PAID-IN CAPITAL be these civil or commercial. To meet its corporate purpose, the Com- The subscribed and paid-in capital of Oxinova C.A. amounts to pany may act on its own behalf or through third parties, even as an Th$4,952,164 bolivares, equivalent to 4,952,164 registered and par agent or representative, undertake all acts and enter into all contracts value shares of 1,000 bolivares each. related to the corporate purpose, and enter into partnership or partici- The shareholders of Oxinova C.A. are Oxiquim Inversiones Interna- pation account contracts, constitute companies or associations of any cionales Limitada with 51% of the shares and Inversiones Internacio- kind and acquire rights, shares or participations in those companies nales Terranova S.A. with the remaining 49%. currently existing, and manage them.
CORPORATE PURPOSE BOARD OF DIRECTORS The construction and operation of a chemical plant in Venezuela, par- Directors: Enrique Cibié Bluth ticularly for the production and marketing of formaldehyde and resins. Patricio Reyes Urrutia Eduardo Vial Ruiz-Tagle BOARD OF DIRECTORS Chief Executive Officer: Eduardo Vial Ruiz-Tagle Incumbent Directors: Enrique Cibié Bluth. Miguel Oneto Rosales. Vicente Navarrete. Edmundo Puentes.
Alternate Directors: Patricio Reyes Urrutia Eduardo Vial Ruiz Tagle Vicente Navarrete Rolando Pablo Ayala Rolando
Chief Executive Officer: Cristian Roempler RELATED COMPANIES 2006 MASISA | 167
AFFILIATES ABSORBED BY MASISA S.A. IN JUNE 2006
27 MASISA CONCEPCIÓN LTDA.
The company Masisa Concepción Ltda., was originally established as CORPORATE PURPOSE C y D Agrofruta Ltda., by means of a public deed dated January 15, The company’s corporate purpose was to undertake any kinds of 1986, granted in the Santiago Notary of Mr. Raúl Undurraga Laso, short and long-term profitable investments, including investments in whose excerpt was registered on January 23, 1986, on sheet 1468 chattels and real estate in general in Chile and overseas, especially Nº752 of the Santiago Commerce Registry in 1986, and published in including leasing productive, industrial and manufacturing Particle the Official Gazette on January 28, 1986. Board plants, and other wood products and byproducts. This inclu- By means of a public deed, dated June 21, 2006, granted by the ded the construction, development and/or management of own or Santiago Notary of Mr. José Musalem Saffie, the dissolution on that third-party facilities or plants for the industrialization and processing same date of Inversiones Coronel Limitada, a partner of Masisa Con- of wood. The Company extended its corporate purpose to any kinds cepción Limitada, was recorded. This led to the dissolution of Masisa of transactions regarding chattels or rights thereon, any kinds of tran- Concepción Limitada, as all its company rights were vested in Masisa sactions regarding shares, company rights, bearer securities and bills S.A. An authorized excerpt of the aforementioned public deed was of exchange, and investment in any kinds of companies. registered on sheets 24.926, Nº17.382 in the Commerce Registry of the Santiago Real Estate Registrar in 2006, and was published in the MANAGEMENT Official Gazette on June 29, 2006. The Company was managed by the partner Masisa S.A., which undertook this through the proxies of its general system of powers SUBSCRIBED AND PAID-IN CAPITAL of attorney. The subscribed and paid-in capital of Masisa Concepción on its dis- solution date amounted to Th$8,189,284. The company’s outstanding capital amounted to Th US $32,658. The Company was an affiliate of Inversiones Coronel Limitada, which had 99.99% of the company rights, and the remaining 0.01% belonged to Masisa S.A.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings - 8,117 Operating income - 7,585 Non-operating income - 2,410 Period net income - 8,703 Total assets - 33,301 Total liabilities - 1,451 Monetary interest - - Shareholders’ equity - 31,850 Net cash flow for the period - -2
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR - 2
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR - - 168
28 MASISA INVERSIONES LTDA.
LEGAL CONSTITUTION CORPORATE PURPOSE Masisa Inversiones Limitada was originally established as Agrofruta The company’s corporate purpose was: a) the development of rural, Copiapó Limitada by means of a public deed, dated November 16, own or third-party plots by means of agricultural, livestock or forestry 1989, granted in the Santiago Notary of Mr. José Musalem Saffie. activities, b) the agro-industry, marketing, export or import of agricul- The excerpt was registered on sheet 31455 N°16950 of the Santiago tural products, c) the rendering of any kinds of services and consul- Commerce Registry in 1989, and was published in the Official Gazette tancy, d) making any kinds of long-term and profitable investments, on November 27, 1989. and e) investments in any kinds of companies. In a public deed dated June 23, 2006, granted in the Santiago Notary of Mr. José Musalem Saffie, Masisa Overseas Limited trans- MANAGEMENT ferred all its company rights in Masisa Inversiones Limitada (former The Company was managed and represented by the partner Masisa “Agrofruta Copiapó Limitada”) to Masisa S.A., and this therefore led S.A., which undertook this through the proxies of its general system of to the de jure dissolution of Masisa Inversiones Limitada due to all its powers of attorney. company rights being vested in Masisa S.A. An authorized excerpt of the aforementioned public deed was registered on sheets 24.927, Nº17.383 in the Commerce Registry of the Santiago Real Estate Registrar in 2006, and was published in the Official Gazette on June 29, 2006.
SUBSCRIBED AND PAID-IN CAPITAL The subscribed and paid-in capital of Masisa Inversiones Ltda. amounted to ThUS$171,693 on its date of dissolution. The Company was an affiliate of Masisa S.A., which held 99.99458% of the company rights, with the remaining percentage held by Masisa Overseas Limited.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings - 9,610 Operating income - 9,610 Non-operating income - 10,904 Period net income - 18,936 Total assets - 377,997 Total liabilities - 132,915 Monetary interest - - Shareholders’ equity - 245,082 Net cash flow for the period - -355
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR - 3,958
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR - 3,603 RELATED COMPANIES 2006 MASISA | 169
29 INVERSIONES CORONEL LTDA.
LEGAL CONSTITUTION CORPORATE PURPOSE Inversiones Coronel Limitada was established on December 18, 1984, The company’s corporate purpose was a) the marketing and export by means of a public deed granted in the Santiago Notary of Mr. of any kinds of articles, products, goods and/or raw materials, b) the Enrique Morgan Torres. The excerpt of such deed was registered on rendering of any kinds of services and consultancy, c) making any sheet 1,055 N°540 of the Commerce Registry of the Santiago Real kinds of long-term and profitable investments, and d) investment in Estate Registrar in 1985, and was published in the Official Gazette on any kinds of companies. January 23, 1985. By means of a public deed, dated June 21, 2006, granted by the MANAGEMENT Santiago Notary of Mr. José Musalem Saffie, Masisa Overseas Limited The Company was managed by the partner Masisa S.A., which under- transferred all its company rights in Inversiones Coronel Limitada to took this by means of representatives appointed by public deed. Masisa S.A., and this therefore led to the de jure dissolution of Inver- siones Coronel Limitada due to all its company rights being vested in Masisa S.A. An authorized excerpt of the aforementioned deed was registered on sheet 24.925, Nº17.381 of the Commerce Registry of the Santiago Real Estate Registrar in 2006, and was published in the Official Gazette on June 29, 2006.
SUBSCRIBED AND PAID-IN CAPITAL The subscribed and paid-in capital of Inversiones Coronel Ltda. amounted to Th$36,816 on its dissolution date. The company’s outs- tanding stock amounted to ThUS$84,885 for the effects and purposes of Chilean financial statements. The Company was an affiliate of Masisa S.A., which held 99.99% of the company rights, and Masisa Overseas Limited held the remai- ning percentage.
FINANCIAL STATEMENTS For the years ended December 31,
THOUSANDS OF US DOLLARS 2006 2005
Operating earnings - 4,278 Operating income - 1,560 Non-operating income - 10,286 Period net income - 11,870 Total assets - 84,186 Total liabilities - 89 Monetary interest - - Shareholders’ equity - 84,097 Net cash flow for the period - -1
CASH FLOW AND CASH FLOW EQUIVALENT AT THE BEGINNING OF THE YEAR - 1
CASH FLOW AND CASH FLOW EQUIVALENTS AT THE END OF THE YEAR - -
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