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we make forestry matter Annual Report 2013

CONTENTS p. 1. Message from the President of the Board 3 2. Report from the CEO 7 3. Executive Summary 12 4. Forestry Platform 16 5. Trading 19 6. Industrial Forestry Sector 20 7. Environmental and Social Development 24 8. Addenda 28

1. Message from the President of the Board

Mexico City, Federal District, April 23, 2014 To the Stakeholders of Proteak Uno, S.A.B. de C.V. Company Results during 2013 2013 marked a watershed for Proteak. Not only did we consolidate our global position as a leading provider of certified Teak, but we also firmly ventured into the largest industrial forestry project in Mexico. On the commercial front, the year was highlighted by the strengthening of Proteak s position as a certified Teak supplier tailored to clients in Asian markets. We successfully counteracted the demand decrease in India, as a result of the devaluation of the rupee, by increasing sales in China and Vietnam, without sacrificing the price of our Teak. Regarding our forestry operations, we continued implementing the Proteak Standard throughout the entire process, including site selection, physical and chemical adaptation of the soil and cultivation of clones, allowing us to harvest our plantations in shorter cycles than those initially contemplated. Thanks to the outstanding effort of our forestry and harvesting teams, we planted 909 new hectares with high-quality clones and successfully renewed the Forest Stewardship Council (FSC) forest management and chain of custody certifications for our plantations, complying with their assigned budgets. As you know, dynamism and innovation are the Company s distinguishing features. At the start of 2013, we decided to leverage Proteak s position as leader in the forestry sector and develop the most important industrial forestry project in the country: the first MDF plant in Mexico with cutting-edge technology. To do so, we acquired the largest private forestry plantation in the country, Forestaciones Operativas de México S.A. de C.V. (Fomex), from Grupo KUO, with more than 8,000 mature and certified hectares of Eucalyptus. With a total investment of USD 175 MM, the MDF project will allow us to become the producer with the lowest costs in Mexico and cover over 20% of domestic demand. While an exhaustive due diligence was undertaken with Fomex, we simultaneously started raising capital for the development of the project. Given the interest of Proteak s existing stakeholders, a follow-on offering was initiated, raising US 75 MM, subscribed almost entirely by current institutional investors. We concluded, the Fomex acquisition in August at USD 30.6 MM, in parallel with the successful negotiation of a loan worth USD 91.2 MM with German banks AKA and Commerzbank. Additionally, three turnkey contracts were signed with German company Dieffenbacher, a leader in the production of machinery and complete plant installations worldwide. 4 It is easily said, but in only twelve months, we raised capital and debt, duplicated the size of Proteak through the acquisition of Fomex, and started the construction of the first MDF plant in Mexico with world class standards.

This project will allow us to maximize the potential of our forestry platform, successfully venturing into the industrialization of softwoods. The plant will start generating profit by 2016, decreasing the Company s risk of liquidity. The latter will also help close the gap between the market value of Proteak s CPO s and the fundamental value of the Company. The Company s CPO s closed at MXP 11.50, equaling the price of the previous year. It is worth noting that trading volume involved less than 1% of the Company certificates in a twelve month period, and that the price objective was well below the forecast of independent valuations, which had estimated a price range between MXP 21-25 per CPO. On the corporate front, the Company managed a smooth transition into Sociedad Anónima Bursátil. Summed up briefly, 2013 was an unprecedented year for Proteak, highligted by the trust of capital markets and international financial institutions in our Company, our amazing team and our projects. We are paving our way into becoming a global reference in the industrial forestry sector. Héctor Bonilla Castañeda Chairman 5

2. Report from the CEO

Mexico City, Federal District, April 23, 2014 To the Audit and Corporate Practices Committee of Proteak Uno, S.A.B. de C.V. Dear Members of the Board, In accordance to article 44, fraction XI, of the Stock Exchange Law, and article 72 of the General Law of Business Corporations, acting as Chief Executive Officer of Proteak Uno, S.A.B. de C.V., I present the following annual activities report for your consideration: A. Report of the Company s Results during the 2013 Fiscal Year 2013 was originally oriented to consolidate Teak operations. Having validated the main components of our original business plan (prices, estimated growths, etc.), the objective was set into action. In this sense, our trading effort sought to strengthen and diversify our commercial ties, optimizing the product-client ratio, and reducing risks related to concentration and country performance within regions we currently operate in. Having done so, we reached sales equivalent to MXP 153 MM (vs. MXP 85 MM in 2012) and increased our client portfolio to 25 (vs. 12 in 2012). We mainly traded in three Asian markets: India, China and Vietnam, the latter recently opened this year and already representing 15% of our sales. Regarding forestry operations, the Company reached its 2013 objective of planting 909 highly productive hectares in high quality soil. To do so, intensive soil preparation was executed to guarantee ideal physical and chemical conditions, using select genetic material from our clonal garden in Zapata, Tabasco. Following our original plan, we reached 8,200 has. of Teak plantations. It is worth mentioning that both plantation and maintenance activities were executed according to the planned budget. This year more than 7,000 has. of plantations of different ages were maintained. Additionally, we received MXP 15 MM of subsidies from Conafor s ProArbol program for plantations planted in 2012. In the manufacturing front, we decided to transfer operations of our Lerma plant, to focus on roundlog trading;we have, however, kept our finished product presence through a 100% variable scheme. Taking all these activities into account, recurrent Teak operations (excluding new plantation investments) reached a neutral cash flow for the first time in the Company s history. Having accomplished our original business plan, the Company s main achievement was the raising of capital in August, reaching MXP 970 MM, to develop the most important industrial forestry project in the country: a Medium Density Fiberboard (MDF) plant with cuttingedge technology. This achievement is not only an extremely attractive project, considering Proteak s ideal position to execute it, but also an opportunity to strengthen our business platform and add value to our Ordinary Participation Certificates (CPO s). 8

As a first step to accomplish the latter, we acquired Forestaciones Operativas de México S.A. de C.V. (Fomex) for MXP 412 MM. Fomex has more than 8,000 has. of mature and Forest Stewardship Council (FSC) certified Eucalyptus plantations, which will provide the necessary inputs for MDF production. Including the area of this acquisition, Proteak has reached 18,000 has., becoming the largest forestry Company in Mexico and Central America, and thus confirming its leadership in the sector. The second step was entrusting a complete plant installation with at least 200,000 m 3 capacity of wood board production to the German company Dieffenbacher GMBH, through turnkey contracts. Additionally, Dieffenbacher will jointly operate the plant with Proteak to ensure the implementation of high quality and capacity standards. Regarding the Management Team, three new members were appointed, these being Omar Nacif, as Vice President of the Board Division, who will be responsible of manufacturing and trading boards, Ingrid Cerwinka as Executive Director of Strategic Planning and Institutional Relations, and Enrique Espinosa, who was previously Chief Operating Officer and will also take on the role of Vice President of Teak Operations. B. Report of the Policies Followed by Management The Management of Proteak Uno, S.A.B. de C.V. is responsible for maintaining a system of internal control. The purpose of the system is to provide reasonable assurance to shareholders, the financial community and any other stakeholders, that transactions are executed in accordance with the guidelines set forth by the Company s Management and that the financial records are a reliable basis for the preparation of the consolidated financial statements. In order to fulfill its responsibilities in terms of the integrity of the financial information, the Company s Management maintains and verifies compliance with policies that are communicated to all personnel through the appropriate channels. In 2013, Management has focused its efforts in evaluating and reviewing the fulfillment of: Valuation of Biological Assets at fair value: Biological Assets, including agricultural products, must be recognized at fair value, provided that this can be reliably obtained from an active market. In order to be accomplished, 6,000 Eucalyptus parcels and 800 Teak parcels were measured in 2013. Recognition of income from revaluations of Biological Assets: The difference in the value of Biological Assets in relation to historical cost and/or previous fair value, is part of the net income from the reporting period in which the aforementioned variation is produced. Starting in 2013, provisions from such income will be made during the first three trimesters of the year. Final figures will then be calculated and determined during the last quarter of the year. 9

Valuation of property, plant and equipment: The value of the Company s assets is recognized through appraisals. When the appraisal increases the asset s value, it is reflected as revaluation surplus. In the opposite case, it is known as other comprehensive income. Several appraisals were performed with third parties during 2013 on approximately 6,400 has. Revenue: The Company s revenue from sales must comply with the requirements stated in the International Financial Reporting Standards (IFRS). Furthermore, the latter must take into account the estimate of sales costs and provisions for bad debt portfolio. This internal control system is supported by regular internal audits, which report their findings to the Management and the Auditing Committee throughout the year. The Company s Management considers that to this date, this system provides a reasonable guarantee that any irregularities and mistakes are prevented or detected on time. C. Report on the Company s Financial Position and Results Total assets of the Company increased by 73%, in comparison to the previous year, reaching MXP 2,372 MM, mainly due to the increase of capital (to the date of this letter the subscription and payment of MXP 173 MM are still pending), and, to a lesser extent, the acquisition of Biological Assets and Fixed Assets. The growth of Biological Assets is triggered by the organic growth of the plantations, excellent forestry management throughout the Company s history, and the new Eucalyptus plantations. Fixed Assets, mainly integrated by land, has increased according to appraisals, which have stated a greater market value after their acquisition. Regarding Current Assets, Cash and Cash Equivalents stand out, totaling MXP 360 MM from the increase in capital. To a lesser extent, Accounts Receivable grew 44% as a natural consequence of the Company s sales increase, which were 80% higher than the previous year, and the reduction of the collection period to 30 days. Long-term Assets held for Sale came down to MXP 21 MM because of the sale of two properties in Costa Rica. Liabilities increased 45%, reaching MXP 65 MM, due to the growth of Accounts Payable. During the first semester, the Company exercised USD 5 MM out of the USD 10 MM loan from the International Finance Corporation, approved in 2012. Minor withdrawals were also carried out from the Financiera Rural credit lines, leaving Long Term Loans at MXP 229 MM, including capitalized interest. In terms of its capital structure, the Company s position continues to be very solid with a Liabilities/ Equity ratio of 1 to 4 (1 to 6 in 2012). 10 Concerning the Company s results, sales reached a record high of MXP 153 MM. The reduction in Operating Results, in comparison to the previous year, was mainly affected by general and administrative and sales expenses, resulting from activities related to the capital increase and the operating start of the Eucalyptus and MDF business lines.

The Cost of Sales reflects a negative effect, derived from the profit generated in previous years by the change in the fair value of the Biological Assets amounting to MXP 9 MM. Consequently, Operating Results were neutral. Finally, changes in the fiscal legislation, such as the elimination of the Flat Rate Business Tax (IETU), created an adverse non-cash effect towards the income tax for approximately MXP 15 MM. Derived from the aforementioned variables, the 2013 tax year closed with a MXP 18 MM Net Loss. We consider that this result is in line with the Company s objectives. Gaston Mauvezin Chief Executive Officer Proteak Uno, S.A.B. de C.V. 11

3 Executive Summary Proteak is the largest forestry Company in Mexico. Operating in four countries and trading in more than fifteen destinations, Proteak has transformed itself into an authentic global enterprise. The Company s forestry activities are primarily concentrated in plantations of tropical hardwood trees of the species whose scientific name is Tectona Grandis (commonly known as Teak ) and Eucalyptus. 12

7 Environmental and Social Development Since its creation, Proteak was conceived with a high sense of environmental and social conscience. The Company has developed sustainable practices that include: The selection of clean lands. The conservation of more than 2,380 hectares of primary rainforest. Wildlife conservancy programs. Conservation of rivers and wetlands, maintaining buffer areas and wildlife corridors. Use of chemicals with a low environmental impact. Recycling of raw materials. Registration of a carbon capture project to generate and trade carbon credits in 2014. Proteak s annual carbon capture is equivalent to the emissions of 401,954 cars.

Main Financial Indicators MMXP Sales Assets 180,000 160,000 140,000 MMXP 120,000 2,500 100,000 80,000 60,000 40,000 20,000 2,000 1,500 1,000 500 0 2009 2010 2011 2012 2013 Our History 2011 2012 2013 Gr. 1 Gr. 2 Biological Assets on December 31, 2013 Liabilities / Equity Ratio 100% 90% Young 12% Mature 000 MXP. 6,000 Equity Liabilities 80% 5,000 70% 60% 50% 40% 30% 42% 97% 88% 93% 4,000 3,000 2,000 20% 10% 0% 58% Teak 3% 7% Eucalyptus Teak Eucalyptus 1,000 2011 2012 2013 Value Biological Assets Planted Area Gr. 3 Gr. 4 14

2013 Results 2013 marked a watershed for Proteak. On the one hand, it continued to consolidate its position globally as a leading provider of certified Teak, and on the other, it decided to diversify its business portfolio and venture into the industrial forestry sector with the production of medium density fiberboard (MDF). In 2013, the Company met the goals set forth in its Business Plan, generating positive results in areas that are key to the business value chain. 15

4 Forestry Platform One of Proteak s main strengths is its forestry platform and its experience throughout the wood value chain, ranging from site selection, use of select genetic material, appropriate soil preparation and maintenance techniques and wood trading. This growth platform is based on the following competitive advantages that the Company has developed: 1. Command of the forestry business and leading position in the market. 2. Unique integrated business platform with proven track record. 3. Industry with high growth potential and low correlation to economic and market impacts. 4. World-class capabilities in research, development and application of forestry techniques. 5. Geographic diversification in strategic markets with natural entry barriers. 6. Solid corporate governance with a proven management team. Value Chain Diagram Proteak generates value through an integrated value chain: Forestry, Operations and Trading. FORESTRY Proteak has one of the most advanced nurseries of the forestry industry, to develop clonal material and provide an adequate treatment of the clones to ensure their development and survival in the field. Clearance of grass and weeds around the trees to ensure their proper development and survival. Constant monitoring and surveillance to control weeds and detect possible plagues. Mature trees are measured to determine the best time for final harvest. Logs are bar-coded. 1. Site Selection 2. Hydroponic Nursery and Greenhouse 3. Soil Preparation 4.Maintenance 5. Thinning 6. Final Harvest Intensive mechanical preparation of the soils to adapt physical and chemical traits of the surface and provide optimal conditions for growth. Strategic reduction of the tree density per hectare to provide enough space between the trees with potential growth. It is generally performed in the years 5, 9, 12, 15 and 20 of the 25-year cycle. 16 Gr. 5

What is Teak? Among woods, Teak holds the place that diamonds maintain among precious stones. 1 Teak is native to India and Southeast Asia, (Myanmar, Thailand, Laos). It is known for its excellent properties, being one of the most valuable woods in the world. It is characterized by its strength and light weight, by its durability, dimensional stability, non-corrosive nature, the ease with which it is carved and dried, resistance to termites, fungi and the elements, and for its beauty. Teak has many uses, such as the construction of bridges and jetties, furniture, railway cars and sleepers and carpentry in general. It is especially valued in the shipbuilding industry, where it is used for decking; it is also used for carving and provides durable flooring.2 1 OIMT Actualidad Forestal Tropical. Volume 12, Number 1 (2004), p 3. 2 El futuro de la Teca en la América Tropical http://www.fao.org/docrep/n6845s/n6845s02.htm In terms of forestry operations, 2013 was a year of major achievements. The Company planted 909 new hectares in Mexico, all with high-quality clones. The Company s holdings reached a total of 8,192 planted hectares of Teak, surpassing the timetable set forth in the original Business Plan presented in the Initial Public Offering of 2010. 17

Price Fine Woods $25 Natural Teak $20 $15 $10 Plantation Teak $5 $0 Teak Cherry Mahogany Walnut Maple Holm Oak English Oak Birch Aspen White Ash Price per Board Foot of different fine woods species. Source: Mason s Mill and Lumber Co. Houston, TX. Gr. 6 During the year, Proteak continued to promote its Research and Development division, focusing on the improvement of genetic material for its plantations, which will make it possible to reduce the cycle in Teak plantations by 3 to 5 years. As in the previous year, during 2013 the Company was able to acquire the high-quality land needed to meet our planting program. These properties are mainly located in the state of Tabasco, where we have found that the environmental characteristics are most favorable for the optimal growth of our plantations. 18

5 Trading 2013 Sales On the commercial front, the year was highlighted by the strengthening of Proteak s position as a certified Teak supplier tailored to clients in Asian markets. 100% 80% 60% 40% Products Roundlogs 17% Domestic Market Foreign Market 8% 20% 0% 83% 92% Gr. 7 The decrease in demand in India, as a result of the devaluation of the rupee, was successfully counteracted with increases in sales in China and Vietnam directly to end-customers and manufacturers of furniture and other products. The Company was able, for the first time, to have its Teak used for the manufacturing of furniture for the Chinese domestic market. Proteak optimizes and controls all of its harvest. To ensure the chain of custody of each and every one of the Teak logs the Company exports, they are identified by a bar code that allows them to be traced from their place of origin throughout their final destination. 19

6 Industrial Forestry Sector In 2013 Proteak sought a great opportunity to diversify its business portfolio, developing the most important industrial forestry project in Mexico: the construction of a MDF (Medium Density Fiberboard) plant in the state of Tabasco to supply over 20% of domestic demand, by substituting imports. Resources for the MDF project were obtained through a capital increase with the issuance of 85,933,750 CPO s at a price of MXP 12, subscribed almost entirely by current institutional investors. The capital obtained for the project was used first for the purchase of FOMEX, the largest private forestry company in Mexico, with more than 8,000 hectares of mature, certified Eucalyptus plantations. In addition, in January 2014 a loan for EUR 66.8 MM (USD 91.2 MM) was signed with Ausfuhrkredit-Gesellschaft mbh ( AKA ). These resources will be used for the acquisition of German machinery for the MDF plant. The Eucalyptus will be used for the manufacture of MDF in the industrial plant whose construction has begun in Huimanguillo, Tabasco, very close to our plantations. For the acquisition of machinery and initial operation of the plant, the company signed turnkey contracts with German company Dieffenbacher, a leader in the production of machinery and complete plant installations worldwide The agreements include the production of machinery, its transportation, part of the civil works in Mexico and the co-operation of the plant in its initial stage for up to 15 months. 20

Growth of MDF Consumption vs. Other Products 400 300 200 100 0 Gr. 8 2000 2001 2002 2013 2014 MDF Growth 24% 2015 Other Fiberboards Growth 14% 2006 2007 2008 2009 2010 2011 Source: FAO What is MDF? MDF is a composite formed by breaking down wood fibers, combined with a resin binder applied under high temperature and pressure. Its surface is flat, smooth and unblemished, allowing it to be easily worked, like solid wood. Both in terms of price and performance it is a very attractive product, whose use is increasing day by day in different industries. The consumption of MDF in Mexico is more than 600,000 m 3 per year, its annual growth exceeds 20% and imports meet 90% of domestic demand. MDF is the fastest growing board in the market and Proteak has the opportunity to capture value in this new business. 21

Annual Consumption of MDF in Mexico To develop the marketing strategy for MDF, a comprehensive study was conducted with a renowned consulting firm, which confirmed the great potential of this product in Mexico. It is the only vertically integrated project in Mexico. Proteak s main advantage is reduced production costs, assuring competitiveness even in harsh market circumstances. The MDF project will also include a cogeneration electrical power plant that will allow us not only to generate the necessary energy for the plant, but to sell the surplus to the market. 1000 800 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Sistema de Información de Aduanas Vía Internet (SIAVI) Gr. 9 This process is very efficient and environmentally friendly. The diversification of its business portfolio will allow the company to reduce its liquidity risk and quickly close the gap between the market value of its CPOs and the fundamental value of the Company. The main differentiators of Proteak will be the costs of production and distribution, forestry experience in the development of superior plantations and the synergies of both businesses (Teak and MDF), which will allow Proteak to generate a profitable business both in the medium and long-term. Pre-construction activities have already begun for the plant in Huimanguillo, Tabasco, which will have an annual production capacity of at least 200,000m 3. The start-up of the plant is scheduled for the second half of 2015. 22

All these activities have resulted in the authorization of all the plantations by SEMARNAT (Ministry of the Environment and Natural Resources) and the granting of subsidies with a high score from CONAFOR (National Forestry Commission). Proteak was also granted the maximum environmental forestry distinction when it was certified as an environmentally and socially responsible company by the Forestry Stewardship Council (FSC). Proteak s recent acquisitions are also FSC certified, thus Proteak continues with its philosophy of maintaining a high sense of environmental and social conscience. In 2013, Proteak maintained its commitment to the highest standards of sustainable forest management. In the second half of the year, it concluded the process of certification for Forest Management and Chain of Custody from the FSC for its Teak operations in Mexico and Costa Rica, through the agency SCS Global Services (SCS). For the facilities located in Lerma, Mexico, and La Gloria, Colombia, an annual audit was conducted to meet the FSC Chain of Custody standard, with the auditing agency Rainforest Alliance. Both sites successfully met the standards. FSC provides the most robust and recognized certification worldwide for forest products, from the time they are planted to their delivery to the consumer, and is a guarantee of social, environmental and economic sustainability. To receive certification, Proteak has implemented practices and procedures in compliance with the ten principles and criteria of FSC in all its forestry activities. 25

In addition, it has incorporated environmental and social elements to function sustainably, such as plans for monitoring environmental, social, and forestry matters; assessments of social impact in consultation with stakeholders, and assessments to determine measures for the protection of High Conservation Value Forests located within the plantations. 26 Lastly, Proteak recognizes the importance of participating in the communities where it works and strengthening their future human capital. For this reason it has established an internship program with students from the Mayan Center for Agricultural and Livestock Studies in the National University of Chiapas. It also conducted five events relating to environmental education and reforestation in the academic institutions of Tabasco and Chiapas, benefiting 88 students.

ADDENDA

8 Financial Position and Results for 2013 The Company s total assets increased by 73%, mainly due to the acquisition of FOMEX. Proteak s total assets reached MXP 2.37 billion by December 2013, and continue to reflect the use of funds from the Company s placement of CPOs in June 2010 and the subsequent capital increase in August 2013. Proteak s main assets are now concentrated in Biological Assets and Fixed Assets, which will allow us to begin to generate operating flows, leaving only the amount necessary in cash to follow the planting program established in the Business Plan and the development of the MDF project. Total assets of the Company increased by 73%, mainly due to the acquisition of FOMEX. The cash position also increased, reflecting the events of the year, registering MXP 559.2MM on December 31, 2013. The Company s Biological Assets increased by 67% in 2013, as a result of the new plantations acquired from the purchase of FOMEX and the excellent growth in existing plantations. 29

As for assets held for sale, these were affected by the translation adjustment derived from the depreciation of the peso to the US dollar and the sale of two properties in Costa Rica. Other Accounts Receivable (Customers), increased as a natural consequence of the rise in the level of activity, but continues to only represent a minor portion of total assets. Table 1 / Total assets ASSETS ($000) DIC-13 DIC-12 DIC-11 Cash and cash equivalents 359,279 48,716 6,451 Accounts receivable 59,106 41,851 7,533 (Customers) others accounts receivable 59,696 66,911 46,193 Inventory of wood and processed wood 13,696 18,998 23,524 Mature and immature biological assets 111,364 141,550 54,330 Advance payments 12,213 - - Assets held for sale 102,889 124,092 133,557 Financial assets available for sale - - 112,078 Immature consumable biological assets 817,592 414,148 429,526 Property, plant and equipment 737,036 485,324 438,006 Anticipated payments and other assets 99,507 32,325 25,711 Total Assets 2,372,378 1,373,915 1,276,908 Source: Proteak Financial Statements In terms of capital structure, the Company s position continues to be very solid with a Liabilities/Equity ratio of 1 to 4. Net Fixed Assets Net Fixed Assets Long-term Assets held for sale Proteak s Fixed Assets (net) totaled MXP 737 MM pesos in December 2013, an increase of slightly over 52% compared to December 2012. This growth is primarily due to the acquisition of FOMEX, as well as the acquisition of land for planting in Mexico. 103 134 124 438 485 737 DEC 11 DEC 12 DEC 13 30 Gr. 11

Income Statement Regarding the Company s results, it is worth underscoring that the Operating Result, excluding costs incurred in the acquisition of FOMEX and the MDF project of approximately MXP 30.0 MM, showed a positive result of MXP 34.0 MM versus MXP 38.0 MM in 2012. Annual sales of Teak roundlogs reached MXP 115.7 MM, doubling the amount obtained in 2012 of MXP 59.2 MM. Total sales increased by 80%. Total administrative expenses reflect the incorporation of FOMEX to Proteak, and those related to the new MDF project, which will generate added value to the company. Table 2 / Income statment Income statement (MxP 000) 2013 2012 2011 Net income 153,720 85,300 19,502 Gain from change in fair value less 95,212 79,674 34,777 estimated point of sale costs of of biological assets Subsidies received 15,010 11,454 13,998 Cost of sales 169,702 79,373 24,298 Administration and sales expenses 97,237 61,070 52,489 Net profit from acquisition of subsidiary companies 2,652 - - Other income-net 336 2,964 2,870 OPERATING PROFIT (LOSS) (9) 38,949 (5,641) Comprehensive financing results (1,150) (5,680) (2,666) PROFIT (LOSS) BEFORE TAXES (1,159) 33,269 (8,306) Income taxes (16,583) 4,972 7,732 CONSOLIDATED PROFIT (LOSS) NET (17,742) 38,241 (574) Source: Proteak Financial Statements 31

Table 3 / Statement of financial position (000) PESOS 2013 2012 2011 Variations ^ 2013-2012 Cash and cash equivalents 359,279 48,716 6,451 310,563 637.5% Trade receivables (Customers) 59,106 41,851 7,533 17,255 41.2% Recoverable taxes 42,724 40,239 26,473 2,485 6.2% Income tax and flat tax 12,451 10,244 5,640 2,207 21.5% Sundry debtors 4,521 16,428 14,080 (11,907) (72.5%) Inventory of wood and processed wood 13,696 18,998 23,524 (5,302) (27.9%) Financial assets available for sale - - 112,078 - N/A Consumable mature and immature biological assets 111,364 141,550 54,330 (30,186) (21.3%) Advance payments 12,213 - - 12,213 N/A Long-term assets available for sale 102,889 124,092 133,557 (21,203) (17.1%) Total current assets 718,243 442,118 383,666 276,125 62.5% Restricted cash 16,217 - - 16,217 N/A Long-term accounts receivable 11,163 - - 11,163 N/A Immature consumable biological assets 817,592 414,148 429,526 403,444 97.4% Property, plant and equipment 737,036 485,324 438,006 251,712 51.9% Deferred income tax 16,370 9,035 3,456 7,335 81.2% Sundry debtors 5,829 - - 5,829 N/A Advance payments 49,674 21,798 21,454 27,876 127.9% Guarantee deposits 254 1,492 801 (1,238) (83.0%) Total non-current assets 1,654,135 931,797 893,242 722,338 77.5% Total assets 2,372,378 1,373,915 1,276,908 998,463 72.7% Suppliers (accounts payable) 21,816 10,562 5,237 11,254 106.6% Sundry creditors 27,057 24,818 23,069 2,239 9.0% Provisions 8,028 7,970 58 0.7% Advance payment from customers - 127 505 (127) N/A Payable flat tax and income tax 8,025 1,868 599 6,157 329.6% Worker profit sharing payable 443 337 351 106 31.5% Total short-term liabilities 65,369 45,682 29,761 19,687 43.1% Labor obligations 374 120 103 254 211.7% Long-term credits 228,873 135,920 51,698 92,953 68.4% Deferred flat tax - 6,756 - (6,756) (100.0%) Deferred income tax 152,553 26,353 33,483 126,200 478.9% Total long-term liabilities 381,800 169,149 85,285 212,651 125.7% Total liabilities 447,169 214,831 115,045 232,338 108.1% 32 Paid-in subscribed capital stock 655,682 463,950 463,950 191,732 41.3% Premium on the subscription and placement of shares 1,163,417 579,892 579,892 583,525 100.6% Accumulated deficit (43,330) (81,571) (62,893) 38,241 (46.9%) Profit (deficit) for the year (17,742) 38,241 (18,678) (55,983) (146.4%) Cumulative translation adjustment 72,010 63,571 131,085 8,439 13.3% Financial assets available for sale 46 46 78.381 00 0.0% Revaluation surplus 95,126 94,955 68,428 171 0.2% Total equity capital 1,925,209 1,159,084 1,161,863 766,125 66.1% Total liabilities + equity capital 2,372,378 1,373,915 1,276,908 998,463 72.7%

Company results showed a net loss resulting from the expenses derived from the acquisition of FOMEX and those related to the new MDF Project, which will generate added value to the Company. Company sales achieved an exponential growth, increasing sales by MXP 68 MM, equivalent to a growth of 80% compared to the previous period. The Company met its target goal of exporting more than 800 containers to Asia, while at the same time validating the prices established in its business model. Due to the above, general expenses increased 59%, reflecting the acquisition of FOMEX and the MDF Project, in line with expectations. Income from revaluations of Biological Assets accounts for 35% of total revenues and is mainly derived from two sources: the increased value of mature plantations and the recognition of the discounted value of the 8 year rule as set forth by IAS 41 for young plantations in periods of 3 to 8 years. 33

we make forestry matter

Av. Paseo de la Reforma 725, Col. Lomas de Chapultepec, Del. Miguel Hidalgo C.P. 11000, México D.F. www.proteak.com