Fundación Chile is the Sponsor. Fundación Chile was established in 1976 and is a private, non-profit institution, created by the Chilean government and ITT Corporation with the objective of contributing to market innovation and technology transfer, essentially in sectors based on renewable natural resources. It’s main areas of activity are in agribusiness, aquaculture/fisheries, forestry/wood products and various other sectors including IT. Fundación Chile’s activities in forestry sector are wide-ranging and include leadership in developing simulation models for radiata pine and eucalyptus plantations, silviculture and forestry biotechnology and certification. Moreover, Fundación Chile has been actively engaged in promoting the use of wood in construction, improving further processing and impregnation of wood to support the competitive wood processing industry in Chile. In this process, it has gained substantial respect from the Chilean business community and various stakeholders in Chile. Fundación Chile has a long-term relationship with Chile’s leading forestry companies and has historically played the role of honest broker in joint forestry/wood development efforts. For the purpose of the Lignum Fund and future forestry fund investments in Chile, Fundacion Chile has partnered Asset Chile and Independencia to leverage the partner’s investment banking experience as well as fund management expertise. Asset Chile is a Chilean boutique investment bank, founded in 1984, providing corporate finance advisory services in a variety of areas including M&A, strategic alliances, divestments, IPOs and general capital. Independencia is a privately-owned Chilean fund manager specializing in real estate investments.

The Lignum Fund will be an approximately $34 million equity fund. It is expected that 4-6 Chilean institutional investors will be the primary investors and IFC is considering an equity investment of up to $6.5 million in the Fund.

6.50 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	6.50

* These investment figures are indicative

The Fund will acquire land use rights mainly in Chile’s VIIth and VIIIth Regions. The average size of the sites is expected to be around 130 hectares and will be in relatively remote locations. The land use rights targeted for new plantations will be dry eroded areas with little or no agriculture value. The Fund will not acquire any land use rights for natural forest or in regions facing indigenous conflicts.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of adverse environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical and environmental/social information provided by Fundación Chile, the project sponsor. The following aspects of the project were analyzed: regulatory framework; forest management plans; land use agreements; environmental management capacity; sustainable forestry management; and anticipated impacts. Please refer to the ERS dated October 8, 2004 for a comprehensive description of environmental and social issues.
Location of environmental documents in locally affected community
The ERS will be available in CORMA’s offices in Santiago and Concepcion. The ERS will also be available at Fundacion Chile’s office in Santiago.

By supporting the Lignum Fund, IFC will be supporting the introduction of a long-term financial mechanism that will help small landowners and farmers increase their income and overcome a number of constraints that are preventing them from effectively managing and optimizing the value of their properties, including: - relatively small holdings; - lack of access to credit; and - unmechanized management and harvesting procedures. The project will also have an important environmental impact through the afforestation of eroded land with marginal alternative agricultural use, and will ensure that sustainable forestry management practices are applied to all of the land and forestry assets under its management. IFC’s support and fund structuring expertise will help to mobilize investment from Chilean institutional investors and will also help the Project achieve it’s objective of introducing an innovative securitized financial instrument that can be replicated over time, providing Chilean institutional investors an alternative to invest in the forestry sector while also providing a new financing source to Chile’s forestry products industry.