LATAM Airlines Group Annual Report 2012

Plain-text annual report

CONTENTS 01. INTRODUCTION Message from the Chairman of the Board Letter from Chief Executive Officer 02. OUR COMPANY Business Strategy Our History Our Fleet Destinations Our People Company Information 03. CORPORATE GOVERNANCE Board of Directors Senior Management Corporate Governance Practices Ownership Structure and Principal Shareholders Financial Policy 04. OPERATIONS International Passenger Operations TAM LAN LAN Perú LAN Ecuador LAN Argentina LAN Colombia Customer Loyalty Programs Cargo Operations 05. 2012 RESULTS Industry Overview Financial Results Awards and Recognitions Stock Market Information Additional Information Material News Risk Factors 06. SUSTAINABILITY LAN TAM 07. FINANCIAL STATEMENTS Financial Statements Subsidiaries and Affiliated Companies 3 4 6 8 9 11 14 20 25 27 28 29 34 41 46 49 52 53 56 58 60 62 64 66 68 70 72 73 75 79 81 85 86 98 100 101 105 111 111 277 INTRODUCTION LATAM AIRLINES GROUP S.A. María Estibaliz LAN Argentina Paola Russo TAM Perú 4 INTRODUCTION / MESSAGE FROM THE CHAIRMAN OF THE BOARD Dear Shareholders, In 2012, by implementing the association between LAN and TAM, the region’s principal airlines, we not only fulfilled a long-sought-after dream on our road to consolidation but also took an historic step in Latin America’s airline industry. The merger process represented over two years of hard work and dedication, the result of which finally materialized on June 22 when we announced the birth of LATAM Airlines Group. This achievement is a source of both pride and, of course, motivation since it will allow us to build an airline that is a leader in the region in terms of size and coverage, with a combined fleet comprising over 300 aircraft and an unrivalled network serving 135 destinations across 22 countries and transporting cargo to 144 destinations in 27 countries. In this way, we have grown significantly in capacity and connectivity, offering more flights and more destinations in the region as well as to and from the rest of the world. At the regional level, LATAM Airlines Group has today a diversified presence, with domestic operations in Chile, Argentina, Perú, Ecuador and Colombia as well as Brazil, by far the region’s largest market, in addition to a key position in the main hubs for connections between South America and the rest of the world such as Santiago, São Paulo and Lima. This allows us to promote the region internationally through a service of excellence with which we hope to contribute to South America’s commercial integration and to expand our culture beyond the region. The integration of LAN and TAM will enable us to be more competitive and efficient, providing more travel options for our clients at attractive prices with the same service quality that has been the hallmark of all our operations. We estimate that this alliance will generate synergies worth between US$600 million and US$700 million a year as from the fourth year of the integration. This does not, moreover, include the development potential of Brazil’s domestic market which moves around 77 million passengers each year and, at present, represents around 30% of the group’s consolidated revenues. Just as we foresee great opportunities for growth, we are also aware that merger processes are not easy and, on the contrary, entail many challenges and lessons to be learned. In particular, we face an important organizational challenge since the association of LAN and TAM involves a team formed by over 53,000 people of different nationalities, making LATAM Airlines Group a company that is not only multinational but also multicultural, with all the advantages this implies in terms of knowledge of different markets and their people. I would like to take this opportunity to express our sincerest thanks IntroductionMEMORIA ANUAL20125 to all our employees for the dedication, effort and commitment they have shown over these two years. This was, without doubt, crucial for the successful implementation of our merger process. We know we still have a long road ahead of us and I would, therefore, invite you to keep alive this spirit of collaboration and to be protagonists of the consolidation of this unique and historic project of making LATAM Airlines Group one of the world’s ten largest and most important airlines. In order to reach this stage, we have worked with passion and given the best of ourselves. 2012, in particular, was an important transition year in which we invested much time and resources and this is reflected in our results. We are certain that all this effort will create greater prosperity for all the LATAM Airlines Group family. Our passengers and cargo clients will benefit through an increased number of flights and better connections within the region and with the rest of the world. The growth of our operations will also mean new career opportunities and jobs for our employees. And, finally, the gains in terms of synergies and increased flow of passengers, among other benefits of the merger, will be reflected in greater profitability for our shareholders. Before finishing these remarks, I would like to draw particular attention to the long history of collaboration between LAN and TAM as independent airlines. Both companies shared not only a similar business vision but also the same values and culture of service and these are decisive for the success of this integration process. Together, we will now build on all our strengths and attributes as regards size, coverage and know-how in order to consolidate our position as a global operator that is well prepared to compete in the big leagues of the international airline industry. Mauricio Amaro Chairman of the Board IntroductionMEMORIA ANUAL20126 INTRODUCTION / LETTER FROM CHIEF EXECUTIVE OFFICER Dear Shareholders, In a year marked by challenges for airlines worldwide, the creation of the LATAM Airlines Group in 2012 represented a milestone in the history of aviation in the Americas. The merger – one of the continent’s largest business initiatives – was crowned a success and resulted in the largest airline group in Latin America and one of the world’s first in terms of market capitalization. and Europe, this load factor shows that we are on the right path to recovering profitability in Brazil’s domestic market, which accounts for approximately 30% of the LATAM Airlines Group’s revenue. Important steps were taken that allowed us to capture the important synergies and opportunities initially projected for the integration process. We made available to our passengers the joint sale of LAN and TAM flights, which increased our offering of destinations, and also worked continuously to adjust itineraries to improve connections from our continent to Europe and the United States. Second, with the signing of code-sharing agreements between TAM and American Airlines, among the two largest airlines in their respective countries, following approval by the regulatory agencies, we will begin offering in the Brazilian market 48 new destinations in the United States based out of Miami, which is Brazilian’s main port of entry into the country. We also advanced important changes in our two largest domestic markets, Colombia and Brazil, which will bring significant gains going forward. In Colombia, we continued to replace our current fleet with new Airbus aircraft that are more efficient and have more seats, which reduces our costs and allows us to improve our on-time performance. In Brazil, there are two points I would like to underscore. First, we were able to successfully reduce excess capacity in the domestic market, which significantly increased our average load factor in the year to 73.6%. Though still below the levels of more mature markets like the United States Brazil’s largest airport, Guarulhos International Airport in São Paulo, has been under private management since mid-2012 through a concession contract. The move represents an important initiative for stimulating the region’s aviation market, adjusting infrastructure to air carriers’ growing needs and improving service for their millions of passengers. One of our most important objectives is to transform Guarulhos International Airport into a major hub for LATAM Airlines Group, effectively connecting South America to the rest of the world. By concentrating our operations in a single terminal we will be IntroductionMEMORIA ANUAL20127 able to offer our passengers, both domestic and international, shorter distances between gates, better connection times and more comfort and conveniences in our lounges. We are also renewing our fleet over the short and medium term. The LATAM Airlines Group fleet is already one of the youngest in the world, but our objective is to offer greater comfort and well-being to our passengers, while also increasing flight efficiency by using latest generation aircraft, which consume less fuel. Along these lines, the company has significant orders of Boeing 787 and Airbus A350 state-of-the-art aircraft to operate with greater efficiency and providing a superior travel experience for passengers. Additionally, we are constantly evaluating opportunities to improve our product in the current fleet, especially for long-haul routes. invested in systems and technology that will allow us to better manage the interactions with our passengers. These changes were not free of challenges in their implementation, but we remain convinced that in the long term they will be reflected in an organization that is increasingly responsive to customer needs. Lastly, I would like to highlight the importance we are dedicating to our employees. Our group brings together 53,000 people from various countries and with distinct backgrounds and cultures, which is why we are investing in creating a shared team spirit across our corporation. LATAM Airlines Group was created from two companies that have always shared similar values and a culture of excellence inestimable is of in customer service, which importance in any integration process. More than ever, we maintain our commitment to excellence in the service we provide to passengers and cargo customers. In addition to continuous improvements in the connectivity of our network and the constant renewal of our fleet, we have Over the next few years we will overcome major challenges that are inherent to any enterprise of this grandeur. And the LATAM Airlines Group merger will, without a doubt, mark the history of global aviation. Enrique Cueto P. CEO IntroductionMEMORIA ANUAL2012OUR COMPANY LATAM AIRLINES GROUP S.A. Taciana Castro TAM Brazil Gabriela Estrella LAN Ecuador 9 OUR COMPANY / BUSINESS STRATEGY For LATAM Airlines Group, success consists in making the airlines it brings together - LAN and TAM - a business that is sustainable over time, that has over the years carried millions of passengers and that, today, after their integration, is positioned as one of the world’s most important airline groups. For this reason, it has based its strategy on the pillars of connectivity, diversity and efficiency. Through its regional presence, the Company offers unrivalled connectivity and no other airline group in the region offers more flights to more destinations than LATAM Airlines Group. In addition, it competes on a daily basis on the global stage, with an extensive network of destinations and hubs located at strategic points in the region (Santiago, Lima and São Paulo) that enable it to improve the connection of South America with the rest of the world and of the rest of the world with South America, offering clients more travel options and constantly striving to provide a service of excellence to both passengers and cargo clients. Both companies have a diversified business model. This includes both geographic diversity - as a regional company with a presence in the region’s main markets - and business diversity in that, although a group of passenger airlines, it derives an important part of its revenues from cargo operations. LATAM Airlines Group has built a solid network of subsidiaries in Chile, Brazil, Perú, Argentina, Ecuador and Colombia and is the leader in most of these markets, contributing to the countries’ economic and social development and, thanks to its low-cost model, making air travel ever more accessible to their inhabitants. Business and geographic diversification The diversification of the Company’s business model has also been key in its consolidation as one of the most efficient, competitive and profitable in the international airline industry, achieving the integration of its cargo and passenger businesses, optimizing utilization of its aircraft, adjusting its routes and flights to demand and providing solidity and stability in relation to the external factors by which it could be affected. At present, its cargo business accounts for 14.6% of revenues and its passenger business for the other 83.4%. Another pillar of LATAM Airlines Group’s strategy is for its operations to be profitable and, at the same time, environmentally friendly and their efficiency has been key for its success. With a modern fleet of more than 320 aircraft in service and purchase orders for around a further 187, LATAM Airlines Group stands out for its use of latest-generation planes such as the Boeing 787 Dreamliner and the Boeing 777-200F cargo plane as well as its purchase orders for the new Airbus A350-200. The great investment that the Company has made in its fleet is reflected in savings on operating costs. In some cases, the efficiency of its aircraft has allowed it to cut fuel consumption by around 15%, resulting in a reduction in CO2 emissions and offering passengers a better service. Our CompanyANNUAL REPORT20120 1 The integration of LAN and TAM has united two financially solid companies, bringing the best of each to the new company, giving it an important position in the global market and generating synergies and cost efficiencies to allow it to continue growing and providing greater benefits to the region. Our CompanyANNUAL REPORT20121 1 OUR COMPANY / OUR HISTORY 1929 Línea Aerea Nacional de Chile (LAN) founded by Comandante Arturo Merino Benítez. 1946 First LAN international flight: Santiago-Buenos Aires. 1956 Start of LAN services to Lima. 1958 Start of LAN services to Miami. 1961 TAM-Taxi Aéreo Marília created by five charter flight pilots. 1970 LAN begins flights to Europe. 1975 Foundation of TAM-Transportes Aéreos Regionais by Capitan Rolim Adolfo Amaro. 1976 Launch of TAM services in Brazilian cities, especially Mato Grosso and São Paulo. 1983 Constitution of Linea Aerea Nacional - Chile Limitada, through CORFO 1985 LAN becomes a joint stock company. 1986 Acquisition by TAM of VOTEC-Brasil Central Linhas Aéreas, another regional airline operating in the north and center of the country. Our CompanyANNUAL REPORT20122 1 1989 Start of privatization of LAN: the Chilean government sells a 51% stake to local investors and Scandinavian Airlines System (SAS). 2001 LAN Alliance with Iberia and inauguration of Miami cargo terminal. 1990 Brasil Central renamed TAM-Transportes Aéreos Meridonais. 1993 Launch by TAM of TAM Fidelidade, Brazil’s first frequent flyer program. 1994 Privatization of LAN completed with the acquisition of a 98.7% stake by its current controllers and other shareholders. 1996 Acquisition by TAM of Lapsa airline from the Paraguayan government and creation of TAM Mercosur; start of São Paulo-Asunción flights. 1997 LAN lists on the New York Stock Exchange, becoming the first Latin American airline to trade ADRs on this important market. 1998 Arrival of first A330; first TAM international flight from São Paulo to Miami. 1999 LAN’s expansion begins: start of operations of LAN Perú. 1999 Start of TAM services to Europe through a code sharing agreement with Air France to Paris Charles de Gaulle. 2000 LAN joins the oneworld® alliance. 2001 Creation of TAM Technology Center and Service Academy in São Paulo. 2002 LAN Alliance with Qantas and Lufthansa Cargo. 2003 LAN continues its expansion plan: start of operations of LAN Ecuador. 2004 Launch of new corporate image as LAN Airlines S.A. 2004 Start of TAM flights to Santiago. 2005 Further step in LAN’s regional expansion plan: start of operations of LAN Argentina. 2005 TAM S.A. lists on the BOVESPA stock market; start of flights to New York and Buenos Aires. 2006 Launch of new LAN Premium Business Class. 2006 TAM S.A. lists on the NYSE / Start of flights to London and, through agreement with Air France, to Zurich and Geneva. 2007 Implementation of low-cost model in domestic markets; capital increase of US$320 million; purchase orders for 32 Boeing 787 Dreamliners. 2007 Start of TAM flights to Milan and Córdoba; authorization from Brazil’s National Civil Aviation Agency (ANAC) to start flights to Madrid and Frankfurt. Our CompanyANNUAL REPORT20123 1 2008 Completion of renewal of LAN’s short-haul fleet with aircraft from the Airbus A320 family. 2008 TAM receives its first Boeing 777-300ER. 2009 Start of cargo operations in Colombia and domestic passenger operations in Ecuador. 2009 Launch of Multiplus Fidelidade; acquisition of Pantanal Linhas Aéreas. 2010 Acquisition of Colombia’s Aires airline. 2010 TAM officially joins Star Alliance. 2011 LAN and TAM sign binding agreements related to the business combination of the two airlines. 2012 LATAM Airlines Group is born as a result of the business combination between LAN and TAM. Our CompanyANNUAL REPORT20124 1 OUR COMPANY / OUR FLEET LATAM Airlines Group operates a fleet of 327 aircraft whose average age of 6.7 years positions it as one of the most modern in the industry. As of December 2012, LAN’s and TAM’s planes continued to operate under their respective brands but with a focus on the connectivity of their networks to the benefit of passenger and cargo clients. For short-haul operations, the Company uses almost exclusively aircraft from the Airbus A320 family. The great flexibility afforded by their range and power allows the Company to serve its domestic and regional routes within South America efficiently. In 2012, 22 new aircraft from this family were incorporated and 15 were taken out of service, giving LATAM Airlines Group a fleet of 212 planes from this family. It is important to note that the homogeneity of LAN’s and TAM’s short-haul fleets is an important element in the process of integrating the businesses of the two airlines. Only in the case of LAN Colombia do six Boeing 737- 700s and ten Dash planes remain in service, all of which are operating leases were received by LAN as a result of its acquisition of Colombia’s Aires (in November 2010). Over the medium term, they will gradually be taken out of service and mostly replaced by Airbus A320 planes. LATAM Airlines Group’s strategic plan for the renewal of its short-haul fleet envisages the incorporation of larger models such as A320s and A321s whose greater passenger capacity will allow it to serve the densest routes efficiently and the growth of both domestic and regional markets. In this same context, the withdrawal from service of Airbus A318s, the smallest model in the Company’s A320 family fleet, will be completed in 2013, as well as the withdrawal of the Dash 8-Q400s, which are currently being checked prior to their return. In the case of long-haul planes, one of the milestones of 2012 was the incorporation of the first three Boeing 787-8 Dreamliners out of a total order for 32 planes of this model which will arrive over the next eight years. As a result, LATAM Airlines Group became the first airline in the Americas and only the fourth in the world to take delivery of these latest-generation planes. Considered the new “ecological aircraft”, the Boeing 787 is between 12% and 15% more efficient in fuel consumption, representing an important competitive advantage in terms of costs as well as making a positive contribution to the environment by reducing the CO2 emissions of flights. In 2012, the Company also incorporated nine new Boeing 767-300s, all equipped for the new long-haul configuration - complying with the same standards established for the modern Boeing 787 Dreamliners - and, as of December 2012, had 41 planes of this model in operation. During 2012, the Company also started to reconfigure the cabins of some of its Boeing 767s, in order to optimize the distribution of passengers, improve the commercial mix on Our CompanyANNUAL REPORT20125 1 the short-haul routes for which these aircraft are used and provide passengers with a better travel experience. The Company’s fleet also includes 27 Airbus A330 and A340 planes, the latter of which it prefers for its ultra-long-haul routes. The future fleet plan of LATAM Airlines Group envisages orders for 187 planes, including the new Airbus A350s, the first of which are expected to be delivered in 2016. The plan represents a total investment of approximately US$13,000 million through to 2018. In the case of Boeing 777s, of which the Company currently has eight and expects to receive a further four in 2013 and 2014, it has launched a process of cabin reevaluation so as to offer a homogenous product, configured to service standards that are similar in both LAN and TAM. As of December 2012, the Company’s cargo fleet comprised twelve Boeing 767Fs and four Boeing 777Fs. The latter are the most modern cargo planes of their type in the industry. MAITENANCE In this field, one of the milestones of 2012 was the certification of TAM MRO - the Maintenance, Repair and Overhaul business unit of TAM S.A. - by Brazil’s National Civil Aviation Agency (ANAC) for the provision of aircraft maintenance services such as the installation and remodeling of engines, propellers and undercarriages and corrective measures. TAM MRO is authorized to attend Airbus planes (A318 / A319 / A320 / A321 / A330), Boeing 767s, Fokker 100s and ATRs (ATR-42 and ATR-72) with Brazilian registration. The unit is currently working to expand its services to external clients. Its goal is to increase revenues from services to third parties by 20% each year through to 2016. At present, they account for 18% of its total revenues and the aim is to reach over 40% by 2016. Our CompanyANNUAL REPORT20126 1 A320 FAMILY A318-100 A319-100 A320-200 A321-200 Length: 31.8 mts Width: 34.1 mts Seats: 126 Cruising Speed: 850 km/h Maximun weight at take-off: 63,000 kg Length: 33.8 mts Width: 34.1 mts Seats: 144 Cruising Speed: 850 km/h Maximun weight at take-off: 70,000 kg Length: 37.6 mts Width: 34.1 mts Seats: 168 - 174 Cruising Speed: 850 km/h Maximun weight at take-off: 77,000 kg Length: 44.51 mts Width: 34.1 mts Seats: 220 Cruising Speed: 850 km/h Maximun weight at take-off: 89,000 kg Our CompanyANNUAL REPORT20127 1 A330-200 A340 FAMILY A340-300 A340-500 Length: 58.8 mts Width: 60.3 mts Seats: 223 Cruising Speed: 870 km/h Maximun weight at take-off: 230,000 kg Length: 63.7 mts Width: 60.3 mts Seats: 260 Cruising Speed: 896 km/h Maximun weight at take-off: 275,000 kg Length: 67.9 mts Width: 63.45 mts Seats: 267 Cruising Speed: 907 km/h Maximun weight at take-off: 372,000 kg Our CompanyANNUAL REPORT20128 1 BOEING 737-700 BOEING 767-300 BOEING 777-300 BOEING 787-8 Length: 39.5 mts Width: 35.7 mts Seats: 148 Cruising Speed: 828 km/h Maximun weight at take-off: 70,000 kg Length: 54.2 mts Width: 47.6 mts Seats: 221 - 238 - 205 Cruising Speed: 869 km/h Maximun weight at take-off: 184,611 kg Length: 73.9 mts Width: 64.8 mts Seats: 362 Cruising Speed: 896 km/h Maximun weight at take-off: 347,800 kg Length: 56.69 mts Width: 60.0 mts Seats: 247 Cruising Speed: 913 km/h Maximun weight at take-off: 227,930 kg Our CompanyANNUAL REPORT20129 1 BOEING 767-300F BOEING 777-200F DASH 8-200 DASH 8-Q400 Length: 54.2 mts Width: 47.6 mts Cargo Volume: 438.1 m3 Cruising Speed: 869 km/h Maximun weight at take-off: 186,880 kg Length: 63.7 mts Width: 64.8 mts Cargo Volume: 652.7 m3 Cruising Speed: 896 km/h Maximun weight at take-off: 347,450 kg Length: 22.25 mts Width: 25.89 mts Seats: 37 Cruising Speed: 500 km/h Maximun weight at take-off: 16,470 kg Length: 32.81 mts Width: 28.4 mts Seats: 78 Cruising Speed: 667 km/h Maximun weight at take-off: 29,260 kg Our CompanyANNUAL REPORT20120 2 OUR COMPANY / DESTINATIONS LATAM NETWORK Our CompanyANNUAL REPORT20121 2 PASSENGER AND CARGO Passenger and Cargo (Chile) Passenger and Cargo (Perú) Our CompanyANNUAL REPORT20122 2 Passenger and Cargo (Brazil) Passenger and Cargo (Ecuador) Our CompanyANNUAL REPORT20123 2 Passenger and Cargo (Argentina) Passenger and Cargo (Colombia) Our CompanyANNUAL REPORT20124 2 Passenger and Cargo (International) Only Cargo and Codeshare Our CompanyANNUAL REPORT20125 2 OUR COMPANY / OUR PEOPLE The formation of LATAM Airlines Group is the fulfillment of a great dream and has been possible thanks to the effort and commitment of all our people. 2012 has been the most significant year for all the Group’s employees who are the protagonists of the important challenges implicit in the integration of LAN and TAM, their growth and cross-cultural interchange. therefore, fundamental For both airlines, the development of their people is, that their growth plan for the future also means new opportunities for employees and, at the same time, boosts economic development and employment in the countries served by the Group. for ensuring As of December 2012, LATAM Airlines Group had 53,599 employees of 57 different nationalities across the 20 countries where it has its own personnel. In 2012, in line with its focus on the development of its people, 35,478 LATAM Airlines Group employees with a permanent contract, equivalent to 64% of the workforce, received a total of 1,567,604 hours of training. and IT were working in an integrated way. This process implied that, across the Group, 7,810 employees changed jobs within the group while many of them had the opportunity to move to another country. A high-performance, committed and customer- focused human team is one of the transversal objectives of LATAM Airlines Group. This is reflected in the joint work it has undertaken to homologate some policies and the modifications both companies have made in their organizational structures. As of end-2012, the areas of Human Resources, Cargo, International Business, Finance, Planning, Auditing Work has also taken place to redesign both companies’ executive posts in order to ensure their equivalence. This is key for the formation and cohesion of LAN’s and TAM’s work teams. To this end, the competencies required for all members of the organization were identified, creating the new Model of Competencies for LATAM Our CompanyANNUAL REPORT20126 2 Airlines Group. Through the development of a series of methods and techniques to strengthen those skills that are key for achieving a performance of excellence, this helps to identify the training needs to be addressed by the Company. The challenge of creating this holding of airlines is rich in lessons and opportunities for all our people who are vital for the construction of this story which is only just beginning. At present, we are working to design a single model of Culture for LATAM Airlines Group which will, without doubt, be an important step in creating the identity of the new Company. LATAM employees by country Staffing levels Our CompanyANNUAL REPORT20127 2 OUR COMPANY / COMPANY INFORMATION LATAM AIRLINES GROUP Chilean Tax N° (RUT): 89.862.200-2 Tel: From outside US (651) 453-2128 Tel: Global Invest Direct (800) 428-4237 E-mail: jpmorgan.adr@wellsfargo.com CUSTODIAN BANK ADRs Banco Santander Chile Bandera 140, Santiago Custody Department Tel: (56) (2) 2320 3320 Fax: (56) (2) 2320 3560 CUSTODIAN/DEPOSITARY BANK BDRs Itaú Corretora de Valores S.A. Rua Ururaí, 111 – Prédio II – Piso Térreo Tatuapé – São Paulo/SP CEP: 03084-010 Attention: Unidade Dedicada Produto ADR/BDR Tel.: (55) (11) 2797 3411 Fax.: (55) (11) 2797 3413 E-mail: dr.itau@itau-unibanco.com.br EXTERNAL AUDITORS PricewaterhouseCoopers Avenida Andrés Bello 2711, 5th Floor Santiago, Chile Tel: (56) (2) 2940 0000 WEBSITES Complete information about LATAM Airlines: www.latamairlinesgroup.net www.lan.com www.tam.com.br CORPORATE HEADQUARTERS Avenida Presidente Riesco 5711, 19th Floor Las Condes, Santiago, Chile Tel: (56) (2) 2565 2525 Fax: (56) (2) 2565 8764 MAINTENANCE CENTER Arturo Merino Benítez Airport Santiago, Chile Tel: (56) (2) 2677 4500 Fax: (56) (2) 2677 4505 TICKER SYMBOL LAN - Santiago Stock Exchange LFL - New York Stock Exchange LATM11 - Sao Paulo S.E. FINANCIAL INFORMATION Investor Relations LATAM Airlines Group S.A. Avenida Presidente Riesco 5711, 20th Floor Las Condes, Santiago, Chile Tel: (56) (2) 2565 8785 E-mail: investor.relations@lan.com SHAREHOLDER ENQUIRIES Depósito Central de Valores Huérfanos 770, 22nd Floor Santiago, Chile E-mail: atencionaccionistas@dcv.cl Tel: (56) (2) 2393 9003 Fax: (56) (2) 2393 9315 DEPOSITARY BANK ADRs JPMorgan Chase Bank, N.A. P.O. Box 64504 St. Paul, MN 55164-0504 Tel: General (800) 990-1135 Our CompanyANNUAL REPORT2012 CORPORATE GOVERNANCE LATAM AIRLINES GROUP S.A. Pedro Esposti TAM Brazil Nora Sánchez LAN Colombia 9 2 CORPORATE GOVERNANCE / BOARD OF DIRECTORS MAURICIO ROLIM AMARO MARÍA CLAUDIA AMARO Mr. Mauricio Rolim Amaro, a business administrator, has been a director of LATAM Airlines Group since 28 June 2012 and chairman of its board of directors since 3 August 2012. He has held different positions in TAM Group and was also a professional pilot with TAM Linhas Aéreas S.A. and TAM Aviação Executiva S.A. He has been a member of the Council of Administration of TAM S.A. since 2004, serving as its vice-chairman as from April 2007. He is also executive director of TAM Empreendimentos e Participações S.A. and chairs the Councils of Administration of Multiplus S.A. and TAM Aviação Executiva e Taxi Aéreo S.A. Mr. Amaro is a member of the Strategy, Leadership, Finance, Brand, Product and Frequent Flyer Program Committees of LATAM Airlines Group. Mrs. María Claudia Amaro, who holds a degree in business administration and marketing, has been a director of LATAM Airlines Group since 28 June 2012. She has served as director of marketing at TAM Linhas Aéreas and, since September 2003 has been a member of the Council of Administration of TAM S.A., chairing its Board of Directors since April 2007. She is also executive director of TAM Empreendimentos e Participações S.A. and forms part of the Councils of Administration of Multiplus S.A. and TAM Aviação Executiva e Taxi Aéreo S.A. Mrs. Amaro is a member of the Strategy, Leadership, Brand, Product and Frequent Flyer Program Committees of LATAM Airlines Group. Corporate GovernanceANNUAL REPORT20120 3 RAMÓN EBLEN KADIS CARLOS HELLER SOLARI Mr. Ramón Eblen Kadis an economist and business administrator, has been a director of LATAM Airlines Group since June 1994. He has served as chairman of Comercial Los Lagos Ltda., Inversiones Santa Blanca S.A. and TJC Chile S.A. Mr. Eblen is a member of the Directors’ Committee and of the Leadership, Brand, Product and Frequent Flyer Program Committees of LATAM Airlines Group. Mr. Carlos Heller Solari, an agricultural engineer, joined the board of LATAM Airlines Group in May 2010. He has great experience in the retail, transport and agricultural sectors. He currently serves as vice- chairman of Bethia (an investment company and owner of Axxion) and as chairman of Axxion S.A., Megavisión, Club Hípico de Santiago, Sotraser S.A. and Agrícola Ancali. In addition, he is a member of the boards of SACI Falabella S.A., Falabella Retail S.A., Sodimac S.A. and Titanium S.A. and is the main shareholder and vice-chairman of Azul Azul. Corporate GovernanceANNUAL REPORT20121 3 JUAN JOSÉ CUETO PLAZA JOSÉ MARÍA EYZAGUIRRE BAEZA Mr. Juan José Cueto Plaza, an economist and business administrator, has been a director of LATAM Airlines Group since 1994. He currently serves as executive vice-president of Inversiones Costa Verde S.A., a position he has held since 1990, and is a member of the boards of Forestal Copihue S.A. and Minera Michilla S.A. He also previously served as director of other companies including Consorcio Maderero S.A. Mr. Cueto is a member of the Finance, Brand, Product and Frequent Flyer Program Committees of LATAM Airlines Group. Mr. José María Eyzaguirre Baeza, a lawyer, joined the board of LATAM Airlines Group in September 2012. He has been a partner in the Claro y Cía. law firm since 1993 and a director of Walmart Chile S.A. and Sociedad Química y Minera de Chile S.A. since 2010 and 2001, respectively. Since 2010, he has also been a director of Komax S.A., the company which represents in Chile brands that include Polo Ralph Lauren, Brooks Brothers, GAP, Banana Republic and The North Face. He previously served on the boards of other companies that include Embotelladora Andina S.A. and AES Gener S.A. Corporate GovernanceANNUAL REPORT20122 3 GERARDO JOFRÉ MIRANDA GEORGES DE BOURGUIGNON ARNDT Mr. Gerardo Jofré Miranda, an economist and business administrator, joined the board of LATAM Airlines Group in May 2010. He is chairman of the board of the National Copper Corporation of Chile (Codelco) and a director Air Life Chile S.A. as well as president of the Fundación Saber Más and a member of the investment council of Santander real estate funds. From 2005 to 2009, Mr. Jofré was a director of Endesa Chile S.A., Viña San Pedro Tarapacá S.A., D&S S.A., Construmart S.A., Inmobiliaria Titanium S.A. and Inmobiliaria Parque del Sendero S.A. Between 2004 and 2005, he was insurance director for the Americas at Spain’s Grupo Santander. From 1989 to 2004, he worked for Grupo Santander in Chile as group vice- president and as CEO of different companies in the group. Mr. Jofré chairs the Directors’ Committee and the Finance Committee and is a member of the Strategy and Leadership Committees of LATAM Airlines Group. Mr. Georges de Bourguignon holds an economic degree from the Catholic University of Chile and an MBA from Harvard University. He was elected to the board of LATAM Airlines Group in September 2012. Mr. de Bourguignon is a co-founding partner and executive director of the Asset Chile S.A. investment bank. He is currently also a director of Sal Lobos, the Chilean subsidiary of Germany’s K+S group and vice-chairman of the board of Chile’s La Polar retail company. Before founding Asset Chile, he served as vice-president of Citibank S.A. in Chile and director of Intergénesis Administradora de Fondos de Inversión as well as an economics lecturer at the Catholic University of Chile. Mr. de Bourguignon is a member of the Directors’ Committee of LATAM Airlines Group. Corporate GovernanceANNUAL REPORT20123 3 FRANCISCO LUZÓN LÓPEZ Mr. Francisco Luzón López, an economist, was elected to the board of LATAM Airlines Group in September 2012. He is currently an advisor to the Inter-American Development Bank (IDB), a visiting leader at the China Europe International Business School (CEIBS) in Shanghai and chairman of the Council of the ICADE Business School (Madrid). From 1999 to 2012, Mr. Luzón served as executive vice-president for Latin America at Banco Santander and, during this period, was also international vice-president of Universia S.A. He was previously chairman and councilor of Grupo Bancario Argentaria and was appointed as councilor and director general of both Banco Vizcaya and Grupo Bancario BBV. During his career, Mr. Luzón has also served on the administrative councils of companies that include the global textile company Inditex-Zara. Mr. Luzón is a member of the Strategy and Finance Committees of LATAM Airlines Group. Corporate GovernanceANNUAL REPORT20124 3 CORPORATE GOVERNANCE / SENIOR MANAGEMENT ENRIQUE CUETO IGNACIO CUETO Mr. Enrique Cueto Plaza is the chief executive officer of LATAM Airlines Group, a post he has held since 1994. From 1983 to 1993, he served as general manager of Fast Air, a Chilean cargo airline. With 30 years’ experience in the airline industry, Mr. Cueto has wide knowledge of both the commercial and operational management of passenger and cargo airlines. He is an active member of the governing boards of the oneworld® alliance and the International Air Transport Association (IATA). He is also a member of the boards of the Chilean Manufacturers’ Association (SOFOFA) and the Endeavor foundation, an organization that promotes entrepreneurship in Chile. Mr. Ignacio Cueto Plaza is the chief executive officer of LAN, a post he has held since 2005. Mr. Cueto began his career in the airline industry in 1985 at Fast Air. Between 1985 and 1993, he held posts that included service manager, sales director and vice-president for sales and marketing. Between 1993 and 1995, he served as general manager of Fast Air and, from 1995 to 1998, as president of LAN Cargo Group. Mr. Cueto was also a director of Ladeco between 1994 and 1997 and of LAN Airlines between 1995 and 1997. In 1999, he became chief executive officer for passengers at LAN Airlines, a post he held until taking up his current position. Corporate GovernanceANNUAL REPORT20125 3 MARCO BOLOGNA ARMANDO VALDIVIESO Mr. Marco Antonio Bologna is chief executive officer of TAM, a post he has held since April 2010. Mr. Bologna joined TAM in March 2001 as vice-president for finance and administration and director of investor relations. From 2004 to 2007, he served as president of TAM Linhas Aéreas and, in March 2009, was appointed as president of TAM Aviação Executiva e Taxi Aéreo S.A. Since February 2012, he has also been president of TAM Linhas Aéreas. Mr. Bologna has extensive experience in the airline industry in addition to having worked in the financial sector for more than 20 years. Mr. Armando Valdivieso Montes was appointed as LATAM Airlines Group’s senior vice-president for passenger business in Spanish-speaking countries in 2012 following the integration of LAN and TAM. Since 2006, he had served as LAN’s chief executive officer for passengers. From 1997 to 2005, he served as chief executive officer for cargo at LAN Airlines and, from 1995 to 1997, as general manager of Fast Air. Between 1991 and 1994, he served as Fast Air’s vice-president in the United States, based in Miami. Mr. Valdivieso is a civil engineer and holds an Executive MBA from Harvard University. Corporate GovernanceANNUAL REPORT20126 3 CRISTIÁN URETA DAMIAN SCOKIN Mr. Cristián Ureta is LATAM Airlines Group’s chief executive officer for cargo, a post he has held since 2005. He holds an engineering degree from the Catholic University of Chile and is a graduate of Stanford University’s Executive Specialization Program. Between 2002 and 2005, Mr. Ureta served as LAN Cargo’s vice-president for production and, from 1998 to 2002, as its vice-president for planning and development. He was previously director general and commercial director of MAS Air and manager for services at Fast Air. Mr. Damian Scokin is chief executive officer for international passenger business. He was previously chief executive officer of LAN Argentina where he was responsible for this new subsidiary’s start of operations. Before joining LAN, Mr. Scokin developed a successful career as a consultant at McKinsey & Company where, for 11 years, he worked on different projects in the United States, the United Kingdom, Chile, Brazil, Perú and Argentina. In 2000, he became a partner in the firm and, in 2003, location manager for its office in Buenos Aires. Mr. Scokin holds an undergraduate degree in economics and industrial engineering and an MBA from Harvard University. Corporate GovernanceANNUAL REPORT20127 3 ALEJANDRO DE LA FUENTE ROBERTO ALVO Mr. Alejandro de la Fuente Goic is the chief financial officer of LATAM Airlines Group. He joined LAN Airlines in April 1995 after serving as administration and finance manager at Chiquita Frupac Ltda., a subsidiary of Chiquita Brands Inc. Mr. de la Fuente is an agricultural engineer who holds a master’s degree in economics and agrarian economy from the Catholic University of Chile and an MBA from the Adolfo Ibáñez University. Mr. Roberto Alvo Milosawlewitsch is LATAM Airlines Group’s vice-president for planning, management and research, a post to which he was appointed in August 2008. He joined LAN Airlines in November 2001 and, before taking up his present post, served as director of administration and finance at LAN Argentina, manager of development and financial planning and deputy chief financial officer at LAN Airlines. Before joining the company, Mr. Alvo held various posts at Sociedad Química y Minera de Chile S.A., a leading Chilean non-metallic mining company. He is a civil engineer and holds an MBA from the IMD in Lausanne, Switzerland. Corporate GovernanceANNUAL REPORT20128 3 EMILIO DEL REAL Mr. Emilio del Real Sota has been LATAM Airlines Group’s vice-president for human resources since August 2005. He holds a psychology degree from the Gabriela Mistral University. Between 2003 and 2005, he served as manager for human resources at D&S, a Chilean retail company. Between 1997 and 2003, he held various posts at Unilever, including human resource manager at Lever Chile, manager of executive development for customer service in Latin America and manager of training and recruitment. Corporate GovernanceANNUAL REPORT20129 3 2012 In 2012, the Company paid its main executives (including the levels of vice-president, CEO and director) total remunerations of US$15.8 million, plus a further US$6.8 million in incentives. The company did not pay compensations to main executives. Corporate GovernanceANNUAL REPORT20120 4 COMPENSATION PLAN On 31 March 2012, the period for subscribing and paying the stock options available under a Compensation Plan for employees of the Company and its subsidiaries expired. In accordance with the decision of the Extraordinary Shareholders’ Meeting of 5 April 2007, a total of 2,209,091 shares were allocated to this Compensation Plan of which 91 were not subscribed and paid. The Extraordinary Shareholders’ Meeting of 21 December 2011 agreed a new Compensation Plan which has the following general characteristics: 1. A total of 4,800,000 shares were allocated to the Plan. 2. The options assigned to each employee will accrue in stages on the following three occasions: (1) 30% on 21 December 2014, (2) 30% on 21 December 2015, and 3) 40% on 21 June 2016, subject to the employee remaining with the Company. 3. Once the options have accrued in the stages indicated above, employees may exercise them totally or partially in which case they must subscribe and pay the respective options at the moment of subscribing them. If exercised partially, this may not be for less than 10% of the total options allocated to the employee. 4. 5. The period in which employees may exercise the options, once accrued, will expire on 21 December 2016. The price to be paid for each share allocated to the Compensation Plan, if the respective options are exercised, will be U$23.19. As from the date at which the price was set, this price expressed in US dollars will be adjusted for the variation in the Consumer Price Index (CPI), published monthly by the US Department of Labor, between the date of setting the price and the date of subscribing and paying the options. The options will be paid in Chilean pesos at the exchange rate for the Observed Dollar published in the Official Gazette at the same date on which they are subscribed and paid. Corporate GovernanceANNUAL REPORT20121 4 CORPORATE GOVERNANCE / CORPORATE GOVERNANCE PRACTICES LATAM Airlines Group S.A. (“LATAM”) is a listed joint stock company registered with the Superintendencia de Valores y Seguros (SVS), Chile’s stock market regulator, under Inscription N° 306. Its shares trade on the Santiago Stock Exchange, Chile’s Electronic Stock Exchange and the Valparaíso Stock Exchange as well as on the New York Stock Exchange (NYSE) as American Depositary Receipts (ADRs) and on Brazil’s Stock, Commodity and Futures Exchange (BM&FBOVESPA S.A.) in the form of Brazilian Depositary Receipts (BDRs). LATAM Airlines Group’s corporate governance practices are regulated by Chile’s Securities Market Law (Nº 18.045) and its Corporations Law (Nº 18.046), including the latter’s associated norms, as well as other norms issued by the SVS. In addition, it is subject to the legislation and regulation of the United States and that country’s Securities and Exchange Commission (SEC) as they apply to ADRs and the laws and regulation of the Federal Republic of Brazil and the Comissão de Valores Mobiliários (CVM), the country’s stock market regulator, as they apply to BDRs. The corporate governance practices of LATAM Airlines Group are subject to constant review in order to ensure that its internal self-regulation processes are totally aligned with the regulation in force and its own values. LATAM Airlines Group’s decisions and commercial activities are underpinned by the ethical principles established in LAN’s Code of Conduct and TAM’s Code of Ethics. STRUCTURE As of 31 December 2012, LATAM Airlines Group had a total of 1,660 registered shareholders. The Company is controlled by the Cueto group, represented by Costa Verde Aeronáutica S.A., Inversiones Nueva Costa Verde Aeronáutica Ltda. and Costa Verde Aeronáutica SpA. As of end-2012, these companies together held a 25.91% stake while the remainder corresponded to different institutional investors, companies and individuals. As of 31 December 2012, 6.16% of the Company was held in the form of ADRs and 1.36% as BDRs. The main bodies responsible for LATAM Airlines Group’s corporate governance are its Board of Directors and the Directors’ Committee (which also fulfills the functions of the Audit Committee required under the Sarbanes-Oxley Act of the United States), together with the Strategy, Finance, Leadership and Product, Brand and Frequent Flyer Program Subcommittees created after the merger between LAN and TAM. The principal functions of these bodies are set out below. Corporate GovernanceANNUAL REPORT20122 4 BOARD OF DIRECTORS OF LATAM AIRLINES GROUP These include: LATAM Airlines Group’s Board of Directors has nine members and is the body responsible for analyzing and defining the Company’s strategic vision, thereby playing a fundamental role in its corporate governance. All the Board seats come up for election every two years and, under LATAM Airlines Group’s statutes, directors are elected according to the total number of votes they receive. Each shareholder has one vote per share and can use all his or her votes to support one candidate or divide them among any number of candidates. This arrangement ensures that a shareholder with more than a 10% stake can elect at least one director. The present Board of Directors was elected by the Extraordinary Shareholders’ Meeting which took place on 4 September 2012. LATAM Airlines Group’s Board holds ordinary monthly meetings and extraordinary meetings whenever the Company’s affairs so require. Directors’ fees must be approved by vote at the Ordinary Shareholders’ Meeting. The Directors’ Committee usually meets monthly and its functions and powers are established by the applicable legislation and regulation. DIRECTOR’S COMMITTEE OF LATAM AIRLINES GROUP Under Chilean law, listed joint stock companies must appoint at least one independent director and a Directors’ Committee when they have a market capitalization of at least 1,500,000 unidades de fomento (an inflation-indexed currency unit) and at least 12.5% of the voting shares are held by shareholders who individually control or possess less than 10% of these shares. Three of the nine Board members form a Directors’ Committee, which fulfills both the functions required under Chile’s Corporations Law and those of the Audit Committee required under the Sarbanes-Oxley Act of the United States and the corresponding SEC norms. • • • • • to examine the reports of LATAM Airlines Group’s external auditors, general balance sheets and other financial statements that LATAM Airlines Group’s administrators provide to shareholders and for expressing an opinion about these reports prior to their presentation for approval by shareholders; to put to the Board proposals as to the external auditors and risk rating agencies to be used; to examine internal control reports and any related complaints; to examine and report on all matters regarding related-party transactions; to examine the pay scale of the Company’s senior management. The requirements for directors’ independence are set out in Chile’s Corporations Law and its subsequent modifications under Law Nº 19,705 on the relationship between directors and a company’s controlling shareholders. A director is considered independent when he or she does not, in general, have ties, interests or economic, professional, credit or commercial dependence of a significant nature or size with or on the company, the other companies in the group of which it forms part, its controller or senior management or a family relationship with the latter nor any of the other types of ties specified in Law Nº 18,046. Under US regulation, it is necessary to have an Audit Committee, comprising at least three Board members, that fulfills the independence requirements established under Rule 10A of the Exchange Act. Given the similarity of the functions of the Directors’ Committee and the Audit Committee, LATAM Airlines Group’s Directors’ Committee acts as an Audit Committee under Rule 10A of the Exchange Act. The Directors’ and Audit Committee has the functions established in Article 50 bis of Chile’s Corporations Law (Nº 18,046) and the other applicable regulation. As of 31 December 2012, all the members of the Directors’ Committee, who also act as part of the Audit Committee, were independent directors as Corporate GovernanceANNUAL REPORT20123 4 defined under Rule 10A of the Exchange Act. At that date, its members were Messrs. Ramón Eblen Kadis, Georges de Bourguignon Arndt and Juan Gerardo Jofré Miranda (chairman of the Committee). For the purposes of Chile’s Corporations Law (Nº 18,046), Ramón Eblen Kadis is not considered an independent director. In accordance with Article 50 bis of Law Nº 18,046, the matters examined by the Directors’ Committee during 2012 are set out below. 1. Ordinary Session N°120 31/1/12: - Review of Financial Statements at 31 December 2011 - Related-party transaction - Progress of 2011 audit plan - Review of Financial Statements at 31 March 2012 7. Ordinary Session N°124 29/5/12: - Presentation by Revenue Accounting - Presentation on credit risk - Approval of fees of PWC 8. Ordinary Session N°125 26/6/12: - LAN 2012 audit plan, progress and methodological aspects - Progress on integration of audit function with TAM - Approval of fees of PWC 9. Ordinary Session N°126 3/8/12: - TAM Corporate Audit 2. Extraordinary Session N°13 14/2/12: 10. Extraordinary Session N°15 10/08/12: - Review of Financial Statements at 31 December 2011 - Letters about fees from external auditors - Review of Financial Statements at 30 June 2012 - Approval of fees of PWC 3. Ordinary Session N°121 6/3/12: 11. Ordinary Session N°127 25/09/12 - Progress of 2011 audit plan - Compensation plans for employees of the Company and its subsidiaries 4. Ordinary Session N°122 27/3/12: - Analysis of an aspect of the “safety” issue - Annual report on the Committee’s activities - Proposal for external auditors and private risk rating agencies for 2012 - Installation and election of Committee chairman - Information about related-party transactions by subsidiaries: i. Sale of property at Avda. Presidente Riesco 5537, Las Condes, Santiago, Chile; ii. Advance ticket purchase operation between TAM Linhas Aéreas S.A. and Multiplus S.A. 5. Ordinary Session N°123 24/4/12: - Close of 2011 audit plan and 2012 plan - Approval of fees of PWC - Employee compensation plan 12. Ordinary Session N°128 30/10/12: 6. Extraordinary Session N°14 11/5/12: - Formalities of meeting’s convening - Installation and election of Committee chairman - SOX 2012 project - Information about related-party transaction by subsidiary Corporate GovernanceANNUAL REPORT2012 4 4 - Progress of 2012 audit plan - Other business 13. Extraordinary Session N°16 12/11/12: - Review of Financial Statements at 30 September 2012 - Approval of fees of PWC - Other business 14. Ordinary Session N°129 21/12/12: - Coordination of matters covered in previous minutes - Progress of 2012 audit plan - Letter from external auditors or contingency plan for the CEO of LATAM and evaluation of the performance of the CEO of LATAM. The Finance Subcommittee will focus on financial policies and strategy, capital structure, control of compliance policies, tax optimization strategy and the quality and reliability of financial information. Finally, the Brand, Product and Frequent Flyer Program Subcommittee will focus on brand strategies and brand construction initiatives for corporate brands and those of the principal business units, the principal characteristics of products and services for each of the principal business units, the strategy of the Frequent Flyer Program and its key characteristics and regular auditing of the brand’s performance. SUBCOMMITTEES OF THE BOARD OF DIRECTORS OF LATAM AIRLINES GROUP In accordance with the shareholders’ agreement of 25 January 2012 between LATAM Airlines Group S.A. (previously LAN Airlines S.A.) and TEP Chile S.A., the Ordinary Board Session of 3 August 2012 established the following four subcommittees to review, discuss and make recommendations to the Board about the issues entailed in their respective areas of responsibility: (i) Strategy Subcommittee, (ii) Finance Subcommittee, and (iv) Brand, Product and Frequent Flyer Program Subcommittee. In accordance with the said shareholders’ agreement, each subcommittee will comprise two or more directors of LATAM Airlines Group and at least one of their members must be a director elected by TEP Chile S.A. Subcommittee, Leadership (iii) The Strategy Subcommittee will focus on corporate strategy, current strategic affairs and three-year plans, the budgets of the main business units and functional areas and high-level strategy reviews. The Leadership Subcommittee will focus on areas that include group culture, high-level organizational structure, appointment of the executive vice- president of LATAM Airlines Group (henceforth, “CEO of LATAM”) and those who report to this person, the philosophy of corporate remunerations, structures and levels of remunerations and objectives for the CEO of LATAM and other key staff, succession RELATED-PARTY TRANSACTIONS Under Chile’s Corporations Law, a listed company’s operations with a related party must take place in market conditions and comply with certain authorization and disclosure requirements that are different from those applying to a non-listed company. This applies to listed companies and their subsidiaries. its subsidiaries, LATAM Airlines Group has carried out different transactions with including entities owned or controlled by some of its majority shareholders. In the normal course of the Company’s business, different types of services have been provided to or received from related companies, including the rental and exchange of aircraft, cargo transport and booking services. LATAM Airlines Group’s policy is not to carry out transactions with or for the benefit of any shareholder or Board member or with any entity controlled by these persons or in which they have a significant economic interest, except when the transaction is related to the Company and the price and other terms are at least as favorable for the Company as those which could be obtained from a third party under market conditions. These transactions are summarized in the audited consolidated financial statements for the year ending on 31 December 2012. Corporate GovernanceANNUAL REPORT20125 4 Finally, for the purposes of letter b) of the last point of Article 147 of Law No. 18,046 on Corporations, LATAM Airlines Group has a general habitual operations policy which was approved by its Board of Directors in its Session of 29 December 2009 and reported as material news to the Superintendencia de Valores y Seguros on that same date. The operations indicated in this general habitual operations policy may be carried out without the requirements envisaged in the said Article 147. PRINCIPLES OF GOOD CORPORATE GOVERNANCE LATAM Airlines Group’s good corporate governance is the result of the interaction of different individuals and stakeholders. Although all our employees share responsibility for compliance with the high standards of ethics and adherence to regulation established by LATAM Airlines Group’s Board of Directors, it is the Board, the Directors’ Committee and senior management who are primarily responsible for LATAM Airlines Group’s good corporate governance. In line with the above, LATAM Airlines Group is committed to transparency and compliance with the ethical and regulatory standards established for this purpose by its Board of Directors. PILLARS OF LATAM AIRLINES GROUP’S CORPORATE GOVERNANCE the responsibilities of Notwithstanding the Company’s Board of Directors and its Directors’ Committee, LATAM Airlines Group’s management has also taken a number of measures to ensure due corporate governance. These include principally: 1. LAN’s Code of Conduct and TAM’s Code of Ethics which seek to ensure that all employees adhere to the highest standards of ethics, transparency and compliance with regulation required by LATAM Airlines Group. • Ethics Lines of LAN ethicspoint.com) and TAM eticatam.com.br) which (www.lan. (www. provide employees with a direct and private channel through which to report any concerns in the knowledge that these will be properly processed or investigated without any risk of reprisal. 2. Code of Ethics for Senior Financial Executives. This fosters honest and ethical conduct in the disclosure of financial information, compliance with regulation and avoidance of conflicts of interest. 3. Manual for Management of Market-Sensitive Information. This is required by the SVS and, since Law Nº 20,382 on Corporate Governance came into force, also by Chilean securities market legislation. LATAM Airlines Group, however, seeks to go further than these norms and regulates the criteria for disclosure of operations, periods of voluntary abstinence from the purchase and sale of the Company’s shares, mechanisms for continuous disclosure of market-sensitive and mechanisms for the protection of confidential information by the Company’s employees and executives. information 4. Compliance Program under which LATAM’s Compliance Area, which forms part of the Legal Vice-Presidency of LATAM Airlines Group, in coordination with and under the supervision of the Board of Directors and its Directors’ Committee, supervises compliance with the laws and regulation applicable to LATAM Airlines Group’s business and activities in the different countries in which it operates. Corporate GovernanceANNUAL REPORT20126 4 CORPORATE GOVERNANCE / OWNERSHIP STRUCTURE AND PRINCIPAL SHAREHOLDERS Corporate GovernanceANNUAL REPORT20127 4 PRINCIPAL CONTROLLING GROUPS 2012 2011 Corporate GovernanceANNUAL REPORT20128 4 DIVIDENDS The Company’s policy is to pay the minimum dividends required by law or, in other words, 30% of profits calculated in accordance with the regulation in force. This does not, however, preclude the distribution of dividends above this obligatory minimum level depending on the particular events and circumstances that may arise during the year. The dividends corresponding to 2010 and 2011 represent 50% of the distributable profits of the respective year. Distributable profits in 2010, 2011 and 2012 for the payment of dividends corresponded to the annual earnings attributable to holders of a stake in the controller’s net equity while. In 2012 this amount corresponded to the net profit reported in accordance with the International Financial Reporting Standards (IFRS). The table below shows the dividend per share paid during the past three years. Corporate GovernanceANNUAL REPORT20129 4 CORPORATE GOVERNANCE / FINANCIAL POLICY The Directorate of Corporate Finances is responsible for managing the Company’s Financial Policy. This Policy enables the Company to respond effectively to external conditions for the operation of its business and, in this way, maintain a stable flow of funds to ensure the continuity of its operations. The Finance Committee, formed by the executive vice-president and company directors, meets periodically to review and approve matters not regulated by the Financial Policy. • counterparty Reduce through diversification of and caps on investments and operations with counterparties. risk LATAM Airlines Group’s Financial Policy seeks to: • Ensure a minimum level of liquidity for the operation. Preserve and maintain cash levels adequate for the needs of the operation and its growth. Maintain an adequate level of lines of credit with local and overseas banks for response to contingencies. • Maintain an optimum borrowing level and profile that are reasonably proportionate to the growth of operations and take into account the objective of minimizing financing costs. • • Achieve a return on cash surpluses through financial investments which guarantee a level of risk and liquidity consistent with the investment policy. Reduce the impact on the Company’s net margin of market risks such as variations in exchange rates, the price of fuel and interest rates. • Maintain visibility of the Company’s projected long-term financial situation so as to anticipate situations such as failure to comply with covenants, low liquidity and a deterioration of the financial ratios established in undertakings with ratings agencies, etc. The Company’s Financial Policy establishes guidelines and restrictions for managing operations related to Liquidity and Investment, Financing Activities and Management of Financial Risk. LIQUIDITY AND INVESTMENT POLICY liquidity level of In 2012, LATAM Airlines Group maintained an appropriate for providing protection against potential external shocks. In addition, it maintained lines of credit for a total of US$208 million with local and international financial institutions which, as of end-year, it had not used. During the year, it continued to finance Corporate GovernanceANNUAL REPORT20120 5 out of its own resources an important part of pre- delivery payments for the Boeing and Airbus planes it will receive in the future. As of 31 December 2012, LATAM Airlines Group held a total of US$1,120 million in cash and easily convertible securities and US$641 million in advances on aircraft financed out of its own resources. The aim of the Company’s Investment Policy is to centralize investment decisions so as to optimize return adjusted for exchange-rate risk, subject to maintaining an adequate level of security and liquidity. It also seeks to reduce risk through diversification of counterparties and instruments. FINANCING POLICY The Company’s Financing Policy is designed to centralize financing activities and ensure a balance between the useful life of its assets and debt maturity. The vast majority of LATAM Airlines Group’s investments correspond to fleet acquisition programs, which are generally financed using a combination of its own resources and structured long-term financial debt. Normally, the Company finances between 80% and 85% through bank loans or bonds guaranteed by export promotion agencies and the remainder through commercial loans or out of its own resources. Maturities under the different financing structures vary from 12 to 16 years but, in the vast majority of cases, are 12 years. In the case of short-term financing, the Company holds around 7% of its total debt in the form of loans to exporters/ importers in order to finance working capital needs. or partially against these risks, the Company uses different derivatives to fix or cap increases in the underlying assets. In order to operate with counterparties, the Company must have a line approved and an ISDA or LFC contract signed with the one chosen. Counterparties must have a risk rating equivalent to at least A- issued by an international rating agency. (i) Fuel-price risk: Variations in fuel prices depend to an important extent on world oil supply and demand, decisions taken by the Organization of the Petroleum Exporting Countries (OPEC), world refining capacity and the level of stocks as well as the occurrence or not of climatic phenomena and geopolitical factors. The Company buys aircraft fuel known as Jet Fuel 54. There is an international reference index for this underlying asset - the US Gulf Coast Jet 54 - but the futures market for this index has a low level of liquidity and LATAM Airlines Group, therefore, hedges in West Texas Intermediate (WTI) crude, Brent (BRENT) crude and distilled Heating Oil (HO). They show a strong correlation with Jet Fuel and, compared to the US Gulf Coast Jet 54 index, have the advantage of greater liquidity. The Company’s Fuel Hedging Policy restricts the minimum and maximum range of fuel to be hedged depending on its capacity to pass on these changes in costs and the market outlook as reflected in the price of fuel. In addition, it limits the maximum hedging period. As instruments for fuel hedging, it permits the use of swaps, collars, three-way collars (long volatility), call options and swaptions. MARKET RISK POLICY The nature of LATAM Airlines Group’s operations means that it is exposed to market risks such as: (i) fuel-price risk, (ii) interest-rate risk, and (iii) local exchange-rate risk. In order to hedge completely Variations in interest rates bear a strong relation to the international economic situation, with an improvement in the long-term outlook leading to (ii) Interest-rate risk of cash flow: Corporate GovernanceANNUAL REPORT20121 5 an increase in long-term rates and a deterioration in the outlook prompting a drop due to market effects. In periods of economic contraction, governments also tend to reduce their benchmark interest rates in order to boost domestic demand by making credit more accessible and to increase output (and, similarly, raise them at times of economic expansion). Uncertainty as to how the market and governments will behave and, therefore, how interest rates may change implies a risk related to the Company’s debt which is subject to a floating interest rate and to its investments. The interest-rate risk associated with borrowing is equivalent to the risk of future cash flows on financial instruments due to fluctuations in market interest rates. The Company’s exposure to variations in market interest rates is related principally to its long-term floating-rate liabilities. international passenger businesses are set in US dollars while, in its domestic businesses, a mix exists. In Perú, sales are in local currency but prices are indexed to the US dollar while, in Brazil, Chile, Argentina and Colombia, prices are in local currency without any form of indexation and, in Ecuador, both tariffs and sales are in US dollars. As a result, the Company is exposed to fluctuations in different currencies including, principally, the Brazilian real, the Chilean peso, the Argentine peso, the Uruguayan peso, the Paraguayan guaraní, the Mexican peso, the euro, sterling, the Peruvian nuevo sol, the Colombian peso and the Australian and New Zealand dollars. Out of these currencies, its greatest exposure is to the Chilean peso and the Brazilian real. LATAM Airlines Group has partially hedged against exchange-rate risk by acquiring currency forwards. In order to reduce the risk related to an increase in interest rates, LATAM Airlines Groups has acquired interest-rate swaps and call options. The Company’s policy allows it to acquire derivatives to protect it against the possible appreciation or depreciation of currencies against the functional currency used by the parent company. The instruments that may be used under its Interest- Rate Hedging Policy are swaps, reverse swaps, call options and forward-start swaps. (iii) Local exchange-rate risk: The US dollar is the functional currency used by the parent company to set the prices of its services and for its classified financial and earnings statements. It sells most of its services in US dollars, in prices equivalent to the US dollar or in Brazilian reais. Approximately 54% of the Company’s revenues is denominated in US dollars and approximately 27% in Brazilian reais. A large part of its costs are also denominated in US dollars or in the equivalent in US dollars. This is the case, particularly, of fuel costs, airport charges, aircraft rentals, insurance and accessories. Remunerations, on the other hand, are denominated in local currency. As a result, around 41% of the Company’s total costs is denominated in US dollars and approximately 33% in Brazilian reais. components aircraft and The tariffs of LATAM Airlines Group’s cargo and Corporate GovernanceANNUAL REPORT2012OPERATIONS LATAM AIRLINES GROUP S.A. Karina Sarmiento TAM Perú Helios Cedeño LAN Ecuador 3 5 OPERATIONS / INTERNATIONAL PASSENGER OPERATIONS LATAM Airlines Group’s international passenger operations include both long-haul flights connecting South America with the rest of the world and services within the region. The integration of LAN’s and TAM’s businesses represents the birth of the region’s largest airline group in terms of its network of connections. The undertaking of this new group of airlines is to make air travel an ever simpler and more accessible experience, facilitating the connection of people within the region and with the rest of the world. In 2012, passenger traffic in the region grew by 10%, ahead of the world average, as compared to increases of 1% in the United States and 5% in Europe. Following the two companies’ integration, during international the second half of 2012, their operations were unified and, as from the second half of the year, placed under the management of LATAM Airlines Group, although they continue to operate in parallel under their existing brands. The integration of this area of the business called for homogenization of the two companies’ tariffs and the implementation of a system of crossed sales of their flights as well as the introduction of code sharing on several international routes in order to capture connectivity synergies and offer clients more alternatives through a single network. OperationsANNUAL REPORT20124 5 In the case of long-haul passenger operations, the United States and Europe are the two most important markets and, therefore, strategic for LATAM Airlines Group. In the former, it serves five destinations - Miami, Orlando, New York, Los Angeles and San Francisco - and is the second largest operator in terms of capacity for the transport of passengers between South America and the United States, accounting for 24% of total capacity, after American Airlines with 33% and followed by United Airlines and Delta Airlines with 14% and 13%, respectively. In the case of Europe, complementarity between the routes operated by LAN and TAM means that LATAM Airlines Group can now serve five cities, with a larger number of flights through the different connections permitted by its network. The destinations served are Madrid, Frankfurt, Paris, London and Milan and, in terms of capacity, the airline is positioned as the third largest operator between South America and Europe, accounting for 13% of total capacity after IAG with 22% and Air France-KLM with 21%. In view of Europe’s weak economic situation in 2012, LATAM Airlines Group gave priority to the growth of its services to North America. In this context, LAN Colombia inaugurated the Bogotá-Miami route with a daily flight throughout the week operated by an Airbus A320. In addition, TAM replaced the Airbus A330 on its two flights daily on the São Paulo-Miami route with a Boeing 777-300, thereby significantly increasing their capacity. Similarly, for its routes from Belo Horizonte, Brasilia, Manaus and Río de Janeiro to Miami, TAM began to use Airbus A330s, instead of Boeing 767s, also increasing capacity, and, as from August, gradually added one, two and up to three flights per week from Santiago and Lima to North America and the Caribbean, offering passengers a total of more than 20 new flights. In this context, LAN Perú increased its flights on the Lima-New York, Lima-Miami and Lima-Los Angeles routes to 11, 17 and 13 per week, respectively, and, on the Lima-San Francisco route, from three to four per week. These increases seek to boost Miami as the port of entry to the United States through the hub of our associate, American Airlines, and to strengthen services to the rest of our destinations in North America through our hub in Lima. In the case of Mexico and the Caribbean, flights from Lima to Mexico City increased from four to seven per week while more flights were also added from Lima to Cancún and La Habana. LATAM Airlines Group is the leading operator of regional services within South America, representing 46% of total capacity. In this market, its main competitors are Avianca-Taca and GOL, with shares of 24% and 10%, respectively. The new regional routes opened by LATAM Airlines Group in 2012 include Bogotá-São Pablo, served by LAN Colombia with one flight per day using an Airbus A320, while TAM also began to fly the Río de Janeiro-Montevideo and Río de Janeiro-Santiago routes, with one flight daily in both cases, and increased its flights on the São Paulo-Santiago and São Paulo-Montevideo routes to three per day. LAN also added more flights on the Santiago-Montevideo route, offering passengers a third daily non-stop flight between the two cities. Capacity on the Lima- São Paulo route also increased as a result of the connection of these two cities with an Airbus A330 instead of an Airbus A320, thereby boosting these two centers as a hub. In all, considering comparable joint LAN and TAM international statistics, LATAM Airlines Group’s passenger operations transported 13.4 million passengers in 2012 of whom 5.4 million flew international long-haul routes and 8.0 million regional routes. Considering both LAN’s and TAM’s international operations, consolidated passenger traffic grew by 7.2% in 2012 while capacity increased by 7.0%, giving a load factor of 82.0%. In a bid to improve its passenger service system (PSS), which includes the booking system, inventories and control of departures, LAN switched these processes to SABRE. Some difficulties were experienced during the change, in September 2012. However, for both the airline and its passengers, it will mean important improvements in the provision of these services and is expected to generate important cost savings in the coming years. implemented to the numerous In addition international destinations that LATAM Airlines Group serves directly, its clients have access to some 159 destinations around the world under strategic alliances and commercial agreements that LAN and TAM have signed with other airline operators. As of December 2012, LAN continued to be a member of the oneworld alliance and TAM of Star Alliance. in compliance with a requirement However, OperationsANNUAL REPORT20125 5 imposed by Chile’s Tribunal for the Defense of Free Competition, the choice of oneworld as LATAM Airlines Group’s global passenger alliance was announced on 7 March 2013. This implies that LAN Colombia and TAM, with its subsidiary in Paraguay, will join the alliance in 2014. In 2012, TAM entered into a code sharing agreement with American Airlines, allowing it to increase and diversify options for flights to North America. Similarly, LAN Ecuador and LAN Colombia signed bilateral agreements with American Airlines in order to offer more alternatives for traveling to and within the United States and Canada and, at the same time, bring more tourists from these countries to Ecuador and Colombia, thereby boosting connectivity in the region. OperationsANNUAL REPORT20126 5 OPERATIONS / TAM With a population of around 200 million, Brazil accounts for almost half of South America’s inhabitants, making it the region’s largest passenger market. Although 77.4 million people took domestic flights in 2012, the penetration of air travel is quite low, offering great potential for growth. Internationally, LATAM Airlines Group has built a superior network from Brazil to Europe, America and the rest of South America. This is why the coordination between the group’s airlines has been improved, and thus empower this country as a gateway to Europe, covering five destinations to this continent. In Brazil, TAM serves 45 domestic destinations, using a modern fleet of 109 aircraft from the Airbus A320 family. In 2012, it carried 33.5 million domestic passengers and, as of the end of the year, had a 43.7% market share of traffic. Its main competitors are GOL, Azul and Avianca Brasil, with market shares of 34.4%, 15.0% and 6.5%, respectively. Despite the opportunities the Brazilian market offers for the development of air travel, it has been characterized in recent years by the strong growth of capacity. At the end of 2011, this began to be adjusted by the main operators. OperationsANNUAL REPORT20127 5 In this context, TAM reduced its capacity in the domestic market by around 1.1% in 2012 while the industry’s total capacity, measured in ASKs, contracted by 7.4%. TAM’s restructuring process seeks to increase unit revenues on domestic operations through better passenger segmentation. This was reflected in a sharp increase in the Company’s load factor which rose from 68.8% in 2011 to 73.6% in 2012 and an average 77.8% in the second half of the year. Along these same lines, TAM also developed a new tariff structure in 2012. Based on a larger number of tariffs, this implied a complete redesign of the regulation of each one in order to achieve better segmentation by type of passenger. Other commercial initiatives implemented in 2012 included a change in the duration of a booking in order to be able to define the offer of a flight with more anticipation. In addition, different policies such as the baggage allowance were brought into line with those of LAN. All these measures put TAM on a better footing to address the complex context that existed for its domestic operation in 2012, affected by the deceleration of the Brazilian economy. In addition, the depreciation of the real had a negative impact on results due to the high percentage of the Company’s costs that are denominated in US dollars. In the future, TAM will continue to reinforce the structural changes already beginning to be seen in Brazil’s domestic market in order to make them sustainable and permanent over time and establish solid foundations from which to take advantage of the growth potential offered by this market. OperationsANNUAL REPORT20128 5 OPERATIONS / LAN In 2012, Chile experienced the region’s second highest rate of economic growth and this dynamism was reflected in strong and solid demand for domestic air travel. Demand has been further stimulated by the low-cost model that LAN introduced in Chile a few years ago and by mining development in the north of the country. The Company took advantage of this favorable context to continue improving its service and maintain its position as the leading operator, reaching a 77.2% market share at the end of the year. In 2012, LAN carried 6.3 million passengers, up by 18% on 2011. Domestic passenger traffic within Chile, measured in RPKs, rose by 13.3% while capacity, measured in ASKs, increased by 15.9%, giving an average load factor on domestic passenger operations of 80.1%, down by 1.8 percentage points on the previous year. This is the continuation of the solid expansion experimented by this country in the last five years, empowered principally by the enhanced development of the mining industry in the north part of Chile, accumulating an average annual increase of 15% in passenger traffic, and an increase of 23% in 2012 in the number of flights to ther north part of Chile OperationsANNUAL REPORT20129 5 LAN serves 16 domestic destinations in Chile, integrating the north and south of the country as well as Easter Island. In October 2012, it incorporated the Island of Chiloé into its network, offering four flights per week from Santiago to Castro with a stopover in Puerto Montt, and is the first airline to fly to this destination. Through this new service, the Company is seeking to enhance connectivity for the Island’s inhabitants while, at the same time, promoting it as one of southern Chile’s most attractive areas for tourism. For its domestic operations in Chile, the Company has a modern fleet of 22 aircraft from the Airbus A320 family, with between 126 and 174 seats, designed with the highest levels of technology. The fleet plan for 2013 envisages the withdrawal from service of the 126-seat A318s and their replacement by planes with more capacity, to optimize the operations and improve the capacity The main competitors of LAN in Chile are Sky Airline and Principal Airlines which have a market share of 19.6% and 3.2%, respectively. In 2012, a new player, the Sinami airline, entered the domestic market. Formed by the Union of Industrial Assembly Workers (SINAMI) together with Servicios Aéreos Río Baker, it has focused its operations in the mining regions of northern Chile. From Chile, LAN operates a broad international network, with flights to the rest of South America, Europe, United States and Oceania, being the gateway to this continent from South America. OperationsANNUAL REPORT20120 6 OPERATIONS / LAN PERÚ Thanks to the dynamism of the Peruvian economy, this country’s domestic airline industry has been growing at an annual rate of over 18% in past four years, registering the region’s highest rate of expansion in terms of the number of domestic passengers transported. This trend persisted in 2012 when Perú experienced the region’s fastest economic growth and this was, in turn, reflected in an 8% annual increase in the industry’s capacity measured in ASK, driven both by LAN Perú and other airlines. Although the increase in LAN Perú’s capacity was slightly below that of its competitors, the Company was more successful in stimulating demand and saw an 18% increase in passenger traffic, measured in RPKs. As a result, it closed the year with a market share of 62.2% on domestic routes and carried 4.5 million passengers, up by 14.2% on the previous year. This gave it an average load factor of 81.0%, up by three percentage points and above the average for the industry internationally. LAN Perú currently serves 14 domestic destinations, operating up to 110 flights per day with a modern fleet of 14 Airbus A319s. In 2012, the Company inaugurated the Tarapoto-Iquitos route, with two flights per week, thereby offering the most complete OperationsANNUAL REPORT20121 6 coverage, connectivity and national integration. On domestic routes, its main competitors are Peruvian Airlines, Starperú and Avianca-Taca which have market shares of 10.5%, 10.9% and 12.6%, respectively. In the same time, Lima has been positioned as an important hub for the regional and international operations of LATAM Airlines Group, with connections to the rest of South America, United States and Europe. In terms of its infrastructure, LAN Perú achieved two important milestones in 2012. In April, it inaugurated its new Premium Maintenance base in Lima, with the capacity to provide maintenance services for six Airbus planes of the A320 family or two Boeing 767s in an area of 10,500 m2 plus 3,000 m2 for support offices. In October, it went on to inaugurate the Technical Training Center (CIT) in the Jorge Chávez airport, with simulators of Boeing aircraft and Airbus A320s and latest-generation installations and equipment for the training of Peruvian pilots and crew. This Center, the most modern of its type in Latin America, will enable LAN Perú to optimize the time and resources used in this area. OperationsANNUAL REPORT20122 6 OPERATIONS / LAN ECUADOR LAN Ecuador serves six domestic destinations through the Quito-Guayaquil, Quito-Cuenca and Guayaquil-Cuenca routes as well as the Quito/ Guayaquil route to the San Cristóbal and Baltra Islands it incorporated its sixth domestic destination, with the launch of two flights daily on the Quito-Manta route. in the Galápagos. In March 2013, Regarding the international market, LAN Ecuador has operations to rest of South America, United States and Europe, and has been recognized as the main operator with the 32% of the market share. Also more connectivity is offered through the connection with the group’s entire network and our airline partners. For its domestic operations, the Company uses a modern fleet of five Airbus A320s. These aircraft have the largest and most comfortable passenger cabin of their category. The Company’s growth in 2012 included an increase in the number of flights on the Quito-Guayaquil and Quito-Cuenca routes. In 2012, Ecuador’s airline industry was affected by the ending of fuel subsidies. These subsidies, which covered 40% of the cost of fuel purchases, had helped to boost the development of Ecuador’s airline market since operators were able to keep some of their fares unchanged and, even, lower them, thanks to the introduction of innovative OperationsANNUAL REPORT20123 6 models for stimulating demand such as that implemented by LAN Ecuador after the start of its domestic operations in 2009. In order to mitigate the impact of this government measure and finance the resulting increase in costs, all the country’s airlines modified their fare structures. LAN Ecuador had to introduce a fuel surcharge, separate from fares, which varies with the international price of oil. Thanks to its constant efforts to provide the best product to passengers in terms of safety, reliability and service, LAN Ecuador has progressively consolidated a position as an important player in the domestic market. As of December 2012, it had achieved a market share of 31.8% and, considering only the routes it operates, of 44.8%. In 2012, the Company carried 1.2 million passengers, up by 20.0% on the previous year. It is also important to note that the Company increased its market share of all the routes it serves by 5 percentage points and, on the most heavily used Quito-Guayaquil route, by 7 percentage points. LAN Ecuador’s passenger traffic on domestic routes rose by 16.9% in 2012 while its capacity increased by 13.3%, giving an average load factor of 78.1%, up by 2.5 percentage points on 2011. On domestic routes, LAN Ecuador’s main competitors are TAME and Avianca-Taca through its Aerogal subsidiary, with market shares of 44.7% and 22.7%, respectively. its commitment In a demonstration of to the country, LAN Ecuador made a number of important investments in 2012. They included the implementation of its facilities at the new Quito International Airport, in which it invested US$4.7 million, and the inauguration of its new offices and passenger contact centers. OperationsANNUAL REPORT20124 6 OPERATIONS / LAN ARGENTINA Since its launch seven years ago, LAN Argentina has positioned itself as one of the country’s most important operators of domestic flights. It currently serves 14 destinations in Argentina, connecting the capital with the country’s other main cities. In 2012, it completely reestablished its direct service on the Buenos Aires-San Carlos de Bariloche route after an interruption of nine months following the eruption of Chile’s Puyehue Volcano in June 2011, which particularly affected this destination. In July, it also increased the number of flights on this route to up to five flights on weekdays and up to nine per day at weekends in order to provide an efficient service for the high winter-holiday demand experienced by this tourist center. The company was rewarded with the preference of passengers on all the routes it serves and, at end- 2012, had a 32.0% share of the domestic market. During the year, it carried 2.3 million passengers, up by 21% on the previous year. Consolidated passenger traffic grew by 18.2% while capacity increased by 21.1%, giving an average load factor of 74.0%. On domestic routes, LAN Argentina competes with Aerolíneas Argentinas and Andes Lineas Aereas, with market shares of 66.5% and 1.5%, respectively. OperationsANNUAL REPORT20125 6 For its domestic flights, the Company has a fleet of ten Airbus A320s, considered the most modern, efficient and ecologic in the industry for operations of this type. In a bid to stimulate growth of the domestic airline market through more competitive tariffs, the Company mounted a number of campaigns in association with local banks, offering attractive discounts on the purchase of tickets. In addition, the Company launched the LANTOURS program throughout including different destinations within the country, and also opened two new commercial offices in Buenos Aires and one in the city of Tucumán. country, the In 2012, as part of its permanent quest to enhance its value proposition, LAN Argentina launched the first stage of the “bus project” to transport passengers between an airport and nearby cities to which there are not flights. Regarding the international market, LAN Argentina operates flights to other South American cities and the United States, achieving a solid coverage through the LATAM Airlines Group’s network and codeshare agreements with our airline partners. OperationsANNUAL REPORT20126 6 OPERATIONS / LAN COLOMBIA In its first year of operations as LAN Colombia, the Company achieved a share of the domestic market that reached 19.6% in December 2012 and, over the course of the year, carried 3.2 million passengers. Its consolidated passenger traffic grew by 12.5% while its capacity increased by 13.4%, giving an average load factor of 73.3%. The Company serves 20 destinations in Colombia and, in terms of coverage, is the country’s second largest airline. Its main competitors are Avianca-Taca and Copa Colombia, with market shares of 61.4% and 8.5%, respectively. from Fort Lauderdale to Miami, aiming to generate better connections with our partner airlines, specially with American Airlines. Also during 2013 LAN Colombia will incorporate new Boeing 767-300 aircraft to its international operations, in order to improve its service. These new wide-body aircraft, configured with the new onboard design of LAN, will initially start flying on routes to Miami and Sao Paulo, increasing the capacity between those cities and improving the passenger’s experience. Regarding international operations, in 2012 LAN Colombia changed its route to the United States LAN Colombia is the result of the acquisition of the local Aires airline (at the end of 2010). Its deteriorated financial situation and low service standards called OperationsANNUAL REPORT20127 6 for a far-reaching restructuring plan to bring it into line with LAN’s safety, punctuality and efficiency standards. This process was achieved in record time and culminated at the end of 2011 with the change of brand. Among other measures designed to restore its profitability, the Company began the renewal of its fleet in 2012 in order to gradually take Aires’s Boeing 737-700s and Bombardier Dashs out of service and replace them, mainly, with Airbus A320s, a process which will take some years and generate associated costs. As of December 2012, LAN Colombia was operating its domestic flights with a fleet of 21 aircraft, comprising five Airbus A320s, six Boeing 737- 700s and ten Dash 8-200s, having already withdrawn from service four Dash 8-Q400s which should be returned. In 2013, all the Boeing 737-700s are also expected to be taken out of service. In 2012, the Company defined a commercial strategy focusing on stimulating demand, replicating the low-cost model successfully implemented by LAN in other domestic markets in the region, with reductions of around 35% in base fares accompanied segmentation of passengers. It also by better implemented a new marketing strategy designed to increase recognition of the LAN brand, increased its penetration of the corporate segment by signing contracts with the main companies using air transport within Colombia and launched the LAN Corporate loyalty program. Other commercial initiatives implemented in 2012 included a redefinition of the commissions paid to travel agencies in order to increase the Company’s penetration of the indirect sales channel and the co-branding of LANPASS with the Banco de Bogotá y Occidente in conjunction with the Visa brand. Finally, in maintenance, LAN Colombia implemented the MXI system in order to homologate the operation in a single corporate system. OperationsANNUAL REPORT20128 6 OPERATIONS / CUSTOMER LOYALTY PROGRAMS As of December 2012, LAN and TAM continued to have independent customer loyalty programs although, as from June 2012, members of the two programs were able to accumulate and redeem kilometers and points, respectively, throughout the two airlines’ network. LANPASS is the frequent flyer program created by LAN in 1984 to reward the preference and loyalty of its customers with numerous benefits and privileges through the accumulation of kilometers that can be exchanged for tickets or a wide range of other products and services. As of December 2012, the program had 7.4 million members across Chile, Argentina, Perú, Ecuador, the United States and Colombia. This last country led the program’s expansion in 2012, ending the year with over 620,000 members. Members of the program earn LANPASS kilometers every time they fly with LAN, TAM or any of the airlines in the oneworld alliance or others affiliated to the program such as Alaska Airlines and Aeroméxico as well as when shopping with or using the services of a vast network of companies around the world which have an agreement with it. With people who fly constantly in mind, TAM created OperationsANNUAL REPORT20129 6 the TAM Fidelidade program in 1993 to enhance services for its passengers and reward them. Members of the program have a single account in which they accumulate points in a wide variety of loyalty programs. These can then be redeemed in all TAM’s destinations and those of associated airlines as well as to participate in the Multiplus Fidelidade network. In January 2012, TAM went on to create Multiplus, a coalition of loyalty programs, to administer the accumulation and redemption of TAM Fidelidade points. Multiplus is a joint stock company that trades on the São Paulo stock market and in which LATAM Airlines Group is the principal shareholder with a 72.9% stake. As of December 2012, this program had over 10.5 million members and a network of 230 partner companies including hotels, financial institutions, retailers, supermarkets, car rentals and magazines. OperationsANNUAL REPORT20120 7 OPERATIONS / CARGO OPERATIONS Following the association of LAN and TAM in June 2012, the cargo operations of the two companies and their subsidiaries began to develop commercial and operational agreements, bringing together highly complementary capacities and networks of routes. This positioned the cargo companies that form part of LATAM Airlines Group as the largest air cargo operator group in Latin America and, in particular, Brazil. This generated important benefits for clients in terms of access to the broadest network of routes in the region and the world with 144 destinations in 27 countries, modern infrastructure, increased capacity and a wide range of products and services at both the domestic and international levels. In the framework of the association, important efficiency gains were achieved in the international business during 2012. Commercial and operational structures were unified either by bringing back in- house offices and functions that TAM had outsourced or by negotiating new agreements with suppliers. In addition, through agreements for the purchase of space, the bellies of TAM’s aircraft began to be administered by LAN Cargo and its subsidiaries. This permitted the incorporation of LAN Cargo’s systems, processes and best practices into the group’s new cargo operations. Connectivity in the main cargo hubs was also improved in order to optimize the filling of this new capacity and be able to administer the business as a single large network. OperationsANNUAL REPORT20121 7 In the domestic Brazilian market, important synergies were generated through the incorporation of TAM’s extensive network of passenger planes, permitting coverage of a large number of destinations, while the freighters of ABSA - LAN Cargo’s subsidiary in Brazil for 15 years - provide great capacity on the routes where demand is heaviest as well as access to the charter business and special businesses such as the routes tendered by the country’s postal service. In all these fields, the group’s operations were further boosted by the strong position of the TAM Cargo brand under which all its capacity is marketed. In 2012, the cargo business was, however, affected by a contraction of markets in response to adverse macroeconomic conditions and, in particular, the crisis in the Eurozone. Weaker demand was explained mainly by a drop in imports into Latin America and, especially, Brazil, the region’s largest market, where the economy showed an important deceleration. Competition in Latin America’s cargo markets also increased not only on the part of local operators but also because European and Asian cargo airlines transferred part of their capacity to the region and, in particular, Brazil, exerting downward pressure on tariffs. One of the strengths of LATAM Airlines Group’s cargo business is its presence in the region’s different markets. In 2012, this allowed it to partly offset the weakness of imports into Brazil with the solid performance of the exports of other countries in the region to the United States and Europe, principally perishable products such as flowers, fruit and fish, which remained strong throughout the year. In addition, the incorporation of two new Boeing 777-200F freighters in 2012 not only strengthened operations in Latin America and Europe but also helped to increase the efficiency of the business. These modern aircraft represent an improvement on the Boeing 767-300Fs in that they have twice their capacity but only consume 50% more fuel. Overall, the cargo traffic of LATAM Airlines Group and its subsidiaries fell by 2.4% in 2012 while capacity showed a 0.1% drop, giving a load factor of 58.7%, down by 1.1 percentage points, in all cases relative to comparable figures for the operations of TAM, LAN and their respective subsidiaries in 2011. OperationsANNUAL REPORT20122012 RESULTS LATAM AIRLINES GROUP S.A. Juliana Bentz TAM Brazil Tatiana Simon LAN Perú 3 7 2012 RESULTS / INDUSTRY OVERVIEW Conditions for the world’s airline industry were complex in 2012. This reflected a combination of factors that included the high price of fuel, which averaged around US$109.5/barrel (WTI), and the depreciation of a number of currencies against the dollar, which raised the costs of many airlines, as well as the euro zone debt crisis and the deceleration of the world’s largest economies and, in particular, China. History shows that, under similar conditions in the past, the airline industry reported very weak results and, even, losses. In 2012, however, airlines achieved levels of earnings and cash flow that were similar to 2006 when the price of fuel was just US$45/barrel and the world economy was experiencing 4% growth. The industry has, in other words, reinvented itself and now has greater resources with which to address the current difficult conditions. In this process, consolidation and capacity discipline have proven to be key factors for success. In 2012, there was also a clear trend towards cooperation, rather than confrontation, with an even greater emphasis on the development of alliances, commercial agreements and, even, cross-border mergers. It was large operators, with the advantages of scale economies and greater efficiency, that were best placed to handle the difficult context while many small airlines were unable to survive and some other larger companies only did so with government help. Capacity discipline, previously a practice confined almost exclusively to North American airlines, spread to other regions. Particularly noteworthy was the capacity discipline seen in the second half of the year in Brazil where the principal operators embarked on a sharp reduction in the excess capacity seen in this country’s domestic market. Despite the weak macroeconomic context, the industry’s global performance was positively impacted in 2012 by strong passenger traffic - which rose by 5.3% on the previous year - and by a 3% increase in yields. These advances were led by the Middle East, followed by Latin America, while, in Europe and the Asia-Pacific region, there was a marked rise in the traffic of low-cost airlines which increased their market share. By contrast, the cargo market saw a 2% contraction of traffic and a similar drop in yields. This was the result of a decrease in international trade and a preference for sea transport. This affected principally operators in the Asia-Pacific region for whom the cargo business represents an important part of their total revenues. The only operators to achieve growth in the cargo market were those in the Middle East. 2012 ResultsANNUAL REPORT20124 7 In view of the industry’s performance over the first nine months of the year, the International Air Transport Association (IATA) increased its estimate of airlines’ global earnings in 2012 from US$3.0 billion in June to US$6.7 billion in December (as compared to US$8.8 billion in 2011). This change, nonetheless, envisages a drop in net margin from 1.4% in 2011 to 1.0% in 2012 and 1.3% in 2013 whereas the margin required to recover the industry’s cost of capital is 7%-8%. It is important to note that, in recent years, the industry’s growth has been driven by the emerging markets of Asia-Pacific, Latin America and the Middle East. This trend is expected to persist in the coming years due to the low penetration of air transport in these regions and their prospects for economic growth. 2012 ResultsANNUAL REPORT20125 7 2012 RESULTS / FINANCIAL RESULTS In 2012, the results of LATAM Airlines Group were affected principally by the integration of LAN’s and TAM’s businesses which occurred in June 2012. The Company reported net earnings of US$11.0 million for 2012, down by 96.6% from US$320.2 million in 2011. This included a loss of US$45.2 million due to the consolidation of TAM as from 22 June 2012. In addition, tax payments rose by US$70.4 million due to a rise in Chile’s corporate income tax rate from 17% to 20% as part of a tax reform officially published on 27 September 2012. As a result, the net margin dropped to 0.1% in 2012, down from 5.6%. Operating revenues reached US$9,942.3 million, up by 73.9% on the previous year, of which US$3,695.8 million corresponded to the integration with TAM. Operating costs increased by 85.9% to US$9,625.5 million of which US$3,709.0 million corresponded to the integration with TAM. LATAM Airlines Group’s accounting operating earnings reached US$316.9 million, down by 41.3% on 2011, while its operating margin, at 3.2%, was equivalent to a drop of 6.2 percentage points on the previous year. If the impact of the integration of LAN’s and TAM’s businesses is excluded, operating earnings reached US$331.2 million, down by 38.6% on 2011, while the operating margin dropped from 9.4% to 5.2%. The pro-forma financial statements presented below, which consolidate LAN’s and TAM’s results for the complete years of 2011 and 2012, provide a more meaningful comparison. 2012 ResultsANNUAL REPORT20126 7 In 2012, pro-forma revenues dropped by 0.3% as compared to 2011 and reached US$13,271.1 million. This reflected a 1.0% increase in passenger revenues, a 6.2% drop in cargo revenues and also a 6.2% drop in other revenues. In the case of passenger operations, unit revenues per ASK were down by 3.5% due to a 6.3% drop in yields. This reflected the important impact of the 16.7% devaluation of the Brazilian real against the US dollar in 2012, which affected approximately a third of the Company’s revenues and was partly offset by increases in revenues per ASK in LATAM Airlines Group’s other domestic markets. In 2012, the load factor rose from 75.9% to 78.2% since, at 4.6%, the increase in capacity measured in ASKs was less than the increase of 7.8% in traffic measured in RPKs. In the case of cargo operations, a 5.7% drop in unit revenues per ATK was driven by a decrease of 3.9% in the yield and of 1.1 percentage points in the load factor which reached 58.7%. Traffic, measured in tonnes, dropped by 1.0% in 2012, reflecting the weakness of global cargo markets and weak demand in the market for imports into Latin America. The Company’s pro-forma operating costs reached US$13,182.2 million in 2012, up by 7.2% on the pro- forma results for 2011. They were affected by a US$535.5 million increase in expenditure on fuels, an item that accounted for 36.3% of total operating costs. This 12.6% increase was the result of a 2.7% rise in gallons consumed and a 9.7% increase in the price of fuel once hedging is taken into account. In addition, TAM received a credit against payments of fuel taxes (PIS/COFINS) for US$323 million in 2011 which was registered as a reduction in that year’s expenditure on fuel. As a result, the pro-forma operating earnings of LATAM Airlines Group in 2012 reached US$88.9 million in comparison to US$1,010.9 million under the pro-forma results for 2011. It should be noted that these earnings include approximately US$72 million in synergies related to the integration of LAN’s and TAM’s businesses as well as one time costs of US$47 million during 2012 that were related to the merger process. Finally, LATAM Airlines Group showed a net pro- forma loss of US$491.8 million in 2012 as compared to a net pro-forma profit of US$29.8 million in 2011. This implies a negative net pro-forma margin of 3.7% in 2012 as compared to a positive net pro-forma margin of 0.2% in the previous year. 2012 ResultsANNUAL REPORT20127 7 Revenue Breakdown by Country 2011 Revenue Breakdown by Country 2012 2012 ResultsANNUAL REPORT20128 7 2012 ResultsANNUAL REPORT20129 7 2012 RESULTS / AWARDS AND RECOGNITIONS Principal recognitions received by LATAM Airlines Group in 2012 • LA SEGUNDA-ADIMARK: RANKING OF CHILE’S MOST RESPECTED COMPANIES LAN 2012 1st place “Most Respected Company” • MERCO 1st place “Company with Best Reputation in Chile” • BUSINESS TRAVELLER’S CELLARS IN THE SKY AIRLINE WINE AWARDS • 2012 DUOC UC HUMAN CAPITAL PRIZE 1st place Best Sparkling Wine (Champagne Louis Roederer) Recognition of nine Chilean companies that most supported professional-technical training courses • WORLD AIRLINE AWARDS (SKYTRAX) • CAPITAL MAGAZINE AND FUNDACIÓN CHILE 2nd place “Best South American Airline”. 5th place Ranking of Companies in Chile Most Committed to Climate Change Management • BEST OF THE WEB AWARDS: LAST MILE LEADER • BUSINESS TRAVELLER 1st place “Best online airline site” 1st place “Best Business Class in Latin America” 2012 ResultsANNUAL REPORT2012 0 8 TAM 2012 • WORLD AIRLINE AWARDS (SKYTRAX) 1st place “Best Airline in South America” and “Best Airline Staff Service in South America”. • CARTA CAPITAL MAGAZINE: MOST ADMIRED COMPANIES IN BRAZIL • • PRIZE FOR EXCELLENCE IN CUSTOMER SERVICE (CONSUMIDOR MODERNO MAGAZINE) 1st place “Best Logistics Company (TAM Cargo)” TRUSTED BRANDS PRIZE (SELECCIONES MAGAZINE) 1st and 5th places, respectively “Airline” and “Brazilian Companies Most Admired in Latin America”. 1st place “Airline” • THE BEST OF DINHEIRO (ISTOÉ DINHEIRO) 1st place “Human Resource Management”. • BRAZIL’S MOST VALUABLE BRANDS (ISTOÉ DINHEIRO / BRAND ANALYTICS) 1st place In industry and 19th in overall ranking • AIRLINETRENDS.COM 5th most innovative airline in the world. • FREDDIE AWARDS, INSIDE FLYER MAGAZINE 1st place (TAM Fidelidade) “Best redemption of customer loyalty programs in the Americas” • CELLARS IN THE SKY REVISTA BUSINESS TRAVELLER 1st place “Best First Class Red Clos Canon 2008” 1st place “Most Improved First Class Cellar”. 2012 ResultsANNUAL REPORT2012 1 8 2012 RESULTS / STOCK MARKET INFORMATION STOCK MARKET ACTIVITY In 2012, LATAM Airlines Group’s share price showed a loss of 7.7% while LAN’s ADR gained 1.4%. As of 31 December 2012, the Company had a market capitalization of US$11,218 million. In 2012, LATAM Airlines Group’s shares performed below Chile’s IPSA share price index, which showed an annual gain of 3.0%. 2012 ResultsANNUAL REPORT20122 8 2012 ResultsANNUAL REPORT20123 8 (USD) (USD) 2012 ResultsANNUAL REPORT20124 8 (BRL) (BRL) 2012 ResultsANNUAL REPORT20125 8 2012 RESULTS / ADDITIONAL INFORMATION SUPPLIERS In 2012, as in previous years, the main suppliers of LATAM Airlines Group were the Airbus and Boeing aircraft manufacturers. Its other suppliers consist mainly of companies that produce aircraft accessories, spares and components such as Pratt & Whitney, IAE International Aero Engines AG, Rolls- Royce plc, General Electric Commercial Aviation Services Ltd. (engines), SICMA (seats), Air France and Lufthansa Technik (MRO components), Thales (in-flight entertainment), Goodrich (reversers) and Messier Bugatti and Goodrich (brakes). In addition, the Company has a number of fuel suppliers including Repsol YPF, Copec, Shell, Terpel, Chevron and Exxon. INSURANCE Taking into account all those areas of its operations that involve potential risks, LATAM Airlines Group carries insurance that can be divided into three main categories: aviation, hull and liability insurance. This type of insurance covers all the risks inherent to commercial aviation such as aircraft, engines, spare parts and third-party liability for passengers, cargo, baggage, merchandise and airports. This coverage is taken out jointly by LATAM Airlines Group and its subsidiaries and reinsured on the London market. Since 2006, the Company has also had an agreement with British Airways, Aer Lingus and other companies for the joint negotiation of the terms of hull and liability insurance, which helps in obtaining lower premiums and better coverage. GENERAL INSURANCE Insurance of this type provides coverage against all those risks that could affect the Company’s assets, particularly its physical goods and financial assets. These are protected through multi-risk policies (including fire, theft, computer equipment, transport of securities, window breakage and other all-risk coverage) as well as traditional coverage of motor vehicles, air and sea transport, corporate civil liability, etc. In addition, the Company holds life and accident insurance on behalf of all its personnel including executives, staff in general and flight crews. TRADEMARKS AND PATENTS The Company and its subsidiaries use a number of trademarks. These are duly registered with the corresponding bodies in the different countries in which they operate or are the origin and/or destination of their operations in order to be able to differentiate and market their products and services in these countries. 2012 ResultsANNUAL REPORT20126 8 2012 RESULTS / MATERIAL NEWS 20/12/2012 - 19:15 PLACEMENT OF SECURITIES ON INTERNATIONAL AND/OR NATIONAL MARKETS / LATAM AIRLINES GROUP S.A. in Article 9 and As provided in the second subparagraph of Article 10 of the Securities Market Law, and in General Rule #30, under due authorization, I hereby make the following material DISCLOSURE regarding LATAM Airlines Group S.A., Securities Registration #306: the parameters of the share offer submitted on December 14, 2012. At a meeting held today, the Board unanimously resolved: 04/09/2012 - 17:42 CHANGES IN MANAGEMENT / LATAM AIRLINES GROUP S.A. 1. 2. 3. To begin the preemptive option period to subscribe 7,436,816 cash shares in the Company on account of the capital increase approved by the Special Shareholders Meeting on December 21, 2011, as modified by the Special Shareholders Meeting on September 4, 2012. The period will begin on December 21, 2012 by publication of the Notice ordered in Article 26 (formerly Article 29) of the Companies Regulations, which will be made in the newspaper La Tercera. As provided in Articles 9 and 10 of Securities Market Law 18045 and in General Rule #30 of the Commission of 1989, please be advised that at an Extraordinary Shareholders Meeting (Meeting) of LATAM Airlines Group S.A. (LATAM) held September 4, 2012, LATAM’s shareholders elected the members of LATAM’s Board of Directors, who will hold office for two years. The following individuals were elected Directors at the Meeting: To set the placement price for the shares being preemptively offered to the Company’s shareholders at CH$ [•] per share during the preemptive option period. • • José María Eyzaguirre Baeza; Juan José Cueto Plaza; To place a total of 2,951,390 shares in the Company on December 21, 2012 at a price of CH$ 11,000 per share using the Order Book Auction system of the Santiago Stock Exchange, Securities Exchange, according to • Mauricio Rolim Amaro; • Maria Claudia Amaro; • Ramón Eblen Kadis; 2012 ResultsANNUAL REPORT20127 8 • • • • Carlos Heller Solari; 1. Revoke Board of Directors. Francisco Luzón López; 2. Election of members of the Board of Directors. Juan Gerardo Jofré Miranda; y Georges de Bourguignon Arndt. The Directors named in numbers 7, 8 and 9 above were elected as independent directors, according to article 50-bis of Companies Law 18046. 03/08/2012 - 18:34 CHANGES IN MANAGEMENT / LAN AIRLINES S.A. As provided in Article 9, in the second subparagraph of Article 10 of the Securities Market Law and in General Rule #30, under due authorization, I hereby DISCLOSE the following material events of LATAM Airlines Group S.A. (formerly called LAN Airlines S.A.), Securities Registration #306: Today, Mr. Jorge Awad Mehech submitted his resignation from his position of Chairman of the Company’s Board of Directors. He will continue on as director. The Board then unanimously appointed Mr. Mauricio Rolim Amaro as Chairman of the Board of LATAM Airlines Group S.A. 03/08/2012 - 18:28 EXTRAORDINARY SHAREHOLDER’S MEETING, NOTICES, AGREEMENTS AND PROPOSALS / LATAM AIRLINES GROUP S.A. As provided in Article 9, in the second subparagraph of Article 10 of the Securities Market Law and in General Rule #30, under due authorization, I hereby DISCLOSE the following material events of LATAM Airlines Group S.A. (formerly called LAN Airlines S.A.), Securities Registration #306: At a the meeting held today, the Board of Directors of LATAM Airlines Group S.A. resolved to convene an Extraordinary Shareholders Meeting at 10:30 a.m. on September 4, 2012 to discuss the following matters: 3. Approve that the remaining 7,436,816 shares (all ordinary and without nominal value) of LATAM Airlines Group S.A., from the total of 142,555,882 shares (all ordinary and without nominal value) issued as per the authorization from the Extraordinary General Meeting of Shareholders held on December 21, 2011 and that not were exchanged for shares of Sister Holdco S.A. and Holdco II S.A., to be offered preferably to the shareholders of LATAM Airlines Group S.A. (the “Remaining Shares”) pursuant to section 25 of the Law No. 18,046 regarding the Chilean Corporation Act; and that any unsubscribed shares to be offered and placed in the securities markets. 4. 5. Fix, set and determine the subscription and placement price of the Remaining Shares, namely, for the 7,436,816 shares (all ordinary and without nominal value) of LATAM Airlines Group S.A., or to delegate in the Board of Directors of the Company to determine the price and conditions for the subscription and placement of the Remaining Shares. Fix, set and determine the subscription and placement price of the 4,800,000 shares (all ordinary and without nominal value) to be used to create and implement a stock option plan pursuant to Section 24 of the of the Law No. 18,046 regarding the Chilean Corporation Act, as approved by the Extraordinary General Meeting of Shareholders held on December 21, 2011 (the “Stock Option Compensation Plan”); or to delegate in the Board of Directors of the Company the determination, setting and fixing of the subscription and placement price and applicable terms and conditions for the creation and implementation of the Stock Option Compensation Plan. 6. Adopt any other resolutions to carry out the items above listed. 2012 ResultsANNUAL REPORT20128 8 28/06/2012 - 9:19 OTHERS / LAN AIRLINES S.A. As provided in Article 9, in the second subparagraph of Article 10 of the Securities Market Law and in General Rule #30, under due authorization, I hereby DISCLOSE the following material events of LATAM Airlines Group S.A. (formerly called LAN Airlines S.A.), Securities Registration #306: 1. A Special Shareholders Meeting held December 21, 2011 (the “Meeting”) approved, among other matters, the merger of LAN Airlines S.A. (“LAN”) and Sister Holdco S.A. (“Sister”) and Holdco II S.A. (“Holdco II”) (the “Merger”). These two latter companies had been incorporated especially for, and prior to, the merger of LAN and TAM S.A. (“TAM”), a Brazilian company. Sister and Holdco II held the shares in TAM either directly or indirectly. LAN (now called “LATAM”) would be the company surviving the Merger. 2. Among the matters discussed at the Meeting, the issuance of 142,555,882 shares was authorized to implement the respective exchange in the Merger (all common shares, with no par value). Said Meeting also approved the issuance of 4,800,000 additional shares (all common, with no par value) to create and implement, combined with any remainder of shares not used in the Merger exchange, an employee compensation plan for employees of LATAM and its subsidiaries pursuant to Article 24 of the Companies Law. The Board was granted the power to determine the conditions for placement of such shares. 3. Since the level of acceptance of the exchange offer did not cover all shares in TAM existing on the market, there was a remainder of 7,421,021 authorized shares in LATAM after the Merger (all common, with no par value) that were not exchanged for shares in Sister and Holdco II (“Share Remainder”). 4. On today’s date, the Board resolved to submit a motion to the company’s shareholders that the Share Remainder not be used to create and implement a compensation plan for employees of LATAM and its subsidiaries pursuant to Article 24 of the Companies Law, but rather be allocated to a preemptive offer to the LATAM shareholders according to Article 25 of the Companies Law, and that any unsubscribed balance be offered and placed on the general market. For these purposes, the Board shall also convene the corresponding Special Shareholders Meeting, which will be duly disclosed. 5. Please note that by letter dated June 26, 2012, BM&FBOVESPA S.A. Bolsa de Valores Mercadorias y Futuros notified Itau Corretora de Valores S.A. (“Itau Corretora”)--the securities intermediary retained by LATAM to implement the exchange offer and depositary of its BDR program--that 17,550 shares were unilaterally reversed, of the 29,723,889 shares in TAM that were accepted for exchange in the Federal Republic of Brazil (“Brazil”) by the end of the exchange offer that were in the custody of that stock exchange and were contributed by Itau Corretora to Holdco II by subscription of the same number of shares in this company, because of duplicate orders that the stock exchange did not opportunely identify. Therefore, the result of the exchange offer in Brazil was effectively 29,706,339 shares in TAM, which meant that LATAM delivered 15,795 shares in LATAM in excess to Itau Corretora (17,550 x 0.90). Said shares are in possession of Itau Corretora in the form of BDRs. LATAM is taking action with Itau Corretora to correct this situation as soon as possible (which will result in the revocation of foreign exchange contracts in Brazil for those 15,795 shares and their respective BDRs). 6. The situation described in the preceding paragraph did not affect the timely delivery of the corresponding ADRs and BDRs of LATAM to TAM shareholders that accepted the exchange offer on June 27, 2012. And after the adjustment the preceding paragraph indicated concludes, the Share Remainder placeable will total 7,436,816 shares in LATAM (all common shares, with no par value). in 2012 ResultsANNUAL REPORT2012 9 8 28/06/2012 - 9:14 CHANGES IN MANAGEMENT / LAN AIRLINES S.A. As provided in Article 9, in the second subparagraph of Article 10 of the Securities Market Law and in General Rule #30, under due authorization, I hereby DISCLOSE the following material event of LATAM Airlines Group S.A. (formerly called LAN Airlines S.A.), Securities Registration #306: 1. On today’s date, the company’s Board of Directors learned of the resignation of Mr. Jose Cox Donoso and Mr. Dario Calderon Gonzalez from their directorships. In view of those vacancies, the Board resolved to appoint Mr. Mauricio Rolim Amaro and Ms. Maria Cláudia Amaro in their stead as directors of the company. In light of the foregoing, the entire board of directors will be renewed at the next regular shareholders meeting of the company. “Mergers”), with LAN continuing as the surviving entity. Prior to the Mergers, Sister Holdco would hold the TAM shares contributed by the controlling shareholders of TAM, and Holdco II would hold the TAM shares and ADSs acquired pursuant to the exchange offer. 2. By means of Essential Fact dated May 10, 2012, it was reported that Holdco II and LAN had initiated in the Federal Republic of Brazil (“Brazil”) and in the United States of America (“USA”) an exchange offer (the “Exchange Offer”) for all outstanding TAM shares (including those represented by TAM ADSs) other than those held by the controlling shareholders of TAM, for Holdco II shares, and ultimately, for LAN shares (the latter being the legal successor of Holdco II due to the effectiveness of the Mergers), in the form of Brazilian Depositary Receipts - BDRs - in Brazil, and American Depositary Receipts - ADRs – in the USA. 22/06/2012 - 9:04 DIVISION, MERGER OR CREATION OF COMPANIES / LAN AIRLINES S.A. 3. As established in Article 9 and in Article 10, paragraph 2, of the Securities Market Law (Ley de Mercado de Valores), and in General Regulation No. 30, (Norma de Carácter General N° 30), being duly empowered, I hereby report the following ESSENTIAL FACT regarding LAN Airlines S.A. (“LAN”), Securities Registry No. 306: 1. By means of Essential Fact dated December 21, 2011, it was reported that shareholders meetings were held and approved the merger of LAN with Sister Holdco S.A. (“Sister Holdco”) and Holdco II S.A. (“Holdco II”), two companies specially incorporated for purposes of the proposed combination between LAN and TAM S.A. (“TAM”). If Holdco II successfully completed an exchange offer for the TAM shares (including those represented by American Depositary Shares – ADSs – of TAM), both Sister Holdco and Holdco II would be absorbed by LAN (the The Exchange Offer was subject to minimum conditions of acceptance for its success and to certain other conditions. In particular, there were established (i) the squeeze-out condition, as a result of which TAM would be able to mandatorily redeem all of the TAM shares not tendered in the Exchange Offer or contributed by the controlling shareholders of TAM; and (ii) the delisting condition, as a result of which TAM would no longer be a registered public company in Brazil. • According to Brazilian law, for the delisting condition to be met, more than 2/3 of the total TAM shares Exchange participating Offer shall have agreed with the deregistration of TAM as a public company in Brazil. the in 4. On June 12, 2012, LAN waived the squeeze-out condition, which was informed by means of an Essential Fact on that same date. As a result of this waiver, according to Brazilian law, the term of the Exchange Offer was extended for 10 calendar days, and a new date for the auction in BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros was scheduled for June 2012 ResultsANNUAL REPORT20120 9 22, 2012 at 9:00 a.m., Santiago and New York time (10:00 a.m., Sao Paulo time). 5. Prior to the expiration of the Exchange Offer, 99.9% of the TAM shares that participated in the Exchange Offer agreed with the deregistration of TAM as a public company in Brazil, thereby satisfying For information purposes, the TAM shares tendered in the Exchange Offer together with those contributed by the controlling shareholders of TAM represent 95.9% of TAM shares in circulation. the delisting condition. 6. Based on the foregoing and the satisfaction of the other conditions to the completion of the Exchange Offer, the auction took place in BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros today, at 9:00 a.m., Santiago and New York time (10:00 a.m., Sao Paulo time). 7. Also, and following the steps provided in the transaction, on this same date LAN, Sister Holdco and Holdco II have executed the deed evidencing the Mergers, pursuant to which the outstanding Sister Holdco and Holdco II shares are exchanged for LAN shares, at the rate of 0.9 shares of LAN for each one of such shares: 2012 ResultsANNUAL REPORT20121 9 8. 9. The share exchange process is automatically executed in the LAN’s shareholders registry on June 22, 2012, and settlement of the Exchange Offer will occur with the delivery abroad to the shareholders of TAM that accepted the Exchange Offer of the corresponding ADRs and BDRs of LAN on June 27, 2012. Finally, on this date (i) LAN changes its name to “LATAM Airlines Group S.A.”, notwithstanding that it may also continue to do business under the trade names “LATAM Airlines”, “LATAM Airlines Group”, “LATAM Group”, “LAN Airlines”, “LAN Group” and/or “LAN”; and (ii) the shareholders agreements with respect to LAN, Holdco I S.A., and TAM and its subsidiaries referred to in the Material Fact dated January 19, 2011, become effective. 12/06/2012 - 8:28 OTHERS / LAN AIRLINES S.A. As established in Article 9 and in Article 10, part 2, of the Securities Market Law (Ley de Mercado de Valores), and in General Regulation No. 30, (Norma de Carácter General N° 30), duly empowered, I hereby report the following ESSENTIAL FACT regarding LAN Airlines S.A. (“LAN”), Securities Registry No. 306: 1. By means of Essential Fact dated December 21, 2011, it was reported that the shareholders meetings that approved the merger of LAN with Sister Holdco S.A. (“Sister Holdco”) and Holdco II S.A. (“Holdco II”), two companies specially incorporated for purposes of the proposed combination between LAN and TAM S.A. (“TAM”), had occurred. If Holdco II successfully completes an exchange offer for the shares of TAM (including those represented by American Depositary Shares – ADSs – of TAM), both Sister Holdco and Holdco II will be merged into LAN (the “Merger”), with LAN continuing as the surviving entity of the Merger. Prior to the Merger, Sister Holdco will hold the shares of TAM contributed by the controlling shareholders of TAM, and Holdco II will hold the shares and ADSs of TAM acquired pursuant to the exchange offer. 2. By means of Essential Fact dated May 10, 2012, it was reported that Holdco II S.A. (“Holdco II”) and LAN had commenced in the República Federativa de Brazil (“Brazil”) and in the United States of America (“USA”) an exchange offer (the “Exchange Offer”) for all the outstanding TAM shares (including those represented by TAM ADSs) other than those held by the controlling shareholders of TAM, in exchange for Holdco II shares, and ultimately, for LAN shares (the latter as legal successor of Holdco II due to the effectiveness of the Merger), in the form of Brazilian Depositary Receipts - BDRs - in Brazil, and American Depositary Receipts - ADRs – in the USA. 3. The Exchange Offer was subject to minimum conditions of acceptance for its success and certain other conditions. 4. Prior to the expiration of the Exchange Offer, the acceptances received, together with the shares held by the controlling shareholders of TAM, account for 147,836,864 TAM shares (including those represented by TAM ADSs), which correspond to 94.4% of the TAM shares in circulation, amount which is less than the acceptances required to satisfy the squeeze- out condition. Unless this condition is satisfied, TAM cannot mandatorily redeem all of the TAM shares not offered for acceptance in the Exchange Offer or contributed by the controlling shareholders of TAM. 5. In order to proceed with the proposed association between LAN and TAM, on this date the board of directors of LAN has authorized the company to waive, and LAN has waived, the squeeze-out condition. As a result of this waiver, in accordance with Brazilian laws, the period of the Exchange Offer will be extended for 10 calendar days. 6. Therefore, subject to the satisfaction of the other completion conditions set forth in the Exchange Offer documents, the auction that was originally scheduled for today in BM&FBOVESPA 2012 ResultsANNUAL REPORT20122 9 S.A. - Bolsa de Valores, Mercadorias e Futuros has been postponed until 9:00 am, Santiago and New York time (10:00 am, Sao Paulo time), of June 22, 2012. 3. 10/05/2012 - 5:31 OTHERS / LAN AIRLINES S.A. As established in Article 9 and in Article 10, part 2, of the Securities Market Law (Ley de Mercado de Valores), and in General Regulation 30, (la Norma de Carácter General N° 30), duly empowered, I hereby report the following ESSENTIAL FACT regarding LAN Airlines S.A. (“LAN”), Securities Registry Nº 306: 1. We refer to the Essential Facts dated May 7 and 9, 2012, in which we informed that Holdco II S.A. (“Holdco II”) and LAN obtained the required registrations and authorizations in the Federative Republic of Brazil (“Brazil”) and in the United States of America (“USA”) to carry out the offer to exchange shares of TAM S.A. (“TAM”) initially for Holdco II shares and ultimately for LAN shares (as Holdco II will merge into LAN, with LAN being the legal successor of Holdco II), in the form of Brazilian Depositary Receipts – BDRs – in Brazil and American Depositary Receipts – ADRs – in the USA. 2. In addition to the information previously mentioned, in view of the registrations and authorizations obtained in Brazil and in the USA, and having obtained further authorizations in other jurisdictions, including the resolution of the Chilean Antitrust Court (Tribunal de Defensa de la Libre Competencia) dated September 21, 2011, which was upheld by the Supreme Court of Chile (Excelentísima Corte Suprema) on April 5, 2012, and the registration for the issuance of LAN shares in your Superintendency under N° 955 dated April 17, 2012, on this date Holdco II and LAN have commenced the exchange offer for TAM shares simultaneously in Brazil and in the USA. The exchange offer shall remain open until 5:00 pm, New York time (6:00 pm, Sao Paulo time) on June 11, 2012 and the auction will be held on BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros, at 9:00 am, New York time (10:00 am, Sao Paulo time) on June 12, 2012. The documents related to the exchange offer can be found in the corporate Internet websites www.lan.com, www.tam.com.br, and www.latamairlines.com, and in the Internet websites of the Brazilian and US securities authorities, www.cvm.gov. br and www.sec.gov. respectively, 09/05/2012 - 17:11 OTHERS / LAN AIRLINES S.A. As established in Article 9 and in Article 10, part 2, of the Securities Market Law (Ley de Mercado de Valores), and in General Regulation 30, (la Norma de Carácter General N° 30), duly empowered, I hereby report the following ESSENTIAL FACT regarding LAN Airlines S.A. (“LAN”), Securities Registry Nº 306: 1. On S.A., January 18, 2011, LAN, Costa Verde Aeronáutica Inversiones Mineras del Cantábrico S.A., TAM S.A. (“TAM”), TAM Empreendimentos e Participações S.A., and Messrs Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro, and João Francisco Amaro signed contracts written language, referred to as Implementation Agreement, and (b) Exchange Offer Agreement (the “Executed Contracts”, including subsequent amendments thereto) containing the definitive terms and conditions for the proposed merger between LAN and TAM. in the English (a) 2. On December 21, 2011, shareholders’ meetings were held authorizing the merger of LAN with the companies Sister Holdco S.A. (“Sister Holdco”) and Holdco II S.A. (“Holdco II”), two companies incorporated specifically for the purposes of the proposed combination of LAN and TAM. If Holdco II successfully completes the first-step exchange offer for TAM shares (including those represented by TAM ADSs) contemplated by the Executed Contracts (the “Exchange Offer”), each of Sister Holdco and Holdco II will merge with and into LAN (the “Mergers”) and LAN will be the surviving company of each Merger. Prior to the Mergers, Sister Holdco will hold TAM shares contributed by the controlling shareholders of TAM and Holdco II will hold TAM shares and TAM ADSs acquired in the Exchange Offer. 2012 ResultsANNUAL REPORT20123 9 3. In accordance with the steps set forth in the Executed Contracts: • • • • • • Holdco II and LAN filed with the (“USA”) United States of America securities authority, the Securities and Exchange Commission (the “SEC”), the registration statement under the US Securities Act of 1933 referred to as the Registration Statement on Form F-4 (Registration No. 333-177984) (“Form F-4”) regarding the Exchange Offer and Merger in order to register the offer and sale of the Holdco II shares to be issued in the Exchange Offer and the LAN shares to be issued in the Mergers (in the form of American Depositary Receipts – ADRs) to US shareholders of TAM. The Form F-4 contains an offer to exchange/prospectus which sets forth the terms and conditions of the Exchange Offer and Mergers which will be mailed to US shareholders of TAM The Form F-4 can be found in the websites www.lan.com, www.tam. com.br, www.latamairlines.com, and www.sec.gov. On May 7, 2012, Holdco II and LAN filed a request with the SEC to accelerate the effectiveness of the Form F-4 to 10:00 a.m., New York time, on May 9, 2012. At 10:00 a.m., New York time, on May 9, 2012, the SEC declared the Form F-4 effective, which will permit Holdco II and LAN to commence the Exchange Offer in the USA. As previously informed by Essential Fact dated May 7, 2012, on that date the securities authorities and the stock exchange of the Federative Republic (“Brazil”) provided their of Brazil authorization for the corresponding registration of the Exchange Offer in Brazil. The Exchange Offer, according to the applicable regulations in Brazil, must be launched in Brazil within 10 days following the registration date and will be launched simultaneously in the USA. 07/05/2012 - 17:57 OTHERS / LAN AIRLINES S.A. As established in Article 9 and in Article 10, part 2, of the Securities Market Law (Ley de Mercado de Valores), and in General Regulation 30, (la Norma de Carácter General N° 30), duly empowered, I hereby report the following ESSENTIAL FACT regarding LAN Airlines S.A. (“LAN”), Securities Registry Nº 306: 1. On S.A., January 18, 2011, LAN, Costa Verde Inversiones Mineras Aeronáutica del Cantábrico S.A., TAM S.A. (“TAM”), TAM Empreendimentos e Participações S.A., and Messrs. Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro, and João Francisco Amaro signed contracts written language, referred to as Implementation Agreement, and (b) Exchange Offer Agreement (the “Executed Contracts”, including subsequent amendments thereto) containing the definitive terms and conditions for the proposed combination of LAN and TAM. in the English (a) 2. On December 21, 2011, shareholders’ meetings were held authorizing the merger of LAN with the companies Sister Holdco S.A. (“Sister Holdco”) and Holdco II S.A. (“Holdco II”), two companies incorporated specifically for the purposes of the proposed combination of LAN and TAM. If Holdco II successfully completes the first-step exchange offer for TAM shares (including those represented by TAM ADSs) contemplated by the Executed Contracts, each of Sister Holdco and Holdco II will merge with and into LAN (the “Mergers”) and LAN will be the surviving company of each Merger. Prior to the Mergers, Sister Holdco will hold TAM shares contributed by the controlling shareholders of TAM and Holdco II will hold TAM shares and TAM ADSs acquired in the exchange offer. 2012 ResultsANNUAL REPORT20124 9 3. • • • • In accordance with the steps set forth in the Executed Contracts: a to request LAN and Itaú Corretora de Valores S.A. (“Itaú Corretora”), in its capacity as a depositary organization, made the exchange authorities and stock exchange in the Federative Republic of Brazil, to wit, theComissão de Valores Mobiliários (the “CVM”) and BM&FBOVESPA S.A.—Bolsa de Valores, Mercadorias e Futuros (the “BM&FBOVESPA”), for the registration of a Programa de Certificados de Depósito de Ações Ordinárias de Emissão by LAN, also known as a Brazilian Depositary Receipts (“BDRs”) program. Furthermore, on February 27, 2012, LAN and Itaú Corretora signed a contract written in the Portuguese language referred to as Contrato de Prestação de Serviços de Emissão e Escrituração de BDRs, which, subject to receipt of the registration mentioned in the preceding paragraph, regulates the issuance of the BDRs and designates Banco Itaú Chile as the share custodian. On May 7, 2012, the CVM granted authorization for the corresponding registration of the LAN BDR program, which was assigned the ticker symbol “LATM11”. Trading of the BDRs would commence on the business day following the completion of the Exchange Offer in Brazil (as defined in the following paragraphs). Furthermore, Holdco II, LAN, and Banco Itaú BBA S.A., the latter acting through Itaú Corretora, made a request to CVM and BM&FBOVESPA for the registration of the offer for the exchange of TAM shares in Brazil initially for Holdco II shares and ultimately for LAN shares (as LAN will be the legal successor of Holdco II after the Mergers) in the form of BDRs, and cancellation of the registration of TAM as a company listed on the BM&FBOVESPA (the “Exchange Offer in Brazil”). de Oferta Pública de Permuta de Ações para Cancelamento de Registro de Companhia Aberta e Consequente Saída do Nível 2 de Governança Corporativa da BM&FBOVESPA regarding TAM (the “Edital”). • • The Edital can be found in the websites www. lan.com, www.tam.com.br, www.latamairlines. com and www.cvm.gov.br. On May 7, 2012, the CVM and BM&FBOVESPA granted authorization for the corresponding registration of the Exchange Offer in Brazil which, according to applicable regulations in Brazil, must commence within the following 10 days. 26/04/2012 - 18:16 DISTRIBUTION OF PROFITS (PAYMENT OF DIVIDENDS) / LAN AIRLINES S.A. As provided in Articles 9 and 10 of Securities Market Law 18045 and in General Rule #30 of the Commission of 1989, please be advised that at a Regular Shareholders Meeting of Lan Airlines S.A. (LAN) held April 26, 2012, LAN’s shareholders approved payment of the final dividend proposed by the Board at its meeting held April 24, 2012, consisting of the distribution of 50% of the 2011 fiscal year profits, equal to US$160,098,330.74. The two interim dividends #44 and #45 will be imputed toward this dividend, which, combined, amount to US$141,635,532.96 and were disclosed and paid previously by LAN. Consequently, US$18,461,735.07 will be effectively distributed, equal to US$0.05414 per share, payable starting May 17, 2012. All shareholders who are shareholders on the fifth business day prior to that date will be entitled to this dividend. In compliance with Circular #660 of 1986, enclosed please find Appendix 1 that describes this dividend in detail. • The terms and conditions of the Exchange Offer in Brazil will be reflected in the Edital 2012 ResultsANNUAL REPORT20125 9 26/04/2012 - 18:15 DISTRIBUTION OF PROFITS (PAYMENT OF DIVIDENDS) /LAN AIRLINES S.A. As provided in Articles 9 and 10 of Securities Market Law 18045 and in General Rule #30 of the Commission of 1989, please be advised that at a Regular Shareholders Meeting (Meeting) of Lan Airlines S.A. (LAN) held April 26, 2012, LAN’s shareholders elected the members of LAN’s Board of Directors, who will hold office for two years. 1. 2. approval of the annual report, balance sheet and financial statements of the Company for the fiscal year ending December 31, 2011; approval of the payment of a final dividend on account of the 2011 fiscal year profits. The interim dividends of US$0.116677 and US$0.24988 per share, paid in September 2011 and January 2012, must be imputed toward that sum; 3. the election of the Company’s Board of Directors; The following individuals were elected Directors at the Meeting: 4. • • • • • • • • • Juan José Cueto Plaza; José Cox Donoso; Darío Calderón González; Carlos Heller Solari; Ramón Eblen Kadis; Jorge Alberto Awad Mehech; Bernardo Fontaine Talavera; Juan Gerardo Jofré Miranda; y Jorge Salvatierra Pacheco The Directors named in numbers 6, 7, 8 and 9 above were elected as independent directors, according to article 50-bis of Companies Law 18,046. 27/03/2012 - 18:25 ORDINARY SHAREHOLDERS MEETING, NOTICES, AGREEMENTS AND PROPOSALS / LAN AIRLINES S.A. As provided in Articles 9 and 10 of Securities Market Law and in General Rule #30, under due authorization, please be advised that at a Regular Meeting held March 27, 2012, the Board of Directors of Lan Airlines S.A. (hereinafter the “Company”) resolved to convene a Regular Shareholders Meeting at 10:30 a.m. on April 26, 2012 to discuss the following matters: the compensation to be paid to the Company’s Board of Directors for the fiscal year ending December 31, 2012; the compensation to be paid to the Company’s Audit Committee and its budget for the fiscal year ending December 31, 2012; the appointment of the external auditing firm and risk rating agencies for the Company; and the reports on the matters indicated in Title XVI of Companies Law 18,046; information on the cost of processing, printing and sending the in Circular 1816 of the Securities and Insurance Commission; information indicated 5. 6. 7. 8. designation of the newspaper in which the Company will make publications; and 9. other matters of corporate interest within the purview of a Regular Shareholders Meeting of the Company. 31/01/2012 - 18:04 OTHERS / LAN AIRLINES S.A. Pursuant to article 9 and the second subparagraph of article 10 of Securities Market Law 18045 and General Rule No. 30 of the Securities and Insurance Commission, under due authority and accordingly to the board of Directors meeting held on January 31st, 2012, please be advised of the following MATERIAL EVENT of Lan Airlines S.A. (“LAN”), Securities Register N° 306: 2012 ResultsANNUAL REPORT20126 9 On this date, notwithstanding the forwarding of the corresponding FECU within the pertinent deadline, the Audit Committee and Board of Directors of LAN Airlines S.A. have approved publication, as a material event, of the financial information enclosed herewith. This information corresponds to summary financial information on the income statement and consolidated balance sheet of the company and also includes a qualitative explanation of the operating performance for year 2011 as well as for the fourth quarter ending December 31st, 2011. Please note that LAN Airlines S.A. will provide this financial information to its shareholders, investors and the market in general for the purpose of (i) providing them truthful, sufficient and timely information in advance of the delivery of the respective FECU within the applicable deadlines; (ii) complying with the deadline for delivery of financial information to the market, investors and analysts, as has been the practice of LAN Airlines S.A. in recent years; and (iii) keeping our shareholders, investors and the market in general adequately informed through the delivery of financial information on LAN Airlines S.A. according to IFRS. Finally, this financial information does not supersede or modify the corresponding FECU according to IFRS, which will be delivered for the purposes of year 2011 within the deadlines stipulated in the rules of the Securities and Insurance Commission. 12/01/2012 - 19:29 OTHERS / LAN AIRLINES S.A. As provided in Article 9, in the second subparagraph of Article 10 of Securities Market Law and in General Rule #30, under due authorization granted at the Board Meeting held January 12, 2012, I hereby DISCLOSE the following material event of LAN Airlines S.A. (“LAN”), Securities Registration #306: 1. As reported to investors and to the market at large upon the merger of LAN and TAM S.A. (“TAM”), once the merger is perfected, it should create annually synergies for approximately US$400 million. Overall, those synergies will come in equal proportions from an alignment of the passenger networks, a growth in the coverage of cargo operations (internationally and in Brazil) and cost reductions. Approximately one-third of the synergies should be achieved during the first year after the process is closed and all by the end of the third year. 2. Because of the decision by the Antitrust Court on September 21, 2001, which approved the merger of both companies subject to fulfillment of certain conditions, investors and the market were later informed that the impact on minor synergies given those mitigative measures would be no more than US$10 million annually. The previously announced figure of US$400 million annually would be reduced by that amount. 3. According to evaluations made in the last 10 weeks together with McKinsey & Company and Bain & Company, consultants, the combined synergies after consummation of the merger of LAN and TAM have been estimated to increase the operating income of the new company, LATAM Airlines Group S.A. (“LATAM”), over time by US$600 million to US$700 million, before depreciation and taxes, by the fourth year after the merger is complete. This new estimation is a reflection of the revision and adjustment of combined cost savings and of income– generating opportunities resulting from the merger between LAN and TAM. It includes the benefits of transferring the best practices identified in certain areas. From US$170 million to US$200 million of the total of this new estimation of synergies are expected to be attained during the first year after the merger is complete. 4. It is predicted that 40% of the potential synergies in this new estimation of the synergies from the merger of LAN and TAM would also come from an increase in passenger income, 20% from an increase in cargo income, and the remaining 40% from cost-savings synergies. 5. A press release and investor release sent by LAN according to the Manual on Handling Information of Interest of LAN is attached, which was sent simultaneous to this disclosure. It describes how the aforesaid potential synergies will be created and segmented. This 2012 ResultsANNUAL REPORT2012 7 9 information is provided subject to the legends and cautions contained in that release, which are an essential part of the same. 2012 ResultsANNUAL REPORT20128 9 2012 RESULTS / RISK FACTORS RISKS RELATED TO OUR OPERATIONS AND THE AIRLINE INDUSTRY Our performance depends significantly on the economic situation in the countries where we operate. Adverse economic conditions in these countries could have an adverse impact on our business. Its success depends on key regulatory issues that can negatively affect our business and operating results. We depend on strategic alliances and commercial relations in many countries in which we operate and our business could be negatively impacted if any of these strategic alliances or commercial relations were terminated. Our businesses and operating results could be negatively affected if we ceased to obtain and maintain routes, suitable airport access and slots and other operating permits. Our businesses and the market value of our ADRs and common shares would suffer if we were unable to implement our growth strategy successfully. Our businesses could be negatively affected by a downturn in the commercial aviation industry as a result of exogenous events that affect travel habits or raise costs, such as epidemics, wars or terrorist attacks. A relatively limited range of products accounts for a considerable part of our cargo revenues which could be affected by events impacting their production or sale. high daily rate of aircraft utilization in order to increase our revenues and this makes us particularly vulnerable to delays. We fly Airbus and Boeing aircraft and depend on these companies. As a result, our business is at risk if we do not receive opportune delivery of aircraft, if aircraft are not available from these companies or if the public has a negative perception of our aircraft. We are frequently affected by certain factors beyond our control such as weather conditions that affect our operations. Losses and liabilities caused by accidents affecting one or more aircraft could have a significant impact on our businesses. The intense competition in the airline industry can adversely affect our level of operations. Some of our competitors could receive external support with a negative impact on our competitive position. If, in future, we are unable to incorporate leased aircraft into our fleet at acceptable prices and conditions, our business could suffer. Our operations are subject to fluctuations in the supply and cost of jet fuel, which could negatively affect our businesses. We rely on maintaining a We are incorporating a number of technologies and new equipment and their phase-in could have 2012 ResultsANNUAL REPORT20129 9 a negative impact on our service and operating standards. RISKS RELATED TO OUR COMMON SHARES AND ADRs Our business could be adversely affected if we were unable to cover our important future financing requirements. Our business could be negatively affected by our high borrowing level and aircraft leasing liabilities as compared to our equity. Higher insurance costs and/or significant reductions in its coverage could negatively affect our financial situation and the results of our operations. Problems in air control systems or other technical failures could disrupt our operations and have a significant adverse effect on our business. Our controlling shareholders may have interests that differ from those of our other shareholders. A limited number of our ADRs and common shares have been placed on the market and could experience further illiquidity and price volatility. Holders of our ADRs could be adversely affected by currency devaluations and exchange-rate fluctuations. Future changes in Chile’s foreign investment controls and withholding taxes could negatively affect non-residents in Chile who invest in our shares. Holders of our ADRs could, in certain circumstances, be unable to exercise their preferential rights. Our financial success depends on the availability and performance of key personnel, who are not subject to non-competition restrictions. There can be negative consequences for our business if we are unable to reach satisfactory collective bargaining agreements with our unionized employees. Pressure from employees could cause operational difficulties and negatively affect our business. Increases in labor costs, which represent a significant part of our operating costs, could directly affect our earnings. We may experience difficulties in finding, training and retaining employees. A failure on our part to comply with the applicable environment regulation could adversely affect our business and reputation. RISKS INHERENT TO CHILE AND OTHER EMERGING MARKETS Events in Latin American countries and other emerging markets could adversely affect the Chilean economy, negatively impact our business and operating results and cause a drop in the market price of our common shares and ADRs. Fluctuations in the value of the Chilean peso and the currencies of other countries where we operate could adversely affect our revenues and profitability. We are not obliged to disclose as much information to our investors as US issuers and you may, therefore, receive less information than from a comparable US company. 2012 ResultsANNUAL REPORT2012 SUSTAINABILITY LATAM AIRLINES GROUP S.A. Tereza Alcantara TAM Brasil Alfredo Perilla LAN Ecuador 1 0 1 SUSTAINABILITY / LAN At LAN, we are aware of our role as an agent with an impact on society, the environment and economic development. For this reason, the Company has, since 2011, had in place a sustainability strategy comprising eight spheres which, as a company, we consider it a priority to address and which represent the concrete way in which we contribute to sustainable development. OPERATIONAL EXCELLENCE • • • Host: We changed LAN’s booking, inventory and passenger check-in system without any interruption of our operations or significant impact on clients. Risk Management: We have created a special integrated risk management area with a financial approach. Boeing 787 Dreamliners: The arrival of our first three B-787s is the fruit of our efforts to increase the efficiency and environmental friendliness of our fleet. ETHICS AND GOVERNANCE • • Ethics point: We have implemented a platform that allows our collaborators to make enquiries and report complaints anonymously. Global Compact: As LATAM Airlines Group, we have signed the UN Global Compact in a demonstration of our commitment to adhering in our strategies and operations to its ten principles (relating to human rights and labor, SustainabilityANNUAL REPORT20122 0 1 environmental and anti-corruption practices). OUR PEOPLE • • • 193 corporate volunteers: In 2012, 193 volunteers reforested green areas in the cities of Buenos Aires, Guayaquil and Santiago. Employees: LAN has a total of 23,721 employees of whom 42.8% are women and 57.2% are men. 1,022,140 hours of training: Our Corporate Academy provided 1,022,140 hours of training to a total of 21,006 employees in 2012, representing an investment of US$31.13 million. ENVIRONMENT • • • Biofuel: We carried out South America’s first commercial flight using biofuel and support the Roadmap Chile Bio Renovables initiative. By managing fuel use on our flights, we have gradually reduced CO2 emissions per unit transported. In 2012, we emitted 72.09 kg of CO2/100 RTK. The carbon footprint of our subsidiary in Perú was certified by the Spanish Normalization and Certification Association (AENOR). • We are members of the IATA Environmental Assessment (IEnvA) Program, an environmental management system designed specially for the airline industry. • CO2 calculator: We posted a CO2 calculator on www.lancargo.com with which it is possible to calculate the impact of the movement of cargo. SAFETY • • 1,489 employees are volunteers with the Assistance to Passengers and their Families (APF) Program. IOSA: LAN and Operational Safety Audit (IOSA) certification. its subsidiaries have IATA SustainabilityANNUAL REPORT20123 0 1 • Zero accidents: Since 1991, no flight has suffered an accident that has resulted in serious injury to passengers or crew or serious damage to an aircraft. SUPPLIERS • • • 81.2% of expenditure on global corporate procurement went to suppliers in Argentina, Chile, Colombia, Ecuador and Perú, the countries we have domestic operations. Four groups of suppliers: We classify our suppliers into four groups: aircraft suppliers, suppliers of inputs and fuel, in-flight suppliers and suppliers of general goods and services. Sustainable suppliers: In 2012, we worked to draw up a supplier policy that incorporates sustainability issues. COMMUNITY • • Cuido mi Destino program in 12 places: The Cuido mi destino (I look after my destination) program experienced strong growth in 2012, restoring tourist attractions in 12 places in South America, encouraging 693 young people and 107 volunteers to promote sustainable tourism. 4,331 children visit LAN: In 2012, 4,331 children had the opportunity to visit the Company’s installations and hundreds of them were able to fly for the first time, thanks to the Conociendo LAN (Getting to know LAN) programs. • Works of art and animals: In 2012, LAN Cargo transported nine elephants from Namibia to Mexico City, 83 works of art from the Guggenheim collection from Venice and New York to Santiago for the Grandes Momentos (Great Moments) exhibition and the instruments of Chile’s National Youth Symphony Orchestra to Frankfurt for its tour of Europe. • Donation of LANPASS kilometers: The donation of 1,000,000 LANPASS kilometers to three NGOs marked the launch in Chile of the option of SustainabilityANNUAL REPORT20124 0 1 donating LANPASS kilometers, without a transfer charge, to NGOs throughout Latin America that have an alliance with LAN (América Solidaria, COANIQUEM, TECHO). CARGO CLIENTS AND PASSENGERS: WE PROMOTE SOUTH AMERICA IN THE REST OF THE WORLD • • • • LAN and TAM unified their cargo operations and together transported 1.2 million tonnes of freight as well as 64.9 million passengers. LANPASS had 7.4 million members and 572,637 tickets were obtained with LANPASS kilometers. Sustainable tourism: In-flight promotion of sustainable tourism through videos, images on snacks and the In magazine. Customer rights: Campaigns were implemented in Colombia and Argentina to inform our passengers about their rights and obligations. SustainabilityANNUAL REPORT20125 0 1 SUSTAINABILITY / TAM CLIENTS We demonstrate our commitment to sustainability in order to make this apparent to clients at all points of contact from booking to boarding. • In-Flight Waste Separation: In 2012, we achieved great progress in our sustainability projects, particularly in the area of in-flight waste separation where we equipped our planes with specially adapted trolleys that have two compartments, one for organic waste and the other for recyclable waste. This initiative is part of the adjustment required to comply with new disposal procedures introduced by Infraero at São Paulo’s Congonhas Airport which we saw as an opportunity to apply waste separation to our entire domestic network. We also trained our cabin crews and other employees involved in waste collection and prepared an educational campaign for passengers. Tests showed that approximately 85% of in-flight waste is recyclable. • Media: We use our in-flight media and presence in social networks to inform clients about our sustainability practices as well as to promote the concept of sustainability, addressing issues such as sustainable tourism, conservation of the environment, diversity, social inclusion and volunteer activities. In this way, we help to give greater visibility to the campaigns and activities of the NGOs with which we have alliances whilst also strengthening our ties with them. SustainabilityANNUAL REPORT2012 6 0 1 • Awards: We received the ISTOÉ Dinheiro Award as the transport services company with the best social responsibility performance. EMPLOYEES We seek to increase our employees’ awareness of issues related to sustainability through educational and motivational activities and encourage our teams to adopt sustainable practices in their activities both within and outside the Company. • • Education: In view of our crews’ close relations with clients, we decided to create a training program on sustainability especially for them. The result was the FOCCO program, launched in 2011, which, in two years, has already trained 4,060 cabin staff. internal policy of valuing Diversity: Our diversity and non-discrimination and seeking integration account equity of people with disabilities, ethnic-racial issues, gender, age and sexual orientation. takes and We promote diversity through: (Young Aprendiz Apprentice) Jovem program: The key objective of the Young Apprentice program is to prepare young people for their professional life, providing conditions training and, by of social employability, inclusion. Over 600 young people aged between 14 and 24, who are starting their professional careers with our Company, are currently participating in the program. creating guaranteeing Inclusão (Wings of Asas da Inclusion) program: Through this program, we train people with disabilities so they can fill work posts in the Company. By 2012, a total of 319 people had received this training. VOLUNTEER ACTIVITIES • We have in place two volunteer programs SustainabilityANNUAL REPORT2012 7 0 1 developed in conjunction with international institutions: • Make a Wish: We make the dreams of terminally ill children come true. Our or seriously employees participate in this program through groups that meet to fulfill the dreams of these children and young people. • Junior Achievement: We promote classes on entrepreneurship given by volunteer employees to young people from deprived communities. In addition to these two programs, we also undertake specific activities such as campaigns to collect clothing and toys. ENVIRONMENT In order to avoid or minimize damage to the environment, we must understand and study the environmental impact of our present and future activities. At TAM, we have a plan in place to reduce emissions of greenhouse gases and the generation of waste and to protect biodiversity. • • Climate Change: We have a working group charged with reducing our emissions of greenhouse gases through education about the issue, research for the development of biofuels and our operational practices. Biofuel: On 22 November 2010, we carried out an experimental flight in a commercial aircraft using biofuel made from jatropha, an oilseed plant also used to produce biodiesel. This was the first flight of its type in Latin America and represented a milestone industry. in the history of Brazil’s airline In this experimental project, the aircraft, an Airbus A320 with a capacity for 174 passengers, took off from Río de Janeiro’s Tom Jobim International Airport and flew over the Atlantic Ocean in Brazilian airspace for 45 minutes, with 18 people on board including technicians and executives from TAM and other companies SustainabilityANNUAL REPORT2012 8 0 1 involved in the project. Brazil is already working on different lines of research and the first aircraft biofuels are expected to be ready for production in five years’ time. Through this innovative project, we have taken the first step towards the creation of a Brazilian aircraft biofuel platform. The long-term goal is to replace up to 20% of oil- based kerosene with the new biokerosene. This will represent an enormous gain from the point of view of the environment since it will allow the Company to reduce the carbon emissions of its flights by between 65% and 80%. WASTE SEPARATION, RECYCLING AND DISPOSAL • Waste Separation: We installed groups of bins for each type of waste (paper, plastic, metal, non-recyclable, etc.) at strategic places. • Recycling of Uniform: TAM is working to recycle waste with the potential for reuse. In conjunction with a specialized company, we are recycling old uniforms. • Waste Management: This is required by law and we monitor and organize disposal of the different types of waste generated by all TAM’s different activities (offices, maintenance hangars, cargo terminals and airports). By 2012, 100% of bases were managing the waste that poses the highest risk of environmental impact. • Environmental permits: The process through which an activity obtains an environmental permit or is exempted from requiring a permit is established by law. Rather than merely complying with requirements, TAM has adopted a proactive stance, investing in processes for obtaining environmental permits. In 2012, six bases completed the process and were exempted from requiring a permit while another 25 bases are engaged in the same process and awaiting the results. legal • Emissions Report: EThe fifth GHG Report was prepared in conjunction with different areas of the Company but has yet to be published. SustainabilityANNUAL REPORT2012 9 0 1 • Investors: We seek to explain to investors that our sustainability practices have a bearing on their economic interests, demonstrating that our economic results are related to the Company’s environmental and social activities. We do this through the annual publication of a Sustainability Report. COMMUNITY We undertake activities related to sustainable tourism and the environment and strive to establish close relations with the community. • • • invest resources Social Investment fund: Our private social investment has a strategic focus on the development of sustainable tourism and protection of the environment. Each year, in non-profit social we organizations such as associations, foundations and NGOs that promote these issues, with an emphasis on projects that foster tourism in hospitality, the through promotion of local culture, the mitigation of environmental impacts and conservation of the environment. The number of NGOs registering in the selection process has increased year by year. In 2013, over 200 projects were presented, up by 82% on the previous year, by a total of 110 organizations. improvements Donations: In addition to our social investment fund, we also donate surplus items from our operations and those collected through campaigns. In 2012, over 240,000 people benefited from these donations. Suppliers: We have had a project in place sustainable for the 2007. practices implementation of suppliers since by In 2012, we went on to launch a second stage of this project, drawing up a map of the more than 4,000 suppliers of TAM Linhas includes evaluation of their Aéreas. This contracts, inclusion of sustainability clauses, workshops for critical suppliers and the SustainabilityANNUAL REPORT2012 0 1 1 sustainability audits and training as well as the design of LATAM’s sustainability policy. We expect to complete this project during the first half of 2013. SustainabilityANNUAL REPORT2012CONSOLIDATED FINANCIAL STATEMENTS LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES DECEMBER 31, 2012 CONTENTS > Consolidated Statement of Financial Position > Consolidated Statement of Income by Function > Consolidated Statement of Comprehensive Income > Consolidated Statement of Changes in Equity > Consolidated Statement of Cash Flows - Direct Method > Notes to the Consolidated Financial Statements - CLP - ARS - US$ - THUS$ - COP BRL/R$ - - THR$ CHILEAN PESO ARGENTINE PESO UNITED STATES DOLLAR THOUSANDS OF UNITED STATES DOLLARS COLOMBIAN PESO BRAZILIAN REAL THOUSANDS OF BRAZILIAN REAL NOTES NOTE 1. General information NOTE 2. Summary of significant accounting policies 2.1. Preparation 2.2. Consolidation 2.3. Foreign currency transactions 2.4. Property, plant and equipment 2.5. Intangible assets other than goodwill 2.6. Goodwill 2.7. Borrowing costs 2.8. Losses for impairment of non-financial assets 2.9. Financial assets 2.10. Derivative financial instruments and hedging activities 2.11. Inventories 2.12. Trade and other accounts receivable 2.13. Cash and cash equivalents 2.14. Capital 2.15. Trade and other accounts payables 2.16. Interest-bearing loans 2.17. Deferred taxes 2.18. Employee benefits 2.19. Provisions 2.20. Revenue recognition 2.21. Leases 2.22. Non-current assets (or disposal groups) classified as held for sale 2.23. Maintenance 2.24. Environmental costs NOTE 3. Financial risk management 3.1. Financial risk factors 3.2. Capital risk management 3.3. Estimates of fair value NOTE 4. Accounting estimates and judgments NOTE 5. Segmental information NOTE 6 . Cash and cash equivalents NOTE 7. Financial instruments 13 19 19 24 25 25 26 26 26 26 27 28 29 29 29 29 29 29 29 30 30 30 31 31 31 31 32 32 43 44 48 49 51 53 7.1. Financial instruments by category 7.2. Financial instruments by currency NOTE 8. Trade, other accounts receivable and non-current accounts receivable NOTE 9. Accounts receivable from/payable to related entities NOTE 10. Inventories NOTE 11. Tax assets NOTE 12. Other financial assets NOTE 13. Other non-financial assets NOTE 14. Non current assets (or disposal groups) classified as held for sale NOTE 15. Investments in subsidiaries NOTE 16. Equity accounted investments NOTE 17. Intangible assets other than goodwill NOTE 18. Goodwill and bussines combination 18.1. Goodwill 18.2. Business Combination NOTE 19. Property, plant and equipment NOTE 20. Taxes and deferred tax NOTE 21. Other financial liabilities NOTE 22. Trade and other accounts payables NOTE 23. Other provisions NOTE 24. Tax liabilities NOTEE 25. Other non-financial liabilities NOTE 26. Employee benefits NOTE 27. Accounts payable non-current NOTE 28. Equity NOTE 29. Revenue NOTE 30. Costs and expenses by nature NOTE 31. Gains (losses) on the sale of non-current assets not classified as held for sale NOTE 32. Other income, by function NOTE 33. Foreign currency and exchange rate differences NOTE 34. Earnings per share NOTE 35. Contingencies NOTE 36. Commitments NOTE 37. Transactions with related parties NOTE 38. Share-based payments NOTE 39. The environment NOTE 40. Events subsequent to the date of the financial statements SUBSIDIARIES AND AFFILIATED COMPANIES 53 55 56 60 62 63 64 66 67 68 71 75 77 77 78 84 94 99 111 113 116 117 118 119 120 126 127 129 130 131 134 139 149 155 158 161 162 167 6 1 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A CONSOLIDATED STATEMENT OF FINANCIAL POSITION LATAM AIRLINES GROUP S.A AND SUBSIDIARIES Assets CURRENT ASSETS Cash and cash equivalents Other financial assets Other non-financial assets Trade and other accounts receivable Accounts receivable from related entities Inventories Tax assets TOTAL CURRENT ASSETS OTHER THAN NON-CURRENT ASSETS (OR DISPOSAL GROUPS) CLASSIFIED AS HELD FOR SALE OR AS HELD FOR DISTRIBUTION TO OWNERS NON-CURRENT ASSETS (OR DISPOSAL GROUPS) CLASSIFIED AS HELD FOR SALE OR AS HELD FOR DISTRIBUTION TO OWNERS TOTAL CURRENT ASSETS NON-CURRENT ASSETS Other financial assets Other non-financial assets Accounts receivable Equity accounted investments Intangible assets other than goodwill Goodwill Property, plant and equipment Current tax assets, long term portion Deferred tax assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS Note 6 - 7 7 - 12 13 7 - 8 7 - 9 10 11 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 650,263 636,543 169,824 1,426,330 15,187 181,283 220,529 374,407 227,803 32,711 531,355 838 72,787 98,789 3,299,959 1,338,690 14 47,655 4,661 3,347,614 1,343,351 7 - 12 13 7 - 8 16 17 18 19 11 20 74,095 243,905 50,612 3,757 1,848,593 3,008,657 21,833 15,205 7,491 991 64,923 163,777 11,797,889 5,927,982 73,516 144,629 42,958 60,148 17,245,653 6,305,308 20,593,267 7,648,659 The accompanying Notes 1 to 40 form an integral part of these consolidated financial statements. 7 1 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A CONSOLIDATED STATEMENT OF FINANCIAL POSITION LATAM AIRLINES GROUP S.A AN D SUBSIDIARIES Liabilities and Equity LIABILITIES Other financial liabilities Trade and other accounts payables Accounts payable to related entities Other provisions Tax liabilities Other non-financial liabilities TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Other financial liabilities Accounts payable Other provisions Deferred tax liabilities Employee benefits Other non-financial liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES EQUITY Share capital Retained earnings Treasury Shares Other reserves Parent’s ownership interest Non-controlling interest TOTAL EQUITY Note 7 - 21 7 - 22 7 - 9 23 24 25 7 - 21 7 - 27 23 20 26 25 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 2,047,330 1,652,955 274 21,719 115,481 582.257 645.086 367 7.363 29.369 1,942,530 1.057.637 5,780,289 2.322.079 7,698,857 3,109,136 731.235 536,334 558,049 18,366 101,321 354,930 22,385 369,625 13,132 - 9,644,162 3,869,208 15,424,451 6,191,287 Note As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 28 28 28 28 1,501,018 473,907 1,106,168 1,116,798 (203) - 2,535,100 (145,381) 5,142,083 1,445,324 26,733 12,048 5,168,816 1,457,372 TOTAL LIABILITIES AND EQUITY 20,593,267 7,648,659 The accompanying Notes 1 to 40 form an integral part of these consolidated financial statements. 8 1 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A CONSOLIDATED STATEMENT OF INCOME BY FUNCTION LATAM AIRLINES GROUP S.A AND SUBSIDIARIES Revenue Cost of sales GROSS MARGIN Other income Distribution costs Administrative expenses Other expenses Other gains/(losses) GAINS (LOSSES) FROM OPERATING ACTIVITIES Financial income Financial costs Equity accounted earnings Foreign exchange gains/(losses) Result of indexation units INCOME BEFORE TAXES INCOME TAX EXPENSE Net income for the period Income attributable to owners of the parent Income attributable to non-controlling interest For the Periods ended December 31, Note 2012 2011 ThUS$ ThUS$ 29 9,722,189 5,585,440 (7,642,643) (4,078,598) 32 30 16 33 20 2,079,546 1,506,842 220,156 (803,619) (869,504) (311,753) (38,750) 132,804 (479,829) (405,716) (214,411) (33,039) 276.076 506.651 77,489 14,453 (294,598) (139,077) 972 66,685 (22) 126,602 (102,212) 24,390 10,956 13,434 458 (256) 131 382,360 (61,789) 320,571 320,197 374 NET INCOME FOR THE PERIOD 24,390 320,571 EARNINGS PER SHARE Basic earnings per share (US$) Diluted earnings per share (US$) 34 34 0.02657 0.02657 0.94335 0.94260 The accompanying Notes 1 to 40 form an integral part of these consolidated financial statements. 9 1 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME LATAM AIRLINES GROUP S.A AND SUBSIDIARIES NET INCOME Components of other comprehensive income, before taxes Currency translation differences Gains (losses) on currency translation, before tax Other comprehensive income, before taxes, currency translation differences Cash flow hedges Gains (losses) on cash flow hedges before tax Other comprehensive income, before taxes, cash flow hedges Other components of other comprehensive income, before taxes INCOME TAX RELATING TO OTHER COMPREHENSIVE INCOME Income tax related to currency translation differences in other comprehensive income Income tax related to cash flow hedges in other comprehensive income Amount of income taxes related to components of other comprehensive income Other comprehensive income TOTAL COMPREHENSIVE INCOME Comprehensive income attributable to: Comprehensive income attributable to owners of the parent Comprehensive income attributable to non-controlling interest For the Periods ended December 31, Note 2012 2011 ThUS$ ThUS$ 24,390 320,571 33 21 20 20 18,692 18,692 (2,510) (2,510) 16,182 (2,734) (2,623) (5,357) 10,825 35,215 27,673 7,542 (10,864) (10,864) (40,368) (40,368) (51,232) 1,846 6,862 8,708 (42,524) 278,047 277,631 416 TOTAL COMPREHENSIVE INCOME 35,215 278,047 The accompanying Notes 1 to 40 form an integral part of these consolidated financial statements. 0 2 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T CONSOLIDATED STATEMENT OF CHANGES IN EQUITY LATAM AIRLINES GROUP S.A AND SUBSIDIARIES y t i u q e l a t o T g n i l l o r t n o c n o N t s e r e t n i s ’ t n e r a P p i h s r e n w o t s e r e t n i d e n i a t e R s g n i n r a e w o fl h s a C g n i g d e h e v r e s e r y c n e r r u C n o i t a l s n a r t e v r e s e r y r d n u s r e h t O e v r e s e r y r u s a e r T s e r a h s e r a h S l a t i p a C e t o N t n e r a p e h t f o s r e n w o o t e l b a t u b i r t t A s e v r e s e r r e h t o n i s e g n a h C The accompanying Notes 1 to 40 form an integral part of these consolidated financial statements. , 2 7 3 7 5 4 1 , 0 9 3 4 2 , 5 2 8 0 1 , 5 1 2 , 5 3 ) 3 0 2 ( ) 9 4 7 1 2 ( , , 3 1 3 6 9 6 3 , 8 4 0 2 1 , 4 3 4 3 1 , ) 2 9 8 5 ( , 2 4 5 , 7 - - - , 4 2 3 5 4 4 1 , 6 5 9 0 1 , 7 1 7 6 1 , 3 7 6 , 7 2 , 3 1 3 6 9 6 3 , - 6 5 9 0 1 , 6 5 9 , 0 1 - ) 3 0 2 ( - ) 9 4 7 1 2 ( , ) 9 4 7 1 2 ( , , 8 9 7 6 1 1 1 . ) 6 5 5 0 4 1 ( , ) 7 1 3 3 1 ( , 2 9 4 8 , - ) 4 7 1 ( ) 4 7 1 ( - - - - - - - - - - - 1 9 8 6 1 , 1 9 8 , 6 1 - - - - - , 2 9 6 5 6 6 2 , - - - - - - ) 3 0 2 ( 7 0 9 3 7 4 , 2 1 0 2 , 1 y r a u n a J f o s a y t i u q E - - - 8 2 ) s e s s o l ( n i a G y t i u q e n i ) e s a e r c e d ( e s a e r c n i l a t o T e m o c n i e v i s n e h e r p m o C E M O C N I E V I S N E H E R P M O C L A T O T e m o c n i e v i s n e h e r p m o c r e h t O - - , 1 2 6 0 3 0 1 , 8 2 8 2 8 3 8 2 - s e r a h s y r u s a e r t h t i w s n o i t c a s n a r t h g u o r h t ) e s a e r c e d ( e s a e r c n I h g u o r h t ) e s a e r c e d ( e s a e r c n I e c n a u s s i y t i u q E s d n e d i v i D l s r e d o h e r a h s h t i w s n o i t c a s n a r T 8 6 8 1 , 9 2 2 , 6 7 6 , 3 3 4 1 7 , 3 4 1 , 7 ) 5 7 2 5 ( , 3 6 1 6 8 0 , 9 6 6 , 3 ) 6 8 5 , 1 2 ( ) 8 2 9 1 ( , - ) 0 1 5 3 ( , 8 3 8 2 - y t i u q e , s e g n a h c r e h t o d n a s r e f s n a r t 4 6 7 , 3 6 6 , 2 ) 3 0 2 ( 1 1 1 , 7 2 0 , 1 H T I W S N O I T C A S N A R T L A T O T S R E D L O H E R A H S 6 1 8 , 8 6 1 , 5 3 3 7 , 6 2 3 8 0 , 2 4 1 , 5 8 6 1 , 6 0 1 , 1 ) 0 3 7 , 0 4 1 ( 4 7 5 , 3 6 5 2 , 2 7 6 , 2 ) 3 0 2 ( 8 1 0 , 1 0 5 , 1 T N E R R U C F O S A E C N A L A B G N I S O L C S E C N A L A B G N D N E R A E Y I 2 1 0 2 , 1 3 R E B M E C E D 1 2 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A CONSOLIDATED STATEMENT OF CHANGES IN EQUITY LATAM AIRLINES GROUP S.A AND SUBSIDIARIES y t i u q e l a t o T g n i l l o r t n o c n o N t s e r e t n i s ’ t n e r a P p i h s r e n w o t s e r e t n i t n e r a p e h t f o s r e n w o o t e l b a t u b i r t t A s e v r e s e r r e h t o n i s e g n a h C d e n i a t e R s g n i n r a e w o fl h s a C g n i g d e h e v r e s e r y c n e r r u C n o i t a l s n a r t e v r e s e r y r d n u s r e h t O s e v r e s e r l a t i p a c e r a h S e t o N $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T , 0 6 0 0 0 3 1 , 1 7 5 0 2 3 , ) 4 2 5 2 4 ( , 7 4 0 , 8 7 2 5 3 1 3 2 , ) 1 8 9 1 5 1 ( , 1 1 1 8 , ) 5 3 7 , 0 2 1 ( 6 4 2 3 , 4 7 3 2 4 6 1 4 - - 6 8 3 8 , 6 8 3 , 8 , 4 1 8 6 9 2 1 , 4 1 2 9 4 9 , ) 0 5 0 7 0 1 ( , ) 7 5 2 4 ( , 3 6 4 5 , 4 4 4 3 5 4 , 7 9 1 0 2 3 , ) 6 6 5 2 4 ( , 1 3 6 , 7 7 2 5 3 1 3 2 , ) 1 8 9 1 5 1 ( , ) 5 7 2 ( ) 2 3 6 ( ) 1 2 1 , 9 2 1 ( ) 3 1 6 , 2 5 1 ( - 7 9 1 , 0 2 3 - ) 1 8 9 1 5 1 ( , 7 9 1 0 2 3 , - - - - - ) 6 0 5 3 3 ( . ) 6 0 5 , 3 3 ( - ) 0 6 0 9 ( , ) 0 6 0 , 9 ( - - - - - - - - - 9 2 0 3 , 9 2 0 , 3 - - - - 5 3 1 3 2 , ) 2 7 6 2 ( , 3 6 4 , 0 2 8 2 8 3 - 8 2 8 2 8 3 - 8 2 2 7 3 , 7 5 4 , 1 8 4 0 , 2 1 4 2 3 , 5 4 4 , 1 8 9 7 , 6 1 1 , 1 ) 6 5 5 , 0 4 1 ( ) 7 1 3 , 3 1 ( 2 9 4 , 8 7 0 9 , 3 7 4 The accompanying Notes 1 to 40 form an integral part of these consolidated financial statements. y t i u q e n i ) e s a e r c e d ( e s a e r c n i l a t o T 1 1 0 2 , 1 y r a u n a J f o s a y t i u q E E M O C N I E V I S N E H E R P M O C L A T O T e m o c n i e v i s n e h e r p m o c r e h t O e m o c n i e v i s n e h e r p m o C ) s e s s o l ( n i a G l s r e d o h e r a h s h t i w s n o i t c a s n a r T S R E D L O H E R A H S H T I W S N O I T C A S N A R T L A T O T s r e f s n a r t h g u o r h t ) e s a e r c e d ( e s a e r c n I y t i u q e , s e g n a h c r e h t o d n a e c n a u s s i y t i u q E s d n e d i v i D I S E C N A L A B G N D N E R A E Y R O I R P 1 1 0 2 , 1 3 R E B M E C E D 2 2 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A CONSOLIDATED STATEMENT OF CASH FLOWS DIRECT – METHOD LATAM AIRLINES GROUP S.A AND SUBSIDIARIES CASH FLOWS FROM OPERATING ACTIVITIES Cash collection from operating activities Proceeds from sales of goods and services Other cash receipts from operating activities PAYMENTS FOR OPERATING ACTIVITIES Payments to suppliers for goods and services Payments to and on behalf of employees Other payments for operating activities Interest received Income taxes refunded (paid) Other cash inflows (outflows) NET CASH FLOWS FROM OPERATING ACTIVITIES Cash flows used in investing activities Cash flows arising from the loss of control of subsidiaries or other entities Cash flows used for acquisition of subsidiaries Other cash receipts from sales of equity or debt instruments of other entities Other payments to acquire equity or debt instruments of other entities Amounts raised from sale of property, plant and equipment Purchases of property, plant and equipment Amounts raised from sale of intangible assets Purchases of intangible assets Payment from other long-term assets Dividends received Other cash inflows (outflows) For the Periods ended December 31, Note 2012 2011 ThUS$ ThUS$ 10,258,473 5,966,464 57,763 52,012 (7,153,865) (4,286,394) (1,938,769) (19,325) (52,986) (3,018) (50,433) 1,203,812 - (3,223) 386,379 - 73,429 (883,297) (84.000) 9.762 626 (7.499) 767,674 47,337 (3,541) 9,201 (72) 93,787 (2,389,364) (1,367,025) - (59,166) 38,035 351 27,143 6,189 (27,615) - 89 545 NET CASH FLOW USED IN INVESTING ACTIVITIES (1,926,416) (1,241,105) Cash flows from (used in) financing activities Amounts raised from issuance of shares Payments to acquire or redeem the shares of the entity Amounts raised from long-term loans Amounts raised from short-term loans Loans repayments Payments of finance lease liabilities Dividends paid Interest paid Other cash inflows (outflows) The accompanying Notes 1 to 40 form an integral part of these consolidated financial statements. NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES Net increase (decrease) in cash and cash equivalents before effect of exchanges rate change Effects of variation in the exchange rate on cash and cash equivalents Net increase (decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS AT END OF PERIOD 83,512 (203) 2,185,663 152,000 (539,332) (292,931) (124,827) (227,607) (231,079) 1,005,196 23,153 - 969,252 334,500 (883,402) (59,990) (192,133) (121,338) 146,849 216,891 282,592 (256,540) (6,736) 275,856 374,407 (105) (256,645) 631,052 650,263 374,407 6 6 3 2 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS LATAM AIRLINES GROUP S.A AND SUBSIDIARIES AS OF DECEMBER 31, 2012 NOTE 1. GENERAL INFORMATION (the “Company”) LATAM Airlines Group S.A. is a public company registered with the Chilean Superintendency of Securities and Insurance (SVS), under No.306, whose shares are quoted in Chile on the Stock Brokers - Stock Exchange (Valparaíso), the Chilean Electronic Stock Exchange and the Santiago Stock Exchange; it is also quoted in the United States of America on the New York Stock Exchange (“NYSE”) in New York in the form of American Depositary Receipts (“ADRs”) and in Brazil BM & FBOVESPA S.A. – Stock Exchange, Mercadorias e Futuros, in the form of Brazilian Depositary Receipts (“BDRs”). Its principal business is passenger and cargo air transportation, both in the domestic markets of Chile, Peru, Argentina, Colombia, Ecuador and Brazil and in a developed series of regional and international routes in America, Europe and Oceania. These businesses are performed directly or through its subsidiaries in different countries. In addition, the Company has subsidiaries operating in the freight business in Mexico, Brazil and Colombia. On August 13, 2010, the Company reported to the Superintendency of Securities and Insurance, as an Essential Matter, that at this date the Company Inversiones Costa Verde Aeronáutica S.A. and Mineras del Cantábrico S.A. latter two, (the “Cueto Subsidiaries”), TAM S.A. (“TAM”), and TAM Empreendimentos e Participações (“TEP”) signed a non-binding Memorandum of Understanding (“MOU”) in which the companies agreed to proceed with their intention of carrying out their operations jointly under one parent company, to be named LATAM Airlines Group S.A. (“LATAM”). The proposed affiliation would be within the world’s 10 largest airline groups, providing transport services for passengers and cargo to more than 115 destinations in 23 countries, operating with a fleet of over 300 aircraft, with over 50,000 employees. Both airlines would continue operating independently with their current operating licenses and brands. On October 20, 2010, the Company and TAM announced that the operating subsidiaries of TAM had presented the structure of the transaction to the Brazilian Civil Aviation Agency (“ANAC”), which was approved by this agency on March 1, 2011. On January 18, 2011 the parties of the MOU and Mrs. Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Olivera Amaro and Joao Francisco Amaro (“Amaro Family”), as the only shareholders of TEP, signed binding contracts written in English (b) called Exchange Offer Agreement (“Contracts Signed”) containing the final terms and conditions of the proposed partnership between the Company and TAM. Implementation Agreement and (a) On September 21, 2011, the Court of Defense of Free Competition (“TDLC”) approved the merger between the Company and TAM, establishing 14 mitigation 4 2 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A measures. On October 3, 2011, the Company and TAM filed an appeal to the Supreme Court objecting to certain mitigation measures. On April 5, 2012, the Supreme Court confirmed the TDLC resolution rejecting the appeal filed by both companies. On December 21, 2011, the Board of the Company cited a special meeting of shareholders, carried out on November 11, 2011, in which their shareholders approved, among others, the following matters: (a) The merger of the Company with Sister Holdco S.A. and Holdco II S.A. companies (the “Absorbed Companies”), two companies specially constituted for the purpose of the association between the Company and TAM; (b) The change of Company name and the rest of the transactions contemplated in the subscribed contracts. (c) The increase in capital by US$ 1,465,372,970.09 by issuing 147,355,882 common shares without par value of which: (i) US$ 1,417,639,617.60 through the issuance of 142,555,882 shares, which would be intended to be exchanged for shares of the Absorbed Companies as a result of the proposed merger, at a rate of 0.9 new shares of the Company for each share that is fully subscribed and paid for each of the Absorbed Companies, and that belongs to shareholders other than the Company’s. The shares that the Company holds in the acquired companies at the time of the merger, shall have no effect; and (ii) US$ 47,733,352.49 through the issuance of 4,800,000 shares, which would go towards compensation plans for employees of the Company and its Subsidiaries, as provided in Article 24 of the Corporations Law. The effectiveness of these agreements was subject to compliance with the conditions established in the extraordinary shareholders’ meeting. On May 10, 2012, the Company and Holdco II initiated the exchange offer of TAM shares. Having complied with the conditions for declaring the exchange offer successful and having received 95.9% of the total shares of TAM in circulation, on June 22, 2012, the Company and the Absorbed Companies granted the execution deed of Merger, through which the shares of the Absorbed Companies were exchanged for shares of the Company, as effected according to that described above. On that same date the change of the Company’s name to “LATAM Airlines Group S.A.” became effective. The execution deed was rectified by instrument dated July 10, 2012. On September 4, 2012 the Board of the Company cited a special meeting of shareholders, carried out on August 3, 2012 in which their shareholders approved, among others, the following matters: (a) Total revocation of the Board and election of the new Board of the Company. (b) Approval that the remaining 7,436,816 LATAM shares, out of the total 142,555,882 shares issued under the authorization of the Extraordinary Shareholders’ Meeting held on December 21, 2011, and that were not to be exchanged for shares of the Sister Holdco SA and Holdco II SA, would be defined to be offered preferably to LATAM shareholders under Article 25 of the Corporations Law and that the unsubscribed balance would be offered and placed on the market in general. (c) Authorization of the Board of the Company to agree and proceed with the broadest powers, the terms of the issue and placement of the referred remaining shares and delegation to the Board of the Company the authority to determine, fix and agree freely and with broadest powers the placement price of the shares in accordance with the second paragraph of Article 28 of the Corporate Regulations. (d) Delegation to the Board of the Company the authority to determine, fix and agree freely and with the broadest powers the placement price of 4,800,000 shares defined under the Extraordinary Shareholders meeting dated December 21, 2011 to the compensation in terms of Article 24 of the Corporations Law, in accordance with the second paragraph of Article 28 of the Corporations Regulations, and determine the terms and conditions applicable to the latter. 5 2 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A of 1,660 registered shareholders. At that date approximately 6.16% of the Company’s share capital was in the form of ADRs and approximately 1.36% in the form of BDRs. The Company had an average of 22,214 employees in the first semester of 2012 and 53,167 employees in the second semester of 2012, caused by Business Combination with TAM S.A. and Subsidiaries. Ended this year with a total of 53,599 employees, spread over 8,980 administrative employees, 6,932 in Maintenance, 18,138 in Operations, 10,164 in Cabin Crew, 4,527 in Controls Crew, and 4,858 in Sales. The subsidiaries included in these consolidated financial statements are as follows: The placement of the shares referred to in paragraph (b) above was approved by the Superintendency of Securities and Insurance, on December 11, 2012. On December 20, 2012, the Board of Directors agreed to start, from December 21, 2012, at the period of preferred option of those shares and proceeded to fix the price of placement of them, all of which was reported to the Superintendency of Securities and Insurance by Essential Matter on the same date. The Information on the result of this placement is available in Note 40 on Subsequent Events. The Company is located in Santiago, Chile, at Avenida Américo Vespucio Sur No. 901, commune of Renca. Corporate Governance practices of the Company are set in accordance with Securities Market Law the Corporations Law and its regulations, and the regulations of the SVS and the laws and regulations of the United States of America and the U.S. Securities and Exchange Commission (“SEC”) of that country, with respect to the issuance of ADRs, and the Federal Republic of Brazil and the Comissão de Valores Mobiliários (“CVM”) of that country, as it pertains to the issuance of BDRs. The Board of the Company is composed of nine members who are elected every two years by the ordinary shareholders’ meeting. The Board meets in regular monthly sessions and in extraordinary sessions as the corporate needs demand. Of the nine board members, three form part of its Directors’ Committee which fulfills both the role foreseen in the Corporations Law and the functions of the Audit Committee required by the Sarbanes Oxley Law of the United States of America and the respective regulations of the SEC. The majority shareholder of the Company is the Cueto Group, which through Costa Verde Aeronáutica S.A., and its Subsidiaries, Inversiones Nueva Costa Verde Aeronáutica Limitada, Costa Verde Aeronáutica., Spa owns 25.92% of the shares issued by the Company, and therefore is the controlling shareholder of the Company in accordance with the provisions of the letter b) of Article 97 and Article 99 of the Securities Market Law, given that there is a decisive influence on its administration. As of December 31, 2012, the Company had a total 6 2 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A a) As of December 31, 2012 e h t r o f s t l u s e R g n i d n e d o i r e p 2 1 0 2 , 1 3 r e b m e c e D n o i t i s o p l a i c n a n fi f o t n e m e t a t S 2 1 0 2 , 1 3 r e b m e c e D f o s A f o s A e t a R n o i t a p i c i t r a P 2 1 0 2 , 1 3 r e b m e c e D e m o c n I T E N y t i u q E s e i t i l i b a i L s t e s s A l a t o T p i h s r e n w o t s e r e t n i t c e r i d n I p i h s r e n w o t s e r e t n i t c e r i D p i h s r e n w o t s e r e t n i $ S U h T $ S U h T $ S U h T $ S U h T % % % 0 0 3 1 . 9 1 7 7 1 , ) 9 6 2 7 7 ( , 3 1 5 2 . ) 0 1 ( ) 3 9 6 0 5 ( , 0 7 4 7 1 1 , 4 4 1 1 1 , - ) 5 ( 3 ) 2 4 ( 7 6 0 2 , ) 5 7 3 6 ( , ) 2 1 1 ( ) 8 5 4 4 ( , ) 3 6 1 5 4 ( , . t n e m e v o m t u o h t i w y t i t n e , . 2 4 0 9 , ) 8 2 8 ( 8 2 4 5 5 3 , ) 7 0 8 1 ( , 5 2 5 3 5 1 2 , 8 7 6 2 , 0 0 0 0 0 0 1 . 0 0 1 0 0 . 0 0 9 9 9 9 . 8 9 1 4 3 , 9 2 0 3 2 , 7 2 2 7 5 , 0 0 0 0 0 0 1 . ) 5 9 3 2 1 1 ( , 1 5 8 7 3 6 , 8 0 4 2 2 5 , 0 0 0 0 0 0 1 . 0 0 9 9 0 . 9 3 6 1 0 . 9 1 3 0 5 1 , 1 6 3 9 5 1 , 0 0 0 0 0 7 . 0 0 0 0 1 2 . 0 0 1 0 9 9 . 1 6 3 8 9 9 . 0 0 0 0 9 4 . 7 4 2 5 , 9 1 4 4 , 0 0 0 0 0 0 1 . 0 0 1 0 0 . 0 0 9 9 9 9 . 3 6 6 , . 1 7 3 1 9 0 7 2 7 , 0 8 9 8 9 9 . 1 4 0 0 0 . 1 4 0 2 , 4 3 2 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 9 3 9 8 9 9 . 0 0 0 0 0 . ) 6 0 8 4 ( , 4 8 4 9 2 , 8 7 6 4 2 , 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 . 3 2 4 3 4 2 , 2 0 3 4 1 1 , 5 2 7 7 5 3 , 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . ) 2 1 6 ( ) 9 9 7 2 ( , 5 5 1 8 , 5 0 4 ) 8 5 1 ( 2 1 6 9 9 7 2 , 3 5 5 1 , 1 1 8 2 2 - - 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 8 0 7 9 , 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 6 1 4 0 7 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 . 0 0 0 0 0 . 0 0 0 0 0 . 0 0 0 0 0 . 0 0 0 0 0 . 0 0 0 0 0 . ) 8 6 3 7 3 ( , 1 1 6 7 9 3 , 2 8 4 4 6 3 , 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 . ) 2 9 6 8 ( , 6 6 4 6 , 3 0 9 3 5 7 . 4 1 7 9 , 5 0 9 4 6 , 4 5 1 7 5 , 1 8 1 6 1 , , 6 9 6 7 1 5 7 , , 9 2 7 2 9 2 8 , 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 1 7 9 9 . 0 0 0 0 0 . 0 0 0 0 0 0 1 . 9 9 0 9 6 3 . 0 0 0 0 0 . 0 0 1 7 9 9 . 1 0 9 0 3 6 . y c n e r r u C l a n o i t c n u F y r t n u o C n i g i r o f o y n a p m o C . o N x a T $ S U $ S U $ S U $ S U $ S U $ S U $ S U . $ S U . $ S U P L C . $ S U P L C P L C S R A . $ S U P L C P L C L R B e l i h C e l i h C e l i h C u r e P n a m y a C s d n a l s I e l i h C . A S U . . A S U . e l i h C e l i h C . A S U . e l i h C e l i h C a n i t n e g r A s a m a h a B e l i h C e l i h C l i z a r B d e t i m i L g n i s a e L l a n o i t a n r e t n I t f a r c r i A . . A S a c i r é m A o c e d a L s e n o i c i d E . . A S o e r é A e t r o p s n a r T . . A S a g r a C e d s e n e c a m A r i A t s a F l . . A S o g r a C o c e d a L . . . L R S o g r a C r e s a L ) * ( s e i r a i d i s b u s d n a . . A S s e n o i s r e v n I o g r a C n a L ) * ( s e i r a i d i s b u s d n a . . A S n a L s e n o i s r e v n I d e t i m i L s a e s r e v O o g r a C n a L ) * ( s e i r a i d i s b u s d n a 7 - 7 - 2 - 9 - 8 - 0 - . 0 8 2 1 5 9 6 9 . . 0 2 0 4 3 6 6 9 . n g i e r o F . 0 2 5 1 3 6 6 9 . . 0 1 4 1 3 6 6 9 . n g i e r o F n g i e r o F . 0 9 6 9 6 9 6 9 . . 0 1 8 5 7 5 6 9 . ) * * * ( ) * * ( ) * ( s e i r a i d i s b u s d n a . . A S M A T n g i e r o F d e t i m i L s t n e m t s e v n I e l i h C n a L ) * ( s e i r a i d i s b u s d n a n g i e r o F . . A S ú r e P n a L n g i e r o F . c n I s e c i v r e S t r o p r i A e m i r P ) * ( s e i r a i d i s b u s d n a n g i e r o F n o i t a r o p r o C a t c e n n o C n g i e r o F . . A S o g r a C n a L 4 - . 0 0 0 3 8 3 3 9 . ) * * * * ( s e i r a i d i s b u s d n a A S s e r t s e r r e T . . s o i c i v r e S e d n o i s i v i D s r u o t n a L . . A S a c i t u á n o r e A a i r a i l i b o m n I ) * ( s e i r a i d i s b u s d n a . . A S p u o r G x a P n a L 6 - 1 - 0 - . 0 6 8 8 1 5 6 9 . . 0 0 9 3 6 7 6 9 . . 0 8 6 9 6 9 6 9 . . A S n a L s e n o i s r e v n I o t . % 1 0 0 d n a . . A S s e r t s e r r e T s o i c i v r e S n ó i s i v i D s r u o t n a L o t . % 9 9 9 9 s d n o p s e r r o c h c i h w , d e t a r o p r o c n i s a w . . A S I I s e r t s e r r e T s o i c i v r e S n ó i s i v i D s r u o t n a L , e t n e v a n e B y i b a R o i c i r t a P . r M f o o g a i t n a S f o y r a t o N e h t n i d e e d c i l b u p y b , 2 1 0 2 , 2 2 r e b m e v o N n O ) * * * * ( . y n a p m o c t a h t f o s e r a h s g n i t o v l a t o t f o % 2 4 9 1 o t . t n e l a v i u q e , . . l A S I o c d o H f o s e r a h s g n i t o v 6 2 2 s n w o . . A S p u o r G s e n i l r i A M A T A L ) * * * ( p u o r G s e n i l r i A M A T A L h c i h w r o f y t i t n e , . . l A S I o c d o H m o r f s e m o c s e i r a i d i s b u S d n a . . A S M A T r e v o e g a t n e c r e p n o i t a p i c i t r a p t c e r i d n i e h T . t s e r e t n i g n i l l o r t n o c - n o N e d u l c n i t o n s e o d , t n e r a p e h t f o s r e n w o o t e l b a t u b i r t t a y t i u q E o t s d n o p s e r r o c d e t r o p e r y t i u q E e h T ) * * ( ) * ( . n o i t a p i c i t r a p % 3 8 9 9 9 9 a s d o h l . . A S . 7 2 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A b) As of December 31, 2011 e h t r o f s t l u s e R d e d n e d o i r e p 1 1 0 2 , 1 3 r e b m e c e D n o i t i s o p l a i c n a n fi f o t n e m e t a t S 1 1 0 2 , 1 3 r e b m e c e D f o s A e m o c n I T E N y t i u q E s e i t i l i b a i L s t e s s A l a t o T p i h s r e n w o t s e r e t n i f o s A r e b m e c e D 1 1 0 2 , 1 3 t c e r i d n I p i h s r e n w o t s e r e t n i t c e r i D p i h s r e n w o t s e r e t n i $ S U h T $ S U h T $ S U h T $ S U h T % % % 0 6 8 4 8 4 3 , 5 8 7 9 4 7 1 , 4 3 5 2 , 0 0 0 0 0 0 1 . 0 0 1 0 0 . 0 0 9 9 9 9 . 9 7 4 1 3 , 1 0 1 4 3 , 0 8 5 5 6 , 0 0 0 0 0 0 1 . 0 0 9 9 0 . 0 0 1 0 9 9 . ) 3 6 1 8 2 ( , ) 5 3 9 4 ( , 4 8 2 2 0 5 , 9 8 7 4 6 4 , 0 0 0 0 0 0 1 . 9 3 6 1 0 . 1 6 3 8 9 9 . 0 2 9 0 2 8 1 , ) 9 0 1 ( ) 5 3 7 ( 0 4 1 7 5 , 6 4 1 6 2 , - ) 8 ( 1 ) 8 1 ( 8 9 9 1 , 7 3 0 9 , 0 7 0 3 , ) 7 4 3 ( 9 0 9 0 1 , 9 7 9 8 2 1 , 8 8 8 9 3 1 , 0 0 0 0 0 7 . 0 0 0 0 1 2 . 0 0 0 0 9 4 . ) 8 1 8 ( 8 3 2 5 , 0 2 4 4 , 0 0 0 0 0 0 1 . 0 0 1 0 0 . 0 0 9 9 9 9 . 0 3 0 2 2 4 , 9 9 7 3 4 3 , 9 2 8 5 6 7 , 0 8 9 8 9 9 . 1 4 0 0 0 . ) 7 7 8 1 ( , 3 2 2 2 , 6 4 3 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 9 3 9 8 9 9 . 0 0 0 0 0 . ) 0 8 9 5 ( , 5 4 9 5 1 , 5 6 9 9 , 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 . ) 6 6 5 ( 6 6 5 ) 4 9 7 2 ( , 4 9 7 2 , - - 0 8 2 2 3 2 , 3 6 6 6 1 1 , 3 4 9 8 4 3 , 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 . 0 0 0 0 0 . 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 . 0 2 3 3 1 , 2 7 3 1 1 , 2 9 6 4 2 , 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 2 7 3 ) 4 3 1 ( 8 6 1 2 0 8 3 2 8 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 . 0 0 0 0 0 . 0 0 0 0 0 . ) 0 9 9 0 3 ( , 4 1 6 9 8 1 , 2 0 0 2 6 1 , 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 . ) 7 7 4 2 ( , 1 7 6 9 6 , 4 9 1 7 6 , 0 0 0 0 0 0 1 . 0 0 0 0 0 0 1 . 0 0 0 0 0 . 8 7 4 6 , 1 2 8 7 , 9 9 2 4 1 , 0 0 1 7 9 9 . 0 0 0 0 0 . 0 0 1 7 9 9 . l a n o i t c n u F y c n e r r u C y r t n u o C n i g i r o f o y n a p m o C . o N x a T $ S U $ S U $ S U $ S U $ S U $ S U $ S U . $ S U . $ S U P L C . $ S U P L C P L C S R A . $ S U P L C P L C e l i h C e l i h C e l i h C u r e P n a m y a C s d n a l s I e l i h C . A S U . . A S U . . . A S a c i t u á n o r e A a i r a i l i b o m n I . . A S s e r t s e r r e T s o i c i v r e S e d n o i s i v i D s r u o t n a L d n a . . A S p u o r G x a P n a L ) * ( s e i r a i d i s b u S . 6 - 0 6 8 8 1 5 6 9 . . 1 - 0 0 9 3 6 7 6 9 . . 0 - 0 8 6 9 6 9 6 9 . d e t i m i L s t n e m t s e v n I e l i h C n a L ) * ( s e i r a i d i s b u S d n a n g i e r o F . . A S ú r e P n a L n g i e r o F . c n I s e c i v r e S t r o p r i A e m i r P ) * ( y r a i d i s b u S d n a n g i e r o F n o i t a r o p r o C a t c e n n o C n g i e r o F . . A S o g r a C n a L . 4 - 0 0 0 3 8 3 3 9 . e l i h C e l i h C . . A S a c i r é m A o c e d a L s e n o i c i d E . . A S o e r é A e t r o p s n a r T . 7 - 0 8 2 1 5 9 6 9 . . 7 - 0 2 0 4 3 6 6 9 . . A S U . l a n o i t a n r e t n I t f a r c r i A d e t i m i L g n i s a e L n g i e r o F e l i h C e l i h C a n i t n e g r A s a m a h a B e l i h C e l i h C . . A S a g r a C e d s e n e c a m A r i A t s a F l . . A S o g r a C o c e d a L d e t i m i L s a e s r e v O o g r a C n a L ) * ( s e i r a i d i s b u S d n a . . A S s e n o i s r e v n I o g r a C n a L ) * ( y r a i d i s b u S d n a d n a . . A S n a L s e n o i s r e v n I ) * ( s e i r a i d i s b u S . . . L R S o g r a C r e s a L . 2 - 0 2 5 1 3 6 6 9 . . 9 - 0 1 4 1 3 6 6 9 . n g i e r o F n g i e r o F . 8 - 0 9 6 9 6 9 6 9 . . 0 - 0 1 8 5 7 5 6 9 . . t s e r e t n i g n i l l o r t n o c - n o n e d u l c n i t o n s e o d , t n e r a p e h t f o s r e n w o o t e l b a t u b i r t t a y t i u q E o t s d n o p s e r r o c d e t r o p e r y t i u q E e h T ) * ( 8 2 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Additionally, has proceeded to consolidate special purpose entities, denominated: JOL, destined to the aircraft financing and Chercán Leasing Limited, destined to the aircraft advance financing, as the Company has major risks and benefits associated to them according to standards issued by the Standing Interpretations Committee of the International Accounting Information: Consolidation - Special Purpose Entities (“SIC 12”) and private investment funds in which the parent company and subsidiaries are contributors. All the entities controlled have been included in the consolidation. Changes in the scope of consolidation between January 1, 2011 and December 31, 2012, are detailed below: (1) Incorporation or acquisition of companies - AEROASIS S.A., direct subsidiary of Lan Pax Group S.A, was acquired in February 2011 (See Note 18.2). - TAM S.A. and Subsidiaries became part of LATAM Airlines Group S.A. as of June 22, 2012 date on which merger was materialized with the companies Sister Holdco S.A. and Holdco II S.A. (see Note 18.2). (2) Disposal of companies - Blue Express INTL Ltda. and Subsidiaries, dated April 6, 2011 Lan Cargo S.A. and Inversiones Lan S.A., subsidiaries of LATAM Airline Group S.A., as sellers, and Servicios de Transporte Limitada and Inversiones Betmin SpA, subsidiaries of the Bethia S.A. company, as buyers, entered into a purchase agreement in respect to 100% of the share capital of Blue Express INTL Ltda. and its subsidiary Blue Express S.A. The sales value of Blue Express INTL Ltda and subsidiary was ThUS$ 53,386, the book value of the investment at March 2011 was ThUS$ 9,061, the sale generated a profit of approximately ThUS$ 44,325, which is reflected in Other gain (loss) in the Consolidated income statement. 9 2 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNT- ING POLICIES The following describes the principal accounting policies adopted in the preparation of these consoli- dated financial statements. 2.1. PREPARATION The consolidated financial statements of LATAM Air- lines Group S.A. are for the period ended December 31, 2012 and have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and IFRIC interpretations. The consolidated financial statements have been prepared under the historic-cost criterion, although modified by the valuation at fair value of certain fi- nancial instruments. The preparation of the consolidated financial state- ments in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to use its judgment in applying the Company’s accounting policies. Note 4 shows the areas that imply a greater degree of judgment or complexity or the areas where the assumptions and estimates are significant to the consolidated finan- cial statements. In order to facilitate comparison, there have been some minor reclassifications to the consoli- dated financial statements corresponding to the previous year. 0 3 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (a) Accounting pronouncements with implementation effective from January 1, 2012: Standards and amendments Amendment to IFRS 7: Financial Instruments: Disclosures Issued in October 2010, increases the disclosure requirements for transactions involving transfers of financial assets. Comparative information for the first year of implementation is not required. Amendment to IAS 12: Income tax This amendment, issued in December 2010, provides an excep- tion to the general principles of IAS 12 for investment properties that are measured using the fair value contained in IAS 40 “Investment Property”. The exception also applies to investment property acquired in a Business Combination if after the Business Combination the acquirer applies the fair value contained in IAS 40. The amendment incorporates the presump- tion that investment property valued at fair value, are made by sale, so it requires apply to the temporary differences arising from these, the tax rate for sales operations. Early adoption is permitted. The adoption of the standards, amendments and interpretations described above have not had a significant impact on the Company’s consolidated financial statements. (b) Accounting pronouncements with applications effective as of January 1, 2013 and following: Standards and amendments Amendment to IAS 1: Presentation of financial statements Issued in June 2011. The main change in this amendment requires that items of Other Comprehensive Income are classified and grouped evaluating if they potentially will be reclassified to results in future periods. Early adoption is permitted. IAS 27: Separate financial statements. Issued in May 2011, replaces IAS 27 (2008). The scope of this standard is restricted beginning with this change only for separate financial statements, as the aspects related to the definition of control and consolidation were removed and included in IFRS 10. Early adoption is permitted in conjunction with IFRS 10, IFRS 11 and IFRS 12 and the amendment to IAS 28. Mandatory application: Annual periods beginning on or after 07/01/2011 01/01/2012 Mandatory application: Annual periods beginning on or after 07/01/2012 01/01/2013 1 3 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Standards and amendments Mandatory application: Annual periods beginning on or after Amendment IFRS 7: Financial Instruments: Disclosures 01/01/2013 Issued in December 2011. Requires improvement of current disclosures over compensation of financial assets and liabilities, with the aim of increasing convergence between IFRS and USGAAP. These revelations are focused on quantitative information over the financial instruments recognized that offset in the Statement of Financial Position. Early adoption is permitted. IFRS 10: Consolidated financial statements 01/01/2013 Issued in May 2011, replaces SIC 12 “Consolidation of special purpose enti- ties” and orientation on control and consolidation in IAS 27 “Consolidated Financial Statements”. Sets clarifications and new parameters for the defi- nition of control, and the principles for the preparation of consolidated fi- nancial statements. Early adoption is permitted in conjunction with IFRS 11, IFRS 12 and amendments to IAS 27 and 28. IFRS 11: Joint arrangements Issued in May 2011, replaces IAS 31 “Interests in Joint Ventures” and SIC 13 “Jointly controlled entities”. Provides a more realistic reflection of joint ar- rangements by focusing on rights and obligations arising from the agree- ments rather than their legal form. Within its modifications include the elimination of the concept of jointly controlled assets and the possibility of proportional consolidation of entities under joint control. Early adop- tion is permitted in conjunction with IFRS 10, IFRS 12 and amendments to IAS 27 and 28. IFRS 12: Disclosures of interests in other entities Issued in May 2011, brings together in one standard all required disclosures in the financial statements related to investments in other entities, wheth- er they are classified as subsidiaries, associates or joint ventures. Applica- ble for entities that hold investments in subsidiaries, joint ventures, and associates. Early adoption is permitted in conjunction with IFRS 10, IFRS 11 and amendments to IAS 27 and 28. 01/01/2013 01/01/2013 2 3 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Standards and amendments Mandatory application: Annual periods beginning on or after IFRS 13: Fair value measurement Issued in May 2011, brings together in one standard the way to measure the fair value of assets and liabilities and disclosures required on it, and incorporates new concepts and explanations for measurement. IAS 19 Revised: Employee benefits Issued in June 2011, replaces IAS 19 (1998). This revised standard changes the recognition and measurement of costs for defined benefit plans and termination benefits. Additionally, it includes modifications to disclo- sures for all employee benefits. Amendment to IAS 32: Financial instruments: Presentation Issued in December 2011. Clarifies the requirements for off-setting finan- cial assets and liabilities in the Statement of Financial Position. Specifi- cally, that the right to compensation should be available at the reporting date and not depend on a future event. It also indicates that it must be le- gally binding upon both counterparties in the normal course of business, as well as in the case of default, insolvency or bankruptcy. Early adoption is permitted. IFRS 9: Financial instruments Issued in December 2009, amending the classification and measurement of financial assets. Later this standard was amended in November 2010 to include treatment and classification of financial liabilities. Early adoption is permitted. 01/01/2013 01/01/2013 01/01/2014 01/01/2015 3 3 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Improvements issued in May 2012 IAS 1: Presentation of financial statements – Clarifies requirements for comparative information when an entity has a 3rd Statement of Financial Position column. 01/01/2013 IAS 16: Property plant and equipment - Clarifies that the parts and service equipment will be classified as Property, plant and equipment rather than inventory, as it meets the definition of Property, plant and equipment. IAS 32: Financial instrument: Presentation - Clarifies the treatment income tax distributions and related transaction costs. IAS 34 Interim Financial Reporting - Clarifies the disclosure requirements of segment assets and liabilities in interim periods, confirming the same requirements applicable to annual financial statements. Amendments to IFRS 10: Consolidated Financial Statements, IFRS 11: Joint Arrangements and IFRS 12: Disclosure of interests in other entities. Issued in June 2012. Clarifies the transitional provisions for IFRS 10, indicating that it is necessary to apply the first day of the annual period in adopting the rule. Therefore, it may be necessary to make modifications to the comparative information presented in this period, if the evaluation of the control over investments differs from that recognized in accordance with IAS 27/SIC 12. IAS 27: Separate Financial Statements and IFRS 10: Consolidated Financial Statements and IFRS 12: Disclosure of interests in other entities - issued in October 2012. The modifications include the definition of an investment entity and introduce an exception to consolidate certain subsidiaries pertaining to investment entities. This amendment requires an entity to measure the investment of these subsidiaries at fair value through profit or loss according to IFRS 9 “Financial Instruments” in the consolidated and separate financial statements. The amendment also introduces new disclosure requirements on investment firms in IFRS 12 and IAS 27. The Company’s management believes that the adoption of the standards, amendments and interpretations described above would not have had a significant impact on the Company’s consolidated financial statements in the year of their first application. The Company has not early adopted any of the above standards. 01/01/2014 4 3 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A 2.2. CONSOLIDATION (b) Transactions with non-controlling interests (a) Subsidiaries Subsidiaries are all the entities (including special- purpose entities) over which the Company has the power to control the financial and operating policies, which are generally accompanied by a holding of more than half of the voting rights. In evaluating whether the Company controls another entity, the existence and effect of potential voting rights that are currently exercisable or convertible at the date of the consolidated financial statements are considered. The subsidiaries are consolidated from the date on which control is passed to the Company and they are excluded from the consolidation on the date they cease to be so controlled. The results and flows are incorporated from the date of acquisition. The Company uses the acquisition method for the purchase of subsidiaries. The cost of acquisition is the fair value of the assets delivered, the equity instruments issued and the liabilities incurred or assumed on the exchange date. The identifiable assets acquired and the liabilities and contingent liabilities assumed in a Business Combination are initially valued at their fair value on the date of acquisition, regardless of the extent of the non- controlling interests. The excess of the acquisition cost over the fair value of the Company’s holding in the net identifiable assets acquired is shown as Goodwill. If the cost is less than the fair value of the net assets of the acquired subsidiary, the difference is recorded directly in the consolidated statement of income (Note 2.6). The transaction costs in a Business Combination are recognized in the consolidated income statement when they are incurred. Inter-company transactions, balances and unrealized gains on transactions between the Company’s entities are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment loss of the asset transferred. When necessary in order to ensure uniformity with the policies adopted by the Company, the accounting policies of the subsidiaries are modified. The Company applies the policy of considering transactions with non-controlling interests, when not related to loss of control, as equity transactions without an effect on income. (c) Sales of subsidiaries When a subsidiary is sold and a percentage of participation is not retained, the Company derecognizes assets and liabilities of the subsidiary, the non-controlling and other components of equity related to the subsidiary. Any gain or loss resulting from the loss of control is recognized in the consolidated income statement in Other gains (losses). If LATAM Airlines Group S.A. and Subsidiaries retain an ownership of participation in the sold subsidiary, and does not represent control, this is recognized at fair value on the date that control is lost, the amounts previously recognized in Other comprehensive income are accounted as if the Company had disposed directly from the assets and related liabilities, which can cause these amounts are reclassified to profit or loss. The percentage retained valued at fair value are subsequently accounted using the equity method. (d) Investees or associates Investees or associates are all entities over which LATAM Airlines Group S.A. and Subsidiaries have significant influence but have no control. This usually arises from holding between 20% and 50% of the voting rights. Investments in associates are booked using the equity method and are initially recognized at their cost. The participation of LATAM Airlines Group S.A. and Subsidiaries in the losses or gains after the acquisition of its investees or associates is shown in results, and its participation in post acquisition movements in reserves of investees or associates are shown in reserves. 5 3 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A is adjusted against Post-acquisition movement the book value of the investment. When the participation of LATAM Airlines Group S.A. and Subsidiaries in the losses of an investee or associate is equal to or more than its holding in it, including any other non guaranteed account receivable, LATAM Airlines Group S.A. and Subsidiaries will not show the additional losses unless it has incurred obligations or made payments on behalf of the investee or associate. Gains or losses for dilution in investees or associates are shown in the consolidated statement of income. 2.3. FOREIGN CURRENCY TRANSACTIONS (a) Presentation and functional currencies The items included in the financial statements of each of the entities of LATAM Airlines Group S.A. and Subsidiaries are valued using the currency of the main economic environment in which the entity operates (the functional currency). The functional currency of LATAM Airlines Group S.A. is the United States dollar which is also the presentation currency of the consolidated financial statements of LATAM Airlines Group S.A. and Subsidiaries. (b) Transactions and balances Foreign currency transactions are translated to the functional currency using the exchange rates on the transaction dates. Foreign currency gains and losses resulting from the liquidation of these transactions and from the translation at the closing exchange rates of the monetary assets and liabilities denominated in foreign currency are shown in the consolidated statement of income. (c) Group entities The results and financial position of all the Group entities (none of which has the currency of a hyper- inflationary economy) that have a functional currency other than the presentation currency are translated to the presentation currency as follows: translated at the closing exchange rate on the consolidated statement of financial position date; (ii) The revenues and expenses of each income statement account are translated at the exchange rates prevailing on the transaction dates, (iii) All the resultant exchange differences are shown as a separate component in Other comprehensive income. The exchange rates used correspond to those fixed in the country where the subsidiary is located, whose functional currency is different to the U.S. dollar. In the consolidation, exchange differences arising from the translation of a net investment in foreign entities (or local with a functional currency different to that of the parent), and of loans and other foreign currency instruments designated as hedges for these investments, are recorded within net equity. When the investment is sold, these exchange differences are shown in the consolidated statement of income as part of the loss or gain on the sale. Adjustments to the Goodwill and fair value arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing exchange rate. 2.4. PROPERTY, PLAN AND EQUIPMENT The land of LATAM Airlines Group S.A. and Subsidiaries less any accumulated is recognized at cost impairment loss. The rest of the Property, plant and equipment are measured, initially and subsequently, at historic cost less the corresponding depreciation and any impairment loss. The amounts of advance payments to aircraft manufacturers are capitalized by the Company under Construction in progress until receipt of the aircraft. (i) Assets and liabilities of each consolidated statement of financial position presented are Subsequent costs (replacement of components, improvements, extensions, etc.) are included in 6 3 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A the value of the initial asset or shown as a separate asset only when it is probable that the future economic benefits associated with the elements of Property, plant and equipment are going to flow to the Company and the cost of the element can be determined reliably. The value of the component replaced is written off in the books at the time of replacement. The rest of the repairs and maintenance are charged to the results of the year in which they are incurred. Depreciation of Property, plant and equipment is calculated using the straight-line method over their estimated technical useful lives; except in the case of certain technical components which are depreciated on the basis of cycles and hours flown. their estimated useful lives. to related Expenses the development or maintenance of computer software which do not qualify for capitalization, are shown as an expense when incurred. Certain costs directly related to the production of unique and identifiable computer software controlled by the Company, are shown as intangible Assets others than Goodwill when they have met all the criteria for capitalization. The direct costs include the expenses of the personnel who develop the computer software and other costs directly associated. Development costs of computer software shown as assets are amortized over their estimated useful lives. The residual value and useful life of assets are reviewed, and adjusted if necessary, once per year. 2.6. GOODWILL When the carrying amount of an asset is higher than its estimated recoverable amount, its value is reduced immediately to its recoverable amount (Note 2.8). Losses and gains on the sale of Property, plant and equipment are calculated by comparing the proceeds obtained with the book value and are included in the consolidated statement of income. 2.5. INTANGIBLE ASSETS OTHER THAN GOODWILL Brands and airport Slots Brands and airport Slots are intangible assets of indefinite useful life and are subject to impairment tests annually. The airport slots correspond to an administrative authorization to carry out an operation of arrival and departure of aircraft at a specific airport, within a specified period. Computer software Licenses for computer software acquired are capitalized on the basis of the costs incurred in acquiring them and preparing them for using the specific software. These costs are amortized over Goodwill represents the excess of acquisition cost over the fair value of the Company’s participation in the net identifiable assets of the subsidiary or associate on the acquisition date. Goodwill related to acquisition of subsidiaries is not amortized but tested for impairment annually. Gains and losses on the sale of an entity include the book amount of the goodwill related to the entity sold. 2.7.BORROWING COSTS Interest costs incurred for the construction of any qualified asset are capitalized over the time necessary for completing and preparing the asset for its intended use. Other interest costs are charged to income and expenses. 2.8. LOSSES FOR IMPAIRMENT OF NON-FINANCIAL ASSETS Intangible assets that have an indefinite useful life, and developing IT projects, are not subject to amortization and are subject to annual testing for impairment losses. Assets subject to amortization are subjected to impairment tests whenever any event or change in circumstances indicates that the book value of the assets may not be recoverable. An impairment loss is recorded when the book value is greater than the recoverable amount. The 7 3 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. In evaluating the impairment, the assets are grouped at the lowest level for which cash flows are separately identifiable (CGUs). Non-financial assets other than goodwill that have suffered an impairment loss are reviewed if there are indicators of reverse losses. 2.9. FINANCIAL ASSETS The Company classifies its financial instruments in the following categories: financial assets at fair value through profit and loss, loans and receivables and financial assets held to maturity. The classification depends on the purpose for which the financial instruments were acquired. Management its financial determines the classification of instruments at the time of initial recognition, which occurs on the date of transaction. (a) Financial assets at fair value through profit and loss Financial assets at fair value through profit and loss are financial instruments held for trading and those which have been designated at fair value through profit or loss in their initial classification. A financial asset is classified in this category if acquired mainly for the purpose of being sold in the near future or when these assets are managed and measured using fair value. Derivatives are also classified as acquired for trading unless they are designated as hedges. Assets in this category are classified as Cash and cash equivalents, held for trading, and other financial assets, designated on initial recognition. (b) Loans and receivables Loans and receivables are non-derivative financial instruments with fixed or determinable payments not traded on an active market. These items are classified in current assets except for those with maturity over 12 months from the date of the consolidated statement of financial position, which are classified as non-current assets. Loans and receivables are included in trade and other accounts receivable in the consolidated statement of financial position (Note 2.12). (c) Financial assets held to maturity Financial assets held to maturity are non-derivative financial instruments with fixed or determinable payments and fixed maturities that the Company’s management has the positive intention and capacity to hold until their maturity. Should the Company sell a not-insignificant amount of the financial assets held to their maturity, the whole category is reclassified as available for sale. These financial instruments held to maturity are included in non- current assets, except for those maturity equal to or less than 12 months from the consolidated statement of financial position, which are classified as other current financial assets. Regular purchases and sales of financial assets are recognized on the trade date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. The financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest rate method. Held to maturity investments are carried at amortized cost using the effective interest rate. At the date of each consolidated statement of financial position, the Company assesses if there is objective evidence that a financial asset or group of financial assets may have suffered an impairment loss. For the case of financial assets held to maturity, if there is any evidence of impairment, the amount of the provision is the difference between the book value of the assets and the present value of the estimated future cash flows, discounted at the original effective interest rate. 2.10. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES 8 3 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Derivatives are booked initially at fair value on the date the derivative contracts are signed and later they continue to be valued at their fair value. The method for booking the resultant loss or gain depends on whether the derivative has been designated as a hedging instrument and if so, the nature of the item hedged. The Company designates certain derivatives as: (a) Hedge of the fair value of recognized assets (fair value hedge); (b) Hedge of an identified risk associated with a recognized liability or an expected highly- probable transaction (cash-flow hedge), or (c) Derivatives that do not qualify for hedge accounting. The Company documents, at the inception of each transaction, the relationship between the hedging instrument and the hedged item, as well as its objectives for managing risk and the strategy for carrying out various hedging transactions. The Company also documents its assessment, both at the beginning and on an ongoing basis, as to whether the derivatives used in the hedging transactions are highly effective in offsetting the changes in the fair value or cash flows of the items being hedged. The total fair value of the hedging derivatives is booked as an other non-current financial asset or liability if the remaining maturity of the item hedged is over 12 months, and as an other current financial asset or liability if the remaining term of the item hedged is less than 12 months. Derivatives not booked as hedges are classified as Other financial assets or liabilities. (a) Fair value hedges Changes in the fair value of designated derivatives that qualify as fair value hedges are shown in the consolidated statement of income, together with any change in the fair value of the asset or liability hedged that is attributable to the risk being hedged. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is shown in the statement of other comprehensive income. The loss or gain relating to the ineffective portion is recognized immediately in the consolidated statement of income under Other gains (losses). Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss. In case of variable interest-rate hedges, the amounts recognized in the statement of Other comprehensive income are reclassified to results within financial costs at the same time the associated debts accrue interest. For fuel price hedges, the amounts shown in the statement of Other comprehensive income are reclassified to results under the line item Cost of sales to the extent that the fuel subject to the hedge is used. For foreign currency hedges, the amounts recognized in the statement of Other comprehensive income are reclassified to income as deferred revenue resulting from the use of points, are recognized as income. When hedging instruments mature or are sold or when they do not meet the requirements to be accounted for as hedges, any gain or loss accumulated in the statement of other comprehensive income until that moment remains in the statement of other comprehensive income and is reclassified to the consolidated statement of income when the hedged transaction is finally recognized. When it is expected that the hedged transaction is no longer going to occur, the gain or loss accumulated in the statement of other comprehensive income is taken immediately to the consolidated statement of income as “Other gains (losses)”. (c) Derivatives not booked as a hedge Certain derivatives are not booked as a hedge. The changes in fair value of any derivative instrument that is not booked as a hedge are shown immediately in the consolidated statement of income in “Other gains (losses)”. (b) Cash flow hedges 2.11. INVENTORIES 9 3 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Inventories, detailed in Note 10, are shown at the lower of cost and their net realizable value. The cost is determined on the basis of the weighted average cost method (WAC). The net realizable value is the estimated selling price in the normal course of business, less estimated costs necessary to make the sale. 2.12. TRADE AND OTHER ACCOUNTS RECEIVABLE Trade accounts receivable are shown initially at their fair value and later at their amortized cost in accordance with the effective interest rate method, less the allowance for impairment losses. An allowance for impairment loss of trade accounts receivable is made when there is objective evidence that the Company will not be able to recover all the amounts due according to the original terms of the accounts receivable. The existence of significant financial difficulties on the part of the debtor, the probability that the debtor is entering bankruptcy or financial reorganization and the default or delay in making payments are indicators that the receivable has considered been impaired. The amount of the provision is the difference between the book value of the assets and the present value of the estimated future cash flows, discounted at the original effective interest rate. The book value of the asset is reduced by the amount of the allowance and the loss is shown in the consolidated statement of income in Cost of sales. When an account receivable is written off, it is charged to the allowance account for accounts receivable. 2.13. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash and bank balances, time deposits in financial institutions, and other short-term and highly liquid investments. 2.14. CAPITAL The common shares are classified as net equity. Incremental costs directly attributable to the issuance of new shares or options are shown in net equity as a deduction from the proceeds received. 2.15. TRADE AND OTHER ACCOUNTS PAYABLES Trade payables and other accounts payable are initially recognized at fair value and subsequently at amortized cost and are valued according to the method of the effective interest rate. 2.16. INTEREST-BEARING LOANS Financial liabilities are shown initially at their fair value, net of the costs incurred in the transaction. Later, these financial liabilities are valued at their amortized cost; any difference between the proceeds obtained (net of the necessary arrangement costs) and the repayment value, is shown in the consolidated statement of income during the term of the debt, according to the effective interest rate method. Financial liabilities are classified in current and non-current liabilities according to the contractual payment dates of the nominal principal. 2.17. DEFERRED TAXES Deferred taxes are calculated on the temporary differences arising between the tax bases of assets and liabilities and their book values. However, if the temporary differences arise from the initial recognition of a liability or an asset in a transaction different from a Business Combination that at the time of the transaction does not affect the accounting result or the tax gain or loss, they are not booked. The deferred tax is determined using the tax rates (and laws) that have been enacted or substantially enacted at the consolidated financial statements close, and are expected to apply when the related deferred tax asset is realized or the deferred tax liability discharged. Deferred tax assets are recognised when it is probable that there will be sufficient future 0 4 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A tax earnings with which to compensate the temporary differences. is made on the basis of the amount estimated for distribution. The Company does not record deferred tax on temporary differences arising on investments in subsidiaries, provided that the opportunity to reverse the temporary differences is controlled by the Company and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax on temporary differences arising on investments in associates is immaterial. 2.18. EMPLOYEE BENEFITS (a) Personnel vacations The Company recognizes the expense for personnel vacations on an accrual basis. (b) Share-based compensation The compensation plans implemented by the granting of options for the subscription and payment of shares are shown in the consolidated financial statements in accordance with IFRS 2: Share based payments, showing the effect of the fair value of the options granted as a charge to remuneration on a straight-line basis between the date of granting such options and the date on which these become vested. (c) Post-employment and other long-term benefits Provisions are made for these obligations by applying the method of the actuarial value of the accrued cost, and taking into account estimates of future permanence, mortality rates and future wage increases determined on the basis of actuarial calculations. The discount rates are determined by reference to market interest-rate curves. Actuarial gains or losses are shown in results for the period when they occur. (d) Incentives The Company has an annual incentives plan for its personnel for compliance with objectives and individual contribution to the results. The incentives eventually granted consist of a given number or portion of monthly remuneration and the provision 2.19. PROVISIONS Provisions are recognised when: (i) The Company has a present legal or implicit obligation as a result of past events. (ii) It is probable that payment is going to be necessary to settle an obligation, and (iii) The amount has been reliably estimated. Provisions are shown at the present value of the disbursements expected to be necessary for settling the obligation using the Company’s best estimates. The pre-tax discount rate used for determining the present value reflects current market evaluations on the date of the consolidated financial statements, time value of money, as well as the specific risks related to the liability in question. 2.20. REVENUE RECONGNITION Revenues include the fair value of the proceeds received or to be received on sales of goods and rendering services in the ordinary course of the Company’s business. Revenues are shown net of refunds, rebates and discounts. (a) Rendering of services (i) Passenger and cargo transport The Company shows revenue from the transportation of passengers and cargo once the service has been provided. (ii) Frequent flyer program The Company currently has a frequent flyer program, whose objective is customer loyalty through the delivery of kilometers or points fly whenever the program holders make certain flights, use the services of entities registered with the program or make purchases with an associated credit card. The 1 4 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A kilometers or points earned can be exchanged for flight tickets or other services of associated entities. Property, plant and equipment. The consolidated financial statements include income), (deferred for this concept liabilities according to the estimate of the valuation established for the kilometers or points accumulated pending use at that date, in accordance with IFRIC 13: Customer loyalty programs. (iii) Other revenues (b) When the Company is the lessee – operating lease Leases, in which the lessor retains an important part of the risks and benefits deriving from ownership, are classified as operating leases. Payments with respect to operating leases (net of any incentive received from the lessor) are charged in the consolidated statement of income on a straight-line basis over the term of the lease. The Company records revenues for other services when these have been provided. 2.22. NON-CURRENT ASSETS OR DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE Non-current assets (or disposal groups) classified as assets held for sale are shown at the lesser of their book value and the fair value less costs to sell. 2.23. MAITENANCE The costs incurred for scheduled major maintenance of the aircraft’s fuselage and engines are capitalized and depreciated until the next maintenance. The depreciation rate is determined on technical grounds, according to its use expressed in terms of cycles and flight hours. The unscheduled maintenance of aircraft and engines, as well as minor maintenance, are charged to results as incurred. 2.24. ENVIRONMENTAL COSTS Disbursements related to environmental protection are charged to results when incurred. (b) Interest income Interest income is booked using the effective interest rate method. (c) Dividend income Dividend income is booked when the right to receive the payment is established. 2.21. LEASES (a) When the Company is the lessee – financial lease The Company leases certain Property, plant and equipment in which it has substantially all the risk and benefits deriving from the ownership; they are therefore classified as financial leases. Financial leases are initially recorded at the lower of the fair value of the asset leased and the present value of the minimum lease payments. Every lease payment is separated between the liability component and the financial expenses so as to obtain a constant interest rate over the outstanding amount of the debt. The corresponding leasing obligations, net of financial charges, are included in Other financial liabilities. The element of interest in the financial cost is charged to the consolidated statement of income over the lease period so that it produces a constant periodic rate of interest on the remaining balance of the liability for each year. The asset acquired under a financial lease is depreciated over its useful life and is included in 2 4 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A During the financial year 2012, the Company recognized losses of US$ 1.8 million on fuel hedging. During the same period 2011, the Company recognized gains of US$ 39.9 million for the same reason. At December 31, 2012, the market value of its fuel positions amounted to US$ 9.9 million (negative). At December 31, 2011, this market value was US$ 30.6 million (positive). The following tables show the notional value of the purchase positions together with the derivatives contracted for the different periods: NOTE 3. FINANCIAL RISK MANAGEMENT 3.1. FINANCIAL RISK FACTORS The Company’s activities are exposed to different financial risks: (a) market risk, (b) credit risk, and (c) liquidity risk. The Company’s global risk management program is focused on uncertainty in the financial markets and tries to minimize the potential adverse effects on the net margin. The Company uses derivatives to hedge part of these risks. (a) Market risk Due to the nature of its operations, the Company is exposed to market risks such as: (i) fuel-price risk, (ii) interest-rate risk, and (iii) local exchange-rate risk. In order to fully or partially hedge all of these risks, the Company operates with derivative instruments to fix or limit rises in the underlying assets.. i. Fuel-price risk: Fluctuations in fuel prices largely depend on the global supply and demand for oil, decisions taken by Organization of Petroleum Exporting Countries (“OPEC”), global refining capacity, stock levels maintained, and weather and geopolitical factors. The Company purchases an aircraft fuel called Jet Fuel grade 54. There is a benchmark price in the international market for this underlying asset, which is US Gulf Coast Jet 54. However, the futures market for this asset has a low liquidity index and as a result the Company hedges its exposure using West Texas Intermediate (“WTI”) crude, Brent (“BRENT”) crude and distillate Heating Oil (“HO”), which have a high correlation with Jet Fuel and are highly liquid assets and therefore have advantages in comparison to the use of the U.S. Gulf Coast Jet 54 index. 3 4 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Positions as of December 31, 2012 (*) Maturities Q113 Q213 Q313 Q413 Q114 Q214 Total Volume (thousands of barrels WTI) 4,824 Contracted future price (US$ per barrel)(**) 104 600 117 525 119 525 119 525 100 75 93 7,074 107 TOTAL (ThUS$) 501,696 70,200 62,475 62,475 52,500 6,975 756,918 Aproximate percentage of the hedge (of expected consumption value) 61% 7% 6% 6% 6% 1% 19% (*) The volume shown in the table considers all the hedging instruments (swaps and options) in Brent and WTI. (**) Weighted average between collars and options when activated. Correspond to equivalent in WTI. Positions as of December 31, 2011 (*) Maturities Volume (thousands of barrels WTI) Contracted future price (US$ per barrel)(**) TOTAL (ThUS$) Q112 Q212 Q312 Total 1,800 95 1,134 92 693 92 3,627 93 171,000 104,328 63,756 337,311 Approximate percentage of hedge (of expected consumption value) 50% 33% 19% 34% (*) The volume shown in the table considers all the hedging instruments (swaps and options) in WTI. (**) Weighted average between collars and options, when activated. Sensitivity analysis Company’s net equity). A drop in fuel price positively affects the Company through a reduction in costs. However, this drop also negatively affects contracted positions as these are acquired to protect the Company against the risk of a rise in price. The policy therefore is to maintain a hedge-free percentage in order to be competitive in the event of a drop in price. Due to the fact that current positions do not represent changes in cash flows, but a variation in the exposure to the market value, the current hedge positions have no impact on income (they are booked as cash flow hedge contracts, so a variation in the fuel price has an impact on the The following table shows the sensitivity analysis of the financial instruments according to reasonable changes in the fuel price and their effect on equity. The term of the projection was defined until the end of the last current fuel hedge contract, being the last business day of the second quarter of 2014. The calculations were made considering a parallel movement of US$ 5 per barrel in the curve of the WTI and BRENT crude futures benchmark price at December, 2012 and the end of December, 2011. 4 4 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (in the same way interest rates are raised in periods of economic expansion). The present uncertainty about how the market and governments will react, and thus how interest rates will change, creates a risk related to the Company’s debt at floating interest rates and its investments. Cash flow interest rate risk equates to the risk of future cash flows of the financial instruments due to the fluctuation in interest rates on the market. The Company’s exposure to risks of changes in market interest rates is mainly related to long-term obligations with variable interest rates. In order to reduce the risk of an eventual rise in interest rates, the Company has signed interest- rate swap and call option contracts. Currently a 62% of the debt is fixed to fluctuations in interest rate. Therefore the Company is exposed in one portion to the variations of London Inter Bank Offer Rate (“LIBOR”) of 30 days, 90 days, 180 days and 360 days, Brazilian Interbank Deposit Certificate (“ILC”), and the Interest Rate Term of Brazil (“TJLP”). The following table shows the sensitivity of changes in financial obligations that are not hedged against interest-rate variations. These changes are considered reasonably possible based on current market conditions. Increase (decrease) in libor 3 months Positions as of December 31, 2012 effect on Pre-Tax earnings (millions of US$) Positions as of December 31, 2011 effect on Pre-Tax earnings (millions of US$) +100 basis points -100 basis points +33.69 +33.69 -3.06 +3.06 Benchmark price (US$ per barril) Positions as of December 31, 2012 effect on equity (millions of US$) Positions as of December 31, 2011 effect on equity (millions of US$) +5 -5 +12.6 -11.3 +16.5 -13.8 The Company seeks to reduce the risk of fuel price rises to ensure it is not left at a disadvantage compared to its competitors in the event of a sharp price fall. The Company therefore uses hedge instruments like swaps, call options and collars to partially hedge the fuel volumes consumed. Beginning with the third quarter of 2012 the company meets the required criteria of IAS 39, presented to apply hedge accounting in respect of fuel hedging TAM society. Until June 30, 2012, the Company did not apply hedge accounting to fuel hedging instruments of TAM. During the periods presented the Company has not recorded inefectiveness within the income statement. Given the fuel hedge structure during 2012, which considers a hedge-free portion, a vertical fall by 5 dollars in the WTI and BRENT benchmark price (the monthly daily average), would have meant a impact of approximately US$ 91.0 million in the cost of total fuel consumption for the same period. For the 2012, a vertical rise by 5 dollars in the WTI and BRENT benchmark price (the monthly daily average) would have meant an impact of approximately US$ 90.4 million of increased fuel costs. ii. Cash flow interest-rate risk: in interest rates depends The fluctuation heavily on the state of the global economy. An improvement in long-term economic prospects moves long-term rates upward while a drop causes a decline through market effects. However, if we consider government intervention in periods of economic recession, it is usual to reduce interest rates to stimulate aggregate demand by making credit more accessible and increasing production 5 4 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Changes in market conditions produce a change in the valuation of current financial instruments hedging interest rates, causing an effect on the Company’s equity (because they are booked as cash-flow hedges). These changes are considered reasonably possible based on current market conditions. The calculations were made increasing (decreasing) vertically 100 basis points of the three- month Libor futures curve. of the domestic business in Ecuador, both tariffs and sales are in US dollar. The Company is therefore exposed to fluctuations in the different currencies, mainly: Brazilian real, Chilean peso, Argentine peso, Uruguayan peso, Paraguayan guaraní, Mexican peso, Euro, Esterling libra, Peruvian sol, Colombian peso, Australian dollar and New Zealand dollar. Of these currencies, the largest exposure is presented by chilean peso and brazilian real. The Company manages its exposure to foreign currency risk through hedging selected balances using forward exchange contracts. The Company may enter into derivative contracts to protect the possible appreciation or depreciation of currencies against the functional currency of the Company. In order to restructure derivative contracts in Brazil, in the first quarter of 2009, in the second quarter of 2010 and in the second quarter of 2011, a dollar deposit was required as a guaranteed collateral. As foreign currency deposits are not allowed in Brazil, a collar contract was made with a notional foreign currency equivalent to the amount of deposit to meet the requirement. The notional value and market value of foreign currency derivative are presented below: Foreign currency derivative Position at December 31, 2012 Notional Value (MUS$) Market Value (MUS$) +30.00 +0.00 Increase (decrease) future curve in libor 3 months Positions as of December 31, 2012 effect on equity (millions of US$) +100 basis points -100 basis points +33.6 -35.5 Positions as of December 31, 2011 effect on equity (millions of US$)) +40.7 -43.2 There are limitations in the method usede for the sensitivity analysis and relate to those provided by the market because the levels indicated by the futures curves are not necessarily met and will change in each period. In accordance with the requarements of IAS 39, during the periods presented, the Company has not recorded amounts for effectiveness in the consolidated income statement. iii. Foreign exchange rate risk: The functional currency used by the Company is the US dollar in terms of setting prices for its services, the composition of its statement of financial position and effects on its operating income. The Company sells most of its services in US dollars, prices equivalent to the US dollar and Brazilian real. A large part of its expenses are denominated in US dollars or equivalents to the US dollar, particularly fuel costs, aeronautic charges, aircraft leases, insurance and aircraft components and accessories. Remuneration expenses are denominated in local currencies. The Company maintains its cargo and passenger business tariffs in US dollars. There is a mix in the domestic markets as sales in Peru are in local currency but the prices are indexed to the US dollar. In Brazil, Chile, Argentina and Colombia the tariffs are in local currency without any kind of indexation. In the case 6 4 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A According the structure of the Company to convert financial liabilities, financial assets and account receivables of US dollars to Brazilian real, the results of the Company vary. The following table shows the variation of financial performance to appreciate or depreciate 10% exchange rate R$/US$: Apprececiation (depreciation) R$/US$ Effect at December 31, 2012 MUS$ -10% +10% +404.19 -404.21 The prices of frequent flyer points in the subsidiary Multiplus S.A. are denominated in US dollars. As functional currency is the Brazilian real, the sale of these points are assigned to variations in the exchange rate R$/US$. To decrease exposure, Multiplus S.A. contract rate collars. The following table presents the notional amount and market value of derivatives exchange rate for each maturity date. The expiration date of the derivatives coincide with the probable date of collection points. The highly probable sale of the points are expected to be recognized in income after being exchanged, on average, six months later. Foreign currency derivative multiplus Position at December 31, 2012 maturity 2013 2014 Total Notional Value(MUS$) +283.00 +18.00 +301.00 Market Value(MUS$) -14.68 -0.55 -15.23 Sensitivity exchange rate Multiplus S.A. If the Brazilian real appreciates or depreciates by 10% against the US dollar and all other variables are held constant, the financial results would have varied approximately MUS$ 21.8/ MUS$ 28.2, mainly as the effect of gains or losses from exchange rate in the time value of derivatives, which are recognized immediately as equity. Due to the functional currency of TAM S.A. and Subsidiaries is the Brazilian real, the Company presents effects by the exchange rate fluctuations in Other comprehensive income by converting the Statement of financial position and Income statement of TAM S.A. and Subsidiaries from their functional currency to the U.S. dollar, being these last currency the presentation currency of the consolidated financial statement of LATAM Airlines Group S.A. and Subsidiaries. The goodwill generated in the Business Combination is recognized as an asset of TAM S.A. and Subsidiaries in Brazilian real whose conversion to U.S. dollar also produces effects in Other comprehensive income. The following table shows the change in Other comprehensive income recognized in Total equity to appreciate or depreciate 10% exchange rate R$/US$: Apprececiation (depreciation) R$/US$ Effect at December 31, 2012 MMUS$ -10% +10% +401.12 -328.19 7 4 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Effects of exchange rate derivatives in the Financial Statements The profit or loss caused by changes in the fair value of hedging instruments are segregated between intrinsic value and time value. The intrinsic value is the percentage of cash flow cash covered, initially shown in equity and later transferred to income, while the hedge transaction is recorded in income. The time value corresponds to the ineffective portion of cash flow hedge and is recognized in the financial results of the Company (Note 21). (b) Credit risk Credit risk occurs when the counterparty to a financial agreement or instrument fails to discharge an obligation due or financial instrument, leading to a loss in market value of a financial instrument (only financial assets, not liabilities). The Company is exposed to credit risk due to its operative and financial activities, including deposits with banks and financial institutions, investments instruments, exchange-rate in other kinds of transactions and the contracting of derivative instruments or options. To reduce the credit risk associated with operational activities, the Company has established credit limits to abridge the exposure of their debtors which are monitored permanently (mainly in case of operational activities in Brazil with travel agents). As a way to mitigate credit risk related to financial activities, the Company requires that the counterparty to the financial activities remain at least investment grade by major Risk Assessment Agencies. Additionally the company has established maximum investments which are monitored regularly. limits for i. Financial activities Cash surpluses that remain after the financing of assets necessary for the operation are invested according to credit limits approved by the Company’s Board, mainly in time deposits with different financial institutions, private investment funds, short-term mutual funds, and easily-liquidated corporate and sovereign bonds with short remaining maturities. These investments are booked as Cash and cash equivalents and Other current financial assets. (both In order to reduce counterparty risk and to ensure that the risk assumed is known and managed by the Company, investments are diversified among local and institutions different banking international). The Company evaluates the credit standing of each counterparty and the levels of investment, based on (i) their credit rating, (ii) the equity size of the counterparty, and (iii) investment limits according to the Company’s level of liquidity. According to these three parameters, the Company chooses the most restrictive parameter of the previous three and based on this, establishes limits for operations with each counterparty. The Company has no guarantees to mitigate this exposure. ii. Operational activities The Company has four large sales “clusters”: travel agencies, cargo agents, airlines and credit- card administrators. The first three are governed International Air Transport Association, by (“IATA”) organization comprising international most of the airlines that represent over 90% of scheduled commercial traffic and one of its main objectives is to regulate the financial transactions between airlines and travel agents and cargo. When an agency or airline does not pay their debt, they are excluded from operating with IATA’s member airlines. In the case of credit-card administrators, they are fully guaranteed by 100% by the issuing institutions. The exposure consists of the term granted, which fluctuates between 1 and 45 days. One of the tools the Company uses for reducing credit risk is to participate in global entities related to the industry, such as IATA, Business Sales Processing (“BSP”), Cargo Account Settlement Systems (“ICH”) (“CASS”), IATA Clearing House and banks (credit cards). These institutions fulfill the role of collectors and distributors between airlines and travel and cargo agencies. In the case The Company has future obligations related to financial leases, operating leases, maturities of other bank borrowings, derivative contracts and aircraft purchase contracts. 8 4 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A of the Clearing House, it acts as an offsetting entity between airlines for the services provided between them. A reduction in term and implementation of guarantees has been achieved through these entities. Currently the sales invoicing of TAM Linhas Aéreas S.A. related with travel agents and cargo agents for domestic transportation in Brazil is done directly by TAM Linhas Aéreas S.A. Credit quality of financial assets The external credit evaluation system used by the Company is provided by IATA. Internal systems are also used for particular evaluations or specific markets based on trade reports available on the local market. The internal classification system is complementary to the external one, i.e. for agencies or airlines not members of IATA, the internal demands are greater. To reduce the credit risk associated with operational activities, the Company has established credit limits to abridge the exposure of their debtors which are monitored permanently (mainly in case of operational activities of TAM Linhas Aéreas S.A. with travel agents).The bad-debt rate in the principal countries where the Company has a presence is insignificant. (c) Liquidity risk Liquidity risk represents the risk that the Company has no funds to meet its obligations. Because of the cyclical nature of the business, the operation, and its investment and financing needs related to the acquisition of new aircraft and renewal of its fleet, plus the financing needs related to market-risk hedges, the Company requires liquid funds to meet its payment obligations. The Company therefore manages its cash and cash equivalents and its financial assets, matching the term of investments with those of its obligations. The Company’s policy is that the average term of its investments may not exceed the average term of its obligations. This cash and cash equivalents position is invested in highly-liquid short-term instruments through first-class financial entities. 9 4 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A e t a r l a n i m o N e u l a v l a n i m o N e t a r e v i t c e f f E n o i t a z i t r o m A l a t o T n a h t e r o M s r a e y e v fi n a h t e r o M o t e e r h t s r a e y e v fi e n o n a h t e r o M s r a e y e e r h t o t n a h t e r o M o t s y a d 0 9 r a e y e n o 0 9 o t p U s y a d y c n e r r u C y r t n u o c r o t i d e r C r o t i d e r C . o N x a T r o t i d e r C r o t b e D y r t n u o c r o t b e D r o t b e D . o N x a T y t i l i b a i L f o s s a l C 2 1 0 2 , 1 3 r e b m e c e D f o s a y t i r u t a m f o e t a d y b d e r e d r o k s i r y t i d i u q i l f o s i s y l a n a e h t r o f y t i l i b a i l f o s s a l C 6 9 9 , 3 7 3 , 5 8 2 9 , 0 8 8 , 5 7 4 2 , 7 6 2 , 2 8 8 7 , 7 9 0 , 1 6 4 2 , 3 6 5 , 1 6 9 5 , 1 4 5 1 5 0 , 1 1 4 L A T O T % 7 1 2 . 0 0 0 0 3 , % 7 1 2 . l a u n n a i m e S 1 3 3 0 3 , % 0 7 1 . % 2 3 1 . % 9 7 1 . % 7 5 2 . % 4 7 1 . 0 0 0 5 3 , 0 0 0 5 7 , 0 0 0 2 0 1 . 3 7 3 4 1 2 , 8 4 8 4 4 , % 0 7 1 . % 2 3 1 . % 3 8 1 . % 7 5 2 . % 6 7 1 . l a u n n a i m e S y l r e t r a u Q l a u n n A - l a u n n a i m e S 2 0 1 5 3 , 5 0 2 5 7 , , 0 7 7 2 0 1 , 9 4 7 4 1 2 0 3 4 5 4 , - - - - - - - - - - - - - - - - - - - - 3 7 3 4 1 2 , 5 9 1 - 0 3 4 5 4 , 1 3 3 0 3 , 2 0 1 5 3 , 5 0 2 5 7 , 0 7 7 2 0 1 , - 1 8 1 % 1 0 5 . 9 4 6 2 0 1 , % 9 6 5 . y l r e t r a u Q , 2 4 8 4 2 1 6 3 3 4 4 , 3 0 2 2 3 , 8 0 2 2 3 , 0 7 0 2 1 , 5 2 0 4 , % 7 3 3 . 8 4 4 7 8 , % 2 4 3 . y l r e t r a u Q 1 5 4 0 9 , - 7 5 7 6 , 9 1 0 6 3 , 0 3 7 4 3 , 5 4 9 2 1 , $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T % 1 4 4 . % 7 6 3 . % 6 7 1 . % 0 1 2 . % 5 8 0 . % 3 1 1 . % 1 1 1 . 8 4 1 6 6 , 0 9 0 1 5 4 , , 3 6 4 9 5 9 1 . 8 0 9 9 0 4 , 9 4 4 0 2 2 , 2 2 2 8 2 1 , 0 8 4 3 6 , % 6 9 4 . % 5 1 4 . % 7 5 2 . % 1 7 2 . % 9 3 1 . % 3 7 1 . % 1 7 1 . y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q 0 2 7 6 7 , , 9 4 2 4 1 5 3 9 4 9 1 , 4 7 5 2 5 1 , , 9 1 9 3 6 1 2 , , 5 2 8 7 0 2 1 . 6 5 1 , . 1 5 4 , 7 2 6 0 3 2 , 9 6 7 6 3 1 9 3 7 7 6 , 4 3 0 7 1 2 , 1 7 7 9 1 1 , 6 5 4 7 7 , 3 9 5 8 3 , 7 9 5 5 1 , , 3 6 4 6 4 1 , 2 7 7 0 8 3 9 9 6 4 9 , 5 8 0 5 4 , 0 9 1 4 2 , 8 9 8 1 1 , 6 2 7 4 2 , 7 3 0 4 4 1 , 4 3 0 3 8 3 , 7 8 2 3 9 , 5 8 0 4 4 , 7 6 5 3 2 , 6 7 5 1 1 , 5 9 6 2 1 , 5 3 4 3 5 , 1 2 2 4 4 1 , 8 2 6 4 3 , 1 8 2 6 1 , 0 8 6 8 , 2 6 2 4 , 9 0 2 4 , 0 4 7 7 1 , 7 6 0 8 4 , 8 0 5 1 1 , 5 0 4 5 , 6 7 8 2 , 0 1 4 1 , % 6 2 1 . 9 8 7 2 7 1 , % 7 9 1 . y l r e t r a u Q , 8 5 8 6 8 1 9 5 0 1 1 1 , 3 0 7 0 3 , 8 8 1 0 3 , 4 9 1 1 1 , 4 1 7 3 , % 7 2 1 . 2 7 0 7 0 1 , % 8 9 1 . y l r e t r a u Q , 7 6 7 5 1 1 2 6 6 8 6 , 9 7 0 9 1 , 9 5 7 8 1 , 8 5 9 6 , % 5 3 3 . 0 0 0 0 9 1 , % 5 3 3 . y l r e t r a u Q , 7 3 0 7 2 2 9 9 0 9 0 1 , 0 9 7 7 4 , 8 5 9 6 4 , 3 1 4 7 1 , % 2 4 3 . 1 9 4 5 8 , % 1 7 3 . y l r e t r a u Q 2 1 0 2 9 , 5 6 8 1 , 6 9 5 6 2 , 3 4 4 8 3 , 8 4 8 7 1 , % 9 2 1 . 4 8 6 3 0 1 , % 2 3 1 . y l r e t r a u Q , 1 3 8 8 0 1 6 2 2 6 2 , 5 7 3 1 3 , 3 9 0 1 3 , 5 4 1 5 1 , % 5 6 5 . % 1 3 1 . % 0 7 4 . % 6 8 1 . % 8 0 2 . - - 6 8 0 6 4 , 2 6 4 7 , 1 6 2 4 1 3 , 9 8 1 6 4 1 , 0 6 9 8 5 , 4 2 6 1 4 1 , 0 0 3 0 1 , % 8 3 6 . % 1 3 1 . % 9 2 5 . % 6 8 1 . % 8 0 2 . - - y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q - y l r e t r a u Q - - 2 6 2 6 5 , 5 2 5 7 , , 3 8 5 1 6 3 , 3 3 0 9 4 1 9 5 9 8 5 , 5 7 0 6 1 , 5 7 0 6 1 , 5 7 0 6 1 , - - 1 0 5 1 5 , , 3 8 7 2 2 1 - - - 4 1 2 5 1 , - 0 7 8 4 2 1 , 9 8 1 6 4 1 , 3 7 4 9 2 , 8 2 0 6 , 6 7 6 5 , 5 2 8 6 4 , 8 4 2 2 , 3 3 7 0 1 , , 4 8 2 6 4 1 8 7 6 , . 5 9 0 5 0 3 , 0 6 3 8 6 , 4 4 3 1 3 , 3 9 3 0 1 , 8 1 7 0 1 , - - 6 2 9 5 , 7 5 5 3 , 5 3 2 1 , 9 0 3 2 , 7 7 7 5 , 0 6 2 7 , 2 9 9 4 , 9 0 0 2 , 9 4 8 1 , 4 0 6 5 1 , 6 9 5 9 3 5 3 , $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U e l i h C E L I H C E D O C N A B . 5 - 0 0 0 4 0 0 7 9 . e l i h C e l i h C e l i h C e l i h C e l i h C . A S U . e c n a r F . A S U . . A S U . . A S U . . A S U . R E D N A T N A S O D A T S E E L O C I R G A T I D E R C O C F E P G N I I S A B R A P P N B O G R A F S L L E W K N A B I T I C I C B U A T I A V B B . 6 - 0 0 0 6 0 0 7 9 . . K - 0 3 0 5 4 6 6 7 . . 8 - 0 0 0 2 3 0 7 9 . . K - 0 0 0 6 3 0 7 9 . . 7 - 0 0 0 0 3 0 7 9 . E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 . A S U . . A S U . . A S U . . A S U . . A S U . . A S U . e c n a r F . A S U . . A S U . . A S U . . A S U . - - - H C N Y L L I R R E M F O K N A B A C I R E M A T N E M P O L E V E D N A P A J F O K N A B K N A B E L P P A U M T B K N A B E H C S T U E D E L O C I R G A T I D E R C K N A B I T I C G N I D E R E T R A H C S . O C F E P G N I E O B S O R T O S O R T O S O R T O E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 - - - e l i h C R E D N A T N A S . K - 0 0 0 6 3 0 7 9 . e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C e l i h C e l i h C e l i h C e l i h C . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C e l i h C e l i h C e l i h C e l i h C . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . s r e t r o p x e o t s n a o L s n a o l k n a B d e e t n a r a u G s n o i t a g i l b o l a i c n a n i F s e s a e l s n a o l r e h t O s e v i t a v i r e d g n i g d e H g n i g d e H n o N - s e v i t a v i r e d 0 5 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A e t a r l a n i m o N l a n i m o N e u l a v e t a r e v i t c e f f E n o i t a z i t r o m A l a t o T n a h t e r o M s r a e y e v fi n a h t e r o M o t e e r h t s r a e y e v fi e r o M e n o n a h t e e r h t o t s r a e y n a h t e r o M o t s y a d 0 9 r a e y e n o 0 9 o t p U s y a d y c n e r r u C r o t i d e r C y r t n u o c r o t i d e r C r o t i d e r C . o N x a T r o t b e D y r t n u o c r o t b e D . o N x a T r o t b e D y t i l i b a i L f o s s a l C 2 1 0 2 , 1 3 r e b m e c e D f o s a y t i r u t a m f o e t a d y b d e r e d r o k s i r y t i d i u q i l f o s i s y l a n a e h t r o f y t i l i b a i l f o s s a l C % 1 8 2 . % 3 0 4 . % 5 3 5 . % 2 7 0 1 . % 5 6 5 . % 1 0 4 / . % 9 6 7 . % 4 9 8 . % 4 3 3 . % 5 9 0 . % 1 4 8 . % 6 5 8 . A / N A / N % 5 2 2 . A / N % 0 5 1 . % 4 8 3 . % 9 6 3 . % 9 2 2 . % 7 3 0 / . % 1 0 2 . % 9 8 2 . % 5 2 2 . % 9 5 2 . % 5 8 0 . % 1 2 2 / . % 1 1 2 . % 2 3 3 / . % 2 6 2 . % 6 9 1 . % 2 4 2 . % 8 9 1 . % 5 9 1 . % 8 0 0 . % 1 5 7 . % 8 5 0 1 . % 1 3 5 . % 8 0 9 . % 2 8 6 . $ S U h T 2 2 3 0 5 , 6 8 9 9 2 , 0 8 9 1 5 1 , 2 9 1 9 3 3 6 1 , 6 4 4 2 3 , 8 8 4 8 4 7 2 , 8 0 6 4 , , 0 0 0 0 0 1 1 , 8 7 6 4 4 2 , 7 2 1 5 6 , 0 5 7 2 1 , 3 3 0 7 8 , 7 1 6 7 1 , 6 2 3 4 2 , 6 8 9 7 8 , 4 8 2 1 5 4 , 0 1 8 4 1 1 , 1 2 7 4 9 4 , 0 0 5 7 3 , 2 0 4 5 , 6 8 0 1 8 , 8 5 4 9 6 , 0 7 7 7 9 , 5 2 4 6 1 3 , 2 9 0 7 1 1 , 7 4 6 3 2 , % 4 9 8 . % 4 3 3 . % 6 9 0 . % 0 6 8 . % 6 9 8 . A / N A / N % 5 2 2 . A / N % 0 5 1 . % 4 8 3 . % 9 6 3 . % 9 2 2 . y l h t n o M n o i t a r i p x E t A l a u n n a i m e S y l h t n o M y l h t n o M y l h t n o M y l h t n o M y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q % 2 8 0 / . % 1 0 2 . l a u n n a i m e S / y l r e t r a u Q % 9 8 2 . % 5 2 2 . % 9 5 2 . % 0 7 1 . y l r e t r a u Q y l h t n o M y l h t n o M y l r e t r a u Q % 6 9 1 . % 2 4 2 . y l h t n o M y l r e t r a u Q % 1 2 2 / . % 1 1 2 . y l r e t r a u Q / y l h t n o M % 2 3 3 / . % 2 6 2 . l a u n n a i m e S / y l r e t r a u Q 1 6 0 6 , 5 9 6 2 , 0 2 3 1 , 0 2 3 1 , 5 9 4 , 0 0 5 5 1 8 1 , , 1 6 1 8 2 0 1 , 8 0 7 0 8 4 , 0 2 7 1 9 1 , 2 1 7 3 1 3 , - - - 4 2 6 1 8 , 1 7 8 2 1 , 9 7 1 4 9 , 3 3 3 0 3 , 9 8 9 5 2 , 4 6 6 6 9 , 7 8 8 6 7 4 , 5 4 6 2 2 1 , 5 7 6 3 1 5 , 0 3 4 9 3 , 1 5 6 5 , 2 8 9 2 8 , 5 0 3 4 7 , 3 3 5 5 0 1 , 0 5 3 9 6 3 , 5 8 3 8 2 1 , 5 7 6 6 2 , - 6 9 1 9 2 , 7 8 6 3 2 , - 7 6 8 1 1 , 9 3 9 5 4 , 4 9 6 1 4 2 , 3 0 6 0 2 , - 9 0 6 0 2 , 2 4 6 8 2 , - 3 8 9 5 , 6 7 4 9 1 , 3 8 0 7 8 , 8 2 7 1 1 , - 9 0 6 0 2 , 6 5 0 8 2 , 8 1 4 9 , 5 4 4 5 , 4 2 8 9 1 , 6 9 2 0 9 , 8 5 7 0 7 , 4 3 7 4 8 1 , 5 2 8 4 2 1 , 0 3 8 2 3 1 , - - - 5 7 9 3 4 , 4 8 7 7 2 , 7 5 9 8 7 1 , 1 8 6 8 4 , 9 9 5 5 1 , - 8 6 7 - 2 0 3 2 1 , 6 4 2 5 2 , 8 8 3 8 7 , 7 0 9 8 3 , 9 6 5 3 , 5 4 8 5 2 , 8 1 9 2 , 9 3 3 1 5 , 0 0 0 2 1 , 4 3 1 5 3 , 0 1 7 3 7 , 6 0 4 7 2 , 2 3 3 4 , 2 0 9 7 8 , 0 9 4 1 7 2 , 8 2 7 7 , 0 5 3 9 , 5 0 1 0 1 , 8 5 9 4 1 , 9 1 9 1 , 7 8 4 8 , 5 9 6 4 4 , 4 6 1 4 1 , 1 3 9 0 5 , 3 0 1 0 1 , 6 5 4 1 , 5 4 7 0 2 , 7 2 4 4 , 1 0 8 2 1 , 9 6 1 6 2 , 3 7 7 9 , 5 3 8 1 , % 1 8 2 . % 3 0 4 . % 5 3 5 . % 2 7 0 1 . % 5 6 5 . y l r e t r a u Q n o i t a r i p x E t A n o i t a r i p x E t A l a u n n a i m e S n o i t a r i p x E t A 6 2 6 5 6 , 5 6 4 2 3 , 6 5 3 7 6 7 4 6 1 , 6 6 2 2 8 1 , % 1 0 4 / . % 9 6 7 . n o i t a r i p x E t A / y l h t n o M 5 4 1 5 3 , y l h t n o M n o i t a r i p x E t A 1 0 1 3 6 5 8 2 , - - - - - - - - - - - - - - - - - - - - - - - 1 6 8 - 3 3 5 4 6 , 5 4 9 5 , 1 2 8 8 1 1 , 8 3 6 9 2 1 , 1 9 3 5 1 , 9 2 3 6 5 8 2 , $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T 1 3 4 9 1 , % 8 8 0 . y l r e t r a u Q 1 4 3 0 2 , 6 5 9 8 , 9 8 5 4 , 1 8 4 4 , 4 5 6 1 , 1 7 2 0 1 , % 8 9 1 . y l h t n o M 0 2 4 0 1 , - - 5 0 2 3 , 9 7 3 5 , 6 3 8 1 , 5 2 0 0 8 3 , % 5 9 1 . y l r e t r a u Q 1 7 7 0 1 4 , 2 2 4 7 5 1 , 4 6 2 9 9 , 7 9 1 0 0 1 , 2 0 1 9 3 , 6 8 7 4 1 , 3 9 0 1 , 0 2 5 6 2 , 6 4 9 5 4 , 6 5 3 8 2 6 2 5 , 3 9 8 8 1 , - 2 7 1 3 2 9 0 0 7 2 , 2 2 2 2 4 , 2 8 4 3 , 1 2 5 3 , 9 8 6 3 , 5 7 7 7 5 9 5 , 8 3 9 2 , 9 1 1 3 1 , 2 9 3 5 , 5 5 3 0 2 , 9 0 5 2 8 4 3 , 8 9 8 0 1 , 1 0 6 1 , 8 6 5 4 , 6 2 1 2 1 , 8 1 6 3 , 0 4 3 1 , 1 6 6 3 9 4 4 0 6 1 4 7 7 1 9 2 6 $ S U $ S U $ S U L R B $ S U $ S U / L R B L R B L R B $ S U $ S U L R B $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U L R B L R B L R B L R B R U E e c n a r F l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B . A S L I S A R B O D O C N A B E L O C I R G A T I D E R C K N A B I T I C A B B U A T I O C N A B . A S M B I O C N A B A R F A S O C N A B I O C N A B N U O C N A B O C S E D A R B O C N A B E H C S D N A L R E D E N - M C N I G N R E K E Z R E V T E I D E R C d n a l l o H J I P P A H C S T A A M . . A S U . K R O Y W E N F O K N A B E H T l i z a r B . A S L I S A R B O D O C N A B . . . . . . A S U . . A S U . . A S U . . A S U . . A S U . e c n a r F d n a l g n E . . A S U . e c n a r F y a m r e G . . . A S U . . A S U . e c n a r F y a m r e G e c n a r F . . A S U . C L L X I T N E M T S E V N I S F A L A I C N A N I F S U B R I A A D A N A C R I A I S A B R A P P N B I S A B R A P P N B . A N K N A B I T I C S E C I V R E S S A W A B I C - E L O C I R G A T I D E R C B I C - E L O C I R G A T I D E R C N O I T A R O P R O C L A T I P A C C I R T C E L E L A R E N E G E S K N A B B V D E S K N A B B V D K N A B X E P I - W F K S I X I T A N C B S H . C N I , S U E C N A N I F R I A K P g r u o b m e x u L . . A S G N I S A E L U O P A C A W . A S U . K N A B O G R A F S L L E W E L A R É N É G É T É I C O S . . A N T S E W H T R O N y l a t I H C N A R B N A L I M . . . A S U . l i z a r B l i z a r B l i z a r B l i z a r B e c n a r F - I I N O N M O D O T N O R O T E H T N E D N A L E G A L E D O C N A B K N A B O T N E M A D N E R R A A N I T A L S I C . A S L I T N A C R E M . A S M B I O C N A B . A S L I S A R B E C I V R E S L A I C N A N I F P H E C N A R F R I A E T E I C O S E L A R E N E G E T E I C O S % 0 0 0 . 0 2 5 2 , % 0 0 0 . y l h t n o M % 0 2 2 . % 0 0 0 . % 0 0 0 . 4 2 3 5 1 , % 0 0 0 . 2 9 3 , 9 9 3 , 4 5 3 0 5 1 , % 0 0 0 . - - 5 2 0 1 4 , % 0 2 2 . y l h t n o M 5 2 0 2 , 5 5 2 2 , 3 5 7 4 7 2 7 5 1 , % 1 5 7 . % 8 5 0 1 . % 1 3 5 . % 8 0 9 . % 2 8 6 . y l h t n o M y l h t n o M y l h t n o M y l h t n o M y l h t n o M 2 4 8 3 , 2 2 6 2 , 4 5 9 9 7 0 4 9 1 , 6 6 7 2 , 5 2 0 1 4 , 4 2 3 5 1 , 5 3 0 5 1 , - - - - - - - - - - - - - - - - - - 6 3 1 1 9 8 1 , - 3 9 3 0 2 1 , - - 8 5 4 1 , 2 8 8 1 , 3 1 9 2 5 8 0 1 - 9 7 6 , 6 5 4 , 5 0 5 9 , 9 6 0 , 2 7 0 4 , 3 4 0 , 1 9 1 5 , 1 2 9 7 7 9 , 7 4 0 , 1 6 2 8 , 3 7 3 l a t o T 3 6 9 1 , 3 5 3 9 , 8 0 0 4 , 9 2 5 4 , 3 0 9 6 , 3 0 6 3 , 3 4 1 9 , 2 8 8 1 3 , L R B $ S U $ S U l i z a r B O T N E M A G A P E D S O I E M E D A R I E L I S A R B A I H N A P M O C l i z a r B l i z a r B S O R T O S O R T O 6 6 7 2 , L R B l i z a r B . A S G N I S A E L E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i s a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T l i z a r B s e i r a i d i s b u S d n a . . A S M A T l i z a r B s e i r a i d i s b u S d n a . . A S M A T l i z a r B s e i r a i d i s b u S d n a . . A S M A T 0 6 - 1 0 0 0 / 2 6 8 2 1 0 2 0 . . 0 6 - 1 0 0 0 / 2 6 8 2 1 0 2 0 . . 0 6 - 1 0 0 0 / 2 6 8 2 1 0 2 0 . . l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B s e i r a i d i s b u S d n a A S M A T . . s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T 0 6 - 1 0 0 0 / 2 6 8 2 1 0 2 0 . . 0 6 - 1 0 0 0 / 2 6 8 2 1 0 2 0 . . l i s a r B s e i r a i d i s b u S d n a . . A S M A T 0 6 - 1 0 0 0 / 2 6 8 2 1 0 2 0 . . s n a o l k n a B h t i w n o i t a g i l b O c i l b u p e h t s e s a e l l a i c n a n i F s e v i t a v i r e d g n i g d e H g n i g d e H n o N - s e v i t a v i r e d s n a o l r e h t O 1 5 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A l a n i m o N e t a r l a n i m o N e u l a v e t a r e v i t c e f f E n o i t a z i t r o m A l a t o T n a h t e r o M s r a e y e v fi n a h t e r o M o t e e r h t s r a e y e v fi e r o M e n o n a h t e e r h t o t s r a e y n a h t e r o M o t s y a d 0 9 r a e y e n o 0 9 o t p U s y a d y c n e r r u C r o t i d e r C y r t n u o c r o t i d e r C r o t i d e r C . o N x a T r o t b e D y r t n u o c r o t b e D . o N x a T r o t b e D y t i l i b a i L f o s s a l C 2 1 0 2 , 1 3 r e b m e c e D f o s a y t i r u t a m f o e t a d y b d e r e d r o k s i r y t i d i u q i l f o s i s y l a n a e h t r o f y t i l i b a i l f o s s a l C - - - - % 0 6 6 . - - - % 6 0 2 . $ S U h T 9 3 3 7 3 6 , 1 6 7 5 , 3 8 8 3 6 4 , 8 1 6 8 3 , 8 6 6 9 1 , 8 6 9 8 9 1 , 0 0 0 8 1 , 1 4 5 5 1 , 4 9 5 3 , % 0 6 6 . 9 8 0 7 0 2 , - - - - - - 1 6 4 , 8 0 6 , 1 9 4 8 . 1 , 8 3 . 1 , 1 - - - - - - - - % 0 6 6 . y l h t n o M - - - % 6 0 2 . % 0 6 6 . - - - - - y l r e t r a u Q - y l h t n o M - - - $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T 7 3 3 , 9 2 6 , 1 4 1 9 , 2 4 1 2 7 8 , 4 4 9 3 8 , 6 7 9 7 5 , 6 3 1 3 3 1 , 8 2 2 , 1 4 4 9 , 6 6 9 , 2 1 1 1 1 , 0 8 4 , 4 7 6 0 , 6 8 1 , 2 4 0 6 , 1 6 5 , 2 2 5 1 , 6 2 7 , 1 0 1 0 , 3 1 0 , 2 9 3 3 7 3 6 , 1 6 7 5 , 3 8 8 3 6 4 , 8 1 6 8 3 , 9 6 8 9 1 , 8 6 9 8 9 1 , 0 0 0 8 1 , 4 9 9 5 1 , 4 9 5 3 , - - - - - - - - - - - - - - - - - - 4 1 7 3 2 3 2 - - - - - - 7 3 0 7 2 2 , 4 1 9 2 4 1 , 2 7 8 4 4 , - - - - - - - - - 0 0 0 8 1 , 4 9 9 5 1 , 4 9 5 3 , 1 5 2 9 3 , 9 4 0 . , 2 8 - 0 6 8 8 , 0 9 1 . , 1 3 0 8 4 4 1 , - - - - - - - - 0 9 2 5 5 5 , 1 6 7 5 , 3 9 6 2 3 4 , 8 5 7 9 2 , 9 8 3 5 , 8 6 9 8 9 1 , $ S U P L C L R B L R B L R B r e h t o s e i c n e r r u c - - - - 4 1 7 3 2 3 2 $ S U $ S U L R B L R B P L C $ S U L R B - - e l i h C e l i h C l i z a r B e g a p f o l a t o t b u S a d t L . r t s i D m o C . d e t a d i l o s n o c l a t o T . p e R e r e h w y r e v E n i e d a M E - 0 s r e h t O s r e h t O s r e h t O - - l a c i n h c e T n a L a s n a h t f u L s e l a i l i F y . . A S a i h t e B . . A S g n n i a r T i . 1 - 0 7 3 1 9 5 8 7 . . K - 0 8 8 7 4 8 6 9 . s r e h t O . . A S p u o r G s e n i l r i A M A T A L s e i r a i d i s b u S d n a s r e h t O . . A S p u o r G s e n i l r i A M A T A L s e i r a i d i s b u S d n a s r e h t O s r e h t O . . A S p u o r G s e n i l r i A M A T A L - - s e l b a y a p s t n u o c c a r e h t o d n a e d a r T e l b a y a p , e l b a y a p s t n u o c c A t n e r r u c - n o n e l b a y a p s t n u o c c A s e i t r a p d e t a l e r o t s t n e r r u c 2 5 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A l a n i m o N e t a r l a n i m o N e u l a v e t a r e v i t c e f f E n o i t a z i t r o m A l a t o T n a h t e r o M s r a e y e v fi n a h t e r o M o t e e r h t s r a e y e v fi e r o M e n o n a h t e e r h t o t s r a e y n a h t e r o M o t s y a d 0 9 r a e y e n o 0 9 o t p U s y a d y c n e r r u C r o t i d e r C y r t n u o c r o t i d e r C r o t i d e r C . o N x a T r o t b e D y r t n u o c r o t b e D . o N x a T r o t b e D y t i l i b a i L f o s s a l C 1 1 0 2 , 1 3 r e b m e c e D f o s a y t i r u t a m f o e t a d y b d e r e d r o k s i r y t i d i u q i l f o s i s y l a n a e h t r o f y t i l i b a i l f o s s a l C % 1 9 1 . % 1 5 1 . % 5 3 2 . % 3 1 2 . % 5 5 2 . % 1 8 1 . % 1 0 5 . % 5 0 4 . % 1 6 4 . % 1 8 3 . % 3 5 3 . % 1 6 2 . % 1 0 1 . % 4 9 0 . % 6 2 1 . % 2 2 1 . % 3 7 3 . % 6 4 1 . % 2 8 1 . % 6 5 1 . % 8 6 4 . % 7 8 1 . % 3 4 2 . - - - - - - - - - - $ S U h T 0 0 0 0 3 , 0 0 0 0 5 , 0 0 5 2 1 , 0 0 0 0 6 , 8 4 8 4 4 , 9 9 8 2 0 2 , 3 9 1 3 1 1 , 1 4 0 2 8 1 , 0 6 3 4 5 3 , 7 1 5 7 5 5 , 2 4 9 8 8 1 , 7 0 7 7 9 4 , 2 8 8 9 3 2 , 5 9 2 6 2 2 , 3 6 8 5 0 1 , 1 4 5 6 3 , 6 7 5 0 1 1 , 8 2 4 9 7 , 6 2 4 6 2 , 1 8 4 4 1 , 8 4 9 5 8 , 0 6 9 8 5 , 5 6 9 9 6 2 , 0 1 4 4 5 1 , 0 8 3 5 1 , 8 0 4 5 1 , 8 2 8 7 3 4 , 5 4 2 8 7 , 0 0 0 6 3 , 7 4 1 2 6 1 1 2 0 1 % 1 9 1 . % 1 5 1 . % 5 3 2 . % 1 2 2 . % 5 5 2 . % 2 8 1 . % 9 6 5 . % 5 0 4 . % 8 1 5 . % 7 2 4 . % 4 6 3 . % 4 9 2 . % 4 1 1 . % 9 0 1 . % 1 4 1 . % 7 3 1 . % 4 9 3 . % 6 4 1 . % 5 8 1 . % 6 5 1 . % 2 2 5 . % 7 8 1 . % 3 4 2 . - - - - - - - - - - l a u n n a i m e S y l r e t r a u Q l a u n n a i m e S l a u n n A - l a u n n a i m e S y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q - y l r e t r a u Q - - - - - - - - - - $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T 3 8 5 0 3 , 7 8 1 0 5 , 4 0 7 2 1 , 7 9 2 1 6 , 8 0 4 6 4 , 8 3 2 7 0 2 , 4 4 9 0 4 1 , 7 0 6 1 9 1 , 4 3 8 8 1 4 , 2 1 7 2 5 6 , 1 8 3 5 2 2 , 1 5 6 6 6 5 , 0 7 8 5 5 2 , 9 1 1 1 4 2 , 0 7 3 5 1 1 , 0 3 8 9 3 , 9 9 1 1 2 1 , 4 2 4 5 8 , 2 1 6 7 2 , 6 4 7 4 1 , 2 2 8 8 9 , 7 8 0 2 6 , 1 9 1 7 7 2 , 6 3 4 9 5 1 , 7 3 8 5 1 , 8 0 4 5 1 , 8 2 8 7 3 4 , 5 4 2 8 7 , 0 0 0 6 3 , 7 4 1 2 6 1 1 2 0 1 - - - - - - 8 2 2 7 , 8 3 4 0 6 , 8 0 4 4 2 1 , 5 6 8 2 5 2 , 2 5 3 3 1 1 , 3 6 4 0 9 2 , 5 7 6 3 4 1 , 3 6 7 3 4 1 , 5 8 0 9 6 , 2 5 9 3 2 , 4 2 3 9 , 3 9 0 5 3 , - - 6 3 7 4 1 , - - 0 2 6 8 , - - - - - - - - - - - - - - - 3 1 2 2 3 , 6 2 8 3 3 , 3 3 8 6 0 1 , 8 4 5 1 6 1 , 9 4 7 4 4 , 6 0 3 1 1 1 , 1 6 4 5 4 , 0 8 5 9 3 , 7 0 8 8 1 , 9 6 4 6 , 3 0 7 9 3 , 1 0 9 0 2 , - - 9 2 6 3 3 , - 6 0 0 1 3 , 2 8 3 1 4 , - - - - 2 3 5 5 4 , 9 7 7 3 0 2 , 2 9 1 2 3 , 4 4 7 7 6 , 0 6 0 5 2 1 , 0 2 4 9 5 1 , 7 3 8 4 4 , 2 3 2 0 1 1 , 1 2 7 4 4 , 5 5 7 8 3 , 4 3 4 8 1 , 2 2 3 6 , 1 8 2 3 4 , 9 9 0 0 2 , 3 6 6 9 1 , 8 3 5 7 , 6 3 6 3 3 , 1 8 0 1 3 , 7 0 3 1 7 2 , - 1 9 2 0 3 , 4 0 7 2 1 , 7 9 2 1 6 , 6 7 8 4 1 3 2 , 6 7 0 2 1 , 0 6 5 1 6 , 0 0 9 6 4 , 3 6 2 9 5 , 8 2 8 6 1 , 5 6 0 1 4 , 7 7 5 6 1 , 9 2 3 4 1 , 7 1 8 6 , 0 3 3 2 , 9 5 5 , 1 2 0 2 0 7 , 0 4 1 6 , 5 3 4 5 , 7 1 6 2 1 , - 4 8 8 5 , - - 2 9 2 7 8 1 0 5 , - 5 4 1 1 , 5 2 0 4 , 9 4 2 1 2 , 3 3 6 5 1 , 6 1 6 9 1 , 5 1 6 5 , 5 8 5 3 1 , 6 3 4 5 , 2 9 6 4 , 7 2 2 2 , 7 5 7 2 3 3 7 , 1 1 3 2 , 9 0 8 1 , 3 7 7 1 , 4 0 2 4 , - - 3 0 3 0 7 , 0 4 9 8 2 , 1 9 1 0 1 , 6 8 5 1 , 8 9 9 8 , 6 9 8 3 , 7 5 3 1 , - - - - - - - - - - - 0 0 0 6 3 , - - - - - - - - - - - 0 2 9 5 2 , 8 0 4 5 1 , 8 0 9 1 1 4 , 5 4 2 8 7 , - 7 4 1 2 6 1 1 2 0 1 $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U P L C R E H T O S E I C N E R R U C $ S U $ S U P L C P L C $ S U e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C . A S U . E L I H C E D O C N A B R E D N A T N A S A V B B R E D N A T N A S O D A T S E I C B G N I e c n a r F E L O C I R G A T I D E R C . A S U . . A S U . . A S U . . A S U . e l i h C . A S U . . A S U . . A S U . . A S U . I S A B R A P P N B O G R A F S L L E W O C F E P R E D N A T N A S N A G R O M P J K N A B I T I C U M T B K N A B E L P P A G N I e c n a r F E L O C I R G A T I D E R C . A S U . . A S U . . A S U . . A S U . - - - - - e l i h C e l i h C e l i h C D E R E T R A H C S . K N A B I T I C O C F E P G N I E O B S R E H T O S R E H T O S R E H T O S R E H T O S R E H T O l a c i n h c e T n a L a s n a h t f u L . . A S a i r a n o i s e c n o C d a d e i c o S l a r t s u A s e l a i l i F y . . A S a i h t e B . . A S g n n i a r T i . 5 - 0 0 0 4 0 0 7 9 . . 6 - 0 0 0 6 0 0 7 9 . . K - 0 0 0 6 3 0 7 9 . . 8 - 0 0 0 2 3 0 7 9 . . K - 0 0 0 6 3 0 7 9 . . 7 - 0 0 0 0 3 0 7 9 . E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 . K - 0 0 0 6 3 0 7 9 . E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 - - - - - . K - 0 8 8 7 4 8 6 9 . . 3 - 0 7 0 1 2 9 6 9 . . 1 - 0 7 3 1 9 5 8 7 . e n i t n e g r A a c i t u á n o r e A a r o s r e v n I a n i t n e g r A g n i e r o F e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C s r e h t O s r e h t O s r e h t O s r e h t O s r e h t O s r e h t O 0 1 0 , 6 8 2 , 4 7 3 9 , 6 8 6 , 4 2 0 0 , 7 9 2 , 1 9 9 9 , 8 6 7 4 3 9 , 8 3 4 , 1 8 3 6 , 2 0 5 4 6 3 , 9 7 6 l a t o T . . . . . . . . . . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . . . . . . . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . . . . . . . . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . . . . . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . . . A S p u o r G s e n i l r i A M A T A L s e i r a i d i s b u S d n a s e i r a i d i s b u S d n a . A S p u o r G s e n i l r i A M A T A L s e i r a i d i s b u S d n a . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . - - - s r e t r o p x e o t s n a o L s n a o l k n a B d e e t n a r a u G s n o i t a g i l b o s e s a e l l a i c n a n i F s e v i t a v i r e d g n i g d e H s e l b a y a p s t n u o c c a r e h t o d n a e d a r T g n i g d e h n o N - s e v i t a v i r e d s n a o l r e h t O , e l b a y a p s t n u o c c A e l b a y a p s t n u o c c A s e i t r a p d e t a l e r o t s t n e r r u c 3 5 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A The Company has fuel, interest rate and exchange rate hedging strategies involving derivatives contracts with different financial institutions. The Company has margin facilities with each financial institution in order to regulate the mutual exposure produced by changes in the market valuation of the derivatives. the rating agency Fitch has issued on June 22, 2012 a new long-term rating for the Company of BB + with stable perspective (which is not an investment grade rating). Prior to the merger, the Company had a rating of BBB with a negative perspective (issued pursuant to the merger announcement in August 2010). The leverage ratios as of December 31, 2012, and December 31, 2011, were as follows: As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ Total financial loans 9,759,507 3,788,272 Last twelve months Operating lease payment x 8 3,390,664 1,393,576 Less: Cash and marketable securities (1,120,335) (472,499) TOTAL NET ADJUSTED DEBT 12,029,836 4,709,349 Net Equity 5,142,083 1,445,324 Cash flow hedging reserve 140,730 140,556 ADJUSTED EQUITY 5,282,813 1,585,880 TOTAL ADJUSTED DEBT AND EQUITY 17,312,649 6,295,229 Adjusted leverage 69.5% 74.8% See information related to financial covenants in Note 36 (a). At the end of 2011, the Company provided US$ 117.2 million in derivative margin guarantees, for cash and stand-by letters of credit. At the end of December 31, 2012, the Company had provided US$ 189.9 million in guarantees for Cash and cash equivalent and stand-by letters of credit. The increase was due at maturity and fuel purchase contracts and rates, and changes in fuel prices and interest rates. 3.2. CAPITAL RISK MANAGEMENT The Company’s objectives, with respect to the management of capital, are (i) to safeguard it in order to continue as an on-going business, (ii) to seek a return for its shareholders, and (iii) to maintain an optimum capital structure and reduce its costs. In order to maintain or adjust the capital structure, the Company may adjust the amount of the dividends payable to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Company monitors the adjusted leverage ratio, in line with industry practice. This index is calculated as net adjusted debt divided by the sum of adjusted equity and net adjusted debt. Net adjusted debt is total financial debt plus 8 times the operating lease payments of the last 12 months, less total cash (measured as the sum of cash and cash equivalents plus marketable securities). Adjusted capital is the amount of net equity without the impact of the market value of derivatives. The Company’s strategy, which has not changed since 2007, has consisted of maintaining a leverage ratio of between 70% and 80% and an international credit rating of higher than BBB-(the minimum required for being considered investment grade). As a result of consolidation with TAM S.A. and Subsidiaries, 4 5 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A 3.3 ESTIMATES OF FAIR VALUE At December 31, 2012, the Company maintained financial instruments that should be recorded at fair value. These include: • • • • • Investments in short-term Mutual Funds (cash equivalent), Bank certificate of deposit - CBD Interest rate derivative contracts, Fuel derivative contracts, Currency derivative contracts, Private investment funds and • Financial letters the The Company has classified fair value measurement using a hierarchy that reflects the level of information used in the assessment. This hierarchy consists of 3 levels (I) fair value based on quoted prices in active markets for identical assets or liabilities, (II) fair value calculated through valuation methods based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) and (III) fair value based on inputs for the asset or liability that are not based on observable market data. The fair value of financial instruments traded in active markets, such as investments acquired for trading, is based on quoted market prices at the close of the period using the current price of the buyer. The fair value of financial assets not traded in active markets (derivative contracts) is determined using valuation techniques that maximize use of available market information. Valuation techniques generally used by the Company are quoted market prices of similar instruments and / or estimating the present value of future cash flows using forward price curves of the market at period end. 5 5 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A The following table shows the classification of financial instruments at fair value at December 31, 2012 depending on the level of information used in the assessment: As of December 31,2012 ASSETS CASH AND CASH EQUIVALENTS Short-term mutual funds OTHER FINANCIAL ASSETS, CURRENT Fair value of interest rate derivatives Fair value of fuel derivatives Private investment funds Certificate of deposit CDB Financial letter Domestic and foreign bonds Other investments OTHER FINANCIAL ASSETS, NON CURRENT Fair value of fuel derivatives Fair value of foreign currency derivatives LIABILITIES OTHER FINANCIAL LIABILITIES, CURRENT Fair value of interest rate derivatives Fair value of fuel derivatives Fair value of foreign currency derivatives Interest rate derivatives not recognized as a hedge OTHER FINANCIAL LIABILITIES, NON CURRENT Fair value of interest rate derivatives Fair value of fuel derivatives Fair value of foreign currency derivatives Interest rate derivatives not recognized as a hedge Fair value measurements using values considered as Level I Level II Level III Fair value Ar December 31, 2012 ThUS$ ThUS$ ThUS$ ThUS$ 311,675 311,675 474,176 6 4,098 317,598 77,316 73,611 748 799 1,118 1,023 95 70,075 41,736 10,502 13,360 4,477 116,555 104,547 4,530 1,963 5,515 311,675 311,675 319,145 - - 317,598 - - 748 799 - - - - - - - - - - - - - - - 155,031 6 4,098 - 77,316 73,611 - - 1,118 1,023 95 70,075 41,736 10,502 13,360 4,477 116,555 104,547 4,530 1,963 5,515 - - - - - - - - - - - - - - - - - - - - - - - 6 5 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A As of December 31, 2011 Fair value measurements using values considered as Fair value ThUS$ Level I ThUS$ Level II ThUS$ Level III ThUS$ ASSETS CASH AND CASH EQUIVALENTS Short-term mutual funds OTHER FINANCIAL ASSETS, CURRENT Fair value of interest rate derivatives Fair value of fuel derivatives Fair value of foreign currency derivatives Private investment funds LIABILITIES OTHER FINANCIAL LIABILITIES, CURRENT Fair value of interest rate derivatives Fair value of foreign currency derivatives Interest rate derivatives not recognized as a hedge OTHER FINANCIAL LIABILITIES, NON CURRENT Fair value of interest rate derivatives Interest rate derivatives not recognized as a hedge 156,334 156,334 92,052 73 30,615 631 60,733 44,923 39,132 884 4,907 130,163 120,304 9,859 156,334 156,334 60,733 - - - 60,733 - - - - - - - - - 31,319 73 30,615 631 - 44,923 39,132 884 4,907 130,163 120,304 9,859 - - - - - - - - - - - - - - 7 5 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Additionally, at December 31, 2012, the Company has financial instruments which are not recorded at fair value. In order to meet the disclosure requirements of fair values, the Company has valued these instruments as shown in the table below: As of December 31, 2012 As of December 31, 2011 Book value Fair value Book value Fair value ThUS$ ThUS$ ThUS$ ThUS$ 338,588 6,835 147,373 119,713 64,667 162,367 338,588 6,835 147,373 119,713 64,667 162,367 - - 162,367 162,367 218,073 218,073 4,605 17,013 46,028 150,427 135,751 37,359 98,392 4,605 17,013 46,028 150,427 138,642 40,250 98,392 Cash and cash equivalents Cash on hand Bank balance Overnight Time deposits Other financial assets Domestic and foreign bonds Other financial assets Trade and other accounts receivable current 1,426,330 1,426,330 531,355 531,355 Accounts receivable from related entities Other financial assets, non current Accounts receivable 15,187 72,977 50,612 15,187 72,977 50,612 Other financial liabilities, current 1,977,255 2,090,726 Trade and other accounts payables 1,652,955 1,652,955 Accounts payable to related entities 274 274 838 21,833 7,491 537,334 645,086 367 838 21,833 7,491 593,585 645,086 367 Other financial liabilities, non current 7,582,302 7,806,643 2,978,973 3,072,076 Accounts payable, non-current 731,235 731,235 354,930 354,930 The book values of accounts receivable and payable are assumed to approximate their fair values, due to their short-term nature. In the case of cash on hand, bank balances, deposits and accounts payable, non- current, fair value approximates their carrying values. The fair value of Other financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate for similar financial instruments. In the case of Other financial assets, the valuation was performed according to market prices at period end. 8 5 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A LATAM to substantially all of the economic benefits that will be generated by the LATAM Group and also, consequently, exposing it to substantially all the risks incidental to the operations of TAM. This exchange aligns the economic interests of LATAM and all of its shareholders, including the TAM controlling shareholders, ensuring that the shareholders and directors of TAM will have no incentive to exercise their rights in a manner that is beneficial to TAM but detrimental to LATAM. Further, all significant actions required for the operation of the airlines require the affirmative vote of both LATAM and the TAM controlling shareholders. In addition, LATAM is in process of integrating operations with TAM, and both entities will be operated as a single company. Within this, most critical airline activities will be managed in Brazil under the TAM CEO and globally by the LATAM CEO, who will be in charge of the overall operation of the LATAM Group and who will report to the LATAM board. Further, the LATAM CEO will evaluate performance of the LATAM Group executives and, together with the LATAM board, determine compensation. Although there are restrictions on voting interests that currently may be held by foreign investors under Brazilian law, LATAM believes that the economic substance of these arrangements satisfies the requirements established by the applicable accounting standards and that consolidation by LATAM of TAM’s operations is appropriate. NOTE 4. ACCOUNTING ESTIMATES AND JUDGMENTS The Company has used estimates to value and book some of the assets, liabilities, revenues, expenses and commitments; these relate principally to: (a) The evaluation of possible impairment losses for certain assets. (b) The useful lives and residual values of fixed and intangible assets. (c) The criteria employed in the valuation of certain assets. (d) Air tickets sold that are not actually used. (e) The calculation of deferred income at the end of the period, corresponding to the valuation of kilometers or points credited to holders of the loyalty programs which have not yet been used. (f) The need for provisions and where required, the determination of their values. (g) The recoverability of deferred tax assets. These estimates are made on the basis of the best information available on the matters analyzed. In any case, it is possible that events will require modification of the estimates in the future, in which case the effects would be accounted for prospectively. Additionally, the management has applied judgment in determining that LATAM Airlines Group S.A. has control over TAM S.A. and Subsidiaries for accounting purposes and therefore has consolidated their financial statements. The above on the basis that LATAM issued their ordinary shares in exchange for all of the outstanding common and preferred shares of TAM (except those shareholders of TAM who did not accept exchange and which were subject of the squeeze-out described in Note 18.2), entitling 9 5 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 5. SEGMENTAL INFORMATION The Company reports information by segments as established in IFRS 8 “Operating segments”. This standard sets rules for the reporting of information by segments in the financial statements, plus reporting about products and services, geographical areas and principal customers. An operating segment is defined as a component of an entity on which financial information is held separately and which is evaluated regularly by the senior management in making decisions with respect to the assignment of resources and evaluation of results. The Company has determined that it has two operating segments: the air transportation and the customer loyalty program (“Multiplus”). (a) For the periods ended Air transport At December 31, Multiplus At December 31, Eliminations At December 31, Consolidated At December 31, 2012 2011 2012 2011 2012 2011 2012 2011 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Income from ordinary activities 9,733,950 5,585,440 400,860 Other operating income 211,955 132,804 Interest income 51,004 14,453 Interest expense (294,447) (139,077) 8,201 26,485 (151) TOTAL NET INTEREST EXPENSE Depreciation and amortization (243.443) (124,624) 26,334 (784,038) (396.475) (849) SEGMENT PROFIT (51,190) 320,197 62,146 Participation of the entity in the income of associates 972 458 - Expenses for income tax (101,019) (61,789) (1,193) Assets of segment 19,978,154 7,648,659 637,195 Investments in associates 1,619 991 2,138 Purchase of non-monetary assets of segment - 1,394,640 - - - - - - - - - - - - - (412,621) - - - - - - - - (22,082) - - - - - - - - - - - - - - 9,722,189 5,585,440 220,156 132,804 77,489 14,453 (294,598) (139,077) (217,109) (124,624) (784,887) (396,475) 10,956 320,197 972 458 (102,212) (61,789) 20,593,267 7,648,659 3,757 991 2,448,530 1,394,640 0 6 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A For the period ended at December 31, 2012 ThUS$ 620,263 890,167 1,268,573 738,803 366,664 3,334,249 266,271 1,525,009 712,190 9,722,189 220,156 2011 ThUS$ 557,549 616,625 1,135,904 523,749 367,642 258,300 228,871 1,312,376 584,424 5,585,440 132,804 The Company’s revenues by geographic area are as follows: Perú Argentina USA Europe Colombia Brazil Ecuador Chile Asia Pacífic and rest of Latin America INCOME FROM ORDINARY ACTIVITIES OTHER OPERATING INCOME The Company allocates revenues by geographic area based on the point of sale of the passenger ticket or cargo. Assets are composed primarily of aircraft and aeronautical equipment, which are used throughout the different countries, so it is not possible to assign a geographic area. The Company has no customers that individually represent more than 10% of sales. For the period ended at December 31, 2012 the income incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. 1 6 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 6. CASH AND CASH EQUIVALENTS Cash Cash on hand Overnight TOTAL CASH Time deposits Mutual funds TOTAL CASH EQUIVALENTS TOTAL CASH AND CASH EQUIVALENTS The balance at December 31, 2012 Cash and cash equivalents, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. Cash and cash equivalents are denominated in the following currencies at December 31, 2012, and December 31, 2011: Currency Argentine peso (*) Brazilian real Chilean peso (*) Colombian peso Euro US Dollar Strong bolivar (**) Other currencies As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 70,381 149,723 40,212 28,758 15,502 230,776 51,346 63,565 20,020 6,616 148,274 7,668 5,688 158,313 21,589 6,239 TOTAL 650,263 374,407 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 6,835 147,373 119,713 273,921 64,667 311,675 376,342 650,263 4,605 17,013 46,028 67,646 150,427 156,334 306,761 374,407 (*) The Company has no currency derivative contracts (forward) at December 31, 2012 (ThUS$ 110,339 at December 31, 2011), for conversion into dollars of investments in pesos. For currency derivative contracts, for conversion into dollars for the investments in Argentine pesos, the Company has no outstanding contracts at December 31, 2012. (**) In Venezuela, effective 2003, the authorities decreed that all remittances abroad should be approved by the Currency Management Commission (“CADIVI”). Despite having free availability of bolivars in Venezuela, the Company has certain restrictions for freely remitting these funds outside Venezuela. At December 31, 2012, the restricted amount, in US dollars is ThUS$ 51,346 (ThUS$ 23,914 at December 31, 2011). 2 6 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A The Company has no transactions that must be disclosed. significant non-cash Other inflows (outflows) of cash at 31 December 2012 and 31 December 2011 are detailed as follow. Fuel hedge Hedging margin guarantees Guarantees Commodities fuel derivatives Bank commissions, taxes paid and other TOTAL OTHER INFLOW (OUTFLOWS) OPERATION FLOW Opening balance Cash and cash equivalents acquired companies Amount paid by Squeeze Out TAMS S.A (*) Certificate of bank deposits Other TOTAL OTHER INFLOWS (OUTFLOWS) INVESTMENT FLOW Aircraft Financing advances Credit card loan manager Settlement of derivative contracts Other For the period ended December 31, 2012 ThUS$ 14,237 12,057 (13,974) (20,479) (42,274) (50,433) 263,986 (167,589) (69,254) - 27,143 2011 ThUS$ 51,611 (40,519) (1,609) (7,987) (8,995) (7,499) 1,122 - - (577) 545 (242,804) 163,754 76,280 (50,827) (13,728) - (9,219) (7,686) TOTAL OTHER INFLOWS (OUTFLOWS) FINANCING FLOW (231,079) 146,849 3 6 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 7. FINANCIAL INSTRUMENTS 7.1 FINANCIAL INSTRUMENTS BY CATEGORY As of December 31, 2012 Assets Loans and receivables Hedge derivatives Held for trading Initial designation as fair value through profit and loss Total Cash and cash equivalents Other financial assets, current (*) Trade and others accounts receivable, current Accounts receivable from related entities, current Other financial assets, non current (*) Accounts receivable, non current TOTAL Liabilities Other liabilities, current Trade and others accounts payable, current Accounts payable to related entities, current Other financial liabilities, non current Accounts payable, non current ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 338,588 162,367 1,426,330 15,187 72,470 50,612 2,065,554 - 4,104 - - 1,118 - 5,222 - 74,359 - - 507 - 311,675 395,713 - - - - 650,263 636,543 1,426,330 15,187 74,095 50,612 74,866 707,388 2,853,030 Other financial liabilities Hedge derivatives Held for trading Total ThUS$ ThUS$ ThUS$ ThUS$ 1,977,255 65,598 4,477 2,047,330 1,652,955 274 7,582,302 731,235 - - 111,040 - - - 5,515 - 1,652,955 274 7,698,857 731,235 TOTAL 11,944,021 176,638 9,992 12,130,651 (*) The value presented at fair value through profit and loss on initial recognition, corresponds to private investment funds; and loans and receivables corresponds to guarantees given. 4 6 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A At December 31, 2011 Assets Held for maturity Loans to receivables Hedge derivatives Held for trading Initial designation as fair value through profit and loss Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Cash and cash equivalents - 218,073 - 156,334 - 374,407 Other financial assets, current (*) Trade and others accounts receivable, current Accounts receivable to related entities, current Other financial assets, non current (*) Accounts receivable, non current 37,359 98,392 31,319 - - 508 - 531,354 838 21,325 7,491 - - - - - - - - - 60,733 227,803 - - - - 531,355 838 21,833 7,491 TOTAL 37,867 877,474 31,319 156,334 60,733 1,163,727 Liabilities Other liabilities, current Trade and other accounts payable, current Accounts payable to related entities, current Other financial liabilities, non current Accounts payable, non current TOTAL Other financial liabilities Hedge derivatives Held for trading Total ThUS$ ThUS$ ThUS$ ThUS$ 537,334 645,086 367 40,016 4,907 582,257 - - - - 645,086 367 2,978,973 120,304 9,859 3,109,136 354,930 4,516,690 - - 354,930 160,320 14,766 4,691,776 (*) The value presented in held to maturity corresponds mainly to domestic and foreign bonds and other investments; in designated as at fair value through profit and loss on initial recognition corresponds to private investment funds; and loans and receivables corresponds to guarantees given. 5 6 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A 7.2 FINANCIAL INSTRUMENTS BY CURRENCY a) Assets Cash and cash equivalents Argentine peso Brazilian real Chilean peso Colombian peso Euro US Dollar Strong bolívar Other currencies Other financial assets (current and non current) Argentine peso Brazilian real Chilean peso Colombian peso Euro US Dollar Strong bolívar Other currencies As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 650,263 70,381 149,723 40,212 28,758 15,502 230,776 51,346 63,565 710,638 131 545,426 648 2,828 7,825 142,254 601 10,925 374,407 20,020 6,616 148,274 7,668 5,688 158,313 21,589 6,239 249,636 125 3,066 588 4,175 291 241,008 5 378 Trade and other accounts receivable, current 1,426,330 531,355 Argentine peso Brazilian real Chilean peso Colombian peso Euro US Dollar Strong bolívar Other currencies Accounts receivable, non-current Brazilian real Chilean peso US Dollar Other currencies Accounts receivable from related entities, current Brazilian real Chilean peso US Dollar TOTAL ASSETS ARGENTINE PESO BRAZILIAN REAL CHILEAN PESO COLOMBIAN PESO EURO US DOLLAR STRONG BOLÍVAR OTHER CURRENCIES 33,049 561,746 132,869 8,086 67,287 530,380 2,759 90,154 50,612 6,677 9,564 34,123 248 15,187 611 14,565 11 24,879 35,467 63,818 34,583 8,266 348,921 1,247 14,174 7,491 - 7,422 9 60 838 - 809 29 2,853,030 1,163,727 b) Liabilities Liabilities information is detailed in the table within Note 3 Financial risk management 103,561 1,264,183 197,858 39,672 90,614 937,544 54,706 164,892 45,024 45,149 220,911 46,426 14,245 748,280 22,841 20,851 6 6 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 8. TRADE, OTHER ACCOUNTS RECEIVABLE AND NON-CURRENT ACCOUNTS RECEIVABLE Trade accounts receivable Other accounts receivable TOTAL TRADE AND OTHER ACCOUNTS RECEIVABLE LESS: ALLOWANCE FOR IMPAIRMENT LOSS TOTAL NET TRADE AND ACCOUNTS RECEIVABLE LESS: NON-CURRENT PORTION – ACCOUNTS RECEIVABLE TRADE AND OTHER ACCOUNTS RECEIVABLE, CURRENT The balance at December 31, 2012 of Trade, other accounts receivables and non-current accounts receivables, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. The fair value of trade and other accounts receivable does not differ significantly from the book value. The maturity of these accounts at the end of each period is as follows: Day Expired from 1 to 90 days Expired from 91 to 180 days More than 180 days overdue (*) Judicial, pre-judicial collection and protested documents Accounts receivable that were evaluated in their ability to recover As of December 31, 2012 As of December 31, 2012 ThUS$ ThUS$ 1,369,465 182,980 1,552,445 (75,503) 1,476,942 (50,612) 1,426,330 474,852 84,519 559,371 (20,525) 538,846 (7,491) 531,355 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 1,226,120 33,160 10,705 23,977 29,556 45,947 428,706 24,082 564 975 10,549 9,976 TOTAL 1,369,465 474,852 (*) Value of this segment corresponds primarily to Accounts receivable that were evaluated in their ability to recover, therefore not requiring a provision. 7 6 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A The receivable past due but not impaired at the end of each period is as follows: Expired from 1 to 90 days Expired from 91 to 180 days More than 180 days overdue TOTAL The amounts of individually impaired Trade and other accounts receivable are as follows: Judicial, pre-judicial collection and protested documents Debtors under pre-judicial collection process and portfolio sensitization TOTAL Currency balances that make up the Trade receivables, non-current accounts receivable and accounts receivables at December 31, 2012 and December 31, 2011, are as follows: CURRENCY Argentine Peso Brazilian Real Chilean Peso Colombian peso Euro US Dollar Strong bolivar Other currency TOTAL As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 33,160 10,705 23,977 67,842 24,082 564 975 25,621 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 29,556 45,947 75,503 10,549 9,976 20,525 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 33,049 568,423 142,433 8,086 67,287 564,503 2,759 90,402 1,476,942 24,879 35,467 71,240 34,583 8,266 348,930 1,247 14,234 538,846 8 6 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A The Company records allowances when there is evidence of impairment of trade receivables. The criteria used to determine that there is objective evidence of impairment losses are the maturity of the portfolio, specific acts of damage (default) and specific market signals. Maturity Impairment Judicial and pre-judicial collection assets Over 1 year Between 6 and 12 months 100% 100% 50% Specifically for TAM S.A. the situation is different, the estimate of the provision is by document, those due in more than 180 days are provisioned 100%, except for those that are considered real active guarantees. The movement in the allowance for impairment loss of Trade accounts and Other accounts receivables between January 1, 2011 and December 31, 2012 is as follows: As of January 1, 2011 Write-offs (Increase) decrease in allowance ThUS$ (22,077) 4,060 (2,508) CLOSING BALANCE AS OF DECEMBER 31, 2011 (20,525) As of January 1. 2012 Write-offs (Increase) decrease in allowance Addition for business combination Conversion difference affiliates (20,525) 3,312 (2,857) (54,511) (922) CLOSING BALANCE AS OF DECEMBER 31, 2012 (75,503) Once pre-judicial and judicial collection efforts are exhausted, the assets are written off against the allowance. The Company only uses the allowance method rather than direct write-off, to ensure control. 9 6 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Historic and current re-negotiations are not relevant and the policy is to analyze case by case in order to classify them according to the existence of risk, determining whether it is appropriate to re- classify accounts to pre-judicial recovery. If such re- classification is justified, an allowance is made for the account, whether overdue or falling due. The maximum credit-risk exposure at the date of presentation of the information is the fair value of each one of the categories of accounts receivable indicated above. As of December 31, 2012 Gross Impaired exposure Gross exposure Exposure net of risk concen- trations Gross exposure As of December 31, 2011 Gross Impaired exposure Exposure net of risk concen- trations ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Trade accounts receivable 1,.369,465 (75,503) 1,293,962 Other accounts receivable 182,980 - 182,980 474,852 84,519 (20,525) - 454,327 84,519 There are no relevant guarantees covering credit risk and these are valued when they are settled; no materially significant direct guarantees exist. Existing guarantees, if appropriate, are made through IATA. 0 7 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 9. ACCOUNTS RECEIVABLE FROM/ PAYABLE TO RELATED ENTITIES The Accounts receivable from and payable to related entities as of December 31, 2012 and December 31, 2011, respectively, are as follows: (a) Accounts Receivable Tax No. Related party Relationship Country of origin As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ Currency Transaction deadlines Nature of transaction 96.810.370-9 Inversiones Costa Verde Ltda. y CPA. 78.591.370-1 Bethia S.A. y Filiales 87.752.000-5 96.812.280-0 Granja Marina Tornagaleones S.A. San Alberto S.A. y Filiales Controlling shareholder Others related parties Others related parties Others related parties Foreign Foreign Foreign TAM Aviação Executiva e Taxi Aéreo S.A. Others related parties Companhia Brasileira de Serviços de Fidelização Others related parties Inversora Aeronautica Argentina Others related parties Argentina Chile 1 Chile 14,534 Chile Chile Brazil Brazil 30 - 14 597 11 19 758 32 29 - - - CLP CLP CLP 30 to 45 days Monetary 30 to 45 days Monetary 30 to 45 days Monetary US$ 30 to 45 days Monetary BRL BRL US$ 30 to 45 days Monetary 30 to 45 days Monetary 30 to 45 days Monetary TOTAL CURRENT ASSETS 15,187 838 On December 28, 2012, Inmobiliaria Aeronáutica S.A. as seller and Sotraser S.A. (Subsidiary of Bethia S.A.) as purchaser, entered into an agreement to purchase the land called “Lot No. 12 of parcellation project Lo Echevers”. The value of the sale amounts to ThUS$ 14,217. 1 7 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (b) Accounts payable Tax No. Related party Relationship Country of origin As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ Currency Transaction deadlines Nature of transaction 96.847.880-K 96.921.070-3 Lufthansa Lan Technical Training S.A. Austral Sociedad Concesionaria S.A. 78.591.370-1 Bethia S.A. y Filiales Associate Chile 237 Associate Other related parties Chile Chile Brazil Foreign Foreign Made In Everywhere Repr. Com. Distr. Ltda. Other related parties Inversora Aeronaútica Argentina Other related parties Argentina TOTAL CURRENT LIABILITIES - 14 23 - 274 US$ CLP CLP BRL 30 to 45 days Monetary 30 to 45 days Monetary 30 to 45 days Monetary 30 to 45 days Monetary US$ 30 to 45 days Monetary 147 2 116 - 102 367 Transactions between related parties have been carried out on free-trade conditions between interested and duly-informed parties. 2 7 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 10. INVENTORIES The Inventories at December 31, 2012 and December 31, 2011 respectively, are detailed below: As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ Technical stock Non-technical stock 150,130 31,153 57,836 14,951 TOTAL PRODUCTION SUPPLIERS 181,283 72,787 The balance at December 31, 2012 of Inventories, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. The items included in this heading are spare parts and materials that will be used mainly in consumption in in-flight and maintenance services provided to the Company and third parties, which are valued at average cost, net of provision for obsolescence that as of December 31, 2012 amounts to ThUS$ 1,174 (ThUS$ 1,685 as of December 31, 2011). The resulting amounts do not exceed the respective net realizable values. As of December 31, 2012, the Company recorded ThUS$ 127,989 (ThUS$ 41,213 as of December 31, 2011) within the income statement, mainly due to in- flight consumption and maintenance, which forms part of Cost of Sales. 3 7 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 11. TAX ASSETS The composition of Tax assets is as follows: As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 110,609 100,263 9,657 220,529 73,516 73,516 68,755 24,727 5,307 98,789 42,958 42,958 CURRENT Sales tax Tax income Others TOTAL CURRENT NON-CURRENT Sales tax TOTAL NON-CURRENT The balances at December 31, 2012 of Tax assets, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. 4 7 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 12. OTHER FINANCIAL ASSETS The composition of Other financial assets is as follows: As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 632,439 4,104 636,543 72,977 1,118 74,095 196,484 31,319 227,803 21,833 - 21,833 CURRENT (a) Other financial assets (b) Hedging asset TOTAL CURRENT NON-CURRENT (a) Other financial assets (b) Hedging asset TOTAL NON-CURRENT The balance at December 31, 2012 of Other financial the effects of Business assets, Combinations with TAM S.A. and Subsidiaries. incorporates (a) Other financial assets Other financial assets as of December 31, 2012 and December 31, 2011, respectively, are as follows: As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ CURRENT Private investment funds 317,598 60,733 Guarantees for margins of derivatives Financial letters Deposits in guarantee (aircraft) Certificate of deposit CBD Other guarantees given Other investments Domestic and foreign bonds 121,889 79,171 73,611 33,012 77,316 7,466 799 748 - 11,657 - 7,564 - 37,359 TOTAL CURRENT 632,439 196,484 NON-CURRENT Deposits in guarantee (aircraft) Deposits in guarantee (loan) Other guarantees given Other investments 37,247 29,344 5,879 507 15,498 - 5,827 508 TOTAL NON-CURRENT 72,977 21,833 TOTAL OTHER FINANCIAL ASSETS 705,416 218,317 5 7 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (b) Hedging assets Hedging assets as of December 31, 2012 and December 31, 2011, are as follows: As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 6 - 4,098 4,104 95 1,023 1,118 73 631 30,615 31,319 - - - CURRENT Fair value of interest rate derivatives Fair value of foreign currency derivatives Fair value of fuel price derivatives TOTAL CURRENT NON-CURRENT Fair value of foreign currency derivatives Fair value of fuel price derivatives TOTAL NON-CURRENT TOTAL HEDGING ASSET 5,222 31,319 Foreign currency derivatives include the fair value of forward exchange and collars contracts. The types of derivative hedging contracts maintained by the Company at the end of each period are presented in Note 21. 6 7 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 13. OTHER NON-FINANCIAL ASSETS The composition of Other non-financial assets is as follows: (b) Other assets Other assets as of December 31, 2012, and December 31, 2011 are as follows: As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ CURRENT Aircraft maintenance reserve 123,299 Contributions to SITA Others 696 - - 841 318 TOTAL CURRENT 123,995 1,159 NON-CURRENT Aircraft maintenance reserve 149,084 Judicial deposits Contributions to SITA Others TOTAL NON-CURRENT 54,336 474 304 204,198 - - - 4,016 4,016 TOTAL OTHER ASSETS 328,193 5,175 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 45,829 123,995 169,824 39,707 204,198 243,905 31,552 1,159 32,711 11,189 4,016 15,205 CURRENT a) Advance payments b) Other assets TOTAL CURRENT NON-CURRENT a) Advance payments b) Other assets TOTAL NON-CURRENT (a) Advance payments Advance payments as of December 31, 2012 as of December 31, 2011 are as follows: As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ CURRENT Aircraft insurance and others Aircraft leases Handling and ground handling services Others TOTAL CURRENT NON-CURRENT Aircraft leases Others TOTAL NON-CURRENT 12,643 18,703 158 14,325 45,829 20,732 18,975 39,707 7,954 13,196 2,941 7,461 31,552 11,189 - 11,189 TOTAL ADVANCE PAYMENTS 85,536 42,741 7 7 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 14. NON-CURRENT ASSETS (OR DISPOSAL GROUPS) CLASSIFIED AS HELD FOR SALE Non-current assets and disposal groups held for sale as of December 31, 2012, and December 31, 2011 are as follows: Item balances are shown net of provision, which as of December 31, 2012 amounted to ThUS$ 23,413 (ThUS$ 15,504 at December 31, 2011). The Company has no discontinued operations as of December 31, 2012. As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ Aircraft Rotables Inventories on consignment Engines Scrapped aircraft TOTAL 44,878 1,184 686 542 365 47,655 1,537 28 527 2,204 365 4,661 The balance at December 31, 2012 of Non-current assets or disposal groups classified as held for sale, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. During the year 2012, a transfer of an aircraft Boing 767-200, two A318-100 aircraft, the land located in Avenida Presidente Riesco N° 5537 and the land located in Avenida Circunvalación Américo Vespucio N° 1401 from the item Property, plant and equipment to Non-current assets or groups of assets for disposal classified as held for sale. Were sold during the third quarter the Boeing 767-200 and the land located in Avenida Presidente Riesco, and during the fourth quarter the land located in Avenida Circunvalación Américo Vespucio. Otherwise, during the second and third quarter of 2012 retirements were made, as a result of sales of engines of Boeing 737-200 fleet. 8 7 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 15. INVESTMENTS IN SUBSIDIARIES investments investments in companies The Company has recognized as in subsidiaries. All the companies defined as subsidiaries have been consolidated within the financial statements of LATAM Airlines Group S.A. and Subsidiaries. The consolidation also includes special-purpose entities and private investment funds. The following is a summary of financial information with respect to the sum of the financial statements of subsidiary companies, special-purpose entities and private investment funds that have been consolidated: As of December 31, 2012 Assets ThUS$ Liabilities ThUS$ Current Non-Current TOTAL 2,453,764 3,747,068 7,634,339 5,389,364 10,088,103 9,136,432 As of December 31, 2011 Current Non-Current TOTAL Assets ThUS$ Liabilities ThUS$ 493,662 1,498,840 618,360 917,171 1,992,502 1,535,531 For the period ended December 31, 2012 2011 ThUS$ ThUS$ Total operating revenues 6,494,944 2,619,157 Total expenses (6,586,805) (2,577,685) TOTAL NET INCOME (91,861) 41,472 The summarized financial information at December 31, 2012 incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries.. 9 7 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Significant subsidiaries detailed as of December 31, 2012 Name of significant subsidiary Country of incorporation Functional currency % Ownership Nature and scope of significant restrictions on transferring funds to controller Lan Perú S.A. Lan Cargo S.A. Lan Argentina S.A. Transporte Aéreo S.A. Aerolane Líneas Aéreas Nacionales del Ecuador S.A. Aerovías de Integración Regional, AIRES S.A. TAM S.A. Peru Chile Argentina Chile Ecuador Colombia Brazil US$ US$ ARS US$ US$ COP BRL 69.97858 99.89803 94.99055 99.89804 Without significant restrictions Without significant restrictions Without significant restrictions Without significant restrictions 71.94990 Without significant restrictions 98.21089 Without significant restrictions 99.99938 Without significant restrictions Summary financial subsidiaries. information of significant Statement of financial position as of December 31, 2012 Results for the period ended December 31, 2012 Name of significant subsidiary Total Assets Current Assets Non-current Assets Total Liabilities Current Liabilities Non-current Liabilities Revenue Net Income ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Lan Perú S.A. Lan Cargo S.A. Lan Argentina S.A. Transporte Aéreo S.A. Aerolane Líneas Aéreas Nacionales del Ecuador S.A. Aerovías de Integración Regional, AIRES S.A. 159,361 727,091 165,961 357,725 133,448 172,856 144,463 249,174 25,913 554,235 21,498 108,551 150,319 371,663 141,454 114,302 149,263 169,501 139,653 26,731 1,056 1,.047,106 202,162 1,801 87,571 292,066 538,328 373,157 2,513 (50,693) 9,152 11,144 74,204 40,531 33,673 71,284 68,068 3,216 305,177 (14,077) 165,032 58,457 106,575 58,398 46,434 11,964 283,870 (75,522) TAM S.A. (*) 8,292,729 2,026,549 6,266,180 7,517,696 3,039,500 4,478,196 3,645,409 (45,163) (*) Corresponds to consolidated information of TAM S.A. and Subsidiaries. 0 8 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Significant subsidiaries detailed as of December 31, 2011. Name of significant subsidiary Country of incorporation Functional currency % Ownership Nature and scope of significant restrictions on transferring funds to controller Lan Perú S.A. Lan Cargo S.A. Lan Argentina S.A. Transporte Aéreo S.A. Aerolane Líneas Aéreas Nacionales del Ecuador S.A. Aerovías de Integración Regional, AIRES S.A. Summary financial information of significant subsidiaries Peru Chile Argentina Chile Ecuador US$ US$ ARS US$ US$ 69.97858 99.89803 94.99055 99.89804 Without significant restrictions Without significant restrictions Without significant restrictions Without significant restrictions 71.94990 Without significant restrictions Colombia COP 98.21089 Without significant restrictions Summary financial subsidiaries. information of significant Statement of financial position as of December 31, 2011 Results for the period ended December 31, 2011 Name of significant subsidiary Total Assets Current Assets Non-current Assets Total Liabilities Current Liabilities Non-current Liabilities Revenue Net Income ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Lan Perú S.A. Lan Cargo S.A. Lan Argentina S.A. Transporte Aéreo S.A. Aerolane Líneas Aéreas Nacionales del Ecuador S.A. Aerovías de Integración Regional, AIRES S.A. 139,888 765,829 136,579 348,943 124,485 188,937 108,561 237,627 15,403 576,892 28,018 111,316 128,979 343,799 114,037 116,663 128,025 122,450 112,555 26,332 954 221,349 1,482 90,331 916,861 258,298 438,137 370,697 71,598 42,369 29,229 61,102 58,726 2,376 278,039 920 57,140 (1,972) 26,146 2,303 134,983 76,936 58,047 80,271 70,112 10,159 282,493 (25,860) 1 8 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 16. EQUITY ACCOUNTED INVESTMENTS The composition of investments accounted for using the equity method is as follows: (a) Related companies (b) Joint Ventures EQUITY ACCOUNTED INVESTMENTS As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 1,619 2,138 3,757 991 - 991 The balance at December 31, 2012 of Equity accounted investments, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries.. (a) Related Companies The following summarized financial information is the sum of the financial statements of the investees, corresponding to the statements of financial position as of December 31, 2012 and December 31, 2011, and the statements of income for the periods ending as of December 31, 2012 and December 31, 2011. As of December 31, 2012 Current Non-current TOTAL As of December 31, 2011 Current Non-current TOTAL Assets ThUS$ Liabilities ThUS$ 3,193 419 3,612 1,421 109 1,530 Assets ThUS$ Liabilities ThUS$ 2,649 269 2,918 721 115 836 2 8 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A For the period ended December 31 2012 ThUS$ 3,704 (2,759) 945 2011 ThUS$ 2,896 (1,902) 994 Total operating revenues Total expenses SUM OF NET INCOME As an investment in associates, the Company has shown its holdings in the following companies: Austral Sociedad Concesionaria S.A. and Lufthansa Lan Technical Training S.A. The Company made no investments in associates during the year 2012. Company Country of incorporation Functional currency Austral Sociedad Concesionaria S.A. Lufthansa Lan Technical Training S.A. Chile Chile CLP CLP Percentage of ownership Cost os investment As of December 31, 2012 As of December 31, 2011 As of December 31, 2012 As of December 31, 2011 % 20.00 50.00 % ThUS$ ThUS$ 20.00 50.00 661 702 661 702 These companies do not have significant restrictions on the ability to transfer funds. 3 8 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A The movement of investments in associates between January 1, 2011 and December 31, 2012 is as follows: Opening balance as of January 1, 2011 Participation in profits Other reductions, investments in associated entities Dividends received TOTAL CHANGES IN INVESTMENTS IN ASSOCIATED ENTITIES CLOSING BALANCE AS OF DECEMBER 31, 2011 Opening balance as of January 1, 2012 Participation in profits Other increases, investments in associated entities Dividends received TOTAL CHANGES IN INVESTMENTS IN ASSOCIATED ENTITIES CLOSING BALANCE AS OF DECEMBER 31, 2012 The Company records the gain or loss on its investments in associates on a monthly basis in the consolidated statement of income, using the equity method. The Company has no investments in associates which are not accounted for using the equity method. ThUS$ 593 502 (25) (79) 398 991 991 295 685 (352) 628 1,619 (b) Joint Venture Multiplus S.A., a subsidiary of TAM S.A. and AIMIA Newco UK LLP (“Aimia”) jointly control the Companhia Brasileira de Servicos de Fidelização S.A. (“CBSF”). The company was incorporated on April 2, 2012, whose corporate name was changed to Prismah Fidelidade S.A. (“Prismah”). The purpose of Prismah Fidelidade S.A. is the provision of various services, the development of programs related to loyalty programs/customer relationships and sales incentive programs for companies. Their activities include but are not limited to: the customer relationship management, technical and technological consulting, and through points programs or other ways of possible changes, the conversion of loyalty program points. The shareholding participation in Prismah Fidelidade S.A., does not allow unilateral decisions that affect investment returns. Multiplus S.A. owns 50% of company shares and participation is accounted by the equity method proportional investment, initially recognized at cost. The participation in earnings of the company are recognized in income and the participation in changes in reserves are recognized in reserves of Multiplus S.A. Amount of shares - 500 6,571,500 - 6,572,000 ThUS$ - 1 3,215 (1,078) 2,138 4 8 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Movement investment al December 31, 2012 Beginning balance at December 31, 2011 Capital aware - AAG Constituent (*) Capital increase - AGE (**) 09/18/2012 Result of equity equivalence ENDING BALANCE AT DECEMBER 31, 2012 (*) General Assembly Act (**) Extraordinary General Assembly The company Prismah Fidelidade S.A. as of December 31, 2012, has the following items:: Social capital at December 31, 2012 ThUS$ Number of ordinary shares “Ordinary shares owned by Multiplus S.A.” Participation % 6,432 13,144,000 6,572,000 50 As of December 31, 2012 ThUS$ 6,432 2,137 (2,156) (1,078) 4,356 2,275 2,356 164 (2,320) Liquid equity Investment value Loss for the year Result of the heritage equity Current assets Non-current assets Current liabilities Year Revenues Expense in the period 5 8 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 17. INTANGIBLE ASSETS OTHER THAN GOODWILL The details of intangible assets are as follows: CLASSES OF INTANGIBLE ASSETS (NET) Computer software Developing software Airport slots Trademarks Other assets TOTAL CLASSES OF INTANGIBLE ASSETS (GROSS) Computer software Developing computer software Airport slots Trademarks Other assets TOTAL As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 144,244 60,040 1,561,130 82,373 806 1,848,593 25,124 39,395 - - 404 64,923 As of December 31, 2012 As of December 31, 2011 ThUS$ 223,586 ThUS$ 73,486 60,040 39,395 1,561,130 82,373 1,372 - - 808 1,928,501 113,689 The balance at December 31, 2012 of Intangible assets other than goodwill, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. 6 8 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A The movement in Intangible assets other than goodwill between January 1, 2011 and December 31, 2012 is as follows: Computer software Net Developing software Airport slots Trademarks Other assets Net Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Opening balance as of January 1, 2011 Additions Withdrawals Amortization CLOSING BALANCE AS OF DECEMBER 31, 2011 Opening balance as of January 1, 2012 Additions Withdrawals Acquisitions through business combinations 26,074 8,904 (184) (9,670) 25,124 25,124 18,768 (1,637) 78,106 19,109 20,286 - - 39,395 39,395 43,633 - - - - - - - - - - - - - - - - - 28,238 1,552,016 81,892 Transfer software 55,618 (51,392) Subsidiaries conversion difference Amortization (757) (30,978) 166 - - 9,114 - - 481 - 566 - - (162) 404 404 - (2) 563 - 3 45,749 29,190 (184) (9,832) 64,923 64,923 62,401 (1,639) 1,740,815 4,226 9,007 (162) (31,140) CLOSING BALANCE AS OF DECEMBER 31, 2012 144,244 60,040 1,561,130 82,373 806 1,848,593 programs as of December 31, 2012 amounts to ThUS$ 79,342 (ThUS$ 48,362 as of December 31, 2011). The accumulated amortization of other identifiable intangible assets as of December 31, 2012 amounts to ThUS$ 566 (ThUS$ 404 as of December 31, 2011). The airport slots correspond to an administrative authorization for the arrival and departure of aircraft, in a specific airport, within a period of time. Intangible assets with defined useful lives consist primarily of licensing and computer software, for which the Company has established useful lives of between 3 and 7 years. The amortization of the period is shown in the consolidated statement of income in administrative expenses. The accumulated amortization of computer 7 8 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 18. GOODWILL AND BUSINESS COMBINATION 18.1 GOODWILL The goodwill represents the excess of cost of acquisition over the fair value of the participation of the Company in the identifiable net assets of the subsidiary at the acquisition date. Goodwill at December 31, 2012 amounted to ThUS$ 3,008,657 (ThUS$ 163,777 at December 31, 2011) At December 31, 2012, the Company performed an impairment test based on the value in use and no impairment was identified. The testing is done at least once per year. The value in use of those cash generating units to which goodwill has been assigned has been that yields, occupation determined assuming factors and fleet capacity are maintained at current obtainable levels. The Company projects cash flows for the initial periods based on internal budgets and extrapolate the final value of these periods based on a growth factor consistent with the long- term economic projections in the markets in which the units operate. The determined cash flows are discounted at a rate which takes into account the time value of money and risks related to those cash generating units which have not been taken into account in estimation of the units’ future cash flows. The movement of Goodwill from January 1, 2011 to December 31, 2012, is as follows: Aerovías de Integración Regional. TAM S.A. AIRES S.A. AEROASIS S.A. Other societies Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Opening balance as of January 1, 2011 Additions by business combinations Initial recognition modification (*) Increase (decrease) due to exchange rate differences CLOSING BALANCE AS OF DECEMBER 31, 2011 Opening balance as of January 1, 2012 Additions by business combinations Amendment initial recognition (*) - - - - - - 2,118,057 700,458 94,224 - (820) 25 93,429 93,429 - - Increase (decrease) due to exchange rate differences 16,552 9.219 CLOSING BALANCE AS OF DECEMBER 31, 2012 2,835,067 102,648 - 6,736 - (123) 6,613 6,613 - - 653 7,266 63,770 157,994 - - (35) 63,735 63,735 - - 6,736 (820) (133) 163,777 163,777 2,118,057 700,458 (59) 26,365 63,676 3,008,657 (*) The amendments relate to initial recognition of changes in the Fair value determined at the time of the Business Combination. In TAM S.A. these changes are mainly relate to: fair value of financial instruments, fair value of the fleet and recognition of labor, civil and tax contingency. The maximum time that the standard gives (IFRS 3) to make changes is one year from the date of acquisition of the combined companies.. 8 8 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A by Absorption dated June 22, 2012 by the same parties in the same Notary which the purpose was to invalidate the inclusion of 17,550 shares of TAM accepted for exchange in Brazil for shares of LAN which corresponded to duplicate orders that were not timely identified as such. Because of this, the result of the Exchange Offer in Brazil amounted to 29,706,339 shares of TAM, instead of 29,723,889 shares of TAM. This should be reflected in the Register of Shareholders so that Banco Itaú on behalf of investors was due to discount 15,795 shares of the Company. On July 18, 2012, the Comissão de Valores Mobiliários (“CVM”), by Deed No. 330/2012 informed TAM of the cancellation of its registration as a public company which, dated July 19, 2012, TAM was informed by a Essential Matter. On July 27, 2012, TAM made use of the Squeeze-Out granted by the Brazilian legislation, under which a compulsory could rescue all TAM shares that were not exchanged in the exchange offer or contributed by controlling shareholders of TAM. Since TAM shares received in the exchange offer, plus the shares committed by the controlling shareholders of TAM, represented 95.9% of the total outstanding shares of TAM, the aforementioned condition was met on the remaining 4.1% through the disbursement by TAM of 339 million Brazilian Real. At December 31, 2012 the ownership structure of TAM was as follows: 18.2 BUSINESS COMBINATION (a) TAM S.A. and Subsidiaries Dated June 22, 2012 the merger was successfully completed between LAN Airlines S.A. (today LATAM Airlines Group S.A.), with Sister Holdco S.A. and Holdco II S.A., two companies specially constituted for the purpose of the association between the Company and TAM S.A. which was reflected in the deed of execution of merger issued by such companies at the same time, and it was rectified by deed dated July 10, 2012. These scriptures recorded the share exchange of Sister Holdco S.A. and Holdco II S.A. for LAN´s shares in one related of 0.9 of LAN´s shares for each Sister Holdco S.A. and Holdco II S.A.. That exchange occurred with the delivery of the respective LAN shares to shareholders of Sister Holdco S.A. and the respective BDRs (“Brazilian Depositary Receipts”) and ADRs (“American Depositary Receipts”) from LAN to the shareholders of Holdco II S.A. abroad on June 27, 2012, that is, TAM shareholders who accepted the exchange offer. Under IFRS 3 this operation has been registered as a Business Combination consigning to the Company as purchaser of TAM. Besides the fact that LATAM is the one who issuing the shares in the combination, this is based on the economic rights and relative vote relating of the former shareholders of LAN and TAM over the combined entity. The share exchange offer materialized with the exchange previously referenced was 99.9% of the TAM shares that accepted that TAM would stop being a public company in Brazil, which fulfilled the condition for the cancellation of registration, requirement for the success of the exchange offer. As a consequence of the end of that process: (i) concluded the process of Business Combination of LAN and TAM, and (ii) the renaming of LAN Airlines S.A. to LATAM Airlines Group S.A. became effective. On July 10, 2012, in Santiago´s Notary of Eduardo Diez Morello, Sister Holdco S.A., Holdco II S.A. and the Company granted a deed of rectification Materialization Statement on Merger by Absorption writing Materialization Statement issued Merger 9 8 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Holdco I S.A. Shares Series A (voting): Series B (economic) TOTAL TAM S.A. Shares ON (voting): PN (non-voting): TOTAL TEP Chile S.A. (owned by the controlling shareholders of TAM) LATAM Airlines Group S.A. Total 938 (80.58%) 226 (19.42%) 0 938 55,413,621 (100.00%) 55,413,847 1,164 55,413,621 55,414,785 Holdco I S.A. LATAM Airlines Group S.A Total 55,413,784 (100%) 0 55,413,784 0 55,413,784 94,718,931 (100%) 94,718,931 94,718,931 150,132,715 Considering the acquisition date for accounting purposes was June 22, 2012, the definition and determination of adjustments of Business Combination at December 31, 2012 is not complete, being at this date, provisional in character. The main assets and liabilities that are still subject to fair value calculations are: Intangibles, Contingencies and certain items of Property, plant and equipment. The maximum period that the standard provides for this purpose is one year. The assets and liabilities of the statement of financial position at June 22, 2012 of TAM S.A. and Subsidiaries are as follows: TAM is a leading airline in Brazil with 35 years of operation, over 30 thousand employees, a fleet of 160 aircraft, sales of 7,300 million United States dollars and a market share (2011) Domestic 41.2% in Brazil and 88.1% on international routes operated for the Brazilian airline. This Business Combination has created the leading airline in the region in terms of coverage and fleet. Additionally, the business models of both companies are complementary creating a significant potential in terms of networking and for development connectivity to its passengers. The combined company will offer to its passengers in 22 countries and around 150 destinations transporting cargo to 169 destinations in 27 countries. Among the benefits that passengers of both airlines LATAM and TAM will have are, the increased connectivity, improved routes and frequencies, and reduced connection times. Additionally, members of frequent flyer programs LANPASS and TAM Fidelidade may earn and redeem miles/points in the complete flight network of LATAM and TAM. 0 9 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Expressed in ThUS$ Book Value FairValue Cash and cash equivalents Other financial assets Other non-financial assets Trade and other accounts receivable Accounts receivable from related entities Inventories Tax assets Non-current assets (or disposal groups) classified as held for sale Other financial assets Other non-financial assets Accounts receivable Intangible assets other than goodwill Property, plant and equipment Current tax assets, non-current Deferred tax assets TOTAL ASSETS Other financial liabilities Trade and other accounts payables Accounts payable to related entities Other provisions Tax liabilities Other non-financial liabilities Other financial liabilities Accounts payable Accounts payable to related entities Other provisions Deferred tax liabilities Other non-financial liabilities TOTAL LIABILITIES NET ASSETS 263,986 743,586 27,380 1,027,949 25 70,123 174,718 8,865 66,493 325,171 13,682 282,690 4,651,274 4,266 253,476 7,913,684 1,048,847 731,394 62 14,236 63,239 969,575 3,717,019 454,289 45 189,101 52,835 94,483 7,335,125 578,559 263,986 743,586 27,380 1,022,010 25 69,823 151,949 8,865 66,493 305,706 13,682 1,740,815 4,233,592 4,266 181,953 8,834,131 1,054,225 642,863 62 14,236 65,185 970,299 3,748,677 434,921 45 619,840 204,062 94,483 7,848,898 985,233 The airport slots (landing and take-offs) have been measured at fair value at the date of the combination and its useful lives are classified as indefinite, which shall be subject to impairment test annually. The Goodwill recognized on the acquisition of TAM S.A and Subsidiaries reflects the excess value of the transaction that cannot be attributed to assets and liabilities. This value expresses the synergies that are expected to be achieved through the Business Combination. Therefore, in the statement of financial position of LATAM Airlines Group S.A., Goodwill of ThUS$ 2,818,515 has been recognized. 1 9 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Goodwill determination: ThUS$ ThUS$ Purchase price Less: 3,782,244 963,729 Fair value of assets and liabilities acquired 985,233 Noncontrolling interest (21,504) GOODWILL 2,818,515 The determination of the purchase price is explained in the following table: Number of shares LAN Exchange (a) Share price a fair value at June 22 exchange rate at June 22 US$ (b) Purchase price ThUS$ (a) times (b) Squeeze Out At July exchange rate at June 22 ThUS$ Total purchase price ThUS$ 135,119,066 26.76973 (*) 3,617,101 165,143 3,782,244 was ThUS$ 3,645,409, the net result considered in the consolidated financial statements of the group, at December 31, 2012, being ThUS$ (45,163). (*) Value of the share at June 22 $ 13,489 Exchange rate as of June 22 503.89 The capital increase originated in the merger, is determined by the social capital amount of Sister Holdco S.A. and Holdco II S.A., equivalent to ThUS$ 951,409. The difference between this value and the purchase price, amounting to ThUS$ 2,665,692 is shown in Other reserves. The costs incurred by LATAM Airline Group S.A. to make the Business Combination amounts to in the Income ThUS$50,647, and are recorded statement when they were incurred. In regards to non-controlling interest, this is valued at fair value of acquired assets and liabilities at December 31, 2012. The income contribution of TAM S.A. and Subsidiaries 2 9 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (b) Aerovías de Integración Regional, AIRES S.A. On November 26, 2010 LAN Pax Group S.A., a subsidiary of the Company, acquired 98.942% of the Colombian company Aerovías de Integración Regional, AIRES S.A. This acquisition was made through the purchase of 100% of the shares of the Panamanian corporations AKEMI Holdings S.A. and SAIPAN Holding S.A., which owned the aforementioned percentage of AIRES S.A. The purchase price was ThUS$ 12,000. Aerovías de Integración Regional, AIRES S.A., founded in 1980, at the date of acquisition it was the second largest operator within the Colombian domestic market with a market share of 22%. AIRES S.A. offered regular service to 27 domestic destinations within Colombia as well as 3 international destinations. Synergies are expected between the combination of AIRES S.A. in the Colombian market and efficiency of the business model of LATAM Airlines Group S.A. Additionally, better performance is expected by the business of LATAM Airlines Group S.A. (passengers and cargo) through an increase in coverage in Latin America. The Business Combination is recognized in the statement of financial position of the Company and Subsidiaries as Goodwill of ThUS$ 94,224. Summary statement of financial position at acquisitions date: Currents assets Non-current assets ThUS$ 27,315 Current liabilities 31,652 Non-current liabilities Equity TOTAL ASSETS 58,967 TOTAL LIABILITIES ThUS$ 125,193 20,327 (86,553) 58,967 Controlling Interest (82,224) Goodwill determination: Controlling interest Purchase price GOODWILL ThUS$ 82,224 12,000 94,224 3 9 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (c) AEROASIS S.A. Dated February 15, 2011, LAN Pax Group S.A. subsidiary of the Company acquired 100% of Colombian society AEROASIS S.A. The purchase price was ThUS$ 3,541. AEROASIS S.A. is a corporation incorporated under the laws of the Republic of Colombia through Public Deed No. 1,206 dated May 2, 2006. The Business Combination is recognized in the statement of financial position of the Company and Subsidiaries as goodwill of ThUS$ 6,736. Summary statement of financial position at acquisition date: Currents assets Non-current assets ThUS$ 1,802 3,010 Current Liabilities Non - Current Liabilities Equity TOTAL ASSETS 4,812 TOTAL LIABILITIES Controlling interst (3,195) ThUS$ 8,007 - (3,195) 4,812 Goodwill determination Controlling interest Purchase price GOODWILL ThUS$ 3,195 3,541 6,736 4 9 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 19. PROPERTY, PLANT AND EQUIPMENT The composition by category of Property, plant and equipment is as follows: Gross Book Value Acumulated depreciation Net Book Value As of December 31, 2012 As of December 31, 2011 As of December 31, 2012 As of December 31, 2011 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Construction in progress 1,153,003 1,087,563 Land Buildings 65,307 245,939 35,673 101,123 - - - - (70,869) (23,185) Plant and equipment 7,946,519 5,335,840 (1,640,530) (1,211,814) Own aircraft 6,979,986 4,921,907 (1,278,738) (1,123,871) 966,533 76,956 413,933 3,376 (361,792) (41,799) (87,943) (1,998) 1,153,003 1,087,563 65,307 175,070 6,305,989 5,701,248 604,741 35,157 35,673 77,938 4,124,026 3,798,036 325,990 1,378 Other Machinery Information technology equipment Fixed installations and accessories Motor vehicles Leasehold improvements Other property, plants and equipment 171,568 89,678 (131,105) (67,087) 40,463 22,591 81,251 70,706 87,004 64,936 45,161 94,485 (38,908) (29,838) (48,451) (65,276) (26,943) (62,986) 42,343 22,255 21,728 35,098 18,218 31,499 5,812,401 832,772 (1,875,827) (338,774) 3,936,574 493,998 Financial leasing aircraft 5,657,286 772,.887 (1,835,736) (308,805) 3,821,550 Other TOTAL 155,115 59,885 (40,091) (29,969) 115,024 15,710,654 7,690,607 (3,912,765) (1,762,625) 11,797,889 5,927,982 464,082 29,916 The balance at December 31, 2012 of Property, plant and equipment, incorporates the effects of Business Combinations with TAM S.A.and Subsidiaries. 5 9 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A The movement in the different categories of Property, plant and equipment from January 1, 2011 to December 31, 2012 is shown below: , y t r e p o r P d n a t n a l P t n e m p i u q e t e n r e h t O , y t r e p o r p d n a t n a l p t n e m p i u q e t e n d l o h e s a e L s t n e m e v o r p m i t e n r o t o M s e l c i h e v t e n d e x i F s n o i t a l l a t s n i s e i r o s s e c c a & t e n $ S U h T , 0 3 4 8 4 9 4 , , 5 9 2 4 0 1 1 , 6 1 ) 8 6 1 3 1 1 ( , ) 8 3 1 2 ( , ) 8 2 4 5 ( , ) 1 8 0 9 2 3 ( , ) 2 1 9 1 ( , 8 6 9 6 2 3 , 2 5 5 , 9 7 9 2 8 9 , 7 2 9 , 5 $ S U h T 0 2 0 3 6 3 , 2 7 0 9 1 , 6 1 ) 7 3 5 ( ) 5 1 1 ( ) 5 9 ( ) 2 3 3 ( ) 8 0 6 0 3 ( , 7 7 5 3 4 1 , 8 7 9 , 0 3 1 8 9 9 , 3 9 4 $ S U h T 0 2 1 4 4 , 5 5 5 6 , - - - - - 2 6 7 ) 8 3 9 9 1 ( , ) 1 2 6 , 2 1 ( 9 9 4 , 1 3 $ S U h T 0 9 2 1 , 3 4 5 - ) 6 ( ) 1 ( ) 7 1 ( ) 5 1 2 ( 8 1 5 2 7 4 3 7 3 6 , 1 $ S U h T 3 0 0 7 2 , 3 6 6 6 , - - ) 8 8 5 ( ) 3 2 ( ) 2 0 6 3 ( , ) 4 5 ( 9 9 6 5 , 5 9 0 , 8 8 9 0 , 5 3 9 9 5 8 1 , 5 8 8 1 1 , - ) 8 ( ) 5 9 1 1 ( , ) 5 8 ( ) 4 5 3 6 ( , ) 3 6 ( ) 8 8 1 ( 2 9 9 , 3 1 9 5 , 2 2 $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T n o i t a m r o f n I y g o l o n h c e t t n e m p i u q e t e n d n a t n a l P t n e m p i u q e t e n s g n i d l i u B t e n d n a L n o i t c u r t s n o C s s e r g o r p n i 1 1 0 2 , 1 3 r e b m e c e D f o s A ) a ( , 6 3 1 3 6 6 3 , 1 2 1 0 8 , 8 3 5 5 3 , 3 0 6 5 1 7 , s a e c n a l a b g n n e p O i 1 1 0 2 , 1 y r a u n a J f o 8 9 8 9 2 , s n o i t i d d A - , 8 6 5 8 2 0 1 , - 1 1 1 1 , ) 6 3 9 9 0 1 ( , ) 1 8 6 2 ( , ) 2 1 1 ( ) 7 1 8 4 ( , - ) 4 ( ) 1 7 7 ( ) 5 9 ( ) 2 6 0 5 6 2 ( , ) 2 0 3 3 ( , - - - - - - - - - ) 7 2 1 ( - ) 0 5 1 ( ) 2 5 8 ( ) 1 2 0 9 6 1 ( , 8 8 7 2 , 9 4 8 , 8 7 4 ) 3 8 1 , 2 ( 5 3 1 5 3 1 1 9 1 3 4 3 , 0 6 9 , 1 7 3 5 8 9 , 1 4 1 , 4 8 3 9 , 7 7 3 7 6 , 5 3 3 6 5 , 7 8 0 , 1 i n o i t a n b m o c s s e n i s u b h g u o r h t s n o i t i s i u q c A m o r f ) o t ( s r e f s n a r T s t e s s a t n e r r u c - n o n p u o r g l a s o p s i d d n a s t n e m e r i t e R s l a s o p s i D e s n e p x e n o i t a i c e r p e D e c n e r e f f i d n o i s r e v n o C s e i r a i d i s b u s s e s a e r c n i r e h t O ) s e s a e r c e d ( L A T O T , S E G N A H C F O S A E C N A L A B G N I S O L C 1 1 0 2 , 1 3 R E B M E C E D 6 9 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A The movement in the different categories of Property, plant and equipment from January 1, 2011 to December 31, 2012 is shown below: , y t r e p o r P d n a t n a l P t n e m p i u q e t e n r e h t O , y t r e p o r p d n a t n a l p t n e m p i u q e t e n d l o h e s a e L s t n e m e v o r p m i t e n r o t o M s e l c i h e v t e n d e x i F s n o i t a l l a t s n i s e i r o s s e c c a & t e n n o i t a m r o f n I y g o l o n h c e t t n e m p i u q e t e n d n a t n a l P t n e m p i u q e t e n s g n i d l i u B t e n d n a L n o i t c u r t s n o C s s e r g o r p n i 2 1 0 2 , 1 3 r e b m e c e D f o s A ) b ( $ S U h T , 2 8 9 7 2 9 5 , , 7 4 1 6 0 0 3 , $ S U h T 8 9 9 3 9 4 , 0 0 0 4 5 1 , , 2 9 5 3 3 2 4 , , 9 9 8 8 5 0 3 , ) 6 6 6 3 8 ( , ) 1 6 0 4 6 ( , ) 6 5 0 9 4 1 ( , ) 2 2 1 2 2 6 ( , 8 3 6 2 2 , ) 5 ( - ) 9 9 7 8 1 ( , ) 6 6 3 5 5 2 ( , 7 8 2 6 1 , ) 5 6 5 3 7 4 ( , 0 6 5 7 8 4 , 7 0 9 , 9 6 8 , 5 6 7 5 , 2 4 4 , 3 9 8 8 , 7 9 7 , 1 1 4 7 5 , 6 3 9 , 3 - - - $ S U h T 9 9 4 1 3 , 8 6 6 4 , - ) 2 8 ( ) 2 3 4 6 1 ( , 5 7 0 2 , ) 1 7 7 , 9 ( 8 2 7 , 1 2 $ S U h T 7 3 6 1 , 8 5 4 9 9 0 4 , ) 8 2 ( - ) 2 6 ( ) 6 1 3 1 ( , ) 0 0 1 ( 4 3 5 8 0 , 3 2 2 7 , 4 $ S U h T 8 9 0 5 3 , 6 3 8 7 , 7 9 6 1 , - - ) 2 6 2 ( ) 6 2 5 6 ( , 2 3 5 8 6 9 3 , 5 4 2 , 7 3 4 3 , 2 4 $ S U h T 1 9 5 , , 2 2 1 1 0 9 9 6 1 , - ) 5 1 ( ) 1 5 9 ( ) 2 8 9 4 1 ( , 7 6 9 3 , 7 3 2 1 , 2 7 8 , 7 1 3 6 4 , 0 4 $ S U h T $ S U h T $ S U h T $ S U h T , 5 8 9 1 4 1 4 , 8 3 9 7 7 , 3 7 6 5 3 , , 3 6 5 7 8 0 1 , s a e c n a l a b g n n e p O i 2 1 0 2 , 1 y r a u n a J f o , 9 6 8 3 8 7 2 , 5 0 8 8 , - 5 8 8 4 3 , s n o i t i d d A ) 4 5 6 3 7 ( , ) 1 2 8 4 ( , ) 6 1 1 5 ( , ) 7 2 ( 5 1 4 4 6 4 , 8 3 3 7 8 , 3 7 3 6 4 , 1 8 7 3 5 5 , ) 0 1 9 9 4 ( , - ) 5 9 8 1 1 ( , ) 6 5 2 2 ( , ) 9 1 5 7 2 1 ( , ) 9 8 1 4 2 3 ( , ) 0 0 1 1 ( , ) 1 1 3 3 ( , - - - ) 1 8 2 ( 6 0 2 2 , ) 0 7 3 2 ( , 2 7 2 4 4 8 , , 1 4 9 6 , 6 1 2 , 2 2 3 1 , 7 9 4 3 6 , 9 2 0 4 4 , 5 6 ) 4 2 5 8 5 4 ( , 1 9 5 2 1 , - ) 6 0 5 2 2 5 ( , 9 7 6 , 8 5 3 , 6 0 7 0 , 5 7 1 7 0 3 , 5 0 6 3 0 0 , 3 5 1 , 1 i n o i t a n b m o c s s e n i s u b h g u o r h t s n o i t i s i u q c A m o r f ) o t ( s r e f s n a r T s t e s s a t n e r r u c - n o n s p u o r g l a s o p s i d d n a s t n e m e r i t e R s l a s o p s i D e s n e p x e n o i t a i c e r p e D e c n e r e f f i d n o i s r e v n o C s e i r a i d i s b u s s e s a e r c n i r e h t O ) s e s a e r c e d ( L A T O T , S E G N A H C F O S A E C N A L A B G N I S O L C 2 1 0 2 , 1 3 R E B M E C E D 7 9 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (c) Composition of the fleet Aircraft included in the Company´s Property, plant and equipment: Aircraft Boeing 767 Boeing 767 Boeing 767 Boeing 767 Boeing 777 Boeing 777 Boeing 787 Airbus A318 Airbus A319 Airbus A320 Airbus A321 Airbus A330 Airbus A340 Airbus A340 TOTAL Operating leases: Aircraft Boeing 767 Boeing 767 Boeing 777 Airbus A319 Airbus A320 Airbus A321 Airbus A330 Airbus A340 Boeing 737 Bombardier Bombardier TOTAL TOTAL FLEET Model 300 300ER 300F 200ER 300ER Freighter 800 100 100 200 200 200 300 500 Model 300ER 300F Freighter 100 200 200 200 300 700 Dhc8-200 Dhc8-400 As of December 31, 2012 As of December 31, 2011 3 30 8 - 8 2 3 5 39 76 8 18 2 2 - 21 8 1 - - - 10 24 33 - - 4 - 204 101 As of December 31, 2012 As of December 31, 2011 8 4 2 18 65 1 2 3 6 10 4 123 327 10 4 2 - 9 - - 1 9 10 4 49 150 8 9 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (d) Method used for the depreciation of Property, plant and equipment: Method Useful life minimum maximum Buildings Straight line without residual value Plant and equipment Straight line with residual value of 20% in the short-haul fleet and 36% in the long-haul fleet. (*) Information technology equipment Straight line without residual value Fixed installations and accessories Straight line without residual value Motor vehicle Straight line without residual value Leasehold improvements Straight line without residual value Other property, plant and equipment Straight line with residual value of 20% in the short-haul fleet and 36% in the long-haul fleet. (*) 20 5 5 10 10 5 3 50 20 10 10 10 5 20 (*) Except for certain technical components, which are depreciated on the basis of cycles and flight hours. As a result of the Business Combination with TAM S.A. and Subsidiaries 65 aircraft were incorporated with remarketing clause (**) under modality of financial leasing, which are depreciated according to the duration of their contracts, between 12 and 18 years. Its residual values are estimated according to market value at the end of such contracts. Additionally, for the same Business Combination, 5 aircraft were added under operating lease contracts, which according to the stated policy, are classified as finance leases because the present value of the payments represents most of the economic value of the property. The useful life assigned is 6 years, according to the duration of the contracts (**) Aircraft with remarketing clause are those that are required to sell at the end of the contract. The depreciation charged to income in the period, which is included in the consolidated statement of income, amounts to ThUS$ 622,122 (ThUS$ 329,081 for the period ended December 31, 2011). Depreciation charges for the year are recognized in Cost of sales and administrative expenses in the consolidated statement of income. (e) Additional information regarding Property, plant and equipment: i. Property, plant and equipment pledged as guarantee:: In the period ended December 31, 2012 direct guarantees were added for three aircraft Airbus A319-100, seven Airbus A320-200 aircraft, nine Boeing 767-300 aircraft, six Boeing 777-300 aircraft (four passengers and two cargo) and three Boeing 787-800 aircraft. During the first quarter the Company sold its participation in the permanent establishments Quetro Leasing LLC, Codorniz Leasing Limited, Pochard Leasing LLC, Garza Leasing LLC and Caiquen Leasing LLC. As such the Company eliminated direct guarantees associated with two aircraft Airbus A319-100 and seven aircraft Boeing 767-300 (six passenger aircrafts and one freighter). Additionally, during the second semester of 2012 the guaranties were eliminated for three aircraft A318-100 due to the sale, of two aircraft A340-300 and one aircraft B767-300F. 9 9 1 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Description of Property, plant and equipment pledged as guarantee: Creditor of guarantee Assets committed Fleet As of December 31,2012 As of December 31,2011 Existing Debt ThUS$ Book Value ThUS$ Existing Debt ThUS$ Book Value ThUS$ Boeing 767 1,296,704 1,640,071 1,032,921 1,305,915 Wilmington Trust Company Aircraft and engines Banco Santander S.A. Aircraft and engines Boeing 787 Airbus A319 Airbus A320 Airbus A318 BNP Paribas Aircraft and engines Airbus A319 Credit Agricole Aircraft and engines Airbus A320 Airbus A340 Airbus A320 Airbus A319 858,221 81,698 626,317 121,172 360,100 261,139 44,002 68,096 19,531 JP Morgan Aircraft and engines Boeing 777 280,698 937,074 111,458 782,609 150,026 501,836 333,105 107,625 156,355 105,349 324,159 13,750 89,287 411,043 187,705 301,327 284,265 93,019 34,530 54,491 - 24,664 117,106 504,827 239,530 404,723 350,387 114,376 163,746 215,978 - TOTAL DIRECT GUARANTEE 4,017,678 5,149,667 2,502,338 3,441,252 The amounts of existing debt are presented at nominal value. Book value corresponds to the carrying value of the goods provided as guarantees. Additionally, there are indirect guarantees related to assets recorded in Property, plant and equipment whose total debt at December 31, 2012 amounted to ThUS$ 2,888,753 (ThUS$ 316,859 at December 31, 2011). The book value of assets with indirect guarantees as of December 31, 2012 amounts to ThUS$ 3,777,715 (ThUS$ 504,355 as of December 31, 2011). The balance at December 31, 2012 of Property, plant and equipment, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. 0 0 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A ii. Commitments and others Fully depreciated assets and commitments for future purchases are as follows: As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ Gross book value of fully depreciated property, plant and equipment still in use Commitments for the acquisition of aircraft (*) 188,214 43,626 24,500,000 14,500,000 (*) According to the manufacturer’s price list. In December 2009, the Company signed a purchase commitment with Airbus S.A.S. for the purchase of 30 aircraft of the A320 family with deliveries between 2011 and 2016. Later, in December 2010 the Company signed a new commitment to this manufacturer for the acquisition of 50 aircraft of the same family with deliveries between 2012 and 2016. Additionally, in June 2011, a contract was signed for 20 additional aircraft of the A320 NEO family with deliveries between 2017 and 2018. With regards to the above, as of December 31, 2012, and as a result of different aircraft purchase contracts signed with Airbus S.A.S., there remain 78 Airbus aircraft of the A320 family to be delivered between 2013 and 2018. The approximate amount is ThUS$ 6,400,000, according to the manufacturer’s price list. Additionally, the Company has active purchase options for 4 A320 NEO aircraft. Otherwise purchase contracts were signed with The Boeing Company during February, May and December 2011, for 3, 5 and 2 B767-300 aircraft respectively. aircraft purchase contracts signed with The Boeing Company, remain to receive a total of 4 767-300 aircraft during 2013 and 23 787 Dreamliner aircraft, with delivery dates between 2013 and 2017. The approximate amount, according to the manufacturer’s price list, is ThUS$ 5,000,000. Additionally, the Company has valid purchase options for 15 787 Dreamliner aircraft. The acquisition of these aircraft is part of the strategic plan for the long-term fleet. This plan also involves the sale of 15 Airbus A318 model between 2011 and 2013. It is estimated that this sale will have no significant impact on results. During 2011 the first 5 aircraft were sold. During 2012 sold another 3 and during 2013 the Company plans to sell the last 7. Additionally, as a result of the Business Combination with TAM S.A. and Subsidiaries the following commitments are incorporated: In November 2006, a purchase commitment was signed with Airbus S.A.S. for the acquisition of 31 A320 family aircraft and 6 A330-200 aircraft, with deliveries between 2007 and 2010. Subsequently, in January 2008 signed a new commitment for the acquisition of 20 additional A320 family aircraft and 4 aircraft A330-200, with deliveries between 2010 and 2014, also signed a purchase commitment for 22 A350 aircraft. In July 2010, signed a purchase commitment with Airbus S.A.S. for the acquisition of 20 A320 family aircraft with deliveries between 2014 and 2015 and on the same date the option was exercised to purchase 5 A350. In October 2011, a new commitment was signed to this manufacturer for the acquisition of 10 additional aircraft of the A320 family with deliveries between 2016 and 2017, plus 22 family aircraft A320 NEO with deliveries between 2016 and 2018. With the above, at December 31, 2012, as a result of the different aircraft purchase agreements signed with Airbus S.A.S., remain to receive 71 aircraft Airbus A320 family, with deliveries between 2013 and 2018, and 27 Airbus aircraft A350 family with delivery dates starting from 2015. Additionally, the Company has valid purchase options for 10 A320 family aircraft and 5 Airbus NEO A350. As of December 31, 2012, and as a result of different In December 2008, a new commitment purchase 1 0 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A agreement was signed with The Boeing Company for 2 B777 aircraft with deliveries in 2013, and in February 2011 an agreement was signed for the purchase of another 2 B777 aircraft with deliveries in 2014. With the above, at December 31, 2012, due to the various purchase contracts signed with The Boeing Company, remain to receive 4 B777 aircraft. Additionally, the Company has valid purchase options for 2 B777 aircraft. The approximate amount of individual purchase contracts incorporated for the effect of the Business Combination with TAM S.A. and Subsidiaries is ThUS$ 13,100,000, according to the manufacturers price list. iii. Capitalized Property, plant and equipment. interest costs with respect to For the periods ended December 31, 2012 2011 % 2.60 3.51 Average rate of capitalization of capitalized interest costs Costs of capitalized interest ThUS$ 45,069 33,342 2 0 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A iV. Financial leases The detail of the main financial leases is as follows: Lessor Aircraft Model As of December 31,2012 As of December 31,2011 Agonandra Statutory Trust Agonandra Statutory Trust Air Canada AWMS I (AWAS) Bluebird Leasing LLC Caiquen Leasing LLC Cernicalo Leasing LLC Codorniz Leasing Limited Eagle Leasing LLC FLYAFI 1 S.R.L. FLYAFI 2 S.R.L. FLYAFI 3 S.R.L. Forderum Holding B.V. (GECAS) Garza Leasing LLC General Electric Capital Corporation Intraelo BETA Corpotation (KFW) Juliana Leasing Limited Linnet Leasing Limited Airbus A319 Airbus A320 Airbus A340 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Airbus A319 Boeing 767 Boeing 777 Boeing 777 Boeing 777 Airbus A320 Boeing 767 Airbus A330 Airbus A320 Airbus A320 Airbus A320 NBB Rio de Janeiro Lease CO and Brasilia Lease LLC (BBAM) Airbus A320 NBB São Paulo Lease CO. Limited (BBAM) Petrel Leasing LLC Pochard Leasing LLC Quetro Leasing LLC Seagull Leasing LLC SG Infraestructure Italia S.R.L. SL Alcyone LTD (Showa) TMF Interlease Aviation B.V. TMF Interlease Aviation B.V. TMF Interlease Aviation II B.V. TMF Interlease Aviation II B.V. TMF Interlease Aviation III B.V. TMF Interlease Aviation III B.V. TMF Interlease Aviation III B.V. TMF Interlease Aviation III B.V. Wacapou Leasing S.A Airbus A321 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Boeing 777 Airbus A320 Airbus A320 Airbus A330 Airbus A319 Airbus A320 Airbus A319 Airbus A320 Airbus A321 Airbus A330 Airbus A320 Wells Fargo Bank North National Association (ILFC) Airbus A330 100 200 500 300 300F 300F 300F 100 300ER 300ER 300ER 300ER 200 300ER 200 200 200 200 200 200 300ER 300ER 300ER 300F 300ER 200 200 200 100 200 100 200 200 200 200 200 4 2 2 3 2 1 2 2 1 1 1 1 2 1 6 1 2 4 1 1 1 2 3 - 1 1 12 1 5 2 3 12 7 10 1 1 - - - - 2 - 2 - 1 - - - - - - - - 4 - - 1 - - 1 - - - - - - - - - - - - TOTAL 102 11 3 0 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Leasing contracts where the Company acts as the lessee of aircrafts establish duration between 12 and 18 year terms and semi-annual, quarterly and monthly payments of obligations. Additionally, the lessee will have the obligation to contract and maintain active the insurance coverage for the aircraft, perform maintenance on the aircraft and update the airworthiness certificates at their own cost. Fixed assets acquired under financial leases are classified as Other property, plant and equipment. As of December 31, 2012 the Company had one hundred and two aircraft (eleven aircraft as of December 31, 2011). During the first quarter of 2012, due to the sale of its participation in the permanent establishments Caiquen Leasing LLC, Codorniz Leasing Limited, Garza Leasing LLC, Pochard Leasing LLC and Quetro Leasing LLC, the Company increased its number of aircraft on lease by seven Boeing 767- 300 (one freighter and six passenger aircrafts) and two A319-100. Therefore, these aircraft were reclassified from the Plant and equipment category to the category Other property plant and equipment. As a result of the Business Combination 81 aircraft capital leases were added as financial leasing, and during the third quarter of 2012 two more Airbus A320-200 were added in this way. The book value of assets under financial leases as of December 31, 2012 amounts to ThUS$ 3,863,193 (ThUS$ 464,082 as of December 31, 2011). The minimum payments under financial leases are as follows: As of December 31, 2012 No later than one year Between one and five years Over five years TOTAL As of December 31, 2011 No later than one year Between one and five years Over five years TOTAL Gross Value Interest Present Value ThUS$ ThUS$ ThUS$ 523,033 (66,090) 456,943 1,687,596 (186,145) 1,501,451 1,135,262 (57,455) 1,077,807 3,345,891 (309,690) 3,036,201 Gross Value Interest Present Value ThUS$ ThUS$ ThUS$ 78,369 207,365 59,152 344,886 (7,622) (18,657) (2,078) (28,357) 70,747 188,708 57,074 316,529 4 0 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 20. TAXES AND DEFERRED TAXES Deferred tax assets and liabilities are offset if there is a legal right to offset assets and liabilities for income taxes relating to the same tax authority. The balances of deferred taxes are as follows: Concept Depreciation Leased assets Amortizacion Provissions Revaluation of financial instruments Assets Liabilities As of December 31, 2012 As of December 31, 2011 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ ThUS$ ThUS$ (662) - 15,148 16,266 5,178 (547) - 14,255 9,998 - 548,618 105,554 69,335 (247,743) (30,110) Tax losses 105,652 35,300 (328,608) Revaluation property, plant and equipment Intangibles Others TOTAL - - 3,047 144,629 - - 1,142 60,148 (45,579) 498,674 (12,092) 558,049 The balance at December 31, 2012 of deferred taxes, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. The balance of deferred tax assets and liabilities are composed principally of temporary differences to reverse in the long term. 338,741 65,240 36,667 47,757 (28,788) (83,297) - - (6,695) 369,625 5 0 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Movements of Deferred tax assets and liabilities from January 1, 2011 to December 31, 2012 are as follows: e c n a l a b g n i d n E ) y t i l i b a i l ( t e s s a f o e l a S s t n e m t s e v n I s r e h t O s n o i t a c fi i s s a l c e R n o i t a r o p r o c n I s s e n i s u b y b n o i t a n i b m o c d e z i n g o c e R r e h t o n i e v i s n e h e r p m o c e m o c n i n i d e z i n g o c e R d e t a d i l o s n o c e m o c n i g n i n n i g e B t e s s a e c n a l a B ) y t i l i b a i L ( 1 1 0 2 , 1 3 r e b m e c e D o t 1 y r a u n a J m o r F ) a ( $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T ) 8 8 2 9 3 3 ( , ) 0 4 2 5 6 ( , ) 2 1 4 2 2 ( , ) 9 5 7 7 3 ( , - 8 8 7 8 2 , 7 9 5 8 1 1 , 7 3 8 7 , ) 7 7 4 , 9 0 3 ( - - ) 5 ( ) 8 8 3 ( - - - ) 7 6 ( ) 0 6 4 ( - - - - - - - ) 1 2 5 2 ( , ) 1 2 5 , 2 ( - - - - - - - ) 5 4 6 6 ( , ) 5 4 6 , 6 ( - - 1 1 8 3 , - - - - - 1 1 8 , 3 - - - - - - 2 6 8 6 , 6 4 8 1 , 8 0 7 , 8 $ S U h T ) 4 1 6 8 4 ( , ) 2 9 3 5 ( , ) 3 0 9 8 ( , ) 2 8 4 2 2 ( , ) 4 0 6 1 ( , - , 3 1 0 2 1 1 ) 0 6 4 3 6 ( , ) 2 4 4 , 8 3 ( $ S U h T , ) 9 6 6 0 9 2 ( ) 8 4 8 9 5 ( , ) 0 2 3 7 1 ( , ) 9 8 8 4 1 ( , 4 0 6 1 , 6 2 9 1 2 , 9 2 2 3 1 , 9 3 0 2 7 , ) 8 2 9 , 3 7 2 ( s n o i t a g i l b o t fi e n e b t n e m y o p m e t s o P l s t n e m u r t s n i l a i c n a n fi f o n o i t a u l a v e R s e s s o l x a T s r e h t O L A T O T n o i t a i c e r p e D s t e s s a d e s a e L n o i t a z i t r o m A s n o i s i v o r P 2 1 0 2 , 1 3 r e b m e c e D o t 1 y r a u n a J m o r F ) b ( g n i d n E e c n a l a b ) y t i l i b a i l ( t e s s a s r e h t O m o r f t c e f f E n i e g n a h c e t a r x a t e g n a h c x E e t a r n o i t a i r a v y b n o i t a r o p r o c n I s s e n i s u b n o i t a n i b m o c d e z i n g o c e R r e h t o n i e v i s n e h e r p m o c e m o c n i n i d e z i n g o c e R d e t a d i l o s n o c e m o c n i g n i n e p O e c n a l a b / s t e s s a s e i t i l i b a i l $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T ) 0 8 2 9 4 5 ( , ) 4 5 5 5 0 1 ( , ) 7 8 1 4 5 ( , 9 0 0 4 6 2 , 8 8 2 5 3 , 0 6 2 4 3 4 , 9 7 5 5 4 , 9 3 1 5 1 , ) 4 7 6 8 9 4 ( , - - - - - - - - ) 6 7 7 9 5 ( , ) 3 1 5 1 1 ( , ) 1 7 4 6 ( , ) 3 5 3 8 ( , 0 8 0 5 , 3 1 7 4 1 , - - ) 3 1 6 5 1 ( , 1 0 7 ) 0 2 4 , 3 1 4 ( ) 3 1 6 , 5 1 ( ) 9 1 6 , 5 6 ( ) 0 7 3 ( - ) 0 1 1 ( 1 6 8 1 , 6 5 6 6 2 0 1 1 1 , 6 8 ) 3 1 ( ) 2 1 9 2 ( , ) 6 0 1 3 6 ( , - ) 4 1 6 8 1 ( , 3 8 0 7 1 3 , 5 3 3 9 , 0 1 9 8 8 1 , 3 1 3 5 4 , 0 4 4 4 1 , ) 1 0 4 , 2 ( ) 2 6 7 5 9 4 ( , - - - - - - - ) 3 2 6 2 ( , ) 4 3 7 2 ( , ) 7 5 3 , 5 ( ) 0 4 7 6 8 ( , ) 1 0 8 8 2 ( , ) 0 8 5 6 ( , ) 3 2 8 8 ( , ) 8 4 3 5 ( , 0 3 9 0 1 1 , - - 2 2 4 0 1 , ) 0 4 9 , 4 1 ( , ) 8 8 2 9 3 3 ( ) 0 4 2 5 6 ( , ) 2 1 4 2 2 ( , ) 9 5 7 7 3 ( , 8 8 7 8 2 , 7 9 5 8 1 1 , - - 7 3 8 7 , ) 7 7 4 , 9 0 3 ( i t n e m p u q e d n a t n a l p , y t e p o r p n o i t a u l a v e R s t n e m u r t s n i l a i c n a n fi f o n o i t a u l a v e R s e s s o l x a T s e l b i g n a t n I s r e h t O L A T O T n o i t a i c e r p e D s t e s s a d e s a e L n o i t a z i t r o m A s n o i s i v o r P 6 0 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Deferred tax assets not recognized: As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ Temporary differences Tax losses TOTAL - 1,439 1,439 2,152 35 2,187 Deferred tax assets on tax loss carry-forwards, are recognized to the extent that it is likely to provide relevant tax benefit through future taxable profits. The Company has not recognized deferred tax assets of ThUS$ 1,439 (ThUS$ 35 at December 31, 2011) compared to a loss of ThUS$ 5,265 (ThUS$ 103 at December 31, 2011) to offset against future years tax benefits. Expense (income) for deferred and current income taxes for the periods ended at December 31, 2012 and December 31, 2011, respectively, are as follows: Expense for current income tax Current tax expense Adjustment to previous year’s current tax Other current tax expense (income) TOTAL CURRENT TAX EXPENSE, NET Expense for deferred income taxes Deferred expense (income) for taxes related to the creation and reversal of temporary differences Reduction (increase) in value of deferred tax assets during the evacuation of its usefulness. TOTAL DEFERRED TAX EXPENSE, NET INCOME TAX EXPENSE For the periods ended December 31 2012 ThUS$ 2011 ThUS$ 35,527 (13,886) 12 21,653 79,155 1,404 80,559 102,212 19,470 3,877 - 23,347 40,051 (1,609) 38,442 61,789 7 0 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Composition of income tax expense (income): Current tax expense, net, foreign Current tax expense, net, Chile TOTAL CURRENT TAX EXPENSE, NET Deferred tax expense, net, foreign Deferred tax expense, net, Chile DEFERRED TAX EXPENSE, NET, TOTAL INCOME TAX EXPENSE For the period ended December 31, 2012 ThUS$ 31,791 (10,138) 21,653 (54,980) 135,539 80,559 102,212 2011 ThUS$ 4,486 18,861 23,347 (20,876) 59,318 38,442 61,789 Reconciliation of tax expense using the legal rate to the tax expense using the effective rate: For the period ended December 31, 2012 ThUS$ 22,633 70,441 (10,686) (7,029) 27,437 (584) 79,579 102,212 2011 ThUS$ 76,410 (10,571) 1,916 (11,094) 5,087 41 (14,621) 61,789 Tax expense using the legal rate Tax effect of legal rate change Tax effects of rates in other jurisdictions Tax effect of non-taxable operating revenues Tax effect of disallowable expenses Other increases (decreases) TOTAL ADJUNSTMENTS TO TAX EXPENSE USING THE LEGAL RATE TAX EXPENSE USING THE EFFECTIVE RATE Reconciliation of legal tax rate to effective tax rate: Legal tax rate Effect of tax rates for legal rate change Effect of tax rates in other jurisdictions Effect of tax rate on non-taxable operating revenues Effect of tax rate on disallowable expenses Efecto en tasa impositiva de gastos no deducibles TOTAL ADJUSTMENTS TO THE LEGAL TAX RATE TOTAL EFFECTIVE TAX RATE For the period ended December 31, 2012 2011 % 20.00 62.24 (9.44) (6.21) 24.24 (0.52) 70.31 90.31 % 20.00 (2.77) 0.50 (2.89) 1.33 0.01 (3.82) 16.18 8 0 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A On September 27, 2012, the Law N° 20,630 was published in the Official Journal that “Improves Tax Legislation and Finance Education Reform”. Among the major tax reforms that the amending Law contains, the First Category Tax Rate was modified which must be declared and paid beginning in the 2013 tax year. The above implies, that the rate of income tax for the tax year 2013 is 20%. Therefore, for purposes of the closing financial statements beginning as of Deferred taxes related to items charged to net equity: September 30, 2012, this should be considered in determining the provision for income taxes and the determination of deferred tax rate of 20%. Thereby, at December 31, 2012 the Company had tax expense considering the increased rate of 17% to 20%, which meant a higher recorded tax expense by ThUS$ 70,441. Aggregate deferred taxation of components of other comprehensive income Aggregate deferred taxation related to items charged to net equity TOTAL DEFERRED TAXES RELATED TO ITEMS CHARGED TO NET EQUITY Deferred tax effects of the components of other comprehensive income: For the period ended December 31, 2012 ThUS$ (5,357) (257) (5,614) 2011 ThUS$ 8,708 (355) 8,353 Cash-flow hedges Translation adjustment Cash-flow hedges Translation adjustment As of December 31, 2012 Amount before Taxes Income tax expense (income) ThUS$ 2,510 (18,692) ThUS$ 2,623 2,734 5,357 As of December 31, 2011 Amount before Taxes Income tax expense (income) ThUS$ 40,368 10,864 ThUS$ (6,862) (1,846) (8,708) Amount after Taxes ThUS$ 5,133 (15,958) Amount after Taxes ThUS$ 33,506 9,018 9 0 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 21. OTHER FINANCIAL LIABILITIES The composition of Other financial liabilities is as follows: As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ CURRENT (a) Interest bearing loans 1,977,255 537,334 (b) Derivatives not recognized as a hedge (c) Hedge derivatives TOTAL CURRENT NON-CURRENT 4,477 65,598 4,907 40,016 2,047,330 582,257 (a) Interest bearing loans 7,582,302 2,978,973 (b) Derivatives not recognized as a hedge (c) Hedge derivatives TOTAL NON-CURRENT 5,515 111,040 9,859 120,304 7,698,857 3,109,136 The balance at December 31, 2012 of Other financial liabilities, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. 0 1 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (a) Interest bearing loans Obligations with credit instruments: institutions and debt As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 242,955 519,762 411,313 1,174,030 273,682 471,896 57,647 1,977,255 219,319 3,432,919 3,652,238 1,123,840 2,615,924 190,300 153,386 379 310,217 463,982 - 70,747 2,605 537,334 247,725 2,159,055 2,406,780 - 245,782 326,411 CURRENT Loans to exporters Bank loans Guaranteed obligations SUBTOTAL BANK LOANS Obligation with the public Financial leases Other loans TOTAL CURRENT NON-CURRENT Bank loans Guaranteed obligations SUBTOTAL BANK LOANS Obligation with the public Financial leases Other loans TOTAL NON-CURRENT 7,582,302 2,978,973 TOTAL OBLIGATIONS WITH FINANCIAL INSTITUTIONS 9,559,557 3,516,307 All interest-bearing liabilities are recorded using the effective interest rate method. Under IFRS, the effective interest rate for loans with a fixed interest rate does not vary throughout the loan, while in the case of loans with variable interest rates, the effective rate changes on each date of repricing of the loan. Currency balances that make the interest bearing loans at December 31, 2012 and December 31, 2011, are as follows: CURRENCY Brazilian real Euro US Dollar TOTAL As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 326,394 1,785 - - 9,231,378 3,516,307 9,559,557 3,516,307 1 1 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A e u l a v l a n i m o n t a 2 1 0 2 , 1 3 r e b m e c e D t a e u d s t l u s e r l l a t s n i n i e u d s n a o l g n i r a e b - t s e r e t n I % $ S U h T % $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T l a n i m o N e t a r l a t o T g n i t n u o c c a e u l a v e v i t c e f E e t a r n o i t a z i t r o m A l a t o T l a n i m o n e u l a v n a h t e r o M s r a e y e v fi n a h t e r o M o t e e r h t s r a e y e v fi n a h t e r o M o t e n o s r a e y e e r h t e r o M n a h t s y a d 0 9 e n o o t r a e y o t p U s y a d 0 9 y c n e r r u C r o t i d e r C y r t n u o c r o t i d e r C r o t i d e r C . o N x a T - 4 5 7 3 1 , - - 4 5 7 3 1 , 6 1 9 1 , % 7 1 2 . % 0 7 1 . % 2 3 1 . % 9 7 1 . % 7 5 2 . % 4 7 1 . % 1 0 5 . % 7 3 3 . % 1 4 4 . % 7 6 3 . % 6 7 1 . % 0 1 2 . % 5 8 0 . % 3 1 1 . % 1 1 1 . 3 5 2 0 3 , 6 5 0 5 3 , 4 8 0 5 7 , 2 6 5 2 0 1 , 6 8 5 4 1 2 , 2 7 9 4 4 , 1 6 4 1 0 1 , 9 1 7 7 8 , 4 9 4 5 6 , 0 0 7 4 4 4 , 4 5 8 9 9 3 , 4 3 4 4 1 2 , 0 2 9 3 2 1 , 1 1 4 1 6 , , 6 1 6 2 7 8 1 , % 6 2 1 . 4 9 3 5 6 1 , % 7 2 1 . 2 6 6 2 0 1 , % 5 3 3 . 3 1 8 0 9 1 , % 7 1 2 . % 0 7 1 . % 2 3 1 . % 9 7 1 . % 7 5 2 . % 4 7 1 . % 1 0 5 . % 7 3 3 . % 1 4 4 . % 7 6 3 . % 6 7 1 . % 0 1 2 . % 5 8 0 . % 3 1 1 . % 1 1 1 . % 6 2 1 . % 7 2 1 . % 5 3 3 . % 2 4 3 . % 9 2 1 . % 5 6 5 . % 1 3 1 . % 0 7 4 . % 6 8 1 . % 8 0 2 . 0 7 6 5 8 , 9 6 8 3 0 1 , 0 8 4 5 4 , 6 6 4 7 , 8 1 4 1 1 3 , 2 8 5 8 4 1 , 0 4 3 8 5 , % 2 4 3 . % 9 2 1 . % 5 6 5 . % 1 3 1 . % 0 7 4 . % 6 8 1 . % 8 0 2 . l a u n n a i m e S l a u n n a i m e S y l r e t r a u Q 0 0 0 0 3 , 0 0 0 5 3 , 0 0 0 5 7 , l a u n n A 0 0 0 2 0 1 , l a u n n a i m e S 8 4 8 4 4 , - 3 7 3 4 1 2 , - - - - - - y l r e t r a u Q 9 4 6 2 0 1 , 4 1 1 1 4 , y l r e t r a u Q y l r e t r a u Q 8 4 4 7 8 , 8 4 1 6 6 , - 1 1 2 8 1 , y l r e t r a u Q 0 9 0 1 5 4 , 1 3 2 6 4 1 , y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q 8 0 9 9 0 4 , 9 4 4 0 2 2 , 2 2 2 8 2 1 , 0 8 4 3 6 , 0 1 7 8 0 2 , 4 2 0 7 1 1 , 3 3 7 4 7 , 3 2 2 7 3 , , 3 6 4 9 5 9 1 , , 2 6 1 1 4 1 1 , - - - - - - 8 7 4 6 2 , 4 1 7 6 , 4 1 0 3 1 , 7 7 8 0 3 1 , 7 0 4 4 3 3 , 9 6 3 4 8 , 5 4 6 2 4 , 1 2 2 2 2 , 9 1 9 0 1 , y l r e t r a u Q 9 8 7 2 7 1 , 4 5 0 6 0 1 , 6 8 5 7 2 , y l r e t r a u Q 2 7 0 7 0 1 , 9 7 5 5 6 , y l r e t r a u Q 0 0 0 0 9 1 , 6 0 9 6 9 , y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q 1 9 4 5 8 , 4 8 6 3 0 1 , 6 8 0 6 4 , 2 6 4 7 , - 4 4 8 1 , 5 8 4 5 2 , 9 8 0 5 1 , 3 5 1 7 1 , 1 9 7 9 3 , 9 4 5 3 , - 3 6 5 5 2 , 6 1 2 0 3 , 1 6 4 3 1 , - - - - - 3 7 3 4 1 2 , 1 5 9 3 2 , 9 2 1 5 3 , 3 5 7 0 2 , 9 6 7 8 1 1 , 0 9 8 4 2 3 , 2 1 1 9 7 , 0 3 9 0 4 , 6 1 1 1 2 , 9 5 3 0 1 , 8 8 3 6 2 , 4 0 4 6 1 , 9 3 3 6 3 , 8 5 1 5 , - 9 9 4 5 3 , 5 4 1 9 2 , 4 1 0 2 1 , - - - - - 8 4 8 4 4 . 4 7 3 8 , 2 0 4 3 3 , 6 9 6 0 1 , 5 3 6 1 4 , 8 5 4 9 1 1 , 6 0 4 8 2 , 9 1 9 4 1 , 8 3 6 7 , 8 4 7 3 , 2 0 6 9 , 0 0 0 0 3 , 0 0 0 5 3 , 0 0 0 5 7 , 0 0 0 2 0 1 , - - 2 3 7 2 , 3 0 2 2 1 , 4 7 4 3 , 8 7 5 3 1 , 6 4 5 9 3 , 1 1 3 9 , 1 3 9 4 , 4 1 5 2 , 1 3 2 1 , 9 5 1 3 , 4 7 9 5 , 2 6 9 1 , 3 1 8 2 1 , 1 5 1 4 , 6 1 3 2 , 5 1 8 5 7 0 6 1 , 2 9 1 4 1 , 4 6 1 4 , 7 3 6 5 , 0 1 5 6 , 6 4 6 4 , 8 5 3 . , 1 5 2 8 1 , y l r e t r a u Q 1 6 2 4 1 3 , 2 7 5 9 4 , 6 1 1 2 1 1 , 1 7 0 4 0 1 , 3 0 6 6 3 , 9 9 8 1 1 , - y l r e t r a u Q 9 8 1 6 4 1 , 0 6 9 8 5 , - - - 8 5 2 5 1 , 9 8 1 6 4 1 , 2 7 4 9 2 , - - 6 0 7 0 1 , 4 2 5 3 , 0 7 5 , 7 0 1 , 5 6 2 8 , 5 3 2 , 5 3 5 8 , 6 4 1 , 2 7 3 3 , 6 5 9 1 6 0 , 0 3 3 , 1 6 0 2 , 1 3 4 9 6 3 , 1 7 3 $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C . . A S U . E L I H C E D O C N A B R E D N A T N A S O D A T S E G N I I C B U A T I A V B B e c n a r F E L O C I R G A T I D E R C . . . . . A S U . . A S U . . A S U . . A S U . I S A B R A P P N B O G R A F S L L E W K N A B I T I C O C F E P . 5 - 0 0 0 4 0 0 7 9 . . - 6 0 0 0 6 0 0 7 9 . . - K 0 3 0 5 4 6 6 7 . . 8 - 0 0 0 2 3 0 7 9 . . - K 0 0 0 6 3 0 7 9 . . - 7 0 0 0 0 3 0 7 9 . E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 . . . . . . . . A S U . . A S U . . A S U . . A S U . . A S U . - . A S U . A C I R E M A F O K N A B H C N Y L L I R R E M T N E M P O L E V E D N A P A J F O K N A B K N A B E H C S T U E D s e n o i v A P A W S s o d a g e l l K N A B E L P P A U M T B G N I e c n a r F E L O C I R G A T I D E R C . . . . . A S U . . A S U . . A S U . . A S U . - D E R E T R A H C S . K N A B I T I C O C F E P G N I E O B S R E H T O L A T O T E - 0 E - 0 E - 0 E - 0 E - 0 - E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 - e l i h C R E D N A T N A S . K - 0 0 0 6 3 0 7 9 . r o t i d e r C y r t n u o c r o t b e D e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L r o t b e D . o N x a t . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . y t i l i b a i L f o s s a l C s r e t r o p x e o t s n a o L s n o i t a g i l b o d e e t n a r a u G s n a o l k n a B s e s a e l l a i c n a n i F s n a o l r e h t O % $ S U h T % $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T l a n i m o N e t a r l a t o T g n i t n u o c c a e u l a v e v i t c e f E e t a r n o i t a z i t r o m A l a t o T l a n i m o n e u l a v n a h t e r o M s r a e y e v fi n a h t e r o M o t e e r h t s r a e y e v fi n a h t e r o M o t e n o e e r h t s r a e y n a h t e r o M s y a d 0 9 e n o o t r a e y o t p U s y a d 0 9 y c n e r r u C r o t i d e r C y r t n u o c r o t i d e r C r o t i d e r C . o N x a T 2 1 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A e u l a v l a n i m o n t a , 2 1 0 2 , 1 3 r e b m e c e D t a e u d s t n e r l l a t s n i n i e u d s n a o l g n i r a e b - t s e r e t n I % 1 8 2 . % 3 0 4 . % 5 3 5 . % 2 7 0 1 . % 5 6 5 . 0 8 4 4 6 , 9 1 4 0 3 , 7 1 5 2 5 1 , 6 3 3 6 1 9 6 6 1 , % 1 8 2 . % 3 0 4 . % 5 3 5 . % 2 7 0 1 . % 5 6 5 . % 1 0 4 / . % 9 6 7 . 6 9 5 2 3 , % 1 0 4 / . % 9 6 7 . % 4 9 8 . % 4 3 3 . % 5 9 0 . % 1 4 8 . % 6 5 8 . A / N A / N % 5 2 2 . A / N % 0 5 1 . % 4 8 3 . % 9 6 3 . % 9 2 2 . 8 7 6 0 5 7 2 , 4 7 6 4 , , 1 5 2 6 4 1 1 , 1 7 2 1 5 2 , 2 3 0 6 6 , 1 7 8 2 1 , 9 0 4 7 8 , 8 8 5 8 1 , 9 7 4 4 2 , 9 0 1 8 8 , 1 0 2 1 5 4 . 3 9 4 5 1 1 , % 4 9 8 . % 4 3 3 . % 6 9 0 . % 0 6 8 . % 6 9 8 . A / N A / N % 5 2 2 , A / N % 0 5 1 . % 4 8 3 . % 9 6 3 . % 9 2 2 . % 7 3 0 / . % 1 0 2 . 6 8 9 7 9 4 , % 2 8 0 / . % 1 0 2 . % 9 8 2 . % 5 2 2 . % 9 5 2 . % 5 8 0 . 0 7 5 7 3 , 0 2 4 5 , 9 7 3 1 8 , 6 9 5 9 6 , % 9 8 2 . % 5 2 2 . % 9 5 2 . % 0 7 1 . % 1 2 2 / . % 1 1 2 . 1 1 1 8 9 , % 1 2 2 / . % 1 1 2 . % 2 3 3 / . % 2 6 2 . 2 0 0 9 1 3 , % 2 3 3 / . % 2 6 2 . % 6 9 1 . % 2 4 2 . % 8 9 1 . % 5 9 1 . % 8 0 0 . % 1 5 7 . % 8 5 0 1 . % 1 3 5 . % 8 0 9 . % 2 8 6 . % 0 0 0 . 0 2 5 7 1 1 , 4 4 8 3 2 , 0 0 3 0 1 , 7 4 8 1 8 3 , 5 4 5 9 1 , 4 4 3 1 , 2 9 1 2 , 0 5 1 1 7 5 8 7 1 , 4 3 5 1 , % 6 9 1 . % 2 4 2 . % 8 9 1 . % 5 9 1 . % 8 8 0 . % 1 5 7 . % 8 5 0 1 . % 1 3 5 . % 8 0 9 . % 2 8 6 . % 0 0 0 . l a u n n a i m e S 8 7 6 4 4 2 , - - n o i t a r i p x E t A , 0 0 0 0 0 1 1 , 0 0 0 0 0 8 , 0 0 0 0 0 3 , - - y l h t a n o M 8 0 6 4 , 3 8 3 2 , 1 7 9 1 6 8 - - 7 2 4 8 4 7 2 , 7 9 2 - - 1 6 6 9 - 0 1 2 0 2 2 , 8 6 4 4 2 , y l r e t r a u Q 2 2 3 0 5 , l a u n n a i m e S 2 9 n o i t a r i p x E t A n o i t a r i p x E t A 6 8 9 9 2 , 0 8 9 1 5 1 , n o i t a r i p x E t A 1 9 3 3 6 1 , t A / y l h t a n o M n o i t a r i p x E 6 4 4 2 3 , y l h t a n o M 8 8 n o i t a r i p x E t A 4 8 4 7 2 , - - - - - - - - - - - - - - - - - - - - - 2 2 3 0 5 , - - 3 2 6 5 , 4 7 8 9 0 1 , 2 9 3 6 3 4 2 , 6 0 1 2 4 , 2 5 8 7 1 1 , 9 3 5 5 4 , $ S U $ S U $ S U L R B $ S U 4 8 7 6 5 3 4 1 , 6 0 3 7 1 , $ S U / L R B y l h t a n o M y l h t a n o M y l h t a n o M y l h t a n o M y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q / y l r e t r a u Q l a u n n a i m e S y l r e t r a u Q y l h t a n o M y l h t a n o M y l r e t r a u Q / y l h t a n o M y l r e t r a u Q / y l r e t r a u Q l a u n n a i m e S y l h t a n o M y l r e t r a u Q y l h t a n o M y l r e t r a u Q y l r e t r a u Q y l h t a n o M y l h t a n o M y l h t a n o M y l h t a n o M y l h t a n o M y l h t a n o M 0 0 5 7 3 , 2 0 4 5 , 6 8 0 1 8 , 8 5 4 9 6 , 0 7 7 7 9 , - - - 4 3 3 2 4 , 8 8 8 6 2 , - 6 5 7 - 9 4 2 1 1 , 4 0 6 3 2 , 5 2 4 6 1 3 , 4 6 4 3 6 1 , 9 8 9 6 6 , 2 9 0 7 1 1 , 7 4 6 3 2 , 1 7 2 0 1 , 5 2 0 0 8 3 , 1 3 4 9 1 , 5 2 0 2 , 5 5 2 2 , 3 5 7 4 7 2 7 5 1 , 0 2 5 2 , - 0 0 5 6 4 , 1 2 5 5 1 , 8 9 7 8 , 8 6 9 1 5 1 , - 3 7 3 6 3 , 7 4 8 2 , 4 6 9 1 9 , 0 9 3 4 , - - - - - - - - - - - - - - 0 0 0 5 2 , 1 2 8 , . 2 9 7 9 1 5 , 3 1 7 0 1 , 6 2 2 2 3 , 9 7 5 9 5 , 0 3 5 3 2 , 9 6 3 3 . 4 9 1 3 , 4 6 1 0 9 , 7 0 2 4 , 5 1 0 1 . 1 8 - 4 7 0 2 3 1 . - - 7 2 1 5 6 , 0 5 7 2 1 , 3 3 0 7 8 , 7 1 6 7 1 , 6 2 3 4 2 , 6 8 9 7 8 , 4 8 2 1 5 4 , 0 1 8 4 1 1 , 5 2 9 6 2 , 0 8 5 6 1 , 6 1 8 4 1 , - - 5 2 9 2 2 , 0 7 0 7 2 , - 5 3 5 1 1 , 9 2 9 3 4 , 7 5 6 4 3 2 , 9 8 6 9 1 , - 9 0 6 5 , 4 8 3 7 1 , 9 2 1 1 8 , 7 2 6 0 1 , - 7 5 3 5 2 , 1 5 6 5 , 9 3 9 4 , 4 6 0 7 1 , 3 9 5 2 8 , 9 2 6 7 6 , 0 4 1 5 , 0 5 3 9 , 9 1 8 8 , 5 7 9 8 , 9 9 6 1 , 7 3 2 7 , 3 4 0 1 4 , 3 8 6 2 1 , 1 2 7 4 9 4 , 1 6 5 2 8 1 , 1 9 3 1 2 1 , 0 3 9 6 2 1 , 4 9 8 7 4 , 5 7 3 9 , 9 6 3 1 , 7 6 9 9 1 , 7 8 8 3 , 3 4 3 1 1 , 1 2 4 0 2 , 0 8 0 8 , 7 1 4 1 , 8 0 3 5 , 4 7 5 4 3 , 5 5 3 1 1 , 2 3 5 1 , 8 5 7 1 3 6 1 , 3 1 4 8 4 1 9 1 - 4 0 5 2 5 2 3 4 5 0 4 9 8 1 1 6 0 2 5 2 , 6 6 6 1 , 0 0 4 3 , 2 6 8 2 , 1 9 9 2 , 4 4 5 2 7 3 2 , 2 6 8 1 1 , 2 8 1 4 , 5 4 9 5 1 , 6 5 4 5 2 1 3 , 0 4 1 9 , 5 7 2 1 , 9 0 7 3 , 2 7 9 5 , 3 9 4 9 0 6 2 , 9 6 7 1 , L R B L R B $ S U $ S U L R B $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U L R B L R B L R B L R B R U E L R B e c n a r F E L O C I R G A T I D E R C l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B d n a l l o H . A S U . I J I P P A H C S T A A M G N R E K E Z R E V T E I D E R C K R O Y W E N F O K N A B E H T . . A S L I S A R B O D O C N A B K N A B I T I C . . A S M B I O C N A B A B B U A T I O C N A B A R F A S O C N A B I O C N A B N U O C N A B O C S E D A R B O C N A B E H C S D N A L R E D E N l i z a r B . . A S L I S A R B O D O C N A B . A S U . . A S U . . A S U . e c n a r F d n a l g n E . A S U . y n a m r e G e c n a r F . A S U . . A S U . . A S U . y n a m r e G e c n a r F e c n a r F . A S U . . A S U . S E C I V R E S L A I C N A N I F S U B R I A C L L X I T N E M T S E V N I S F A A D A N A C R I A - B I C E L O C I R G A T I D E R C B I C - E L O C I R G A T I D E R C E S K N A B B V D E S K N A B B V D L A T I P A C C I R T C E L E L A R E N E G N O I T A R O P R O C . C N I , S U E C N A N I F R I A K P K N A B X E P I - W F K C B S H S I X I T A N I S A B R A P P N B I S A B R A P P N B K N A B I T I C S A W A g r u o b m e x u L . . A S G N I S A E L U O P A C A W . . U U E E . . . . A N T S E W H T R O N K N A B O G R A F S L L E W y l a t I H C N A R B N A L I M E L A R É N É G É T É I C O S l i z a r B l i z a r B l i z a r B l i z a r B e c n a r F l i z a r B . A S L I S A R B N E D N A L E G A L E D O C N A B O T N E M A D N E R R A A N I T A L S I C . A S L I T N A C R E M . A S M B I O C N A B E C I V R E S L A I C N A N I F P H E C N A R F R I A E T E I C O S . A S G N I S A E L E L A R E N E G E T E I C O S . A S U . I I K N A B N O N M O D O T N O R O T E H T - E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 % 0 2 2 . 5 2 0 1 4 , % 0 2 2 . y l h t a n o M 5 2 0 1 4 , 3 4 1 9 , 2 8 8 1 3 , L R B l i z a r B E D A R I E L I S A R B A I H N A P M O C O T N E M A G A P E D S O I E M 7 8 9 , 1 5 4 , 4 7 5 5 , 9 5 5 , 9 3 3 0 , 9 6 3 , 4 7 7 0 , 0 0 8 , 1 3 3 9 , 8 1 8 6 9 8 , 5 5 6 8 7 3 , 8 1 8 9 4 7 , 5 7 2 L A T O T 9 5 8 , 4 0 6 , 9 0 3 9 , 6 4 9 , 3 0 7 2 , 5 7 7 , 1 7 5 9 , 5 8 9 , 1 4 8 5 , 9 4 2 , 1 8 1 1 , 7 4 6 D E T A D I L O S N O C L A T O T r o t i d e r C y r t n u o c r o t b e D l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T r o t b e D . o N x a t 0 6 - 1 0 0 0 / 2 6 8 2 1 0 2 0 . . 0 6 - 1 0 0 0 / 2 6 8 2 1 0 2 0 . . 0 6 - 1 0 0 0 / 2 6 8 2 1 0 2 0 . . 0 6 - 1 0 0 0 / 2 6 8 2 1 0 2 0 . . f o s s a l C y t i l i b a i L s n a o l k n a B h t i w s n o i t a g i l b O c i l b u p e h t s e s a e l l a i c n a n i F s n a o l r e h t O 3 1 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A s e u l a v g n i t n u o c c a t a , 2 1 0 2 , 1 3 r e b m e c e D o t s t n e m l l a t s n i n i e u d s n a o l g n i r a e b - t s e r e t n I l a n i m o N e t a r % 7 1 2 . % 0 7 1 . % 2 3 1 . % 9 7 1 . % 7 5 2 . % 4 7 1 . % 1 0 5 . % 7 3 3 . % 1 4 4 . % 7 6 3 . % 6 7 1 . % 0 1 2 . % 5 8 0 . % 3 1 1 . % 1 1 1 . % 6 2 1 . % 7 2 1 . % 5 3 3 . - % 2 4 3 . % 9 2 1 . % 5 6 5 . % 1 3 1 . % 0 7 4 . % 6 8 1 . % 8 0 2 . l a t o T l a n i m o n e u l a v e v i t c e f E e t a r n o i t a z i t r o m A l a t o T g n i t n u o c c a e u l a v n a h t e r o M s r a e y e v fi n a h t e r o M o t e e r h t s r a e y e v fi n a h t e r o M o t e n o e e r h t s r a e y n a h t e r o M s y a d 0 9 e n o o t r a e y o t p U s y a d 0 9 y c n e r r u C r o t i d e r C y r t n u o c r o t i d e r C r o t i d e r C . o N x a T $ S U h T 0 0 0 0 3 , 0 0 0 5 3 , 0 0 0 5 7 , 0 0 0 2 0 1 , 3 7 3 4 1 2 . 8 4 8 4 4 . 9 4 6 2 0 1 , 8 4 4 7 8 , 8 4 1 6 6 , 0 9 0 1 5 4 , , 3 6 4 9 5 9 1 , 8 0 9 9 0 4 , 9 4 4 0 2 2 , 2 2 2 8 2 1 , 0 8 4 3 6 , 9 8 7 2 7 1 , 2 7 0 7 0 1 , 0 0 0 0 9 1 , 4 5 7 3 1 , 1 9 4 5 8 , 4 8 6 3 0 1 , 6 8 0 6 4 , 2 6 4 7 , 1 6 2 4 1 3 , 9 8 1 6 4 1 , 0 6 9 8 5 , % 7 1 2 . % 0 7 1 . % 2 3 1 . % 3 8 1 . % 7 5 2 . % 6 7 1 . % 9 6 5 . % 2 4 3 . % 6 9 4 . % 5 1 4 . % 7 5 2 . % 1 7 2 . % 9 3 1 . % 3 7 1 . % 1 7 1 . % 7 9 1 . % 8 9 1 . % 5 3 3 . - % 1 7 3 . % 2 3 1 . % 8 3 6 . % 1 3 1 . % 9 2 5 . % 6 8 1 . % 8 0 2 . l a u n n a i m e s l a u n n a i m e s y l r e t r a u Q 3 5 2 0 3 , 6 5 0 5 3 , 4 8 0 5 7 , l a u n n A 2 6 5 2 0 1 , - l a u n n a i m e s 6 8 5 4 1 2 . 2 7 9 4 4 . - - - - - - - - - - - - - - - - ) 6 1 ( 2 7 3 4 1 2 , - - - - - 8 8 9 4 4 , 3 5 2 0 3 , 6 5 0 5 3 , 4 8 0 5 7 , 2 6 5 2 0 1 , - 4 1 2 $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T y l r e t r a u Q 1 6 4 1 0 1 . 3 8 7 0 4 , 7 4 9 5 2 , 7 6 7 2 2 , 4 7 3 8 , 0 9 5 3 , y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q - y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q - y l r e t r a u Q 9 1 7 7 8 , 4 9 4 5 6 , 0 0 7 4 4 4 , - 9 7 0 8 1 , 4 2 2 5 4 1 , , 6 1 6 2 7 8 1 , , 6 2 9 9 0 1 1 , 4 5 8 9 9 3 , 4 3 4 4 1 2 , 0 2 9 3 2 1 , 1 1 4 1 6 , 4 9 3 5 6 1 , 2 6 6 2 0 1 , 3 1 8 0 9 1 , 4 5 7 3 1 , 0 7 6 5 8 , 9 6 8 3 0 1 , 0 8 4 5 4 , 6 6 4 7 , 7 2 7 5 0 2 , 3 9 2 5 1 1 , 9 8 2 3 7 , 7 9 4 6 3 , 8 7 2 3 0 1 , 0 7 8 3 6 , 6 0 9 6 9 , 6 1 9 1 , - 1 4 8 1 , 6 8 4 5 2 , 5 9 9 4 1 , 4 1 7 6 , 4 6 7 2 1 , 5 6 7 8 2 1 , 0 0 7 3 1 3 , 8 8 5 1 8 , 7 1 1 1 4 , 7 7 1 1 2 , 1 0 4 0 1 , 0 6 8 5 2 , 5 8 0 6 1 , 1 9 7 9 3 , 9 4 5 3 , - 1 3 4 5 2 , 6 1 2 0 3 , 7 3 2 3 1 , 8 2 1 5 3 , 6 2 1 0 2 , 8 4 6 3 1 1 , 3 2 4 4 8 2 , 2 2 4 3 7 , 7 9 7 7 3 , 0 7 0 9 1 , 7 4 3 9 , 8 8 0 3 2 , 0 6 3 4 1 , 9 3 3 6 3 , 8 5 1 5 , - 5 5 1 5 3 , 5 4 1 9 2 , 1 8 4 1 1 , 2 0 4 3 3 , 6 9 6 0 1 , 5 3 6 1 4 , 8 5 4 9 1 1 , 6 0 4 8 2 , 9 1 9 4 1 , 8 3 6 7 , 8 4 7 3 , 2 0 6 9 , 4 7 9 5 , 3 1 8 2 1 , 6 1 3 2 , 6 7 0 6 1 , 1 9 1 4 1 , 4 6 1 4 , 8 3 6 5 , 5 7 4 2 1 , 9 2 8 3 , 8 2 4 5 1 , 9 0 1 5 4 , 1 1 7 0 1 , 8 0 3 5 , 6 4 7 2 , 8 1 4 1 , 6 6 5 3 , 3 7 3 2 , 4 6 9 4 , 5 1 8 7 6 1 7 , 1 3 8 4 , 3 0 6 1 , 8 2 8 1 , 8 1 4 1 1 3 , 0 6 3 9 4 , 1 8 9 0 1 1 , , 4 1 5 0 0 1 3 0 6 6 3 , 0 6 9 3 1 , 2 8 5 8 4 1 , 0 4 3 8 5 , - - - 8 3 6 4 1 , , 0 9 1 6 4 1 2 7 4 9 2 , 9 2 8 1 , 6 0 7 0 1 , 3 6 5 4 2 5 3 , 6 2 8 , 5 3 2 , 5 0 7 5 , 7 0 1 , 5 0 7 4 , 2 0 1 , 2 1 6 9 , 1 2 9 6 8 9 , 0 6 2 , 1 6 7 1 , 3 3 4 7 7 9 , 8 8 3 $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C . A S U . E L I H C E D O C N A B R E D N A T N A S O D A T S E G N I I C B U A T I A V B B e c n a r F E L O C I R G A T I D E R C . A S U . . A S U . . A S U . . A S U . e l i h C . A S U . . A S U . . A S U . . A S U . . A S U . H C N Y L L I R R E M A C I R E M A F O K N A B N A P A J F O K N A B T N E M P O L E V E D K N A B E H C S T U E D I S A B R A P P N B O G R A F S L L E W O C F E P R E D N A T N A S K N A B I T I C U M T B K N A B E L P P A . A S U . G N I e c n a r F E L O C I R G A T I D E R C - s o d a g e l l s e n o i v A P A W S . A S U . . A S U . . A S U . . A S U . . A S U . D E R E T R A H C S . K N A B I T I C O C F E P G N I E O B S R E H T O L A T O T . 5 - 0 0 0 4 0 0 7 9 . . 6 - 0 0 0 6 0 0 7 9 . . K - 0 3 0 5 4 6 6 7 . . 8 - 0 0 0 2 3 0 7 9 . . K - 0 0 0 6 3 0 7 9 . . 7 - 0 0 0 0 3 0 7 9 . E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 . K - 0 0 0 6 3 0 7 9 . E - 0 E - 0 E - 0 E - 0 E - 0 - E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 - r o t b e D y r t n u o c r o t b e D e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L . . A S p u o r G s e n i l r i A M A T A L r o t b e D . o N x a t . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . y t i l i b a i L f o s s a l C s r e t r o p x e o t s n a o L s n o i t a g i l b o d e e t n a r a u G s n a o l k n a B s e s a e l l a i c n a n i F s n a o l r e h t O 4 1 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A l a t o T l a n i m o n e u l a v e v i t c e f E e t a r n o i t a z i t r o m A l a t o T g n i t n u o c c a e u l a v n a h t e r o M e v fi r a e y n a h t e r o M o t e e r h t e v fi r a e y n a h t e r o M o t e n o e e r h t r a e y n a h t e r o M s y a d 0 9 e n o o t r a e y o t p U 0 9 s y a d y c n e r r u C r o t b e D y r t n u o c r o t i d e r C r o t i d e r C º N x a T r o t b e D y r t n u o c r o t b e D r o t b e D º N x a T f o s s a l C y t i l i b a i L e u l a v g n i t n u o c c a t a , 2 1 0 2 , 1 3 r e b m e c e D o t s t n e m l l a t s n i n i e u d s n a o l g n i r a e b - t s e r e t n I % 8 0 0 . 1 3 4 9 1 , % 8 8 0 . y l r e t r a u Q 5 4 5 9 1 , 8 9 7 8 , 0 9 3 4 , 6 0 2 4 , 3 3 5 1 , % 1 5 7 . % 8 5 0 1 . % 1 3 5 . % 8 0 9 . % 2 8 6 . % 0 0 0 . 5 2 0 2 , 5 5 2 2 , 3 5 7 4 7 2 7 5 1 , 0 2 5 2 , % 1 5 7 . % 8 5 0 1 . % 1 3 5 . % 8 0 9 . % 2 8 6 . % 0 0 0 . y l h t n o M y l h t n o M y l h t n o M y l h t n o M y l h t n o M y l h t n o M 4 4 3 1 , 2 9 1 2 , 0 5 1 1 7 5 8 7 1 , 4 3 5 1 , % 0 2 2 . 5 2 0 1 4 , % 0 2 2 . y l h t n o M 5 2 0 1 4 , - - - - - - - - - - - - - - 9 3 9 2 0 1 - 1 8 8 4 1 1 , - - 2 0 3 5 8 5 1 , 3 1 2 7 4 5 3 - % 8 9 1 . 1 7 2 0 1 , % 8 9 1 . y l h t n o M 0 0 3 0 1 , - - 4 9 1 3 , 8 0 3 5 , 8 9 7 1 , % 5 9 1 . 5 2 0 0 8 3 , % 5 9 1 . y l r e t r a u Q 7 4 8 1 8 3 , 8 6 9 1 5 1 , 4 6 9 1 9 , 4 6 1 0 9 , 4 7 5 4 3 , 7 7 1 3 1 , 3 3 0 , 9 6 3 , 4 9 5 8 , 4 0 6 , 9 7 8 9 , 1 5 4 , 4 3 2 9 , 9 0 8 , 1 6 0 7 , 5 2 8 6 5 2 , 1 6 6 3 3 1 , 4 4 8 9 6 9 , 0 1 3 L A T O T 7 5 5 , 9 5 5 , 9 3 9 3 , 2 1 9 , 3 7 6 6 , 7 4 7 , 1 2 4 2 , 2 2 9 , 1 9 0 3 , 7 7 2 , 1 6 4 9 , 9 9 6 D E T A D I L O S N O C L A T O T 3 4 1 9 , 2 8 8 1 3 , L R B l i z a r B E D A R I E L I S A R B A I H N A P M O C O T N E M A G A P E D S O I E M l a n i m o N e t a r % 1 8 2 . % 3 0 4 . % 5 3 5 . % 2 7 0 1 . % 5 6 5 . $ S U h T 2 2 3 0 5 , 6 8 9 9 2 , 0 8 9 1 5 1 , 2 9 1 9 3 3 6 1 , % 1 8 2 . % 3 0 4 . % 5 3 5 . % 2 7 0 1 . % 5 6 5 . % 4 9 8 . % 4 3 3 . 8 8 4 8 4 7 2 , % 4 9 8 . % 4 3 3 . % 1 0 4 / . % 9 6 7 . 6 4 4 2 3 , % 1 0 4 / . % 9 6 7 . % 1 4 8 . % 6 5 8 . A / N A / N % 5 2 2 . A / N % 0 5 1 . % 4 8 3 . % 9 6 3 . % 9 2 2 . 7 2 1 5 6 , 0 5 7 2 1 , 3 3 0 7 8 , 7 1 6 7 1 , 6 2 3 4 2 , 6 8 9 7 8 , 4 8 2 1 5 4 , 0 1 8 4 1 1 , A / N A / N % 5 2 2 . A / N % 0 5 1 . % 4 8 3 . % 9 6 3 . % 9 2 2 . % 9 8 2 . % 5 2 2 . % 9 5 2 . 0 0 5 7 3 , 2 0 4 5 , 6 8 0 1 8 , % 9 8 2 . % 5 2 2 . % 9 5 2 . % 7 3 0 / . % 1 0 2 . 1 2 7 4 9 4 , % 2 8 0 / . % 1 0 2 . % 5 8 0 . 8 5 4 9 6 , % 0 7 1 . % 1 2 2 / . % 1 1 2 . 0 7 7 7 9 , % 1 2 2 / . % 1 1 2 . % 6 9 1 . % 2 4 2 . 2 9 0 7 1 1 , 7 4 6 3 2 , % 6 9 1 . % 2 4 2 . % 2 3 3 / . % 2 6 2 . 5 2 4 6 1 3 , % 2 3 3 / . % 2 6 2 . y l h t n o M y l h t n o M y l h t n o M y l h t n o M y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q / y l r e t r a u Q l a u n n a i m e S y l r e t r a u Q y l h t n o M y l h t n o M y l r e t r a u Q / y l h t n o M y l r e t r a u Q / y l r e t r a u Q l a u n n a i m e S y l h t n o M y l r e t r a u Q 2 3 0 6 6 , 1 7 8 2 1 , 9 0 4 7 8 , 8 8 5 8 1 , 9 7 4 4 2 , 9 0 1 8 8 , 1 0 2 1 5 4 , 3 9 4 5 1 1 , 5 2 9 6 2 , 0 8 5 6 1 , 6 1 8 4 1 , - - - 5 2 9 2 2 , 0 7 0 7 2 , 7 5 3 5 2 , - 5 3 5 1 1 , 9 2 9 3 4 , 7 5 6 4 3 2 , 9 8 6 9 1 , - 9 0 6 5 , 4 8 3 7 1 , 9 2 1 1 8 , 7 2 6 0 1 , 1 5 6 5 , 9 3 9 4 , 4 6 0 7 1 , 3 9 5 2 8 , 9 2 6 7 6 , 0 4 1 5 , 0 5 3 9 , 9 1 8 8 , 5 7 9 8 , 9 9 6 1 , 7 3 2 7 , 3 4 0 1 4 , 3 8 6 2 1 , 6 8 9 7 9 4 , 2 6 5 2 8 1 , 2 9 3 1 2 1 , 9 2 9 6 2 1 , 4 9 8 7 4 , 0 7 5 7 3 , 0 2 4 5 , 9 7 3 1 8 , 6 9 5 9 6 , 1 1 1 8 9 , - - - - 6 5 7 - 4 3 3 2 4 , 8 8 8 6 2 , 9 4 2 1 1 , 5 0 6 3 2 , 2 0 0 9 1 3 , 4 6 4 3 6 1 , 9 8 9 6 6 , 0 2 5 7 1 1 , 4 4 8 3 2 , 0 0 5 6 4 , 8 1 0 5 1 , 3 7 3 6 3 , 7 4 8 2 , 0 0 0 5 2 , 1 2 8 2 , 6 7 8 0 5 , 3 1 7 0 1 , 6 2 2 2 3 , 9 7 5 9 5 , 0 3 5 3 2 , 0 7 3 3 , 5 7 3 9 , 9 6 3 1 , 7 6 9 9 1 , 6 3 5 0 1 , 7 8 8 3 , 3 4 3 1 1 , 1 2 4 0 2 , 0 8 0 8 , 7 1 4 1 , 3 1 4 1 , 9 4 0 4 , 9 4 5 8 , 7 3 0 3 , 2 9 1 1 , , 0 0 0 0 0 1 1 , % 0 6 8 . n o i t a r i p x E t A , 1 5 2 6 4 1 1 , 9 4 3 0 1 8 , 1 7 7 6 0 3 , 0 2 7 6 , 2 5 6 9 , 9 5 7 2 1 , 8 7 6 4 4 2 , % 6 9 8 . l a u n n a i m e S 1 7 2 1 5 2 , - - - 0 1 2 0 2 2 , 1 6 0 1 3 , % 5 9 0 . 8 0 6 4 , % 6 9 0 . y l h t n o M 4 7 6 4 , 2 8 3 2 , 1 7 9 1 6 8 8 9 2 2 6 1 $ S U d n a l l o H $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T y l r e t r a u Q n o i t a r i p x E t A 0 8 4 4 6 , 9 1 4 0 3 , n o i t a r i p x E t A 7 1 5 2 5 1 , l a u n n a i m e S 6 3 3 n o i t a r i p x E t A 6 1 9 6 6 1 , t A / y l h t n o M n o i t a r i p x E 6 9 5 2 3 , y l h t n o M 8 7 n o i t a r i p x E t A 6 0 5 7 2 , - - - - - - - - - - - - - - - - - - - - - - 7 4 7 3 6 , 4 8 6 5 , , 3 7 0 1 1 1 3 3 7 5 3 7 4 2 , 4 4 4 1 4 , 6 3 3 , 1 1 7 9 1 1 5 0 2 7 4 , $ S U $ S U $ S U L R B $ S U - - 8 2 6 0 5 7 2 , - 0 5 L R B L R B 8 4 7 0 6 5 4 1 , 8 8 2 7 1 , $ S U / L R B e c n a r F l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B . . A S L I S A R B O D O C N A B E L O C I R G A T I D E R C K N A B I T I C . . A S M B I O C N A B A B B U A T I O C N A B A R F A S O C N A B I O C N A B N U O C N A B O C S E D A R B O C N A B 1 7 5 2 , 1 2 5 3 , 8 3 2 3 , 7 9 6 2 6 9 3 , 5 9 4 2 , 9 7 7 1 1 , 5 6 8 4 , 9 0 2 9 1 , 4 7 4 5 9 1 3 , 8 1 6 3 0 1 5 0 5 7 3 8 5 1 2 0 6 4 3 5 1 , $ S U L R B $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U L R B L R B L R B L R B R U E L R B . . A S U . I J I P P A H C S T A A M G N R E K E Z R E V T E I D E R C E H C S D N A L R E D E N K R O Y W E N F O K N A B E H T . . . . . . A S U . . A S U . . A S U . . A S U . . A S U . e c n a r F d n a l g n E . . A S U . y n a m r e G e c n a r F . . . A S U . . A S U . a i n a m e l A e c n a r F e c n a r F . . A S U . S E C I V R E S L A I C N A N I F S U B R I A C L L X I T N E M T S E V N I S F A A D A N A C R I A - B I C E L O C I R G A T I D E R C B I C - E L O C I R G A T I D E R C E S K N A B B V D E S K N A B B V D L A T I P A C C I R T C E L E L A R E N E G N O I T A R O P R O C . C N I , S U E C N A N I F R I A K P K N A B X E P I - W F K C B S H S I X I T A N I S A B R A P P N B I S A B R A P P N B K N A B I T I C S A W A g r u b m e x u L . . A S G N I S A E L U O P A C A W l i z a r B . . A S L I S A R B O D O C N A B . . . A S U . . . A N T S E W H T R O N K N A B O G R A F S L L E W y l a t I H C N A R B N A L I M E L A R É N É G É T É I C O S . A S U . I I K N A B N O N M O D O T N O R O T E H T - l i z a r B l i z a r B l i z a r B l i z a r B e c n a r F l i z a r B . A S L I S A R B N E D N A L E G A L E D O C N A B O T N E M A D N E R R A A N I T A L S I C . A S L I T N A C R E M . A S M B I O C N A B . A S G N I S A E L E L A R E N E G E T E I C O S E C I V R E S L A I C N A N I F P H E C N A R F R I A E T E I C O S E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T l i z a r B s e i r a i d i s b u S d n a . . A S M A T - 0 6 1 0 0 0 / 2 6 8 2 1 0 2 0 . . l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T 0 6 - s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T 0 6 - s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T 1 0 0 0 / 2 6 8 2 1 0 2 0 . . 1 0 0 0 / 2 6 8 2 1 0 2 0 . . l i z a r B s e i r a i d i s b u S d n a . . A S M A T l i z a r B s e i r a i d i s b u S d n a . . A S M A T l i z a r B s e i r a i d i s b u S d n a . . A S M A T l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B l i z a r B s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T s e i r a i d i s b u S d n a . . A S M A T l i z a r B s e i r a i d i s b u S d n a . . A S M A T - 0 6 1 0 0 0 / 2 6 8 2 1 0 2 0 . . s n a o l k n a B h t i w s n o i t a g i l b O c i l b u p e h t s e s a e l l a i c n a n i F s n a o l s r e h t O 5 1 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A l a t o T g n i t n u o c c a e u l a v e v i t c e f E e t a r n o i t a z i t r o m A l a t o T l a n i m o n e u l a v n a h t e r o M s r a e y e v fi n a h t e r o M o t e e r h t s r a e y e v fi n a h t e r o M o t e n o s r a e y e e r h t e r o M n a h t s y a d 0 9 e n o o t r a e y o t p U s y a d 0 9 y c n e r r u C r o t i d e r C y r t n u o c r o t i d e r C r o t i d e r C o N x a T r o t i d e r C y r t n u o c r o t b e D r o t b e D o N x a t y t i l i b a i L f o s s a l C e u l a v l a n i m o n t a , 1 1 0 2 , 1 3 r e b m e c e D t a e u d s t n e m l l a t s n i s n a o l g n i r a e b - t s e r e t n I l a n i m o N e t a r % 5 3 2 . % 1 9 1 . % 1 5 1 . % 3 1 2 . % 1 8 1 . % 5 5 2 . % 1 0 5 . % 5 0 4 . % 1 6 4 . % 1 8 3 . % 3 5 3 . % 1 6 2 . % 1 0 1 . % 4 9 0 . % 6 2 1 . % 2 2 1 . - % 3 7 3 . % 6 4 1 . % 2 8 1 . % 6 5 1 . % 8 6 4 . $ S U h T 5 1 6 2 1 , 4 2 2 0 3 , 5 6 0 0 5 , 2 8 4 0 6 , 5 7 9 4 4 , 9 2 1 3 0 2 , 5 0 6 1 1 1 , 6 7 8 2 8 1 , 4 8 0 0 5 3 , 5 2 5 8 4 5 , 9 6 9 4 8 1 , 1 0 8 4 8 4 , 6 7 6 2 3 2 , 8 7 9 7 1 2 , 5 6 0 2 0 1 , 4 5 2 5 3 , 9 3 4 8 1 , 7 0 7 0 1 1 , 2 5 5 9 7 , 7 6 4 6 2 , 8 8 4 4 1 , 5 1 3 5 8 , % 5 3 2 . % 1 9 1 . % 1 5 1 . % 1 2 2 . % 2 8 1 . % 5 5 2 . % 9 6 5 . % 5 0 4 . % 8 1 5 . % 7 2 4 . % 4 6 3 . % 4 9 2 . % 4 1 1 . % 9 0 1 . % 1 4 1 . % 7 3 1 . - % 4 9 3 . % 6 4 1 . % 5 8 1 . % 6 5 1 . % 2 2 5 . l a u n n a i m e S l a u n n a i m e S y l r e t r a u Q l a u n n A 0 0 5 2 1 , 0 0 0 0 3 , 0 0 0 0 5 , 0 0 0 0 6 , l a u n n a i m e S 8 4 8 4 4 , - 9 9 8 2 0 2 , y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q - y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q 3 9 1 3 1 1 , 1 4 0 2 8 1 , 0 6 3 4 5 3 , 7 1 5 7 5 5 , 2 4 9 8 8 1 , 7 0 7 7 9 4 , 2 8 8 9 3 2 , 5 9 2 6 2 2 , 3 6 8 5 0 1 , 1 4 5 6 3 , 9 3 4 8 1 , 8 2 4 9 7 , 6 2 4 6 2 , 1 8 4 4 1 , 8 4 9 5 8 , - - - - - - 7 9 6 4 5 , 8 5 1 7 , 1 6 4 6 1 1 , 7 2 4 7 3 2 , 6 2 3 3 0 1 , 1 0 6 3 7 2 , 4 7 5 8 3 1 , 5 9 4 8 3 1 , 7 5 6 5 6 , 1 6 7 2 2 , 1 2 0 2 , - - - 6 7 5 0 1 1 , 1 0 0 9 , 9 4 3 4 1 , 3 5 6 0 3 , - - - - - - 2 7 1 5 2 , 9 8 0 3 3 , 1 4 7 0 9 , 3 9 3 7 3 1 , 9 9 9 5 3 , 8 8 3 4 9 , 7 6 7 1 4 , 8 8 2 6 3 , 2 0 7 6 1 , 0 4 7 5 , 2 9 7 3 , 0 4 3 3 1 , 0 4 2 1 4 , - - - - - - 8 4 8 4 4 , 9 9 8 2 0 2 , 9 7 7 2 2 , 7 9 7 4 6 , 6 6 2 0 0 1 , 2 6 7 4 2 1 , 0 4 6 3 3 , 5 0 0 8 8 , 8 0 1 0 4 , 6 2 7 4 3 , 6 7 8 5 1 , 0 4 4 5 , 7 8 8 8 , 1 6 1 9 5 , 8 1 5 5 2 , 7 2 2 9 1 , 2 6 4 7 , 9 3 9 7 2 , 0 0 5 2 1 , 0 0 0 0 3 , - 0 0 0 0 6 , - - 1 6 9 7 , 4 2 6 7 5 , 7 7 3 5 3 , 5 0 7 3 4 , 1 3 0 2 1 , 8 2 4 1 3 , 1 1 6 4 1 , 5 3 6 2 1 , 2 4 7 5 , 7 5 9 1 , 0 7 7 2 , 6 1 8 1 2 , 4 3 5 9 , 2 4 8 4 , 3 0 3 5 , 6 2 8 9 , - - - - - 0 0 0 0 5 , 4 8 5 2 , 3 7 3 9 1 , 5 1 5 1 1 , 0 3 2 4 1 , 6 4 9 3 , 5 8 2 0 1 , 2 2 8 4 , 1 5 1 4 , 6 8 8 1 , 3 4 6 9 6 9 8 5 2 7 , 6 3 1 3 , 7 5 3 2 , 6 1 7 1 , 1 8 1 3 , $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T % 7 8 1 . % 3 4 2 . 9 6 5 2 7 2 , 7 4 4 6 5 , % 7 8 1 . % 3 4 2 . - y l r e t r a u Q 5 6 9 9 6 2 , 0 6 9 8 5 , - - 0 6 9 8 5 , - - 5 6 9 9 6 2 , - - - - 7 0 3 , 6 1 5 , 3 1 1 8 , 6 6 5 , 3 8 2 5 , 3 8 1 , 1 4 6 2 , 5 6 6 5 0 3 , 6 9 1 , 1 2 6 6 , 9 7 3 2 5 0 , 2 4 1 $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C . A S U . E L I H C E D O C N A B R E D N A T N A S A V B B I C B R E D N A T N A S O D A T S E G N I e c n a r F E L O C I R G A T I D E R C . A S U . . A S U . . A S U . . A S U . e l i h C . A S U . . A S U . . A S U . I S A B R A P P N B O G R A F S L L E W O C F E P R E D N A T N A S N A G R O M P J K N A B I T I C U M T B K N A B E L P P A . A S U . G N I e c n a r F E L O C I R G A T I D E R C . A S U . . A S U . . A S U . . A S U . - D E R E T R A H C S . K N A B I T I C O C F E P G N I E O B S O R T O L A T O T - s o d a g e l l s e n o i v A P A W S . k - 0 0 0 6 3 0 7 9 . . 5 - 0 0 0 4 0 0 7 9 . . 6 - 0 0 0 6 0 0 7 9 . . 8 - 0 0 0 2 3 0 7 9 . . 7 - 0 0 0 0 3 0 7 9 . . k - 0 0 0 6 3 0 7 9 . . K - 0 0 0 6 3 0 7 9 . E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 - E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 - e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C . . . . . . . . . . . . . . . . . . . . . . . . . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . 2 - 0 0 2 2 6 8 9 8 . . A S p u o r G s e n i l r i A M A T A L . 2 - 0 0 2 2 6 8 9 8 . . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . 2 - 0 0 2 2 6 8 9 8 . . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . 2 - 0 0 2 2 6 8 9 8 . . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . A S p u o r G s e n i l r i A M A T A L . 2 - 0 0 2 2 6 8 9 8 . s r e t r o p x e o t s n a o L n o i t a g i l b o d e e t n a r a u G s n a o l k n a B s e s a e l l a i c n a n i F s n a o l r e h t O % 7 8 1 . % 3 4 2 . 5 6 9 9 6 2 , 0 6 9 8 5 , % 7 8 1 . % 3 4 2 . - y l r e t r a u Q 9 6 5 2 7 2 , 7 4 4 6 5 , - - 7 4 4 6 5 , - - 4 6 9 9 6 2 , - - - 5 0 6 2 , 1 1 8 , 6 6 5 , 3 7 0 3 , 6 1 5 , 3 0 8 6 , 6 6 1 , 1 6 8 5 , 7 4 6 7 0 7 , 4 6 1 , 1 0 6 6 , 9 7 3 4 7 6 , 7 5 1 L A T O T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T l a t o T l a n i m o n e u l a v e v i t c e f E e t a r n o i t a z i t r o m A l a t o T g n i t n u o c a a e u l a v n a h t e r o M s r a e y e v fi n a h t e r o M o t e e r h t s r a e y e v fi n a h t e r o M o t e n o e e r h t s r a e y e r o M n a h t s y a d 0 9 e n o o t r a e y o t p U s y a d 0 9 y c n e r r u C r o t i d e r C y r t n u o c r o t i d e r C r o t i d e r C . o N x a T 6 1 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A s e u l a V g n i t n u o c c a t a , 1 1 0 2 , 1 3 r e b m e c e D t a s t n e m l l a t s n i n i e u d s n a o l g n i r a e b - t s e r e t n I l a n i m o N e t a r % 5 3 2 . % 1 9 1 . % 1 5 1 . % 3 1 2 . % 1 8 1 . % 5 5 2 . % 1 0 5 . % 5 0 4 . % 1 6 4 . % 1 8 3 . % 3 5 3 . % 1 6 2 . % 1 0 1 . % 4 9 0 . % 6 2 1 . % 2 2 1 . - % 3 7 3 . % 6 4 1 . % 2 8 1 . % 6 5 1 . % 8 6 4 . 0 0 5 2 1 , 0 0 0 0 3 , 0 0 0 0 5 , 0 0 0 0 6 , 8 4 8 4 4 , 9 9 8 2 0 2 , 3 9 1 3 1 1 , 1 4 0 2 8 1 , 0 6 3 4 5 3 , 7 1 5 7 5 5 , 2 4 9 8 8 1 , 7 0 7 7 9 4 , 2 8 8 9 3 2 , 5 9 2 6 2 2 , 3 6 8 5 0 1 , 1 4 5 6 3 , 9 3 4 8 1 , 6 7 5 0 1 1 , 8 2 4 9 7 , 6 2 4 6 2 , 1 8 4 4 1 , 8 4 9 5 8 , % 5 3 2 . % 1 9 1 . % 1 5 1 . % 1 2 2 . % 2 8 1 . % 5 5 2 . % 9 6 5 . % 5 0 4 . % 8 1 5 . % 7 2 4 . % 4 6 3 . % 4 9 2 . % 4 1 1 . % 9 0 1 . % 1 4 1 . % 7 3 1 . - % 4 9 3 . % 6 4 1 . % 5 8 1 . % 6 5 1 . % 2 2 5 . l a u n n a i m e S l a u n n a i m e S y l r e t r a u Q l a u n n A 5 1 6 2 1 , 4 2 2 0 3 , 5 6 0 0 5 , 2 8 4 0 6 , l a u n n a i m e S 5 7 9 4 4 , - 9 2 1 3 0 2 , y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q 5 0 6 1 1 1 , 6 7 8 2 8 1 , 4 8 0 0 5 3 , 5 2 5 8 4 5 , 9 6 9 4 8 1 , 1 0 8 4 8 4 , 6 7 6 2 3 2 , 8 7 9 7 1 2 , 5 6 0 2 0 1 , 4 5 2 5 3 , 9 3 4 8 1 , - - - - - - 8 1 1 4 5 , 8 5 1 7 , 2 1 6 5 1 1 , 5 7 2 5 3 2 , 3 6 0 2 0 1 , 0 4 1 9 6 2 , 6 3 1 6 3 1 , 4 3 4 5 3 1 , 3 9 1 4 6 , 4 5 2 2 2 , 1 2 0 2 , y l r e t r a u Q 7 0 7 0 1 1 , 1 7 9 8 , y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q y l r e t r a u Q 2 5 5 9 7 , 7 6 4 6 2 , 8 8 4 4 1 , 5 1 3 5 8 , - - - - - - - - - 6 9 8 4 3 , 2 2 9 0 9 , 1 1 0 0 4 , 3 7 3 4 3 , 3 0 8 5 1 , 0 3 4 5 , 2 9 7 3 , 4 9 1 3 1 , 0 4 2 1 4 , - - 8 3 5 4 2 , 9 8 0 3 3 , 3 8 0 9 8 , 0 9 4 1 2 , 6 9 7 4 6 , 6 9 3 6 9 , 3 4 4 4 3 1 , 0 9 3 8 1 1 , 2 1 4 1 3 , 2 7 1 1 8 , 9 4 6 6 3 , 0 6 0 1 3 , 7 6 1 4 1 , 2 5 8 4 , 7 8 8 8 , 8 6 5 8 5 , 8 1 5 5 2 , 4 1 2 9 1 , 2 6 4 7 , 5 8 9 6 2 , 1 6 9 7 , 4 2 6 7 5 , 7 7 3 5 3 , 5 0 7 3 4 , 1 3 0 2 1 , 7 2 4 1 3 , 1 1 6 4 1 , 5 3 6 2 1 , 1 4 7 5 , 7 5 9 1 , 0 7 7 2 , 6 1 8 1 2 , 4 3 5 9 , 2 4 8 4 , 3 0 3 5 , 6 2 8 9 , 6 2 8 4 4 , 9 9 8 2 0 2 , - - - - - - - 0 0 5 2 1 , 0 0 0 0 3 , 5 1 1 4 2 2 5 6 0 0 5 , 0 0 0 0 6 , 2 8 4 9 4 1 0 3 2 8 9 4 3 , 9 0 2 0 2 , 6 1 6 3 1 , 2 1 7 6 1 , 7 6 5 4 , 0 4 1 2 1 , 9 6 2 5 , 6 7 4 4 , 1 6 1 2 , 1 6 7 9 6 9 8 5 1 8 , 0 6 2 3 , 1 1 4 2 , 3 2 7 1 , 4 7 8 3 , 5 0 3 4 1 , 5 2 3 0 3 , $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U $ S U e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C . A S U . E L I H C E D O C N A B R E D N A T N A S A V B B I C B R E D N A T N A S O D A T S E G N I e c n a r F E L O C I R G A T I D E R C . A S U . . A S U . . A S U . . A S U . e l i h C . A S U . . A S U . . A S U . I S A B R A P P N B O G R A F S L L E W R E D N A T N A S N A G R O M P J K N A B I T I C U M T B K N A B E L P P A O C F E P e c n a r F E L O C I R G A T I D E R C . A S U . G N I - s o d a g e l l s e n o i v A P A W S . A S U . . A S U . . A S U . . A S U . - D E R E T R A H C S . K N A B I T I C O C F E P G N I E O B S O R T O . K - 0 0 0 6 3 0 7 9 . . 5 - 0 0 0 4 0 0 7 9 . . 6 - 0 0 0 6 0 0 7 9 . . 8 - 0 0 0 2 3 0 7 9 . . 7 - 0 0 0 0 3 0 7 9 . . K - 0 0 0 6 3 0 7 9 . E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 . K - 0 0 0 6 3 0 7 9 . E - 0 E - 0 E - 0 - E - 0 E - 0 E - 0 E - 0 E - 0 E - 0 - r o t b e D y r t n u o c r o t b e D e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L e l i h C . . A S p u o r G s e n i l r i A M A T A L r o t b e D . o N x a t . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . . 2 - 0 0 2 2 6 8 9 8 . y t i l i b a i L f o s s a l C t r o p x e o t s n a o L s n a o l k n a B s n o i t a g i l b o d e e t n a r a u G s e s a e l l a i c n a n i F s n a o l r e h t O 7 1 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Summary of other financial non-current loans (other than bank loans, obligations with the public and financial leases) CURRENT a) Other interest bearing loans (see note 21 a) b) Derivative not recognized as a hedge (see note 21 b) c) Hedge derivatives (see note 21 c) TOTAL CURRENTS NON-CURRENT a) Other interest bearing loans (see note 21 a) b) Derivative not recognized as a hedge (see note 21 b) c) Hedge derivatives (see note 21 c) TOTAL NON-CURRENTS (b) Derivatives not recognized as a hedge. Derivatives not recognized as a hedge as of December 31, 2012 and December 31, 2011, respectively, is as follows: CURRENT Interest rate derivative not recognized as a hedge TOTAL CURRENT NON-CURRENT Interest rate derivative not recognized as a hedge TOTAL NON-CURRENT As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 57,647 4,477 65,598 127,722 190,300 5,515 111,040 306,855 2,605 4,907 40,016 47,528 326,411 9,859 120,304 456,574 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 4,477 4,477 5,515 5,515 4,907 4,907 9,859 9,859 TOTAL OTHER FINANCIAL LIABILITIES 9,992 14,766 8 1 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (c) Hedge derivatives Hedge derivatives as of December 31, 2012 and December 31, 2011 are as follows: CURRENT Accrued Interest from the last date of interest rate swap Fair value interest rate derivatives Fair value of fuel derivatives Fair value of foreign currency derivatives TOTAL CURRENT NON-CURRENT Fair value of interest rate derivatives Fair value of fuel derivatives Fair value of foreign currency derivatives TOTAL NON-CURRENT As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 4,660 37,076 10,502 13,360 65,598 5,027 34,105 - 884 40,016 104,547 120,304 4,530 1,963 - - 111,040 120,304 TOTAL HEDGING LIABILITIES 176,638 160,320 The foreign currency derivatives are forward exchange and collars contract. 9 1 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Hedging operation The fair values of assets/(liabilities), by type of derivative, of the contracts held as hedging instruments are presented below: Forward starting swaps (FSS) (1) Interest rate options (2) Interest rate swaps (3) Fuel collars (4) Fuel swap (5) Currency forward (6) Currency collars (7) As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ - 6 (19,703) 73 (146,283) (139,733) (911) (9,000) - (15,228) 19,016 11,599 (253) - (1) Covers the significant variations in cash flows associated with market risk implicit in the changes in the 3-month LIBOR interest rate for long-term loans incurred in the acquisition of aircraft to be produced from the future contract date. These contracts are recorded as cash flow hedges. (2) Covers the significant variations in cash flows associated with market risk implicit in the changes in the 3-month LIBOR interest rate for long-term loans incurred in the acquisition of aircraft. These contracts are recorded as cash flow hedges. (3) Covers the significant variations in cash flows associated with market risk implicit in the increases in the 3, 6 and 12 months LIBOR interest rates for long-term loans incurred in the acquisition of aircraft and bank loans. These contracts are recorded as cash flow hedges. (4) Covers significant variations in cash flows associated with market risk implicit in the changes in the price of future fuel purchases. (5) Covers the significant variations in cash flows associated with market risk implicit in the changes in the price of future fuel purchases. (6) Covers investments denominated in Chilean pesos to changes in the US Dollar - Chilean Peso exchange rate, with the aim of ensuring investment in dollars. (7) Covers TAM’s revenues recorded in another currency. 0 2 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A During the periods presented, the Company only maintains cash flow hedges. In the case of fuel hedges, the cash flows subject to said hedges will impact results over the next 18 months from the consolidated statement of financial position date, where as in the case of interest rate hedging, the hedges will impact results over the life of the related loans, which are valid for 12 years. The hedges on investments will impact results continuously throughout the life of the investment (up to 3 months), while the cash flows occur at the maturity of the investment. During the periods presented, there have not occurred hedging operations of future highly probable transaction that have not been realized. During the periods presented, there has been hedge ineffectiveness recognized in the consolidated statement of income, for currency collars. Since none of the coverage resulted in the recognition of a non-financial asset, no portion of the result of the derivatives recognized in equity was transferred to the initial value of such assets. The amounts recognized in comprehensive income during the period and transferred from net equity to income are as follows: Debit (credit) recognized in comprehensive income during the year Debit (credit) transferred from net equity to income during the year As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ (2,510) (26,470) (40,368) 62 1 2 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 22. TRADE AND OTHER ACCOUNTS PAYABLES The composition of Trade and other accounts payables is as follows: CURRENT (a) Trade and other accounts payables (b) Accrued liabilities at the reporting date TOTAL TRADE AND OTHER ACCOUNTS PAYABLES The balance at December 31, 2012 of Trade and other accounts payables, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. (a) Trade and other accounts payable as of December 31, 2012 and December 31, 2011 are as follows: Trade creditors Leasing obligations Other accounts payabe (*) TOTAL As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 1,364,237 288,718 531,481 113,605 1,652,955 645,086 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 1,036,436 30,818 296,983 410,533 18,849 102,099 1,364,237 531,481 (*) Includes agreement entitled “Plea Agreement” with the Department of Justice of the United States of America. See detail in Note 23. The details of Trade and other accounts payables are as follows: 2 2 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Aircraft fuel Boarding Fee Other personnel expenses Landing and other aviation fees Suppliers' technical purchases Fleet (jol) Professional services and advisory Marketing Handling and ground handling Ground services Aircraft and engines leasing Services on board Leases, maintenance and IT services Tax recovery program (*) U.S.A. Department of Justice (**) Crew Maintenance Aviation insurance Communications Distrubution sistem Others As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 360,618 203,690 134,357 121,464 64,981 59,181 52,903 51,360 49,738 38,436 30,818 26,674 24,433 19,668 18,387 16,233 8,619 7,465 5,038 1,389 68,785 134,088 80,253 32,833 41,900 36,387 - 29,870 22,183 34,743 7,563 18,849 12,929 13,419 - 18,387 9,780 11,252 6,274 5,881 3,137 11,753 TOTAL TRADE AND OTHER ACCOUNTS PAYABLES 1,364,237 531,481 is (*) Fiscal Recovery Program in Brazil (REFIS), established in Law No. 11.941/09 and Provisional Measure No. 449/2009. REFIS intended to allow the settlement of tax debts through a special mechanism to pay and refinance.. (**) Includes agreement entitled “Plea Agreement” with the Department of Justice of the United States of America. See detail in Note 23. (b) The liabilities accrued at December 31, 2012 and December 31, 2011, are as follows: Accrued personnel expenses Accounts payable to personnel (*) Aircraft and engine maintenance Others accrued liabilities TOTAL ACCRUED LIABILITIES (*) Profits and bonds participation (Note 26 letter b) As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 174,147 70,625 22,053 21,893 46,034 38,391 11,178 18,002 288,718 113,605 3 2 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 23. OTHER PROVISIONS The detail of Other provisions as of December 31, 2012 and December 31, 2011 is as follows: CURRENT PROVISION LEGAL CLAIMS (1) Civil contingencies Labor contingencies Tax contingencies TOTAL OTHER PROVISIONS, CURRENT NON-CURRENT PROVISION LEGAL CLAIMS (1) Civil contingencies Labor contingencies Tax contingencies Other PROVISION FOR EUROPEAN COMMISION INVESTIGATION (2) TOTAL OTHER PROVISIONS, NON-CURRENT TOTAL OTHER PROVISIONS (3) As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 14,776 171 6,772 21,719 68,236 125,119 326,048 6,066 10,865 536,334 558,053 260 331 6,772 7,363 1,024 1,005 3,700 5,981 10,675 22,385 29,748 (1) The amount represents a provision for certain legal claims made against the Company by former employees, regulatory agencies and others. The charge for the provision is shown in the consolidated statement of income in Administrative expenses. It is expected that the current balance as of December 31, 2012 will be applied during the next 12 months. (2) Provision made for proceedings brought by the European Commission for possible breaches of free competition in the freight market. (3) Referenced value in Note 35 Contingencies. The balance at December 31, 2012 of Other provisions, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. 4 2 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A The movement of provisions between January 1, 2011 and December 31, 2012 is as follows: Opening balance as of January 1, 2011 Increase in provisions Provision used Reversal of unused provision (*) Exchange difference CLOSING BALANCE AS OF DECEMBER 31, 2011 Opening balance as of January 1, 2012 Increase in provisions Provision used (**) Reversal of unused provision Additions due to business combination Subsidiaries conversion difference Exchange difference Legal claims European Commission Investigation Total ThUS$ ThUS$ ThUS$ 21,957 12,085 (3,592) (11,518) 141 19,073 19,073 5,596 (115,123) (449) 634,076 3,724 291 10,916 - - - (241) 32,873 12,085 (3,592) (11,518) (100) 10,675 29,748 10,675 29,748 - - - - - 190 5,596 (115,123) (449) 634,076 3,724 481 CLOSING BALANCE AS OF DECEMBER 31, 2012 547,188 10,865 558,053 (*) Is mainly related to the reversal of tax contingencies. (**) The deposit judicial in guarantee, regarding the Fundo Aeroviário (FA), in the amount of MUSD $115, was done in order to suspend the enforceability of the tax credit. The company is discussing over the Tribunal the constitutionality of the requirement made by FA in a legal suit. Initially it was covered by the effects of a provisional remedy, meaning that, the company was not obligated to collect the tax while there was not a judicial decision in this regard. However, the decision taken by a judge in the first instance was publicized in an unfavorable way, revoking the provisional remedy relief. As the legal suit is still in progress (TAM appealed from this first decision), the company needed to do the deposit judicial in guarantee to suspend the enforceability of such tax credit. Finally, if the final decision is favorable to the company, the deposit already made is going to come back to TAM. On the other hand, if the tribunal confirms the first decision, such deposit will be converted in a definitive payment in favor of the Brazilian Government. European Commission Provision: (a) This provision was established because of the investigation brought by the Directorate General for Competition of the European Commission against more than 25 cargo airlines, including Lan Cargo S.A., as part of a global investigation begun in 2006 regarding possible unfair competition on the air cargo market. This was a joint investigation by the European and U.S.A. authorities. The start of the investigation was disclosed through a Essential Matter report dated December 27, 2007. The U.S.A. portion of the global investigation concluded when Lan Cargo S.A. and its subsidiary, Aerolíneas Brasileiras S.A. (“ABSA”) signed a Plea Agreement with the U.S.A. Department of Justice, as disclosed in a Essential Matter report notice on January 21, 2009. (b) A Essential Matter report dated November 9, 2010, reported that the General Direction of Competition had issued its decision on this case (the “decision”), under which it imposed fines totaling € 799,445,000 5 2 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (seven hundred and ninety nine million four hundred and forty-five thousand Euros) for infringement of European Union regulations on free competition against eleven (11) airlines, among which are LATAM Airline Group S.A. and Lan Cargo S.A., Air Canada, Air France, KLM, British Airways, Cargolux, Cathay Pacific, Japan Airlines, Qantas Airways, S.A.S. and Singapore Airlines. (c) Jointly, LATAM Airline Group S.A. and Lan Cargo S.A., have been fined in the amount of € 8,220,000 (eight million two hundred twenty thousand Euros) for said infractions, which was provisioned in the financial statements of LATAM Airline Group S.A.. This is a minor fine in comparison to the original decision, as there was a significant reduction in fine because LATAM Airline Group S.A. cooperated during the investigation. (d) On January 24, 2011, LATAM Airline Group S.A. and Lan Cargo S.A. appealed the decision before the Court of Justice of the European Union. At December 31, 2012, the provision reached the amount of ThUS$ 10,865 (ThUS$ 10,675 at December 31, 2011) 6 2 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 24. TAX LIABILITIES The composition of Tax liabilities is as follow: CURRENT Sales tax Retentions Income tax Others TOTAL CURRENT The balances at December 31, 2012 of Tax liabilities, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 47,122 14,512 45,413 8,434 115,481 5,197 13,138 9,750 1,284 29,369 7 2 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 25. OTHER NON-FINANCIAL LIABILITIES Other non-financial liabilities as of December 31, 2012 and December 31, 2011 are as follows: Current Deferred revenues Dividends payable Sale leaseback Other sundry liabilities As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 1,909,896 4,023 7,867 20,744 969,873 85,318 - 2,446 TOTAL OTHER NON-FINANCIAL LIABILITIES, CURRENT 1,942,530 1,057,637 Non-current Deferred revenues Other sundry liabilities TOTAL OTHER NON-FINANCIAL, NON CURRENT 101,259 62 101,321 - - - TOTAL OTHER NON-FINANCIAL LIABILITIES 2,043,851 1,057,637 The balance at December 31, 2012 of Other non- financial liabilities current and non-current, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. 8 2 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 26. EMPLOYEE BENEFITS Liability for employee benefits as of December 31, 2012 and December 31, 2011, respectively, are as follows: (b) The liability for short-term benefits as of December 31, 2012 and December 31, 2011 respectively, is detailed below: As of December 31, 2012 As of December 31, 2011 ThUS$ 12,594 240 5,532 ThUS$ 10,556 280 2,296 Pension payments Termination payments Other obligations As of December 31, 2012 As of December 31, 2011 ThUS$ 70,625 ThUS$ 38,391 Profit-sharing and bonuses (*) TOTAL LIABILITY FOR EMPLOYEE BENEFITS 18,366 13,132 (*) Accounts payables to the personnel (Note 22 letter b) The balance at December 31, 2012 of Employee benefits, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. (a) The movement in Pension and termination payments and other obligations between January 1, 2011 and December 31, 2012 is as follows: Opening balance as of January 1, 2011 Increase (decrease) current service provision Benefits paid CLOSING BALANCE AS OF DECEMBER 31, 2011 Opening balance as of January 1, 2012 Increase (decrease) current service provision Benefits paid CLOSING BALANCE AS OF DECEMBER 31, 2012 ThUS$ 9,657 5,482 (2,007) 13,132 13,132 5,274 (40) 18,366 The participation in profits and bonuses corresponds to an annual incentives plan for achievement of objectives. (c) Employment expenses are detailed below: For the periods ended December 31, Salaries and wages 2012 ThUS$ 1,296,101 Short-term employee benefits 397,824 Termination benefits Other personnel expenses 32,864 181,084 2011 ThUS$ 764,396 85,681 18,207 144,219 TOTAL 1,907,873 1,012,503 For the period ended at December 31, 2012 the personnel expenses, the effects of Business Combinations with TAM S.A. and Subsidiaries. incorporates 9 2 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 27. ACCOUNTS PAYABLE, NON-CURRENT Non-current accounts payable as of December 31, 2012 and December 31, 2011 are as follows:: Fleet financing (JOL) Tax recovery program (*) Other accounts payable (**) Aircraft and engine maintenance Provision for vacations and bonuses Other sundry liabilities As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 140,769 207,089 21,594 335,834 9,954 15,995 271,965 - 36,000 38,540 7,982 443 TOTAL ACCOUNTS PAYABLE, NON-CURRENT 731,235 354,930 (*) Fiscal Recovery Program in Brazil (REFIS), established in Law No. 11.941/09 and Provisional Measure No. 449/2009. REFIS is intended to allow the settlement of tax debts through a special mechanism to pay and refinance. (**) Agreement entitled “Plea Agreement” with the Department of Justice of United States of America; its short-term part is in Trade and other payable. See details in Note 23. The balance at December 31, 2012 of accounts payable non-current, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. 0 3 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 28. EQUITY (a) Capital The Company’s objective is to maintain an appropriate level of capitalization that enables it to ensure access to the financial markets for carrying out its medium and long-term objectives, optimizing the return for its shareholders and maintaining a solid financial position. The Capital of the Company is managed and composed in the following form: The capital of the Company at December 31, 2012 amounts to ThUS$ 1,501,018 divided into 479,098,052 common stock of a same series (ThUS$ 473,907, divided into 340,326,431 shares as of December 31, 2011), no par value. There are no special series of shares and no privileges. The form of its stock certificates and their issuance, exchange, disablement, loss, replacement and other similar circumstances, as well as the transfer of the shares, is governed by the provisions of Corporations Law and its regulations. (b) Subscribed and paid shares As of December 31, 2012, the total number of shares authorized is 488,355,791 shares no par value, according to the capital increase approved at the Extraodinary Shareholders’ Meeting of December 21, 2011 by 147,355,882 ordinary shares no par value. Of this increase, 142,555,882 shares, was allocated to the merger with companies Sister Holdco S.A. and Holdco II S.A.; and 4,800,000 shares will be allocated to compensation plans for employees of the Company and its subsidiaries. At the end of December 2012, 343,978,986 are fully paid and 135,119,066 were subjected to exchange for shares of the Sister Holdco S.A. and Holdco II S.A. As reported by Essential Matter dated June 28, 2012, the Board agreed to submit to the approval of shareholders of the Company that the remaining 7,436,816 shares that were not used in the exchange, not be used for the purpose of creating and implementing a compensation plan for employees of the Company and its subsidiaries, as provided in Article 24 of the Corporations Law, but instead preferably intended to be offered to shareholders of LATAM Airlines Group S.A., according to article 25 of the Corporation Law. According to the information through Essential Matter dated August 3, 2012, to this date, the Board agreed to call Extraordinary Shareholders Meeting to discuss, among other matters, that the referred 7,436,816 shares were intended to be offered preferentially to shareholders of the Company and the balance not subscribed, was offered and placed on the market in general. The aforementioned Extraordinary Shareholders Meeting held on September 4, 2012, agreed, among other matters, the approval of the remaining 7,436,816 shares of total 142,555,882 shares issued under the authorization of the Extraordinary Shareholders Meeting dated December 21, 2011, and were not to be exchanged for shares of the Sister Holdco S.A. and Holdco II S.A., were intended to be offered preferably between the LATAM shareholders under Article 25 of the Corporations Law and that the unsubscribed balance, would be offered and placed on the market in general. The re-destination and placement of those shares was approved by the Superintendency of Securities and Insurance, dated December 11, 2012. On December 20, 2012, the Board of Directors agreed to start, from December 21, 2012, the period of preferred option of those shares, proceeded to fix the price of placing them, which was reported to the Superintendency of Securities and Insurance by Essential Matter on the same date. At December 31, 2012, 2,988,885 of the said 7,436,816 shares had been placed of which 2,979,077 were paid. The Information on the result of this placement is available in Note 40 on Subsequent Events. At December 31, 2011, of the total shares subscribed, 340,326,431 shares have been fully paid (includes 7,000 shares paid on December 30, 2011 and 1 3 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A registered in the Register of Shareholders in January 2012), leaving 673,569 shares reserved for issuance under option contracts. The following table shows the movement of the authorized and fully paid shares described above between January 1, 2011 and December 31, 2012 Movement of authorized shares Authorized shares as of January 1, 2011 Increase Capital as of December 21, 2011 Issued shares merger companies sister Holco S.A. and Holdcol S.A. Compensation plans for employees Authorized shares as of December 31, 2011 Authorized shares as of January 1, 2012 Increase capital option closing year 2007 options over canceled shares Authorized shares as of December 31, 2012 Movement fully paid shares (*) Paid shares as of January 1, 2011 Exercise stock options increase capital 2007 Paid shares as of December 31, 2011 Paid shares as of January 1, 2012 Exercise stock options increase capital 2007 Exchange of shares for merger Companies Sister Holdco S.A. and Holdco II S.A. Placement of the remaining preferred shares issued for merger with companies sister Holdco S.A. and Holdco II S.A. Paid shares as of December 31, 2012 (*) N° of shares 341,000,000 142,555,882 4,800,000 488,355,882 488,355,882 (91) 488,355,791 N° of shares 338,790,909 1,535,522 340,326,431 340,326,431 673,478 135,119,066 Amount ThUS$ 453,444 23,135 476,579 476,579 10,226 951,409 2,979,077 68,986 479,098,052 1,507,200 (*) Amounts reported represent only those arising from the payment of the outstanding shares, does not consider the capitalization costs for issuance and placement of shares by ThUS$ (3,510) at December 31, 2012 and ThUS$ (2,672) to December 31, 2011. The movement of stock options over shares related to the capital increase in 2007 is detailed in Note 38. 2 3 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (c) Treasury stock At December 31, 2012, of the total number of shares subscribed and paid, the Company has acquired 7,401 shares, from the shareholders who exercised the right to retirement, for an amount of ThUS$ 203. (d) Other sundry reserves The movement of Other sundry reserves between January 1, 2010 and December 31, 2012 is as follows: Opening balance as of January 1, 2011 Stock option plans Deferred tax Transactions with non-controlling interest Capitalization share issuance and placement cost (1) Legal reserves CLOSING BALANCE AS OF DECEMBER 31, 2011 Opening balance as of January 1, 2012 Stock option plan Deferred tax Transactions with non-controlling interest Cost of issuance and placement of shares (2) Capitalization share issuance and placement cost (2) Higher value for TAM S.A. share exchange Legal reserves Stock option plans Other reserves Total ThUS$ ThUS$ ThUS$ 5,401 2,084 (355) - - - 7,130 7,130 (1,299) (257) - - - - - 62 - - 5,463 2,084 (355) (1,801) (1,801) 2,672 429 1,362 1,362 - - (1,604) (3,510) 3,510 2,672 429 8,492 8,492 (1,299) (257) (1,604) (3,510) 3,510 2,665,692 2,665,692 1,232 1,232 CLOSING BALANCE AS OF DECEMBER 31, 2012 5,574 2,666,682 2,672,256 (1) Capitalization share issuance and placement costs caused by the capital increase carried out in 2007, as set out Extraordinary Shareholders Meeting held on December 21, 2011. (2) The costs of issuance and placement of shares recognized in reserves during the first half of 2012 were capitalized during the month of September 2012, according to the minutes of the Extraordinary Meeting of Shareholders held on September 4, 2012. 3 3 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (d.1) Reserves for stock option plans These reserves are related to the “Share-based payments” explained in Note 38. (d.2) Other reserves The balance of Other reserves comprises the following: Higher value for TAM S.A. share exchange (1) Reserve for the adjustment to the value of fixed assets (2) Transactions with non-controlling interest (3) Others TOTAL As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 2,665,692 2,620 (3,405) 1,775 2,666,682 - 2,620 (1,801) 543 1,362 (1) Corresponds to the difference in the shares value of TAM S.A. acquired (under subscriptions) by Sister Holdco S.A. and Holdco II S.A. (under the Exchange Offer), as stipulated in the Declaration of Posting of Merger by Absorption and the fair value of these exchange shares of LATAM Airlines Group S.A. at June 22, 2012. (2) Corresponds to the technical revaluation of fixed assets authorized by the Superintendence of Securities and Insurance in 1979, in Circular No. 1,529. The revaluation was optional and could be taken only once, the reserve is not distributable and can only be capitalized. (3) Corresponds to the loss generated by the participation of Lan Pax Group S.A., in the capital increase for Aerovías de Integración Regional, AIRES S.A. by ThUS$ (621) at December 31, 2012 (ThUS$ (1,801) at December 31, 2011) and the loss generated by the participation of Lan Cargo S.A. Investment in the capital increase carried out by Línea Aérea Carguera de Colombia S.A. by ThUS$ (983) at December 31, 2012. (e) Reserves with effect in other comprehensive income. The movement of Reserves with effect in other comprehensive income between January 1, 2011 and December 31, 2012 is as follows: Opening balance as of January 1, 2011 Derivatives valuation gains (losses) Deferred tax Conversion difference subsidiaries CLOSING BALANCE AS OF DECEMBER 31, 2011 Opening balance as of January 1, 2012 Derivatives valuation gains (losses) Deferred tax Conversion difference subsidiaries CLOSING BALANCE AS OF DECEMBER 31, 2012 Currency translation reserve Cash flow hedging reserve Total ThUS$ ThUS$ ThUS$ (4,257) - 1,855 (10,915) (107,050) (111,307) (40,368) (40,368) 6,862 8,717 - (10,915) (13,317) (140,556) (153,873) (13,317) (140,556) (153,873) - (2,727) 19,618 3,574 5,003 (5,177) - 5,003 (7,904) 19,618 (140,730) (137,156) 4 3 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (e.1) Currency translation reserve These originate from exchange differences arising from the translation of any investment in foreign entities (or Chilean investment with a functional currency different to that of the parent), and from loans and other instruments in foreign currency designated as hedges for such investments. When the investment (all or part) is sold or disposed and loss of control occurs, these reserves are shown in the consolidated statement of income as part of the loss or gain on the sale or disposal. If the sale does not involve loss of control, these reserves are transferred to non-controlling interests. (e.2) Cash flow hedging reserve These originate from the fair value valuation at the end of each period of the outstanding derivative contracts that have been defined as cash flow hedges. When these contracts expire, these reserves should be adjusted and the corresponding results recognized. (f) Retained earnings The movement of Retained earnings between January 1, 2010 and December 31, 2012 is as follows: Opening balance as of January 1, 2011 Result for the period Other decreases Dividends CLOSING BALANCE AS OF DECEMBER 31, 2011 Opening balance as of January 1, 2012 Result for the period Other decreases Dividends ThUS$ 949,214 320,197 (632) (151,981) 1,116,798 1,116,798 10,956 163 (21,749) CLOSING BALANCE AS OF DECEMBER 31, 2012 1,106,168 5 3 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (g) Dividends per share As of December 31, 2012 Description Date of dividend Amount of the dividend (ThUS$) Final dividend, 2011 04-26-2012 18,462 Mandatory minimum dividend, 2012 12-31-2012 3,287 Number of shares among which the dividend is distributed 340,999,909 479,098,052 Dividend per share (US$) 0.05414 0.00686 As of December 31, 2011 Description Date of dividend Amount of the dividend (ThUS$) Number of shares among which the dividend is distributed Final dividend, 2010 Interim dividend, 2011 Interim dividend, 2011 04-29-2011 10,386 08-30-2011 56,595 12-20-2011 85,000 339,310,509 339,358,209 340,164,105 Dividend per share (US$) 0.03061 0.16677 0.24988 The Company’s dividend policy is that dividends distributed will be equal to the minimum required by law, i.e. 30% of the net income according to current regulations. This policy does not preclude the Company from distributing dividends in excess of this obligatory minimum, based on the events and circumstances that may occur during the course of the year. At December 31, 2012, dividends are provisioned for a minimum mandatory dividend corresponding to 30% of the value of Company. This amount is in the category Other non-financial liabilities, current. 6 3 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 29. REVENUE The detail of revenues is as follows: Passengers Cargo TOTAL For the periods ended December 31, 2012 ThUS$ 2011 ThUS$ 7,978,664 4,008,910 1,743,525 1,576,530 9,722,189 5,585,440 For the period ended at December 31, 2012 the incorporates the effects of Business Revenue, Combinations with TAM S.A. and Subsidiaries. 7 3 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 30. COSTS AND EXPENSES BY NATURE (a) Costs and operating expenses The main operating costs and administrative expenses are detailed below: Other rentals and landing fees Aircraft fuel Comissions Other operating expenses Aircraft rentals Aircraft maintenance Passenger services TOTAL (b) Depreciation and amortization Depreciation and amortization are detailed below: Depreciation (*) Amortization TOTAL For the periods ended December 31, 2012 ThUS$ 1,052,594 2011 ThUS$ 671,614 3,434,569 1,750,052 308,941 1,288,151 313,038 297,618 239,848 209,255 646,051 174,197 182,358 136,049 6,934,759 3,769,576 For the periods ended December 31, 2012 ThUS$ 753,747 31,140 784,887 2011 ThUS$ 386,644 9,831 396,475 (*) Includes the depreciation of Property, plant and equipment and the maintenance cost of aircraft held under operating leases. (c) Personnel expensesl The costs for personnel expenses are disclosed in Liability for employee benefits (See Note 26). 8 3 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (d) Financial costs The detail of financial costs is as follows: Bank loan interest Financial leases Other financial instruments TOTAL For the periods ended December 31, 2012 ThUS$ 213,332 46,893 34,373 2011 ThUS$ 109,168 12,265 17,644 294,598 139,077 Costs and expenses by nature presented in this note plus the Employee expenses disclosed in Note 26, are equivalent to the sum of cost of sales, distribution costs, administrative expenses, other expenses and financing costs presented in the consolidated statement of income by function. For the period ended at December 31, 2012 the Cost and expenses by nature, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. 9 3 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 31. GAINS (LOSSES) ON THE SALE OF NON- CURRENT ASSETS NOT CLASSIFIED AS HELD FOR SALE The gains (losses) on sales of non-current assets not classified as held for sale as of December 31, 2012 and 2011 are as follows: Property, plant and equipment TOTAL For the periods ended December 31, 2012 ThUS$ (2,836) (2,836) 2011 ThUS$ (172) (172) 0 4 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 32. OTHER INCOME, BY FUNCTION Other income by function is as follows: Duty free Aircraft leasing Logistics and courier Customs and warehousing Tours Other miscellaneous income TOTAL For the periods ended December 31, 2012 ThUS$ 17,463 28,863 - 24,537 74,226 75,067 2011 ThUS$ 16,874 12,701 10,958 24,677 43,952 23,642 220,156 132,804 For the period ended at December 31, 2012 of Other income, by function, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. 1 4 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 33. FOREIGN CURRENCY AND EXCHANGE RATE DIFFERENCES The functional currency of LATAM Airlines Group S.A. is the US dollar, also it has subsidiaries whose functional currency is different to the US dollar, such as the Chilean peso, Argentine peso, Colombian peso and Brazilian real, the latter due to Business Combinations with TAM S.A. and Subsidiaries. The functional currency is defined primarily as the currency of the primary economic environment in which an entity operates in each state and all other currencies are defined as foreign currency. Considering the above, the balances by currency mentioned in this note correspond to the sum of foreign currency of each of the entities that make LATAM Airlines Group S.A. and Subsidiaries. It was also necessary to apply the above definition to the December 2011 amounts, for comparative purposes. Current assets (a) Foreign currency The foreign currency detail of balances of monetary items in current and non-current assets is as follows:: As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ CASH AND CASH EQUIVALENTS 337,223 216,747 Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency OTHER FINANCIAL ASSETS Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency 68,705 3,308 40,091 671 15,502 94,035 51,346 63,565 30,936 - 2,167 550 2,147 8 18,020 601 7,443 12,956 6,616 148,148 864 5,688 14,647 21,589 6,239 17,214 1 1,127 499 18 291 14,948 5 325 2 4 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Current assets As of December 31, 2012 ThUS$ TRADE AND OTHER ACCOUNTS RECEIVABLE 503,601 As of December 31, 2011 ThUS$ 160,882 Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency ACCOUNTS RECEIVABLE FROM RELATED ENTITIES Chilean peso U.S. dollar TAX ASSETS Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency TOTAL ASSETS Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. Dollar Strong bolivar Other currency 9,441 33,313 130,736 3,153 67,287 166,758 2,759 90,154 14,565 14,565 - 64,553 3,740 10,753 24,764 924 4,618 1,649 351 17,754 950,878 81,886 49,541 210,706 6,895 87,415 280,462 55,057 178,916 8,450 35,467 61,839 28,150 8,266 3,289 1,247 14,174 838 809 29 45,524 1,792 8,475 14,651 124 522 - - 19,960 441,205 23,199 51,685 225,946 29,156 14,767 32,913 22,841 40,698 3 4 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Non-current assets OTHER FINANCIAL ASSETS Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Other currency ACCOUNTS RECEIVABLE Chilean peso U.S. dollar Other currency TAX ASSETS, LONG TERM PORTION Argentine peso U.S. dollar Other currency DEFERRED TAX ASSETS Other currency TOTAL ASSETS Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Other currency As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 31,329 8 3,505 98 524 7,817 15,895 3,482 14,812 9,564 5,000 248 22,105 41 1 22,063 4,203 4,203 72,449 49 3,505 9,662 524 7,817 20,896 29,996 4,388 1 1,939 89 2,166 - 140 53 7,482 7,422 - 60 17,951 17,951 - - - - 29,821 17,952 1,939 7,511 2,166 - 140 113 4 4 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A The foreign currency detail of balances of monetary items in current liabilities and non-current is as follows: Current liabilities Up to 90 days 91 days to 1 year As of December 31, 2012 As of December 31, 2011 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ ThUS$ ThUS$ OTHER FINANCIAL LIABILITIES CURRENT U.S. dollar Euro 241,473 240,871 602 - - - TRADE AND OTHER ACCOUNTS PAYABLES 825,391 292,133 Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency ACCOUNTS PAYABLE TO RELATED ENTITIES Chilean peso U.S. dollar TAX LIABILITIES Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Other currency 21,398 38,506 72,643 29,268 38,540 208,858 2,710 413,468 14 14 - 12,840 2,125 2,925 3,019 200 3,261 325 985 14,968 32,898 74,576 26,594 10,921 44,115 1,269 86,792 367 118 249 7,520 305 1,724 3,238 - 468 593 1,192 589,105 589,070 35 19,850 - 8 - - - 12,272 - 9 11,938 10,062 - 1,695 6,157 - 52 - - - - - - - - - - - - 697 1,431 22 51 - - - 1,012 - 334 678 - - - - 5 4 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Current liabilities Up to 90 days 91 days to 1 year As of December 31, 2012 As of December 31, 2011 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ ThUS$ ThUS$ OTHER NON-FINANCIAL LIABILITIES 48,935 51,884 Brazilian real Chilean peso Colombian peso U.S. dollar Strong bolivar Other currency 98 120 3,082 44,056 1,211 368 - 114 16,135 35,392 239 4 16 10 - - - - 6 3,827 235 361 - 3,231 - - TOTAL LIABILITIES 1,128,653 351,904 608,971 17,111 Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency Non-current liabilities OTHER FINANCIAL LIABILITIES U.S. dollar Euro ACCOUNTS PAYABLE Chilean peso U.S. dollar Other currency Other provisions Argentine peso Brazillian real Chilean peso Euro Other currency TOTAL NON-CURRENT LIABILITIES Argentine peso Brazilian real Chilean peso Euro U.S. dollar Other currency 23,523 41,529 75,796 32,550 42,403 494,110 3,921 414,821 15,273 34,622 78,046 42,729 11,389 80,349 1,508 87,988 - 18 11,938 - 1,730 595,227 - 58 - 578 11,101 - 697 4,662 22 51 More than 1 to 3 years More than 3 to 5 years More than 5 years As of December 31, 2012 As of December 31, 2011 As of December 31, 2012 As of December 31, 2011 As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 623,828 622,680 1.148 313,215 8,286 303,631 1,298 16,187 664 808 36 10,865 3,814 953,230 664 808 8,322 12,013 926,311 5,112 - - - 7,530 6,549 - 981 11,821 651 466 29 10,675 - 859,526 859,526 - 138 138 - - - - - - - - 19,351 859,664 651 466 6,578 10,675 - 981 - - 138 - 859,526 - - - - 76 76 - - - - - - - - 76 - - 76 - - - 1,811,660 1,811,660 - - - - - - - - - - - 1,811,660 - - - - 1,811,660 - - - - 10 10 - - - - - - - - 10 - - 10 - - - 6 4 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A General summary of foreign currency: TOTAL ASSETS Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency TOTAL LIABILITIES Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency NET POSITION Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 1,023,327 81,935 53,046 220,368 7,419 95,232 301,358 55,057 208,912 471,026 41,151 53,624 233,457 31,322 14,767 33,053 22,841 40,811 5,362,178 388,452 24,187 42,355 96,194 32,550 56,146 4,686,834 3,921 419,991 57,748 10,691 124,174 (25,131) 39,086 (4,385,476) 51,136 (211,079) 15,924 35,666 95,811 42,729 22,761 85,011 1,530 89,020 25,227 17,958 137,646 (11,407) (7,994) (51,958) 21,311 (48,209) 7 4 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (b) Exchange differences Exchange differences recognized in the income statement, except for financial instruments mea- sured at fair value through profit or loss for the year ended December 31, 2012 and 2011, generated a gain of ThUS$ 66,685 and a loss of ThUS$ 256, respectively. Exchange differences recognized in equity as re- serves for currency translation differences for the year ended December 31, 2012 and 2011, represented a gain of ThUS$ 18,692 and a loss of ThUS$ 10,864, re- spectively. The following shows the current exchange rates for the U.S. dollar, on the dates indicated: Argentine peso Brazilian real Chilean peso Colombian peso Euro Strong bolivar Australian dollar Boliviano Mexican peso New Zealand dollar Peruvian Sol Uruguayan peso As of December 31, 2012 As of December 31, 2011 4.91 2.04 479.96 1,760.00 0.76 4.30 0.96 6.86 12.99 1.22 2.55 19.05 4.30 1.87 519.20 1,936.00 0.77 4.30 0.98 6.86 13.96 1.28 2.69 19.80 For the period ended at December 31, 2012 of Foreign currency and exchange rate differences, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. 8 4 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 34. EARNINGS PER SHARE Basic earnings Earnings attributable to controlling company’s equity holders (ThUS$) Weighted average number of shares, basic For the periods ended December 31, 2012 2011 10,956 320,197 412,267.624 339,424,598 Basic earnings per share (US$) 0.02657 0.94335 Diluted earnings Earnings attributable to controlling company’s equity holders (ThUS$) Weighted average number of shares, basic Adjustment diluted weighted average shares stock options Weighted average number of shares, diluted For the periods ended December 31, 2012 2011 10,956 320,197 412,267,624 339,424,598 - 271,380 412,267,624 339,695,978 DILUTED EARNINGS PER SHARE (US$) 0.02657 0.94260 9 4 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 35. CONTINGENCIES Lawsuits (i) Lawsuits filed by LATAM Airlines Group S.A. and Subsidiaries Company Court Case No. Origin Stage of trial Atlantic Aviation Investments LLC (AAI) Supreme Court of the State of New York County of New York. 07-6022920 Atlantic Aviation Investments LLC (AAI) Supreme Court of the State of New York County of New York. 602286-09 Atlantic Aviation Investments LLC. ("AAI"), an indirect subsid- iary LATAM Airlines Group S.A., incorporated under the laws of the State of Delaware, sued in August 29th, 2007 Varig Logistics S.A. ("Variglog") for non-payment of four documented loans in credit agreements governed by New York law. These contracts establish the acceleration of the loans in the event of sale of the original debtor, VRG Linhas Aéreas S.A. Atlantic Aviation Investments LLC. (“AAI”) sued on July 24, 2009 Mat- lin Patterson Global Advisers LLC, Matlin Patterson Global Opportu- nities Partners II LP, Matlin Patter- son Global Opportunities Partners (Cayman) II LP and Logistics LLC Volo (a) as alter egos of Variglog for non-payment of the four loans mentioned in the previous note and (b) for breach of its obligation to guarantee and other obliga- tions under the Memorandum of Understanding signed between the parties on September 29, 2006. Amounts commited ThUS$ 17,100 plus interest and costs In implementation stage in Swit- zerland, the conviction stated that Variglog should pay the principal, interest and costs in favor of AAI. It keeps the embar- go of Variglog funds in Switzer- land with AAI. Variglog is in the process of judicial recovery in Brazil and has asked Switzerland to recognize the judgment that declared the state of judicial re- covery. 17,100 plus interest, costs and damages AAI filed a “summary judgment” (abbreviated trial) which the court ruled favorably. The de- fendants appealed this decision which was ultimately dismissed by the High Court. The cause was turned back to the lower court for determination of the amount actually payable by the appli- cants (damages). Aerotransportes Mas de Carga S.A. Federal Court of fiscal and administrative justice. 31698/11- 17-01-8 Nullity trial against the tax au- thority's refusal to restore bal- ance in favor of VAT. Presentation of evidence. 4,900 0 5 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Company Court Case No. Origin Stage of trial Amounts commited ThUS$ Lan Cargo S.A. y LATAM Airlines Group S.A. In the High Court of Justice Chancery División (Inglaterra) and Directie Juridische Zaken Afdeling Ceveil Recht (Países Bajos). Aerovías de Integración Regional, AIRES S.A. Juzgado Tercero Civil del Circuito de Bogotá. Aerolinhas Brasileiras S.A. Administrative Council for Economic Defense, Brazil - - - Case is in evidence discovery process. Undeter- mined possible violations Lawsuits filed against European freight airlines by users of services in private prosecutions as a result of the investigation for of airline competition freighters, especially fuel surcharge. Lan Cargo S.A. and LATAM Airlines Group S.A, have been sued in court proceedings as third parties, based in England and the Netherlands. On July 31, 2012 the demander filed a memorial rectifying the demand. By order on August 23, 2012 (reported by state August 27, 2012), the Court considered the demand remedied and resolved the objection requirement, stating that it did not prosper. Also ordered to pay the costs guarantee call for a million pesos COP. ($ 1,000,000). preliminary On December 10, 2008, the aircraft HK-4491 was in the airport in Bucaramanga, and after start of the engine No. 2, to start the engine starting procedure of the engine No. 1, failure occurred in the start system and pressurization of the aircraft. The demander, Mrs. Milena Paez, alleged contractual liability for what lost happened because she hearing capacity in her right ear and her family, professional and community life were affected, breaking the obligation to keep airline passengers safe until their destination. Aires S.A. was d e m a n d e d with a main claim of ap- proximately ThUS$ 1,768, i.e. COP 1,900 million (equi- valent to 3,550 SMMLV (*), plus the in- liqui- terests dated from D e c e m b e r 2008, an item that genera- tes an addi- COP tional 1,500 million, equivalent to 2,800 SMMLV ). (*) SMMLV: Current legal monthly minimum wage. for Investigation possible violations of airline competition fuel freighters, surcharge especially Investigation pending. CADE has not yet issued a final decision. Indetermined 1 5 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Company Court Case No. Origin Stage of trial Amounts commited ThUS$ Aerolane Líneas Aéreas Nacionales del Ecuador S.A. 2nd District Court Guayaquil 09504- 2010-0114 Order Determining the Value Added Tax (VAT) 2006. Sentence pending 4,565 Aerolane Líneas Aéreas Nacionales del Ecuador S.A. Tribunal Fiscal de Guayaquil. 6319-4064-05 Judicial proceedings against the Regional Director of the Internal Revenue Services Guayaquil, for overpayment of taxes. Tax Litigation Division of the National Court accepts appeal of IRS. Extraordinary Action Protection for the Constitutional Court. 4,210 plus interest Aerolane Líneas Aéreas Nacionales del Ecuador S.A. Internal revenue services. 17502- 2012-0082 Determination Act for 2006 In- come Tax, which have unknown CEDT requesting certification of branch expenses, ARC commis- sions without Withholding of In- come Tax, etc. Process initiated in 2012. (ii) Trials received by LATAM AIRLAINS GROUP S.A. and subsidiries Sentence pending. 8,971 LATAM Airlines Group S.A. y Lan Cargo S.A. European commission and Canada LATAM Airlines Group S.A. y Lan Cargo S.A. Competition Bureau Canadá. - - Investigation for possible vio- lations of airline competition freighters, especially fuel sur- charge. On December 26, 2007, the Directorate General for Com- petition of the European Com- mission notified Lan Cargo S.A. and LATAM Airlines Group S.A. of a case against twenty-five cargo airlines, including Lan Cargo S.A., for possible violations of free com- petition in the European air cargo market, especially the alleged fix- ing a fuel surcharge and freight. On November 9, 2010, the Director- ate General for Competition of the European Commission notified Lan Cargo S.A. and LATAM Airlines Group SA the imposition of a fine in the amount of ThUS$ $ 10,865. This penalty is being appealed by Lan Cargo SA and LATAM Airlines Group S.A. The outcome of this ap- peal cannot be predicted. Investigation for possible vio- lations of airline competition freighters, especially fuel sur- charge On April 14, 2008, the notification of the European Commission was answered. The appeal was filed on January 24, 2011. 10,865 Investigation pending Undeter- mined 2 5 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Company Court Case No. Origin Stage of trial Amounts commited ThUS$ LATAM Airlines Group S.A. Tenth Civil Court of Santiago - The company Jara Jara and Lim- ited sues LATAM Airlines Group S.A. based on the damage they have caused due to the criminal complaints filed for the crime of fraud against them in 2008, which were dismissed for good. They claim that the damage caused by LATAM Airlines Group S.A. affected their prestige and business continuity. First instance. 11,935 Aerolane Líneas Aéreas Nacionales del Ecuador S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Civil Court 20 Pichincha. 374-2012 LA Passenger demand for misuse by counter agent of credit card. Waiting for conciliation hearing date. 5,500 Secretary of Federal Revenues of Brazil (Internal Revenue Ser- vice of Brazil). Tribunal Re- gional Federal da 2 da Região the (Court of the Second Region). 10314.720023 / 2011-15 Notice of Violation to request Import tax collection (“II”) and the Excise Tax (“IPI”) over the im- ports of certain aircraft. Decision in favor at first instance by determining the exclusion of BRL$ 700 millions. Currently waiting for the judgment on the letter of appeal and the vol- untary appeal filed by the Com- pany. 2001.51.01. 012530-0 Ordinary judicial action brought to declare that there is no legal relationship obligating the Com- pany to raise the Air Fund. granted Protection re- move the charge by the Fundo Aeroviário (FA). Pending the com- pletion of the survey. to Tribunal Re- gional Federal da 3a Região (Court of the Third Region) 2007.61.05. 014317-3 (AI 2008.03.00. 004494-2) presented to Requirements eliminate possible sanctions for noncompliance with special customs regime of temporary admission. 16643.000087 /2009-36 Notice of Violation of the re- quirement to pay the social con- tribution on net profit ("CSL"). Secretary of Federal Revenues of Brazil (Internal Revenue Ser- vice of Brazil). The main process associated with this case ruled favorably to the interests of the Company. Currently awaiting the imple- mentation of the same decision in the present case. Decisions of first and second ad- ministrative instance adverse to the interest of the company. Cur- rently awaiting the decision of the wew action brought by the company. 376,827 123,204 50,205 35,447 3 5 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Company Court Case No. Origin Stage of trial Amounts commited ThUS$ Tam Linhas Aéreas S.A. Secretary of Federal Revenues of Brazil (Internal Revenue Ser- vice of Brazil). 10880.725950 /2011-05 Compensation claims of social contributions PIS and COFINS. Currently awaiting for the judg- ment in the event of disagree- ment presented by the Company. 32,586 Pantanal Linhas Aéreas S.A. Regional Court of the Third District. 1997.0002503-9 Execution filed to collect tax penalties for breach of special customs regime of temporary admission. Waiting for the decision of the second instance. Favorable sen- tence. 25,789 Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Secretary of Federal Revenues of Brazil (Internal Revenue Ser- vice of Brazil). Secretary of Federal Revenues of Brazil (Internal Revenue Ser- vice of Brazil). Secretary of Federal Revenues of Brazil (Internal Revenue Ser- vice of Brazil). Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo) Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). 10314.720181 /2011-75 Order to require the collection of II, IPI and social contribu- tions PIS and COFINS affecting imports of aircraft components. Pending the decision of the first administrative instance. 23,792 16643.000085 /2009-47 Order compound to demand the income tax and CSL derived from royalties expense detail and the use of the brand TAM. First instance decision unfa- vorable to the interests of the company. Currently expecting ruling on the appeal filed by the Company. 15,687 10831.012344 /2005-55 Infraction II presented to de- mand payment and social contri- butions of PIS and COFINS aris- ing from the loss of unidentified international cargo. Partially favorable decision at the first administrative level. Currently awaiting the decision of appeal by the Company. 12,619 3.123.785-0 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Currently expecting the ruling on the appeal filed by the Com- pany. 10,951 3.130.043-1 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Currently expecting ruling on the appeal filed by the Company. 10,531 4 5 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Company Court Case No. Origin Stage of trial Amounts commited ThUS$ Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). Secretary of Federal Revenues of Brazil (Internal Revenue Ser- vice of Brazil). Secretary of Finance of the State of Sao Paulo. Secretary of Finance of the State of Sao Paulo. Tribunal Re- gional Federal da 3a Região (Court of the Third Region). Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). Secretary of Federal Revenues of Brazil (Internal Revenue Ser- vice of Brazil). 3.099.486-0 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Currently expecting ruling on the appeal filed by the Company. 10,531 11610.001360 /2001-56 Application for reimbursement of social security contributions of PIS. Unfavorable ruling in the first and second administrative in- stances. Currently expecting fis- cal execution ruling. 8,864 3.117.001-8 Notice of infringement demand- ing payment of ICMS on imports of aircraft Pending decision on the appeal filed by the Company. 8,712 3.120.346-2 Notice of infringement demand- ing payment of ICMS on imports of aircraft. Pending decision on the appeal filed by the company. 8,375 2006.03.00. 022504-6 Penalty forcing IRPJ collection in the months of February, March and August 1998. Pending first instance ruling. 8,066 3.120.355-3 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Currently awaiting a ruling on the appeal filed by the Company. 7,970 0045794 Notice of infraction registered to demand payment of COFINS social contribution in the third quarter of 1997. Expected the ruling on impeach- ment filed by the Company 7,941 5 5 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Company Court Case No. Origin Stage of trial Amounts commited ThUS$ Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). Governo do Estado de São Paulo (State Government of Sao Paulo). Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). 3.120.286-0 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Trial suspended. It now expects the end of main trial. 7,234 990.172 Fiscal Execution to demand pay- ment of ICMS that affects the im- port of aircraft. Trial suspended. It now expects the end of main trial. 6,956 3.123.000-3 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Trial suspended. It now expects the end of main trial. 6,950 3.099.563-2 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Currently awaiting a ruling on the appeal filed by the Company. 6,427 Tam Linhas Aéreas S.A. Internal Rev- enue Service. 2002.61.19. 001123-1 Injunction filed to prevent recov- ery of IPI on imports of aircraft. Currently awaiting a ruling on the appeal filed by the Company. Tam Linhas Aéreas S.A. Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). 4.002.475-1 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Expected the ruling on impeach- ment filed by the Company. 6,360 6,184 6 5 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Company Court Case No. Origin Stage of trial Amounts commited ThUS$ Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). Secretaria da Fazenda do Estado da Paraíba (Secre- tary of Finance of the State of Paraiba). Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). Secretaria da Receita Federal (Inter- nal Revenue Service). 3.019.886-0 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Trial suspended. It now expects the end of main trial. 5,693 93300008.09. 00000883 /2009-31 Order of infringement to de- mand payment of ICMS in par- ticular operations. Currently awaiting a ruling on the appeal filed by the Company. 5,626 3.123.770-8 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Currently awaiting a ruling on the appeal filed by the Company. 5,604 3.154.701-1 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Expected the ruling on impeach- ment filed by the Company. 5,480 3.146.575-4 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Trial suspended. It now expects the end of main trial. 5,309 10880- 676.339 /2009-13 Order of infringement to de- mand payment of IRPJ. Expected the ruling on impeach- ment filed by the Company. 5,264 7 5 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Company Court Case No. Origin Stage of trial Amounts commited ThUS$ Tam Linhas Aéreas S.A. National Social Security Insti- tute – INSS. 2006.03.00. 080569-5 Regular judicial action filed to cancel the collection of INSS on amounts paid by way of trans- portation benefit. Pending decision on the appeal filed by the company. 5,202 Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). Secretaria da Fazenda do Es- tado de Goiás (Secretaria de Hacienda del Estado de Goias). Secretaria da Receita Fed- eral (Servicio de Impuestos Internos de Brazil). Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). Secretaria da Fazenda do Estado de São Paulo (Secre- tary of Finance of the State of Sao Paulo). 3.146.651-5 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Trial suspended. It now expects the end of main trial. 5,174 3032722060291 Order of infringement to de- mand payment of ICMS in par- ticular operations. Currently awaiting a ruling on the appeal filed by the Company. 5,309 16643.000088 /2009-81 Order of infringement to de- mand payment of IRPJ and CSLL. Currently awaiting a ruling on the appeal filed by the Company. 4,850 3.117.801-7 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Trial suspended. It now expects the end of mai trial. 4,816 3.129.987-8 Order of infringement to de- mand payment of ICMS govern- ing the importation of aircraft. Currently awaiting arulin on the appeal riled by the company. 4,537 8 5 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Company Court Case No. Origin Stage of trial Amounts commited ThUS$ Tam Linhas Aéreas S.A. 1st Civil Court of the District of Navegantes / SC. 033.03.013110-6 (precautionary) 033.03.014870- (ordinary). We are currently awaiting the evaluation of our objection to the expert report. 4,637 Action filed by a former sales representative of TAM demand- ing compensation for moral and economic damage in con- sequence of the alleged wrong- ful termination of contract and unfounded trade representative land freight transport other than agreeing in advance the estab- lishment of protection enforce- able court. Tam Linhas Aéreas S.A. Labour Court of Porto Alegre. 0000504- 79.2010.5. 04.0014 Class action by the Union of Aviation Workers of Porto Alegre which requires payment of the bond risk for maintenance em- ployees. Process in the last instance, waiting judgment of appeal. 5,046 Approximate value / Estimated Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Labour Justice Guarulhos / SP - Jurisdiction of Labor Gua- rulhos. Labour Justice Salvador / BA - Labor Jurisdic- tion Salvador / BA. 0000728- 47.2010.5. 02.0313 Class action by the Union of Avia- tion Workers of Guarulhos/SP which requires payment of risk bonus for all workers of the base. Process in the second instance, awaiting the judgment of the ap- peal on both parts. 53,020 Approximate value / Estimated 0000033- 78.2011.5. 05.0021 Class action by the National Union of Aviation workers, which requires payment of risk bonus for all employees of the SSA base. Process in the first instance. Awaiting sentencing. Tam Linhas Aéreas S.A. Labour Justice Sao Paulo. 001680- 65.2011.5. 02.0030 Action by the Union State Aero- vias de São Paulo/SP that re- quires payment of hazard pay for all employees. Procedure according to comple- tion. Tam Aéreas S.A. Linhas Labour Court Brasilia. 01683.2009. 015.10.003 Action by the Union Aerovias Brasilia/DF demanding payment of hazard compensation for all maintenance employees. Process in the last instance. Awaiting the outcome of the ap- peal. 13,010 Approximate value / Estimated 15,645 Approximate value / Estimated 4,717 Approximate value / Estimated In order to deal with any financial obligations arising from legal proceedings outstanding at December 31, 2012, whether civil, labor or tax, LATAM Airlines Group S.A., has made provisions, which at the end of these financial statements, reached the sum of ThUS$ 558,053 which is disclosed in Note 23. The Company has not disclosed the individual probability of success for each contingency in order to not negatively affect its outcome. the Asamblea General de Debenturista granted the requested waiver and as a result, this obligation shall be classified within current financial liabilities and non-current in the next financial statements. 9 5 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 36. COMMITMENTS (a) Loan covenants With respect to various loans signed by the Company for the financing of Boeing 767, 777 and 787 aircraft, which carry the guarantee of the United States Export–Import Bank, limits have been set on some of the Company’s financial indicators on a consolidated basis. Moreover, and related to these same contracts, restrictions are also in place on the Company’s management in terms of its ownership and disposal of assets. Additionally, with respect to various loans signed by its subsidiary Lan Cargo S.A. for the financing of Boeing 767F and 777F aircraft, which carry the guarantee of the United States Export–Import Bank, restrictions have been established to the Company´s management and its subsidiary Lan Cargo S.A. in terms of shareholder composition and disposal of assets. In connection with the financing of spare engines for its Boeing 767, 767F, 777, 777F and 787, which are guaranteed by the Export - Import Bank of the United States, restrictions have been placed on the ownership structure of their guarantors and their legal successor in case of merger. In relation to credit agreements entered into by the Company, for the current period local banks have set limits to some financial indicators of the Company on a consolidated basis. At December 31, 2012, the Company is in compliance with these indicators. The subsidiary TAM Linhas Aéreas S.A., in connection with the issuance of debentures (CVM 476) by original amount of ThR$ 600,000 in 2009, has established financial limit indicators to TAM Linhas Aéreas S.A.. Anticipating a possible declaration of breach of this limit at the end of December 2012, TAM Linheas Aéreas S.A. requested a waiver to the Asamblea General de Debenturista and according to IFRS accounting standards, financial liabilities related to this issuance of debentures are classified in current financial liabilities. On February 14, 2013, 0 6 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (b) Commitments under operating leases as lessee Details of the main operating leases are as follows: Lessor ACS Aircraft Finance Bermuda Ltd. - Aircastle (WFBN) Air Canada (Sublessor) Airbus Financial Services Aircraft 76B-26261 Inc. (ILFC) Aircraft 76B-26327 Inc. (ILFC) Aircraft 76B-26329 Inc. (ILFC) Aircraft 76B-27597 Inc. (ILFC) Aircraft 76B-27613 Inc. (ILFC) Aircraft 76B-27615 Inc. (ILFC) Aircraft 76B-28206 Inc. (ILFC) Aircraft Boeing 737 Airbus A340 Airbus A340 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Aircraft Solutions Lux V S.ÀR.L. (AVMAX) Bombardier Dhc8-200 ALC A319 1703, LLC (*) Aviacion Centaurus, A.I.E (Santander) (*) Aviación Centaurus, A.I.E. (*) Aviación Real A.I.E (*) Aviación Real A.I.E (*) Aviación Tritón A.I.E. (*) Avolon Aerospace AOE 19 Limited Avolon Aerospace AOE 20 Limited Avolon Aerospace AOE 6 Limited AWAS (SWEDEN TWO) AB (*) AWAS 4839 Trust AWAS 5125 Trust AWAS 5178 Limited AWAS 5234 Trust Baker & Spice Aviation Limited (*) BOC Aviation Pte. Ltd. Celestial Aviation Trading 35 Ltd. (GECAS) CIT Aerospace International CIT Aerospace International (*) CIT Aerospace International (*) Continuity Air Finance IV B.V (BOC) (*) Airbus A319 Airbus A319 Airbus A321 Airbus A319 Airbus A320 Airbus A319 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Boeing 767 Boeing 767 Airbus A319 Airbus A320 Airbus A319 Delaware Trust Company, National Association (CRAFT) Bombardier Dhc8-200 Eden Irish Aircr Leasing MSN 1459 (AERCAP) (*) GECAS Sverige Aircraft Leasing Worldwide AB (*) Airbus A320 Airbus A320 As of December 31, 2012 As of December 31, 2011 1 1 2 1 - 1 - 1 1 1 1 1 3 1 1 1 3 1 1 1 2 1 1 1 1 2 1 1 1 3 4 1 9 1 10 1 1 - 1 1 1 1 1 1 1 1 - - - - - - 1 1 1 - 1 - - - - 1 1 1 - - - 9 - - 1 6 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Lessor GECAS Sverige Aircraft Leasing Worldwide AB (*) GFL Aircraft Leasing Netherlands B.V. (GECAS) (*) International Lease Finance Corporation International Lease Finance Corporation International Lease Finance Corporation (*) JB 30244, Inc. - AWAS JB 30249, Inc. - AWAS Aircraft Airbus A330 Airbus A320 Boeing 737 Boeing 767 Airbus A320 Boeing 737 Boeing 737 KN Operating Limited (NAC) Bombardier Dhc8-400 MASL Sweden (1) AB (MACQUARIE) (*) MASL Sweden (2) AB (MACQUARIE) (*) MASL Sweden (7) AB (MACQUARIE) (*) MASL Sweden (8) AB (MACQUARIE) (*) MCAP Europe Limited - Mitsubishi (WTC) MSN 32415, LLC - AWAS Orix Aviation Systems Limited Pembroke B737-7006 Leasing Limited RBS Aerospace Limited (*) SKY HICH V LEASING COMPANY LIMITED (*) Sunflower Aircraft Leasing Limited - AerCap Volito Aviation August 2007 AB (*) Volito Aviation November 2006 AB (*) Volito Brasilien AB (*) Volito November 2006 AB (*) Wells Fargo Bank North National Association (ACG) (*) Wells Fargo Bank North National Association (ACG) (*) Wells Fargo Bank North National Association (BAKER & SPICE) (*) Wells Fargo Bank North National Association (BOC) (*) Wells Fargo Bank North National Association (BOC) (*) Wells Fargo Bank Northwest N.A (AVOLON) (*) Wells Fargo Bank Northwest National Association (ACG) (*) Wells Fargo Bank Northwest National Association (BOC) (*) Wells Fargo Bank Northwest, N.A. (GECAS) Wells Fargo Bank Northwest, N.A. (GECAS) Wilmington Trust Company (ILFC) (*) Zipdell Limited (BBAM) (*) TOTAL Airbus A320 Airbus A320 Airbus A320 Airbus A320 Boeing 737 Boeing 737 Airbus A320 Boeing 737 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A319 Airbus A320 Airbus A319 Airbus A320 Airbus A320 Airbus A319 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Boeing 767 Boeing 777 Airbus A319 Airbus A320 As of December 31, 2012 As of December 31, 2011 2 1 2 1 1 - - 4 1 1 1 1 1 - 3 2 6 1 2 2 2 1 2 1 2 1 3 2 4 2 1 4 2 1 1 - - 2 1 - 1 1 4 - - - - 1 1 2 2 - - 2 - - - - - - - - - - - - 4 2 - - 123 49 (*) The composition of the fleet as operating leases at December 31, 2012, incorporates the effects of Business Combinations with TAM S.A. and Subsidiaries. The rentals are shown in results for the period for which they are incurred. 2 6 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A The minimum future lease payments not yet payable are the following: No later than one year Between one and five years Over five years TOTAL The minimum lease payments charged to income are the following: Minimum operating lease payments TOTAL As of December 31, 2012 As of December 31, 2011 ThUS$ 380,713 852,659 235,658 1,469,030 ThUS$ 169,842 443,256 92,264 705,362 For the periods ended December 31, 2012 2011 ThUS$ 310,496 310,496 ThUS$ 168,369 168,369 In December 2010, the Company added one Airbus A 320-200 aircraft for a period of eight months, the latter finally returned in May 2011. Additionally, in November and December 2010 added two Boeing 767-300F for periods of seven and six months, respectively. In January 2011 the Company added to the fleet three aircraft, a Boeing 767-300F with a contract term of five years, one Airbus A320-200 for a period of seven years and one Airbus A319-100 for a period of four months which was returned in May 2011. In July 2011 the Company added two Airbus A320-200 aircrafts for a period of eight years, while in August and September 2011, the Company received an Airbus A320-200 aircraft for a period of eight years. On the other hand, in September 2011 a Bombardier Dhc8- 200 aircraft was returned due to termination of the lease term. In September 2011, the Company signed a contract to establish the early departure of three Boeing 737- 700. The return of these three aircraft was completed during the second quarter of 2012. During the second quarter of 2012, added three Airbus A320-200 aircraft leased for a period of 8 years. During the third quarter of 2012, it the Company added two Airbus A320-200 aircraft, leased for periods of 6 and 8 years. In addition, two Boeing 767- 300 aircraft and two Airbus A320-200 were returned given the end of the lease contract. The operating lease agreements signed by the Company and its subsidiaries state that maintenance of the aircraft should be done according to the manufacturer’s technical instructions and within the margins agreed in the leasing agreements, a cost that must be assumed by the lessee. The lessee should also contract insurance for each aircraft to cover associated risks and the amounts of these assets. Regarding rental payments, these are 3 6 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A unrestricted and may not be netted against other accounts receivable or payable between the lessor and lessee. At December 31, 2012 the Company has existing letters of credit related to operating leasing as follows: Creditor Guarantee Debtor Type Value ThUS$ Release date Air Canada LATAM Airlines Group S.A. One letter of credit 1,800 February 13, 2013 Celestial Aviation Trading 16 Limited Lan Cargo S.A. Two letter of credit 3,500 April 25, 2013 GE Capital Aviation Services Limited LATAM Airlines Group S.A. Six letter of credit GE Capital Aviation Services Limited Lan Cargo S.A. Five letter of credit International Lease Finance Corp LATAM Airlines Group S.A. Eight letter of credit Orix Aviation System Limited LATAM Airlines Group S.A. Two letter of credit TAF Mercury TAF Venus LATAM Airlines Group S.A. One letter of credit LATAM Airlines Group S.A. One letter of credit CIT Aerospace International LATAM Airlines Group S.A. Two letter of credit 17,052 15,222 3,880 6,520 4,000 4,000 3,240 January 10, 2013 November 16, 2013 February 26, 2013 May 5, 2013 December 11, 2013 December 11, 2013 May 13, 2013 Wells Fargo Bank Northwest, National Association LATAM Airlines Group S.A. One letter of credit 2,530 June 30, 2013 Baker & Spice Aviation Limited Tam Linhas Aéreas S.A. Four letter of credit 30,428 April 23, 2013 BOC Aviation (USA) Corporation Tam Linhas Aéreas S.A. Four letter of credit 8,365 February 3, 2013 Cit Aerospace International Tam Linhas Aéreas S.A. Seven letter of credit 26,382 January 10, 2013 DVB Group Merchant Bank (Asia) Ltd. Tam Linhas Aéreas S.A. Two letter of credit 6,386 April 13, 2013 GE Capital Aviation Services Limited Tam Linhas Aéreas S.A. Twelve letter of credit Masl Sweden Tam Linhas Aéreas S.A. Six letter of credit RBS Aerospace Limited Tam Linhas Aéreas S.A. Five letter of credit 8,380 6,163 7,425 May 23, 2013 October 4, 2013 May 31, 2013 SMBC Aviation Tam Linhas Aéreas S.A. Three letter of credit 12,143 February 24, 2013 Volito November 2006 Ab Tam Linhas Aéreas S.A. Three letter of credit 1,311 September 17, 2013 168,727 4 6 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (c) Other commitments At December 31, 2012 the Company has existing letters of credit, certificates of deposits and warranty insurance policies as follows: Creditor Guarantee Debtor Type Value ThUS$ Release date Deutsche Bank A.G. LATAM Airlines Group S.A. Three letter of credit 30,000 January 31, 2013 The Royal Bank of Scotland plc LATAM Airlines Group S.A. Two letter of credit 18,000 January 8, 2013 Dirección General de Aviación Civil de Chile LATAM Airlines Group S.A. Sixty two ticket guarantee 16,970 September 1, 2013 Comisión Europea LATAM Airlines Group S.A. One letter of credit 10,686 February 11, 2013 Dirección Seccional de Aduanas de Bogotá Línea Aérea Carguera de Colombia S.A. Three insurance policies guarantee 5,025 June 10, 2013 Washington International Insurance LATAM Airlines Group S.A. Six letter of credit Metropolitan Dade County LATAM Airlines Group S.A. Five letter of credit PK Airfinance US, INC. Tam Linhas Aéreas S.A. Three letter of credit GE Capital Aviation Services Limited Tam Linhas Aéreas S.A. Three letter of credit 12ª Vara Cível da Comarca de Natal/RN Tam Linhas Aéreas S.A. One insurance policies guarantee 6ª Vara da Fazenda Pública de São Paulo/SP Tam Linhas Aéreas S.A. One insurance policies guarantee 3ª Vara da Fazenda Pública de São Paulo Tam Linhas Aéreas S.A. One insurance policies guarantee 2,700 1,675 4,800 4,162 2,347 2,474 1,402 April 5, 2013 May 31, 2013 September 23, 2013 October 8, 2013 May 17, 2013 March 1, 2013 May 28, 2014 12ª Vara da Fazenda Pública do Estado de São Paulo Tam Linhas Aéreas S.A. One insurance policies guarantee 1,392 January 28, 2014 Vara De Execuções Fiscais De Santa Cataria Tam Linhas Aéreas S.A. One insurance policies guarantee 3,780 November 20, 2013 6ª Vara de Execuções Fiscais Federal de Campo Grande/MS Tam Linhas Aéreas S.A. Two insurance policies guarantee 73,142 January 4, 2014 União Federal Tam Linhas Aéreas S.A. One insurance policies guarantee 2,533 July 24, 2015 Execuções Fiscais Estaduais da Comarca de São Paulo Tam Linhas Aéreas S.A. One insurance policies guarantee 1,158 May 25, 2014 2ª Vara Cível da Comarca de Bauru/SP Tam Linhas Aéreas S.A. One insurance policies guarantee 1,000 November 14, 2014 183,246 5 6 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTA 37. TRANSACTIONS WITH RELATED PARTIES f o s t n u o m A s n o i t c a s n a r t y c n e r r u C $ S U h T 1 1 1 1 4 ) 3 0 8 ( ) 1 0 1 1 ( , 3 1 ) 3 1 ( 1 4 7 7 9 8 3 ) 6 8 7 ( 7 1 2 4 1 , ) 9 7 2 ( 3 4 2 ) 9 2 ( ) 2 4 4 ( 1 1 ) 8 1 ( 6 0 3 3 ) 1 1 2 ( 9 1 4 P L C P L C P L C $ S U P L C P L C P L C P L C P L C P L C P L C P L C P L C $ S U $ S U $ S U $ S U L R B L R B L R B L R B ) 1 ( i t n e m p u q e d n a t n a l p y t r e p o r P f o e l a S d e d i v o r p s e c i v r e s m o r f e u n e v e R n o e d a m s t n e m t i m m o C y t i t n e e h t f o f l a h e b d e v i e c e r s e c i v r e S d e i v o r p s e c i v r e s m o r f e u n e v e R e r u t l u c i c s i P d e v i e c e R s e c i v r e S s t n e m t s e v n I d e v i e c e R s e c i v r e S t r o p s n a r T d e d i v o r p s e c i v r e s m o r f e u n e v e R s t n e m t s e v n I d e d i v o r p s e c i v r e s m o r f e u n e v e R n e m o w d n a n o i t o m o r P d e v i e c e r s e c i v r e S t n e m r e w o p m e r o s s e l s a s e s a e L s t n e m t s e v n I d e v i e c e r s e c i v r e S d e v i e c e r s e c i v r e S r o s s e l s a s e s a e L r e t n e c g n n i a r T i d e t a l e r f o e r u t a N s n o i t c s n a r t s e i t r a p r e h t o f o n o i t a n a l p x E t u o b a n o i t a m r o f n i s e i t r a p d e t a l e r f o y r t n u o C n i g i r o o e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C e l i h C p i h s n o i t a l e r f o e r u t a N s e i t r a p d e t a l e r h t i w y t r a p d e t a l e R . o N x a T l r e d o h e r a h S g n i l l o r t n o C a t s o C s e n o i s r e v n I . A P C y . a d t L e d r e V e t a i c o s s A l a c i n h c e T n a L a s n a h t f u L . . A S g n n i a r T i s e i t r a p d e t a l e r r e h t O r e j u M d a d n u m o C i s e i t r a p d e t a l e r r e h t O s e i t r a p d e t a l e r r e h t O s e l a i l i F y . . A S a i h t e B s e i t r a p d e t a l e r r e h t O . . A S e p i l e F n a S s e t r o p s n a r T s e i t r a p d e t a l e r r e h t O . . A S s e n o e l a g a n r o T a n i r a M a j n a r G s e i t r a p d e t a l e r r e h t O s e l a i l i F y . . A S o t r e b A n a S l . 9 - 0 7 3 0 1 8 6 9 . . K - 0 8 8 7 4 8 6 9 . . K - 0 0 0 6 1 2 5 6 . . 1 - 0 7 3 1 9 5 8 7 . . 3 - 0 4 4 3 7 7 9 7 . . 5 - 0 0 0 2 5 7 7 8 . . 0 - 0 8 2 2 1 8 6 9 . f o f l a h e b n o t n e m e l t t e s s e i t i l i b a i L y t r a p d e t a l e r e h t r o f y t i t n e e h t f o f l a h e b n o t n e m e l t t e s s e i t i l i b a i L y t r a p d e t a l e r e h t r o f y t i t n e e h t f o f l a h e b n o t n e m e l t t e s s e i t i l i b a i L y t r a p d e t a l e r e h t r o f y t i t n e e h t g n i t e k r a M d e v i e c e R s e c i v r e S t r o p s n a r T d e i v o r p s e c i v r e s m o r f e u n e v e R t r o p s n a r T d e v i e c e R s e c i v r e S t r o p s n a r T l i z a r B l i z a r B l i z a r B l i z a r B s e i t r a p d e t a l e r r e h t O s e i t r a p d e t a l e r r e h t O a v i t u c e x E o ã ç a i v A M A T . . A S o e r é A i x a T e e t r o p s n a r T - f e d a T e o ã ç a r t s i n m d A i . a d t L o ã ç a p i c i t r a P s e i t r a p d e t a l e r r e h t O . a d t L . r t s i D m o C . . r p e R e r e h w y r e v E n I e d a M s e i t r a p d e t a l e r r e h t O . . A S e d a d i l e d i F h a m s i r P r o s s e l s a s e s a e L s t n e m t s e v n I a n i t n e g r A s e i t r a p d e t a l e r r e h t O a c i t u á n o r e A a r o s r e v n I a n i t n e g r A n g i e r o F n g i e r o F n g i e r o F n g i e r o F n g i e r o F 2 1 0 2 , 1 3 r e b m e c e D d e d n e d o i r e p e h t r o f s e i t r a p d e t a l e r h t i w s n o i t c a s n a r T ) a n o i t a l l e c r a p e h t f o 2 1 . o N t o L “ d e l l a c d n a l e h t e s a h c r u p o t t n e m e e r g a n a o t n i d e r e t n e , r e s a h c r u p s a ) . . A S a i h t e B f o y r a i d i s b u S ( . . A S r e s a r t o S d n a r e l l e s s a . . A S a c i t u á n o r e A a i r a i l i b o m n I , 2 1 0 2 , 8 2 r e b m e c e D n O ) 1 ( . , 7 1 2 4 1 $ S U h T o t d e t n u o m a e l a s e h t f o e u l a v e h T ” . s r e v e h c E o L t c e y o r p 6 6 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A f o s t n u o m A s n o i t c a s n a r t $ S U h T y c n e r r u C 1 7 9 1 2 2 1 ) 2 5 6 ( ) 4 9 5 ( 6 4 5 3 8 6 1 , 1 6 4 4 , ) 6 5 4 ( 6 8 3 3 5 , 9 9 1 ) 1 1 8 ( 1 1 8 ) 2 1 4 ( P L C P L C P L C P L C $ S U P L C P L C P L C P L C P L C P L C $ S U $ S U $ S U d e d i v o r p s e c i v r e s m o r f e u n e v e R d e v i e c e r s e c i v r e S d e v i e c e r s e c i v r e S r o s s e l s a s e s a e L d e d i v o r p s e c i v r e s m o r f e u n e v e R r o s s e l s a s e s a e L t b e d d e t n a r g n o i s s e C s e i r a i d i s b u s f o e l a S d e v i e c e r s e c i v r e S r e t n e c g n n i a r T i e l i h C e t a i c o s s A l a c i n h c e T n a L a s n a h t f u L . . A S g n n i a r T i s t n e m t s e v n i e l i h C s e i t r a p d e t a l e r r e h t O ) 1 ( s e l a i l i F y . . A S a i h t e B d e d i v o r p s e c i v r e s m o r f e u n e v e R i g n m r a f h s i F d e v i e c e r s t n e m y a p e r p r e h t O s t n e m t s e v n I e l i h C e l i h C s e i t r a p d e t a l e r r e h t O s e i t r a p d e t a l e r r e h t O d e t n a r g s t n e m y a p e r p r e h t O e e s s e l s a s e s a e L s t n e m t s e v n I a n i t n e g r A s e i t r a p d e t a l e r r e h t O . . A S s e n o e l a g a n r o T a n i r a M a j n a r G i s a r e n M s e n o i s r e v n I . . A S o c i r b a t n a C l e d a c i t u á n o r e A a r o s r e v n I a n i t n e g r A . - K 0 8 8 7 4 8 6 9 . 1 - 5 - 1 - . 0 7 3 1 9 5 8 7 . . 0 0 0 2 5 7 7 8 . . 0 4 3 5 2 6 6 9 . n g i e r o F r o s s e l s a s e s a e L s t n e m t s e v n I e l i h C l s r e d o h e r a h S g n i l l o r t n o C a t s o C s e n o i s r e v n I . A P C y . a d t L e d r e V 9 - . 0 7 3 0 1 8 6 9 . d e t a l e r f o e r u t a N s n o i t c s n a r t s e i t r a p r e h t o f o n o i t a n a l p x E t u o b a n o i t a m r o f n i s e i t r a p d e t a l e r f o y r t n u o C n i g i r o o p i h s n o i t a l e r f o e r u t a N s e i t r a p d e t a l e r h t i w y t r a p d e t a l e R . o N x a T 1 1 0 2 , 1 3 r e b m e c e D d e d n e d o i r e p e h t r o f s e i t r a p d e t a l e r h t i w s n o i t c a s n a r T ) b ( , . . A S a i h t e B f o s e i r a i d i s b u s , . i A p S n m t e B s e n o i s r e v n I d n a a d a t i m i L e t r o p s n a r T e d s o i c i v r e S d n a s r e l l e s s a . . A S s p u o r G s e n i l r i A M A T A L f o s e i r a i d i s b u s , . . A S n a L s e n o i s r e v n I d n a . . A S o g r a C n a L , 1 1 0 2 , 6 l i r p A n O ) 1 ( r o f s a w y r a i d i s b u s d n a . a d t L L T N I l e u B f o e l a s e h t f o e u l a v e h T . A S . s s e r p x E e u B y l . a d t L L T N I l s s e r p x E e u B s e i n a p m o c f o y t i u q e l a i c o s e h t f o % 0 0 1 o t d e t a l e r e l a s f o t c a r t n o c a o t n i d e r e t n e , s r e s a h c r u p s a . , 6 8 3 3 5 $ S U h T . 9 e t o N n i d e s o l c s i d e r a s e i t r a p d e t a l e r o t e l b a y a p s t n u o c c a d n a e l b a v i e c e r s t n u o c c A f o s e c n a l a b e h T . 2 1 0 2 , 2 2 e n u J s i h c i h w , i n o i t a n b m o C s s e n i s u B f o e t a d e h t m o r f d e r e d i s n o c e r a , s e i r a i d i s b u S d n a . . l A S M A T f o s r e d o h e r a h s n o m m o c h t i w s n o i t a r e p o 2 1 0 2 , 1 3 r e b m e c e D f o s A 7 6 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (c) Compensation of key management The Company has defined for these purposes that key management personnel are the executives who define the Company’s policies and major guidelines and who directly affect the results of the business, considering the levels of Vice-Presidents, Chief Executives and Directors.. For the periods ended December 31, 2012 ThUS$ 15,146 653 395 5,060 1,412 2011 ThUS$ 9,696 185 665 5,011 2,084 Remuneration Management fees Non-monetary benefits Short-term benefits Share-based payments TOTAL 22,666 17,641 8 6 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 38. SHARE-BASED PAYMENTS (a) LATAM Airlines Group S.A. compensation plans. carried out during the first quarter of 2010 and established a new term and exercise price. The original grant and subsequent amendments have been formalized through the signing of option contracts for the subscription of shares according to the proportions shown in the accrual schedule, which are related to the permanence of the executive on those dates for exercising the options: The compensation plans implemented through the granting of options to subscribe and pay for shares, which have been granted since the last quarter of 2007, are shown in the consolidated statements of financial position in accordance with IFRS 2 “Share- based payments”, booking the effect of the grate date fair value of the options granted as a charge to remuneration on a straight-line basis between the date of granting the options and the date on which these become vested. During the last quarter of 2009, the original terms of the plan were amended regarding subscription and payment of options. These modifications were Percentage Period 30% 70% From October 29, 2010 until March 31, 2012 From October 30, 2011 until March 31, 2012 These options have been valued and booked at their fair value on the grant date, determined using the “Black-Scholes-Merton” method. All options expired on March 31, 2012. Stock options under a share- based payment agreement Number of share options Balance as of January 1, 2011 Stock options exercised Closing balance as of December 31, 2011 Balance as of January 1, 2012 Stock options annulled Stock options exercised Closing balance as of December 31, 2012 2,209,091 (1,535,522) 673,569 673,569 (91) (673,478) - 9 6 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Entry data for option valuation model used for stock options granted. Weighted average share price Exercise price Expected volatility Life of option Dividends expected Risk-free interest US$ 17.3 US$ 14.5 33.2% 1.9 years 50% 0.0348 (b) Subsidiaries compensation plans TAM Linhas Aereas S.A. and Multiplus S.A., both subsidiaries of TAM S.A., have outstanding stock options at December 31, 2012, which amounted to 972,344 shares and 891,261 shares, respectively. TAM Linhas Aéreas S.A. Description 1st Grant 2nd Grant 3rd Grant 4th Grant 1st Extraordi- nary Grant 3nd Extraordi- nary Grant 4th Extraordi- nary Grant Total Date 12-28-2005 11-30-2006 12-14-2007 05-28-2010 09-27-2007 04-01-2010 04-01-2010 - 119,041 259,857 363,446 230,000 - - 972,344 Outstanding option number Multiplus S.A. Description 1st Grant 2nd Grant 3rd Grant 4th Grant 1st Extraordi- nary Grant 2nd Extraordi- nary Grant 3th Extraordi- nary Grant Total Date 10-04-2010 11-08-2010 04-16-2012 10-04-2010 10-04-2010 10-04-2010 04-16-2012 Outstanding option number 61,463 2,245 362,272 - 403,235 - 62,046 891,261 The Options of TAM Linhas Aéreas S.A., under the plan’s terms, are divided into three equal parts and employees can run a third of its options after three, four and five years respectively, as long as they remain employees of the company. The agreed term of the options is seven years. For Multiplus S.A., the plan’s terms provide that the options granted to the usual prizes are divided into three equal parts and employees may exercise one-third of their two, three and four, options respectively, as long as they keep being employees of the company. The agreed term of the options is seven years after the grant of the option. The first extraordinary granting was divided into two equal parts, and only half of the options may be exercised after three years and half after four years. The second extraordinary granting was also divided into two equal parts, which may be exercised after one and two years respectively. 0 7 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Both companies have an option that contains a “service condition” in which the exercise of options depends exclusively on the delivery services by employees during a predetermined period. Terminated employees will be required to meet certain preconditions in order to maintain their right to the options. The state, in relation to the acquisition of the share’s rights, in both companies is as follows: Company Number of shares Accrued options Number of shares Non accrued options TAM Linhas Aéreas S.A. Multiplus S.A. 972,344 - - 891,261 1 7 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A Ecuador: • the Starting an environmental management system project for our operations at the new airport in Quito. implementation of USA: • the Starting an environmental management system project for our cargo operation in Miami. implementation of During 2012 Environmental Division was US$ 526,074. the expenses incurred by the NOTE 39. THE ENVIRONMENT In 2010 the Group completed the creation of the Environmental Division of LAN Airlines S.A., whose structure has allowed it to manage environmental issues inside the Company on a global level over the last two years. The main objective of this department implement a management system and environmental programs that meet the increasingly demanding requirements globally and with it, position the Company as an industry leader in global environmental issues. to is One of the functions of the Environmental Division is to develop, in conjunction with the various areas of the Company, continuous improvement programs in their internal processes that generate environmental benefits and to complement those programs currently in process. The main initiatives in 2012 on environmental issues were as follow: Chile: • • Implementation of the first commercial flight within South America with Biofuel used cooking oil; Studies and external audits and environmental issues, particularly in diagnostics and updating environmental compliances. Peru: • Measurement and external Verification of Carbon Footprint in LAN Perú S.A. • Purchase carbon credits in the amount of US$ 49,000 to offset the emissions of our operations on the ground. 2 7 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A NOTE 40. EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS 1. Devaluation in Venezuela: On February 8, 2013, Exchange Arrangement N°14 was published in the Official Gazette of the Bolivarian Republic of Venezuela according to which effective February 9, 2013, the exchange rate was set at 6.30 bolivars per US$1. Until that date, the exchange rate was 4.30 bolivars per US$1. Article 9 of the same Arrangement added that foreign currency sale transactions corresponding to applications that had been marked received by the Foreign Currency Administration Commission as of February 8, 2013 for, among other purposes, international passenger, cargo and mail air carriage duly licensed by the National Executive Branch, will be settled using the exchange rate of 4.30 bolivars per US$1. 2. Suspension of the B787 Fleet Operation: On January 16, 2013, All Nippon Airways and Japan Airlines suspended their Boeing 787 operations because of recent occurrences with the battery systems of those aircraft. On the same date, the Federal Aviation Administration (“FAA”) instructed the Boeing 787 operators in the United States of America to suspend their flights until inspections and actions were taken regarding the battery system. Therefore, in coordination with the Chilean Civil Aviation Board (“DGAC”), the Company decided to suspend its Boeing 787 operations until further notice. Boeing has been working on resolving the problems that led to the suspension of the Boeing 787 fleet. There has not yet been any official decision by the FAA, so it is impossible to determine when that fleet will resume operation. 3. Employee Compensation Plan for the Company and its subsidiaries: At a Special Shareholders Meeting held December 21, 2011, the Company’s shareholders approved, among other matters, an increase in its capital by US$1,465,372,970.09 through the issuance of 147,355,882 common shares with no par value. US$47,733,352.49 of that increase, corresponding to the issuance of 4,800,000 shares, would be allocated to compensation plans for employees of the Company and its subsidiaries, pursuant to Article 24 of the Companies Law. The main conditions for these compensation plans are: (a) Upon a recommendation by the Company’s Executive Committee, the Board will determine the employees of the Company and its subsidiaries included in the Compensation Plan and the number of options for the acquisition of shares in the Company that will be allocated to each, after which a stock option agreement will be signed with each employee. (b) Until the shares in the option are subscribed, the optionee will have no economic or political rights and will not be considered in the quorum for shareholders meetings. (c) The options allocated to each employee will accrue in parts on the following three dates: 1) 30% on December 21, 2014: (2) 30% on December 21, 2015 and (3) 40% on June 21, 2016, subject to remaining in the company’s employ. (d) The price payable for each share allocated to the Compensation Plan, if the options are exercised, will be CLP$11,000. It will be calculated, adjusted and payable in the manner indicated in letter h) below. (e) Once the options accrue, in the aforesaid parts, the employee may exercise them in whole or in part, in which case he must subscribe and pay for the respective shares at once, in the act of subscription, in cash, by check, by bank check, by electronic 3 7 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A fund transfer or any other instrument or paper representing money payable on demand. Partial exercise may be for no less than 10% of all options held by the Employee. (f) The period during which the employee must exercise the options after they have accrued according to letter c) above will expire December 21, 2016. If the employee has not exercised or waived the options in that period, he will be understood, for all purposes, to have waived the options and, accordingly, all rights, powers, promises or offers in relation to the subscription of cash shares in the Company will be deemed extinguished and it will be understood that the employee has irrevocably waived any right or power in relation thereto. The Company will be released from any obligation. (g) If the employee resigns from his position or his employment contract is terminated for any reason other than the reasons contained in article 160 of the Labor Code, only the options accrued through the date of termination of the employment contract may be exercised, always provided the period for exercise of the options is in force. The employee will also forfeit the right to exercise the options, whether or not they have accrued, if he is severed for any of the reasons contained in article 160 of the Labor Code. The heirs or legatees of the employee shall exercise the rights and fulfill the obligations in substitution for the employee should he die, and the above provisions in this letter shall consequently not apply. In that case, all of the options granted shall accrue automatically and the heirs or legatees must exercise them within 180 calendar days after the date of the employee’s death. The employee shall retain his rights to the options in the event of a permanent disability and may exercise them in the periods indicated above. (h) The price payable for these shares, if the respective options are exercised, will be expressed in Dollars of the United States of America (“Dollars”), for the equivalent in that currency to the Placement Price indicated in letter d) above on the date when the Company’s Board of Directors sets it (the “Pricing Date”), converted at the observed dollar exchange rate published in the Official Gazette on the Pricing Date. As of the Pricing Date, said price expressed in Dollars will be adjusted by the change in the Consumer Price Index (CPI) published monthly by the U.S. Department of Labor, from the Pricing Date to the date of subscription and payment of the shares. The subscription price shall be paid in pesos, local currency, converted at the observed dollar exchange rate published in the Official Gazette on the date of subscription and payment of the shares. (i) The options may not be assigned, liened or transferred in any way by the employee. However, the employee may state his waiver of the options at any time by sending a certified letter of waiver to the Chief Financial Officer of the Company. 4. Decision on Global Alliance: On March 7, 2013, the Company informed the Insurance Commission of the Securities and following material event: (a) In Decision N° 37 dated September 21, 2011 (the “Decision”), the Antitrust Court (“TDLC”) approved the concentration transaction between LAN Airlines S.A. (now called LATAM Airlines Group S.A.) and TAM Linhas Aereas S.A., subject to fulfillment of the conditions stipulated in that Decision. (b) The sixth condition imposed by the TDLC’s Decision requires that “LATAM resign from at least one of the two global alliances in which the parties to this Transaction, LAN and TAM, are members, in the period of 24 months as from the date of consummation of the Transaction.” (c) The Conselho Administrativo de Defesa Economica (the Administrative Economic Defense Council, or CADE) of Brazil approved the merger of TAM S.A. and LAN Airlines S.A. by resolution issued December 14, 2011, which was partially amended on February 8, 2012, subject to fulfillment of the conditions stipulated in said resolution. One of those definitive conditions was that the petitioners, namely LAN Airlines S.A. and TAM S.A., submit the choice of the global alliance in which they will participate to approval by CADE in the period of 22 months after consummation of the concentration transaction, i.e., as from June 22, 2012. 4 7 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A (d) In order to fulfill the aforesaid conditions imposed by each of TDLC and CADE, the Board of Directors of LATAM Airlines Group resolved, at a regular Board meeting held March 5, 2013, to choose oneworld as its global alliance for the airlines in its group. As a result, TAM Linhas Aereas S.A. (“TAM”) and Aerovias de Integracion Regional-Aires S.A. (“Lan Colombia”) will join oneworld in which LATAM Airlines Group and 13 others are already members. (e) In the opinion of the Board of LATAM Airlines Group, this global alliance is the one best suited to the company’s interests and has the most synergies with LATAM Airlines Group. It also offers the best benefits, more connectivity and products for our passengers. (f) TAM’s Board also resolved to resign from TAM’s membership in the Star Alliance global alliance, which will take effect in the second quarter of 2014, on a date to be disclosed during 2013. (g) TAM is expected to officially join oneworld during the second quarter of 2014, as soon as it leaves Star Alliance. That date will also be announced this year. (h) LAN Colombia is expected to join oneworld in the fourth quarter of 2013. (i) Finally, this decision by the Board of LATAM Airlines Group S.A. will be presented in due course to CADE, according to the terms of its aforesaid resolution and to applicable procedure. 5. Covenants of TAM Linhas Aéreas S.A.: Our subsidiary, TAM Linhas Aéreas S.A., has set limits on some of its financial indicators in relation to the issuance of debentures (CVM 476) in 2009 for an original amount of ThR $600,000. Anticipating a potential declaration of default on those limits at the close of December 2012, TAM Linheas Aéreas S.A. requested a waiver by the General Debenture Holder Assembly and according to IFRS accounting standards, the financial liabilities relating to this debenture issue are classified as a current financial liability. On February 14, 2013, the General Debenture Holder Assembly granted that waiver, so this obligation will be classified as current and non-current financial liabilities in the future financial statements. 6. Placement of remainder in the exchange of shares: On September 4, 2012, the Company held a special shareholders meeting convened by its Board of Directors on August 3, 2012. At that meeting, shareholders decided, among other matters, that the remainder of 7,436,816 shares in LATAM out of a total of 142,555,882 shares issued under authorization of the Special Shareholders Meeting held December 21, 2011 that were not exchanged for shares in Sister Holdco S.A. and Holdco II S.A. be allocated to a preemptive offer among LATAM shareholders according to article 25 of the Companies Law, and that any unsubscribed balance be placed on the market. Placement of these shares was approved by the Securities and Insurance Commission on December 11, 2012. On December 20, 2012, the Company’s Board of Directors agreed to begin the right of first refusal period for such shares effective December 21, 2012 and to set the placement price at CLP$11,000 per share, all of which was informed to the Securities and Insurance Commission by a disclosure on the same date. At the end of that right of first refusal period, i.e., on January 19, 2013, 6,857,190 shares of that remainder had been subscribed and paid, leaving a balance of 579,626 unsubscribed shares. That balance was auctioned on the Santiago Stock Exchange, Securities Exchange, on January 23, 2013 at a price of CLP$11,921 per share. 7. Capital increase of Multiplus S.A. On March 8, 2013 the company Multiplus S.A., subsidiary of TAM S.A., published the following Significant matter: Multiplus S.A. (BM&FBOVESPA: MPLU3) (“Company”), 5 7 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A pursuant to Law 6404 of December 15, 1976, as amended (“Corporation Law”), Instruction 358/02 issued by the Brazilian Securities and Exchange Commission (“CVM”), as amended, and article 7 of CVM Instruction 471 of August 8, 2008 (“CVM Instruction 471”), hereby informs its shareholders and the market in general that: Today, the Company presented ANBIMA – the Brazilian Association of Capital and Financial Market Entities (“ANBIMA”) with a request for the preliminary analysis of the registration of a primary public distribution of registered common book-entry shares with no par value issued by the Company, free and clear of any encumbrances (“Shares” and “Offering”, respectively). Said request for the preliminary analysis for the registration of the Offering will obey the simplified procedure envisaged in CVM Instruction 471 and in the ANBIMA Regulation and Best Practices Code for Agreement Activities. The Offering will be coordinated by Banco BTG Pactual S.A. (“Lead Manager” and “Stabilizing Agent”) and Banco J.P. Morgan S.A. and will comprise the primary public distribution of Shares in Brazil on the unorganized over-the-counter market, pursuant to CVM Instruction 400 of December 29, 2003, as amended (“CVM Instruction 400”), including best placement efforts abroad for qualified institutional investors resident and domiciled in the United States of America, defined in accordance with Rule 144A of the Securities Act of 1933, through operations that are exempt from prior registration as per said Securities Act, as well as for investors in other countries, except the United States of America and Brazil, who are not resident in the United States of America or constituted in accordance with its laws. The Company’s shareholders will not be entitled to pre-emptive rights as per article 172 of Corporation Law, although they will have priority to subscribe to shares proportional to their share of the Company’s total capital stock, pursuant to the Offering documentation (“Priority Offering”). In accordance with article 24 of CVM Instruction 400, the number of Shares initially offered may be augmented by an over-allotment option of up to 15% of the total Shares initially offered (“Over-Allotment Option”), to be granted by the Company to the Stabilizing Agent in order to meet any excess demand determined during the Offering. In addition, without prejudice to the Over-Allotment Option, pursuant to article 14, paragraph 2 of CVM Instruction 400, the number of Shares initially offered, excluding the Over-Allotment Option, may, at the criterion of the Company, be augmented by up to 20% of the total Shares initially offered under the same conditions and at the same price as the Shares initially offered (“Additional Shares”). The amount of the Offering, excluding the Over- Allotment Option and the Additional Shares, is estimated at approximately R$ 800 million (eight hundred million reais), although this may vary depending on effective demand for the Shares demonstrated during the course of the Offering. The sale price of the Shares will be determined after conclusion of the bookbuilding process, based on the following parameters: (i) the price of the Shares on the BM&FBOVESPA; and (ii) the indications of interest, due to the nature of demand (by volume and price), collected during the bookbuilding process. The Offering, and its terms and conditions, were approved by a meeting of the Company’s Board of Directors on March 7, 2013. The effective capital increase within the limits of authorized capital, with the exclusion of existing shareholders’ pre-emptive rights, pursuant to article 172, item I of Corporation Law, and the price per share will be approved by a meeting of the Company’s Board of Directors to be held before the CVM grants registration of the Offering. This communication should not be regarded as an announcement of a Share offering. The Offering will be subject to national and international market conditions. In due time, the Company will publish a Notice to the Market containing information on: (i) the remaining characteristics of the Offering; (ii) the locations from where the preliminary prospectus can be obtained; (iii) the estimated Offering disclosure dates and locations; and (iv) the conditions, procedures, reserve period and bookbuilding period. The Offering’s registration request is currently under study and the Offering will only begin when it has been duly registered 6 7 2 s t n e m e t a t S l a i c n a n i F 2 1 0 2 T R O P E R L A U N N A with the CVM. The Company will keep the market informed of any important decisions regarding the Offering. Finally, pursuant to Official Letter Ofício-Circular/CVM/SEP/ N°01/2013, the Company hereby declares that its Management opted to discontinue the disclosure of its guidance in item 11 of its Reference Form, given the need to align its guidance disclosure policy with the procedures of its independent auditors and other consultants in the context of public offerings of securities issued by the Company in Brazil and abroad, in accordance with CVM Instruction 400. The Consolidated Financial Statements of LATAM Airlines Group S.A. and Subsidiaries as December 31, 2012 were approved at Board of Directors Meeting held March 19, 2013. INFORMATION ABOUT SUBSIDIARIES AND AFFILIATED COMPANIES LATAM AIRLINES GROUP S.A. 8 7 2 LATAM Airlines Group S.A. NOMBRE: LATAM AIRLINES GROUP S.A., CHILEAN TAX Nº 89.862.200-2 Official Gazette of 14 January 2012. The change of name came into force on 22 June 2012. LATAM Airlines Group S.A. is subject to the regulation applicable to listed joint stock companies and is registered with the Superintendencia de Valores y Seguros (SVS), Chile’s stock market regulator, under Inscription N° 0306 of 22 January 1987. Note: The financial information about subsidiaries presented below has been summarized. Their complete financial statements are available to the public at our corporate headquarters and at the Superintendencia de Valores y Seguros (SVS). Incorporation: Established as a limited liability company by public deed of 30 December 1983, extended by Public NotaryEduardo Avello Arellano, an extract of which was recorded at Folio 20,341 Nº 11,248 of 1983 of the Santiago Business Register and published in the Official Gazette of 31 December 1983. By public deed of 20 August 1985, extended by Public Notary Miguel Garay Figueroa, the company became a joint stock company under the name of LíneaAéreaNacionalde Chile S.A. (now LATAM Airlines Group S.A.). As regards aeronautic and radio communication concessions, traffic rights and other administrative concessions, this company was expressly designated by Law N°18.400 as the legal continuation of the state company created in 1929. The Extraordinary Shareholders’ Meeting of LAN Chile S.A. held on 23 July 2004 agreed to change the company’s name to “LAN Airlines S.A.”. An extract of the public deed corresponding to the Meeting’s minutes was recorded on the Business Register of the Real Estate Registry Office at Folio 25,128 Nº 18,764 of 2004 and was published in the Official Gazette of 21 August 2004. Thechange of namecameintoforceon 8 September 2004. The Extraordinary Shareholders’ Meeting of LAN Airlines S.A. held on 21 December 2011 agreed to change the company’s name to “LATAM Airlines Group S.A.” An extract of the public deed corresponding to the Meeting’s minutes was recorded on the Business Register of the Real Estate Registry Office at Folio 4,238 Nº 2,921 of 2012 and was published in the Subsidiaries and Affiliated CompaniesANNUAL REPORT20129 7 2 TAM S.A. and Subsidiaries BOARD OF DIRECTORS: Chairman: Directors: Maria Cláudia Oliveira Amaro Maurício Rolim Amaro Noemy Almeida Oliveira Amaro Flávia Turci Enrique Cueto Plaza Ignacio Cueto Plaza Incorporation: Joint stock company established in Brazil in May 1997. Purpose: To participate as a shareholder in other companies, especially companies that provide regular national and international air transport services and other activities associated, related and complementary to regular air transport. Subscribed and paid-in capital: Net income: Shareholding: % of consolidated assets: ThUS$ 404,169 ThUS$ (28,166) 100,00% 3,76% Sociedades Filiales de TAM S.A. y Participación TAM Linhas Aereas S.A. y filiales Multiplus S.A. Transportes Aereos del Mercosur S.A. Pantanal Linhas Aereas S.A. Corsair Participações Ltda. TP Franchising Limited 100,00% 72,87% 94,98% 100,00% 100,00% 99,99% Subsidiaries and Affiliated CompaniesANNUAL REPORT2012 0 8 2 TAM S.A. and Subsidiaries Consolidated Statements of Financial Position As of December 31, 2012 ASSETS Total current assets other than non-current assets (or disposal groups) classified as held for sale or as held for distribution to owners Non-current assets (or disposal groups) classified as held for sale or as held for distribution to owners Total current assets Total non-current assets TOTAL ASSETS LIABILITIES AND EQUITY LIABILITIES Total current liabilities Total non-current liabilities TOTAL LIABILITIES EQUITY Parent’s ownership interest Non-controlling interest Total equity TOTAL LIABILITIES AND EQUITY Consolidated Statements of Income by Function Revenues Gross margin Income before taxes Income tax expense NET INCOMEFOR THE PERIOD Net income for the period attributable to: Owners of the parent Non-controlling interest NET INCOMEFOR THE PERIOD 2.017.632 8.917 2.026.549 6.266.180 8.292.729 3.039.500 4.478.196 7.517.696 753.907 21.126 775.033 8.292.729 As of the period betweenJune 22th and December 31th of 2012 ThUS$ 3.645.409 615.475 (22.171) (5.995) (28.166) (45.163) 16.997 (28.166) Subsidiaries and Affiliated CompaniesANNUAL REPORT20121 8 2 Consolidated Statements of Comprehensive Income by Function As of the period between June 22th and December 31th of 2012 NET INCOMEFOR THE PERIOD Other comprehensive income TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Comprehensive income attributable to: Owners of the parent Non-controlling interest TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Consolidated Statements of Changes in Equity Equity as ofJune 22, 2012 Comprehensive income for the period Dividends Other increase (decrease) in equity CLOSING BALANCE AS OF CURRENT YEAR ENDING BALANCES DECEMBER 31, 2012 Parent’s ownership interest Non- controlling interest ThUS$ 963.736 (40.072) - (169.757) 753.907 ThUS$ 21.497 17.847 (19.997) 1.779 21.126 Consolidated Statements of Cash Flows – Direct Method Net cash flow from (used in) operating activities Net cash flow from (used in) investment activities Net cash flow from (used in) financing activities NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Effects of variation in the exchanges rate on cash and cash equivalents Cash and cash equivalents at end of period ThUS$ (28.166) 5.941 (22.225) (40.072) 17.847 (22.225) Total equity ThUS$ 985.233 (22.225) (19.997) (167.978) 775.033 As of the period between June 22th and December 31th of 2012 MUS$ (28.166) 195.418 (537.981) (63.317) (6.587) 320.716 Subsidiaries and Affiliated CompaniesANNUAL REPORT20122 8 2 LAN Cargo S.A. and Subsidiaries Board of directors Chairman: Directors: José Cox Donoso Juan José Cueto Plaza Ramón Eblen Kadis Ignacio Cueto Plaza Enrique Cueto Plaza INCORPORATION: Established as a closed joint stock company by public deed of 22 May 1970, extended by Public Notary Sergio Rodríguez Garcés, with the assets and liabilities of the Línea Aérea del Cobre Limitada (Ladeco Limitada) which had been established by public deed of 3 September 1958, extended by Public Notary Jaime García Palazuelos. The company’s bylaws have since been amended on a number of occasions, most recently by public deed of 20 November 1998, recorded at Folio 30,091 Nº 24,117 of the Santiago Business Register and published in the Official Gazette of 3 December 1998, under which Ladeco S.A. merged through incorporation with Fast Air Carrier S.A., a subsidiary of LAN Chile S.A. Under public deed of 22 October 2001 corresponding to the Extraordinary Shareholders’ Meeting of Ladeco S.A. held on the same date, its name was changed to “LAN Chile Cargo S.A.”. An extract of this deed is recorded on the Business Register of the Santiago Real Estate Registry Office at Folio 27,746 Nº 22,624 of 2001 and was published in the Official Gazette of 5 November, 2001. The change of name came into force on 10 December 2001. Under public deed of 23 August 2004 corresponding to the Extraordinary Shareholders’ Meeting of LAN Chile Cargo S.A. held on 17 August 2004, its name was changed to “LAN Cargo S.A.” An extract of this deed is recorded on the Business Register of the Santiago Real Estate Registry Office at Folio 26,994 Nº 20,082 of 2004 and was published in the Official Gazette of 30 August 2004. PURPOSE: To engage in and develop, on its own account or on behalf of others, the following activities: transport in general in any of its forms and, in particular, the air transport of passengers, cargo and mail within and outside Chile; tourism, hotel and other complementary activities in any of their forms within and outside Chile; the purchase, sale, manufacture and/or assembly, maintenance, renting or any other form of use of aircraft, spare parts and aeronautic equipment, either on its own account or on behalf of third parties, and their exploitation on any account; the provision of all types of services and consultancy related to transport in general and to air transport in particular, in any of its forms whether consisting of ground support, maintenance, technical or any other type of consultancy, within and outside Chile; and, all types of activities related to tourism, hotels and the other activities and goods referred to above, within and outside Chile. In compliance with these objectives, the Company may make investments or become a partner in other companies by acquiring shares or rights or interests in any other type of association, whether existing or formed in the future, and may in general perform all the acts and enter into all contracts necessary and pertinent to fulfill the above objectives. Subscribed and paid-in capital: Net income: Shareholding: % of consolidated assets: ThUS$ 83,225 ThUS$55,356 99,8980% 2,20% Subsidiaries and Affiliated CompaniesANNUAL REPORT2012 3 8 2 LAN Cargo S.A.: Shareholdings Sociedades Filiales de LAN Cargo S.A. y Participación in subsidiaries Laser Cargo S.R.L Aircraft Internacional Leasing Limited Ediciones Ladeco América S.A. Ladeco Cargo S.A. Fast Air Almacenes de Carga S.A. Prime Airport Services Inc. y filial LAN Cargo Overseas Limited y filiales Transporte Aéreo S.A. Consorcio Fast Air Almacenes de Carga S.A. - Laser Cargo S.R.L. Unión Transitoria de Empresas LAN Cargo Inversiones S.A. y filial Connecta Corporation 99,99% 99,98% 99,00% 99,00% 99,89% 100,00% 99,98% 99,99% 100,00% 99,00% 100,00% LAN Cargo S.A. and subsidiaries (Closed joint stock company) Consolidated Statements of Financial Position ASSETS Total current assets other than non-current assets (or disposal groups) classified as held for sale or as held for distribution to owners Non-current assets (or disposal groups) classified as held for sale or as held for distribution to owners Total current assets Total non-current assets TOTAL ASSETS LIABILITIES AND EQUITY LIABILITIES Total current liabilities Total non-current liabilities TOTAL LIABILITIES EQUITY Parent’s ownership interest Non-controlling interest TOTAL EQUITY TOTAL LEABILITIES AND EQUITY As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 484.594 499.321 2.318 2.291 486.885 716.666 501.639 528.033 1.203.551 1.029.672 296.223 455.291 215.112 292.417 751.514 507.529 447.028 518.600 5.009 3.543 452.037 522.143 1.203.551 1.029.672 Subsidiaries and Affiliated CompaniesANNUAL REPORT20124 8 2 Consolidated Statements of Income by Function Revenues Gross margin Income before income taxes Income tax expense NET INCOMEFOR THE PERIOD Net income for the period attributable to: Owners of the parent Non-controlling interest NET INCOME FOR THE PERIOD For the periods ended December 31, 2012 2011 ThUS$ ThUS$ 1.333.780 40.465 (47.360) (7.996) (55.356) (55.478) 122 (55.356) 1.292.997 59.930 111.710 (14.657) 97.053 96.365 688 97.053 Consolidated Statements of Comprehensive Income by Function NET INCOMEFOR THE PERIOD Other comprehensive income TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Comprehensive income attributable to: Owners of the parent Non-controlling interest TOTAL COMPREHENSIVE INCOME FOR THE PERIOD For the periods ended December 31, 2012 ThUS$ (55.356) 1.055 (54.301) (54.308) 7 (54.301) 2011 ThUS$ 97.053 (1.162) 95.891 95.199 692 95.891 Consolidated Statements of Changes in Equity Parent’s ownership interest Non- controlling interest Total equity EQUITY AS OF JANUARY 1, 2011 Comprehensive income for the period Dividends Other increase (decrease) in equity (161) PRIOR YEAR ENDING BALANCE AS OF DECEMBER 31, 2011 EQUITY AS OF JANUARY 1, 2012 Comprehensive income for the period Dividends Other increase (decrease) in equity CLOSING BALANCE AS OF CURRENT YEAR ENDING BALANCES DECEMBER 31, 2012 ThUS$ 456.106 95.199 (32.544) (161) 518.600 518.600 (54.308) (15.901) (1.363) 447.028 ThUS$ 2.752 692 (14) 113 3.543 3.543 7 - 1.459 5.009 ThUS$ 458.858 95.891 (32.558) (48) 522.143 522.143 (54.301) (15.901) 96 452.037 Subsidiaries and Affiliated CompaniesANNUAL REPORT20125 8 2 Consolidated Statements of Cash Flows – Direct Method Net cash flow from (used in) operating activities Net cash flow from (used in) investment activities Net cash flow from (used in) financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS Effects of variation in the exchanges rate on cash and cash equivalents Cash and cash equivalents at end of period For the periods ended December 31, 2012 ThUS$ 125.990 (11.677) 2011 ThUS$ 71.438 104.682 (118.848) (177.751) (4.535) (2) 12.688 (1.631) (74) 17.225 Subsidiaries and Affiliated CompaniesANNUAL REPORT20126 8 2 LAN Perú S.A. BOARD OF DIRECTORS: Chairman: Directors: Emilio Rodríguez Larraín Salinas Enrique Cueto Plaza Ignacio Cueto Plaza Alejandro de la Fuente Goic Jorge Harten Costa Alejandro García Vargas Luis Enrique Gálvez de la Puente INCORPORATION: company in Peru on14 February 1997. Established as a joint stock PURPOSE: To provide air transport services for passengers, cargo and mail, domestically and internationally, in compliance with civil aeronautical laws. Subscribed and paid-in capital: Net income: Shareholding: % of consolidated assets: ThUS$4,341 ThUS$2,683 70,00% 0,04% LAN Perú S.A. (Closed joint stock company) Balance Sheet Assets Liabilities Shareholder equity Equity and Liabilities As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 167.121 147.055 20.066 167.121 143.212 126.881 16.331 143.212 Subsidiaries and Affiliated CompaniesANNUAL REPORT2012 7 8 2 Income Statement Operating revenues Operating profit Non-operating income (loss) Incometax Net income For the periods ended December 31, 2012 ThUS$ 1.121.219 4.336 78 (1.731) 2.683 2011 ThUS$ 975.522 2.182 685 (1.874) 993 Statements of Changes in Equity Changes in equity paid- in-capital Changes in surplus revaluation Changes in legal reserve Changes in retained earnings Changes in Equity total ThUS$ ThUS$ OPENING BALANCE AS OF JANUARY 01, 2011 Revaluation of land Deferred tax revaluation of land Years’profit CLOSING BALANCE AS OF DECEMBER 31, 2011 OPENING BALANCE AS OF JANUARY 01, 2012 Revaluation of land Dividends ThUS$ 4.341 - - - 4.341 4.341 - - 3.229 2.330 (699) - 4.960 4.960 7.760 - 868 - - - 868 868 - - - Deferred tax revaluation of land - (2.328) Years’profit CLOSING BALANCE AS OF DECEMBER 31, 2012 - 4.341 - - 10.392 868 Consolidated Statements of Cash Flows – Direct Method Net cash flow from (used in) operating activities Net cash flow from (used in) investment activities Net cash flow from (used in) financing activities NET DECREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at end of period ThUS$ 5.169 ThUS$ 13.707 - 2.330 - (699) 993 993 6.162 6.162 - (4.380) 16.331 16.331 7.760 (4.380) - (2.328) 2.683 6.162 2.683 20.066 For the periods ended December 31, 2012 ThUS$ (3.134) (6.636) (4.380) (14.150) 41.982 2011 ThUS$ (3.209) (5.377) - (8.586) 56.132 Subsidiaries and Affiliated CompaniesANNUAL REPORT2012 8 8 2 Inversiones LAN S.A. and Subsidiaries BOARD OF DIRECTORS: Chairman: Directors: Enrique Cueto Plaza Ignacio Cueto Plaza Alejandro de la Fuente Goic Roberto Alvo Milosawlewitsch Enrique Elsaca Hirmas INCORPORATION: Established as a closed joint stock company by public deed of 23 January 1990, extended by Public Notary Humberto Quezada M., recorded at Folio 3,462 Nº 1,833 of 1990 of the Santiago Business Register and published in the Official Gazette of 2 February 1990. PURPOSE: To invest in all types of property, whether moveable or real, tangible or intangible; in addition, the company may form other companies of all types and acquire rights in, administer, modify and liquidate existing companies. Subscribed and paid-in capital: Net income: Shareholding: % of consolidated assets: ThUS$ 458 ThUS$ (111) 99,71% 0,03% Inversiones LAN S.A.: Shareholdings in subsidiaries Transport Aviation Leasing Limited Hawk Aviation Management Ltd Falcon Aviation Management Ltd Aviation Administration Services Ltd Cargo Aircraft Leasing Limited Passenger Aircraft Leasing Limited Andes Airport Services S.A. 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 98,00% Subsidiaries and Affiliated CompaniesANNUAL REPORT2012 9 8 2 INVERSIONES LAN S.A.: SHAREHOLDINGS IN SUBSIDIARIES (Closed joint stock company) Consolidated Statements of Financial Position As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ ASSETS Total current assets other than non-current assets (or disposal groups) classified as held for sale or as held for distribution to owners 5.001 4.230 Non-current assets (or disposal groups) classified as held for sale or as held for distribution to owners Total current assets Total non-current assets TOTAL ASSETS LIABILITIES AND EQUITY LIABILITIES Total current liabilities Total non-current liabilities TOTAL LIABILITIES EQUITY Parent’s ownership interest Non-controlling interest TOTAL EQUITY TOTAL LEABILITIES AND EQUITY 948 5.574 10.607 16.181 9.158 556 9.714 6.466 1 6.467 16.181 573 5.178 9.121 14.299 7.650 171 7.821 6.476 2 6.478 14.299 Consolidated Statements of Income by Function For the periods ended December 31, Revenues Gross margin Income before income taxes Income tax expense NET INCOMEFOR THE PERIOD Net income for the period attributable to: Owners of the parent Non-controlling interest NET INCOME FOR THE PERIOD 2012 ThUS$ 24.667 4.854 (201) 90 (111) (112) 1 (111) 2011 ThUS$ 22.546 3.232 (427) 73 (354) (347) ( 7) (354) Subsidiaries and Affiliated CompaniesANNUAL REPORT20120 9 2 Consolidated Statements of Comprehensive Income by Function NET INCOME FOR THE PERIOD Other comprehensive income TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Comprehensive income attributable to: Owners of the parent Non-controlling interest TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Statement of Changes in Equily Equity as of January 1, 2011 Comprehensive income for the period Other increase (decrease) in equity PRIOR YEAR ENDING BALANCE AS OF DECEMBER 31, 2011 Equity as of January 1, 2012 Comprehensive income for the period Other increase (decrease) in equity CLOSING BALANCE AS OF CURRENT YEAR ENDING BALANCES DECEMBER 31, 2012 For the periods ended December 31, 2012 ThUS$ (111) 152 41 37 4 41 2011 ThUS$ (354) 49 (305) (306) 1 (305) Parent’s ownership interest Non- controlling interest Total equity ThUS$ ThUS$ ThUS$ 7.320 (306) (538) 6.476 6.476 37 (47) 6.466 8 1 (7) 2 2 4 (5) 1 7.328 (305) (545) 6.478 6.478 41 (52) 6.467 Consolidated Statements of Cash Flows – Direct Method Net cash flow from (used in) operating activities Net cash flow from (used in) investment activities Net cash flow from (used in) financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS Effects of variation in the exchanges rate on cash and cash equivalents Cash and cash equivalents at end of period For the periods ended December 31, 2012 2011 ThUS$ ThUS$ 4.677 (4.547) 96 226 (2) 290 814 (859) - (45) (24) 66 Subsidiaries and Affiliated CompaniesANNUAL REPORT20121 9 2 Inmobiliaria Aeronáutica S.A. BOARD OF DIRECTORS: Chairman: Directors: Enrique Cueto Plaza Alejandro de la Fuente Goic Armando Valdivieso Montes INCORPORATION: Established as a closed joint stock company by public deed of 1 August 1995, extended by Public Notary Gonzalo de la CuadraFabres, recorded at Folio 21,690 N° 17,549 of 1995 of the Santiago Business Register and published in the Official Gazette of 14 September 1995. PURPOSE: To acquire and sell real estate and rights over real estate; to develop, plan, sell and build real estate and real estate projects; to rent, administer and exploit real estate in any other way, whether on its own account or on behalf of third parties. Subscribed and paid-in capital: Net income: Shareholding: % of consolidated assets: ThUS$1,147 ThUS$17,719 100,00% 0,17% Subsidiaries and Affiliated CompaniesANNUAL REPORT2012 2 9 2 INMOBILIARIA AERONAUTICA S.A. (Closed joint stock company) Statements of Financial Position ASSETS Total current assets Total non-current assets TOTAL ASSETS LIABILITIES AND EQUITY LIABILITIES Total current liabilities Total non-current liabilities Total liabilities EQUITY TOTAL EQUITY TOTAL LEABILITIES AND EQUITY Statements of Income by Function Revenues Gross margin Income before income taxes Income tax expense NET INCOMEFOR THE PERIOD Statements of Comprehensive Income by Function NET INCOMEFOR THE PERIOD TOTAL COMPREHENSIVE INCOME FOR THE PERIOD As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 15.620 41.607 57.227 17.226 5.803 23.029 34.198 57.227 2.908 62.672 65.580 1.676 32.425 34.101 31.479 65.580 For the periods ended December 31, 2012 ThUS$ 50.256 24.671 23.514 (5.795) 17.719 2011 ThUS$ 8.961 4.765 4.444 (960) 3.484 For the periods ended December 31, 2012 ThUS$ 17.719 17.719 2011 ThUS$ 3.484 3.484 Subsidiaries and Affiliated CompaniesANNUAL REPORT20123 9 2 Statements of Changes in Equity EQUITY AS OF JANUARY 1, 2011 Comprehensive income for the period Dividends PRIOR YEAR ENDING BALANCE AS OF DECEMBER 31, 2011 EQUITY AS OF JANUARY 1, 2012 Comprehensive income for the period Dividends CLOSING BALANCE AS OF CURRENT YEAR ENDING BALANCES DECEMBER 31, 2012 Statements of Cash Flows – Direct Method Net cash flow from (used in) operating activities Net cash flow from (used in) investment activities Net cash flow from (used in) financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS Effects of variation in the exchanges rate on cash and cash equivalents Cash and cash equivalents at end of period Changes in paid-in- capital Changes in retainedearnings Changes in net equity total ThUS$ 1.147 - - 1.147 1.147 - - 1.147 ThUS$ ThUS$ 29.348 3.484 (2.500) 30.332 30.332 17.719 (15.000) 33.051 30.495 30.495 (2.500) 31.479 31.479 17.719 (15.000) 34.198 For the periods ended December 31, 2012 ThUS$ (22.860) 22.986 1 127 1 142 2011 ThUS$ 1.366 332 (1.680) 18 (6) 14 Subsidiaries and Affiliated CompaniesANNUAL REPORT20124 9 2 Lantours División Servicios Terrestres S.A. and subsidiary BOARD OF DIRECTORS: Chairman: Directors: Damián Scokin Rimolo Armando Valdivieso Monte Andrés del Valle Eitel INCORPORATION: Established as a closed joint stock company by public deed of 22 June 1987, extended by Santiago Public Notary RaúlUndurragaLaso, recorded at Folio 13,139 N° 8,495 of 1987 of the Santiago Business Register and published in the Official Gazette of 2 July 1987. The company’s bylaws have been amended on a number of occasions, most recently under public deed of 27 July 2010, extended by Santiago Public Notary Patricio RabyBenavente, recorded at Folio 39,034 N° 26,946 of 2010 of the Santiago Business Register and published in the Official Gazette of 12 August 2010. PURPOSE: To exploit, administer and represent local or overseas companies or businesses dedicated to hotel, shipping, air transport and tourism activities; to exploit, on its own account or on behalf of third parties, car rental activities; to import, export, produce, market and distribute, on its own account or on behalf of others, in domestic or international markets, any type of goods whether raw materials, inputs or finished products. Subscribed and paid-in capital: Net income: Shareholding: % of consolidated assets: ThUS$225 ThUS$1,300 100,00% 0,00% Lantours División Servicios Terrestres S.A. : Shareholdings in subsidiary Lantours División Servicios Terrestres II S.A. 99,99% Subsidiaries and Affiliated CompaniesANNUAL REPORT2012 5 9 2 LANTOURS DIVISION SERVICES TERRESTRES S.A. AND SUBSIDIARY (Closed joint stock company) Statements of Financial Position ASSETS Total current assets Total non-current assets TOTAL ASSETS LIABILITIES AND EQUITY LIABILITIES Total current liabilities Total non-current liabilities Total liabilities EQUITY TOTAL EQUITY TOTAL LEABILITIES AND EQUITY Statements of Income by Function Revenues Gross margin Income before income taxes Income tax expense NET INCOMEFOR THE PERIOD Statements of Comprehensive Income by Function NET INCOMEFOR THE PERIOD TOTAL COMPREHENSIVE INCOME FOR THE PERIOD As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 2.411 267 2.678 2.121 32 2.153 525 2.678 2.283 251 2.534 1.745 4 1.749 785 2.534 For the periods ended December 31, 2012 ThUS$ 9.399 5.600 1.598 (298) 1.300 2011 ThUS$ 7.872 4.575 1.082 (222) 860 For the periods ended December 31, 2012 MUS$ 1.300 1.300 2011 MUS$ 860 860 Subsidiaries and Affiliated CompaniesANNUAL REPORT20126 9 2 Statements of Changes in Equity EQUITY AS OF JANUARY 1, 2011 Comprehensive income for the period Dividends PRIOR YEAR ENDING BALANCE AS OF DECEMBER 31, 2011 EQUITY AS OF JANUARY 1, 2012 Comprehensive income for the period Dividends CLOSING BALANCE AS OF CURRENT YEAR ENDING BALANCES DECEMBER 31, 2012 Statements of Cash Flows – Direct Method Net cash flow from (used in) operating activities Net cash flow from (used in) investment activities Net cash flow from (used in) financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at end of period Changes in paid-in- capital Changes in retainedearnings Changes in net equity total ThUS$ ThUS$ ThUS$ 225 - - 225 225 - - 225 80 860 (380) 560 560 1.300 (1.560) 300 305 860 (380) 785 305 1.300 (1.560) 525 For the periods ended December 31, 2012 2011 ThUS$ ThUS$ 1.604 (41) (1.560) 3 11 444 (69) (380) (5) 8 Subsidiaries and Affiliated CompaniesANNUAL REPORT20127 9 2 LAN Pax Group S.A. and Subsidiaries BOARD OF DIRECTORS: Chairman: Directors: Ignacio Cueto Plaza Alejandro de la Fuente Goic Enrique Elsaca Hirmas Incorporation: Established as a closed joint stock company by public deed of 27 September 2001, extended by Santiago Public Notary Patricio ZaldivarMackenna, recorded at Folio 25,636 N° 20,794 of the Santiago Business Register on 4 October 2001 and published in the Official Gazette of 6 October 2001. Purpose: To invest in all types of property, whether moveable or real, tangible or intangible; in addition, the company may form other companies of all types and acquire rights in, administer, modify and liquidate existing companies. In general, it may acquire, sell and exploit all types of goods, whether on its own account or on behalf of others, and perform acts of any type and enter into contracts of any kind that are conducive to its objectives. It may also develop and undertake any other activity resulting from its purpose and/or linked, related, pursuant or complementary to this purpose. Subscribed and paid-in capital: Net income: Shareholding: % of consolidated assets: ThUS$425 ThUS$(82,277) 100,00% 0,00% LAN Pax Group S.A.: Shareholdings in subsidiaries Inversora Cordillera S.A. and subsidiaries Lantours S.A. (Ex Siventas S.A.) Atlantic Aviation Investments LLC Perdiz Leasing LLC Akemi Holdings S.A. Saipan Holdings S.A. Aeroasis S.A. Aerolane, Líneas Aéreas Nacionales del Ecuador S.A. Puerto Montt Holding S.A. and subsidiaries 95,78% 100,00% 99,00% 99,00% 100,00% 100,00% 100,00% 71,92% 99,875% Subsidiaries and Affiliated CompaniesANNUAL REPORT2012 8 9 2 LAN PAX GROUP S.A. AND SUBSIDIARIES (Closed joint stock company) Estado de Situación Financiera Clasificado Consolidado ASSETS Total current assets Total non-current assets TOTAL ASSETS LIABILITIES AND EQUITY LIABILITIES Total current liabilities Total non-current liabilities Total liabilities EQUITY Parent’s ownership interest Non-controlling interest TOTAL EQUITY TOTAL LEABILITIES AND EQUITY Consolidated Statements of Income by Function Revenues Gross margin Income before income taxes Income tax expense NET INCOMEFOR THE PERIOD Net income for the period attributable to: Owners of the parent Non-controlling interest NET INCOME FOR THE PERIOD As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 228.849 228.532 293.559 236.257 522.408 464.789 582.742 447.140 55.109 55.144 637.851 502.284 (112.395) (3.048) (41.935) 4.440 (115.443) (37.495) 522.408 464.789 For the periods ended December 31, 2012 MUS$ 1.130.295 128.389 (114.478) 32.201 2011 MUS$ 722.701 88.125 (46.074) 16.784 (82.277) (29.290) (77.269) (27.622) (5.008) (1.668) (82.277) (29.290) Subsidiaries and Affiliated CompaniesANNUAL REPORT20129 9 2 Consolidated Statements of Comprehensive Income by Function NET INCOMEFOR THE PERIOD Other comprehensive income TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Comprehensive income attributable to: Owners of the parent Non-controlling interest TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Consolidated Statements of Changes in Equity EQUITY AS OF JANUARY 1, 2011 Comprehensive income for the period Other increase (decrease) in equity PRIOR YEAR ENDING BALANCE AS OF DECEMBER 31, 2011 EQUITY AS OF JANUARY 1, 2012 Comprehensive income for the period Other increase (decrease) in equity CLOSING BALANCE AS OF CURRENT YEAR ENDING BALANCES DECEMBER 31, 2012 For the periods ended December 31, 2012 ThUS$ (82.277) (6.087) 2011 ThUS$ (29.290) (5.690) (76.190) (34.980) (70.823) (5.367) (33.228) (1.752) (76.190) (34.980) Parent’s ownership interest Non- controlling interest Total equity ThUS$ (7.082) (33.228) (1.625) (41.935) (41.935) (70.823) 363 ThUS$ (3.175) (1.752) 9.367 4.440 4.440 (5.367) (2.121) ThUS$ (10.257) (34.980) 7.742 (37.495) (37.495) (76.190) (1.758) (112.395) (3.048) (115.443) Consolidated Statements of Cash Flows – Direct Method Net cash flow from (used in) operating activities Net cash flow from (used in) investment activities Net cash flow from (used in) financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS Effects of variation in the exchanges rate on cash and cash equivalents Cash and cash equivalents at end of period For the periods ended December 31, 2012 ThUS$ 2011 ThUS$ (134.249) (115.774) 4.310 145.516 116.611 (13.328) (144) 42.335 (2.498) 27.244 ( 1) 55.807 Subsidiaries and Affiliated CompaniesANNUAL REPORT20120 0 3 LAN Chile Investments Limited and subsidiaries BOARD OF DIRECTORS: Chairman: Directors: Enrique Cueto Plaza Alejandro de la Fuente Goic Andrea Williams INCORPORATION: Established as a limited liability company by public deed of 30 July 1999 in the Cayman Islands and recorded in the Cayman Islands Company Register on the same date. PURPOSE: To invest in all types of property, whether moveable or real, tangible or intangible. Subscribed and paid-in capital: Net income: Shareholding: % of consolidated assets: ThUS$10 ThUS$(10) 100,00% 0,00% LAN Chile Investments Limited: Shareholdings in subsidiary Inversiones La Burguería S.A. 99,90% Subsidiaries and Affiliated CompaniesANNUAL REPORT2012 1 0 3 LAN CHILE INVESTMENTS LIMITED AND SUBSIDIARIES (Limited liability company) Consolidated Statements of Financial Position ASSETS Total current assets Total non-current assets TOTAL ASSETS LIABILITIES AND EQUITY LIABILITIES Total current liabilities Total non-current liabilities TOTAL LIABILITIES EQUITY Parent’s ownership interest TOTAL EQUITY TOTAL LEABILITIES AND EQUITY Consolidated Statements of Income by Function Revenues Gross margin Income before income taxes Income tax expense NET INCOMEFOR THE PERIOD Net income for the period attributable to: Owners of the parent Non-controlling interest NET INCOME FOR THE PERIOD As of December 31, 2012 As of December 31, 2011 ThUS$ ThUS$ 4.419 - 4.419 11 5.236 5.247 4.420 - 4.420 2.088 3.150 5.238 (828) (828) 4.419 (818) (818) 4.420 For the periods ended December 31, 2012 ThUS$ - - (10) - (10) (10) - (10) 2011 ThUS$ 278.039 37.692 1.578 889 2.467 1.820 647 2.467 Subsidiaries and Affiliated CompaniesANNUAL REPORT20122 0 3 Consolidated Statements of Comprehensive Income by Function NET INCOMEFOR THE PERIOD Other comprehensive income TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Comprehensive income attributable to: Owners of the parent Non-controlling interest TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Consolidated Statements of Changes in Equity EQUITY AS OF JANUARY 1, 2011 Comprehensive income for the period Other increase (decrease) in equity PRIOR YEAR ENDING BALANCE AS OF DECEMBER 31, 2011 EQUITY AS OF JANUARY 1, 2012 Comprehensive income for the period CLOSING BALANCE AS OF CURRENT YEAR ENDING BALANCES DECEMBER 31, 2012 Consolidated Statements of Cash Flows – Direct Method Net cash flow from (used in) operating activities Net cash flow from (used in) investment activities Net cash flow from (used in) financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at end of period For the periods ended December 31, 2012 ThUS$ (10) - (10) (10) - (10) 2011 ThUS$ 2.467 - 2.467 1.820 647 2.467 Parent’s ownership interest Non- controlling interest Total equity ThUS$ ThUS$ ThUS$ (2.634) 1.820 (4) (818) (818) (10) (828) 6 647 ( 653) - - - - (2.628) 2.467 (657) (818) (818) (10) (828) For the periods ended December 31, 2012 ThUS$ - - - - 1 2011 ThUS$ 18.494 (27.479) 6.325 (2.660) 1 Subsidiaries and Affiliated CompaniesANNUAL REPORT20123 0 3 SWORN STATEMENT As Directors and Chief Financial Officer of LATAM Airlines Group, we declare under oath our responsibility on the veracity of the information contained in this Annual Report. Mauricio Rolim Amaro President María Claudia Amaro Director Ramón Eblen Kadis Director Carlos Heller Solari Director Juan José Cueto Plaza Director José María Eyzaguirre Baeza Director Gerardo Jofré Miranda Director Georges De Bourguignon Arndt Director Francisco Luzón López Director Alejandro de la Fuente Goic Chief Financial Officer Subsidiaries and Affiliated CompaniesANNUAL REPORT2012

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