LATAM Airlines Group Annual Report 2013

Plain-text annual report

ANNUAL REPORT 2013 INDEX 01. Introduction Message from the Chairman of the Board Message from the Chief Executive Officer 02. Our company Business Strategy Our History Fleet Destinations Our People Company Information 03. Corporate Governance Board of Director Senior Managment Corporate Governance Practices Ownership Structure and Principal Shareholders Financial Policy 04. Operations International Passenger Operations Brazil Chile Perú Colombia Argentina Ecuador Cargo Operations Customer Loyalty Programs Property Plants and Equipment 05. Results 2013 Industry Overview Regulatory Framework Financial Results Awards and Recognitions Stock Market Information Additional Information Material News Risk Factors 06. Sustainability 07. Financial Statement EE.FF Susidiaries and Affiliated Companies Sworn Statement 3 4 6 8 9 11 14 22 27 29 30 31 36 46 54 57 61 62 65 67 69 72 75 77 79 82 85 87 88 90 96 101 104 108 109 115 119 132 132 335 INTRODUCTION LATAM AIRLINES GROUP S.A 01 ANNUAL REPORT 20133INTRODUCTION / MESSAGE FROM THE CHAIRMAN OF THE BOARD MAURICIO ROLIM AMARO Dear Shareholders, For LATAM Airlines Group, Latin America’s largest airline company, 2013 was a year of intense activity and work. In addition to the challenges inherent in a merger of its magnitude - among which I would like to highlight the key pillars of the integration of the corporate cultures of TAM and LAN, the standardization of administrative processes across practically all areas and the conversion of the two companies’ different operating systems - we faced an increase in competition in the domestic and international markets in which we operate. It is important to note that these events also occurred in the context of a still timid improvement of the US economy and a much slower process of recovery in Europe. Moreover, the price of oil, affected by the risk of propagation of the current war in Syria, remained high in 2013, reaching over US$117/ barrel. In Brazil, our largest and most important market, a reduction in economic activity meant that passenger traffic showed only a modest 1.4% increase. Nonetheless, by maintaining our strategy of seat capacity discipline, we were again able to increase our load factor which reached over 80%, its highest level ever in the history of TAM. At the same time, we maintained a healthy average 40% market share. Despite this challenging situation, LATAM successfully raised US$940 million in a capital increase. This not only significantly reduced our leverage and financial costs but will also allow us to implement investments in new- generation systems and aircraft that will be critical for LATAM’s sustainable growth through to the end of the present decade. ANNUAL REPORT 20134In this extremely complex context, LATAM is forging its identity and strengthening its corporate vision and mission. In 2013, we showed flexibility in responding successfully to the difficulties posed by more competitive markets and demonstrated precisely the reasons for which we created LATAM Airlines Group. Our company has a unique advantage - we are leaders and culturally represent a continent. At the same time, we are South America’s largest airline and the airline that is present in the greatest number of countries. That differentiates us but also implies a great responsibility as regards the region’s economic development. Our position allows us to offer greater connectivity for passengers and greater agility in the transport of cargo, bringing the together, people closer business environment and reducing logistics costs. In this task, we have on our side the best practices we have inherited from TAM and LAN. improving But we can and must expect more from our company in 2014. LATAM has an obligation to constantly improve its corporate governance, the returns it offers shareholders, the integral support it provides for its collaborators and the respect it shows for its passengers and other clients. Thank you and I wish you an excellent year. Maurício Amaro Chairman of the Board LATAM Airlines Group ANNUAL REPORT 20135 INTRODUCTION / MESSAGE FROM THE CHIEF EXECUTIVE OFFICER ENRIQUE CUETO Dear shareholders, The year 2013 was extremely important for our Company. Following the merger in June 2012 of LAN and TAM, South America’s largest airlines, it was the first year in which we operated as LATAM Airlines Group. I can say with great pride that, thanks to this association, we are the region’s leading company in terms of size and coverage and, for our passengers and cargo clients, seek to be the best alternative for reaching any part of the world with the best service. Our results in 2013 reflect the fact that this was a transition year in which we invested much time and resources, striving our utmost to advance firmly towards our goal. The progress we achieved during our first complete year as LATAM Airlines Group was enormous. In the case of our international and cargo operations, the integration is already a reality. Our domestic operation in Brazil has been restructured and today makes a positive contribution to the Group’s results. And, as reflected in the improvement in our financial results, we have achieved the expected progress in capturing the synergies offered by the merger. This has also meant a sustained improvement in our balance sheet indicators, putting us on course to recover our investment grade, an important indicator in a volatile industry such as ours. I think it is particularly important to highlight the efforts made to adapt our fleet plan in order to give priority to the incorporation of latest-generation aircraft for our short and long-haul operations. This has implied an important investment, particularly this year and next, with a view to developing the flexibility needed to implement future fleet renewals without impacting our operations or future financial results, ensuring a competitive advantage that is sustainable in the long term. ANNUAL REPORT 20136Creating a preferred airline for the continent is not a short-term task and the work ahead will be hard, calling for great commitment from all of us who work at the Company. We are optimistic because we are convinced that the merger of LAN and TAM will position us as one of the most solid, sustainable and reliable airline operators in the industry and that this will bring greater prosperity for our region and all the LATAM Airlines Group family. We know that association processes take time and are complex, posing challenges that call for great learning efforts on the part of all those involved. In our case, there are organizational challenges that imply the development of the capacity to adapt, on the part of senior management and all the other members of our workforce. Other challenges involve the integration of systems and, above all, our people who are of different nationalities and come from different cultures, making the process even more complex since building mutual trust takes time. I am, however, convinced that we have the best team in the industry and will be able to continue to rise to this challenge. Any business transformation process affects people and they are our principal asset. That is why I would particularly like to pay tribute to and thank the over 52 thousand, employees who make up the Company. Their work, dedication and commitment have been decisive in our performance during this first year as LATAM Airlines Group. And, I would like to invite them all to keep alive that spirit of collaboration in the coming years and to feel proud of their role as protagonists in an historic project for Latin America’s aviation industry, designed to create one of the world’s three largest airlines. Enrique Cueto P. CEO LATAM Airlines Group ANNUAL REPORT 20137 OUR COMPANY LATAM AIRLINES GROUP S.A 02 ANNUAL REPORT 20138OUR COMPANY / BUSINESS STRATEGY In its first complete year of operations as LATAM Airlines Group, the Company ranked among the world’s 12 largest airlines and the leading operator in South America in terms of fleet size and destinations served. The association between LAN and TAM is, in other words, fulfilling its objective of becoming a global player, competing in a context of open skies in which the trend is towards ever greater consolidation of the international airline market. For its operations, the Company today has a fleet of over 330 aircraft with an average age of less than seven years that stands out as one of the most modern in the industry. Under its strategy, the Company seeks to maintain leadership in efficiency through constant renewal of its aircraft, improving the product it offers and supporting care for the environment, with all the advantages afforded by being one of the first operators of new high-yield technologies. It is important to note that the Company was a pioneer in the western world in incorporating the Boeing 787, the most modern aircraft of its type. In addition to maintaining a safe and efficient fleet with a low average age, another pillar of the Company’s strategy is to constantly strengthen the connectivity of its network in order to offer the best and largest network of routes within South America and connections between the region and the rest of the world. The group has a local presence in seven markets - Chile, Brazil, Argentina, Peru, Ecuador, Colombia and Paraguay - which together represent around 90% of regional traffic. In addition, it has a key position in the principal hubs connecting South America with the rest of the world - São Paulo and Lima - and has numerous alliances and commercial agreements with the industry’s best airlines. This is reflected in the fact that one in two people who fly in South America do so with LAN or TAM, the airlines recognized as offering the region’s best service to customers. ANNUAL REPORT 20139to strengthen São Paulo’s Guarulhos airport as the region’s principal hub. It is, in addition, progressing in the rationalization of capacity on certain routes, fleet modernization and continuous improvement of service standards. standardization and to reduce its exposure On the financial front, in 2013, the Company continued to variations in exchange rates and, particularly, the Brazilian real. As of the end of the year, hedging for the real for the period January- December 2014 reached US$500 million. improving The Company is also working to strengthen its balance sheet, its main financial indicators in order to recover its investment grade, an important and differentiating factor in a high-volatility industry. As of December 2013, LATAM Airlines Group’s borrowing level and liquidity showed important improvements due to an increase in generation of cash flow and the capital increase for US$940.5 million that was successfully completed in January 2014. In addition to the geographic diversification of its operations, another strength of LATAM Airlines Group is its successful combination of its passenger and cargo businesses in a strategy that seeks to maximize load factors on passenger planes through the use of their bellies to transport cargo, complementing the use of freighters and diversifying its sources of income. The flexibility afforded by this business model allows the Company to increase returns on its routes, reduce the impact of seasonal factors and increase load factors. As of December 2013, 83% of its revenues were contributed by its passenger business and 14% by its cargo operation, among others. Looking to the future, the Company’s priority is to successfully complete the integration of LAN and TAM, boosting the best practices, strengths and competitive advantages of the two airlines, in order to achieve greater efficiency at lower costs and, in so doing, capture projected synergies worth between US$600 million and US$700 million a year by 2016. In this context, one of the Company’s principal achievements in the first stage of the merger was the complete restructuring of its domestic operations in Brazil in order to introduce changes that will be sustainable in the long term and lay the foundations for its future growth in the region’s largest market and the third largest in the world. In the case of its international passenger business in which the operations of LAN and TAM have been fully integrated, the Company is seeking ANNUAL REPORT 201310 OUR COMPANY / OUR HISTORY 1929 Línea Aerea Nacional de Chile (LAN) founded by Comandante Arturo Merino Benítez. 1986 Acquisition by TAM of VOTEC-Brasil Central Linhas Aéreas, another regional airline operating in the north and center of the country. 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. 1989 1990 Start of privatization of LAN: the Chilean government sells a 51% stake to local investors and Scandinavian Airlines System (SAS). Central Brasil Transportes Aéreos Meridonais. renamed TAM- 1993 Launch by TAM of TAM Fidelidade, Brazil’s first frequent flyer program. 1970 LAN begins flights to Europe. 1975 1976 of Foundation TAM-Transportes Aéreos Regionais by Capitan Rolim Adolfo Amaro. Launch of TAM services in Brazilian cities, especially Mato Grosso and São Paulo. 1994 1996 1983 Constitution of Linea Aerea Nacional – Chile Limitada, through CORFO 1985 LAN becomes a joint stock company. Privatization of LAN completed with the acquisition of a 98.7% stake by its current controllers and other shareholders. Acquisition by TAM of Lapsa airline from the Paraguayan government and creation of TAM Mercosur; start of São Paulo-Asunción flights. ANNUAL REPORT 201311 1997 Acquisition by TAM of Lapsa airline from the Paraguayan government and creation of TAM Mercosur; start of São Paulo-Asunción flights. 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. 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 in LAN’s Further step 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. 2001 LAN Alliance with Iberia and inauguration of Miami cargo terminal. 2006 Launch of new LAN Premium Business Class. 2001 Creation of TAM Technology Center and Service Academy in São Paulo. 2006 TAM S.A. lists on the NYSE / Start of flights to London and, through agreement with Air France, to Zurich and Geneva. ANNUAL REPORT 201312 2007 Implementation of low-cost model in domestic markets; capital increase of US$320 million; purchase orders for 32 Boeing 787 Dreamliners. 2010 Acquisition of Colombia’s Aires airline. 2010 TAM officially joins Star Alliance. 2011 LAN and TAM sign binding agreements related to the business combination of the two airlines. 2012 2013 LATAM Airlines Group is born as a result of the business combination between LAN and TAM Capital increase for US$ 940.5 million. / LATAM Airlines Group chooses oneworld as its global alliance. 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. 2008 Completion of renewal of LAN’s short-haul fleet with aircraft from the Airbus A320 family. 2008 receives TAM 777-300ER. its first Boeing 2009 2009 Start of cargo operations in Colombia and domestic passenger operations in Ecuador. Launch of Multiplus Fidelidade; acquisition of Pantanal Linhas Aéreas. ANNUAL REPORT 201313OUR COMPANY / FLEET In 2013, LATAM Airlines Group’s fleet comprised over 330 aircraft which, with an average age of less than seven years, stood out as one of the most modern in the industry. In the framework of the integration process, LATAM decided in the second half of 2013 to implement a far-reaching fleet restructuring plan. The plan consists in reducing the number of models operated, gradually taking less efficient models out of service and allocating the most appropriate planes to each of its markets. Starting in the last quarter of 2013 and over the next some 30 months, the Company will gradually ground all its A-330s, A-340s, B737s, Q400s and Q200s in favor of the most efficient models available in the market. In 2013, the Company used principally aircraft from the Airbus A320 family for short-haul passenger operations. As of December 2013, its fleet for these operations - domestic routes and regional routes within South America - comprised 236 aircraft from this family, positioning it as one of the world’s three largest operators of Airbus planes. The short-haul fleet plan envisages constant renewal of aircraft, designed both to maintain its position in the vanguard of the international industry, with modern and efficient aircraft and the resulting advantages in terms of maintenance and the Company’s commitment to the environment, and to meet the needs of its projected growth. In line with this, the Company has already withdrawn from service it’s A318s, the smallest and oldest aircraft in the Airbus A320 family, and is modernizing all its A320 fleet by incorporating sharklets, advanced- technology devices installed on wings that reduce aerodynamic resistance, improve takeoff capacity, increase fuel use efficiency and reduce both CO2 emissions (by around 4%) and noise. In April 2013, the Company received the first A320s equipped with sharklets. However, the focus of LATAM Airlines Group as regards its short-haul fleet plan is on the Airbus A320neo and A321 models whose operating costs per ASK are 6% lower than for the A320. ANNUAL REPORT 201314 The fleet plan also envisages orders for 27 Airbus A-350s through to 2019. Equipped with cutting-edge technology, they will allow the Company to strengthen its long-haul routes. This model forms part of the new mid and long-haul line of aircraft and its use will imply a leap in efficiency as compared to the existing models in this category. Its operating cost per ASK is 25% less than that of TAM’s A330s and it also implies a corresponding reduction in CO2 emissions. As of December 2013, the Company’s cargo fleet comprised 12 Boeing 767Fs and four Boeing 777Fs. These are the most modern freighters of their type in the industry and represent improvements on the B767 in that they have double its cargo capacity but only consumer 50% more fuel. important LATAM Airlines Group’s short term fleet plan implies a fleet commitment of US$1,168 million in 2014 and US$1,893 million in 2015. LATAM Airlines Group has placed orders for 36 modern Airbus A320neos, respectively, for delivery between 2016 and 2018. This new option within the A320 family has a more efficient engine and the new sharklets, a combination offering benefits that include a reduction of up to 15% in fuel consumption. This, in turn, implies avoidance of 3,600 tonnes of CO2 emissions per year per aircraft. The A321 is a larger version of the A320 and will be used to serve high-density routes within South America. As of December 2013, the Company had ten A321s in service - operated by TAM - and, under its fleet plan, will receive a further ten in 2014 and 12 in 2015, taking it to a total 60 A321 for 2017. In the case of its long-haul fleet, the Company’s strategy also seeks to incorporate the best technology and to position it as an industry leader on efficiency. In 2013, it incorporated two new Boeing 787 of which, by December 2013, it had a total of five out of an order for 32 that will be completed over the next five years. Regarded as the most efficient aircraft of its type and offering numerous advantages for passengers, the B787 stands out for its unrivalled fuel yield, giving it an operating cost per ASK that is 12% less than that of LAN’s Boeing 767. These latest-generation planes began to be used in 2013 on the Santiago-Madrid and Santiago-New York routes. ANNUAL REPORT 201315 MAINTENANCE In 2013, the Company started the process of integrating TAM MRO (Maintenance, Repair and Overhaul) capabilities and processes with LAN Heavy Maintenance capabilities and Heavy Maintenance outsourcing under a new coordinated LATAM MRO structure. LATAM MRO provides services mainly for LATAM’s fleet but also for some third-party clients. Its premises in the São Carlos (SP/ Brazil) Technological Center have an area of 100,000 m², with their own 1,720-m runway, while its facilities at the Santiago Internatio- nal Airport (Chile) cover an area of 10,000 m². LATAM MRO is audited and certified by international aviation authorities major from the United States, Europe, Brazil, Chile, Argentina, Ecuador, Paraguay and Canada as well as other countries for Heavy Maintenance, Components Repair and Overhaul for the Airbus A320 family, A-330s, Boeing 767s, 777s and 787s, ATR42/72s and the Embraer E-Jet 170/190 families. It also has minor capabilities for the repair and overhaul of Airbus A-340 and Boeing 777 components. In 2013, it expanded its capacity and can ten now simultaneously accommodate narrowbody/widebody aircraft and two regional/turboprop aircraft. In addition, it has a hangar exclusively for stripping and painting and 29 technical workshops, including a full Landing Gear Repair and Overhaul Workshop and Hydraulics, Pneumatics, Electronics (ATEC), Electrical Components, Electroplating, Composites, Wheels and Brakes, Interiors and Escape Slide Workshops. In 2013, LATAM MRO carried out 1.8 million man-hours of work (a 10% increase on 2012), serviced 277 aircraft for LATAM and other clients, delivered approximately 58,000 components and performed 14 landing gear overhauls. It covered almost 100% of the TAM fleet’s (Airbus A320 family and A-330) demand for Heavy Maintenance and 75% of its demand for Components Repair and Overhaul. Its external maintenance and repair clients include Azul, Trip, Avianca, the Brazilian Air Force, Embraer, Goodrich and Hamilton Sundstrand. ANNUAL REPORT 201316 At São Carlos, it also offers engineering capabilities and a full technical training center to develop TAM’s capabilities in terms of human skills. In 2013, it provided a total of 90,000 hours of training to more than 6,000 students through 80 different basic courses. Passenger A319-100 A320-200 A321-200 A330-200 A340-300/500 B737-700 B767-300 B777-300 ER B787-8/-9 Dash 8-200 Dash 8-Q400 Rented Owned Total 15 65 1 12 4 5 6 2 2 7 3 39 95 9 8 2 0 37 8 3 0 0 54 160 10 20 6 5 43 10 5 7 3 Total Passenger 122 201 323 Cargo B767 Freighter B777 Freighter Total Cargo 4 2 6 8 2 10 12 4 16 Total 128 211 339 ANNUAL REPORT 201317AIRBUS A320 FAMILIY A319-100 Length: 33.8 mts Width: 34.1 mts Seats: 144 Cruising Speed: 850 km/h Maximun weight at take-off: 70,000 kg A320-200 Length: 37.6 mts Width: 34.1 mts Seats: 168 - 174 Cruising Speed: 850 km/h Maximun weight at take-off: 77,000 kg A321-200 Length: 44.51 mts Width: 34.1 mts Seats: 220 Cruising Speed: 850 km/h Maximun weight at take-off: 89,000 kg ANNUAL REPORT 201318AIRBUS A340 FAMILIY BOEING FAMILIY A340-300 Length: 63.7 mts Width: 60.3 mts Seats: 260 Cruising Speed: 896 km/h Maximun weight at take-off: 275,000 kg A340-500 Length: 67.9 mts Width: 63.45 mts Seats: 267 Cruising Speed: 907 km/h Maximun weight at take-off: 372,000 kg Boeing 737-700 Length: 39.5 mts Width: 35.7 mts Seats: 148 Cruising Speed: 828 km/h Maximun weight at take-off: 70,000 kg ANNUAL REPORT 201319Boeing 767-300 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 Boeing 777-300 ER Length: 73.9 mts Width: 64.8 mts Seats: 362 Cruising Speed: 896 km/h Maximun weight at take-off: 347,800 kg Boeing 787-8 Length: 56.69 mts Width: 60.0 mts Seats: 247 Cruising Speed: 913 km/h Maximun weight at take-off: 227,930 kg ANNUAL REPORT 201320DASH FAMILIY BOEING FREIGHTER FAMILIY Dash 8-200 Length: 22.25 mts Width: 25.89 mts Seats: 37 Cruising Speed: 500 km/h Maximun weight at take-off: 16,470 kg Dash 8Q-400 Length: 32.81 mts Width: 28.4 mts Seats: 78 Cruising Speed: 667 km/h Maximun weight at take-off: 29,260 kg Boeing Freighter 767 Length: 54.2 mts Envergadura: 47.6 mts Load time: 438,1 m3 Cruising Speed: 896 km/h Maximun weight at take-off: 186,880 kg Boeing Freighter 777 Length: 63.7 mts Envergadura: 64.8 mts Load time: 652,7 m3 Cruising Speed: 896 km/h Maximun weight at take-off: 347,450 kg ANNUAL REPORT 201321OUR COMPANY / DESTINATIONS PASSENGER AND CARGO (INTERNATIONAL) ANNUAL REPORT 201322PASSENGER AND CARGO (BRASIL) PASSENGER AND CARGO (CHILE) ANNUAL REPORT 201323PASSENGER AND CARGO (PERÚ) PASSENGER AND CARGO (COLOMBIA) ANNUAL REPORT 201324PASSENGER AND CARGO (ARGENTINA) PASSENGER AND CARGO (ECUADOR) ANNUAL REPORT 201325ONLY CARGO CODESHARE ANNUAL REPORT 201326OUR COMPANY / OUR PEOPLE OUR PEOPLE As of December 2013, LATAM Airlines Group had 52,997 employees of 57 different is, nationalities across 23 countries. as a result, a multicultural as well as multinational company. This is an important advantage in terms of understanding the different markets where it operates and their people but also poses great challenges for the merger process. It The Company’s Human Resources area has played a decisive role in mitigating the impacts that any organizational change has on the life of people, who are our principal asset, and, for everyone, this has meant an important learning effort. In 2013, work continued on the development of a single cultural model for LATAM Airlines Group in order to embed and consolidate the new Company’s identity. An objective that * Employees by country is transversal to the Company is to have in place a high-performance human team that is committed and geared to the customer. In line with this, we have worked together to standardize some policies and both airlines have modified their organizational structure. In 2013, the standardization of the Corporate Academy’s courses on Instructor Training and Quality Model permitted the integration of the two airlines’ training areas. In addition, the Leadership syllabus of the Leadership School in Brazil was implemented, thereby standardizing the training of leaders across the Company. Cross-training was also provided for LAN and TAM employees in the group’s airport systems and procedures and courses on service were designed and implemented for people joining the company in areas with contact with passengers. ANNUAL REPORT 201327In addition, the Company launched a single recruitment portal which can be accessed through links on both LAN.com and TAM.com. br. It publishes offers of jobs throughout the Company and, for the first time, allows market candidates to obtain information about job opportunities and the vacancies available and to apply through this portal for jobs in any country and any of the businesses that form part of LATAM Airlines Group. The standardization of the principal HR processes at the LATAM Airlines Group level was completed in 2013. This included, for example, the areas of performance evaluation and succession planning. Other milestones included the implementation of a unified base of information in which each employee can update his or her own information and career interests and HR heads and personnel can see and manage information about the persons for whom they are responsible. In June 2013, an internal job posting process was launched. This provides the Company’s employees with access to information about vacancies available anywhere in the world and allows them to apply online. *Employees by area ANNUAL REPORT 201328 OUR COMPANY / COMPANY INFORMATION LATAM AIRLINES S.A Chilean Tax N° (RUT): 89.862.200-2 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 Stock Exchange FINANCIAL INFORMATION Investor Relations LATAM Airlines Group S.A. Avenida Presidente Riesco 5711, 20th Floor Las Condes, Santiago, Chile Tel: (56) (2) 2565 8785 Email: Investor.Relations@lan.com SHAREHOLDER ENQUIRIES Depósito Central de Valores Huérfanos 770, 22nd Floor Santiago, Chile Email: 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 Tel: From outside US (651) 453-2128 Tel: Global Invest Direct (800) 428-4237 Email: 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 Email: dr.itau@itau-unibanco.com.br EXTERNAL AUDITORS Pricewaterhouse Coopers 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 ANNUAL REPORT 201329CORPORATIVE GOVERNANCE LATAM AIRLINES GROUP S.A 03 ANNUAL REPORT 201330CORPORATIVE GOVERNANCE / BOARD OF DIRECTORS MAURICIO ROLIM AMARO Chairman of the Board 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 also chairs the Councils of Administration of Multiplus S.A. and TAM Aviação Executiva e Táxi Aéreo S.A. Mr. Amaro is a member of the Strategy, Leadership, Finance and Brand, Product and Frequent Flyer Program Committees of LATAM Airlines Group. RUT: 48.143.165-4 Mrs. María Claudia Amaro, who holds a in business administration and degree marketing, has been a member of LATAM Airlines Group’s Board of Directors 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 a member of the Councils of Administration of Multiplus S.A. and TAM Aviação Executiva e Táxi Aéreo S.A. Mrs. Amaro is a member of the Strategy, Leadership, Brand, Product and Frequent Flyer Program, Long Haul and Marketing Committees of LATAM Airlines Group. RUT: 48.143.164-6 ANNUAL REPORT 201331JUAN JOSÉ CUETO PLAZA GEORGES DE BOURGUIGNON ARNDT Mr. Juan José Cueto Plaza, an economist and business administrator, has been a member of the Board of Directors of LATAM Airlines Group since 1994. He currently serves as executive vice-president of Inversiones Costa Verde, a position he has held since 1990, and is a member of the boards of companies include Costa Verde Aeronáutica S.A., Sinergia Inmobiliaria S.A., Minera Michilla S.A., Consorcio Maderero S.A. and Universidad San Sebastián. that Mr. Cueto is a member of the Finance and Brand, Product and Frequent Flyer Program Committees of LATAM Airlines Group. RUT: 6.694.240-6 from Mr. Georges de Bourguignon holds an the Catholic economics degree University of Chile and an MBA from Harvard University. He was elected to the Board of Directors 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 a director of Sal Lobos, the Chilean subsidiary of Germany’s K+S group, and of Salmones Austral. Before founding Asset Chile, he served as vice-president of Citibank S.A. in Chile and as an economics lecturer at the Catholic University of Chile. Mr. de Bourguignon is a member of the Directors’ Committee of LATAM Airlines Group. RUT: 7.269.147-4 ANNUAL REPORT 201332RAMÓN EBLEN KADIS JOSÉ MARÍA EYZAGUIRRE BAEZA Mr. Ramón Eblen Kadis, an economist and business administrator, has been a member of the Board of Directors of LATAM Airlines Group since June 1994. He has served as chairman of Comercial Los Lagos Ltda., Inversiones Santa Blanca S.A., Inversiones Andes SpA, Granja Marina Tornagaleones S.A. and TJC Chile S.A. Mr. Eblen is a member of the Directors’ Committee and the Leadership and Brand, Product and Frequent Flyer Program Committees of LATAM Airlines Group. RUT: 4.346.062-5 Mr. José María Eyzaguirre Baeza, a lawyer, joined the Board of Directors 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, The North Face and Kipling. He previously served on the boards of other companies that include Embotelladora Andina S.A. and AES Gener S.A. RUT: 7.011.679-0 ANNUAL REPORT 201333CARLOS HELLER SOLARI GERARDO JOFRÉ MIRANDA Mr. Carlos Heller Solari, an agricultural engineer, joined the Board of Directors of LATAM Airlines Group in May 2010. He has great experience in the retail, transport and agricultural sectors. He is currently vice-chairman of Bethia investment company and owner of Axxion) and chairman of Axxion S.A., Megavisión, Club Hípico de Santiago, Sotraser S.A. and Agrícola Ancali. In addition, he is a director 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. (an RUT: 8.717.000-4 Mr. Gerardo Jofré Miranda, an economist and business administrator, joined the Board of Directors of LATAM Airlines Group in May 2010. He is chairman of the board of the National Copper Corporation of Chile (Codelco) and a director of Air Life Chile S.A. as well as president of 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 CEO of different companies in the group. Mr. Jofré chairs the Directors’ Committee and Finance Committee of LATAM Airlines Group and is a member of its Strategy and Leadership Committees. RUT: 5.672.444-3 ANNUAL REPORT 201334 administration of companies that include one of the world’s most successful fashion retailers, Inditex-Zara (1996-2012) as well as in different positions in institutions of the most diverse nature such as his membership of the Patronato de la Fundación Príncipe de Asturias, as chairman of Fundación Argentaria and his current responsibility as vice-chairman of the Biblioteca Nacional de España. Mr. Luzón is a member of the Strategy and Finance Committees of LATAM Airlines Group. RUT: 48.171.119-3 FRANCISCO LUZÓN LÓPEZ Mr. Francisco Luzón López joined the Board of Directors of LATAM Airlines Group in September 2012. For the past two years, he has been an adviser to the Inter-American Development Bank (IDB) and a visiting leader at the China Europe International Business School (CEIBS) in Shanghai (2012-2013). He is currently an adviser to the European Stability Mechanism (ESM) (September 2013), an independent member of the Council of Administration of Willis Group (June 2013) and chairman of the Council of the ICADE Business School. 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. Between 1991 and 1996, he served as chairman and CEO of Argentaria. In 1987, after 15 years as an executive in different positions at Grupo Banco de Vizcaya, he was appointed as its councilor-director general and, in 1988, as councilor-director general of Grupo BBV. During his career, Mr. Luzón has also served on the councils of ANNUAL REPORT 201335CORPORATIVE GOVERNANCE / SENIOR MANAGMENT ENRIQUE CUETO CEO LATAM AIRLINES GROUP Enrique Cueto Plaza is the Chief Executive Officer of LATAM Airlines Group and has over 30 years’ experience in the airline industry. From 1983 to 1993, he served as general manager of Fast Air Carrier, a Chilean cargo airline. Subsequently, in 1993 and 1994, he was a member of the Board of Directors of LAN Airlines and became its executive vice-president in August 2012. Following the merger with TAM, he became CEO of LATAM Airlines Group S.A., a post he continues to hold. Mr. Cueto is an active member of the Governing Board of the oneworld® alliance and of the Governing Board and Strategic Committee of the International Air Transport Association (IATA). He is also a member of the boards of the Chilean Manufacturers’ (SOFOFA) and the Endeavor Association foundation, an organization that promotes entrepreneurship in Chile. RUT: 6.694.239-2 ANNUAL REPORT 201336IGNACIO CUETO CEO LAN MARCO BOLOGNA CEO TAM Mr. Ignacio Cueto Plaza is Chief Executive Officer of LAN, a post he has held since 2005. He began his career in the airline industry in 1985 at Fast Air where, through to 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 chairman 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 general manager for passengers at LAN Airlines, a position he held until his appointment to his present post. RUT: 7.040.324-2 Since May 2010, Mr. Marco Antonio Bologna has served as chairman of TAM S.A., the holding company for TAM Linhas Aéreas, TAM Airlines (formerly TAM Mercosur) headquartered in Asunción, Paraguay, and Multiplus S.A. He is also a member of the boards of Suzano Papel and Celulose S.A. Mr. Bologna joined TAM in March 2001 as vice-president for finance and administration and director of investor relations. Three years later, he became chairman of TAM Linhas Aéreas. In December 2007, he left the company and became a consultant to TAM Empreendimentos e Participações S.A. From March 2009 to April 2010, he served as chairman of TAM Aviação Executiva e Táxi Aéreo S.A. and, from September 2009 to June 2012, as a member of the Council of Administration of TAM S.A. He was also chairman of TAM Linhas Aéreas between March 2012 and May 2013. His career includes 24 years’ experience in the financial market. In 1978, Mr. Bologna graduated as a production engineer from the Polytechnic School of the University of São Paulo (USP) and has studied financial services at the Manchester Business School, England. ANNUAL REPORT 201337CLAUDIA SENDER TAM President ARMANDO VALDIVIESO LAN President Mr. Armando Valdivieso Montes is LAN´s President, a post to which he was appointed in 2012, following the integration of the businesses of LAN and TAM. Since 2006, he had served as LAN’s general manager for passengers. From 1997 to 2005, he was general manager for cargo at LAN Airlines and, from 1995 to 1997, 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. RUT: 8.321.934-3 Mrs. Claudia Sender is the President of TAM Linhas Aéreas S.A. since May 2013. She joined the company in December 2011 as its commercial and marketing vice-president. In June 2012, when the merger of TAM and LAN was completed with the creation of LATAM Airlines Group, she took responsibility for the Brazil Domestic Business Unit with expanded functions that include customer service. For much of her career, Mrs. Sender has worked in the consumer goods sector, with a focus on marketing and strategic planning. Before joining TAM, she was vice-president for marketing at Whirlpool Latin America where she worked for seven years. She previously worked as a consultant at Bain & Company where she developed projects for large companies in different sectors, including TAM and other global airlines. She holds a degree in chemical engineering from the Polytechnic School of the University of São Paulo (USP) and an MBA from Harvard Business School, United States. ANNUAL REPORT 201338DAMIAN SCOKIN Senior Vice President of International Passenger Operations LATAM Airlines Group Mr. Damian Scokin is LATAM Airlines Group’s International Senior Vicep-president of passenger operations. He was previously general manager of LAN Argentina where he was responsible for the 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, Peru 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. RUT: 14.729.102-7 CRISTIAN URETA Senior Vice-President of Cargo Operations LATAM Airlines Group Mr. Cristián Ureta is LATAM Airlines Group’s Senior Vice-President of Cargo Operations, a post to which he was appointed in 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. RUT: 9.488.819-0 ANNUAL REPORT 201339ROBERTO ALVO CCO LATAM Airlines Group JEROME PAUL JAQUES CADIER CMO LATAM Airlines Group Mr. Roberto Alvo Milosawlewitsch is LATAM Airlines Group’s Chief Corporate Officer, a post he has held since 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 and manager for development and financial planning and deputy finance manager 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. RUT: 8.823.367-0 Jerome Cadier has been LATAM Airlines Group’s Chief Marketing Officer since March 2013. He had previously worked since 2003 at Whirlpool Home Appliances in Brazil where he served as national sales manager and vice-president of marketing. During this period, he also served for two years as president of Whirlpool in Australia and New Zealand. Between 1995 and 2002, Mr. Cadier was a consultant at McKinsey & Company in Brazil. He studied industrial engineering at the Polytechnic School of the University of São Paulo (1994) and holds a master’s degree from the Kellogg Graduate School of Management (1999). RUT: 24.363.805-4 ANNUAL REPORT 201340EMILIO DEL REAL Senior Vice-President of Human Resources LATAM Airlines Group ANDRÉS OSORIO CFO LATAM Airlines Group 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 Chile’s 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 for executive development for customer management in Latin America and manager for training and recruitment. Mr. Andrés Osorio is LATAM Airlines Group’s Chief Financial Officer, a post to which he was appointed in August 2013. He holds a degree in economics and business administration from the Catholic University of Chile and has over 20 years’ experience leading the finance areas of companies such as Cencosud, where he served for seven years as corporate finance manager, and Metrogas S.A. and Pinturas Ceresita S.A. He was also general manager of Empresas Indumotora and a partner at PricewaterhouseCoopers. RUT: 9.908.112-0 RUT 7.035.559-0 ANNUAL REPORT 201341EJERCICIO 2013 Board Members Mauricio Rolim Amaro Maria Claudia Amaro Francisco Luzón López Juan José Cueto Plaza Rámon Eblen Kadis Gerardo Jofré Miranda Carlos Heller Solari José Maria Eyzaguirre Baeza George de Bourguignon Arndt Position Director´s Remuneration US$ Committe of Directors´ member fee US$ Total President Director Director Director Director Director Director Director Director US$ 58,912 27,850 32,982 35,784 35,767 37,521 19,553 23,483 25,221 US$ - - - - 27,361 25,588 - - 27,361 US$ 58,912 27,850 32,982 35,784 63,128 63,109 19,553 23,483 52,582 ANNUAL REPORT 201342The term “Directors”, used to report the remunerations of the Company’s executives, is used in the sense of these posts or internal terms and not the legal sense envisaged in Section IV of Chile’s Law No. 18.046 on Corporations. The remunerations or fees of the members of the Company’s Board of Directors are reported in the corresponding section of this Annual Report. In addition, for the purposes of this Annual Report, all reference to “principal executives” is understood to be to the internal posts or levels of Vice-President, General Manager, Senior Director and Director as set out above. In 2013, the Company paid its principal executives (considering the levels of Vice- Presidents, General Managers, Senior Directors and Directors as defined above) a total of US$26,012,562 plus US$7,394,288 in incentives for performance during 2012, which were paid in March 2013. As a result, the Company paid its principal executives total gross remunerations of US$33,406,850. For the purposes of its management structure, LATAM Airlines Group S.A. uses names or terms that are standard in local and, particularly, international companies and serve to indicate the seniority of the its different executives who comprise administration as well as their respective salary levels. In accordance with the above, the internal terms used in LATAM Airlines Group for the purposes of seniority, supervision and salary scales are as follows: 1. Senior Vice-President. Term indicating the Company’s principal executives. 2. Vice-President. Term indicating senior executives who report to the Executive Vice-President, a Senior Vice-President or a General Manager. 3. Senior Director. indicating executives who report to a Senior Vice- President or a Vice-President. Term 4. Director. Term indicating executives who report to a Senior Vice-President or a Vice-President. 5. Senior Manager. indicating executives who report to a Vice- President, a Senior Director or a Director. Term 6. Manager. Term indicating an executive who reports to a Senior Director, a Director or a Senior Manager. 7. Assistant Manager or Coordinator. Term indicating an executive who reports to a Senior Manager or a Manager. ANNUAL REPORT 201343COMPENSATION PLANS At the Extraordinary Shareholders’ Meeting held on 21 December 2011, the Company’s shareholders approved issue of 4,800,000 shares for compensation plans for the employees of the Company and its subsidiaries (the “2011Compensation Plan”). the The principal conditions of Compensation Plan are as follows: the 2011 1. 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. 2. 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. 3. The period in which employees may exercise the options, once accrued, will expire on 21 December 2016. 4. The price to be paid for each share allocated to the Compensation Plan, if the respective options are exercised, will be US$17.22. As from the date of its setting, 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 Dólar Observado (Observed Dollar) published in the Diario Oficial (Official Gazette) at the same date on which they are subscribed and paid. As of 31 December 2013, a total of 4,497,000 shares from the 2011 Compensation Plan had been assigned to company employees, corresponding almost exclusively to senior executives in the corporate posts indicated above. There remained, therefore, a balance of 303,000 shares that had not been allocated. To date, none of the options has accrued or been exercised in line with point 1 above. At the Extraordinary Shareholders’ Meeting which took place on 11 June 2013, the Company’s shareholders approved, among other decisions, the issue of 1,500,000 shares for compensation plans for the employees of the Company and its subsidiaries (the “2013 Compensation Plan”). The 2013 Compensation Plan has the following general characteristics: 1. The options assigned to each employee will all accrue on 15 November 2017, subject to the employee remaining with the Company. 2. Once the options have accrued at the date indicated, employees may exercise in which them totally or partially case they must subscribe and pay the respective options at the moment of subscribing them in cash or by check, bank check, electronic transfer or any ANNUAL REPORT 201344other instrument representing money payable on sight. If exercised partially, this may not be for less than 10% of the total options allocated to the employee. 3. The period in which employees may exercise the options, once accrued as indicated in point 3 above, will expire on 11 June 2018. If the employee has not exercised or waived the options by this date, it will be understood for all purposes that the employee has waived the options and that, as a result, all right, power, promise or offer related to subscription of the Company’s shares has ceased to exist and the employee has irrevocably renounced all right or power in relation to the shares, freeing the Company from any obligation. 4. The price to be paid for each share allocated to the 2013 Compensation Plan, if the respective options are exercised, will be US$16.40. As from the first day of the preferential option period through to the date of subscription and payment of the shares, 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. The options will be paid in Chilean pesos at the exchange rate for the Dólar Observado (Observed Dollar) published in the Diario Oficial (Official Gazette) at the same date on which they are subscribed and paid. A date for implementation of the 2013 Compensation Plan has yet to be set and no shares corresponding to the Plan have, therefore, so far been allocated. ANNUAL REPORT 201345CORPORATIVE 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 the Valparaíso and 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). Exchange 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 their 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 the issue of 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 the issue of 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 the Company’s 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. ANNUAL REPORT 201346STRUCTURE BOARD OF DIRECTORS OF LATAM AIRLINES GROUP As of 31 de December 2013, LATAM Airlines Group had a total of 1,588 registered shareholders. The Company is controlled by the Cueto group, represented by Costa Verde Aeronáutica S.A., Inversiones Nueva Costa Verde Aeronáutica Ltda., Costa Verde Aeronáutica SpA, Inversiones Priesca Dos y Cía. Ltda., Inversiones Caravia Dos y Cía. Ltda., Inversiones El Fano Dos y Cía. Ltda., Inversiones La Espasa Dos S.A., Inversiones Puerto Claro Dos Limitada and Inversiones Mineras del Cantábrico S.A. As of end-2013, these companies together held a 25.99% stake while the remainder corresponded to different institutional investors, companies and individuals. As of 31 December 2012, 7.91% of the Company was held in the form of ADRs and 0.73% 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. LATAM Airlines Group’s Board of Directors has nine members and the body for analyzing and defining responsible the Company’s strategic vision, thereby playing a fundamental role in its corporate governance. is All the Board seats come up for election every two years and, under LATAM Airlines Group’s statutes, directors are elected through cumulative voting. 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. and LATAM Airlines Group’s Board holds ordinary monthly meetings 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 its functions and powers monthly and are those established by the applicable legislation and regulation. ANNUAL REPORT 201347DIRECTORS’ COMMITTEE OF LATAM AIRLINES GROUP law, listed Under Chilean joint stock least one companies must appoint at 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. 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. These include: • • • • • 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 to express 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 credit 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. for (Nº 18.046) and directors’ requirements The in Chile’s independence are set out Corporations Law 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 principal executives or a family relationship with the latter or 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. As of 31 December 2013, all the members of the Directors’ Committee, who also act as part of the Audit Committee, were independent directors as 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. ANNUAL REPORT 201348ANNUAL REPORT OF THE DIRECTORS’ COMMITTEE In accordance with Article 50 bis of Law Nº 18.046, the matters examined by the Directors’ Committee during 2013 are set out below. » 1. Ordinary Session N°130 29/1/13: System of remunerations and compensation plan for LAN executives LATAM compliance plan Approval of fees of PWC » » 2. Extraordinary Session N°17 19/3/13: » » Review of Financial Statements at 31 December 2012 Approval of fees of PWC 3. Ordinary Session N°131 26/3/13: » » » Annual report on the Committee’s activities Proposal for external auditors and pri- vate credit rating agencies for 2013 Closure of 2012 audit plan and 2013 plan 4. Ordinary Session N°132 30/4/13: » » » Presentation of Financial Statements to SEC (20F) Closure of 2012 audit plan and 2013 plan Approval of fees of PWC » Presentation by PWC on adjustments to the figures of TAM’s Financial Sta- tements in order to close the calcula- tion of goodwill for the merger of the businesses of LAN and TAM 9. Extraordinary Session N°19 6/8/13: » Advance of work on determining ad- justments to the figures of TAM’s Fi- nancial Statements in order to close the calculation of goodwill for the mer- ger of the businesses of LAN and TAM 10. Extraordinary Session N°20 12/8/13: » Advance of work on determining adjustments to the figures of TAM’s Financial Statements in order to close the calculation of goodwill for the merger of the businesses of LAN and TAM 11. Extraordinary Session N°21 20/8/13 » Review of Financial Statements at 30 June 2013 12. Ordinary Session N°136 27/8/13 » Communications the Company about goodwill since the date of the merger issued by 5. Extraordinary Session N°18 14/5/13: 13. Ordinary Session N°137 27/9/13 » Review of Financial Statements at 31 March 2013 6. Ordinary Session N°133 28/5/13: » » » TAM capital increase Closure of 2012 audit plan and 2013 plan Other business 7. Ordinary Session N°134 25/6/13: » Preliminary closure of calculation of goodwill for LATAM transaction 8. Ordinary Session N°135 30/7/13: » » » » registration information Request for information presented by the Committee to the administration in Ordinary Session N°136 about Additional of accounting the the adjustments in the calculation of goodwill related to the merger of LAN and TAM Reserved memo N°640 and ordinary memo N°20377 of the Superintendencia de Valores y Seguros (SVS) Approval of fees of PWC identified 14. Extraordinary Session N°22 8/10/13 ANNUAL REPORT 201349 » approval of Review and complementary information to be filed with the Superintendencia de Valores y Seguros (SVS) in relation to the Company’s Financial Statements at 30 June 2013 15. Ordinary Session N°138 29/10/13: » » » Agreement on price and conditions of compensation plan for employees of the Company and its subsidiaries Extraordinary approved 21 of Shareholders’ Meetings December 2011 and 11 June 2013 2013 Audit Plan Other business by 16. Extraordinary Session N°23 11/11/13 » Review of Financial Statements at 30 September 2013 17. Ordinary Session N°139 26/11/13 2013 External Audit Plan (PWC) Review of compensation plans and others » » 18. Extraordinary Session N°24 17/12/13 » Advance of audit plan 19. Ordinary Session N°140 18/12/13 » Analysis of impairment issue or, in other words, adjustment of value of certain long-term assets. SUBCOMMITTEES OF THE BOARD OF DIRECTORS OF LATAM AIRLINES GROUP four following subcommittees 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 to review, discuss and make recommendations to the Board about the issues related to their respective areas of responsibility: (i) Strategy Subcommittee, (ii) Leadership Subcommittee, (iii) 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. The Strategy Subcommittee will focus on corporate strategy, current strategic affairs and the three-year plans and budgets of the main business units and functional areas and high-level review strategies. The Leadership Subcommittee will focus on areas that include group culture, high-level organizational appointment structure, 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, the succession 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, ANNUAL REPORT 201350tax 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. 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. LATAM Airlines Group has carried out different transactions with its subsidiaries, 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 and 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 2013. 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 policy on habitual operations 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 policy on habitual operations 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 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 the Company’s principal executives 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. ANNUAL REPORT 201351market-sensitive mechanisms for continuous disclosure of information and mechanisms for the protection of confidential information by the Company’s employees and executives. 4. Compliance Program. Managed by LATAM’s Compliance Area, which forms part of the Legal Vice-Presidency, in coordination with and under the supervision of the Board of Directors and its Directors’ Committee, this Program supervises compliance with the laws and regulation applicable to LATAM Airlines Group’s businesses and activities in the different countries in which it operates. PILLARS OF LATAM AIRLINES GROUP’S CORPORATE GOVERNANCE Notwithstanding the responsibilities of the Company’s Board of Directors and its Directors’ Committee, LATAM Airlines Group’s administration 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. These 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 (www.lan.ethicspoint. com) and TAM (www.eticatam.com. br). These facilities provide employees with a direct and private online channel through which to report any concerns in the knowledge that these will be properly processed or investigated without any risk of reprisal against the person reporting them. 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 Superintendencia de Valores y Seguros and, since Law Nº 20.382 on Corporate Governance came into force, also by Chilean securities market LATAM Airlines Group, legislation. 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, ANNUAL REPORT 201352CORPORATE GOVERNANCE PRACTICES In its Session N°378, held on 25 June 2013, the Board of Directors of LATAM Airlines Group approved the Report on the Company’s Corporate Practices, prepared in accordance with General Norm N° 341 issued by the Superintendencia de Valores y Seguros (SVS) on 29 November 2012. The information required under this norm is as of December 31 of each year and must be presented by March 31 of the subsequent year. Notwithstanding this, the first report under this norm had to be presented by 30 June 2013 and refer to the practices in force as of 31 March 2013. The information filed annually with the SVS must refer to the following matters: • • • • The functioning of the Board of Directors; The relation between the Company, its shareholders and the general public; The replacement and remuneration of the Company’s principal executives; The definition, implementation and supervision of the Company’s internal control policies and procedures and risk management. ANNUAL REPORT 201353CORPORATIVE GOVERNANCE / OWNERSHIP STRUCTURE AND PRINCIPAL SHAREHOLDERS 31 December, 2013 Shareholder COSTA VERDE AERONAUTICA S.A. TEP CHILE S.A. J P MORGAN CHASE BANK INVERSIONES NUEVA COSTA VERDE AERONAUTICA LTDA BANCO DE CHILE ON BEHALF OF NON-RESIDENT THIRD PARTIES COSTA VERDE AERONAUTICA SPA AXXION S.A. INVERSIONES ANDES SPA INVERSIONES HS SPA BANCO ITAÚ ON BEHALF OF INVESTORS BANCO SANTANDER ON BEHALF OF FOREIGN INVESTORS AFP PROVIDA S.A. TYPE C FUND 31 December, 2012 Shareholder COSTA VERDE AERONAUTICA S.A. TEP CHILE S.A. J P MORGAN CHASE BANK LARRAIN VIAL S.A. CORREDORA DE BOLSA COSTA VERDE AERONAUTICA SPA AXXION S.A. INVERSIONES ANDES SPA AXXDOS S A N° of shares as of 31/12/2013 % of total 86,386,914 65,554,075 42,318,030 22,314,277 20,134,096 20,000,000 18,473,333 16,120,777 15,028,024 14,554,107 10,050,999 7,974,373 16.1% 12.2% 7.9% 4.2% 3.8% 3.7% 3.5% 3.0% 2.8% 2.7% 1.9% 1.5% N° of shares as of 31/12/2012 % of total 80,445,407 65,554,075 29,516,208 22,071,446 20,000,000 16,994,337 14,288,695 13,551,636 16.8% 13.7% 6.2% 4.6% 4.2% 3.6% 3.0% 2.8% 2.7% 2.4% 2.3% 2.2% INVERSIONES NUEVA COSTA VERDE AERONAUTICA LTDA 12,824,095 BANCO DE CHILE ON BEHALF OF NON-RESIDENT THIRD PARTIES 11,329,732 BANCO ITAÚ ON BEHALF OF INVESTORS BANCHILE CORREDORES DE BOLSA S.A. 10,989,090 10,314,524 ANNUAL REPORT 201354PRINCIPAL CONTROLLING GROUPS 31 December, 2013 31 December, 2012 ANNUAL REPORT 201355DIVIDENDS The Company’s policy is to pay the minimum dividends required by law or, in other words, 30% of profits 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 for 2011 corresponded to 50% of that year’s distributable profits while those for 2012 corresponded to 30% of that year’s distributable profits. Distributable profits in 2011, 2012 and 2013 for the payment of dividends corresponded to the annual earnings attributable to holders of a stake in the controller’s net equity, calculated as the net profit reported in accordance with international financial reporting standards. The table below shows the dividend per share paid during the past three years. Year of profits against which dividend paid Payment date Typo Total dividend paid N° of shares Dividend per share Dividendo por ADR 15 September 2011 Provisional 56,590,766 339,334,209 2011 12 January 2012 Provisional 85,000,207 340,164,105 17 May 2012 Definitive 18,461,735 340,999,909 0.16677 0.24988 0.05414 0.16677 0.24988 0.05414 2012 17 May 2013 Definitive 3,288,127 483,547,819 0.0068 0.00680 2013 No dividends distributed ANNUAL REPORT 201356CORPORATIVE 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 conditions external to the 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 members of the Board of Directors, meets periodically to review and approve matters not regulated by the Financial Policy. 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 the growth of proportionate to • • • 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 Financial Investment Policy. Reduce the impact on the Company’s net margin of market risks such as variations in the price of fuel, exchange rates and interest rates. Reduce diversification investments counterparties. counterparty risk through on and operations with caps and of • 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, a deterioration of the financial ratios established in undertakings with ratings agencies, etc. ANNUAL REPORT 201357The Company’s Financial Policy establishes guidelines and restrictions for managing operations related to Liquidity and Financial Investment, and Management of Market Risk. Financing Activities decisions so as to optimize return adjusted for exchange-rate risk, subject to maintaining an adequate level of security and liquidity. In addition, it seeks to manage risk through the diversification of counterparties, maturities, currencies and instruments. LIQUIDITY AND FINANCIAL INVESTMENT POLICY FINANCING POLICY In 2013, LATAM Airlines Group carried out capital market operations for some US$1,390 million in order to increase its liquidity and, as of end-December, had a liquidity ratio of approximately 19% of total sales. These operations included a capital increase of approximately US$784 million and the issue of a bond for US$450 million securitized with future receivables for credit card sales in the United States and Canada by its passenger and cargo businesses. In January 2014, the Company also raised an additional US$156 million through the sale of the remnant shares from the capital increase which took place in December 2013. The Company maintained an adequate level of liquidity for protection against potential external shocks and the industry’s inherently cyclical nature. In addition, it maintained lines of credit for a total of US$185 million with local and overseas financial institutions which, as of year-end, it had not used. During the year, it continued to finance 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 2013, LATAM Airlines Group held a total of US$2,561 in cash and easily convertible million securities and US$539 million in advances on aircraft financed out of its own resources. the Company’s Financial The aim of Investment Policy is to centralize investment 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. As an additional financing measure, an important percentage of the Company’s fleet acquisition undertakings take the leasing arrangements. form of operational In the case of short-term financing, the Company held around 9% of its total debt as of 31 December 2013 in the form of loans to exporters/importers in order to finance working capital needs. A further objective of the Financing Policy is to ensure a stable profile of debt maturity and rental commitments, including debt service and fleet rental payments, that is consistent with the Company’s operating flows. ANNUAL REPORT 201358MARKET RISK POLICY Due to the nature of its operations, LATAM Airlines Group 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 or partially against these risks, the Company uses different derivatives to fix or cap increases in the underlying assets. Market Risk is managed in an integrated manner and takes into account the correlation between each exposure. In order to operate with counterparties, the Company must have a line approved and an ISDA or LFC contract signed with the chosen counterparty. Counterparties must have a credit 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. The hedging indices used by LATAM Airlines Group are principally Brent crude (BRENT) and the US Gulf Coast Jet 54. The Company’s Fuel Hedging Policy restricts the minimum and maximum range of fuel to be hedged depending on its capacity to pass on changes in these costs and the market outlook as reflected in the fuel price. In addition, the Policy 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. ii. Interest-rate risk of cash flow improvement Variations in interest rates bear a strong international economic relation to the situation, with an in the long-term outlook leading to 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 floating-rate debt 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. In order to reduce the risk related to an increase in interest rates, LATAM Airlines Group has acquired interest-rate swaps and call options. The instruments that may be used under its Interest-Rate Hedging Policy are swaps, reverse swaps, call options and forward- start swaps. ANNUAL REPORT 201359iii. Local exchange-rate risk The US dollar is the functional currency used by the parent company for the prices of its its services, the composition of classified financial situation and effects on its operating results. There are two types of exchange-rate risk: flow risk and balance sheet risk. Flow risk arises as a result of the net position of revenues and costs in currencies other than the US dollar. The Company sells most of its services in US dollars, in prices equivalent to the US dollar or in Brazilian reais. Approximately 57% of its revenues are denominated in US dollars and approximately 30% in Brazilian reais. A large part of its costs are denominated in US dollars or equivalents to the US dollar. This is the case, particularly, of fuel costs, airport charges, aircraft rentals, insurance and aircraft components and accessories. Remunerations, on the other hand, are denominated in local currencies. As a result, some 67% of the Company’s total costs are denominated in US dollars and approximately 24% in Brazilian reais. The tariffs of LATAM Airlines Group’s cargo and international passenger businesses are set in US dollars while, in its domestic businesses, a mix exists. In Peru, 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 and the euro. LATAM Airlines Group has partially hedged against exchange-rate risk by acquiring currency forwards. As of 31 December 2013, hedging for the Brazilian real for the period January-December 2014 reached US$500 million. 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. rates because Balance sheet risk occurs when items included there are exposed to variations in exchange they are denominated in a currency other than the functional currency. The main mismatch is in TAM S.A. whose functional currency is the Brazilian real while a large part of its liabilities are denominated in US dollars. In 2013, in order to reduce the impact of the appreciations or depreciations of real against the US dollar on its results, the Company carried out transactions that reduced the net dollar-denominated liabilities of TAM S.A. These operations included loans between companies in the group, a reduction of its short-term debt in US dollars and a reduction in debt related to the fleet. The Company’s aim is to continue with these transactions in order to achieve the maximum possible reduction in balance sheet exposure in 2014. ANNUAL REPORT 201360OPERATIONS LATAM AIRLINES GROUP S.A 04 ANNUAL REPORT 201361OPERATIONS / INTERNATIONAL PASSENGER OPERATIONS PASSENGERS Airlines Group’s LATAM international passenger operations include both long-haul flights connecting South America with the rest of the world and services within the region and the Caribbean. The year 2013 marked a key milestone in the merger of LAN and TAM since this was the first complete year in which the two airlines’ operations were managed in an integrated manner by LATAM Airlines Group, enabling it to offer customers a better product and, by increasing the connections available through a single network, broaden the scope of its transport of passengers. As a result, the Company offered a total of 24 international destinations served by a joint fleet of 102 aircraft. It carried 12.8 million passengers on international routes, of which 5.3 million corresponded to long-haul routes and 7.5 million to regional routes, allowing the Company to maintain a position of leadership on its principal routes. from performed During the year, there was an increase in competition international airlines offering flights to South America while European markets below expectations. In response, LATAM Airlines Group implemented a strategy that, through detailed management of routes and, in some cases, a rationalization of capacity, focused on profitability. This strategy explained, for example, the consolidation of São Paulo’s Guarulhos International Airport as a new hub for regional and long-haul flights in South America. This permitted a reduction of flights from Rio de Janeiro to Europe and the United States. in traffic Consolidated passenger the Company’s international markets grew by 2.4% on the previous year while capacity increased by 2.3%. As a result, the load factor reached a solid 82.3%, up by 0.1 percentage points on 2012. ANNUAL REPORT 201362former, In the the case of long-haul passenger In operations, North America and Europe are LATAM Airlines Group’s two most important it serves six markets. destinations: Mexico City, Miami, Orlando, New York, Los Angeles and San Francisco. It is the second largest passenger operator between South America and the United States, carrying 3.3 million passengers to and from this country in 2013. In the case of Europe, complementarity between the routes previously operated separately by LAN and TAM means that LATAM Airlines Group can now serve five cities: Madrid, Frankfurt, Paris, London and Milan. In addition, the Company has services to Oceania, with routes to Auckland and Sydney. In 2013, LAN successfully incorporated its first Boeing 787 on some strategic international routes such as Santiago-Madrid and Santiago-New York. TAM also made changes in its fleet, partially grounding its ten oldest and least efficient Airbus A-330s and replacing part of this capacity with six Boeing 767s that previously formed part of LAN’s fleet. This resulted in important efficiency gains and, through the inclusion of a business class with full-flat seats, allowed TAM to offer a better product to corporate customers. On routes between the United States and Latin America, LATAM Airlines Group accounts for 26% of total capacity, after American Airlines with 36% and followed by United Airlines and Delta Air Lines with 13% and 12%, respectively. In the case of routes to Europe, LATAM Airlines Group accounts for 13% of total capacity and its main competitors are Air France-KLM and IAG, each with 22%. An important milestone for the Company’s international passenger business was the code sharing agreement signed by TAM and American Airlines in August 2013, which has allowed the Company to offer greater connectivity to its passengers within the United States from Miami, Orlando and New York, initially to 37 destinations that include Las Vegas, Chicago and Boston. Similarly, customers of American Airlines can now travel to 17 cities in Brazil on flights operated by TAM from São Paulo and Rio de Janeiro. As well as the increase in connectivity, the agreement between TAM and American Airlines also allows the customers of each airline to participate in the other’s loyalty program, making use of this network even more attractive. In August 2013, LAN Colombia also loyalty implemented code sharing and program agreements with American Airlines. These were the first such agreements entered into by the Colombian subsidiary with another airline. This has permitted the sale of code-sharing flights from Colombian cities such as Cali, Barranquilla and Cartagena via Bogotá to 12 destinations in North America such as Atlanta, Boston and Orlando via Miami. ANNUAL REPORT 201363 to in order At the organizational level, the merger process implied the adoption of a number of measures and best revenue management practices in the Company’s international business area capture synergies. These measures included the homogenization of LAN’s and TAM’s fares and the implementation of a cross-selling system for their flights as well as the establishment of code sharing on a number of routes. In addition, their international commercial and airport offices were integrated and common policies were defined in this area in order to capture the merger’s benefits in the different markets. Although the two airlines maintain their respective loyalty programs, work began in 2013 on their harmonization. The two airlines also standardized their in-flight entertainment systems - available on long-haul flights - increasing the number of films from 45 to 110 and consolidating the group’s position in South America as the airline offering the broadest range of in-flight entertainment. These new agreements extend the historic relation between the LATAM group and American Airlines to operations in the Colombian and Brazilian markets, giving an important boost to its operations between Latin America and the United States. In October 2013, LAN Colombia joined the oneworld global alliance, fostering the transport of the alliance’s members to and from the Colombian market and bringing all the LAN group into the alliance. TAM remains a member of Star Alliance but has announced that it will join oneworld as from 1 April 2014, thereby consolidating the participation of LATAM Airlines Group in the alliance. In the regional business, it’s the broad the network of destinations allowed Company to consolidate its positions as the leading airline in south America, LATAM Airlines Group achieved a 52% market share, where its main competitors are Avianca-Taca, Aerolíneas Argentinas and GOL, achieved a 22%, 10% and 8%, respectively. For this operations the company used a fleet of aircraft from the Airbus 320 and Boeing 767 families. In 2013, the Company also expanded its presence in the Caribbean, inaugurating the Bogotá-Aruba route, operated by LAN Colombia with two nighttime flights a week that seek to leverage a tourist destination that attracts one million visitors a year. At the end of 2013, the Company also announced the opening of a new route between Argentina and Brazil, starting on 2 January 2014, to connect the cities of Rosario and São Paulo, with daily non-stop flights operated by TAM. ANNUAL REPORT 201364OPERATIONS / BRAZIL is far South by domestic America’s Brazil largest passenger market and the third largest in the world. In 2013, a total of 90 million passengers the country. flew on routes within routes, maintaining In 2013, TAM carried 32 million passengers its on domestic position as the leading operator with a 40% market share. Its principal competitors are GOL, Azul and Avianca, with market shares of 35%, 13% and 7%, respectively. TAM served 40 destinations within Brazil, using a fleet of 173 aircraft, mostly from the Airbus A320 family and including the first ten Airbus A321s it has incorporated and which have allowed it to cover high-density routes such as São Paulo-Fortaleza and São Paulo-Recife more efficiently. In 2013, the domestic passenger operation in Brazil faced a difficult context, due principally to the weak performance of the country’s economy - with GDP growth of just 2.3% - which was reflected in a reduction of demand in the corporate passenger segment. In addition, the marked depreciation of the Brazilian real, which reached in average 10,4%, exerted pressure on costs denominated in dollars while the market continued to be characterized by the excess capacity that, in recent years, has affected the returns of the airline industry as a whole. this complex situation, Despite TAM achieved significant improvements in its operation. In this, a decisive role was played by the discipline with which it continued to implement the plan for restructuring its domestic business which it launched in ANNUAL REPORT 2013652012 in a bid to achieve changes that will be sustainable in the long term and, in this way, to lay the foundations for profitable growth. One of the pillars of the strategy applied by the Company in this market is supply adjustment. A 1.1% reduction of capacity in 2012 was followed by a further 8.4% reduction in 2013. This has resulted in an increase in unit income, thanks to a higher load factor and a higher yield, both of which showed a sustained improvement over the course of the year. In 2013, revenues per ASK (RASK) showed a significant increase, mostly driven by a load factor that, at 79.7%, was up by 6.1 percentage points on 2012 and reached levels that TAM had not achieved for over five years. addition, the Company In achieved ongoing progress in the implementation of best revenue management and market segmentation practices through a complete overhaul of its fare structure, a measure that, in 2013, allowed it to maintain its leadership segment. corporate passenger in the In the case of costs, a number of initiatives were implemented in a quest for efficiency gains. These included the incorporation of ten A321s which reduce the cost per ASK by 6%. For operational reasons and in line with the Company’s capacity adjustment, there was also a reduction in personnel. Looking to the future, TAM will continue to deepen the structural changes that are beginning to become apparent in the Brazilian domestic market, which represents around a third of the total capacity of LATAM Airlines Group and around 30% of its revenues and is, therefore, one of its most important businesses. ANNUAL REPORT 201366OPERATIONS / CHILE In 2013, the Chilean domestic market was characterized by important growth of demand to which LAN successfully responded with an expansion strategy based on the consolidation of existing destinations. In 2013, LAN carried close to 7 million passengers within Chile, up by 11% on 2012. Its domestic traffic in Chile has more than doubled in six years since it launched its “the new way to fly” model in order to boost and contribute to the development of air travel in the country by stimulating demand and allowing people who had never flown before to access this means of transport. LAN serves 16 domestic destinations - covering the country from north to south - and, in 2013, used a fleet from the Airbus A320, A319 and A318 families. The last Airbus A318s were taken out of service in 2013 and replaced with Airbus A319s, which are more efficient to operate in smaller airports. In 2013, the growth of LAN’s domestic traffic was driven by routes to the mining north of the country and, particularly, the cities of Calama, Antofagasta and Copiapó. In July, over 100,000 passengers flew the Santiago- Antofagasta route, setting a new record for domestic routes. MILLION PASSENGERS % MARKET SHARES LAN SKY AIRLINES PAL AIRLINES OTROS1 77% 19% 3% % AIRCRAFT DOMESTIC DESTINATIONS ANNUAL REPORT 201367However, the south of Chile also contributed to LAN’s growth, with the 438,270 passengers who flew the Punta Arenas route representing an increase of 13% on the previous year. Consolidation of the Company’s service to Chiloé via Puerto Montt continued, improving the quality of life of some 60,000 people by allowing them to reduce journey times and connecting them with the rest of the world as well as boosting the island as one of Chile’s leading tourist attractions. LAN achieved a 77% share of the domestic market measured in RPK (excluding Easter Island). Its principal competitors are Sky Airline and Principal Airlines (PAL), with market shares of 19% and 3%, respectively. LAN’s consolidated passenger traffic (RPK) rose by 12% as compared to the previous year while its capacity (ASK) increased by 14.1%, giving a load factor of 80%. ANNUAL REPORT 201368OPERATIONS / PERU Peru is South America’s fastest growing economy and, although its expansion in 2013 was below expectations, the domestic airline market remained very dynamic and, at 14.8%, the increase in the number of passengers transported was among the highest in the region. In the case of LAN Perú, this was reflected in the close to 5.3 million people carried on domestic routes which represented an increase of 17% on the previous year. Its consolidated passenger traffic (RPK) was up by 16.3% on 2012 while capacity (ASK) increased by 16.4%, giving a load factor that, at a solid 80.6%, was similar to its level in 2012. In 2013, the Company served 14 domestic destinations and, transported 69% of the passengers. Due to increased competition, this represented a drop on the previous year but LAN Perú nonetheless maintained its position as the leading airline in the Peruvian market. On domestic routes, its main competitors are Avianca, Peruvian Airlines, Star Perú and LC Perú but LAN Perú stands out as offering the greatest variety of destinations, frequencies and services for domestic and international travelers. START OF OPERATIONS LAN PERÚ 1999 MILLION PASSENGERS MARKET SHARES LAN PERÚ PERUVIAN AIRLINES STAR PERÚ AVIANCA - TACA OTROS4 63% 11% 8% 14% % AIRCRAFT DOMESTIC DESTINATIONS ANNUAL REPORT 201369The Company, for example, increased the number of daily flights it offers from Lima to destinations such as Piura, Chiclayo and Iquitos. In addition, it launched a direct flight on the Cusco-Arequipa route and on the route to Puerto Maldonado, thereby facilitating the country’s integration. In September, it also extended the times at which it offers flights to Cusco, taking advantage of a modern satellite navigation system which allows it to operate with complete safety outside daylight hours, and is, in fact, the only airline with this capability. In a further measure to boost domestic passenger traffic, the Company introduced more economic fares for inter-regional routes with a stopover in Lima. The results have been more than encouraging, with traffic quadrupling on some of these routes. At the beginning of the year, LAN Perú operated a fleet of 14 Airbus A319s but, during the year, took one of these aircraft out of service and incorporated three Airbus A320s, the first of which arrived in August. These aircraft are equipped with sharklets, an advanced-technology device installed on their wings which improves takeoff capacity, increases fuel consumption efficiency and reduces CO2 emissions by around 4% as well as the noise footprint. Thanks to this alone, LAN Perú expects to avoid annual emissions of some 1,000 tonnes CO2 per aircraft. In 2013, LAN Perú also continued to improve its infrastructure. In August, it added a Boeing 767 flight simulator to its modern (CIT), which Technical Training Center installations and latest-generation has ANNUAL REPORT 201370 equipment for the training of Peruvian pilots and crew. In addition, as part of its Plan of Coverage of Face-to-Face Sales Points, it installed 18 kiosks, three islands and two new sales offices around the country. line with its objective of offering In customers a better service, LAN Perú implemented a change of successfully International Jorge Chávez in the hub Airport. This will allow it to generate competitive advantages that facilitate the operation’s future growth, resolving current infrastructure limitations, positioning the operation in a timetable that is ideal for the Company and improving the connectivity of all the flights it operates. In addition, the Company implemented the Lean philosophy of work, geared to the simplification and improvement of processes at the airport and the achievement of operational efficiencies. In 2013, LAN Perú was recognized as one of the country’s ten preferred employers in a ranking prepared by Arellano Marketing and Laborum, companies which specialize in labor issues. It also became the first airline in Peru and the only one in South America to obtain the Socially Responsible Company international recognition awarded to companies that make a voluntary and public commitment to socially responsible management as part of their culture and business strategy. (ESR) seal, an ANNUAL REPORT 201371OPERATIONS / COLOMBIA Just two years after its start of operations as LAN Colombia, this Company has gradually consolidated a position as a very attractive alternative for corporate travelers and tourists in a market characterized by intense and growing competition. This was possible thanks to the adoption of different measures designed to achieve brand recognition and customer loyalty in a process that was further deepened in 2013. LAN Colombia is the result of the acquisition in December 2010 of the local Aires airline. Its deteriorated situation called for a complete restructuring in order to bring it into line with LAN’s safety, punctuality, efficiency and service quality standards. This was achieved in record time and culminated successfully at the end of 2011 with the change of brand. The Company has since gone on to show a sustained expansion and increase in its coverage of routes within the country. With a network that, as of December 2013, included 20 domestic destinations, positioning it as one of the operators offering the greatest coverage, LAN Colombia transported over 4.2 million passengers on domestic flights in 2013, up by 15% on the previous year. This gave it a 18% market share, positioning it as the second largest airline after Avianca. Other competitors in the domestic market are Copa, Viva Colombia, EasyFly and Satena. START OF OPERATIONS LAN COLOMBIA 2011 MILLION PASSENGERS % MARKET SHARES LAN COLOMBIA AVIANCA VIVA COLOMBIA COPA OTROS6 18% 58% 9% 9% % AIRCRAFT DOMESTIC DESTINATIONS ANNUAL REPORT 201372In this context, the Company launched a new route between Cali and San Andrés in the second half of the year and increased the number of flights per day on the Bucaramanga and Barranquilla routes from four to five and from six to seven, respectively. New flights were also added on its routes from Bogotá to Ibagué, Puerto Asís and Neiva and from Medellín’s Enrique Olaya Herrera Airport to Montería and Pereira. In 2013, the Company made further progress with a fleet renewal plan that forms part of a strategy to increase returns. This process, which began in 2012, entails the gradual withdrawal from service of the Boeing 737- 700s and Bombardier Dash aircraft that it inherited from Aires and their replacement by more modern and efficient models such as those of the Airbus A320 family. This process will be completed in 2014 and will mean cost efficiencies for LAN Colombia. As of December 2013, LAN Colombia was using seven aircraft from the Airbus A320 family, four Boeing 737s and eight Dash8- 200s to serve its domestic markets. In 2014, it is scheduled to receive four new Airbus A320s which will allow it to continue expanding the operation and the number of flights it offers. At the beginning of March, the Company completed its recertification under the IATA Operational Safety Audit (IOSA) system (equivalent to quality certification in other industries). As part of this process, all areas of the operation - some 1,200 processes - were audited without any non-conformance being detected. At the end of the year, LAN Colombia inaugurated a VIP Lounge at Bogotá’s El Dorado airport. With the highest standards of comfort and gastronomy, it is a further tangible incentive for customer loyalty. In an international ranking prepared by the VIP design magazine, it was identified as one of the world’s ten best VIP lounges. (RPK) rose by 10% LAN Colombia’s consolidated passenger traffic in 2013 as compared to the previous year while increased by 2.0%. This capacity gave an average load factor of 80%, up by 6.2 percentage points on 2012. (ASK) ANNUAL REPORT 201373 Thanks to a code sharing agreement between LAN Colombia and American Airlines which came into force in August, the Company was able to expand its offer of flights in the United States to 12 destinations via Miami while American Airlines began to offer flights to Barranquilla, Bucaramanga, Cartagena and Pereira, four of Colombia’s most important cities. In October, LAN Colombia joined the oneworld alliance. As a result, all of LAN’s international operations are now members of this alliance which brings together 13 of the world’s most prestigious airlines, all of which are committed to providing a service of excellence. Through this alliance, LAN Colombia’s passengers now have access to a network of 950 destinations in over 150 countries. ANNUAL REPORT 201374OPERATIONS / ARGENTINA LAN’s domestic operations in Argentina began in June 2005 with just two routes. By December 2013, however, the Company was serving 14 domestic destinations from Buenos Aires, connecting the capital the country’s other main cities with important contribution and making an flights. local to network the of In the eight years since it started operations, LAN Argentina has positioned itself as one of the most important operators of domestic flights, doing so despite fare restrictions and the impossibility of fully low-cost model. Its implementing LAN’s position in the 2.3 million domestic passengers it transported in 2013 which represented a 29% market share. is reflected For its domestic flights, the Company has a fleet of ten Airbus A320s, which are regarded as the most modern and efficient in the industry for operations of this type. In 2013, consolidated passenger traffic (RPK) increased by 0.3% while capacity (ASK) grew by 1.2%, giving a load factor of 73%. On domestic routes, the Company competes principally with the flagship Aerolíneas Argentinas, which has a 70% market share. In 2013, LAN repeatedly faced complexities that hampered its operations to and from the Company Argentina. Despite maintained permanent dialogue with this, ANNUAL REPORT 201375the authorities and achieved operational continuity in line with its commitment to the country, its passengers and their connectivity with the rest of the region. The milestones of the year included the inauguration in January of a VIP Lounge in the new terminal of the Ezeiza International Airport. This was LAN’s first VIP lounge outside Santiago, Chile. It is a spacious facility with an area of over 550 square meters, a totally renovated image and numerous services for the premium passengers of LAN, TAM and the other airlines of the oneworld alliance. In February, the Company opened a commercial office in the center of the city of San Isidro in order to strengthen its presence in the northern part of Greater Buenos Aires. As a result, it now has a network of 17 commercial offices around the country. In April, it went on to centralize the offices of LAN and TAM in the Costa Salguero Complex in Buenos Aires. This allowed it to consolidate the two airlines’ administrative and commercial operations in a single location. ANNUAL REPORT 201376START OF OPERATIONS LAN ECUADOR 2009 OPERATIONS / ECUADOR launching its domestic passenger Since in 2009, LAN Ecuador has operations gradually consolidated a established position as an important operator on routes within the country. This was possible thanks to constant efforts to offer the best product in terms of safety, connectivity and service. With 1.3 million passengers transported in 2013, up by 8.8% on the previous year, the Company is on the way to positioning itself as the airline carrying the largest number of domestic passengers. In 2013, it achieved a 33.2% share of the market in which it competes principally with the flagship Tame airline and with Aerogal, owned by the Avianca-TACA alliance, with market shares of 42.7% and 24.0%, respectively. routes and In 2013, LAN Ecuador served six destinations through the Quito-Guayaquil, Quito-Cuenca the and Guayaquil-Cuenca Quito/Guayaquil route to the San Cristóbal and Baltra Islands in the Galápagos as well as the new Quito-Manta route, launched in March with two flights daily. However, as part of a process of restructuring of itineraries and domestic routes, this latter service temporarily ceased to operate in September. For its domestic operations, LAN Ecuador uses a fleet of three Airbus A320s. In consolidated passenger traffic increased by 15%, despite the important contraction seen across the industry in the corporate passenger market. Its capacity (ASK) experienced an important LAN Ecuador’s 2013, MILLION PASSENGERS % MARKET SHARES LAN ECUADOR TAME AEROGAL 33% 43% 24% AIRCRAFT DOMESTIC DESTINATIONS ANNUAL REPORT 20137728.7% increase, resulting in a reduction of nine percentage points in load factor to 70%. For the fourth consecutive year, LAN Ecuador received the Prize for Service Quality (airline category) awarded by the Ekos magazine. This recognition confirms that the Company has fulfilled its promise to offer the country a world-class airline, with high punctuality standards and an efficient service for both corporate passengers and tourists, giving priority to meeting clients’ requirements. LAN challenges which The Ecuador successfully addressed in 2013 included the transfer of its operations from the old Mariscal Sucre International Airport to the new Quito terminal in Tababela, two hours from the capital, which was inaugurated in February. This represented a significant challenge for all Ecuador’s airline industry which had operated at the old airport for 60 years. ANNUAL REPORT 201378OPERATIONS / CARGO The process of association between LAN and TAM marked a milestone for this business unit since the cargo operations of the two airlines and their respective subsidiaries were integrated both operationally and commercially. With 1.2 million tonnes transported in 2013, up by 1.3% on the previous year, the Company and its subsidiaries positioned themselves as the largest air cargo operator in Latin America and, particularly, Brazil. They offered clients the greatest connectivity between the region and the rest of the world, with 134 destinations in 23 countries, modern infrastructure, a wide range of products and services and the flexibility to adapt to market conditions and needs. In the latter, a key role has been played by the business model developed by the Company and its subsidiaries. Based on the efficient operation of a fleet of freighters combined with optimization of the belly capacity of the passenger planes to which it has access, this contributes to the profitability of routes, permits adjustment of the operation to economic cycles and increases load factors. the 2013, cargo business conditions, due faced In difficult to a weak macroeconomic context. As a result, the internationally grew by cargo business only 1.2% and competition was intense. ANNUAL REPORT 201379 At the regional level, demand for imports on routes from the United States to Latin America was down by 4% on the previous year, with Brazil and Argentina as the destinations most affected. The principal export markets, however, performed healthily, growing by 11%, despite specific seasonal impacts such as phytosanitary problems with salmon in Chile and the climatic phenomena that hit production of asparagus in Peru between June and August and of fruit in Argentina in October. The intensification of competition was driven both by the increase in capacity in passenger planes internationally and the increase in the cargo capacity of regional and international operators whose markets have been affected and who have incorporated latest-generation freighters. regional Faced with this situation, the Company’s strategy in 2013 focused on optimizing use of the belly of passenger planes on international and routes, accompanied by supply discipline and the optimization of its cargo network. This was complemented by constant efforts to ensure efficiency in operating costs and support areas as well as the development and improvement of the processes, systems and infrastructure of the cargo business. In this context, management of the belly capacity of TAM’s international passenger fleet was integrated with the rest of the network of cargo operators, rather than being managed separately in the different markets. As a result, the load factor rose from 47% in 2012 to 54% in 2013. An important part of this increase was explained by routes from Europe and the United States to Brazil, where the load factor improved by almost 20 percentage points as compared to 2012, and the successful use of flights from Brazil to the United States and Europe to transport perishable cargo from different points in South America. Indeed, over 60% of the cargo carried on these flights had its origin outside Brazil, an achievement in which the team work of the commercial and operational areas played a decisive role. An important milestone in this task was the launch of a regional cargo operation between Brazil, Argentina and Chile, which also permitted improved utilization of the Company’s cargo fleet. Similarly, in the Brazilian domestic market, progress was successfully achieved in the process of integrating the cargo operation of ABSA (previously LAN CARGO’s subsidiary in Brazil) with the capacity of the bellies of TAM’s passenger fleet, positioning TAM Cargo (previously ABSA) as the principal cargo operator on routes within the country with a market share of close to 50%. Annual revenues (in Brazilian reais) rose by 15%, with the increase driven new businesses such as the operation for the Brazilian Postal Service as well as by commercial initiatives related to the optimization of tariffs and the filling of each flight, leveraging the capacity of the domestic cargo network and the bellies of passenger planes in Brazil. In addition, operating costs (in reais) were reduced by 9%, thanks to improvements in operational processes and application of the LEAN methodology. An IT system for the management and administration of domestic cargo was also implemented, representing an investment of some US$3.6 million, while ANNUAL REPORT 201380around US$2.0 million was invested in the installation of critical workhouses in Manaos and Rio de Janeiro, which will enable the Company to improve its service to clients. In 2013, the cargo traffic of the Company and its subsidiaries was down by 0.7% on 2012 while capacity measured in ATKs was up by 0.2%. This gave a load factor of 58.3% which represented a drop of 0.5 percentage points on 2012. The long-term strategy of LAN CARGO and its subsidiaries seeks to transform the bellies of the passenger fleet of LATAM Airlines Group into their principal competitive edge, allowing them to offer clients an attractive alternative and enhancing their portfolio of products and the connectivity and coverage of their cargo network. ANNUAL REPORT 201381OPERATIONS / CUSTOMER LOYALTY PROGRAMS However, In 2013, LAN and TAM continued to operate their respective loyalty programs independently. passengers registered with the two programs were able to earn and redeem kilometers/points on any flight of the network administered by the two airlines in accordance with each program’s redemption rules and each company’s fares and seat availability. LANPASS is the frequent flyer program created by LAN in 1984 to reward the preference and loyalty of its passengers with different benefits. Members of the program can exchange LANPASS kilometers for free tickets, products from the program’s catalogue or other options such as gift cards for use at some retail stores. Members of the program earn LANPASS kilometers every time they fly with LAN, TAM or any of the airlines in the oneworld alliance as well as when shopping with or using the services of companies around the world which have an agreement with it. In 2013, the program incorporated new partners in Chile, Argentina, Peru, Ecuador and Colombia. In January 2013, a new category of LANPASS member, Comodoro Black, was introduced. This is the highest elite category and members are attended by Special Services executives and, with their direct family group, have access to preferential services and maximum priority for upgrades. As of December 2013, LANPASS had 8.5 million members, up by 15% on the previous year, principally in Chile, Peru, Argentina, Colombia, Ecuador and the United States. ANNUAL REPORT 201382TAM established TAM Fidelidade, Brazil’s first frequent flyer program, in 1993. It is also designed to reward those who fly regularly with the airline with different benefits and exclusive offers. Members currently earn points each time they use flights operated by TAM, LAN and Star Alliance airlines, when they use their TAM Itaucard credit card or buy products from the TAM Viajes tourist operator. As from 1 April 2014, TAM will, however, cease to belong to Star Alliance and will become a member of the oneworld alliance like LAN. Members of the program can use points for tickets throughout the domestic and international network of TAM and its associates. Points can also be exchanged for an upgrade, providing this is available. As of 2013, TAM Fidelidade had some 11 million members, principally in Brazil. This represented an increase of 5% on 2012. TAM Fidelidade forms part of Multiplus, a subsidiary of TAM created in 2009 and listed on the stock market since 2010. Multiplus is Brazil’s largest and best loyalty network and allows members to accumulate in a single account, Multiplus points directly by shopping at over 13,000 stores across different segments and indirectly by transferring points from another affiliated program. Points can be exchanged for over 420,000 different products and services. ANNUAL REPORT 201383 As of 2013, the Multiplus network had over 460 partners and 12 million registered users. At the end of 2013, Roberto Medeiros was appointed as the company’s new CEO and his principal objective will be to expand the accumulation and redemption of points in different sectors of the economy and to consolidate the position of Multiplus as Brazil’s principal customer loyalty network. In addition, Multiplus and TAM Líneas Aéreas have signed a new contract improving the alignment of incentives for the maintenance of a long-term relationship between the two companies and increasing the stability of this relationship. ANNUAL REPORT 201384OPERATIONS / PROPERTY, PLANTS AND EQUIPMENT LAN’S PROPERTY, PLANT AND EQUIPMENT Headquarters Other Facilities facilities are Our main located near the Comodoro Arturo Merino Benítez International Airport. The complex includes office space, conference space and training facilities dining facilities and mock-up cabins used for crew instruction. Our corporate offices are located in a more central location in Santiago, Chile. Maintenance Base Our maintenance base is located on a site inside the grounds of the Comodoro Arturo Merino Benítez International Airport. This facility contains our aircraft hangar, warehouses, workshops and offices, as well aircraft parking area capable of accommodating short-haul aircraft. up seventeen to We own a flight-training center on the side of the Comodoro Arturo Merino Benítez International Airport. We have also developed a recreational facility for our employees with Airbus’ support. The facility, denominated “Parque LAN,” is located on land that we own near the Comodoro Arturo Merino Benítez International Airport. LAN PERU’S PROPERTY, PLANT AND EQUIPMENT LAN Peru has approximately 19,000 m2 built. All facilities are leased and are distributed as follows: Administrative Offices: 7,000 m2 Sales Offices: 2,000 m2 Concessions airports: 10,000 m2 Miami Facilities We occupy site at the Miami International Airport that has been leased to us by the airport under a concession agreement. Our facilities include corporate building, cargo warehouse (including meter cooling area) and aircraft-parking platform and approximately of furnished office space. LAN COLOMBIA’S PROPERTY, PLANT AND EQUIPMENT LAN Colombia has approximately 27,500 m2 built. All facilities are leased and are distributed as follows: Administrative Offices: 4,500 m2 Sales Offices: 1,700 m2 Concessions airports: 21,300 m2 ANNUAL REPORT 201385 LAN ECUADOR’S PROPERTY, PLANT AND EQUIPMENT Base Maintenance LAN Ecuador has approximately 14,500 m2 built. All facilities are leased and are distributed as follows: Administrative Offices: 1,600 m2 Sales Offices: 1,000 m2 Concessions airports: 11,900 m2 At Hangars II and V in Congonhas Airport, which TAM has offices and hangars. This site also houses the areas of Aircraft Maintenance, Procurement and Logistics of Aeronautical Materials. LAN ARGENTINA’S PROPERTY, PLANT AND EQUIPMENT Other Facilities In São Paulo, TAM has other facilities such as: Commercial Headquarters, Uniform Building, Morumbi Office Tower and a Call Center Building. Besides, in São Paulo, TAM has the offices belonging to the Group as: Multiplus Office, TAM Viagens Office, one store of TAM Viagens and Bahia state. In Guarulhos, TAM has a Passenger Terminal, Operational Areas such as Check-in, Ticket Sales, Check Out, Operations Areas, VIP Lounges, Aircraft Maintenance, GSE, Cargo Terminal, Distribution Centers, etc. LAN Argentina has approximately 18,000 m2 built. All facilities are leased and are distributed as follows: Administrative Offices: 6,600 m2 Sales Offices: 2,600 m2 Concessions airports: 8,700 m2 TAM’S PROPERTY PLANT AND EQUIPMENT Headquarters TAM’s main facilities are located in São Paulo, in hangars within the Congonhas Airport and nearby. At Congonhas Airport, TAM leases hangars belonging to INFRAERO (the Local Administrator Airport): Hangar VII, Hangar VIII, Hangar III. The Service Academy is located about 2.5 km from Congonhas Airport, is a separate property which TAM owns, exclusively for the areas of Selection, Medical Service, Training, and Mock-ups. ANNUAL REPORT 201386RESULTS 2013 LATAM AIRLINES GROUP S.A 05 ANNUAL REPORT 201387RESULTS 2013 / INDUSTRY OVERVIEW and capacity Consolidation rationalization and the development of cooperation agreements, processes which characterized the airline industry in 2013, have played a key role in the recent improvement in its performance. In the United States and Europe, various mergers meant a reduction in the number of operators and this was accompanied by a proliferation of bilateral agreements between operators in the two continents for the unification of their commercial policies and the joint offer of services, resulting in industry consolidation and a rational competitive environment focusing on profitability. At the domestic and regional level, a trend towards adoption of the low-cost model and the unbundling of the different services that comprise the travel experience has permitted better segmentation of the different types of passenger in line with their specific travel needs. North America saw a marked improvement in the profitability of its operators who completed the process of consolidation, generating large airline groups that account for the majority of traffic. This permitted better management of capacity, with an offer of services that resulted in healthy load factors. In addition, the European market starts to recover, showing signs of growth with improvements in the tourist demand. Moreover, there is an improvement in premium traffic between Europe and the United States in response to the improved economic outlook. the economies Asia-Pacific the In depreciation of the local currencies had a negative impact on both, demand and the costs of local airlines as well as the revenues of international operators with flights to the region. Moreover, there was an increase in competition on routes to Asia and the Pacific from Middle Eastern carriers seeking to take advantage of their strategic geographic location to transform their cities of origin into important international hubs. Latin America continued to benefit from the decoupling of its economies from the international economic crisis which, together with the low penetration of air travel in the region, was reflected in an expansion of demand. It was, indeed, the region with the world’s second highest rate of growth of demand. This prompted airlines from other continents to divert increasing the capacity to the region, competitive pressures local airlines. In addition, the depreciation of Latin American currencies against the dollar affected domestic operations since the proportion of the costs of the region’s airlines that are in dollars exceeds that of their revenues. faced by The Brazilian market, that represents 50% of the region’s traffic, benefited from the capacity reduction strategy that have been implementing the main competitors, gaining healthy load factor and significant improvements in the unit revenues. ANNUAL REPORT 201388Latin American cargo operators were affected by entry of the capacity of operators from other regions, with idle capacity in their own markets, at a time when the global demand remained weak. Fuel prices showed only limited variations over the course of the year, with a slight downward trend. Given the changes that have occurred in the market’s structure, the International Air Transport Association (IATA) increased its estimate of the industry’s global earnings in 2014 to US$19.7 billion, which would represent a net margin of 2.6%. Operating margins would average 4.7%, according to IATA, but the United States and Latin America would see higher figures of 6.4% and 5.1%, respectively. Thanks to the capacity discipline seen globally in 2013, IATA anticipates a load factor that, at 81%, would set a new record. This would be the result of an average 5.2% expansion of global capacity (ASK) and an average 6.0% increase in traffic (RPK), with the Middle East, Latin America, Africa and Asia-Pacific all showing above average growth of both indicators. In the case of cargo, IATA forecasts an average 2.1% increase in traffic (ATK) while capacity would expand in line with the increase in the belly capacity of passenger operations. Average global passenger and cargo yields would drop by 0.6% and 2.1%, respectively. Finally, IATA anticipates a 3.4% reduction in the Brent oil price and a 2.7% reduction in the price of jet fuel. ANNUAL REPORT 201389 RESULTS 2013 / REGULATORY FRAMEWORK Below is a brief description of the most important aspects of the aviation regulation, antitrust and other governing Chile. CHILE´S AERONAUTICAL REGULATION Both the DGAC and the JAC oversee and regulate the Chilean aviation industry. The DGAC reports directly to the Chilean Air Force and is responsible for supervising compliance with Chilean laws and regulations relating to air navigation. The JAC is the Chilean civil aviation authority. Primarily on the basis of Decree Law No. 2,564, which regulates commercial aviation, the JAC establishes the main commercial policies for the aviation industry in Chile, regulates the assignment of international routes, and the compliance with certain insurance requirements, and the DGAC regulates flight operations, including personnel, aircraft and security standards, air traffic control and airport management. We have obtained and maintain the necessary authority from the Chilean government to conduct flight operations, including authorization certificates from the JAC and technical operative certificates from the DGAC, the continuation of which is subject to the ongoing compliance with applicable statutes, rules and regulations pertaining to the airline industry, including any rules and regulations that may be adopted in the future. Chile is a contracting state, as well as a permanent member, of the ICAO, an agency of the United Nations established in 1947 to assist in the planning and development of international air transport. The ICAO establishes technical standards for the industry, which international aviation incorporated Chilean authorities have into Chilean laws and regulations. In the absence of an applicable Chilean regulation concerning safety or maintenance, the DGAC has incorporated by reference the majority of the ICAO’s technical standards. We believe that we are in material compliance with all relevant technical standards. ROUTE RIGHTS Domestic Routes. in connection with Chilean airlines are not required to obtain permits carrying passengers or cargo on any domestic routes, but only to comply with the technical and insurance requirements established respectively by the DGAC and the JAC. There are no regulatory barriers that would prevent a foreign airline from creating a Chilean subsidiary and entering the Chilean domestic market using that subsidiary. On January 18, 2012 the Secretary of Transportation and the Secretary of Economics of Chile announced steps towards unilaterally opening the Chilean domestic skies in the near term. International Routes. services on As an airline providing international routes, LAN is also subject to a variety of bilateral civil air transport agreements that provide for the exchange of air traffic rights between Chile and various other countries. There can be no assurance that existing bilateral agreements between Chile and foreign governments will continue, and a modification, suspension or revocation of one or more bilateral treaties could have a material adverse effect on our operations and financial results. ANNUAL REPORT 201390International route rights, as well as the corresponding landing rights, are derived from a variety of air transport agreements negotiated between Chile and foreign governments. Under such agreements, the government of one country grants the government of another country the right to designate one or more of its domestic airlines to operate scheduled services to certain destinations of the former and, in certain cases, to further connect to third- country destinations. In Chile, when additional route frequencies to and from foreign cities become available, any eligible airline may apply to obtain them. If there is more than one applicant for a route frequency the JAC awards it through a public auction for a period of five years. The JAC grants route frequencies subject to the condition that the recipient airline operate them on a permanent basis. If an airline fails to operate a route for a period of six months or more, the JAC may terminate its rights to that route. International route frequencies are freely transferable. In the past, we have generally paid only nominal amounts for international route frequencies obtained in uncontested auctions. AIRFARE PRICING POLICY. Chilean airlines are permitted to establish their own domestic and international fares without government regulation. For more information, see “—Antitrust Regulation” below. In 1997, the Antitrust Commission approved and imposed a specific self- regulatory fare plan for our domestic operations in Chile consistent with the Antitrust Commission’s directive to maintain a competitive environment. According to this plan, we must file notice with the JAC of any increase or decrease in standard fares on routes deemed “non-competitive” by the JAC and any decrease in fares on “competitive” routes at least twenty days in advance. We must file notice with the JAC of any increase in fares on “competitive” routes at least ten days in advance. In addition, the Chilean authorities now require that we justify any modification that we make to our fares on non-competitive routes. We must also ensure that our average yields on a non- competitive route are not higher than those on competitive routes of similar distance. REGISTRATION OF AIRCRAFT. Aircraft registration in Chile is governed by the Chilean Aeronautical Code (“CAC”). In order to register or continue to be registered in Chile, an aircraft must be wholly owned by either: • • • a natural person who is a Chilean citizen; or a legal entity incorporated in and having its domicile and principal place of business in Chile and a majority of the capital stock of which is owned by Chilean nationals, among other requirements established in article 38 of the CAC. The Aeronautical Code expressly allows the DGAC to permit registration of aircraft belonging to non-Chilean individuals or entities with a permanent place of business in Chile. Aircraft owned by non-Chileans, but operated by Chileans or by an airline which is affiliated with a Chilean aviation entity, may also be registered in Chile. Registration of any aircraft can be cancelled if it is not in ANNUAL REPORT 201391 compliance with the requirements for registration and, in particular, if: • • the ownership requirements are not met; or the aircraft does not comply with any applicable safety requirements specified by the DGAC. SAFETY The DGAC requires that all aircraft operated by Chilean airlines be registered either with the DGAC or with an equivalent supervisory body in a country other than Chile. All aircraft must have a valid certificate of airworthiness issued by either the DGAC or an equivalent non-Chilean supervisory entity. In addition, the DGAC will not issue maintenance permits to a Chilean airline until the DGAC has assessed the airline’s maintenance capabilities. The DGAC renews maintenance permits annually, and has approved our maintenance operations. Only DGAC-certified maintenance facilities or facilities certified by an equivalent non- Chilean supervisory body in the country where the aircraft is registered may maintain and repair the aircraft operated by Chilean airlines. Aircraft maintenance personnel at such facilities must also be certified either by the DGAC or an equivalent non-Chilean supervisory body before assuming any aircraft maintenance positions. SECURITY The DGAC establishes and supervises the implementation of security standards and regulations for the Chilean commercial aviation industry. Such standards and regulations are based on standards international commercial developed by aviation organizations. Each airline and airport in Chile must submit an aviation security handbook to the DGAC describing its security procedures for the day-to-day operations of commercial aviation and procedures training. LAN has submitted its aviation security handbook to the DGAC. Chilean airlines that operate international routes must also adopt security measures in accordance with the requirements of applicable bilateral international agreements. for staff security AIRPORT POLICY The DGAC supervises and manages airports in Chile, including the supervision of take- off and landing charges. The DGAC proposes airport charges, which are approved by the JAC and are the same at all airports. Since the mid-90s, a number of Chilean airports have been privatized, including the Comodoro Arturo Merino Benítez International Airport in Santiago. At the privatized airports, the airport administration manages the facilities under the supervision of the DGAC and JAC. ENVIRONMENTAL AND NOISE REGULATION There are no material environmental regulations or controls imposed upon airlines, applicable to aircraft, or that otherwise affect us in Chile, except for laws and regulations of environmental general applicability. There is no noise restriction regulation currently applicable in Chile. However, Chilean to aircraft authorities are planning to pass a noise- ANNUAL REPORT 201392related regulation governing aircraft that fly to and within Chile. The proposed regulation will require all such aircraft to comply with certain noise restrictions, referred to in the market as Stage 3 standards. LAN’s fleet already complies with the proposed restrictions so we do not believe that enactment of the proposed standards would impose a material burden on us. ANTITRUST REGULATION The Chilean antitrust authority, which we refer to as the Antitrust Court (previously the Antitrust Commission), oversees antitrust matters, which are governed by Decree Law No. 211 of 1973, as amended, or the Antitrust Law. The Antitrust Law prohibits any entity from preventing, restricting or distorting competition in any market or any part of any market. The Antitrust Law also prohibits any business or businesses that have a dominant position in any market or a substantial part of any market from abusing that dominant position. An aggrieved person may sue for damages arising from a breach of Antitrust Law and/or file a complaint with the Antitrust Court requesting an order to enjoin the violation of the Antitrust Law. The Antitrust Court has the authority to impose a variety of sanctions for violations of the Antitrust including termination of contracts Law, contrary to the Antitrust Law, dissolution of a company and imposition of fines and daily penalties on businesses. Courts may award damages and other remedies (such as an injunction) in appropriate circumstances. As described above under “—Route Rights— Airfare Pricing Policy,” in October 1997, the Antitrust Court approved a specific self- regulatory fare plan for us consistent with the Antitrust Court’s directive to maintain a competitive environment within the domestic market. Since October 1997, LAN Airlines S.A. and LAN Express follow a self-regulatory plan, which was modified and approved by the Tribunal de la Libre Competencia (the Competition Court) in July 2005, and further in September, 2011. In February 2010, the Fiscalía Nacional Económica (the National Economic Prosecutor’s Office) finalized the investigation initiated in 2007 regarding our compliance with this self-regulatory plan and no further observations were made By means of Resolution No. 37/2011, issued on September 21, 2011 (the “Resolution”), the Tribunal de Defensa de la Libre Competencia de Chile (“TDLC”) approved the merger between LAN and TAM and imposed 14 mitigation measures on LATAM, which scope and details are set out in said Resolution and which, for convenience only, are briefly described below: • • • To exchange 4 pairs of daily slots at the Guarulhos Airport of São Paulo to be exclusively operated in non-stop flights servicing the SCL – GRU route. To extend its frequent flyer program for a term of 5 years in favor of airlines operating (or expressing their intention to operate) the Santiago – São Paulo, Santiago – Río de Janeiro, Santiago – Montevideo, and Santiago – Asunción routes, in the event that the airlines ask for LATAM to extend the referred program in connection with the above- stated routes. into interline agreements To enter covering the Santiago – São Paulo, Santiago – Río de Janeiro and/or Santiago – Asunción interested routes with airlines operating those routes which approach LATAM for that purpose. ANNUAL REPORT 201393 • • • • • • • To observe certain temporary capacity and offer restrictions on the Santiago – São Paulo route. To implement certain amendments to LATAM’s Self-Regulatory Fare Plan applicable to its domestic business. To renounce before June 22, 2014, from either of the two global alliances to which LAN and TAM belonged as of the date of the Resolution. To comply with certain restrictions in signing and maintain some code-sharing agreements, without prior consultation with the TDLC, for specific routes with carriers which are members or partners of an alliance other than that to which LATAM belongs. To abide by certain restrictions to participate in future allocations of third, fourth and fifth freedom traffic rights between Santiago and Lima, and to abandon 4 fifth freedom frequencies to Lima. to the To express relevant air transportation authorities its favorable opinion to the unilateral opening of the sky for domestic flights within Chile, operated by airlines based in foreign States, without reciprocity requirements. To commit, to the extent applicable, to promoting the growth and regular operation of the Guarulhos airport in São Paulo and the Arturo Merino Benítez airport in Santiago. • • • • To comply with certain directives in granting incentives to travel agencies. To temporarily maintain, except upon the occurrence of a force majeure event: i) at least 12 weekly non-stop round- trip flights directly operated by LATAM and covering the routes between Chile and the U.S.; and ii) at least 7 weekly round-trip flights directly non-stop operated by LATAM and covering the routes between Chile and Europe. To comply with certain restrictions on average revenues from air tickets for passenger transport on the Santiago – São Paulo and Santiago – Río de Janeiro routes; and on published airfares effective as of the date of the Resolution for cargo transport on each of the routes between Chile and Brazil. To hire an independent consultant for a term of 3 years to provide advisory the Federal Economic services to Prosecutor’s Office overseeing LATAM’s compliance with the Resolution. in The Brazilian Council for Economic Defense – CADE has approved the LAN/TAM merger by unanimous decision during the hearing session of December 14, 2011, subject to the conditions: (1) the new combined group (LATAM) should leave one of the two global alliances to which it was part (Star Alliance or Oneworld); and (2) the new combined group (LATAM) should offer to swap two pairs of slots in Guarulhos International Airport, to be used by an occasional third party interested in offering direct non-stop ANNUAL REPORT 201394 flights between São Paulo and Santiago do Chile. These impositions are in line with the mitigation measures adopted by the TDLC, in Chile. Furthermore, the merger was submitted to the antitrust authorities in Germany, Italy and Spain. All these jurisdictions granted clearances for this transaction. The merger was filed with the Argentinean antitrust authorities, which approval is still pending. unconditional ANNUAL REPORT 201395RESULTS 2013 / FINANCIAL RESULTS In 2013, LATAM Airlines Group reported operating income of US$643.9 million, up by US$552.5 million on its pro-forma operating income in 2012. At 4.9%, its operating margin was up by 4.2 percentage points on the previous year (pro-forma). This important increase was explained by a significant improvement in the financial results of the Company’s domestic operation in Brazil and the successful rationalization of capacity in its international passenger business as well as by ongoing progress in the integration process and initiatives to increase efficiency and take advantage of synergies. increase Total revenues in 2013 reached US$13,266.1 million as compared to pro-forma revenues of US$13,222.1 million in 2012. This 0.3% in increase reflected a 0.4% passenger revenues and a 28.7% increase in other income which were partly offset by a 4.0% drop in cargo revenues. These results include the negative impact on revenues denominated in Brazilian reais of this currency’s 10.4% depreciation in 2013. As of 31 December, passenger and cargo revenues accounted for 83% and 14% of total revenues, respectively. Passenger revenues were up by 0.4% in 2013 due to a 2.5% increase in passenger traffic which was partly offset by a 2.0% drop in yields. In 2013, the load factor reached 80.8%, up by 2.3 percentage points on the same period in 2012 (pro-forma). This increase was driven by the increase in traffic which occurred despite a 0.4% reduction in capacity. Consolidated revenues per ASK (RASK) were up by 0.8% on 2012 (pro-forma), including the impact of the real’s depreciation in 2013 on revenues denominated in this currency. The international reduction in capacity in 2013 as compared to pro-forma capacity in 2012 was principally the result of an 8.4% reduction in capacity in the Brazilian domestic market and a rationalization on routes, particularly long-haul routes from Brazil to Europe. This capacity rationalization was partly offset by an 11% increase in capacity in the Company’s Spanish-speaking domestic markets during 2013. In addition, the passenger yield dropped due principally to the depreciation of the real as well as of the currencies of the Spanish-speaking markets. In 2013, cargo revenues were down by 4.0%, reflecting a 0.5% drop in cargo traffic as compared to pro-forma traffic in 2012 and a 3.5% drop in yields. The cargo market’s weak performance was a result of its weak ANNUAL REPORT 201396situation internationally and of an increase in competition in South America from international airlines. The regional and drop in yields also reflected the negative impact on cargo revenues denominated in Brazilian reais of this currency’s 10.4% depreciation. In 2013, the company’s cargo capacity increased by only 0.1% in line with its strategy of optimizing use of the bellies of its passenger aircraft and rationalizing use of its freighters. In 2013, operating costs reached US$12,622.7 million, down by 3.9% on pro-forma operating costs in 2012. This resulted in a 3.7% reduction of the cost per ASK (including net financial costs). Lower costs reflected principally a reduction in expenditures on fuel and wages and the positive impact of the real’s depreciation on certain components of costs. At US$4,414.2 million, expenditure on fuel represented a drop of 7.7% from a pro-forma US$4,780.3 million in 2012. This was explained by both lower consumption and lower fuel prices. In 2013, consumption measured in gallons was down by 2.2% in line with the Company’s strategy of rationalization of its passenger and cargo operations, as reflected in a 0.2% reduction of ASK-equivalents, and with the initiatives it implemented during the year in order to achieve efficiency gains. In the case of fuel prices, the reduction reflected a 5.2% drop in the price of fuel (without hedging). In 2013, the Company also reported a US$19 million hedging gain as compared to a US$1.8 million loss in 2012. Remunerations and employee benefits showed a drop of 4.0% in 2013, reflecting principally a reduction of the workforce as compared to 2012 and the impact of the 10.4% depreciation of the Brazilian real on wages paid in this currency. In addition, the Company reported US$15.5 million in compensation payments related to voluntary retirements and exit programs for 800 TAM employees. In 2013, the Company also reported one-off costs arising from the fleet restructuring plan that it began to implement in the second half of the year. This plan seeks to meet the Company’s needs in the wake of the merger and consists in a reduction of the number of models operated, gradually taking less efficient models out of service and allocating the most appropriate planes to each of its markets. Starting in the last quarter of 2013 and over the next some 30 months, the Company will gradually ground all its A330s, A340s, B737s, Q400s and Q200s. The one-off costs are the result of fines related to the early return of aircraft and pre-return maintenance and, in 2013, totaled US$29 million. Excluding these costs, LATAM’s operating margin in 2013 reached 5.1%. Finally, LATAM Airlines Group showed a net loss of US$281.1 million in 2013 as compared to a pro-forma loss of US$523.1 million in 2012. This implied a net margin of -2.1%, representing an improvement of 1.8 percentage points on its net pro-forma margin in 2012. The Company’s net loss in 2013 was affected by an exchange-rate loss of US$482.2 millon due to the 15.1% depreciation of the Brazilian real between the 31st of December of 2012 and the 31st of December 2013. ANNUAL REPORT 201397 For the year ended December 31 2013 2012 (pro forma) % Change REVENUE Passenger Carga Other 11,061,557 1,862,980 341,565 11,016,976 1,939,751 265,365 TOTAL OPERATING REVENUE 13,266,102 13,222,092 EXPENSES Wages and Benefits Aircraft Fuel Comissions to Agents Depreciation and Amortization Other Rental and Landing Fees Passenger Services Aircraft Rentals Aircraft Maintenance (2,492,769) (4,414,249) (408,671) (1,041,733) (1,373,061) (331,405) (441,077) (477,086) (2,596,320) (4,780,2899 (417,124) (1,087,024) (1,377,053) (314,921) (422,036) (424,350) Other Operating Expenses (1,642,146) (1,711,600) 0.4% (4.0)% 28.7% 0.3% (4.0)% (7.7)% (2.0)% (4.2)% (0.3)% 5.2% 4.5% 12.4% (4.1)% TOTAL OPERATING EXPENSES (12,622,197) (13,130,717) (3.9)% OPERATING INCOME Operating Margin NET INCOME Net Margin EBITDA EBITDA Margin EBITDAR EBITDAR Margin 643,905 4.9% 91,375 0.7% 604.7% 4.2 pp (281,114) (523,131) (46.3)% (2.1)% (4.0)% 1.8 pp 1,685,638 1,178,399 12.7% 8.9% 2,126,715 1,600,435 16.0% 12.1% 43.0% 3.8 pp. 32.9% 3.9 pp. ANNUAL REPORT 201398For the 12 month perios ended December 31 2013 2012 % Change System ASKs-equivalent (millions) ATKs (millions) RPKs-equivalent (millions) RTKs (millions) Overall Load Factor (based on ASK-equivalent)% Break-Even Load Factor (based on ASK- equivalent)% Yield based on RPK-equivalent (US Cents) Operating Revenues per ASK-equivalent (US Cents) Costs per ASK-equivalent (US Cents) Costs per ASK-equivalent ex fuel (US Cents) Fuel Gallons Consumed (millions) Average Trip Length (thousands km) 212,237 7,652 153,485 4,467 72,3% 73,6% 8,4 6,1 6,2 1,267 1,6 212,670 7,646 151,131 4,488 71,1% 67,1% 8,6 6,1 6,4 1,295 1,6 Total Number of Employees 52,997 53,599 Passenger ASKs (millions) RPKs (millions) Passengers Transported (thousands) Load Factor (based on ASKs) % Yield based on RPKs (US Cents) Revenues per ASK (US cents) Cargo ATKs (millions) RTKs (millions) Tons Transported (thousands) Load Factor (based on ATKs) % Yield based on RTKs (US Cents) Revenues per ATK (US Cents) 131,691 106,466 66,696 80,8% 10,4 8,4 7,652 4,467 1,171 58,4% 41,7 24,3 132,186 103,886 64,677 78,6% 10,6 8,3 7,646 4,488 1,154 58,7% 43,2 25,4 (0,2)% 0,1% 1,6% (0,5)% 1,3 pp 6,5 pp (1,8)% (0,0)% (3,7)% (2,2)% (0,6)% (1,1)% -0,4% 2,5% 3,1% 2,3 pp (2,0)% 0,8% 0,1% (0,5)% 1,5% (0,3) pp (3,5)% (4,0)% ANNUAL REPORT 201399Passenger and Cargo Revenue Breakdown by Country Perú Argentina USA Europe Colombia Brazil Ecuador Chile Rest of the World 2013 646,217 950,595 1,290,493 937,539 387,999 5,572,884 273,712 1,698,476 1,166,622 Total 12,924,537 % Change 2012 % Change 5% 7% 10% 7% 3% 43% 2% 13% 9% 620,263 890,167 1,268,573 738,803 366,664 3,322,431 266,271 1,525,009 712,191 9,710,372 6% 9% 13% 8% 4% 34% 3% 16% 7% ANNUAL REPORT 2013100RESULTS 2013 / AWARDS AND RECOGNITIONS Major Awards LATAM Airlines Group in 2012 LATAM AIRLINES GROUP Latin Lawyer 1st place “Deal of Merger” the Year: LAN-TAM Santander Global Banking & Markets-Capital magazine 1st place “Ranking companies of 2012” of most traded Global Legal Awards Winners Honoree: LATAM Airlines Group “Global M&A Deal of the Year: Latin America” Dow Jones Sustainability Index Only 81 companies recognized “Emerging Markets” XVI Annual Contest of Reports of Listed Companies in Chile 3rd place “Best Annual Report” ANNUAL REPORT 2013101LAN Word Travel Awards (WTA) 1st place “South America’s Leading Airline” Business Traveller’s Cellars in the Sky Airline Wine Awards 3rd place “Best-Presented Business Class Wine List” La Segunda-Adimark: Most Respected Companies Chile’s 1st place “Most Respected Company” Content Marketing Awards 1st place for In magazine “Best Airline Publication” Global Traveler Wine Competition E-Commerce Awards 3rd place “Best Red Wine Business Class” International 1st place World Airline Awards (Skytrax) Pearl Awards in Nueva York 1st place “Best Airline in South America”. Premier Traveler: The Best of 2013 1st place “The Best of South America” The Boston Consulting Group (BCG) Global Challengers Among the 100 Global Challengers Pearl Gold “Best Use of magazine: special music number Illustration”, In Jane´s IHS Environment ATC Award: 1st place Green Skies of Peru Project Latin Trade Ranking 1st place in 8 of 11 categories “The Best Airlines Flying in Latin America” ANNUAL REPORT 2013102TAM World Airline Awards (Skytrax) 2nd place “Best Airline in South America” Global Traveler Wine Competition 2nd place “Best Red Wine Business Class”. International 5th place “Best Champagne International First Class” and “Best International Business Class Wines” Content Marketing Awards for Nas Nuvens 2nd place magazine “Best Airline Publication” SocialBakers 4Q2012 5th place “Airline Most Active Media in the World” in Social Brand Brazilian Brands. Finance: Ranking of 1st place “La Financial Brand of the Most Valuable Company in Brazil.” Top Folha/Grupo of Mind-Data- Folha 1st place “Airlines” Top of Mind Internet-DataFolha/ UOL 1st place “Airlines” Carta Capital magazine: Most Admired Companies in Brazil 1st place “Airline” and “Business Services”. MERCO Ranking 1st place “Business Reputation Transport and Logistics Sector. in the Selecciones magazine: Trusted Brands Prize 1st place “Airline” Grupo Padrão: Companies Most Respected by Consumers 1st place “Airline” ANNUAL REPORT 2013103RESULTS 2013 / STOCK MARKET INFORMATION During 2013, LATAM Airlines Group’s share price showed a loss of 26.6% while LAN’s ADR showed a loss of 30.8%. As of 31 December 2012, the Company had a market capitalization of US$ 8,218 million. In 2012, LATAM Airlines Group’s shares performed below Chile’s IPSA share price index, which showed an annual loss of 14.0%. Regarding the movements of the stock, this year LATAM Airlines Group stock had a 100% of market presence in the Santiago Stock Exchange. IPSA AND SHARE PRICE ANNUAL REPORT 2013104ADR AND SHARE PRICE BDR AND SHARE PRICE ANNUAL REPORT 2013105Quarterly Volume of Share Trading (Santiago Stock Exchange) Volúmenes Transados por Trimestre Acción (Bolsa de Santiago) 2011 First Quarter Second Quarter Third Quarter Fourth Quarter 2012 First Quarter Second Quarter Third Quarter Fourth Quarter 2013 First Quarter Second Quarter Third Quarter Fourth Quarter N° of Shares Traded 47,347,742 58,475,637 76,581,903 50,436,418 64,710,000 107,445,492 57,157,847 38,877,169 31,787,896 47,046,121 60,095,492 68,677,913 Average Price (CPL) Total Value (CPL) 9,321 10,281 14,292 14,632 14,373 13,097 12,063 11,286 11,214 9,209 7,064 8,167 731,977,564,550 298,041,173,402 973,595,650,579 508,645,049,034 812,172,800,000 1,006,390,000,000 683,382,000,000 438,423,700,000 356,563,517,000 431,735,536,000 414,584,729,000 567,710,204,600 Quarterly Volume of ADR Trading (Santiago Stock Exchange) Volúmenes Transados por Trimestre ADR (NYSE) N° of Shares Traded Avera- ge Price (USD$) Total Value (USD$) 2011 First Quarter Second Quarter Third Quarter Fourth Quarter 2012 First Quarter Second Quarter Third Quarter Fourth Quarter 2013 First Quarter Second Quarter Third Quarter Fourth Quarter 31,175,948 20,585,237 31,053,167 24,414,359 17,180,265 27,871,128 43,620,441 23,579,847 23,842,422 35,452,685 41,500,940 51,531,434 25,65 28,50 21,04 23,27 29,20 25,97 25,37 23,48 23,62 19,05 13,91 15,93 799,544,598 586,730,718 653,274,790 568,234,440 456,019,600 725,219,500 1,080,972,000 560,725,400 562,524,908 665,938,101 573,896,339 822,930,239 ANNUAL REPORT 2013106Quarterly Volume of ADR Trading (Santiago Stock Exchange) Volúmenes Transados por Trimestre Acción (Bolsa de Santiago) 2012 Second Quarter Third Quarter Fourth Quarter 2013 First Quarter Second Quarter Third Quarter Fourth Quarter N° of Shares Traded Average Price (BRL) 35,857,854 5,982,600 1,118,000 1,581,895 1,027,918 1,214,565 42,280 52,12 50,5 47 45,74 38,10 30,59 37,14 Total Value (BDR) 2,041,688,000 301,911,500 54,162,270 73,304,033 40,259,529 38,707,827 1,575,240 ANNUAL REPORT 2013107RESULTS 2013 / ADDITIONAL INFORMATION SUPPLIERS 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 in general and flight crews. including executives, staff 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. In 2013, 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., MTU Hannover, Snecma, CFMI and France/KLM (engines); Zodiac Seats US, Recaro, BE Aerospace and Contour (seats); Teledyne (TCS B787-9); Honeywell and Rockwell Collins (avionics); Air France, LUFTHANSA Technik and Fokker Services (MRO components); Panasonic and Thales (in-flight entertainment); Messier Bugatti (landing gear and brakes); UTC Aerospace In (Molding); and Heico Corp addition, the Company has a number of fuel suppliers such as Raizen, World Fuel Services, Air BP Copec, Petrobras, Terpel, Cepsa, Exxon and Vitol. (repairs). 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. These types of insurance cover all the risks inherent to commercial aviation such as aircraft, engines, spare parts and third-party liability for passengers, cargo, baggage, merchandise and airports, etc. Since the merger of LAN with TAM, insurance for both companies has been acquired by LATAM Airlines Group and the increased volumes negotiated have resulted in lower operational costs. ANNUAL REPORT 2013108RESULTS 2013 / MATERIAL NEWS 20/12/2013 – 18:00 OTHERS In accordance with the provisions of Article 9 and Article 10 paragraph 2 of Law No. 18.045, and of General Rule No. 30 of this Superintendency, on behalf of the Board of Directors and being duly authorized, I hereby inform the following MATERIAL EVENT regarding LATAM Airlines Group S.A. (“LATAM” or “The Company”), Securities Registration No. 306, regarding the capital increase authorized by the Extraordinary Shareholder’s Meeting held last June 11: Having the preemptive period to subscribe 62,000,000 shares (which do not include the shares allocated to the Company and its subsidiaries’ worker compensation plans and shares to be placed by the Company tied to aforementioned capital increase) expired on December 19, 2013, and based on the information available to this date, a total of 51.685.128 shares have been subscribed and paid at a price of US$15,17.- per share, having raised an equivalent to US$ 784 million, according the following proportions: • Local shares (representing 93% of total offer): Subscription of 83,8%, equivalent to 48.740.008 shares;. (representing total • ADRs offer): 72,9% equivalent to 2.673.191 shares; and; 6% of of Subscription • BDR (representing 1% of total offer): Subscription of 57,9%, equivalent to 271.929 shares; Of the remaining 10.314.872 unsubscribed shares, the amount of 8.405.276 shares correspond to the Amaro family, who did not sell or transfer its preemptive right over these shares. Consequently, of the total amount of shares available during the preemptive period, excluding those that corresponded to the Amaro family, 96.4% was subscribed. The 10.314.872 shares that were not subscribed within the preemptive period, will be freely offered by the Company to shareholders and/or to third parties, whether in Chile or abroad, when and in the amounts the Company’s Board of Director’s deems appropriate, with the authority to determine the procedures to do so, as established by the Corporations Law, its Regulations and the rules established by the Superintendency of Securities and Insurance. ANNUAL REPORT 201310901/10/2013 – 08:46 OTHERS In accordance with the provisions of Article 9 and Article 10 paragraph 2 of Law No. 18.045, and General Rule No. 30 of the Superintendency of Securities and Insurance of Chile, I hereby inform to you- being duly empowered by the Board of Directors- the following Material Event regarding the company LATAM Airlines Group S.A. (“LATAM Airlines Group”), Securities Registration No. 306: • • In accordance with the Material Event dated March 7th, 2013, it was informed that the ordinary meeting of LATAM Airlines Group Board of Directors, held on March 5th, 2013, had agreed to choose Oneworld as the global airline alliance for the airlines that are part of its group. With this decision, TAM and Aerovías de Integración Regional - Aires S.A. (“LAN Colombia”) would enter the Oneworld Alliance and would join LATAM Airlines Group and the other members of that global alliance. Such LATAM Board of Director’s decision was adopted pursuant to Resolución No. 37 dated September 21st, 2011, issued by the H. Tribunal de Defensa de la Libre Competencia (“TDLC” or “Tribunal for the Defense of Free Competition”) and the decision issued by the Brazilian Conselho Administrativo de Defesa Economica (“CADE”) on December 14th, 2011, which was partially amended on February 8th, 2012; pursuant to which it was approved the association of LAN Airlines S.A. (currently LATAM Airlines Group S.A.) and TAM Linhas Aereas S.A.. • • Consequently and according to what was informed by the Material Event dated March 7th, 2013, it is hereby informed that TAM Linhas Aéreas will leave the Star Alliance as of March 30th, 2014, and will enter the Oneworld Alliance as of on March 31st, 2014. Meanwhile, LAN Colombia will enter the Oneworld Alliance as of October 1st, 2013. 28/08/2013 – 20:18 OTHERS As required under Article 9 and the second paragraph of Article 10 of the Securities Market Law and under General Norm N° 30, I would, with the due powers, like to report the following MATERIAL NEWS concerning LATAM Airlines Group S.A. (“LATAM Airlines Group”), Securities Register Nº 306: its rules, In the context of the global investigation launched in 2006 into possible infringements of free competition in the air cargo market, carried out jointly by the European and US authorities, Brazil’s Administrative Council for Economic Defense (“CADE”) launched an administrative process in 2006 in accordance with investigating the period from July 2003 to October 2005. As part of this administrative process, CADE today announced that it had issued its decision on this case, levying fines for a total of R$289 million (two hundred and eighty-nine million reais) on a number of international airlines including Aerolíneas Brasileras S.A., VarigLog, American Airlines and Alitalia. Aerolíneas Brasileras S.A., a company related to LATAM Airlines Group, has been fined ANNUAL REPORT 2013110R$114 million (one hundred and fourteen million reais). This administrative decision by CADE is subject to appeal to both CADE and the Federal Courts in Brasilia. ABSA will file the corresponding appeals and legal action against CADE’s decision within the legally established periods. 21/08/2013 – 12:41 OTHERS • • • that it must vacate Yesterday evening Lan Argentina S.A., LATAM Airlines Group’s subsidiary that operates domestic and international flights in Argentina, was notified by the National Airport Agency of Argentina (ORSNA) the maintenance premises it operates in the Aeroparque Jorge Newberry Airport of Buenos Aires within 10 calendar days, and unilaterally anticipated the expiry of the contract with the airport concession company Aeropuertos Argentina 2000 S.A. that was signed on July of 2008 and that, in accordance with its terms, expires on July of 2023. Even though it is early to evaluate the impact of the measure, LATAM Airlines Group believes that the decision by ORSNA is illegitimate and that we will evaluate taking every legal action necessary to restate the contract and our rights to full and complete effectiveness. We understand this is not an isolated action but rather one that seems to be in line with an increasing level of actions against the Company with the purpose of damaging our operations in Argentina measure on the company’s financials and operations as soon as we complete our assessment of the situation. In the meantime, LATAM Airlines Group its customers and to can assure that Lan in Argentina passengers Argentina S.A. will take every and all actions that are necessary to continue to provide as seamless a service as we can in the present circumstances. This illegitimate measure adopted by ORSNA impacts only our domestic in operations of Aeroparque Jorge Newberry Airport and does not affect our international from Argentina. operations to and Argentina out 25/06/2013 – 17:16 OTHERS As provided in Article 9 and in the second paragraph of Article 10 of the Securities Market Law, in General Rule #30 and in Section II.1)a) of Circular #1375, under due authorization I hereby advise you as MATERIAL DISCLOSURE by LATAM Airlines (“LATAM Airlines Group”), Group S.A. Securities Registration #306, in relation to the recently approved capital increase, that LATAM Airlines Group has retained placement agents and legal counsels in Chile and abroad. 11/06/2013 – 18:10 EXTRAORDINARY SHAREHOLDER`S MEETING On this date an extraordinary shareholders’ meeting was held (the “Meeting”), in which LATAM’s shareholders adopted the following agreements/ decisions/ resolutions: • We will report of the effect of this • To increase the capital of the Company in the amount of USD 1,000 million through ANNUAL REPORT 2013111• • • the issuance of 63,500,000 shares, that is, from the amount of USD 1,652,896,812.43, divided into 488,347,819 shares of a single series and with no par value, to the amount of USD 2,652,896,812.43, divided into 551,847,819 shares of a single series and with no par value. To allocate 1,500,000 shares of the a issuance above mentioned compensation plan for LATAM and its subsidiaries’ executives, pursuant to the provisions of Article 24 of the Corporations Law No. 18.046. to To authorize the Company’s Board of Director to freely and with the broadest powers/attributions determine, fix and agree the price, form, time, procedure and conditions for placing the aforementioned shares. the To authorize LATAM’s Board of Director issuance of to proceed with the shares representing the capital increase; perform or stipulate/prepare all necessary procedures/formalities for the registration and placing of the same; represent the Company before any kind of authorities, institutions or individuals related to the securities markets; determine all matters related to the options that are part of the compensation plans; grant the powers necessary or convenient to carry out all or part of the above; and, in general, to resolve/decide all related matters that are approved by this Meeting • To amend the Company’s Bylaws in such Articles that are relevant to the corporate capital in order to conform them to the amendments described above. • • To delegate to the Board of Directors, for a five year term, as from the December 21, 2011, the power/attribution to fix the new placement price of 4,800,000 shares destined to compensation plans subject to the provisions of Article 24 of the Corporations Law, pursuant to the Extraordinary Shareholders’ Meeting held on December 21, 2011- as amended the Shareholders’ Extraordinary by Meeting held on September 4, 2012- and amend and determine the terms and conditions applicable to the latter. LATAM’s authorize To of Directors to adopt other agreements carry as may be necessary aforementioned matters out Board the to 30/04/2013 – 17:34 EXTRAORDINARY SHAREHOLDER`S MEETING. that today the leading airline group in Latin America, its Board of announced Directors agreed to call an Extraordinary General for June 11, 2013, in order to submit for shareholder approval the following issues: Shareholders Meeting • To increase the shareholders’ equity in the amount of of the Company US$1.0 billion, through the issuance of a number of ordinary shares to be determined by the shareholders, for the purpose of financing part of its investment plan for the following years, especially fleet growth and renewal requirements, as well as to strengthen the financial position of the Company; • To utilize part of the capital increase for compensation plans, in accordance with Chilean corporate law; ANNUAL REPORT 2013112• • • To determine the price, mechanism, timing and procedures for the placement of the issued shares or to delegate to the Board of Directors the ability to determine the price, mechanism, timing, procedures and other conditions for the issuance of such shares, including but not limited to all the terms and conditions of the Company’s compensation plans. the To modify by- laws to reflect the agreements of and. Shareholders Meeting; the Company’s To adopt the necessary agreements in order to implement the decisions modifications the and the shareholders. agreed upon by by-law 29/04/2013 – 19:07 DISTRIBUTION OF PROFITS (PAYMENT OF DIVIDENDS) 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 Latam Airlines Group S.A. (LATAM) held April 29, 2013, LATAM’s shareholders approved payment of the final dividend proposed by the Board at its meeting held March 26, 2013, consisting of the distribution of 30% of the 2012 fiscal year profits, equal to US$3,288,125.17. 27/03/2013 – 08:56 EXTRAORDINARY SHAREHOLDER`S MEETING. As provided in Articles 9 and 10 of the Securities Market Law and in General Rule #30, under due authorization, please be advised that at a Regular Meeting held March 26, 2013, the Board of Directors of LATAM Airlines Group S.A. (hereinafter the “Company”) resolved to convene a Regular Shareholders Meeting at 11:00 a.m. on April 29, 2013 to discuss the following matters: • • • • • • • • and approval of the annual report, balance statements financial sheet the fiscal of for the Company 2012; 31, year ending December approval of the payment of a final dividend on account of the 2012 fiscal year profits; the compensation to be paid to the Company’s Board of Directors for the fiscal year ending December 31, 2013; to be paid the compensation the and year Company’s budget its ending December Audit for to Committee the fiscal 2013; 31, the appointment of the external auditing firm and risk rating agencies for the Company; and the reports on the matters indicated in Section XVI of Companies Law 18,046; information on the cost of processing, printing and sending the information the indicated Securities and Insurance Commission; in Circular 1816 of designation of the newspaper in which the Company will make publications; and interest the purview of a Regular other matters of corporate within Shareholders Meeting of the Company. ANNUAL REPORT 2013113 07/03/2013 – 08:57 OTHERS • • • • (“TDLC”) In Decision #37 dated September 21, (the “Decision”), the Antitrust 2011 the Court approved 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. 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.” 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. 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. and Aerovias de Integracion Regional- Aires S.A. (“Lan Colombia”) will join oneworld in which LATAM Airlines Group and 13 others are already members. 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 for our passengers. and products The Board of TAM S.A. (“TAM”) also resolved that TAM Linhas Aereas S.A. resigns from its 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. TAM Linhas Aereas S.A. 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. LAN Colombia is expected to join oneworld in the fourth quarter of 2013. 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. • • • • • ANNUAL REPORT 2013114RESULTS 2013 / RISK FACTORS RISKS RELATED TO THE MERGER OF LAN AND TAM The success of the merger of LAN and TAM and its ability to capture the expected benefits will depend partly on the Company’s skills. There is, however, a risk that the LATAM group could be unable to achieve all the expected synergies. LATAM has incurred and will continue to incur important costs and expenses related to the merger of the businesses of LAN and TAM and the integration of their commercial operations. We do not control TAM’s shares with voting rights or its Board of Directors. Uncertainty related to the merger of the businesses of LAN and TAM may trigger a loss of managers or other key employees and this could negatively affect LATAM’s operations. Following the merger with TAM, LATAM’s financial results are more exposed to fluctuations in exchange rates. LATAM’s future results will be affected if it is unable to manage the expanded operations efficiently after completion of the merger. Following the merger, Fitch Ratings Inc. (Fitch) reduced its credit rating for LATAM. This reduction or others could have a negative effect on LAN’s business. Merger of the frequent flyer programs of LAN and TAM may take time. LATAM will have to withdraw from the alliance of airlines to which LAN or TAM belongs by April 2014. ANNUAL REPORT 2013115RISKS 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. Our business is highly regulated and changes in the regulatory environment within which we operate could negatively affect our business and operating results. We depend on strategic alliances and commercial relations in many countries where we operate and our business could be negatively impacted if any of our 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 tourists’ habits or raise costs, such as epidemics, weather conditions and natural disasters, 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. Our operations are subject to fluctuations in the supply and cost of aircraft fuel which could negatively affect our businesses. We rely on maintaining a 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. 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 have invested in new Boeing 787 aircraft, known as Dreamliners, whose operation has been delayed due to measures adopted by the Federal Aviation Administration (FAA). intense competition Losses and liabilities caused by accidents affecting one or more aircraft could have a significant negative impact on our in businesses. The the airline industry can adversely affect our level of operations. Chile could open its airline industry to overseas airlines without restrictions which could change the competitive situation in Chile’s airline sector and affect our business and operating results. A recent proposal by the Brazilian government could result in the reallocation of certain landing and takeoff rights at Brazilian airports. If this proposal is implemented as currently formulated, it would reduce our access to important airport infrastructure and could negatively affect our operating results. Some of our competitors could receive external support with a negative impact on our competitive position. If, in future, we are unable to incorporate rented aircraft into our fleet at acceptable prices and conditions, our business could suffer. We are incorporating a number of technologies and new equipment and their phase-in could have a negative impact on our service and operating standards. Our business could be adversely affected if we were unable to cover our important ANNUAL REPORT 2013116RISKS INHERENT TO CHILE, BRAZIL AND OTHER EMERGING MARKETS WHERE WE OPERATE 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 the other countries where we operate could adversely affect our revenues and profitability. The government of Brazil exercises an important influence over the Brazilian economy and may continue to do so, which could have a negative impact on our business, financial situation and operating results. It is not possible to predict the future fiscal, monetary, social security and other policies that will be adopted by the present or future governments in Brazil or the possibility of a negative impact of our policies on the Brazilian economy. In addition, possible political crises could affect investor and public confidence which could result in economic deceleration and an impact on the market prices of the securities issued by Brazilian companies. 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. future financing requirements. Our business could be negatively affected by our high borrowing level and aircraft rental liabilities as compared to our equity. Changes in interest rates could have negative effects on our interest payments, business, financial situation, operating results and outlook as well as on the market price of our ADRs, BDRs and preferential shares. Higher insurance costs and/or significant reductions in its coverage would affect our financial situation and operating results. failures Problems in air control systems or other technical could disrupt our operations and have a significant adverse effect on our business. 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. Collective action by our employees could cause operational difficulties and negatively affect our business. Increases in labor costs, which represent a significant part of our operating costs, would directly affect our earnings. We may experience difficulties in finding, training and retaining employees. In Brazil, the regulatory framework for civil aviation is undergoing a process of change and we have not yet been able to evaluate the implications of these changes for our business and operating results. Our operations are subject to local, national and international environmental regulation and the costs of compliance with the applicable norms or the consequences of non-compliance could negatively affect our results, business or reputation. ANNUAL REPORT 2013117RISKS RELATED TO OUR COMMON SHARES AND ADRS 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 they 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-Chilean residents who invest in our shares. Holders of our ADRs could, in certain circumstances, be unable to exercise their preferential rights. ANNUAL REPORT 2013118SUSTAINABILITY LATAM AIRLINES GROUP S.A 06 ANNUAL REPORT 2013119SUSTAINABILITY / In 2013, the LATAM group carried out its first integrated materiality process in a bid to map the main social, economic and environmental issues and impacts related to its businesses. In the process, the views of its principal stakeholders were taken into account, with the people consulted including company executives, other employees, clients, suppliers, market analysts and industry experts, in order to identify the aspects of the group’s socio-environmental management that require attention. The process, which consisted in individual interviews, working meetings, panels and online consultation, resulted in the preparation of LATAM Airlines Group’s Materiality Matrix and the definition of priority issues for the Company which were, in turn, validated by senior management. This process is a key input for the design over the coming years of an integrated sustainability strategy. At present, LAN and TAM each have their own sustainability policies, drawn up before the association process. It is anticipated that, in 2014, a corporate strategy will be prepared, based on these consultations as well as the business’s guidelines and strategic pillars, which will permit proactive action on the principal issues and impacts on society. issues identified in the The principal materiality process are presented below, except for financial issues which are covered in greater depth elsewhere in this Report. ANNUAL REPORT 2013120ENVIRONMENT The airline industry is responsible for 2% of the greenhouse gas emissions produced in the world by human activity. Airlines are, therefore, making great efforts in this field and have achieved significant improvements as regards aerodynamics, engines and operations that are reflected in a 70% gain reduction in efficiency over the past 40 years. In awareness of this impact, we have as an industry undertaken to make ongoing improvements and achieve “Carbon Neutral Growth” by 2020. This undertaking, which is unique in the world, reaffirms the industry’s commitment to balancing care for the environment with international economic development. The industry’s principal environmental impacts take the form of CO2 emissions, noise and the waste generated by the operation of flights and ground activities. As a company, we are aware of these impacts and are taking a series of measures to minimize them. The objectives we have established are to manage our carbon footprint responsibly, to minimize the impact of our operations and to promote the efficient use of resources and the minimization of waste. Examples of our efforts include fleet renewal, the introduction of new flight technologies, operational management in the air and on the ground and the measurement and external verification of our carbon footprint. In the case of fleet renewal, we now have a fleet with an age of less than seven years. In addition, the equipment of our aircraft with winglets and sharklets has allowed us ANNUAL REPORT 2013121to reduce CO2 emissions. It is important to note that LATAM Airlines Group was one of the first companies to incorporate the new Boeing 787, the latest-generation aircraft which reduces CO2 emissions by 20% and noise by 40%. In addition, we have incorporated new flight technologies such as Required Navigation Performance (RNP), a navigation and landing system based on satellite positioning technology. This has resulted in important improvements in our operation such as in CO2 emissions, shorter a reduction flight times, more direct routes and fewer cancellations for weather reasons. In the case of operational management in the air and on the ground, the LEAN Fuel or Smart Fuel program has implemented at least 20 initiatives focusing on reducing fuel consumption and continuous improvement that resulted in the avoidance of emissions of some 230,000 tonnes of CO2 in 2013. In addition, the 2012 carbon footprint of LAN and its subsidiaries, which form part of the LATAM Group, was externally verified in 2013, marking an important environmental achievement for the Company. Thanks to LAN Perú’s program of compensation for its ground operations, the Company also contributed to reforestation of the Peruvian Amazon for the second consecutive year. ANNUAL REPORT 2013122Another key concern is to reduce the noise generated due to the nature of the Company’s operations. To this end, different measures have been implemented and have reduced noise levels. In one example of these measures, it now operates with latest- generation engines that comply with the strictest noise standards of the International Civil Aviation Organization (ICAO). The Company also seeks to promote development and use of more efficient alternative energies that have less impact on the environment. In its bid to achieve an ever more sustainable operation, LAN Colombia marked a milestone in the history of civil aviation in that country and the region by operating the first flight in Colombia to use second-generation biofuel. As a company, we would like to underline that our operations are always governed by current environmental legislation and that, in order to ensure compliance, we adhere to the highest quality and safety standards. We are pleased that our work in this field has been recognized, both for the Company’s excellent report for the Carbon Disclosure Project (CDP) and as one of the three companies in Chile that best manage climate change. ANNUAL REPORT 2013123SAFETY Health and safety are the LATAM group’s top priority and call for operations that are safe and efficient for our customers and for society as well as ensuring the wellbeing of our employees. This involves five pillars: safety, security, emergencies, auditing and workplace safety. The safety pillar refers to the guarantee of the proper functioning and safety of all our flights in all their different stages from maintenance through to operation, including the mapping of risks, technological adjustments and efficiency and quality controls. Operational safety involves the prevention of illegal occurrences in flights which affect passengers, crew, ground equipment and airport installations. Under the emergency and auditing pillars, we act in line with the authorities that regulate the sector and markets where we operate. In this sense, it is important to note our alliance with the International Air Transport Association (IATA) with whose support we carry out regular audits focusing on operational safety. In the case of workplace safety, initiatives focus on the prevention of the risks inherent to different posts such as measures relating to the handling of spares, inputs and equipment and to maintenance operations and initiatives to improve management of the risks related to the work of flight crews. As part of its commitment to achieving the highest operational standards as regards both its flights and administrative activities, its Safety, Quality and LAN Environment Policy. As well as addressing the launched ANNUAL REPORT 2013124issue of compliance with the corresponding international legislation, this reinforces safety as a non-negotiable value of the Company and its employees, highlighting the communication of risks and unsafe actions and conditions as mandatory for teams in the event of any exposure. Some units such as TAM MRO in San Carlos (São Paulo) have their own health, workplace safety and environmental policy to address specific local situations and, in this case, aspects relating to the maintenance, repair and review of aircraft and components, with an emphasis on environmental controls and the prevention of incidents. CUSTOMERS LATAM Airlines Group views its relations with its customers as a key factor for the success of its business model. Our position of leadership in Latin America implies the challenge of offering services of excellence and ensuring the loyalty of customers in different markets as well as the need to optimize processes and, in particular, those that intensify the synergies of the integration of TAM with LAN. Our efforts focus on gaining the trust of our customers and offering them the best experience from the planning of their journey, flight alternatives and check-in through to completion of the journey and delivery of the goods transported. Our mission is to transform the group into the first choice in Latin America for our passengers and the transport of cargo. In ANNUAL REPORT 2013125recent years, LAN and TAM have invested in the modernization of attention of customers in order to improve their experience. In the case of passengers, important improvements include self check-in (online or at the airport), the availability of a virtual assistant to answer queries through the companies’ websites and the launch of applications for smartphones through which customers can make, cancel or change bookings and obtain information about flight times. In the cargo business, there have also been innovations such as the e-business program and its initiatives, which arose from LAN’s Customer Care project in 2011. This focuses on providing information and on managing events that qualify as continuous It envisages a series of improvement. services such as the sending of messages, online cargo tracking and the digitalization of documents relating to the transport of materials. The consolidation of LATAM Cargo has brought with it new tasks such as integration of the approach of attention for our customers. tools Further strategic for generating customer loyalty are the LANPASS and TAM Fidelidade programs, with the facilities and convenience they offer to the frequent flyers of the group’s companies. ANNUAL REPORT 2013126EMPLOYEES maintenance LATAM Airlines Group employs over 52,000 including people across 23 countries, administrative, and operational personnel, cabin and cockpit crews and its sales force. For the group, its employees are very important and efforts, therefore, currently focus on developing the new LATAM culture. We want LATAM’s attributes to incorporate the best of LAN and of TAM. These attributes must be developed by our collaborators in each of the markets where we operate. This proposal is scheduled to be defined and announced in the first half of 2014. We aim to map the best practices already applied by LAN and by TAM and to define the attributes we want to develop in our collaborators in the different markets. This proposal is scheduled to be defined and announced in the first half of 2014. Our long-term objective is to achieve the optimum performance of our employees, accompanied by a good work climate and efficiency in relations with our customers and partners. In order to support this process and develop our performance management, and including integrated career plans, we are developing a LATAM performance evaluation tool for all employees to replace the different evaluation processes currently in place in LAN and TAM. succession planning ANNUAL REPORT 201312757 different nationalities Over are represented among our collaborators who, therefore, constitute a particular and diverse group. As a result, in order to guarantee alignment of practices, all our employees’ actions are guided by the codes of ethics and conduct of LAN and TAM. As from 2014, we will have an integrated corporate code. Another challenge of the integration has to do with the cultural barriers created by the different languages spoken by our employees. This is currently being addressed at some levels and in some areas through Portuguese classes for Spanish speakers and vice versa. Both companies offer regular training for their employees, with a focus on the update of knowledge and processes and the aim of offering a better experience for customers. ANNUAL REPORT 2013128SUSTAINABLE TOURISM At present, the world’s airlines carry over 1,087 million international passengers each year. South America receives around 15% of this total, with an annual growth rate of 3%. According to the World Tourism Organization (UNWTO), the emerging economies will receive more international visitors than the industrialized economies by 2015 and, by 2030, are expected to reach a share of over 50%. that industry, we As part of the tourism understand a implies responsibility which cannot be ignored and calls for responsibility and respect towards the places we visit. tourism We view sustainable tourism, defined as that which promotes socioeconomic development whilst protecting intangible heritage and local natural resources, as a priority issue for LATAM Airlines Group. This view was reinforced by the materiality process in which those consulted mentioned the importance of discussing the role of airlines in promoting tourist destinations whilst causing the least possible negative impact. South America stands out in the world for its people, its history and geography, its history and geography, as a land of opportunity and more. We must respect and protect that, harmonizing economic development with the welfare of our people and respect for the environment so as to pass on to future generations a place that is the same as or better than we received it. ANNUAL REPORT 2013129At LATAM, we are committed to responsible tourism, inculcating and deepening the concept of tourism and environmental awareness in the communities of the countries where we operate. We do this through initiatives that seek to foster the in development of sustainable tourism specific places through programs such as Cuido mi destino (I look after my destination), TAM’s Social Investment Funds for the Support of Socio-Environmental Projects and the acquisition of reforestation bonds in the Peruvian Amazon. Following the merger, a business and tourism area was created which is responsible for planning investments in new routes and destinations, taking into account all their possible effects. We want our next destination to be a better world. RELATIONS WITH GOVERNMENTS AND REGULATORY ISSUES Through the relations it maintains with government bodies and sector entities in the different markets where it operates, LATAM Airlines Group has an active voice on matters that directly or indirectly affect its business strategy. Over time, we have sought to strengthen our participation in bodies that represent the airline industry. At the global level, we act through IATA, which is a key vehicle for the exchange of information about new ANNUAL REPORT 2013130technologies, operational safety and the sector’s current and future challenges. At the regional level, we also participate in the Latin American and Caribbean Air Transport Association (ALTA). Always defending transparent dialogue, we seek joint solutions with a focus on efficiency and profitability. The Company has teams responsible for monitoring and participating in such debates. Given LATAM’s process of integration, we face the challenge of acting in an integrated manner in our relations with political and sector agents in different places such as Chile, Peru, Argentina and Brazil, taking into account the different situations prevailing in these countries. In Chile and other markets, we also work with governments to study routes and flights that can generate tourism, employment and earnings for places where we did not previously operate. to ensure proper relations In order with government representatives and associations, we use LATAM’s codes of In addition, as conduct as reference. part of our compliance program, we are implementing a calendar of training on governance and ethics. ANNUAL REPORT 2013131CONSOLIDATED FINANCIAL STATEMENTS LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES DECEMBER 31. 2013 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$ - VEF CHILEAN PESO ARGENTINE PESO UNITED STATES DOLLAR THOUSANDS OF UNITED STATES DOLLARS COLOMBIAN PESO BRAZILIAN REAL THOUSANDS OF BRAZILIAN REAL STRONG BOLIVAR ANNUAL REPORT 2013132 INDEPENDENT AUDITOR’S REPORT (Free translation from the original in Spanish) Santiago, March 17, 2014 To the Board of Directors and Shareholders Latam Airlines Group S.A. We have audited the accompanying consolidated financial statements of Latam Airlines Group S.A. and its subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2013 and 2012 and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management’s responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes the design, implementation and maintenance of a relevant internal control for the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility is responsibility to express an opinion on financial Our in accordance with statements based on our audit. We conducted our audit that require Chilean generally accepted auditing we plan and perform the audit to obtain reasonable assurance about whether from material misstatement. the consolidated financial these consolidated standards. Those statements standards free are An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Consequently, we do not express such an opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Santiago, March 17, 2014 Latam Airlines Group S.A. 2 Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Latam Airlines Group S.A. and its subsidiaries as at December 31, 2013 and 2012, and the results of operations and cash flows for the years then ended in accordance with International Financial Reporting Standards. Jonathan Yeomans Gibbons RUT: 13.473.972-K CONTENTS OF THE NOTES TO THE CONSOLIDATED STATEMENTS OF LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES. 1.General information 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 3. Financial risk management 3.1. Financial risk factors 3.2. Capital risk management 3.3. Estimates of fair value 4. Accounting estimates and judgments 5. Segmental information 6. Cash and cash equivalents 7. Financial instruments 7.1. Financial instruments by category 7.2. Financial instruments by currency 8. Trade. other accounts receivable and non.current accounts receivable 9. Accounts receivable from/payable to related entities 10. Inventories 11. Tax assets 12. Other financial assets 13 21 21 28 29 30 31 31 31 32 32 33 34 34 35 35 35 35 35 36 36 37 37 38 38 38 39 39 56 57 61 62 66 68 68 70 72 76 77 78 79 ANNUAL REPORT 201313513. Other non.financial assets 14. Non -current assets (or disposal groups) classified as held for sale 15. Investments in subsidiaries 16. Equity accounted investments 17. Intangible assets other than goodwill 18. Goodwill and Bussines combination 18.1. Goodwill 18.2. Business combination 19. Property. plant and equipment 20. Taxes and deferred tax 21. Other financial liabilities 22. Trade and other accounts payables 23. Other provisions 24. Tax liabilities 25. Other non.financial liabilities 26. Employee benefits 27. Accounts payable, non-current 28. Equity 29. Revenue 30. Costs and expenses by nature 31. Gains (losses) on the sale of non-current assets not classified as held for sale 32. Other income, by function 33. Foreign currency and exchange rate differences 34. Earnings per share 35. Contingencies 36. Commitments 37. Transactions with related parties 38. Share based payments 39. The environment 40. Events subsequent to the date of the financial statements 82 85 86 88 92 94 94 96 106 117 123 137 140 144 145 146 148 149 159 160 162 163 164 172 173 187 194 197 201 203 ANNUAL REPORT 2013136CONSOLIDATED 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 Note As of December 31, 2013 As of December 31 2012 (*) 6 - 7 7 - 12 13 7 - 8 7 - 9 10 11 ThUS$ ThUS$ 1,984,903 709,944 335,617 650,263 636,543 284,404 1,633,094 1,417,531 628 231,028 81,890 15,187 176,818 95,785 4,977,104 3,276,531 Non-current assets (or disposal groups) classified as held for sale or as held for distribution to owners 14 2,445 47,655 Total current assets 4,979,549 3,324,186 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 Deferred tax assets Total non-current assets Total assets (*) See Note 18.2 7 - 12 13 7 - 8 16 17 18 19 20 65,289 272,276 100,775 6,596 74,095 307,987 50,612 3,757 2,093,308 2,382,399 3,727,605 4,213,160 10,982,786 11,807,076 402,962 163,067 17,651,597 19,002,153 22,631,146 22,326,339 The accompanying Notes 1 to 40 form an integral part of these consolidated financial statements. ANNUAL REPORT 2013137 CONSOLIDATED STATEMENT OF FINANCIAL POSITION LATAM AIRLINES GROUP S.A AND SUBSIDIARIES LIABILITIES AND EQUITY LIABILITIES Current 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 Note As of December 31, 2013 As of December 31, 2012 (*) ThUS$ ThUS$ 7 - 21 7 - 22 7 - 9 23 24 25 7 - 21 7 - 27 23 20 26 25 2,039,787 1,557,736 505 27,856 11,583 2,047,330 1,689,990 274 59,574 14,512 2,871,640 2,485,887 6,509,107 6,297,567 7,859,985 922,887 1,122,247 767,228 45,666 77,567 7,698,857 1,085,601 1,306,872 579,339 38,095 99,323 Total non-current liabilities 10,795,580 10,808,087 Total liabilities 17,304,687 17,105,654 EQUITY Share capital Retained earnings Treasury Shares Other reserves Parent's ownership interest Non-controlling interest Total equity 28 28 28 28 2,389,384 795,303 (178) 2,054,312 5,238,821 87,638 1,501,018 1,076,136 (203) 2,535,100 5,112,051 108,634 5,326,459 5,220,685 Total liabilities and equity 22,631,146 22,326,339 (*) See Note 18.2 The accompanying Notes 1 to 40 form an integral part of these consolidated financial statements. ANNUAL REPORT 2013138CONSOLIDATED 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 (loss) before taxes Income (loss) tax expense NET INCOME (LOSS) FOR THE PERIOD Income (loss) attributable to owners of the parent Income (loss) attributable to non-controlling interest Net income (loss) for the period EARNINGS PER SHARE Basic earnings (losses) per share (US$) Diluted earnings (losses) per share (US$) Note For the period, ended December 31. 2013 ThUS$ 2012(*) ThUS$ 29 12,924,537 9,710,372 (10,054,164) (7,634,453) 2,870,373 2,075,919 32 30 16 33 20 34 34 341,565 (1,025,896) (1,136,115) (408,703) (55,410) 585,814 72,828 (462,524) 1,954 (482,174) 214 (283,888) 20,069 (263,819) (281,114) 17,295 (263,819) (0,57613) (0,57613) 220,156 (803,619) (888,654) (311,753) (45,831) 246,218 77,489 (294,598) 972 66,685 (22) 96,744 (102,386) (5,642) (19,076) 13,434 (5,642) (0,04627) (0,04627) (*) The balances at December 31, 2012, include TAM S.A. and Subsidiaries from June 22, 2012, date of the business combination materialized. The accompanying Notes 1 to 40 form an integral part of these consolidated financial statements. ANNUAL REPORT 2013139For the period, ended December 31, Note 2013 2012(*) ThUS$ (263,819) ThUS$ (5,642) NET INCOME (LOSS) Components of other comprehensive income that will be reclassified to income before taxes Currency translation differences Gains (losses) on currency translation, before tax 33 (629,858) 19,170 Other comprehensive income, before taxes, currency translation differences Cash flow hedges (629,858) 19,170 Gains (losses) on cash flow hedges before taxes 21 128,166 (2,510) Other comprehensive income (losses), before taxes, cash flow hedges Other components of other comprehensive income (loss), before taxes Income tax relating to other comprehensive income that will be reclassified to income 128,166 (2,510) (501,692) 16,660 Income tax related to currency translation differences in other compre- hensive income 20 - (2,734) Income tax related to cash flow hedges in other comprehensive income 20 (19,345) (2,623) Income taxes related to components of other comprehensive income that will be reclassified to income Other comprehensive income (loss) Total comprehensive income (loss) (19,345) (5,357) (521,037) (784,856) 11,303 5,661 Comprehensive income (loss) attributable to owners of the parent (768,457) (2,359) Comprehensive income (loss) attributable to non-controlling interests TOTAL COMPREHENSIVE INCOME (LOSS) (16,399) (784,856) 8,020 5,661 (*) The balances at December 31, 2012, include information of TAM S.A. and Subsidiaries from June 22, 2012, date of the business combination materialized. The accompanying Notes 1 to 40 form an integral part of these consolidated financial statements. ANNUAL REPORT 2013140CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMELATAM AIRLINES GROUP S.A AND SUBSIDIARIES5 8 6 , 0 2 2 , 5 4 3 6 , 8 0 1 1 5 0 , 2 1 1 5 , , 6 3 1 6 7 0 1 , , 0 0 1 5 3 5 , 2 2 8 6 , 6 6 6 , 2 4 7 5 , 5 ) 0 3 7 0 4 1 ( , 4 7 5 , 3 ) 3 0 2 ( , 8 1 0 1 0 5 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 $ S U h T $ S U h T $ S U h T $ S U h T 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 i p h s r e n w o t s e r e t n i i d e n a t e R i s g n n r a e l a t o T r e h t o y r d n u s e v r e s e r r e h t O y r d n u s e v r e s e r s e r a h S d e s a b s t n e m y a p e v r e s e r w o fl h s a C i g n 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 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 b a t u b i r t t A l s e v r e s e r r e h t o n i e g n a h C 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 Y T I U Q E N I S E G N A H C F O T N E M E T A T S D E T A D I L O S N O C - - 0 7 5 , 8 8 8 - - - - - 0 7 5 , 8 8 8 - - - - - - ) 9 1 8 , 3 6 2 ( 5 9 2 7 1 , , ) 4 1 1 1 8 2 ( , ) 4 1 1 1 8 2 ( - ) 7 3 0 1 2 5 ( , ) 4 9 6 , 3 3 ( ) 3 4 3 7 8 4 ( , - ) 3 4 3 7 8 4 ( , ) 6 5 8 , 4 8 7 ( ) 9 9 3 , 6 1 ( ) 7 5 4 , 8 6 7 ( ) 4 1 1 , 1 8 2 ( ) 3 4 3 , 7 8 4 ( - - - - - - - - - - - - 0 6 0 , 2 ) 7 9 5 , 4 ( 7 5 6 , 6 1 8 2 5 5 5 , 6 ) 2 8 8 , 8 ( 7 3 4 , 5 1 0 3 6 , 0 9 8 ) 7 9 5 , 4 ( 7 2 2 , 5 9 8 1 8 2 5 5 5 , 6 ) 2 8 8 , 8 ( 7 3 4 , 5 1 - - - - - - - - - - - - 2 2 2 , 6 0 1 ) 5 6 5 , 3 9 5 ( 2 2 2 , 6 0 1 ) 5 6 5 , 3 9 5 ( 9 5 4 , 6 2 3 , 5 8 3 6 , 7 8 1 2 8 , 8 3 2 , 5 3 0 3 , 5 9 7 2 1 3 , 4 5 0 , 2 0 0 8 , 7 5 6 , 2 1 1 0 , 1 2 ) 8 0 5 , 4 3 ( ) 1 9 9 , 9 8 5 ( ) 8 7 1 ( 4 8 3 , 9 8 3 , 2 5 2 6 6 3 , 8 8 8 - - - - - - - - - 5 2 ) 5 2 ( 0 7 5 , 8 8 8 8 3 - 8 2 8 2 ) s e s s o l ( i n 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 3 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 e m o c n i e v i s n e h e r p m o c l a t o 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 e m o c n i e v i s n e h e r p m o c r e h t O 8 2 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 e c n a u s s i y t i u q E s d n e d i v i D - ) 9 7 1 ( 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 h g u o r h t ) e s a e r c e d ( e s a e r c n I 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 f o s a e c n a l a b g n i s o l C 3 1 0 2 . 1 3 r e b m e c e D . s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i n a m r o f 0 4 o t 1 s e t o N g n i y n a p m o c c a e h T ANNUAL REPORT 2013141 l a t o T y t i u q e 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 i p h s r e n w o t s e r e t n i i d e n a t e R i s g n n r a e r e h t o l a t o T y r d n u s 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 s e r a h S d e s a b s t n e m y a p e v r e s e r w o fl h s a C i g n 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 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 b a t u b i r t t A l s e v r e s e r r e h t o n i e g n a h C 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 Y T I U Q E N I S E G N A H C F O T N E M E T A T S D E T A D I L O S N O C 5 8 6 , 0 2 2 , 5 4 3 6 , 8 0 1 1 5 0 , 2 1 1 , 5 6 3 1 , 6 7 0 , 1 0 0 1 , 5 3 5 , 2 2 8 6 , 6 6 6 , 2 4 7 5 , 5 ) 0 3 7 , 0 4 1 ( 4 7 5 , 3 ) 3 0 2 ( 8 1 0 , 1 0 5 , 1 $ S U h T , 2 7 3 7 5 4 1 , ) 2 4 6 , 5 ( 3 0 3 1 1 , 1 6 6 , 5 ) 3 0 2 ( ) 9 4 7 1 2 ( , 3 1 3 , 6 9 6 , 3 $ S U h T 8 4 0 , 2 1 4 3 4 , 3 1 ) 4 1 4 , 5 ( 0 2 0 , 8 - - - ) 6 7 0 9 1 ( , ) 6 7 0 9 1 ( , - 7 1 7 6 1 , - 7 1 7 6 1 , ) 9 5 3 , 2 ( ) 6 7 0 , 9 1 ( 7 1 7 , 6 1 - - - ) 3 0 2 ( - ) 9 4 7 1 2 ( , ) 9 4 7 1 2 ( , - - - - 3 1 3 , 6 9 6 , 3 - 2 9 6 , 5 6 6 , 2 2 9 6 , 5 6 6 , 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 4 2 3 , 5 4 4 1 , , 8 9 7 6 1 1 1 , ) 1 8 3 , 5 4 1 ( 2 6 3 1 , 0 3 1 7 , ) 6 5 5 , 0 4 1 ( 1 9 2 , 3 8 6 6 5 , 8 8 ) 5 7 2 , 5 ( 3 6 1 ) 8 2 9 1 ( , ) 2 7 3 ( ) 6 5 5 1 ( , 2 5 6 , 7 5 7 , 3 6 6 5 , 8 8 6 8 0 , 9 6 6 , 3 ) 6 8 5 , 1 2 ( 4 6 7 , 3 6 6 , 2 0 2 3 , 5 6 6 , 2 ) 6 5 5 , 1 ( - ) 4 7 1 ( ) 4 7 1 ( - - - - - $ S U h T ) 7 1 3 , 3 1 ( - 1 9 8 , 6 1 1 9 8 , 6 1 - - - - - ) 3 0 2 ( 1 1 1 , 7 2 0 , 1 $ S U h T $ S U h T - - - - - - ) 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 ( i n 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 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 e m o c n i e v i s n e h e r p m o c r e h t O - - 8 2 8 2 1 2 6 , 0 3 0 1 , 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 e c n a u s s i y t i u q E s d n e d i v i D - ) 0 1 5 , 3 ( 8 3 - 8 2 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 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 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 . s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i n a m r o f 0 4 o t 1 s e t o N g n i y n a p m o c c a e h T ANNUAL REPORT 2013142 CONSOLIDATED STATEMENT OF CASH FLOWS DIRECT – METHOD LATAM AIRLINES GROUP S.A AND SUBSIDIARIES For the periods ended December 31 Note 2013 ThUS$ 2012 ThUS$ 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 used for acquisition of subsidiaries Cash flows used in the purchase of non-controlling interest 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 Purchases of intangible assets Payment from other long-term assets Dividends received Other cash inflows (outflows) Net cash flow used in investing activities 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) 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 6 6 6 6 6 13,406,275 10,258,473 4,638 57,763 (9,570,723) (2,405,315) (31,215) 11,310 (83,033) 76,761 (7,153,865) (1,938,769) (19,325) 52,986 (3,018) (50,433) 1,408,698 1,203,812 (5,517) (497) 270,485 (440,801) 225,196 (3,223) - 386,379 - 73,429 (1,381,786) (2,389,364) (43,484) 22,144 - 75,448 (59,166) 38,035 351 27,143 (1,278,812) (1,926,416) 888,949 - 2,043,518 1,101,159 (1,952,013) (423,105) (29,694) (361,006) (62,013) 1,205,795 1,335,681 (1,041) 1,334,640 650,263 1,984,903 83,512 (203) 2,185,663 152,000 (539,332) (292,931) (124,827) (227,607) (231,079) 1,005,196 282,592 (6,736) 275,856 374,407 650,263 The accompanying Notes 1 to 40 form an integral part of these interim consolidated financial statements. ANNUAL REPORT 2013143NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2013 LATAM AIRLINES GROUP S.A AND SUBSIDIARIES NOTE 1. GENERAL INFORMATION LATAM Airlines Group S.A. (the “Company”) 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”). regional and 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 international series of routes in America, Europe and Oceania. These businesses are performed directly or through in different its subsidiaries countries. In addition, the Company has subsidiaries operating freight business in Mexico, Brazil and Colombia. the in On August 13, 2010, the Company reported to the Superintendency of Securities and Insurance, as an Essential Matter, that at this date the Company Costa Verde Aeronáutica S.A. and Inversiones Mineras del Cantábrico S.A. (the latter two, "Cueto Subsidiaries"), TAM S.A. (“TAM”), and TAM Empreendimentos (“TEP”) signed a non- e Participações binding Memorandum of Understanding (“MOU”) in which the companies agreed to proceed with their intention of carrying jointly under one out their operations 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 in 23 countries, than 115 destinations 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 called (a) Implementation Agreement and Agreement Exchange Offer ("Contracts Signed") containing the final terms and conditions of the proposed partnership between the Company and TAM. (b) On September 21, 2011, the Court of Defense of Free Competition ("TDLC") approved the merger between the Company and TAM, establishing 14 mitigation 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. ANNUAL REPORT 2013144On 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 the Company and TAM; between (b) The change of Company name and the rest of the transactions contemplated contracts. subscribed in the (c) The in increase 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 (Note 38 (a.1)). The effectiveness of these agreements was subject the conditions established in the extraordinary shareholders' meeting. to compliance with 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 S.A. and Holdco II S.A., 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. ANNUAL REPORT 2013145 (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. 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. At the end of the period of first refusal, that is, as of January 19, 2013, there were 6,857,190 shares remaining subscribed and paid, leaving a balance of 579,626 shares to be subscribed. This balance was auctioned on the Santiago Stock Exchange - Stock Exchange dated January 23, 2013 at a value of CLP$ 11,921 per share. On June 11, 2013, the Company held an extraordinary shareholders’ meeting, which had been called by the board on April 30, 2013, at this meeting the shareholders adopted the following resolutions: 1) To increase the company’s capital by the sum of ThUS$ 1,000,000 through the issuance of 63,500,000 shares, that is, from the sum of US$ 1,652,896,812.43, represented by 488,347,819 shares, all of one single series and with no par value, to the sum of US$ 2,652,896,812.43, represented by 551,847,819 shares, all of one single series and with no par value. 2) To set aside 1,500,000 new shares from issuance. the aforementioned to be used for a compensation plan for executives at LATAM and its subsidiaries, as provided in Article 24 of the Corporations Law (Note 38 (a.2)). 3) To empower the Board, acting freely and within the broadest faculties, to determine, fix, and agree the price, manner, time, procedure, and conditions for placing the aforementioned shares. 4) To empower the Board to proceed to issue the shares related with the capital increase; to enact all formal procedures necessary for said shares to be inscribed and floated; to act on behalf of the Company against all types of authorities, bodies, or persons related to the securities market; to determine all matters relating to the options that may form part of the compensation plans; to grant whatsoever powers may be necessary or desirable in order to implement all or part of the above; and, ANNUAL REPORT 2013146 in general, to resolve all related matters approved at this Meeting. 5) To amend the articles of the Corporate Statutes that refer to equity in order to adjust them to the aforementioned modifications. 6) To delegate on the Board, for a five year period starting on December 21, 2011, the power to fix the new price of placement of the 4,800,000 shares destined for in compensation plans, as provided Article 24 of the Corporations Law, in the Extraordinary conformity with Shareholders’ Meeting on December 21, 2011, as modified at the Extraordinary Shareholders’ Meeting held on September 4, 2012, and to amend and resolve the terms and conditions applicable thereto. held 7) To empower the Board to adopt such further agreements as may be necessary in order to carry out the aforementioned matters. On June 20, 2013, was presented to the Superintendency of Securities and Insurance a request for the inscription of 63,500,000 mentioned above. On July 22, 2013 the Superintendency of Securities and Insurance remitted the Company providing comments for said presentation by Deed No. 16141 The Company replied to these submissions on October 16, 2013. Finally. on November 11, 2013, the Superintendency of Securities and Insurance issued the certificate that approved the inscription of that issuance under the number 987. On November 20, 2013, began the preferential subscription period of the 62,000,000 shares not destined for the above compensation plans, settling the price that these shares would be offered to shareholders in US$ 15,17. On December 19, 2013, ended the preferential subscription period, have been subscribed and paid the total of 51,685,128 shares and collected the equivalent of US$ 784 million (Note 40 (a)). The Company is located in Santiago, Chile, at Avenida Américo Vespucio Sur No. 901, commune of Renca. Corporate Governance practices of the in accordance with Company are set 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 Mobiliarios (“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., Inversiones Nueva Costa Verde Aeronáutica Limitada, Costa Verde Aeronáutica SpA, Inversiones Priesca Dos y Cía. Ltda., Inversiones Caravia Dos y Cía. ANNUAL REPORT 2013147 Ltda., Inversiones El Fano Dos y Cía. Ltda., Inversiones La Espada Dos S.A., Inversiones Puerto Claro Dos Limitada e Inversiones Mineras del Cantábrico S.A. owns 25.50% 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, 2013, the Company had a total of 1,588 registered shareholders. At that date approximately 7.91% of the Company’s share capital was in the form of ADRs and approximately 0.73% in the form of BDRs. For the year ended December 31, 2013, the Company had an average of 52,919 employees, ending this period with a total of 52,997 employees, spread over 9,908 Administrative employees, 6,925 in Maintenance, 17,054 in Operations, 9,339 in Cabin Crew, 4,091 in Controls Crew, and 5,680 in Sales. ANNUAL REPORT 2013148 3 1 0 2 . 1 3 r e b m e c e d f o s A 3 1 0 2 , 1 3 r e b m e c e d f o s A 3 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 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 e t a r n o i t a p i c i t r a P $ S U h T $ S U h T $ S U h T $ S U h T % % % ) s s o l ( i n a G y t i u q E s e i t i l i b a i L s t e s s A i p h s r e n w o i p h s r e n w o i p h s r e n w o t s e r e t n i t s e r e t n i t s e r e t n i l a t o T t c e r i d n I t c e r i D y c n e r r u C n g i i r o l a n o i t c n u F f o y r t n u o C y n a p m o C . o N x a T , 1 3 r e b m e c e D f o s A ) a ( 3 1 0 2 : s w o l l o f s a e r a s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e s e h t n i d e d u l c n i s e i r a i d i s b u s e h T 7 8 7 1 3 2 1 , 5 5 7 3 , ) 1 ( 5 8 6 , 3 ) 6 5 3 ( ) 8 7 ( ) 6 6 9 4 0 1 ( , ) 1 2 5 , 6 4 2 ( 1 5 8 1 0 9 , 9 8 5 1 4 6 , 0 0 0 0 . 0 0 1 9 3 6 1 0 . 1 6 3 8 . 9 9 9 2 4 , 6 2 4 2 1 2 1 , 3 5 5 , 8 3 0 0 0 0 . 0 0 1 0 0 9 9 0 . 0 0 1 0 . 9 9 7 0 4 1 1 , , 9 0 1 2 5 2 6 1 5 , 3 6 2 0 0 0 0 . 0 7 0 0 0 0 1 2 . 0 0 0 0 . 9 4 $ S U $ S U $ S U 2 1 5 0 1 2 , 2 2 2 7 2 , 0 0 0 0 . 0 0 1 0 0 1 0 . 0 0 0 9 9 9 9 . $ S U e l i h C e l i h C e l i h C u r e P 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 o i s i v i D s r u o t n a L s e i i r a d i s b u S 6 - 0 6 8 . 8 1 5 . 6 9 ) 1 ( s e i i r a d i s b u S d n a . A . S p u o r G x a P n a L 0 - 0 8 6 . 9 6 9 . 6 9 . 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 1 - 0 0 9 . 3 6 7 . 6 9 . A . S ú r e P n a L n g i e r o F ) 9 2 1 4 ( , 4 9 2 , 9 3 2 9 9 3 , 0 2 1 3 9 6 9 5 3 , 0 0 0 0 . 0 0 1 0 0 0 0 . 0 0 1 0 0 0 0 . 0 - ) 5 ( ) 2 ( ) 4 3 ( 2 0 8 1 , 7 1 5 3 4 0 1 1 1 , ) 6 4 2 1 ( , ) 0 6 5 ( 0 6 5 ) 5 0 8 , 2 ( 5 0 8 , 2 - - 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 1 0 0 0 0 . 0 0 1 0 0 0 0 . 0 1 9 9 6 , 4 8 6 , 3 5 7 6 , 0 1 0 0 0 0 . 0 0 1 0 0 0 0 . 0 0 1 0 0 0 0 . 0 8 6 3 ) 9 4 1 ( 3 1 1 0 2 1 8 3 2 5 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 1 0 0 0 0 . 0 0 1 0 0 0 0 . 0 7 1 8 , 6 9 , 9 0 1 6 5 2 0 5 2 , 4 5 3 0 0 0 0 . 0 0 1 0 0 0 0 . 0 0 1 0 0 0 0 . 0 ) 7 3 9 9 ( , 0 3 6 , 8 4 9 1 4 , 9 3 0 0 0 0 . 0 0 1 0 0 0 0 . 0 0 1 0 0 0 0 . 0 1 2 4 , 6 3 3 9 8 , 2 6 3 , 5 1 0 0 1 7 9 9 . 0 0 0 0 . 0 0 0 1 7 9 9 . ) 5 7 4 , 8 5 4 ( 5 3 0 7 1 6 , 1 7 6 , 3 8 9 7 , 8 5 4 , 5 9 6 , 8 0 0 0 0 . 0 0 1 9 9 0 9 . 6 3 1 0 9 0 . 3 6 , 3 1 1 9 5 3 7 2 5 , 3 1 4 0 4 6 , 2 7 7 0 8 9 8 . 9 9 1 4 0 0 . 0 9 3 9 8 . 9 9 ) 2 6 1 2 ( , 1 7 1 2 , 9 0 0 0 0 . 0 0 1 0 0 0 0 . 0 0 1 0 0 0 0 . 0 ) 4 8 8 , 4 ( 2 1 4 , 8 1 8 2 5 , 3 1 0 0 0 0 . 0 0 1 0 0 0 0 . 0 0 1 0 0 0 0 . 0 $ 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 . A . . S U 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 . A . . S U ) 1 ( i y r a d i s b u S d n a , c n I s e c i v r e S t r o p r i A e m i r P n g i e r o F e l i h C e l i h C . A . . S U e l i h C e l i h C d e t i i m 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 n g i e r o F . 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 2 - 0 2 5 1 3 6 . . 6 9 . A . S a c i r é m A o c e d a L s e n o i c i d E 7 - 0 2 0 . 4 3 6 . 6 9 . A . S o g r a C o c e d a L 9 - 0 1 4 1 3 6 . . 6 9 . 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 a n i t n e g r A . L . R . S o g r a C r e s a L n g i e r o F s a m a h a B ) 1 ( s e i i r a d i s b u S d n a d e t i m L i s a e s r e v O o g r a C n a L n g i e r o F e l i h C e l i h C l i z a r B ) 1 ( i y r a 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 8 - 0 9 6 . 9 6 9 . 6 9 ) 1 ( s e i i r a 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 0 - 0 1 8 . 5 7 5 . 6 9 ) 2 ( ) 1 ( s e i i r a d i s b u S d n a . A . S M A T n g i e r o F ) 9 2 8 ( 8 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 . $ S U s d n a l s I n a m y a C ) 1 ( s e i i r a d i s b u S d n a d e t i m L i s t n e m t s e v n I e l i h C n a L n g i e r o F . % 3 8 9 9 9 9 a s d l o h . . A S 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 , . . A S I o c d l 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 ) 1 ( ) 2 ( . 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 , . . A S I o c d l 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 . n o i t a p i c i t r a p . 0 0 0 , 0 5 6 , 1 $ S U h T f o l a t o t a r o f . . A S M A T n i l a t i p a c f o e s a e r c n i e d a m . . A S p u o r G s e n i l r i A M A T A L 3 1 0 2 g n i r u D ANNUAL REPORT 2013149 2 1 0 2 , 1 3 r e b m e c e d f o s A 2 1 0 2 , 1 3 r e b m e c e d f o s A 2 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 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 e t a r n o i t a p i c i t r a P $ S U h T $ S U h T $ S U h T $ S U h T % % % ) s s o l ( i n a G y t i u q E s e i t i l i b a i L s t e s s A i p h s r e n w o i p h s r e n w o i p h s r e n w o t s e r e t n i t s e r e t n i t s e r e t n i l a t o T t c e r i d n I t c e r i D l a n o i t c n u F y c n e r r u C f o y r t n u o C n g i i r o y n a p m o C . o N x a T , 1 3 r e b m e c e D f o s A ) b ( 2 1 0 2 0 0 3 1 , 9 1 7 7 1 , ) 0 1 ( 3 1 5 , 2 ) 9 6 2 7 7 ( , ) 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 9 3 6 1 0 . 1 6 3 8 . 9 9 8 9 1 4 3 , 9 2 0 , 3 2 7 2 2 7 5 , 0 0 0 0 . 0 0 1 0 0 9 9 0 . 0 0 1 0 . 9 9 2 4 0 9 , 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 0 0 . 9 4 $ S U $ S U $ S U 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 . $ S U e l i h C e l i h C e l i h C u r e P 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 o i s i v i D s r u o t n a L s e i i r a d i s b u S 6 - 0 6 8 . 8 1 5 . 6 9 ) 1 ( s e i i r a d i s b u S d n a . A . S p u o r G x a P n a L 0 - 0 8 6 . 9 6 9 . 6 9 . 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 1 - 0 0 9 . 3 6 7 . 6 9 . A . S ú r e P n a L n g i e r o F ) 8 2 8 ( 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 . $ S U s d n a l s I n a m y a C ) 1 ( s e i i r a d i s b u S d n a d e t i m L i s t n e m t s e v n I e l i h C n a L n g i e r o F ) 3 9 6 , 0 5 ( 8 2 4 , 5 5 3 3 6 6 1 7 3 , 1 9 0 7 2 7 , 0 8 9 8 . 9 9 1 4 0 0 . 0 9 3 9 8 . 9 9 0 7 4 7 1 1 , 4 4 1 1 1 , - ) 5 ( 3 ) 2 4 ( 7 6 0 , 2 ) 5 7 3 , 6 ( ) 8 5 4 , 4 ( ) 2 1 1 ( ) 7 0 8 1 ( , 1 4 0 , 2 4 3 2 0 0 0 0 . 0 0 1 0 0 0 0 . 0 0 1 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 0 0 0 0 . 0 ) 2 1 6 ( 2 1 6 ) 9 9 7 2 ( , 9 9 7 2 , - - 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 1 0 0 0 0 . 0 0 1 0 0 0 0 . 0 5 5 1 8 , 3 5 5 1 , 8 0 7 9 , 0 0 0 0 . 0 0 1 0 0 0 0 . 0 0 1 0 0 0 0 . 0 5 0 4 ) 8 5 1 ( 1 1 8 2 2 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 0 0 0 . 0 0 1 0 0 0 0 . 0 0 1 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 ( 5 0 9 4 6 , 4 5 1 7 5 , 0 0 0 0 . 0 0 1 0 0 0 0 . 0 0 1 0 0 0 0 . 0 6 6 4 , 6 4 1 7 9 , 1 8 1 6 1 , 0 0 1 7 9 9 . 0 0 0 0 . 0 0 0 1 7 9 9 . ) 5 9 1 5 7 ( , ) 2 3 6 , 0 8 4 ( 9 9 8 , 8 9 1 9 , 8 9 2 1 2 8 , , 8 0 0 0 0 . 0 0 1 9 9 0 9 . 6 3 1 0 9 0 . 3 6 $ 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 . 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 ) 1 ( i y r a d i s b u S d n a . c n I s e c i v r e S t r o p r i A e m i r P 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 d e t i i m 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 n g i e r o F . 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 2 - 0 2 5 1 3 6 . . 6 9 . A . S a c i r é m A o c e d a L s e n o i c i d E 7 - 0 2 0 . 4 3 6 . 6 9 . A . S o g r a C o c e d a L 9 - 0 1 4 1 3 6 . . 6 9 . 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 a n i t n e g r A . L . R . S o g r a C r e s a L n g i e r o F s a m a h a B ) 1 ( s e i i r a d i s b u S d n a d e t i m L i s a e s r e v O o g r a C n a L n g i e r o F e l i h C e l i h C l i z a r B ) 1 ( i y r a 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 8 - 0 9 6 . 9 6 9 . 6 9 ) 1 ( s e i i r a 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 0 - 0 1 8 . 5 7 5 . 6 9 ) 2 ( ) 1 ( s e i i r a d i s b u S d n a . A . S M A T n g i e r o F . % 3 8 9 9 9 9 a s d l o h . . A S 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 , . . A S I o c d l 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 . n o i t a p i c i t r a p . 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 , . . A S I o c d l 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 . 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 ) 1 ( ) 2 ( ANNUAL REPORT 2013150 - On October 11, 2013, TAM S.A., under each contracts of sale of shares with Lan Cargo Overseas Limited, TADEF, Participação e Consultoria Empresarial Ltda. y Jochman Participações Ltda. acquired the 99.98% of the shares of Aerolinhas Brasileiras S.A. (ABSA). 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, 2012 and December 31, 2013, are detailed below: (1) Incorporation companies or acquisition of - - 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.(a)). Lantours Division II Land Services S.A. On November 22, 2012, by public deed in the Notary of Santiago of Mr. Patricio incorporated Raby Benavente, was LANTOURS Division II Land Services S.A., which is owned by 99.99% to LANTOURS Division Land Services S.A. and 0.01% Lan Investment S.A., motionless. ANNUAL REPORT 2013151originated before the date of acquisition within TAM S.A. (Note 18.2.(c)). Additionally, in order to facilitate comparison, there have been some minor reclassifications to the consolidated financial statements corresponding to the previous year. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES following describes the principal The accounting policies the in preparation of these consolidated financial statements. adopted 2.1. Preparation The consolidated financial statements of LATAM Airlines Group S.A. are for the period ended December 31, 2013, 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 financial instruments. The preparation of the consolidated financial statements 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 financial statements. The comparative consolidated financial statements have been revised as a result of modifications made to the fair values in the business combination calculated with TAM S.A. and Subsidiaries, during the measurement period in accordance with IFRS 3, and correction of non- significant errors ANNUAL REPORT 2013152(a) Accounting pronouncements with implementation effective from January 1, 2013: Standards and amendments Mandatory application: Annual periods beginning on or after 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. 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. Amendment IFRS 7: Financial instruments: Disclosures 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. IFRS 10: Consolidated financial statements Issued in May 2011, replaces SIC 12 "Consolidation of special purpose entities" and orientation on control and consolidation in IAS 27 "Consolidated Financial Statements". Sets clarifications and new parameters for the definition of control, and the principles for the preparation of consolidated financial statements. 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 arrangements by focusing on rights and obligations arising from the agreements 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. 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, whether they are classified as subsidiaries, associates or joint ventures. Applicable for entities that hold investments in subsidiaries, joint ventures, and associates. 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. Essentially, this amendment eliminates the fluctuation band or “corridor” method, and stipulates that actuarial fluctuations over the period are recognized against Other Comprehensive Income. Additionally, it includes modifications to disclosures for all employee benefits. 07/01/2012 01/01/2013 01/01/2013 01/01/2013 01/01/2013 01/01/2013 01/01/2013 01/01/2013 ANNUAL REPORT 2013153Standards and amendments Improvements issued in May 2012 Mandatory application: Annual periods beginning on or after 01/01/2013 IAS 1: Presentation of financial statements – Clarifies requirements for comparative information when an entity has a 3rd Statement of Financial Position column. 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. 01/01/2013 The application of standards, amendments and interpretations had no material impact on the annual consolidated financial statements of the Company. ANNUAL REPORT 2013154(b) Accounting pronouncements effective implementation starting on January 1, 2014 and following: Standards and amendments Amendment to IAS 32: Financial instruments: Presentation Issued in December 2011. Clarifies the requirements for off-setting financial assets and liabilities in the Statement of Financial Position. Specifically, 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 legally 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, this amendment modifies the classification and measurement of financial assets. It establishes two measurement categories: amortized cost and fair value. All equity instruments are measured at fair value. A debt instrument is measured at amortized cost only if the entity maintains it in order to obtain contractual cash flows and these cash flows represent capital and interest. This standard was subsequently modified in November 2010 to include the treatment and classification of financial liabilities. For liabilities, the standard carries forward the majority of the requirements established in IAS 39. These include accounting at amortized cost for most financial liabilities, with splitting of embedded derivatives. The principal change is that, where the fair value option is selected for financial liabilities, the part of the change in the fair value attributable to changes in own credit risk for the entity is recognized under other comprehensive income rather than profit or loss, unless this creates an accounting mismatch. Early adoption is permitted. IAS 27: Separate financial statements and Amendment to 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. Amendment to IAS 36: Impairment of assets Issued in May 2013 Modifies recoverable amount disclosures for non-financial assets in line with the requirements stipulated under IFRS 13. This amendment requires the disclosure of additional information on the recoverable amount of assets that show impairment if this amount is based on fair value minus costs of disposal. It also requests disclosure of items that include the discount rates used in measuring the recoverable amount determined using present value approaches. Early adoption is permitted. Amendment to IAS 39: Financial instruments: Recognition and measurement Issued in June 2013. This standard outlines requirements for the novation of derivatives, permitting continuation of hedge accounting, so as to prevent novations arising as a result of laws and regulations from affecting financial statements. For these purposes, it indicates that hedging instruments shall not be voided or terminated in the event of changes: (a) arising as a result of laws or regulations, if the parties to the hedging instrument agree that a central counterparty or an entity (or entities) act as a counterparty to provide central compensation replacing the original counterparty; (b) otherwise, as applicable, affecting the hedging instruments, limited to such changes as are necessary to conduct such a replacement of the counterparty. These changes include changes in contractual guarantee requirements, accounts receivable and accounts payable compensation rights, taxes, and encumbrances. Early adoption is permitted. Mandatory application: Annual periods beginning on or after 01/01/2014 Undetermined 01/01/2014 01/01/2014 The Company has adopted early this amend- ment at December 31, 2013. 01/01/2014 ANNUAL REPORT 2013155Standards and amendments IFRS 9 “Financial instruments” Issued in November 2013, the modifications include a substantial overhaul of hedge accounting that will allow entities to better reflect their risk management activities in the financial statements. Additionally, and unrelated to hedge accounting, this modification allows entities to opt for early adoption of the requirement to recognize changes in reasonable value attributable to changes in the credit risk of the entity itself in other comprehensive income (for financial liabilities designated under the fair value option). This modification may be applied without any requirement to adopt the rest of IFRS 9. Mandatory application: Annual periods beginning on or after Undetermined Amendment to IAS 19 “Employee Benefits” Issued in November 2013, this amendment applies to contributions by employees or third parties to defined benefits plans. The modifications seek to simplify accounting procedures for contributions that are independent of the number of years of service of the employees, such as employee contributions calculated as a fixed percentage of their salaries. 01/07/2014 Improvements to the International Financial Reporting Standards (2012) Issued in December 2013. 01/07/2014 IFRS 2 “Share-based Payment” – The amendment clarifies the definitions of “vesting condition” and “market condition” and adds separate definitions of “performance condition” and “service condition”. This amendment must be applied prospectively for all transaction with share-based payments to vest on or after July 1, 2014. Early adoption is permitted. IFRS 3 “Business Combinations” - The standard is amended to clarify that contingent consideration that is classified as financial instrument under the test described in IAS 32 “Financial instruments” shall be classed as a financial liability or equity. The standard is also amended to clarify that all non-equity contingent consideration, both financial and non-financial, shall be measured at fair value at each reporting date, with changes in value imputed to profit or loss. Therefore, IFRS 9, IAS 37, and IAS 39 are also modified. The amendment is prospectively applicable for business combinations with an acquisition date on or after July 1, 2014. Early adoption is permitted so long as the amendments to IFRS 9 and IAS 37, also issued as part of the 2012 improvement plan, are also early adopted. IFRS 8 “Operating Segments” - The standard is amended to include to disclose the judgments made by management in applying the aggregation criteria to operating segments. This includes a description of the segments that have been aggregated and the economic indicators that have been assessed in determining that the segments aggregated share similar economic characteristics. The standard is also amended to require a reconciliation of the total of the reportable segments’ assets with the assets of the entity, when assets are reported by segment. Early adoption is permitted. ANNUAL REPORT 2013156Standards and amendments Mandatory application: Annual periods beginning on or after Improvements to the International Financial Reporting Standards (2012) Issued in December 2013. 01/07/2014 IFRS 13 “Fair Value Measurement” - When IFRS 13 was published, paragraphs B5.4.12 of IFRS 9 and GA79 of IAS 39 were consequently eliminated. This led to a doubt as to whether entities were no longer permitted to measure short term receivables and payables at invoice amounts if the effect of not discounting is immaterial. The IASB has modified the basis of conclusions of IFRS 13 to clarify that it had no intention of removing the capacity to measure short term receivables and payables at the invoice amount under such circumstances. IAS 16, “Property, Plant and Equipment”, and IAS 38, “Intangible Assets” - Both of these standards are amended to clarify the treatment of the gross carrying amount and accumulated depreciation when for entities that apply the revaluation model. In these cases, the carrying amount of the asset is updated to the revalued amount, and this revaluation is split between carrying amount and accumulated depreciation in one of the following ways: 1) either the carrying amount is updated in a manner consistent with the revaluation of the carrying amount and accumulated depreciation is adjusted to equal the difference between the gross carrying amount and the carrying amount after accounting for losses through accumulated impairment; 2) or accumulated depreciation is eliminated, against a charge to the gross carrying amount of the asset. Early adoption is permitted. IAS 24, “Related Party Disclosures” - The standard is amended to include an entity providing key management personnel services to the reporting entity or the parent of the reporting entity as a related party of the reporting entity. The reporting entity is not obligated to disclose the compensation paid to the workers or administrators of the entity providing key management services, but is obligated to disclose the sums imputed to the reporting entity by the service provider entity for the key management personnel services provided. Early adoption is permitted. ANNUAL REPORT 2013157Standards and amendments Improvements to the International Financial Reporting Standards (2012) Issued in December 2013. IFRS 1 “First-time Adoption of International Financial Reporting Standards” - The amendment clarifies that an entity, in its first IFRS financial statements, has the choice between applying an existing and currently effective IFRS or applying early a new or revised IFRS that is not yet mandatorily effective, provided that the new IFRS permits early application for all applicable periods. IFRS 3 “Business Combinations” - The standard is amended to clarify that IFRS 3 is not applicable to accounting procedures for the formation of a joint arrangement under IFRS 11. The amendment also clarifies that the exemption to inclusion only applies in the financial statements of the joint arrangement itself. IFRS 13 “Fair Value Measurement” - The amendment clarifies that the scope of the portfolio exception defined in IFRS 13 includes all contracts accounted for within the scope of IAS 39 or IFRS 9, permitting the reporting entity to measure the fair value of a group of financial assets and liabilities at net value. The amendment is mandatory for financial reporting periods starting on or after July 1, 2014. An entity must apply the amendments prospectively from the start of the first annual period in which IFRS 13 is applied. IAS 40 “Investment Property” - The standard is amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive. IAS 40 provides guidelines to distinguish between investment properties and properties occupied by their owners. When financial information is prepared, the application guidelines for IFRS 3 must also be applied in order to determine whether or not an investment property is a business combination. The amendment is applicable for financial reporting periods starting on or after July 1, 2014, but may be applied to individual property acquisitions before that date, so long as the information necessary to apply the amendment is available. Interpretations IFRIC 21: Levies Issued in May 2013. A levy is defined as a disbursement of resources that include economic benefits imposed on an entity by a government in accordance with legislation in force. The interpretation indicates accounting procedures for the payment of a levy if it the liability falls within the scope of IAS 37. The issue relates to when a liability should be recognized for levies imposed by a public authority to operate in a specific market. The interpretation indicates that the liability should be recognized at the time of the event that generated the obligation, at which point payment was unavoidable. The obligating event may occur on a specific date or progressively over the course of time. Early adoption is permitted. Mandatory application: Annual periods beginning on or after 01/07/2014 Mandatory application: Annual periods beginning on or after 01/01/2014 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. ANNUAL REPORT 20131582.2. Consolidation (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. to To account for and identify the financial revealed when be information carrying out a business combination, such as the acquisition of an entity by the Company, shall apply the acquisition method provided for in IFRS 3 (or IFRS 3 for its acronym in Spanish - http://www. normasinternacionalesdecontabilidad.es/ nic/pdf/niif3.pdf). According to IFRS 3, the cost of acquisition is the fair value of the assets acquired, the equity instruments issued and the liabilities incurred or assumed on the date of the business combination. 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 is shown as Goodwill. If the cost is less than the fair value of the net assets of the acquired recorded the difference subsidiary, 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. Additionally, IFRS 3 allows adjustments to the initial accounting for a business combination within the period of twelve months from the acquisition date. In connection with the business combination process with TAM S.A. and Subsidiaries, this period of 12 months from the day June 22, 2012. 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. (b) Transactions with non-controlling interests 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 is not When a subsidiary is sold and a percentage of participation 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 retained, ANNUAL REPORT 2013159the loss of control is recognized in the consolidated income statement in Other gains (losses). is 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 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. is adjusted Post-acquisition movement against 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 state- ments of each of the entities of LATAM Airli- nes Group S.A. and Subsidiaries are valued using the currency of the main economic en- vironment in which the entity operates (the functional currency). The functional curren- cy of LATAM Airlines Group S.A. is the United States dollar which is also the presentation currency of the consolidated financial state- ments of LATAM Airlines Group S.A. and Sub- sidiaries. (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 by function except when deferred in Other comprehensive income as qualifying cash flow hedges. ANNUAL REPORT 2013160(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: (i) Assets and liabilities of each consolidated statement of financial position presented are translated at the closing exchange rate on the consolidated statement of financial position date; (ii) The revenues and expenses of each income are translated at the exchange rates prevailing on the transaction dates, statement account (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, plant and equipment The land of LATAM Airlines Group S.A. and Subsidiaries is recognized at cost less any accumulated impairment loss. The rest of the Property, plant and equipment are registered, 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. (replacement costs of Subsequent components, improvements, extensions, etc.) are included in 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. ANNUAL REPORT 2013161 The residual value and useful life of assets are reviewed, and adjusted if necessary, once per year. in acquiring them and preparing them for using the specific software. These costs are amortized over their estimated useful lives. 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 compensation with the book value and are included in the consolidated statement of income. Expenses related to 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. 2.5. Intangible assets other than goodwill Brands, airport Slots and Loyalty program The direct costs include the expenses of the personnel who develop the computer software and other costs directly associated. Brands, airport Slots and coalition and loyalty program are intangible assets of indefinite useful life and are subject to impairment tests annually. Development costs of computer software shown as assets are amortized over their estimated useful lives. slots correspond The airport to an administrative authorization to carry out an operation of arrival and departure of aircraft at a specific airport, within a specified period. The Loyalty program corresponds to the system of accumulation and redemption of points that has developed Multiplus. The Brands, airport Slots and Loyalty program were recognized in fair values determined in accordance with IFRS 3, as a consequence of the business combination explained in Note 18.2.(b). Computer software Licenses for computer software acquired are capitalized on the basis of the costs incurred 2.6. Goodwill 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 recognized in the consolidated income statement when they are incurred. ANNUAL REPORT 20131622.8. Losses for impairment of non-financial assets in circumstances 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. Assets subject to amortization are subjected to impairment tests whenever any event or indicates that change the book value of the assets may not be recoverable. An impairment loss is recorded when the book value is greater than the recoverable 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 at each reporting date. amount. The 2.9. Financial assets The Company its financial classifies 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 acquired. instruments were Management determines the classification of its financial 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 ANNUAL REPORT 2013163months 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 investments have cash flows from the 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 interest rate. cost using the effective 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 interest rate. at the original effective 2.10 Derivative financial instruments and hedging activities 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 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. ANNUAL REPORT 2013164(a) Fair value hedges Changes in the fair value of designated deri- vatives that qualify as fair value hedges are shown in the consolidated statement of in- come, together with any change in the fair value of the asset or liability hedged that is attributable to the risk being hedged. (b) Cash flow hedges 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 income until that Other comprehensive 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 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)”. it (c) Derivatives 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)”. 2.11. Inventories 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. ANNUAL REPORT 2013165The existence of significant financial difficulties on the part of the debtor, the is entering probability that the debtor bankruptcy or financial reorganization and the default or delay in making payments are considered indicators that the receivable has 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. 2.16. 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. 2.13. Cash and cash equivalents 2.17. Deferred taxes 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 from the placement of shares. 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. 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 tax earnings with which to compensate the temporary differences. ANNUAL REPORT 2013166 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 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 is made on the basis of the amount estimated for distribution. The Company recognizes the expense for personnel vacations on an accrual basis. Provisions are recognised when: 2.19. Provisions (b) Share-based compensation consolidated financial The compensation plans implemented by the granting of options for the subscription and payment of shares are shown in statements the 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 (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. ANNUAL REPORT 20131672.20. Revenue recognition (iii) Other revenues 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. Consistent with the foregoing, the Company presents the deferred revenues in heading Other financial liabilities in the Statement of Financial Position. (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 kilometers or points earned can be exchanged for flight tickets or other services of associated entities. The consolidated financial statements include liabilities for this concept (deferred income), 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. The Company records revenues for other services when these have been provided. (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 ANNUAL REPORT 2013168These deposits, often called maintenance reserves, a major accumulate until maintenance is performed, once made, is request the recovery to the lessor. At the end of the contract period, the balance between paid reservations and conditions agreed with levels of maintain in delivering, be offset the parties if applicable. 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. included in Property, plant and equipment. (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. 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. Maintenance The costs incurred for scheduled heavy 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 the use of the aircraft expressed in terms of cycles and flight hours. In case of on balance sheet aircraft, these maintenance cost are capitalized as Property, plant and equipment, while in the case of off balance sheet aircraft maintenance cost are periodically provided for and recognized through profit and loss as “Cost of sales”. Additionally, some leases establish the obligation of the lessee to make deposits to the lessor as a guarantee of compliance with the maintenance and return conditions. ANNUAL REPORT 2013169 (“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. During the period of 2013, the Company recognized gains of US$ 19.03 million on fuel hedging. During the same period 2012, the Company recognized losses of US$ 1.80 million for the same reason. At December 31, 2013, the market value of its fuel positions amounted to US$ 15.9 million (positive). At December 31, 2012, this market value was US$ 9.9 million (negative). 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 (“WTI”) crude, Brent Texas Intermediate (“BRENT”) crude and distillate Heating Oil ANNUAL REPORT 2013170The Following tables show the notional value of the purchase positions together with the derivatives contracted for the different periods: Positions as of December 31, 2013 (*) Volume (thousands of barrels) Contracted future price (US$ per barrel)(**) Q114 4,093 110 Q214 1,851 109 Total 5,944 110 Total (ThUS$) 450,230 201,759 653,840 Percentage of the hedge of expected consumption value 56% 26% 41% (*) The volume shown in the table considers all the hedging instruments (swaps and options) in Brent, WTI and JET. (**) Weighted average between collars and options when activated. Correspond to equivalent in Brent. Positions as of December 31, 2012 (*) Maturities Volume (thousands of barrels) Contracted future price (US$ per barrel)(**) Q113 Q213 Q313 Q413 Q114 Q214 4,824 122 600 132 525 132 525 131 525 111 75 104 Total 7,074 123 Total (ThUS$) 588,528 79,200 69,300 68,775 58,275 7,800 870,102 Percentage of the hedge of expected consumption value 61% 7% 6% 6% 6% 1% 19% (*) The volume shown in the table considers all the hedging instruments (swaps and options) in WTI and Brent. (**) Weighted average between collars and options, when activated. Correspond to equivalent in Brent. Given that current derivatives portfolio comprises mainly contracts based on Brent, a decision has been made to change the equivalence applied to this underlying index in order to calculate the agreed future value for different periods. ANNUAL REPORT 2013171Sensitivity analysis A drop in fuel price positively affects the Company through a reduction in costs. However, this drop also negatively affects contracted positions as these are acquired to protect the Company against the risk of a rise in price. The policy therefore is to maintain a hedge-free percentage in order to be competitive in the event of a drop in price. The following table shows the sensitivity analysis of instruments the financial according to reasonable changes in the fuel price and their effect on equity. The term of the projection was defined until the end of the last current fuel hedge contract, being the last business day of the second quarter of 2014. Due to the fact that current positions do not represent changes in cash flows, but a variation in the exposure to the market value, the current hedge positions have no impact on income (they are booked as cash flow hedge contracts, so a variation in the fuel price has an impact on the Company’s net equity). The calculations were made considering a parallel movement of US$ 5 per barrel in the curve of the WTI, BRENT and JET crude futures benchmark price at the end of December, 2013 and the end of December, 2012. Benchmark price (US$ per barrel) Positions as of December 31. 2013 effect on equity (millions of US$) Positions as of December 31. 2012 effect on equity (millions of US$) + 5 -5 +24.57 -19.13 +12.60 -11.30 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 by consume. 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 2013, which considers a hedge-free portion, a vertical fall by 5 dollars in the WTI, BRENT and JET benchmark price (the monthly daily average), would have meant an impact of approximately US$ 127.6 million in the cost of total fuel consumption for the same period. For 2013, a vertical rise by 5 dollars in the WTI, BRENT and JET benchmark price (the monthly daily average) would have meant an ANNUAL REPORT 2013172 impact of approximately US$ 118.5 million of increased fuel costs. (ii) Cash flow interest-rate risk: in improvement The fluctuation in interest rates depends heavily on the state of the global economy. An 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 (in the same way interest rates are raised in periods of economic expansion). 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 70% 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. Other interest rates of less relevance are Brazilian Interbank Deposit Certificate ("ILC"), and the Interest Rate Term of Brazil ("TJLP"). 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. 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. Cash flow interest rate risk equates to the risk of future cash flows of the financial instruments due to the fluctuation in interest Increase (decrease) futures curve in libor 3 months Positions as of December 31. 2013 effect on equity (millions of US$) Positions as of December 31. 2012 effect on equity (millions of US$) +100 basis points -100 basis points -29.70 +29.70 -33.69 +33.69 ANNUAL REPORT 2013173Changes 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. increasing The calculations were made (decreasing) vertically 100 basis points of the three-month Libor futures curve. Increase (decrease) futures curve in libor 3 months +100 basis points -100 basis points Positions as of December 31. 2013 effect on equity (millions of US$) Positions as of December 31. 2012 effect on equity (millions of US$) +23.35 -24.46 +33.60 -35.50 In the case of the subsidiary TAM S.A, which operates with the Brazilian Real as its functional currency, a large proportion of the company’s liabilities are expressed in dollars. Therefore, this subsidiary’s profit and loss varies when its financial assets and liabilities, an its accounts receivable listed in dollars are converted to Brazilian Reals. This impact on profit and loss is consolidated, directly affecting the Company. In order to reduce the impacts on the Company’s profit and loss caused by rises and falls in the R$/US$ exchange rate, during the last quarter of 2013 the Company conducted transactions to reduce the net US$ liabilities held by TAM S.A. There are limitations in the method used 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 ineffectiveness in the consolidated income statement. (iii) Foreign exchange rate risk: The the functional currency used by 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 risk arises when items listed on the balance sheet are exposed to exchange rate variations, due to their being listed in a currency other than the functional currency. ANNUAL REPORT 2013174The following table shows the variation of financial performance to appreciate or depreciate 10% exchange rate R$/US$: Appreciation (depreciation) of R$/US$ Effect at December 31. 2013 Millons of US$ -10% +10% +197.76 -197.76 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 international 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 domestic markets of Brazil, Chile, Argentina and Colombia the tariffs are in local currency without any kind of indexation. In the case 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, among which are: Brazilian real, Chilean peso, Argentine peso, Paraguayan guaraní, Mexican peso, Euro, Pound Sterling, Peruvian sol, Colombian peso, Australian dollar and New Zealand dollar. Of these currencies, the largest exposure is presented by Brazilian real and Chilean peso. On the other hand, one of the sources of financing of the Company is the receipt of future flows relating to dividends and distributions of capital that the subsidiaries project distribute. These futures flows vary depending on the evolution of currency in compared to the US$. Most exposure to future flows is presented in subsidiary TAM S.A. and the volatility in the exchange rate R$/US$. In the case of the subsidiary TAM S.A. the incomes are expressed a large proportion in R$ and a large proportion of their costs are expressed in US$. For cover the inversion in the subsidiaries and reduce the volatility in the cash flow, the Company may acquire derivatives contracts to hedge variations in other currencies against the Company’s functional currency, hedging exchange rate risk through currency forwards. With the object of reduce the exposition to the futures monthly operating flows of all 2014, caused by eventual depreciation of the BRL and assure an economic margins, LATAM done the hedge by derivatives FX Forwards. At December 31, 2013, the market value of its FX positions amounted to US$ 32.06 million (positive), these derivatives were contracted during 2013 so at December 31, 2012, there was no this type of derivatives. ANNUAL REPORT 2013175The following table presents the notional amount of the contracted positions with the average prices agreed: Positions at December 31. 2013 Volume (millon of US$) Forward average price agreed (US$/R$) Total (millon of R$) Q114 Q214 Q314 Q414 Total 125 2.24 280 125 2.28 285 125 2.33 291 125 2.39 500 2.31 299 1.155 Sensitivity exchange rate LATAM A depreciation of exchange rate R$/US$ affects negatively the Company for a rise of its costs in US$, however, it also affects positively the value of contracted derivate positions. Because the changes in the value of current positions not represented changes in cash flows, but a variation in the exposure of market value, the current hedge positions have not impact on result (are registered as cash flow hedges according to IFRS, therefore, a variation in the exposure has an impact on the Company’s net equity). The following table presents the sensitivity of financial instruments agrees with reasonable changes to exchange rate and its effect on equity. The projection term was defined until the end of the last current contract hedge, being the last business day of the fourth quarter of 2014: Appreciation (depreciation) of R$/US$ Effect at December 31. 2014 Millions of US$ -10% +10% -49.46 +49.46 Operations hedging of exchange rate Multiplus 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. ANNUAL REPORT 2013176The following table presents the notional amount and market value of derivatives exchange rate for each maturity date. The expiration date of the derivatives the probable date of coincide with collection points. The highly probable sale of to income after being be exchanged, on average, six months later. the points are expected recognized in Foreign currency derivative Multiplus Notional Value (Millions of US$) Market Value (Millions of US$) Position at December 31. 2013 Maturity 2014 + 18.00 -1.65 Total + 18.00 -1.65 of cash flow hedge and is recognized in the financial results of the Company (Note 21). 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 derivatives hedges of Multiplus expire in March 2014. Have not yet been executed new hedge contracts by the subsidiary Multiplus, because exposure to exchange rate R$/US$ has been managed by a change in the indexation of Multiplus costs, increase the cost base in US$, which creates a natural hedge to reduce the exposure of cash flows to exchange rate R$/US$. 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 US$3.3 million/ US$ 4.2 million, mainly as the effect of gains or losses from exchange rate in the time value of derivatives, which are recognized immediately through profit and loss. Effects of exchange rate derivatives in the Financial Statements The profit or losses 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 ANNUAL REPORT 2013177 The following table shows the change in Other comprehensive income recognized in Total equity to appreciate or depreciate 10% exchange rate R$/US$: Appreciation (depreciation) of R$/US$ Effect at December 31. 2013 Millions of US$ Effect at December 31. 2012 Millions of US$ -10% +10% +466.45 -381.63 +407.00 -332.98 (b) Credit risk (i) Financial activities 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 in other kinds of instruments, exchange-rate transactions and the contracting of derivative instruments or options. the activities, To reduce the credit risk associated with Company operational 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 investment activities grade by major Risk Assessment Agencies. Additionally the company has established maximum limits for investments which are monitored regularly. remain at least 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. In order to reduce counterparty risk and to ensure that the risk assumed is known and managed by the Company, investments are diversified among different banking institutions (both local and 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 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. level of ANNUAL REPORT 2013178The Company has no guarantees to mitigate this exposure. related with travel agents and cargo agents for domestic transportation in Brazil is done directly by TAM Linhas Aéreas S.A. (ii) Operational activities Association, The Company has four large sales “clusters”: travel agencies, cargo agents, airlines and credit-card administrators. The first three are governed by International Air international Transport (“IATA”) organization comprising 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 (“CASS”), IATA Clearing House (“ICH”) and banks (credit cards). These institutions fulfill the role of collectors and distributors between airlines and travel and cargo agencies. In the case 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. 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. the activities, To reduce the credit risk associated with operational 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. its Because of the cyclical nature of the business, the operation, and 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. ANNUAL REPORT 2013179The 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 first-class financial entities. instruments through leases, operating The Company has future obligations related leases, to financial maturities of other bank borrowings, derivative contracts and aircraft purchase contracts. ANNUAL REPORT 2013180i l a n m o N i l a n m o N e v i t c e ff E e t a r e u l a v e t a r 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 e n o n a h t e r o M 0 9 n a h t e r o M o t e e r h t s r a e y e v fi e e r h t o t s r a e y e n o o t s y a d r a e y 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 x a T r o t i d e r C . o N 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 3 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 u q i 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 % $ 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 0 1 . 0 0 0 , 0 3 % 0 0 1 . n o i t a r i p x e t A 0 0 1 0 3 , % 3 6 1 . 0 0 0 , 0 3 2 % 3 6 1 . n o i t a r i p x e t A 3 3 5 1 3 2 , % 6 0 1 . 0 0 0 , 0 4 % 6 0 1 . n o i t a r i p x e t A 8 8 1 0 4 , % 7 8 1 . 0 0 0 , 0 0 1 % 7 8 1 . n o i t a r i p x e t A 4 3 9 0 0 1 , % 9 1 3 . 1 5 0 , 5 1 1 % 9 1 3 . n o i t a r i p x e t A 7 1 7 , 6 1 1 % 5 8 . 4 0 6 4 , 8 6 2 % 5 8 . 4 y l r e t r a u Q 4 7 5 , 8 9 2 % 5 7 . 0 2 5 3 3 , 5 1 % 5 7 . 0 2 y l h t n o M % 8 7 . 3 2 3 0 6 7 2 , % 8 7 . 3 2 y l h t n o M 6 4 6 , 6 1 7 9 6 1 3 , - - - - - - - - - - - - - - - - - 1 5 0 , 5 1 1 0 0 1 0 3 , - 8 8 1 0 4 , - - 3 3 5 1 3 2 , - 9 8 7 7 7 8 4 3 9 0 0 1 , 5 0 5 , 4 8 3 0 6 , 9 3 1 5 6 4 , 5 5 1 0 0 , 9 1 - - - - 1 6 8 , 5 1 5 8 7 9 2 0 , 0 3 8 6 6 1 , % 1 0 . 5 3 4 5 1 9 , % 9 6 . 5 y l r e t r a u Q 6 4 7 , 8 0 1 4 3 2 , 8 2 3 0 2 , 2 3 3 1 2 , 2 3 5 6 0 , 2 1 1 3 0 , 4 % 3 7 . 2 4 6 9 , 8 % 6 0 . 3 y l r e t r a u Q 9 1 1 9 , % 9 9 1 . 2 1 3 , 0 4 1 % 9 9 1 . y l r e t r a u Q 7 0 8 1 4 1 , - - 9 3 1 0 1 , 0 2 9 , 3 8 6 8 8 , 5 3 2 6 8 1 1 , - - 9 3 8 , 6 0 8 2 , 2 % 1 3 . 2 4 5 2 , 8 1 4 % 5 4 . 2 y l r e t r a u Q 8 9 2 , 3 7 4 5 6 8 7 3 2 , 4 4 4 , 6 9 8 6 3 , 3 9 6 9 2 , 4 3 5 2 3 1 1 , % 6 7 1 . , 6 7 7 9 9 0 , 2 % 7 4 . 2 y l r e t r a u Q 8 4 3 , 3 0 3 , 2 7 7 5 , 5 0 2 1 , 7 8 3 7 3 4 , 0 8 6 , 9 3 4 9 6 4 , 5 6 1 5 3 2 , 5 5 % 4 0 . 2 , 1 9 1 2 7 3 % 4 6 . 2 y l r e t r a u Q , 8 1 1 4 0 4 7 1 9 , 8 6 1 6 2 2 , 5 9 7 8 6 , 3 9 8 4 7 , 4 3 0 4 5 1 1 , % 8 7 . 0 9 9 5 , 0 0 2 % 2 3 . 1 y l r e t r a u Q 6 0 3 , 8 0 2 4 9 6 , 6 9 9 5 4 , 5 4 9 5 3 , 4 4 4 7 3 , 6 1 % 4 0 1 . 0 7 0 , 8 1 1 % 4 6 1 . y l r e t r a u Q 6 9 7 , 4 2 1 5 0 0 , 5 6 7 1 4 , 4 2 2 4 7 3 2 , % 4 0 1 . 2 0 5 , 8 5 % 3 6 1 . y l r e t r a u Q 9 5 8 1 6 , 1 6 4 , 2 3 7 1 0 , 2 1 1 7 6 1 1 , 1 4 7 , 8 2 9 2 , 4 0 2 4 , 5 1 9 8 , 2 8 1 4 1 , % 1 8 . 2 2 9 9 , 3 0 7 % 1 8 . 2 y l r e t r a u Q 7 9 5 , 0 2 8 , 5 0 7 9 4 4 8 2 5 7 4 1 , 3 4 6 , 8 4 1 2 2 0 , 6 5 9 9 6 , 8 1 % 7 2 . 3 6 3 0 , 3 7 1 % 7 2 . 3 y l r e t r a u Q 9 2 2 , 3 0 2 3 7 7 3 9 , 1 2 0 , 9 3 5 7 1 7 4 , 0 0 5 7 1 , 0 6 7 5 , % 9 9 1 . 2 9 2 , 5 9 % 9 9 1 . y l r e t r a u Q 8 6 4 , 8 9 % 3 0 . 3 6 7 0 , 5 6 % 3 2 . 3 y l r e t r a u Q 0 6 2 , 9 6 - - 4 2 3 , 9 3 0 7 9 3 , - 6 2 7 5 6 , 4 6 5 , 4 2 8 7 1 8 , % 1 2 . 1 4 1 5 , 9 8 % 1 2 . 1 y l r e t r a u Q 1 8 1 3 9 , 5 1 4 7 1 , 7 4 6 , 4 2 4 3 4 1 3 , % 5 6 . 5 4 6 5 , 0 4 % 8 3 . 6 y l r e t r a u Q 5 2 2 , 8 4 8 3 0 , 8 5 7 0 , 6 1 5 7 0 , 6 1 5 0 2 , 5 1 9 9 5 , 4 1 8 2 0 , 6 8 2 0 , 5 6 8 0 , 5 9 0 0 , 2 % 3 2 . 4 4 7 7 , 8 0 3 % 5 3 . 5 y l r e t r a u Q 1 5 8 , 9 4 3 1 1 2 , 3 2 4 3 9 5 1 1 , 2 6 4 , 0 4 1 8 7 6 , 2 5 6 6 5 7 1 , % 5 1 4 . 4 3 3 7 4 1 , % 5 6 . 4 y l r e t r a u Q 4 4 5 , 3 6 1 9 3 1 7 , 5 7 4 , 9 5 0 9 8 , 4 6 6 5 0 , 4 2 4 8 9 7 , % 3 4 1 . 9 9 8 7 , % 3 4 1 . y l h t n o M 0 3 4 , 8 % 5 7 1 . 8 3 8 , 0 7 1 % 5 7 1 . n o i t a r i p x e t A 2 3 9 , 4 7 1 - - - - , 8 2 1 2 7 1 4 0 8 , 2 - 8 2 6 , 5 9 9 0 , 2 3 0 7 % 0 0 . 6 0 0 0 , 0 5 4 % 0 0 . 6 y l r e t r a u Q 9 0 2 1 8 5 , 4 8 6 , 9 0 2 0 1 8 , 9 0 2 5 6 8 1 3 1 , 0 0 1 0 2 , 0 5 7 9 , - - 9 1 8 , 2 1 1 2 6 5 , 5 0 6 3 , 5 0 7 , 6 - - - - 4 0 5 , 8 1 1 4 1 6 1 6 5 , 6 1 9 2 8 , 9 5 5 9 4 , 0 3 5 0 0 1 1 , 1 4 9 5 , - - 8 1 6 1 , 3 0 2 , 3 0 2 1 1 , 7 5 1 , 7 3 4 , 7 2 3 3 , 4 4 6 , 2 2 7 1 , 6 7 4 , 1 0 7 4 , 2 0 0 , 2 5 9 4 , 0 6 7 8 8 6 , 3 5 5 $ S U $ S U $ S U $ S U $ S U $ F U $ S R A $ S R A $ 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 c n a r F E L O C I R G A T I D E R C E - 0 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 U O C F E P E - 0 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 U S A B I R A P P N B E - 0 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 U O G R A F S L L E W E - 0 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 U K N A B I T I C E - 0 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 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 . A . . S U . A . . S U . A . . S U K N A B E L P P A E - 0 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 K N A B S U E - 0 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 U M T B E - 0 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 U K N A B E H C S T U E D E - 0 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 n i t n e g r A K N A B I T I C E - 0 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 n i t n e g r A A V B B E - 0 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 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 O D A T S E 7 - 0 0 0 . 0 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 X E D A L B 1 - 8 5 4 . 0 0 1 6 7 . 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 V B B 8 - 0 0 0 . 2 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 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 A C N A B P R O C 9 - 0 0 0 . 3 2 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 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 2 - 0 0 2 . 2 6 8 . 9 8 s n a o l k n a B . A . . S U G N I E - 0 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 d e e t n a r a u G s n o i t a g i l b o . A . . S U E S , K N A B B V D E - 0 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 e c n a r F E L O C I R G A T I D E R C E - 0 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 U . A . . S U . A . . S U S A B I R A P P N B E - 0 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 K N A B I T I C E - 0 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 O C F E P E - 0 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 U A C I R E M A F O C N A B E - 0 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 U G N I E - 0 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 d e e t n a r a u g r e h t O 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 . A . . S U . A . . S U - - ) * ( K N A B I T I C E - 0 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 G N I E O B E - 0 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 s n a o l r e h t O S R E H T O S R E H T O l a t o T - - 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 s e v i t a v i r e d g n g d e H i 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 s e v i t a v i r e d g n g d e h - n o N i . a d a n a C d n a s e t a t S d e t i n U n i d r a c t i d e r c h t i w s e l a s e h t m o r f s w o fl e r u t u f e h t h t i w d n o b d e z i t i r u c e S ) * ( ANNUAL REPORT 2013181 i l a n m o N l a t o T e v i t c e ff E e t a r e t a r i l a n m o N e t a r 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 e v fi o t e e r h t e e r h t o t e n o e n o o t s y a d n a h t e r o M n a h t e r o M 0 9 n a h t e r o M s r a e y s r a e y r a e y 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 f o s s a l C y t i l i b a i L 3 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 u q i 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 2 . 3 % 6 6 . 4 % 3 7 . 4 % 4 9 . 2 % 2 4 7 . % 9 2 . 3 % 5 1 0 1 . 5 8 8 , 3 4 9 4 8 7 3 1 , 0 3 8 , 3 7 7 5 3 , 2 6 4 8 6 8 8 6 , 2 4 1 4 3 , 2 2 1 % 6 7 . 3 % 0 2 . 5 % 1 3 . 6 % 3 7 . 3 % 2 4 7 . % 7 8 . 3 n o i t a r i p x E t A n o i t a r i p x E t A n o i t a r i p x E t A n o i t a r i p x E t A y l t h n o M n o i t a r i p x E t A % 3 6 . 0 1 n o i t a r i p x E t A 1 8 4 , 6 4 3 5 2 , 5 4 1 9 9 6 9 7 8 , 9 7 7 9 1 6 6 , 1 8 6 , 0 3 1 6 8 9 , 4 4 - - - - - - - - - - - - - - - - - - 2 - - 5 1 7 0 , 4 4 0 5 4 , 5 3 1 7 4 4 7 3 7 0 5 , 6 8 9 2 2 , 6 8 6 , 0 5 6 8 9 , 4 4 0 1 4 , 2 3 0 8 , 9 2 4 1 9 2 , 1 1 2 , 3 4 0 0 2 5 - 9 9 9 7 , % $ 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 0 . 6 5 1 2 , 4 % 1 0 . 6 y l t h n o M 6 5 3 , 5 5 3 0 , 2 0 2 3 1 , 0 2 3 1 , 5 9 4 6 8 1 % 1 4 . 8 0 0 0 , 0 0 1 1 , % 0 6 . 8 n o i t a r i p x E t A , 3 8 1 5 1 7 1 , 2 1 2 , 3 5 9 7 6 3 7 5 4 , 3 4 3 , 0 9 1 1 5 2 , 0 8 0 1 0 , 4 3 % 5 2 . 1 - % 2 4 1 . - % 0 0 1 . % 5 7 . 0 % 0 9 . 0 % 0 4 1 . % 5 6 . 0 % 0 5 . 2 % 5 7 1 . % 5 2 . 1 % 5 2 . 1 % 4 7 1 . % 8 7 . 2 % 1 7 1 . % 0 0 . 2 1 2 3 , 8 5 0 7 9 , 2 2 5 3 , 5 7 1 5 6 , 5 2 8 0 , 2 2 9 5 3 , 2 2 0 9 5 , 2 2 2 5 4 9 7 9 , 6 9 3 , 5 9 1 9 7 2 , 2 0 0 0 , 5 2 8 7 9 1 5 , 6 9 2 , 4 6 8 1 7 2 8 , , 8 2 1 6 4 2 3 0 4 , 6 0 1 7 3 7 1 2 , % 5 2 . 1 - % 2 4 1 . - % 0 0 1 . % 6 8 . 0 % 3 0 1 . % 0 4 1 . y l t h n o M y l t h n o M y l t h n o M y l t h 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 0 7 9 , 2 8 8 6 , 0 7 2 - 9 8 , 8 1 0 2 5 , 0 8 8 5 7 5 1 , 3 8 0 , 0 1 6 6 3 , 3 2 5 3 4 , 6 2 - 8 4 6 , 8 5 8 3 , 0 1 8 4 3 , 3 0 1 8 0 3 , 4 1 1 0 6 , 5 3 2 0 7 8 , 9 0 1 % 5 7 . 0 y l r e t r a u Q / l a u n n a m e S i 1 4 5 1 0 2 , % 0 5 . 2 % 5 7 1 . % 5 2 . 1 % 5 4 1 . % 4 7 1 . y l r e t r a u Q y l t h n o M y l t h n o M y l r e t r a u Q 5 1 9 5 2 , 2 6 3 , 2 2 1 5 , 2 5 5 0 4 , 8 6 y l r e t r a u Q / y l t h n o M 4 1 3 , 8 8 0 - - - 7 2 , 3 5 5 0 7 7 3 , 2 3 2 , 8 1 % 1 8 . 2 l i a u n n a m e S / y l r e t r a u Q , 8 1 7 5 7 2 1 2 6 , 4 2 1 % 1 7 1 . % 0 0 . 2 y l t h n o M y l r e t r a u Q 8 4 0 , 4 2 7 7 1 5 1 1 , 5 6 9 , 8 3 5 - 8 5 , 4 1 9 - 0 6 , 0 2 7 6 8 1 2 , - 3 8 2 , 6 4 9 3 , 6 9 0 2 , 0 5 7 9 2 , 2 1 9 - 2 6 1 5 , 4 - 8 2 1 6 4 , 2 1 2 7 6 1 2 , 4 4 4 , 2 6 1 0 0 , 9 1 9 - 0 2 , 3 9 - 0 6 , 0 2 4 4 9 , 8 2 - 5 0 7 5 , 7 8 3 , 6 2 4 4 , 8 4 5 9 5 7 5 , 7 3 0 1 6 , 7 1 7 2 1 , 3 - 4 2 1 , 8 4 1 2 1 , 0 8 8 , 0 3 7 1 9 , 8 5 3 8 5 , 3 4 3 - 4 9 , 3 8 2 7 7 , 5 4 6 1 , 5 0 4 , 0 1 2 3 4 , 4 8 0 0 , 2 7 9 3 , 2 1 2 0 , 0 2 7 7 1 4 1 , 1 7 7 , 6 2 1 2 6 2 1 8 , 9 3 0 8 , 8 4 0 8 4 , 4 7 6 0 , 3 1 7 1 1 0 2 , 7 3 1 0 1 , 9 7 6 1 , 0 5 8 , 2 5 2 3 1 , 6 4 5 , 3 2 2 7 2 7 8 1 5 6 , 5 9 5 0 7 , 1 7 9 , 4 4 3 8 , 8 6 8 3 , 3 4 1 2 9 0 7 3 , 1 1 6 1 , 3 6 4 , 4 9 1 6 , 9 1 9 4 , 3 2 3 6 7 2 4 1 , 1 8 7 1 , % 5 2 . 1 4 9 1 3 , % 5 2 . 1 y l t h n o M 8 0 2 , 3 % 7 5 . 0 4 9 3 7 1 , % 7 5 . 0 y l r e t r a u Q 1 5 0 , 8 1 % 8 3 . 0 1 % 8 5 . 0 1 % 0 9 9 . % 2 8 . 6 3 6 9 0 5 0 1 , 9 5 5 , 3 9 7 3 1 , % 8 3 . 0 1 % 8 5 . 0 1 % 0 9 9 . % 2 8 . 6 y l t h n o M y l t h n o M y l t h n o M y l t h n o M 0 0 9 5 2 3 1 , 6 5 1 4 , 5 0 1 2 , 9 - - - - 1 6 , 6 5 - 4 6 6 0 3 3 - 1 3 , 4 4 - 3 5 0 3 6 7 - 0 5 , 4 , 2 3 7 6 1 , 6 7 6 5 0 2 0 6 9 8 5 2 1 , 0 8 5 4 2 2 4 8 1 6 7 3 7 4 8 % 8 7 . 3 5 9 0 , 4 3 3 % 6 8 . 3 y l r e t r a u Q 5 0 8 7 5 3 , 0 6 4 , 5 0 1 6 6 3 , 2 0 1 9 0 3 , 6 9 7 5 5 , 9 3 3 1 1 4 1 , % 8 3 . 2 1 8 7 7 2 , % 8 3 . 2 y l t h n o M 1 8 7 7 2 , - - - 7 3 5 4 4 2 7 2 , % 9 9 . 8 6 1 5 , 8 3 1 % 9 9 . 8 y l t h n o M 1 3 7 5 1 3 , 8 0 4 , 8 9 1 5 1 7 , 4 5 1 8 5 , 2 4 4 2 8 , 4 1 3 0 2 , 5 % 9 9 . 8 - 4 3 5 2 5 6 1 , % 9 9 . 8 - y l t h n o M - 7 1 2 1 , 2 5 6 1 , 2 - 9 7 2 - 9 1 2 - 6 1 4 5 6 5 1 1 , 7 1 6 9 4 1 7 1 , 1 2 4 , 3 9 4 6 , 5 7 3 , 4 5 6 7 , 1 3 7 , 1 3 8 5 , 9 0 9 8 8 5 , 0 3 7 6 3 7 , 0 9 6 7 7 9 , 2 1 3 $ S U $ S U $ S U $ S U L R B $ 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 $ S U $ S U L R B L R B L R B R U E L R B L R B L R B $ 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 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 L I S A R B O D O C N A B K N A B I T I C A B B U A T I O C N A B A R F A S O C N A B A R F A S O C N A B O C S E D A R B O C N A B O C S E D A R B O C N A B I 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 J I P P A H C S T A A M 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 i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a 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 . A . . S U K R O Y W E N F O K N A B E H T E - 0 l i z a r B s e i i r a 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 h t i w n o i t a g i l b O . 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 n a m r e G . A . . S U y n a m r e G e c n a r F . A . . S U . A . . S U e c n a r F 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 S A B I R A P P N B S A B I R A P P N B K N A B I T I C S A W A L A T I P A C L A C I R T C E L E L A R E N E G . C N I . S U E C N A N I F R I A K P N O I T A R O P R O C C B S H K N A B - X E P I W F K S I X I T A N 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 . A . . S U 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 . 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 K N A B O G R A F S L L E W . . A N T S E W H T R O N 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 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 i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a 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 c i l b u p e h t l a i c n a n i F s e s a e l . A . . S U y l a t I . A . . S U 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 l i z a r B l i z a r B l i z a r B K N A B N O N M O D I 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 E - 0 l i z a r B s e i i r a d i s b u S d n a . A . S M A T - O T N O R O T E H T E - 0 l i z a r B s e i i r a d i s b u S d n a . A . S M A T 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 L I S A R B N E D N A L . A . S M B I O C N A B E - 0 E - 0 E - 0 l i z a r B l i z a r B l i z a r B s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T E G A L E D O C N A B E - 0 l i z a r B s e i i r a d i s b u S d n a . A . S M A T A D N E Z A F A D L A R E G L A N O C A N I S R E H T O l a t o T E - 0 l i z a r B s e i i r a d i s b u S d n a . A . S M A T S O I E M E D A R I E L I S A R B O T N E M A G A P E D L I S A R B O D L A R E D E F A T I E C E R E - 0 l i z a r B s e i i r a d i s b u S d n a . A . S M A T A I R O D A R U C O R P E - 0 l i z a r B s e i i r a d i s b u S d n a . A . S M A T I A H N A P M O C E - 0 l i z a r B s e i i r a 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 r e h t O s n a o l ANNUAL REPORT 2013182 $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T $ S U h T i l a n m o N i l a n m o N e v i t c e ff E e t a r e u l a v e t a r 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 e v fi o t e e r h t e e r h t o t e n o e n o o t s y a d n a h t e r o M n a h t e r o M 0 9 n a h t e r o M s r a e y s r a e y r a e y 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 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 3 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 u q i 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 % - $ S U h T 9 9 5 1 2 8 , % - - 9 9 5 1 2 8 , % 1 0 . 2 1 4 1 4 , % 1 0 . 2 y l r e t r a u Q 2 2 4 , 4 - - - 0 7 3 , 6 1 6 6 7 7 0 2 , 9 1 5 , 4 1 2 - - - - - - 0 7 3 , 6 1 6 6 7 7 0 2 , 9 1 5 , 4 1 2 % 1 0 . 2 0 0 4 1 1 , % 1 0 . 2 y l r e t r a u Q 7 5 5 1 1 , - - - 7 8 1 4 1 4 0 3 0 0 3 , 6 7 2 , 1 1 3 8 , 2 0 4 , 1 1 - - - - - - 7 8 1 4 1 4 0 3 8 3 7 , 6 7 2 , 1 4 4 5 , 9 8 0 , 3 1 7 9 0 , 6 7 3 , 4 5 5 7 , 5 8 3 , 2 5 1 6 , 4 4 7 , 2 3 2 4 , 2 6 4 , 1 4 5 6 , 0 2 1 , 2 d e t a d i l o s n o C l a t o T - - - - - - - - - - - - - - - - - - - - 7 5 5 , 1 1 2 9 1 , 1 1 9 8 9 , 3 5 2 , 1 l a t o T - - - - - 7 5 5 1 1 , - - - 6 8 5 4 2 7 , 8 1 3 , 3 4 5 3 , 4 1 8 4 0 1 1 , 4 6 3 , 6 1 8 5 7 7 0 2 , $ S U $ S U P L C L R B s r e h t O 5 1 6 4 0 9 , 3 1 2 s e i c n e r r u c - 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 i i r a d i s b u s d n a d n a e d a r T s t n u o c c a e l b a y a p r e h t o - - - - - $ S U - 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 i i r a d i s b u s d n a 4 0 3 $ S U a n i t n e g r A a n i t n e g r A 7 8 1 4 1 $ S U P L C e l i h C s e l a i l i F a c i t u á n o r e A a r o s r e v n I E - O s r e h t O y . A . i S a h t e B 1 - 0 7 3 . 1 9 5 . 8 7 s r e h t O e l i h C . A . i S g n n a r T i l a c i n h c e T n a L a s n a h t f u L 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 i r a d i s b u s d n a - - t n e r r u c - n o n s t n u o c c A . e l b a y a p s t n u o c c A e l b a y a p d e t a l e r o t s t n e r r u c s e i t r a p ANNUAL REPORT 2013183 i l a n m o N i l a n m o N e v i t c e ff E e t a r e u l a v e t a r n o i t a z i t r o m A l a t o T s r a e y e v fi o t e e r h t e n o s y a d n a h t e r o M n a h t e r o M n a h t e r o M 0 9 n a h t e r o M s r a e y e v fi s r a e y e e r h t o t r a e y e n o o t 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 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 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 u q i 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 % $ 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 % 7 1 2 . 0 0 0 , 0 3 % 7 1 2 . l a u n n a m e S i 1 3 3 , 0 3 % 0 7 1 . 0 0 0 , 5 3 % 0 7 1 . l a u n n a m e S i 2 0 1 5 3 , % 2 3 . 1 0 0 0 , 5 7 % 2 3 . 1 y l r e t r a u Q 5 0 2 , 5 7 % 9 7 1 . 0 0 0 , 2 0 1 % 3 8 1 . l a u n n A 0 7 7 2 0 1 , % 7 5 . 2 3 7 3 , 4 1 2 % 7 5 . 2 - 9 4 7 , 4 1 2 % 4 7 1 . 8 4 8 , 4 4 % 6 7 1 . l a u n n a m e S i 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 , % 1 4 . 4 8 4 1 6 6 , % 6 9 . 4 y l r e t r a u Q 0 2 7 , 6 7 3 9 4 , 9 1 7 9 5 , 5 1 6 2 7 , 4 2 5 9 6 , 2 1 9 0 2 , 4 % 7 6 . 3 0 9 0 1 5 4 , % 5 1 4 . y l r e t r a u Q 9 4 2 , 4 1 5 4 7 5 , 2 5 1 3 6 4 , 6 4 1 7 3 0 , 4 4 1 5 3 4 , 3 5 0 4 7 7 1 , % 6 7 1 . 3 6 4 , 9 5 9 1 , % 7 5 . 2 y l r e t r a u Q 9 1 9 , 3 6 1 2 , , 5 2 8 7 0 2 1 , , 2 7 7 0 8 3 4 3 0 , 3 8 3 1 2 2 , 4 4 1 7 6 0 , 8 4 % 0 1 2 . , 8 0 9 9 0 4 % 1 7 . 2 y l r e t r a u Q , 6 5 1 1 5 4 4 3 0 7 1 2 , 9 9 6 , 4 9 7 8 2 , 3 9 8 2 6 , 4 3 8 0 5 1 1 , % 5 8 . 0 9 4 4 , 0 2 2 % 9 3 . 1 y l r e t r a u Q 7 2 6 , 0 3 2 1 7 7 9 1 1 , 5 8 0 , 5 4 5 8 0 , 4 4 1 8 2 , 6 1 % 3 1 1 . 2 2 2 , 8 2 1 % 3 7 1 . y l r e t r a u Q 9 6 7 , 6 3 1 6 5 4 7 7 , 0 9 1 4 2 , 7 6 5 , 3 2 % 1 1 1 . 0 8 4 , 3 6 % 1 7 1 . y l r e t r a u Q 9 3 7 7 6 , 3 9 5 , 8 3 8 9 8 1 1 , 6 7 5 1 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 , % 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 % 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 % 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 % 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 6 . 5 6 8 0 , 6 4 % 8 3 . 6 y l r e t r a u Q 2 6 2 , 6 5 5 7 0 , 6 1 5 7 0 , 6 1 5 7 0 , 6 1 % 1 3 . 1 2 6 4 7 , % 1 3 . 1 y l r e t r a u Q 5 2 5 7 , - - - 0 8 6 , 8 2 6 2 , 4 4 9 1 1 1 , 8 5 9 , 6 3 1 4 7 1 , 8 4 8 7 1 , 5 4 1 5 1 , 8 2 0 , 6 6 7 6 , 5 5 0 4 , 5 6 7 8 , 2 0 1 4 1 , 4 1 7 3 , 9 0 3 , 2 7 7 7 5 , 0 6 2 7 , 2 9 9 , 4 9 0 0 , 2 9 4 8 1 , % 0 7 . 4 1 6 2 , 4 1 3 % 9 2 . 5 y l r e t r a u Q 3 8 5 1 6 3 , 1 0 5 1 5 , 3 8 7 2 2 1 , 0 7 8 , 4 2 1 5 2 8 , 6 4 4 0 6 , 5 1 % 6 8 1 . , 9 8 1 6 4 1 % 6 8 1 . - 3 3 0 , 9 4 1 % 8 0 . 2 0 6 9 , 8 5 % 8 0 . 2 y l r e t r a u Q 9 5 9 , 8 5 - - - , 9 8 1 6 4 1 8 4 2 , 2 6 9 5 4 1 2 , 5 1 3 7 4 , 9 2 3 3 7 0 1 , 9 3 5 , 3 - - 4 2 6 1 4 1 , 0 0 3 , 0 1 - - - - 4 8 2 , 6 4 1 8 7 6 , 5 9 0 5 , 0 3 0 6 3 , 8 6 8 1 7 0 1 , - - 6 2 9 5 , 4 4 3 1 3 , 7 5 5 , 3 3 9 3 , 0 1 5 3 2 1 , 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 7 4 2 , 7 6 2 , 2 8 8 7 , 7 9 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 $ 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 c n a r F . A . . S U . A . . S U . A . . S U . A . . S U e l i h C . A . . S U . A . . S U E L O C I R G A T I D E R C E - 0 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 S A B I R A P P N B E - 0 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 O G R A F S L L E W E - 0 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 O C F E P E - 0 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 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 K N A B I T I C E - 0 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 U M T B E - 0 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 K N A B E L P P A E - 0 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 D O C N A B 5 - 0 0 0 . 4 0 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 2 - 0 0 2 . 2 6 8 . 9 8 I C B 6 - 0 0 0 . 6 0 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 U A T I K - 0 3 0 . 5 4 6 . 6 7 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 V B B 8 - 0 0 0 . 2 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 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 2 - 0 0 2 . 2 6 8 . 9 8 O D A T S E 7 - 0 0 0 . 0 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 G N I E - 0 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 s r e t r o p s e o t s n a o L d e e t n a r a u G s n o i t a g i l b o k n a B s n a o l . 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 E - 0 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 U N A P A J F O K N A B T N E M P O L E V E D E - 0 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 U . A . . S U e c n a r F . A . . S U . A . . S U . A . . S U . A . . S U - - - E L O C I R G A T I D E R C E - 0 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 D E R E T R A H C S . E - 0 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 K N A B I T I C E - 0 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 K N A B E H C S T U E D E - 0 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 G N I E - 0 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 l a i c n a n i F s e s a e l 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 l a t o T E - 0 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 - 0 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 - - - 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 2 - 0 0 2 . 2 6 8 . 9 8 2 - 0 0 2 . 2 6 8 . 9 8 s e v i t a v i r e d i g n g d e H i g n g d e h - n o N s e v i t a v i r e d s r e h t O s n a o l ANNUAL REPORT 2013184 2 9 3 , 9 9 3 , 4 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 % $ 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 i l a n m o N i l a n m o N e v i t c e ff E e t a r e t a r e t a r 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 e v fi o t e e r h t o t e n o s y a d 0 9 n a h t e r o M n a h t e r o M n a h t e r o M s r a e y s r a e y e e r h t r a e y e n o o t o t p U s y a d 0 9 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 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 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 u q i 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 2 3 , 0 5 6 8 9 9 2 , 0 8 9 1 5 1 , % 2 7 . 0 1 2 9 % 5 6 . 5 1 9 3 , 3 6 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 m e S i 6 5 3 6 2 6 , 5 6 5 6 4 , 2 3 7 6 7 , 4 6 1 n o i t a r i p x e t A 6 6 2 , 2 8 1 % 1 0 . 4 / % 9 6 7 . 6 4 4 , 2 3 % 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 5 4 9 5 , 3 3 5 , 4 6 - 1 2 8 , 8 1 1 1 9 3 , 5 1 8 3 6 , 9 2 1 9 2 3 6 5 , 8 2 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 % 4 9 . 8 % 4 3 . 3 8 8 4 8 4 7 2 , % 5 9 . 0 8 0 6 , 4 % 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 , 4 4 2 0 0 0 , 0 0 1 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 % 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 1 2 7 , 4 9 4 % 2 8 . 0 / % 1 0 . 2 l i a u n n a m e S / y l r e t r a u Q 5 7 6 , 3 1 5 % 9 8 . 2 % 5 2 . 2 % 9 5 . 2 % 5 8 . 0 0 0 5 7 3 , 2 0 4 , 5 6 8 0 1 8 , 8 5 4 , 9 6 % 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 1 5 6 , 5 0 3 4 , 9 3 2 8 9 2 8 , 5 0 3 , 4 7 % 1 2 . 2 / % 1 1 2 . 0 7 7 7 9 , % 1 2 . 2 / % 1 1 2 . y l r e t r a u Q / y l h t n o M 3 3 5 , 5 0 1 - 4 3 7 , 4 8 1 - - 5 7 9 , 3 4 4 8 7 7 2 , % 2 3 . 3 / % 2 6 . 2 5 2 4 , 6 1 3 % 2 3 . 3 / % 2 6 . 2 l i a u n n a m e S / y l r e t r a u Q 0 5 3 , 9 6 3 7 5 9 , 8 7 1 % 6 9 1 . % 2 4 . 2 2 9 0 7 1 1 , 7 4 6 , 3 2 % 6 9 1 . % 2 4 . 2 y l h t n o M y l r e t r a u Q 5 7 6 , 6 2 5 8 3 , 8 2 1 1 8 6 , 8 4 - 9 9 5 , 5 1 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 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 6 - 9 1 9 2 , 7 - 8 6 , 3 2 7 6 8 1 1 , 9 3 9 5 4 , 7 8 8 , 6 7 4 4 9 6 1 4 2 , 5 4 6 , 2 2 1 3 0 6 , 0 2 - 9 0 6 - 2 4 6 , 0 2 , 8 2 3 8 9 5 , 6 7 4 , 9 1 3 8 0 7 8 , 8 2 7 1 1 , - 5 2 8 - 8 6 7 , 4 2 1 2 0 3 , 2 1 6 4 2 , 5 2 8 8 3 , 8 7 7 0 9 , 8 3 9 - 6 5 , 3 - 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 , 0 3 8 , 2 3 1 8 1 9 2 , 5 4 8 , 5 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 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 , 9 0 0 7 2 , 2 2 2 , 2 4 2 8 4 , 3 1 2 5 , 3 9 8 6 , 3 7 5 9 5 , 5 7 7 8 3 9 , 2 9 1 1 3 1 , 2 9 3 , 5 2 8 4 , 3 5 5 3 , 0 2 9 0 5 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 , n o i t a r i p x e t A l a u n n a m e S i , 2 1 7 3 1 3 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 0 9 7 8 , 0 9 4 1 7 2 , y l h t n o M 1 6 0 , 6 5 9 6 , 2 0 2 3 1 , 0 2 3 1 , 5 9 4 1 3 2 % 8 9 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 9 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 % 8 0 . 0 1 3 4 , 9 1 % 8 8 . 0 y l r e t r a u Q 1 4 3 , 0 2 % 1 5 7 . % 8 5 . 0 1 % 1 3 . 5 % 8 0 . 9 % 2 8 . 6 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 % 0 0 . 0 0 2 5 , 2 % 0 0 . 0 y l h t n o M % 0 2 . 2 5 2 0 1 4 , % 0 0 . 0 4 2 3 , 5 1 % 0 2 . 2 % 0 0 . 0 % 0 0 . 0 5 3 0 , 5 1 % 0 0 . 0 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 - 5 9 , 8 - 9 8 5 , 4 1 8 4 , 4 4 5 6 1 , - 6 3 1 3 9 1 9 8 1 , - 3 0 2 1 , - 3 6 9 1 , 8 5 4 1 , 2 8 8 1 , 3 1 9 2 5 - 8 0 1 3 4 1 9 , 3 5 3 , 9 1 6 6 3 9 4 4 0 6 1 4 7 7 1 9 2 6 6 6 7 2 , 2 8 8 1 3 , 8 0 0 , 4 9 2 5 , 4 3 0 9 , 6 3 0 6 , 3 $ 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 L R B L R B $ S U $ S U 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 l i z a r B . A . . S U . A . . S U . 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 – M C N I G N R E K E Z R E V T E I D E R C J I P P A H C S T A A M 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 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 . 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 . 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 n a m r e G . A . . S U y n a m r e G e c n a r F . A . . S U . A . . S U e c n a r F 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 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 . 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 S I X I T A N C B S H S A B I R A P P N B S A B I R A P P N B . . A N 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 K N A B O G R A F S L L E W . . A N T S E W H T R O N 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 s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a 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 k n a B s n a o l l i z a r B s e i i r a 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 n o i t a g i l b O l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a 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 c i l b u p e h t h t i w l a i c n a n i F s e s a e l . A . . S U y l a t I . A . . S U l i s 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 l i z a r B l i z a r B l i z a r B I N O N M O D I K N A B - O T N O R O T E H T E - 0 l i z a r B s e i i r a d i s b u s d n a . A . S M A T 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 E - 0 l i z a r B s e i i r a d i s b u s d n a . A . S M A T 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 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 . A . S G N I S A E L . A . S M B I O C N A B . A . S L I S A R B E - 0 E - 0 E - 0 E - 0 E - 0 l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T l i z a r B s e i i r a d i s b u s d n a . A . S M A T N E D N A L E G A L E D O C N A B E - 0 l i z a r B s e i i r a d i s b u s d n a . A . S M A T 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 H N A P M O C I E - 0 l i z a r B s e i i r a 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 R E H T O E - 0 l i z a r B s e i i r a 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 e v i t a v i r e d i g n g d e H s r e h t O s n a o l S R E H T O E - 0 l i z a r B s e i i r a 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 i g n g d e h - n o N s e v i t a v i r e d ANNUAL REPORT 2013185 0 7 7 , 7 4 6 , 1 8 5 1 , 1 2 4 , 1 1 6 4 6 , 8 6 6 , 1 4 1 9 , 2 4 1 2 7 8 , 4 4 9 3 8 , 6 7 9 7 5 , 6 3 1 2 4 4 , 7 6 2 , 1 e g a p f o l a t o t b u S 3 5 2 , 6 0 0 , 3 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 9 1 3 , 2 5 0 , 2 d e t a d i l o s n o C 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 i l a n m o N i l a n m o N e v i t c e ff E e t a r e u l a v e t a r 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 n a h t e r o M n a h t e r o M o t e e r h t o t e n o s y a d 0 9 s r a e y e v fi s r a e y e e r h t r a e y e n o o t 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 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 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 u q i 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 - - - - 4 3 9 , 8 8 6 1 6 7 5 , 7 9 5 1 5 4 , 8 1 6 , 8 3 % 0 6 . 6 8 6 6 , 9 1 - - - - - - - - - 4 3 9 , 8 8 6 1 6 7 5 , 7 9 5 1 5 4 , 8 1 6 , 8 3 y l h t n o M 9 6 8 , 9 1 % 6 0 . 2 1 4 5 , 5 1 % 6 0 . 2 y l r e t r a u Q 4 9 9 5 1 , - 4 9 5 , 3 - - 4 9 5 , 3 - - 0 0 0 , 8 1 - 8 6 9 , 8 9 1 % 0 6 . 6 - - 8 6 9 , 8 9 1 0 0 0 , 8 1 - - - - - - - - - - - - - - - - - - - - - - - - 0 0 0 , 8 1 4 9 9 5 1 , 4 9 5 , 3 - - - - - - - - - - - - 4 1 7 3 2 3 2 - - - - - - - - - % 0 6 . 6 9 8 0 7 0 2 , % 0 6 . 6 y l h t n o M 7 3 0 7 2 2 , , 4 1 9 2 4 1 2 7 8 , 4 4 1 5 2 , 9 3 - - - - - - - - 9 4 0 , 2 8 5 8 8 , 6 0 6 - 1 6 7 5 , 0 9 1 1 3 , 7 0 4 , 0 2 4 0 6 8 , 8 8 5 7 9 2 , 0 8 4 , 4 1 9 8 3 , 5 $ S U P L C L R B L R B L R B 8 6 9 , 8 9 1 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 e l i h C . A . i S g n n a r T i L R B l i z a r B a d t L . r t s i D . m o C . 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 . A . S p u o r G s e n i l r i A M A T A L - s e i i r a 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 i i r a d i s b u s d n a e l i h C s e l a i l i F y . A . i S a h t e B 1 - 0 7 3 . 1 9 5 . 8 7 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 - n a L a s n a h t f u L l a c i n h c e T K - 0 8 8 7 4 8 . . 6 9 s r e h t O s e i i r a d i s b u s d n a d n a e d a r T s t n u o c c a s e l b a y a p e l b a y a p r e h t o t n e r r u c - n o N s t n u o c c A s e l b a y a p s e i t r a p d e t a l e r s t n e r r u c o t e l b a y a p s t n u o c c A ANNUAL REPORT 2013186 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, the rating agency Fitch has issued on May 3, 2013 a new long-term rating for the Company of BB + with stable perspective (which is not an investment grade rating).Additionally, on June 10, 2013, S&P issued a long term rating of BB, with a positive outlook. 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. At the end of 2012, the Company provided US$ 189.9 million in derivative margin guarantees, for cash and stand-by letters of credit. At December 31, 2013, the Company had provided US$ 94.3 million in guarantees for Cash and cash equivalent and stand- by letters of credit. The fall was due at i) maturity of hedge contracts, ii) acquire of new fuel purchase contracts and exchange rate R$/US$, and iii) changes in fuel prices, exchange rate R$/US$ 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 to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. the dividends payable 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 ANNUAL REPORT 2013187The leverage ratios as of December 31, 2013, and December 31, 2012, were as follows: Total financial loans Last twelve months Operating lease payment x 8 Less: Cash and marketable securities Total net adjusted debt Net Equity Cash flow hedging reserve Adjusted equity As of December 31. 2013 ThUS$ 9,830,866 3,528,616 (2,561,574) 10,797,908 5,238,821 34,508 5,273,329 As of December 31. 2012 ThUS$ 9,759,507 3,390,664 (1,120,335) 12,029,836 5,112,051 140,730 5,252,781 Total adjusted debt and equity 16,071,237 17,282,617 Adjusted average 67.2% 69.6% See information related to financial covenants in Note 36 (a). 3.3. Estimates of fair value. the Company At December 31, 2013, maintained financial that should be recorded at fair value. These are grouped into two categories: instruments (a) Hedge Instruments: category This instruments: includes the following • • • Interest rate derivative contracts, Fuel derivative contracts, Currency derivative contracts (b) Financial Investments: category This instruments: includes the following • • • • Investments in short-term Mutual Funds (cash equivalent), Bank certificate of deposit – CBD, Private investment funds and Financial letters The Company has classified the fair value that measurement using a hierarchy 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. ANNUAL REPORT 2013188The 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. The following table shows the classification of financial instruments at fair value, depending on the level of information used in the assessment: As of December 31, 2013 Fair value measurements using values considered as Fair value Level I Level II Level III ThUS$ ThUS$ ThUS$ ThUS$ Assets Cash and cash equivalents Short-term mutual funds 579,349 579,349 579,349 579,349 - - Other financial assets, current 625,086 546,116 78,970 Fair value of interest rate derivatives Fair value of fuel derivatives Fair value of foreign currency derivatives Interest accrued since the last payment date of Currency Swap 6 15,868 32,058 483 - - - - 544,182 544,182 Private investment funds Certificate of deposit CDB Financial letter Domestic and foreign bonds Other investments Liabilities Other financial liabilities, current Fair value of interest rate derivatives Fair value of foreign currency derivatives Interest accrued since the last payment date of Currency Swap Interest rate derivatives not recognized as a hedge Other financial liabilities, non current Fair value of interest rate derivatives 2,374 351 28,181 1,583 70,506 32,070 28,621 5,775 4,040 56,397 54,906 Interest rate derivatives not recognized as a hedge 1,491 - - - - - - - - - - - - - - - - - - - - 6 15,868 32,058 483 - 2,374 - - 351 - 28,181 1,583 - - - - - - - - - 70,506 32,070 28,621 5,775 4,040 56,397 54,906 1,491 ANNUAL REPORT 2013189As of December 31, 2013 Fair value measurements using values considered as Fair value Level I Level II Level III ThUS$ ThUS$ ThUS$ ThUS$ Assets Cash and cash equivalents Short-term mutual funds 311,675 311,675 311,675 311,675 - - Other financial assets, current 474,176 319,145 155,031 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 6 4,098 - - 317,598 317,598 77,316 73,611 748 799 1,118 1,023 95 Other financial liabilities, current 70,075 Interest accrued since the last payment date of Currency Swap Fair value of interest rate derivatives Fair value of fuel derivatives Fair value of foreign currency derivatives 4,660 37,076 10,502 13,360 Interest rate derivatives not recognized as a hedges 4,477 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 hedges 116,555 104,547 4,530 1,963 5,515 6 4,098 - 77,316 73,611 - - 1,118 1,023 95 70,075 4,660 37,076 10,502 13,360 4,477 116,555 104,547 4,530 1,963 5,515 - - 748 799 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ANNUAL REPORT 2013190Additionally, at December 31, 2013, 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, 2013 As of december 31, 2012 Book value Fair value Book value Fair value ThUS$ ThUS$ ThUS$ ThUS$ Cash and cash equivalents 1,405,554 1,405,554 338,588 338,588 Cash on hand Bank balance Overnight Time deposits Other financial assets Other financial assets 6,017 229,935 508,781 660,821 84,858 84,858 6,017 229,935 508,781 660,821 84,858 84,858 6,835 147,373 119,713 64,667 162,367 162,367 Trade and other accounts receivable current 1,633,094 1,633,094 1,417,531 Accounts receivable from related entities Other financial assets, non current Accounts receivable 628 65,289 100,775 628 65,289 100,775 15,187 72,977 50,612 Other financial liabilities, current 1,969,281 2,128,096 1,977,255 Trade and other accounts payables 1,557,736 1,557,736 1,689,990 Accounts payable to related entities 505 505 Other financial liabilities, non current 7,803,588 7,910,446 Accounts payable, non-current 922,887 922,887 274 7,582,302 1,085,601 6,835 147,373 119,713 64,667 162,367 162,367 1,417,531 15,187 72,977 50,612 2,090,726 1,689,990 274 7,806,643 1,085,601 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. 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. The fair value of Other financial liabilities ANNUAL REPORT 2013191NOTE 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 loyalty credited to holders of the 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 issued their ordinary shares LATAM 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 in Note 18.2.a), squeeze-out described entitling 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. ANNUAL REPORT 2013192NOTE 5. SEGMENTAL INFORMATION The Company information by reports 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. is defined as a An operating segment component of an entity on which financial information is held separately and which the senior regularly by is evaluated 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 business and the coalition and loyalty program Multiplus. The Air transport segment corresponds to the route network for air transport and it is based on the way that the business is run and managed, according to the centralized nature of its operations, the ability to open and close routes and reallocate resources (aircraft, crew, staff, etc..) within the network, which is a functional relationship between all of them, making them inseparable. This segment definition is the most common level used by the global airline industry. The segment of loyalty coalition called Multiplus, unlike Lan Pass and TAM Fidelidade, is a frequent flyer programs which operate as a unilateral system of loyalty that offers a flexible coalition system, interrelated among its members, with eleven millions of members, along with being a government entity with a separately business and not directly related to air transport. ANNUAL REPORT 2013193d e t a d i l o s n o C , 1 3 r e b m e c e d t A s n o i t a n m i i l E , 1 3 r e b m e c e d t A d n a n o i t i l a o C m a r g o r p y t l a y o l s u l p i t l u M , 1 3 r e b m e c e d t A r i A n o i t a t r o p s n a r t , 1 3 r e b m e c e d t A 2 1 0 2 $ S U h T 3 1 0 2 $ S U h T 2 1 0 2 3 1 0 2 $ S U h T $ S U h T 2 1 0 2 $ S U h T 3 1 0 2 $ S U h T 2 1 0 2 3 1 0 2 $ S U h T $ S U h T d e d n e d o i r e p e h t r o F 9 9 0 9 2 5 , , 4 , 6 9 2 1 3 7 4 , 2 7 3 , 0 1 7 , 9 7 3 5 , 4 2 9 , 2 1 , 5 5 5 7 0 1 3 , 7 2 5 , 3 4 7 1 , - - , 6 5 1 0 2 2 9 8 4 7 7 , 9 5 3 , 4 3 7 5 , , 9 7 9 2 6 8 1 , - - 5 6 5 1 4 3 , 8 2 8 , 2 7 ) 8 9 5 , 4 9 2 ( ) 4 2 5 , 2 6 4 ( ) 9 0 1 , 7 1 2 ( ) 6 9 6 , 9 8 3 ( - - - - - - - - 1 9 1 , 0 3 3 3 0 9 , 5 9 5 1 8 1 , 0 8 3 , 9 4 3 6 , 8 2 3 , 2 1 m o r f i s e i t i v i t c a y r a n d r o m o r f e m o c n I s r e m o t s u c l a n r e t x e - - - - - - 9 9 0 9 2 5 , , 4 , 6 9 2 1 3 7 4 , , 5 5 5 7 0 1 3 , 9 5 3 , 4 3 7 5 , 7 2 5 , 3 4 7 1 , , 9 7 9 2 6 8 1 , r e g n e s s a p N A L r e g n e s s a p M A T t h g i e r F ) 6 6 3 , 2 8 3 ( ) 0 6 3 , 0 9 6 ( 5 7 1 2 5 , 7 5 4 , 4 9 , 1 9 1 0 3 3 3 0 9 5 9 5 , s t n e m g e s g n i t a r e p o r e h t o h t i w s n o i t c a s n a r t m o r f s e i i t i v i t c a y r a n d r o m o r f e m o c n I - ) 3 1 8 , 3 1 ( - - - - - - ) 9 8 1 1 1 ( , 9 8 1 1 1 , - 6 9 6 , 6 2 5 8 4 , 6 2 ) 0 5 1 ( - 5 2 9 8 6 , 0 8 2 , 4 3 ) 2 4 5 1 ( , - - t s e r e t n i m o r f s e i i t i v i t c a y r a n d r o m o r f e m o c n I 4 0 0 1 5 , 7 3 7 9 4 , 3 7 2 7 0 2 , 0 4 6 , 2 7 2 ) 8 4 4 , 4 9 2 ( , ) 1 7 1 2 7 4 ( e m o c n i g n i t a r e p o r e h t O e m o c n i t s e r e t n I e s n e p x e t s e r e t n I 5 3 3 , 6 2 8 3 7 , 2 3 ) 4 4 4 , 3 4 2 ( ) 4 3 4 , 2 2 4 ( e s n e p x e t s e r e t n i t e n l a t o T ANNUAL REPORT 2013194 d e t a d i l o s n o C , 1 3 r e b m e c e d t A s n o i t a n m i i l E , 1 3 r e b m e c e D t A d n a n o i t i l a o C m a r g o r p y t l a y o l s u l p i t l u M , 1 3 r e b m e c e D t A r i A n o i t a t r o p s n a r t , 1 3 r e b m e c e d t A 2 1 0 2 $ S U h T , ) 3 1 1 1 7 7 ( , ) 3 3 7 1 4 0 1 ( , 3 1 0 2 $ S U h T 2 1 0 2 $ S U h T 3 1 0 2 $ S U h T 3 1 0 2 $ S U h T ) 9 9 9 3 ( , 2 1 0 2 $ S U h T ) 4 6 2 , 0 7 7 ( 3 1 0 2 $ S U h T , ) 4 3 7 7 3 0 1 ( , d e d n e d o i r e p e h t r o F n o i t a z i t r o m a d n a n o i t a i c e r p e D 8 3 9 1 3 , ) 7 0 6 , 3 2 5 ( ) 7 8 5 , 3 2 ( ) 0 1 1 4 3 ( , ) 2 2 ( ) 8 3 1 1 1 ( , 5 8 6 , 6 6 4 1 2 ) 7 3 5 7 ( , , ) 4 7 1 2 8 4 ( ) 6 7 0 9 1 ( , , ) 4 1 1 1 8 2 ( 2 7 9 ) 6 8 3 , 2 0 1 ( 4 5 9 1 , 9 6 0 , 0 2 - - - - - - - - - - - - - - - - 7 5 7 3 , 6 9 5 , 6 8 5 0 , 5 2 6 , 3 1 , 3 1 9 6 4 7 1 , 7 8 9 5 1 0 , , 4 - , 6 0 9 3 3 3 , 2 2 0 9 1 6 , , 5 6 1 5 7 2 7 , 1 1 0 , 5 8 6 1 , - - - - - - - - - - 9 3 3 , 6 2 3 , 2 2 , 6 4 1 1 3 6 , 2 2 ) 4 0 7 7 ( , ) 0 4 0 , 8 ( 4 5 6 , 5 0 1 7 1 , 7 8 6 , 4 0 3 7 1 , ) 9 7 1 9 1 1 ( , ) 9 3 7 5 7 ( , ) 9 4 8 ( 2 1 0 2 $ S U h T ) 9 5 5 1 ( , ) 7 9 5 1 ( , - 5 9 ) 7 5 ( 6 4 1 2 6 , 6 2 9 7 0 1 , ) 2 2 2 1 8 ( , ) 0 4 0 9 8 3 ( , t fi o r p t n e m g e S - 8 3 1 2 , ) 2 6 0 , 0 3 ( 6 1 3 , 3 6 1 1 , 5 8 2 , 6 4 8 - - 5 8 2 , 6 4 8 4 5 8 , 6 4 7 - - - - - 4 2 0 , 3 ) 6 8 0 , 2 5 ( 6 8 6 , 8 1 1 1 , 2 7 9 ) 4 2 3 , 2 7 ( , 7 2 7 0 7 1 1 2 , 4 5 9 1 , 5 5 1 2 7 , 0 0 5 , 0 2 5 1 2 , e h t n i y t i t n e e h t f o n o i t a p i c i t r a P s e t a i c o s s a f o e m o c n i x a t e m o c n i r o f s e s n e p x E t n e m g e s f o s t e s s A 9 1 6 1 , 2 7 5 , 3 s e t a i c o s s a n i s t n e m t s e v n I , 3 7 7 8 7 7 2 1 , , 3 1 9 6 4 7 1 , t e s s a t n e r r u c - n o n f o t n u o m A ) * ( s n o i t i d d a , 5 6 1 5 7 2 7 , 1 1 0 , 5 8 6 1 , i t n e m p u q e d n a t n a p l . y t r e p o r P , 6 0 9 3 3 3 , 2 2 0 9 1 6 , l l i w d o o g n a h t r e h t o s e b g n a t n l i I , 2 0 7 9 6 1 3 , - l l i w d o o G , 5 7 9 5 7 7 9 7 9 7 7 4 , , 6 1 1 5 4 , 4 0 6 , 6 1 s e i t i l i b a i l t n e m g e S f o s t e s s a y r a t e n o m - n o n f o e s a h c r u P 9 5 ) 3 2 1 ( - 7 1 2 ) 5 3 ( 7 9 4 , 3 3 ) 6 6 6 , 3 2 5 ( n a h t r e h t o s m e t i h s a c - n o n l a i r e t a M n o i t a z i t r o m a d n a n o i t a i c e r p e d ) 0 9 9 1 2 ( , ) 7 8 9 3 3 ( , ) 2 2 ( ) 3 3 2 1 1 ( , 2 4 7 6 6 , 4 1 2 ) 4 5 7 7 ( , , ) 9 3 1 2 8 4 ( y r o t n e v n i d n a s t e s s a d e x fi f o l a s o p s i D s t i n u n o i t a x e d n i f o t l u s e R i s e c n e r e ff d e g n a h c x E s t n u o c c a l u f t b u o D s e s s o l 0 3 5 , 8 4 4 , 2 0 7 2 , 5 2 4 1 , - - - - 0 3 5 , 8 4 4 , 2 0 7 2 , 5 2 4 1 , t n e m g e s , 2 1 0 2 , 1 3 r e b m e c e D t a s e i r a i d i s b u S d n a . . A S M A T h t i w n o i i t a n b m o c s s e n i s u b y b s n o i t i d d a s e d u l c n I ) * ( ANNUAL REPORT 2013195 The Company’s revenues by geographic area are as follows: Peru Argentina USA Europa Colombia Brasil Ecuador Chile For the period ended At december 31. 2013 ThUS$ 646,217 950,595 2012 ThUS$ 620,263 890,167 1,290,493 1,268,573 937,539 387,999 738,803 366,664 5,572,884 3,322,431 273,712 266,271 1,698,476 1,525,009 Asia Pacific and rest of Latin America 1,166,622 712,191 Income from ordinary activities 12,924,537 9,710,372 Other operating income 341,565 220,156 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. ANNUAL REPORT 2013196NOTE 6. CASH AND CASH EQUIVALENTS Cash on hand Bank balances Overnight Total Cash Cash equivalents Time deposits Mutual funds Total cash equivalents Total cash and cash equivalents As of December 31, 2013 As of December 31, 2012 ThUS$ 6,017 229,935 508,781 744,733 660,821 579,349 1,240,170 1,984,903 ThUS$ 6,835 147,373 119,713 273,921 64,667 311,675 376,342 650,263 Cash and cash equivalents are denominated in the following currencies at December 31, 2013, and December 31, 2012: Currency Argentine peso Brazilian real Chilean peso (*) Colombian peso Euro US Dollar Strong bolivar (**) Other currencies Total As of December 31, 2013 As of December 31, 2012 ThUS$ 59,018 253,392 229,918 28,132 16,571 1,200,828 162,809 34,235 1,984,903 ThUS$ 70,381 149,723 40,212 28,758 15,502 230,776 51,346 63,565 650,263 (*) The Company entered into currency derivative contracts (forward) ThUS$174,020 at December 31, 2013 (as of December 31, 2012, there were no forward currency derivatives), for conversion into dollars of investments in pesos. (**) In Venezuela, effective 2003, the authorities decreed that all remittances abroad should be approved by the Currency Management Commission (CADIVI). Despite having free availability of bolivars in Venezuela, the Company has certain restrictions for freely remitting these funds outside Venezuela. At December 31, 2013, the restricted amount, expressed in dollars at the exchange rate of 6.30 VEF/US$ is ThUS$ 162,809 (ThUS$ 51,346 at December 31, 2012). ANNUAL REPORT 2013197The Company has no significant non-cash transactions that must be disclosed. Other inflows (outflows) of cash at December 31, 2013 and December 31, 2012 are detailed as follow: Fuel hedge Hedging Margin Guarantees Guarantees Commodities fuel derivatives Bank commissions, taxes paid and other Total Other inflows (outflows) Operation flow Opening balance Cash and cash equivalents acquired companies Amount paid by Squeeze Out TAM S.A. (*) Certificate of bank deposits Total Other inflows (outflows) Investment flow Aircraft Financing advances Credit card loan manager Settlement of derivative contracts Breakage Other For the periods ended December 31, 2013 ThUS$ 11,413 88,925 (5,001) (4,041) (14,535) 76,761 - - 75,448 75,448 24,650 (8,965) (61,897) (16,280) 479 2012 ThUS$ 14,237 12,057 (13,974) (20,479) (42,274) (50,433) 263,986 (167,589) (69,254) 27,143 (242,804) 76,280 (50,827) (7,405) (6,323) Total Other inflows (outflows) Financing flow (62,013) (231,079) (*) See note 18.2 Business combination ANNUAL REPORT 2013198NOTE 7. FINANCIAL INSTRUMENTS 7.1. Financial instruments by category As of December 31, 2013 Assets Loans and receivables Hedge derivatives Held for trading Initial designation as fair value through profit and loss Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Cash and cash equivalents 1,405,554 - Other financial assets, current (*) 83,136 48,415 Trade and others accounts receivable, current Accounts receivable from related entities, current 1,633,094 628 Other financial assets, non current (*) 64,783 Accounts receivable, non current 100,775 - - - - - 2,073 - - 506 - 579,349 576,320 - - - - 1,984,903 709,944 1,633,094 628 65,289 100,775 Total 3,287,970 48,415 2,579 1,155,669 4,494,633 Liabilities Other financial liabilities Hedge derivatives ThUS$ ThUS$ Held for trading ThUS$ Total ThUS$ Other liabilities, current 1,969,281 66,466 4,040 2,039,787 Trade and others accounts payable, current Accounts payable to related entities, current 1,557,736 505 - - - - 1,557,736 505 Other financial liabilities, non current 7,803,588 54,906 1,491 7,859,985 Accounts payable, non current 922,887 - - 922,887 Total 12,253,997 121,372 5,531 12,380,900 (*) The value presented as initial designation as fair value through profit and loss, corresponds to private investment funds; and loans and receivables corresponds to guarantees given. ANNUAL REPORT 2013199At December 31, 2012 Assets Loans and receivables Hedge derivatives Held for trading Initial designation as fair value through profit and loss Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Cash and cash equivalents Other financial assets, current (*) Trade and others accounts receivable, current Accounts receivable from related entities, current 338,588 162,367 1,417,531 15,187 Other financial assets, non current (*) 72,470 1,118 Accounts receivable, non current 50,612 - - - 4,104 74,359 311,675 395,713 - - - - 507 - - - - - 650,263 636,543 1,417,531 15,187 74,095 50,612 Total 2,056,755 5,222 74,866 707,388 2,844,231 Liabilities Other financial liabilities Hedge derivatives ThUS$ ThUS$ Held for trading ThUS$ Total ThUS$ Other liabilities, current 1,977,255 65,598 4,477 2,047,330 Trade and others accounts payable, current Accounts payable to related entities, current Other financial liabilities, non current Accounts payable, non current 1,689,990 274 - - 7,582,302 111,040 1,085,601 - - - 5,515 - 1,689,990 274 7,698,857 1,085,601 Total 12,335,422 176,638 9,992 12,522,052 (*) The value presented as initial designation as fair value through profit and loss, corresponds to private investment funds; and loans and receivables corresponds to guarantees given. ANNUAL REPORT 20132007.2. 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, 2013 As of December 31, 2012 ThUS$ 1,984,903 59,018 253,392 229,918 28,132 16,571 1,200,828 162,809 34,235 775,233 1,007 610,242 27,555 2,550 5,494 127,294 14 1,077 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 Trade and other accounts receivable, current 1,633,094 1,417,531 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 27,343 802,789 82,880 9,762 21,479 520,991 2,353 165,497 100,775 1,194 8,624 90,755 202 628 162 466 - 4,494,633 87,368 1,667,779 349,443 40,444 43,544 1,939,868 165,176 201,011 33,049 552,947 132,869 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 2,844,231 103,561 1,255,384 197,858 39,672 90,614 937,544 54,706 164,892 ANNUAL REPORT 2013201As of December 31, 2013 ThUS$ 165,497 26,198 22,887 6,899 15,256 5,343 10,332 14,970 6,645 16,929 9,670 30,368 As of December 31, 2012 ThUS$ 90,154 15,944 4,173 10,477 10,159 3,296 5,271 666 1,394 3,362 478 34,934 (*) Other currencies Australian Dollar Chinese Yuan Danish krone Pound Sterling Indian rupee Japanese Yen Norwegian kroner Swiss Franc Korean Won New Taiwanese Dollar Other currencies b) Liabilities Liabilities information is detailed in the table within Note 3 Financial risk management. ANNUAL REPORT 2013202NOTE 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 As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 1,552,489 251,982 1,804,471 (70,602) 1,733,869 (100,775) 1,633,094 1,360,666 182,980 1,543,646 (75,503) 1,468,143 (50,612) 1,417,531 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 Debtor under pre-judicial collection process and portfolio sensitization As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 1,378,226 1,231,937 72,417 11,547 19,697 19,630 50,972 33,160 10,705 9,361 29,556 45,947 Total 1,552,489 1,360,666 (*) Value of this segment corresponds primarily to accounts receivable that were evaluated in their ability to recover, therefore not requiring a provision. ANNUAL REPORT 2013203 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 As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 72,417 11,547 19,697 33,160 10,705 9,361 103,661 53,226 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 As of December 31, 2013 As of December 31, 2012 ThUS$ 19,630 50,972 70,602 ThUS$ 29,556 45,947 75,503 ANNUAL REPORT 2013204Currency balances that make up the Trade and other accounts receivable and Accounts receivable, at December 31, 2013 and December 31, 2012, are as follows: Currency Argentine Peso Brazilian Real Chilean Peso Colombian peso Euro US Dollar Strong bolivar Other currency (*) Total (*) Other currencies Australian Dollar Chinese Yuan Danish krone Pound Sterling Indian rupee Japanese Yen Norwegian kroner Swiss Franc Korean Won New Taiwanese Dollar Other currencies Total As of December 31, 2013 As of December 31, 2012 ThUS$ 27,343 803,983 91,504 9,762 21,479 611,746 2,353 165,699 ThUS$ 33,049 559,624 142,433 8,086 67,287 564,503 2,759 90,402 1,733,869 1,468,143 26,198 22,887 6,899 15,256 5,343 10,332 14,970 6,645 16,929 9,670 30,570 165,699 15,944 4,173 10,477 10,159 3,296 5,271 666 1,394 3,362 478 35,182 90,402 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 Judicial and pre-judicial collection assets Over 1 year Between 6 and 12 months Impairment 100% 100% 50% ANNUAL REPORT 2013205The movement in the allowance for impairment loss of Trade and other accounts receivables between January 1, 2012 and December 31, 2013 is as follows: As of January 1, 2012 Write-offs (Increase) decrease in allowance Addition for business combination Conversion difference affiliates Closing balance as of December 31, 2012 As of January 1, 2013 Write-offs (Increase) decrease in allowance Closing balance as of December 31, 2013 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. 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 ThUS$ (20,525) 3,312 (2,857) (54,511) (922) (75,503) (75,503) 9,928 (5,027) (70,602) 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, 2013 As of December 31, 2012 Gross exposure according to balance Gross impaired exposure Exposure net of risk concentrations Gross exposure according to balance Gross Impaired exposure Exposure net of risk concentrations ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Trade accounts receivable 1,552,489 (70,602) 1,481,887 1,360,666 (75,503) 1,285,163 Other accounts receivable 251,982 - 251,982 182,980 - 182,980 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. ANNUAL REPORT 2013206NOTE 9. ACCOUNTS RECEIVABLE FROM/PAYABLE TO RELATED ENTITIES The Accounts receivable from and payable to related entities as of December 31, 2013 and December 31, 2012, respectively, are as follows: (a) Accounts Receivable Tax No. Related party Relationship Country of origin As of December 31, 2013 As of December 31, 2012 Currency Transaction deadlines Nature of transaction ThUS$ ThUS$ 96.810.370-9 Inversiones Costa Verde Ltda. y CPA. Controlling shareholder 78.591.370-1 Bethia S.A. y Filiales Others related parties 79.773.440-1 Transportes San Felipe S.A. Others related parties 87.752.000-5 Granja Marina Tornagaleones S.A. Others related parties Foreign Made In Everywhere Repr. Com. Distr. Ltda. Others related parties Foreign TAM Aviação Executiva e Taxi Aéreo S.A. Others related parties Foreign Prismah Fidelidade S.A. Others related parties Chile Chile Chile Chile Brazil Brazil Brazil Foreign Inversora Aeronáutica Argentina Others related parties Argentina Total current assets - 441 1 24 2 14 146 - 628 1 14,534 - 30 - 14 597 11 15,187 CLP CLP CLP CLP BRL BRL BRL US$ 30 to 45 days Monetary 30 to 45 days Monetary 30 to 45 days Monetary 30 to 45 days Monetary 30 to 45 days Monetary 30 to 45 days Monetary 30 to 45 days Monetary 30 to 45 days Monetary 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. On December 31, 2013, this balance is paid. (b) Accounts payable Tax No. Related party Relationship Country of origin As of December 31, 2013 As of December 31, 2012 Currency Transaction deadlines Nature of transaction 96.847.880-K Lufthansa Lan Technical Training S.A Associate Chile 78.591.370-1 Bethia S.A. y Filiales Others related parties Chile Foreign Made In Everywhere Repr. Com. Distr. Ltda. Others related parties Brazil Foreign Inversora Aeronáutica Argentina Others related parties Argentina Total current liabilities ThUS$ ThUS$ 187 14 - 304 505 237 14 23 - 274 US$ CLP BRL US$ 30 to 45 days Monetary 30 to 45 days Monetary 30 to 45 days Monetary 30 to 45 days Monetary Transactions between related parties have been carried out on free-trade conditions between interested and duly-informed parties. ANNUAL REPORT 2013207NOTE 10. INVENTORIES The Inventories December 31, 2013 and December 31, 2012 respectively, are detailed below: As of December 31, 2013 As of December 31, 2012 ThUS$ 190,202 40,826 231,028 ThUS$ 145,665 31,153 176,818 As of December 31, 2013, the Company (ThUS$ 127,989 recorded ThUS$ 160,068 as of December 31, 2012) within the income statement, mainly due to in-flight consumption and maintenance, which forms part of Cost of sales. Technical stock Non-technical stock Total production suppliers 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, 2013 amounts to ThUS$1 ,757 (ThUS$ 1,174 as of December 31, 2012). The resulting amounts do not exceed the respective net realizable values. ANNUAL REPORT 2013208NOTE 11. TAX ASSETS The composition of Tax assets is as follows: Current Provisional monthly payments (advance) Other credits recovery Total current As of December 31, 2013 ThUS$ As of December 31, 2012 ThUS$ 61,570 20,320 81,890 76,163 19,612 95,785 ANNUAL REPORT 2013209NOTE 12. OTHER FINANCIAL ASSETS The composition of Other financial assets is as follows: Current (a) Other financial assets (b) Hedging asset Total current Non-current (a) Other financial assets (b) Hedging asset Total non-current As of December 31, 2013 As of December 31, 2013 ThUS$ ThUS$ 661,529 48,415 709,944 65,289 - 65,289 632,439 4,104 636,543 72,977 1,118 74,095 ANNUAL REPORT 2013210(a) Other financial assets Other financial assets as of December 31, 2013 and December 31, 2012, respectively, are as follows: Current Private investment funds Deposits in guarantee (aircraft) Time deposits Guarantees for margins of derivatives Certificate of deposit (CBD) Other investments Domestic and foreign bonds Financial letters Other guarantees given Total current Non-current Deposits in guarantee (aircraft) Deposits in guarantee (loan) Other investments Other guarantees given Total non-current Total other financial assets As of December 31, 2013 ThUS$ As of December 31, 2012 ThUS$ 544,182 51,879 28,181 28,157 2,374 1,583 351 - 4,822 661,529 49,893 11,753 506 3,137 65,289 726,818 317,598 33,012 - 121,889 77,316 799 748 73,611 7,466 632,439 37,247 29,344 507 5,879 72,977 705,416 ANNUAL REPORT 2013211(b) Hedging assets Hedging assets as of December 31, 2013 and December 31, 2012, are as follows: Current Interest accrued since the last payment date of currency Swap 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 As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 483 6 32,058 15,868 48,415 - - - 48,415 - 6 - 4,098 4,104 95 1,023 1,118 5,222 The foreign currency derivatives exchange is collars and cross currency swap. The types of derivative hedging contracts maintained by the Company at the end of each period are presented in Note 21. ANNUAL REPORT 2013212NOTE 13. OTHER NON-FINANCIAL ASSETS The composition of Other non-financial assets is as follows: As of December 31, 2013 ThUS$ As of December 31, 2012 ThUS$ 56,392 279,225 335,617 55,889 216,387 272,276 45,826 238,578 284,404 39,707 268,280 307,987 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, 2013 as of December 31, 2012 are as follows: Current Aircraft leases Aircraft insurance and other Handling and ground handling services Others Total current Non-Current Aircraft leases Others Total non-current Total advance payments As of December 31, 2013 ThUS$ As of December 31, 2012 ThUS$ 28,555 13,180 286 14,371 56,392 17,332 38,557 55,889 112,281 18,703 12,643 158 14,322 45,826 20,732 18,975 39,707 85,533 ANNUAL REPORT 2013213(b) Other assets Other assets as of December 31, 2013, and December 31, 2012 are as follows: Current Aircraft maintenance reserve (*) Sales tax Others taxes Contributions to Société Internationale de Télécommunications Aéronautiques ("SITA") Total current Non-current Aircraft maintenance reserve (*) Judicial deposits Sales tax Contributions to Société Internationale de Télécommunications Aéronautiques ("SITA") Others Total non-current Total other assets As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 152,797 120,215 5,556 657 123,299 106,736 7,847 696 279,225 238,578 79,012 70,380 65,936 515 544 216,387 495,612 140,116 54,336 73,050 474 304 268,280 506,858 (*) Aircraft maintenance reserves reflect prepayment deposits made by the group to lessors of certain aircraft under operating lease agreements in order to ensure that funds are available to support the scheduled heavy maintenance of the aircraft. ANNUAL REPORT 2013214in maintenance As of December 31, 2013, LATAM had ThUS$231,809 reserves (ThUS$ 263,416 at December 31, 2012), corresponding to 21 aircraft out of a total fleet of 339 (24 aircraft out of a total fleet of 327 at December 31, 2012). All of the Company’s containing provisions for maintenance reserves will expire fully by 2017. aircraft leases Aircraft maintenance reserves are classified as current or non-current depending on the dates when the related maintenance is expected to be performed (Note 2.23). These amounts are calculated based on performance measures, such as flight hours or cycles, are payable periodically (usually monthly) and are contractually required to be repaid to the lessee upon the completion of the required maintenance of the leased aircraft. At the end of the lease term, any unused maintenance reserves are either returned to the Company in cash or used to offset amounts that we may owe the lessor as a maintenance adjustment. reviews In some cases (10 lease agreements), if the maintenance cost incurred by LATAM is less than the corresponding maintenance reserves, the lessor is entitled to retain those excess amounts at the time the heavy maintenance is performed. The Company periodically its maintenance reserves for each of its leased aircraft to ensure that they will be recovered, and recognizes an expense if any such amounts are less than probable of being returned. Since the acquisition of TAM in June 2012, the cost of aircraft maintenance has been higher than the related maintenance reserves for all aircraft. ANNUAL REPORT 2013215NOTE 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, 2013, and December 31, 2012 are as follows: As of December 31, 2013 ThUS$ 438 1,362 8 272 365 2,445 As of December 31, 2012 ThUS$ 44,878 1,184 686 542 365 47,655 The figures shown in this item are presented at book value or fair value minus sales cost, whichever is lower. The Company has no discontinued operations as of December 31, 2013. Aircraft Rotables Inventories on consignment Engines Scrapped aircraft Total During 2012, two A318-100 aircraft were transferred from the heading of Property, plant, and equipment to Non-current assets or groups of assets for disposal classed as held for sale. These two aircraft were sold during the first quarter of 2013. Moreover, during the fourth quarter of 2013, a Boeing B737-200 and four ATR42-300 aircraft were sold. ANNUAL REPORT 2013216NOTE 15 . INVESTMENTS IN SUBSIDIARIES The Company has investments in companies recognized as investments 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. Significant subsidiaries detailed as of December 31, 2013 The detail of significant subsidiaries and summarized financial at December 31, 2013 and December 31, 2012 is presented below: information Name of significant subsidiary Country of incorporation Funcional 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. Perú Chile Argentina Chile Ecuador Colombia Brasil US$ US$ ARS US$ US$ COP BRL 69.97858 Without significant restrictions 99.89803 Without significant restrictions 94.99055 Without significant restrictions 99.89804 Without significant restrictions 71.94990 Without significant restrictions 99.01646 Without significant restrictions 99.99938 Without significant restrictions Significant subsidiaries detailed as of December 31, 2012 Name of significant subsidiary Country of incorporation Funcional 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. Perú Chile Argentina Chile Equador Colombia Brasil US$ US$ ARS US$ US$ COP BRL 69.97858 Without significant restrictions 99.89803 Without significant restrictions 94.99055 Without significant restrictions 99.89804 Without significant restrictions 71.94990 Without significant restrictions 98.21089 Without significant restrictions 99.99938 Without significant restrictions ANNUAL REPORT 2013217Summary financial information of significant subsidiaries Statement of financial position as of December 31, 2013 Result for the period ended december 31, 2013 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. 263,516 237,577 25,939 252,109 250,699 1,410 1,173,391 Lan Cargo S.A. 772,640 360,733 411,907 413,527 233,363 180,164 304,060 3,755 3,685 Lan Argentina S.A. 214,426 192,590 21,836 205,672 203,567 2,105 500,128 (13,311) Transporte Aéreo S.A. 359,693 69,459 290,234 120,399 37,049 83,350 400,518 (4,129) Aerolane Líneas Aéreas Nacionales del Ecuador S.A. Aerovías de Integración Regional. AIRES S.A. 94,160 58,867 35,293 93,535 89,802 3,733 299,138 (40,295) 188,518 69,591 118,927 36,009 24,936 11,073 335,854 (63,359) TAM S.A. (*) 8,695,458 2,372,047 6,323,411 7,983,671 3,249,581 4,734,090 6,791,104 (458,475) Summary financial information of significant subsidiaries Statement of financial position as of December 31, 2012 Result for the period ended december 31, 2012 Nombre de subsidiaria significativa 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. 159,361 133,448 25,913 150,319 149,263 1,056 1,047,106 2,513 727,091 172,856 554,235 371,663 169,501 202,162 292,066 (50,693) 165,961 144,463 21,498 141,454 139,653 1,801 538,328 9,152 357,725 249,174 108,551 114,302 26,731 87,571 373,157 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. (*) 8,821,298 2,003,122 6,818,176 9,198,899 3,556,778 5,642,121 3,633,592 (75,195) (*) Corresponds to consolidated information of TAM S.A. and Subsidiaries. ANNUAL REPORT 2013218NOTE 16 . EQUITY ACCOUNTED INVESTMENTS The composition of investments accounted for using the equity method is as follows: As of december 31, 2013 As of december 31, 2012 ThUS$ ThUS$ 3,572 3,024 6,596 1,619 2,138 3,757 (a) Related companies (b) Joint Ventures Equity accounted investments (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, 2013 and December 31, 2012, and the statements of income, for the periods ended at December 31, 2013, and December 31, 2012. As of December 31, 2013 current Non- current Total As of December 31, 2012 current Non- current Total Total operating revenues Total expenses Sum of net income Assets Liabilities ThUS$ ThUS$ 2,147 331 2,478 Assets ThUS$ 3,193 419 3,612 670 109 779 Liabilities ThUS$ 1,421 109 1,530 As of december 31, 2013 ThUS$ 3,212 (2,533) 679 2012 ThUS$ 3,704 (2,759) 945 ANNUAL REPORT 2013219As an investment in associates, the Company has shown its holdings in the following compa- nies: Austral Sociedad Concesionaria S.A. and Lufthansa Lan Technical Training S.A. The Company made no investments in associates during 2013. Percentage of ownership Cost of investment Company Country of incorporation Funcional currency As of december 31, 2013 As of december 31, 2012 As of december 31, 2013 As of december 31, 2012 % % ThUS$ ThUS$ Austral Sociedad Concesionaria S.A. Lufthansa Lan Technical Training S.A. Chile Chile CLP CLP 20.00 20.00 50.00 50.00 661 702 661 702 These companies do not have significant restrictions on the ability to transfer funds. The movement of investments in associates between January 1, 2012 and December 31, 2013 is as follows: Opening balance as of January 1, 2012 Participation in profits Adjustment to participation in previus years profits Dividends received Other increases, investments in associated entities Total changes in investments in associated entities Closing balance as of December 31, 2012 Opening balance as of January 1, 2013 Participation in profits Other increases, investments in associated entities Total changes in investments in associated entities Closing balance as of December 31, 2013 ThUS$ 991 295 (178) (352) 863 628 1,619 1,619 341 1,612 1,953 3,572 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. ANNUAL REPORT 2013220(b) Joint Venture Multiplus S.A., a subsidiary of TAM S.A. and AIMIA Newco UK LLP ("Aimia") jointly control the Companhia Brasileira de Serviços de ("CBSF"). The company Fidelização S.A. 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 Movement investment at December 31, 2013 Capital aware - AAG Constituent (*) Capital increase - AGE (**) 09/18/2012 Equity accounted earnings Closing balance at December 31, 2012 Future advance capital increase Equity accounted earnings Conversion difference affiliates 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 ThUS$ 500 1 6,571,500 - 6,572,000 - - - 3,215 (1,078) 2,138 4,977 (3,833) (258) 3,024 Closing balance at December 31, 2013 6,572,000 (*) General Assembly Act (**) Extraordinary General Assembly ANNUAL REPORT 2013221The company Prismah Fidelidade S.A. as of December 31, 2013, has the following items: Social capital ThUS$ Number of ordinary shares Ordinary shares owned by Multiplus S.A. As of December 31, 2013 As of December 31, 2012 16,323 6,432 35,200,194 13,144,000 17,600,097 6,572,000 Participation % 50 50 Equity accounted investments Current assets Non-current assets Current liabilities Result of the period Equity accounted earnings Revenues in the period Expense in the period ThUS$ ThUS$ 3,024 6,985 1,481 2,418 2,138 4,356 2,275 2,356 For the periods ended December 31, 2013 ThUS$ (7,665) (3,833) 1,091 (8,756) 2012 ThUS$ (1,065) (533) 9 (1,075) ANNUAL REPORT 2013222NOTE 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 Loyalty program Trademarks Other assets Total Classes of intangible assets (gross) Computer software Developing software Airport slots Loyalty program Trademarks Other assets Total As of december 31, 2013 As of december 31, 2012 ThUS$ ThUS$ 143,124 46,075 1,361,807 453,907 88,314 81 144,244 54,635 1,561,130 520,344 101,240 806 2,093,308 2,382,399 As of december 31, 2013 As of december 31, 2012 ThUS$ ThUS$ 278,721 46,075 1,361,807 453,907 88,314 808 223,586 54,635 1,561,130 520,344 101,240 1,372 2,229,632 2,462,307 ANNUAL REPORT 2013223The movement in Intangible assets other than goodwill between January 1, 2012 and December 31, 2013 is as follows: Computer software net Developing software Airport slots (*) Trademarks and loyalty Program (*) Others assets net Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 25,124 18,769 (1,636) 55,618 78,106 (757) (30,980) 39,395 43,632 - (51,391) - - - - - 24 (2) - 404 64,923 - - - 62,425 (1,638) 4,227 22,864 1,552,016 617,934 561 2,271,481 135 - 9,114 3,628 3 12,123 - - (162) (31,142) 144,244 54,635 1,561,130 621,584 806 2,382,399 Opening balance as of January1, 2012 Additions Withdrawals Transfer software Adquisitions through business combinations Difference by subsidiaries conversion Amortization Closing balance as of december 31, 2012 Opening balance as of January 1, 2013 144,244 54,635 1,561,130 621,584 806 2,382,399 Additions Withdrawals Transfer software Subsidiaries conversion difference Amortization Closing balance as of december 31, 2013 14,703 (467) 47,199 (1,975) 46,444 (48,890) - - - - - - - - 61,902 (2,442) (492) (2,938) (5,542) (56,258) (4,894) (199,323) (79,363) - - - (72) (161) (289,194) (56,419) 143,124 46,075 1,361,807 542,221 81 2,093,308 The airport slots correspond to an administrative authorization for the arrival and departure of aircraft, in a specific airport, within a period of time. Airport slots – Air transport CGU Loyalty program – Coalition and loyalty program Multiplus CGU Brand – Air transport CGU The coalition and loyalty program corresponds to the system of accumulation and redemption of points that has developed Multiplus. 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. Intangible assets with undefined useful lives are tested annually for impairment as an integral part of each CGU, in accordance with the premises that are applicable, included as follows: (See Note 18.1.) income The amortization of the period is shown in in the consolidated statement of administrative expenses. The accumulated amortization of computer programs as of December 31, 2013 amounts to ThUS$ 135,597 (ThUS$ 79,342 as of December 31, 2012). The accumulated amortization of other identifiable intangible assets as of December 31, 2013 amounts to ThUS$ 727 (ThUS$ 566 as of December 31, 2012). (*) See Note 2.5 ANNUAL REPORT 2013224NOTE 18. GOODWILL AND BUSINESS COMBINATION Coalition and loyalty program Multiplus CGU(*) • • Long-term growth rate: We used a growth rate between 4.0% and 7.0% per year. Exchange rate R$ / US$: we used a rate between 2.40 and 3.50 R$ / US $, in line with the expectations of the central bank of Brazil. • Discount rate: based on cost of equity (CoE) we used a rate between 20.0% and 25.0%. (*) For the Coalition and loyalty program Multiplus CGU the flows, as in the growth rate and discount, are denominated in real. Given the expectation of growth and the long investment cycles characteristic of the industry, are used projections of ten years. The result of the impairment test, which includes a sensitivity analysis of the main variables, showed the estimated recoverable amount is higher than carrying value of the book value of net assets allocated to the cash generating unit, and therefore impairment was not detected. that 18.1. Goodwill The goodwill represents the excess of cost of acquisition over the fair value of the participation of the Company in the identifiable net assets of the subsidiaries at the acquisition date. Goodwill at December 31, 2013 amounted to ThUS$ 3,727,605 (ThUS$ 4,213,160 as revised at December 31, 2012). “Coalition and The Company has two cash- generating units (CGUs), confirming the existence of two cash- generating units: “Air transportation” and, loyalty program Multiplus”; consistent with this, performed impairment tests based on value in use and no impairment was identified, These tests are done at least once per year. The recoverable amounts of cash generating units have been determined from estimated cash flows by the Administration. The main assumptions used are disclosed as follows: Air transportation CGU • • Long-term growth rate: We used a growth rate between 2.0% and 4.0% per year. Exchange rate R$ / US$: we used a rate between 2.40 and 3.50 R$ / US $, in line with the expectations of the central bank of Brazil. • Discount rate: based on the weighted average cost of capital (WACC) we used a rate between 10.0% and 12.0%. Fuel Price: prices are used in a range of 124.50 and 130.50 US$ / barrel, from commodities curves futures price markets. • ANNUAL REPORT 2013225The sensitivity analysis included individual impact of variations in the key assumptions with impact on the determination of the recoverable amounts, namely: Coalition and loyalty program Multiplus CGU • Using a discount rate up to 24.5% • Using a minimum growth rate of 4.5% Air transportation CGU • Using a discount rate up to 12.0% • Using a minimum growth rate of 2.0% In none of the previous cases was presented an impairment. The movement of Goodwill from January 1, 2012 to December 31, 2013, is as follows: Air transportation (* *) Coalition and loyalty program Multiplus(**) Total ThUS$ ThUS$ ThUS$ Opening balance as of January 1, 2012 Additions by business combinations Amendment initial recognition (*) Increase (decrease) due to exchange rate differences 163,777 2,118,057 1,051,645 28,427 - - 163,777 2,118,057 846,285 1,897,930 4,969 33,396 Closing balance as of December 31, 2012 3,361,906 851,254 4,213,160 Opening balance as of January 1, 2013 3,361,906 851,254 4,213,160 Others 44,860 - 44,860 Increase (decrease) due to exchange rate differences (421,729) (108,686) (530,415) Closing balance as of December 31, 2013 2,985,037 742,568 3,727,605 (*) The amendments to initial recognition includes: changes in fair values determined in accor- dance with IFRS 3 during the measurement period, including Goodwill allocation to loyalty coali- tion program of Multiplus and correction of non-significant errors originated before the date of acquisition. (**) The amounts presented in December 2012 have been revised in accordance with IFRS 3 du- ring the measurement period. ANNUAL REPORT 2013226The capital increase in LATAM Airlines S.A 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 (Note 18.2.b), amounting to ThUS$ 2,665,692 was included in “Other reserves” during 2012. 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 ThUS$ 165,143. 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. The costs incurred by LATAM Airlines Group S.A. to make the Business Combination amounts to ThUS$ 50,647 for the year ended December 31, 2012, and were recorded in the Income statement when they were incurred. 18.2. Business combination The following information summarizes the business combination process with TAM S.A. and subsidiaries: (a) Description of the business combination process with TAM S.A. and Subsidiaries (b) Business combination in accordance with IFRS 3 (c) Revision of the consolidated financial statements for the 2012 accounting period (d) Other information (a) Description of the Business Combination process with TAM S.A. and Subsidiaries June 22, 2012 the merger was Dated successfully LAN completed between 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. 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. ANNUAL REPORT 2013227The ownership structure of TAM, after the business combination, is as follows: TAM S.A. Class of shares Shares % Shares % Shares Holdco I S.A. LATAM Airlines Group S.A. Total ON (voting rights) 55,413,784 100.00 - 55,413,784 PN (non-votings rights) - 94,718,931 100.00 94,718,931 Total 55,413,784 94,718,931 150,132,715 Holdco I S.A. Class of shares Shares % Shares % Shares TEP Chile S.A. (owned by the controlling shareholders of TAM) LATAM Airlines Group S.A. Total Serie A (voting rights) 938 80.58 226 19.42 1,164 Serie B (economic rights) Total - 938 55,413,621 100.00 55,413,621 55,413,847 55,414,785 Under IFRS 3 this operation has been regis- tered 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 re- lating of the former shareholders of LAN and TAM over the combined entity. TAM is a leading airline in Brazil, with more than 35 years in operation, and as of the date of the business combination it boasted: over 30,000 employees, a fleet of more than 160 aircraft, annual sales surpassing US$7.3 billion, and a 2011 Brazilian market share of 41.2% domestically, and 88.1% of international flights operated by Brazilian- flagged airlines. It is appropriate to point out that Multiplus S.A. , a company controlled by TAM S.A. , is engaged in the development and administration of client loyalty programs, Multiplus S.A. has been registered in the "Novo Mercado" section on the BMF&Bovespa exchange since February 3, 2010. ANNUAL REPORT 2013228(b) Business combination in accordance with IFRS 3 (*) IFRS 3 establishes principles and require- ments for how the acquirer: i. Recognizes and measure the consideration paid; ii. Recognizes and measure fair value of iden- tifiable net assets acquired; and iii. Recognizes and measure the goodwill ac- quired. IFRS 3 provides the acquirer with a reaso- nable time (measurement period) to obtain the information necessary to identify and (i) Consideration paid measure the three points mentioned above as of the acquisition date. During the mea- surement period, the acquirer shall retros- pectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acqui- sition date and, if known, would have affec- ted the measurement of the amounts re- cognized as of that date. The measurement period shall not exceed one year from the acquisition date (June 22, 2012). Therefore, some amounts reported in previous financial statements as provisional amounts because the accounting was incomplete have been re- trospectively adjusted. The following summarizes the consideration paid for TAM S.A. and subsidiaries: Number of shares LAN Exchange (a) Share price at fair value at June 22 exchange rate at June 22 US$ (b) Total exchange of shares ThUS$ (a) times (b) Squeeze Out At July 27 at t/c June 22 ThUS$ Total purchase price ThUS$ 135,119,066 26.76973 3,617,101 165,143 3,782,244 Value of the share at June 22, 2012 CLP$ 13,489 Exchange rate as of June 22, 2012 503.89 CLP$/US$ Consideration paid was calculated, in accordance with IFRS 3, as the sum of the fair value of the LAN shares provided and the Squeeze-Out cash payment explained in Note 18.2.(a). (*) See note 2.2 ANNUAL REPORT 2013229(ii) Fair value of identifiable assets acquired and liabilities assumed. The following table summarizes the fair value of recognized amounts of identifiable assets acquired and liabilities assumed at the acquisition date. Cash and cash equivalents Other financial assets Other non-financial assets Trade and other accounts receivable Inventories Tax assets Assets held for sale Airport Slots Loyalty program Other intangible assets Fleet Other property, plant and equipment Other financial liabilities Other non-financial liabilities Trade and other accounts payables Other provisions Employee benefits Tax liabilities Deferred tax Accounts payable to related entities Net assets at fair value Fair value ThUS$ 263,986 810,079 324,170 1,004,331 66,287 145,626 8,865 1,472,625 517,304 281,552 3,178,065 1,063,036 (4,802,902) (1,445,463) (1,473,579) (1,429,012) (18,580) (65,185) (31,940) (82) (130,817) • The airport slots (landing and take-offs) have been measured at fair value at the date of the combination, using the net present value of projected Earing Before Interest and Taxes (EBIT) of those routes going through those airports where slots were acquired as part of the business combination (Congonhas, JFK and Heathrow); and its useful lives are classified as indefinite, which shall be subject to impairment test annually. • Customer loyalty program “Multiplus” fair value has been measured using estimated discounted cash flows related to the mentioned intangible as of the acquisition date and its useful lives are classified as indefinite, which shall be subject to impairment test annually. • Fair value of fleet was measured using market values and considering model, age and actual maintenance conditions of each airplane, Additionally, in relation with those airplanes under operative lease, maintenance cost and devolution cost have been provided for. ANNUAL REPORT 2013230 • Fair value of Other provisions is related with the recognition of contingent in a business liabilities assumed combination even if it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, according to IFRS 3. • As part of the purchase price allocation required under IFRS 3 carried out during the first half of 2013, errors identified and corrected that were were not material the LATAM to consolidated financial statement. These errors originated from TAM S.A. and Subsidiaries. iii. Goodwill acquired The financial statements of LATAM Airlines Group S.A. include goodwill recorded to the value of ThUS$ 4,015,987 calculated and assigned to corresponding segments. The following table sum- marizes the consideration paid, the fair value of assets acquired, liabilities assumed, non-contro- lling interest and goodwill acquired at the acquisition date. Purchase price LESS: Historic net assets Fair value adjustment: Airport Slots Loyalty program Fleet (included maintenance) Other provisions Error correction Deferred tax Other Total adjustment Total net assets at fair value Non-controlling interest Goodwill restated at June 22, 2012 ThUS$ ThUS$ 3,782,244 578,559 (1,472,625) (517,304) 723,364 1,157,419 584,126 104,342 130,054 709,376 (130,817) (130,817) 102,926 4,015,987 ANNUAL REPORT 2013231The following table summarizes Goodwill acquired by segments. Goodwill restated at June 22, 2012 ThUS$ 3,169,702 846,285 4,015,987 • • The errors correction mentioned above at December 31, 2012 had an impact of US$ 416 million in relation with Revenue and deferred revenue, US$ 183 million in relation with Taxes and Income taxes, and US$ 11 million (loss) for the period then ended. The revised amounts of the statement of financial position at June 22, 2012, date of the business combination of TAM S.A. and its subsidiaries are as follows: Goodwill asignned Air transportation CGU Goodwill asignned Coalition and loyalty program Multiplus CGU Total Goodwill Non-controlling interest have been measured and recognized at fair value. (c) Retrospective revision to LATAM 2012 consolidated financial statements. As required by IFRS, during the first half of 2013, based on new information obtained about facts and circumstances that existed as of the acquisition date. Latam Airlines Group S.A. has retrospectively adjusted the amounts presented in the December 31, 2012 consolidated financial statements. Adjustments are related to the fair value of: fleet, customer loyalty programs and provisions, and to non-material errors identified related to Deferred income and Tax liabilities that existed before the acquisition date relating to TAM S.A. and Subsidiaries. • The impact of the fair value adjustments mentioned above at December 31, 2012 increased total assets by US$ 485 million, increased total liabilities by US$ 1,039 million and decreased net results by US$ 19 million for the period then ended. ANNUAL REPORT 2013232- - - - - 18,330 - - - - - - - - - The revised amounts of the statement of financial position at June 22, 2012, date of the business combination of TAM S.A. and its subsidiaries are as follows: Fair value at June 22, 2012 publicated at June 30, publicated at December 31, Variation Fair value modification Errors on Revenue and deferred revenue cycle Errors on tax and deferred taxes cycle 2013 ThUS$ Unaudited 2012 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Cash and cash equivalents 263,986 263,986 Other financial assets 810,079 810,079 - - - - Other non- financial assets 324,170 333,086 (8,916) (8,916) - - - Trade and other accounts receivable Inventories Tax assets 1,004,331 1,035,692 (31,361) (15,686) (15,675) 66,287 69,823 (3,536) (3,434) 145,626 156,215 (10,589) (28,897) Assets held for sale 8,865 8,865 Airport slots 1,472,625 1,472,625 Loyalty programs 517,304 - Other intangibles assets 281,552 268,190 Fleet 3,178,065 3,176,372 Other property, plant and equipment 1,063,036 1,057,220 Other financial liabilities (4,802,902) (4,802,902) - - 517,304 13,362 1,693 5,816 - - - 517,304 (a) 13,385 1,693 5,816 - (102) (22) - - - (23) - - - Other non-financial liabilities (1,445,463) (1,064,782) (380,681) 16,847 (397,528) Trade and other accounts payables (1,473,579) (1,077,784) (395,795) (406,153) (b) 10,358 Other provisions (1,429,012) (634,076) (794,936) (742,180) (c) Employee benefits (18,580) - (18,580) (18,580) Tax liabilities (65,185) (65,185) - - Deferred taxes (31,940) (22,109) (9,831) 136,877 Accounts payable to related entities (82) (82) - - - - - - - (52,756) - - (146,708) - Net assets at fair value (130,817) 985,233 (1,116,050) (531,924) (402,992) (181,134) The main changes made to the fair value correspond to: (a) Loyalty program Complementing the mentioned in Note 18.2 (b) ii. the company has recognized as an intangible asset the loyalty program and coalition of Multiplus. The program provides a system of coalition flexible and interrelated among its partners and members. which allows a considerable increase in consumer loyalty. This program has been valued at fair value using the income approach, through cash from the margins attributed to flows intangible. His life has been regarded as indefinite, based on the ability to maintain and relationship between strategic partners among others aspects. renew the ANNUAL REPORT 2013233(b) Trade and other accounts payables • The main fair values reflected in this category are: • Maintenance It has been liability: adjusted the initial valuation of major maintenance of the leased fleet, taking into consideration the detailed review of all lease contracts and updates the initial calculation (ThUS$ 303,377). • Aircraft return provision: There was registered a provision to cover the additional cost related with the return of aircraft. This is for the portion accrued at the date of the business combination (ThUS$ 38,818). Aircraft operating leasing adjustment: There was registered a provision for the difference between the fair value and the real value of future rents under operating leasing (ThUS$ 53,600). (c) Other provision • The fair value of other provision, correspond to those contingencies with a probability of loss under 50%, which are not provided for the normal application of IFRS enforcement and that only must be registered in the context of a business combination in accordance with IFRS 3. The detailed fair values for other provision are as follows: ThUS$ ThUS$ 3,398 (5,524) 744,306 742,180 516,292 228,014 The litigation and tax criteria correspond to approximately 500 cases involving to the tax treatment applicable to direct and indirect taxes, which are found in both administrative and judicial stage, and whose probability of loss is less than 50%. Civil cases Laboral disputes Litigation and tax criteria Direct taxes Indirect taxes Total Civil cases correspond to approximately 7,000 cases involving different demands of civil order, filed against of TAM S.A. and Subsidiaries and whose loss probability is less than 50%. The labor disputes are approximately 2,200 cases involving different demands of labor order, filed against of TAM S.A. and Subsidiaries and whose loss probability is less than 50%. ANNUAL REPORT 2013234The adjustments to LATAM Airlines Group SA and subsidiaries, for each type of error between the acquisition date and December 31, 2012 were: • Revenue and deferred revenue cycle During this period the adjustments are complementary to the error correction made at the acquisition date, and the main modified items are: Trade and other accounts receivables (increase of ThUS$ 40,856) and Other financial liabilities non- current (increase of ThUS$ 50,393) with effect Revenue (loss of ThUS$ 10,236). • Tax and deferred taxes cycle During this period the adjustments are com- plementary to the error correction made at the acquisition date, and the main modified items are: Other provisions non-current (in- crease of ThUS$ 1,581) and Deferred tax lia- bilities (decrease of ThUS$ 1,139) with effect on Revenue (loss of ThUS$ 1,581) and loss tax expense (less expense of ThUS$ 1,139). In the process of determining the fair values of the net assets of TAM S.A. and its Subsidiaries, at the date of the business combination, non-significant errors were detected within the LATAM’s consolidated financial statement, in Deferred income and Tax liabilities. These errors originated from TAM S.A. and Subsidiaries and the nature of these errors correspond to: • Revenue and deferred revenue cycle Differences between the general ledger and the sub-ledger, corresponding to deferred revenue not recognized related with unused tickets. The correction of this difference resulted in decreases in the following items of the Statement of financial position of TAM S.A. and its Subsidiaries at June 22, 2012: Trade and other accounts receivable for ThUS$ 15,675, other items of assets for ThUS$ 147 and Trade payables and other accounts payable ThUS$ 10,358, and increases in Other financial liabilities non-current of ThUS$ 397,528. • Tax and deferred taxes cycle Errors in the determination of annual taxable income used to calculate of deferred tax and the re-calculation and correction of statements, product of changes in the method of determination of tax credits. The corrections of this errors resulted in the increase of the following items of the Statement of financial position of TAM S.A. and its Subsidiaries at June 22, 2012: Tax assets for ThUS$ 18,330.Other long term provision for ThUS$ 52,756 and Deferred tax liabilities for ThUS$ 146,708. ANNUAL REPORT 2013235The effects resulting from the fair value adjustments and errors correction at December 31, 2012 were the following: Revised amount for the year ended at December 31, 2012 Historical amount for the year ended December 31, 2012 Variation Fair value modification Errors on devenue and deferred revenue cycle Errors on tax and deferred taxes cycle ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Unaudited 9,710,372 9,722,189 (11,817) - (10,236) (1,581) (7,634,453) (7,642,643) 8,190 8,190 (*) - - 2,075,919 2,079,546 (3,627) 8,190 (10,236) (1,581) Revenue Cost of sale Gross margin Other income Distribution cost (803,619) (803,619) 220,156 220,156 - - - - Administrative expenses (888,654) (869,504) (19,150) (19,150) (**) Other expenses (311,753) (311,753) - - Other gains / (losses) (45,831) (38,750) (7,081) (7,081) (*) - - - - - - - - - - Gains (losses) from operating activities 246,218 276,076 (29,858) (18,041) (10,236) (1,581) Financial income Financial cost Equity accounted earning Foreing exchange goins / (losses) Result of indexation units 77,489 77,489 (294,598) (294,598) 972 66,685 (22) 972 66,685 (22) - - - - - - - - - - - - - - - - - - - - Income (loss) before taxes 96,744 126,602 (29,858) (18,041) (10,236) (1,581) Income (loss) tax expenses (102,386) (102,212) (174) (1,313) - NET INCOME (LOSS) FOR THE PERIOD (5,642) 24,390 (30,032) (19,354) (10,236) 1,139 (442) Income (loss) attributable to owners of the parent Income (loss) attributable to non-controlling interest Net income (loss) for the period (19,076) 10,956 (30,032) (19,354) (10,236) (442) 13,434 (5,642) 13,434 - - - 24,390 (30,032) (19,354) (10,236) - (442) (*) Correspond mainly to the impact on the results of operating leases’ fair value adjustments. (**) Correspond mainly to the impact on the results of fair value credit card chargeback adjustments. (d) Other information The income contribution of TAM S.A. and Subsidiaries during the period of 2012 was ThUS$ 3,633,592 the net result considered in the consolidated financial statements of the group at December 31, 2012, was a loss of ThUS$ 75,195. ANNUAL REPORT 2013236NOTE 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, 2013 As of December 31, 2012 As of December 31, 2013 As of December 31, 2012 As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Construction in progress 858,650 1,153,003 59,352 65,307 - - - - 858,650 1,153,003 59,352 65,307 Land Buildings 247,263 245,939 (75,478) (70,869) 171,785 175,070 Plant and equipment 8,461,456 7,942,957 (1,708,668) (1,635,532) 6,752,788 6,307,425 Own aircraft 7,409,394 6,979,985 (1,347,671) (1,278,739) 6,061,723 5,701,246 Other Machinery 1,052,062 962,972 (360,997) (356,793) 691,065 606,179 73,561 76,956 (41,509) (41,799) 32,052 35,157 Information technology equipment 182,108 171,568 (135,889) (131,105) 46,219 40,463 Fixed installations and accessories 97,212 81,252 (46,620) (38,909) 50,592 42,343 Motor vehicles 75,150 70,706 (51,128) (48,451) 24,022 22,255 Leasehold improvements 88,641 87,004 (71,872) (65,276) 16,769 21,728 Other property, plants and equipment 4,791,236 5,814,689 (1,820,679) (1,870,364) 2,970,557 3,944,325 Financial leasing aircraft 4,618,127 5,659,575 (1,777,980) (1,830,273) 2,840,147 3,829,302 Other Total 173,109 155,114 (42,699) (40,091) 130,410 115,023 14,934,629 15,709,381 (3,951,843) (3,902,305) 10,982,786 11,807,076 ANNUAL REPORT 2013237The movement in the different categories of Property, plant and equipment from January 1, 2012 to December 31, 2013 is shown below: (a) As of december 31, 2012 Construction in progress Land Buildings net Plant and equipment net Information technology equipment net Fixed installations & accessories net Motor vehicles net Leasehold improvements net Other property, plant and equipment net Property, plant and equipment net ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Opening balance as of January 1, 2012 1,087,563 35,673 77,938 4,141,985 22,591 35,098 1,637 31,499 493,998 5,927,982 Additions 34,885 - 17,349 2,803,242 11,626 7,836 458 4,668 154,000 3,034,064 Acquisitions through business combinations 553,781 46,373 87,338 469,650 16,990 1,696 4,099 Disposals (27) (5,116) (4,821) (73,654) (15) Transfers (to) from non-curent assets (or disposal groups) (2,256) (11,895) - (49,910) - - - (28) - - - - 3,061,174 4,241,101 (5) (83,666) - (64,061) Retirements Depreciation expenses Conversion difference subsidiaries (281) - - - (1,100) (136,879) (951) (261) (62) (82) (18,799) (158,415) (3,311) (319,578) (14,982) (6,526) (1,316) (16,432) (250,329) (612,474) 1,844 272 (2,370) 2,625 3,968 530 (101) - 16,725 23,493 Other increases (decreases) (522,506) - 4,047 (477,366) 1,236 3,970 35 2,075 487,561 (500,948) Changes, total 65,440 29,634 97,132 2,218,130 17,872 7,245 3,085 (9,771) 3,450,327 5,879,094 Closing balance as of december 31, 2012 1,153,003 65,307 175,070 6,360,115 40,463 42,343 4,722 21,728 3,944,325 11,807,076 ANNUAL REPORT 2013238(b) As of December 31, 2013 Construction in progress Land Buildings net Plant and equipment net Information technology equipment net Fixed installations & accessories net Motor vehicles net Leasehold improvements net Other property, plant and equipment net Property, plant and equipment net ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Opening balance as of January 1, 2013 Additions Disposals Retirements Depreciation expenses Conversion difference subsidiaries 1,153,003 65,307 175,070 6,360,115 40,463 42,343 4,722 21,728 3,944,325 11,807,076 17,731 - (615) - - - - - 11,798 1,555,667 22,146 7,663 303 - (141,328) (31) - (161) - - 69,703 1,685,011 (644,637) (786,157) (430) (65,151) (270) (15) (10) (219) (19,716) (86,426) (11,768) (446,503) (14,131) (8,893) (312) (12,281) (336,586) (830,474) (53,452) (5,955) (12,414) (71,013) (3,375) (1,527) (286) (1) (320,738) (468,761) Other increases (decreases) (258,017) - 9,529 (384,669) 1,417 11,021 (2,512) 7,542 278,206 (337,483) Changes, total (294,353) (5,955) (3,285) 447,003 5,756 8,249 (2,978) (4,959) (973,768) (824,290) Closing balance as of December 31, 2013 858,650 59,352 171,785 6,807,118 46,219 50,592 1,744 16,769 2,970,557 10,982,786 ANNUAL REPORT 2013239(c) Composition of the fleet Aircraft included in the Company's Property, plant and equipment Aircraft Model As of December 31, 2013 As of December 31, 2012 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 300 300ER 300F 300ER Freighter 800 100 100 200 200 200 300 500 Operating leases: Aircraft Model 300ER 300F 300ER Freighter 800 100 200 200 200 300 700 Dhc8-200 Dhc8-400 Boeing 767 Boeing 767 Boeing 777 Boeing 777 Boeing 787 Airbus A319 Airbus A320 Airbus A321 Airbus A330 Airbus A340 Boeing 737 Bombardier Bombardier Total Total fleet 3 34 8 8 2 3 - 39 95 9 8 - 2 3 30 8 8 2 3 5 39 76 8 18 2 2 211 204 As of December 31, 2013 As of December 31, 2012 6 4 2 2 2 15 65 1 12 4 5 7 3 128 339 8 4 - 2 - 18 65 1 2 3 6 10 4 123 327 ANNUAL REPORT 2013240(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 equip- ment 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. (**) Aircraft with remarketing clause are those that are required to sell at the end of the contract. to charged The depreciation income in the period, which is included in the income, statement consolidated amounts to ThUS$ 830,474 (ThUS$ 612,474 at December 2012). Depreciation charges for the year are recognized in Cost of sales and administrative expenses in income. the consolidated statement of 31, of 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. for same business the Additionally, 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. ANNUAL REPORT 2013241(e) Additional information regarding Property, plant and equipment: (i) Property, plant and equipment pledged as guarantee: In the period ended December 31, 2013, we added direct guarantees for nine Boeing 767-300 aircraft, nineteen Airbus A320 and one Airbus A321 aircraft. Moreover, the Company sold its interest in the permanent establishments Mirlo Leasing LLC, Osprey Leasing Limited, and subsidiary Conure Leasing Limited. Product of the above direct guarantees associated with a Boeing 767- 300 aircraft, two aircraft Airbus A320-200s and eight Airbus A319-100 aircraft were eliminated. Additionally, guarantees for seven A318-100 aircraft and two Airbus A340- 300 aircraft were removed from their sale. Description of Property, plant and equipment pledged as guarantee: Creditor of guaranteed Assets committed Fleet As of December 31, 2013 As of December 31, 2012 Existing debt Book value Existing debt Book value ThUS$ ThUS$ ThUS$ ThUS$ Wilmington Trust Company Aircraft and engines Boeing 767 1,437,810 1,827,349 1,296,704 1,640,071 Banco Santander S.A. Aircraft and engines Airbus A319 74,042 105,353 81,698 Boeing 777 / 787 777,796 880,470 858,221 937,074 111,458 BNP Paribas Aircraft and engines Airbus A318 - - 121,172 150,026 Airbus A319 209,993 281,846 360,100 501,836 Airbus A320 643,945 829,185 626,317 782,609 Airbus A321 43,071 49,208 - - Credit Agricole Aircraft and engines Airbus A319 Airbus A320 Airbus A340 32,251 96,774 153,531 68,096 156,355 - - 19,531 105,349 Airbus A320 199,114 257,857 261,139 99,241 44,002 333,105 107,625 JP Morgan Wells Fargo Bank of Utah DVB Bank SE Aircraft and engines Boeing 777 259,272 292,486 280,698 324,159 Aircraft and engines Airbus A320 331,854 384,273 Aircraft and engines Airbus A320 277,622 347,765 Aircraft and engines Boeing 767 95,292 151,824 - - - - - - Total direct guarantee 4,478,836 5,660,388 4,017,678 5,149,667 The amounts of existing debt are presented at nominal value. Book value corresponds to the carrying va- lue 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, 2013 amounted to ThUS$ 2,167,470 (ThUS$ 2,888,753 at December 31, 2012). The book value of assets with indirect guarantees as of December 31, 2013 amounts to ThUS$ 2,767,593 (ThUS$ 3,777,715 as of December 31, 2012). ANNUAL REPORT 2013242(ii) Commitments and others Fully depreciated assets and commitments for future purchases are as follows: Gross book value of fully depreciated property, plant and equipment still in use As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 160,116 188,214 Commitments for the acquisition of aircraft (*) 23,900,000 24,500,000 Moreover, purchase contracts were signed with the same manufacturer in February, May and December 2011, 3, 5 and 2 aircraft 767-300, respectively. As of December 31, 2013, and as a result of different aircraft purchase contracts signed with The Boeing Company, remain to receive a total of 21 787 Dreamliner aircraft, with delivery dates between 2014 and 2018. The approximate amount, according to the manufacturer's price list, is ThUS$ 4,300,000. Additionally, the Company has valid purchase options for 15 787 Dreamliner aircraft. (*) Acording to the manufacturer’s price list. In December 2009, the Company signed commitment with Airbus a purchase 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, 2013, and as a result of different aircraft purchase contracts signed with Airbus S.A.S., there remain 64 Airbus aircraft of the A320 family to be delivered between 2014 and 2018. The approximate amount is ThUS$ 5,600,000, according to the manufacturer’s price list. On October 2007, we signed a binding purchase agreement with The Boeing Company for the purchase of 26 Boeing 787 aircraft with deliveries starting in 2012. ANNUAL REPORT 2013243The 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. During 2011 the first 5 aircraft were sold, during 2012 another 3 were sold and during 2013 the last 7 aircraft were sold. 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 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, 2013, as a result of the different aircraft purchase agreements signed with Airbus S.A.S., remain to receive 58 aircraft Airbus A320 family, with deliveries between 2014 and 2018, and 27 Airbus aircraft A350 family with delivery dates starting from 2015. Additionally, the Company has valid purchase options for 5 Airbus A350. In December 2008, a new commitment purchase agreement was signed with The Boeing Company for 2 777 aircraft with deliveries in 2013, and in February 2011 an agreement was signed for the purchase of another 2 777 aircraft with deliveries in 2014. With the above, at December 31, 2013, due to the various purchase contracts signed with The Boeing Company, remain to receive 2 777 aircraft, whose delivery was scheduled for 2014, which has been rescheduled for 2017. Additionally, the Company has valid purchase options for other 2 777 aircraft. The approximate amount of individual purchase contracts incorporated for the effect of the business combination with TAM S.A. and Subsidiaries is ThUS$ 14,000,000, according to the manufacturers price list. (iii) Capitalized interest costs with respect to Property, plant and equipment: Average rate of capitalization of capitalized interest costs % For the periods ended December 31, 2013 3.63 2012 2.60 Costs of capitalized interest ThUS$ 25,625 45,069 ANNUAL REPORT 2013244 (iv) Financial leases The detail of the main financial leases is as follows: Lessor Aircraft Model As of December 31, 2013 As of December 31, 2012 Agonandra Statutory Trust Agonandra Statutory Trust Air Canada AWMS I (AWAS) Bluebird Leasing LLC Caiquen Leasing LLC Cernicalo Leasing LLC Chirihue Leasing Trust Codorniz Leasing Limited Conure 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 Mirlo Leasing LLC Airbus A319 100 Airbus A320 200 Airbus A340 500 Boeing 767 300 Boeing 767 300F Boeing 767 300F Boeing 767 300F Boeing 767 300F Airbus A319 100 Airbus A320 200 Boeing 767 300ER Boeing 777 300ER Boeing 777 300ER Boeing 777 300ER Airbus A320 200 Boeing 767 300ER Airbus A330 Airbus A320 200 200 Airbus A320 200 Airbus A320 200 Boeing 767 300ER NBB Rio de Janeiro Lease CO. and Brasilia Lease LLC (BBAM) Airbus A320 200 NBB São Paulo Lease CO. Limited (BBAM) Osprey Leasing Limited Petrel Leasing LLC Pochard Leasing LLC Quetro 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 200 Airbus A319 100 Boeing 767 300ER Boeing 767 300ER Boeing 767 300ER Boeing 777 300ER Airbus A320 200 Airbus A320 200 Airbus A330 200 Airbus A319 100 Airbus A320 200 Airbus A319 100 Airbus A320 200 Airbus A321 200 Airbus A330 200 Airbus A320 200 Wells Fargo Bank North National Association (ILFC) Airbus A330 200 4 2 2 3 - 1 2 2 2 2 - 1 1 1 2 1 3 1 2 4 1 1 1 8 1 2 3 1 1 12 1 5 2 3 12 7 - 1 1 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 Total 99 102 ANNUAL REPORT 2013245leasing contracts where Financial 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, 2013 the Company had ninety and nine aircraft (one hundred and two aircraft as of December 31, 2012). During the first quarter of 2013, due to the sale of its participation in the permanent establishments Mirlo Leasing LLC, Osprey Leasing Limited, and subsidiary Conure Leasing Limited, the Company increased its number of aircraft on lease by one Boeing 767-300, two A320-200 and eight Airbus A319-100. Therefore, these aircraft were reclassified from the Plant and equipment category to the category Other property plant and equipment. Additionally, during the second quarter of 2013 the contracts system applied to ten A330-200 aircraft was changed from financial leasing to operative leasing. As a result, the mentioned aircraft are no longer included under Property, plant, and equipment. During to the third quarter of 2013, the option was exercised to purchase 3 A330-200. Therefore, these aircraft were reclassified from the Other property plant and equipment category to the category Plant and equipment. During to the fourth quarter of 2013, the option was exercised to purchase one B767- 300 aircraft belonging Eagle Leasing LLC, was reclassified from the Other property plant and equipment category to the category 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, 2013 amounts to ThUS$ 2,835,840 (ThUS$ 3,863,193 as of December 31, 2012). ANNUAL REPORT 2013246The minimum payments under financial leases are as follows: As December 31, 2013 No later than one year Between one and five years Over five years Total As December 31, 2012 No later than one year Between one and five years Over five years Total Gross value Interest Present value ThUS$ 462,157 1,406,384 633,120 ThUS$ (53,925) (118,702) (19,562) ThUS$ 408,232 1,287,682 613,558 2,501,661 (192,189) 2,309,472 Gross value Interest Present value ThUS$ 523,033 1,687,596 1,135,262 ThUS$ (66,090) (186,145) (57,455) ThUS$ 456,943 1,501,451 1,077,807 3,345,891 (309,690) 3,036,201 ANNUAL REPORT 2013247NOTE 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 entity and tax authority. The balances of deferred taxes are as follows: Concepts Depreciation Leased assets Amortization Provisions Revaluation of financial instruments Tax losses Revaluation property, plant and equipment Intangibles Others Total Assets Liabilities As of December 31, 2013 As of December 31, 2012 As of December 31, 2013 As of December 31, 2013 ThUS$ (17,152) (147,074) (10,778) 317,883 562 267,189 - - ThUS$ (662) - 15,148 34,704 5,178 105,652 - - (7,668) 3,047 ThUS$ 557,845 46,688 113,579 (207,358) (15,508) (284,339) (18,544) 593,325 (18,460) ThUS$ 454,183 268,619 91,911 (520,719) (31,741) (314,926) (22,892) 680,167 (25,263) 402,962 163,067 767,228 579,339 The balance of deferred tax assets and liabilities are composed principally of temporary differences to reverse in the long term. ANNUAL REPORT 2013248) 5 4 8 , 4 5 4 ( ) 9 1 6 , 8 6 2 ( ) 3 6 7 6 7 ( , 3 2 4 , 5 5 5 9 1 9 6 3 , 8 7 5 , 0 2 4 2 9 8 , 2 2 , ) 7 6 1 0 8 6 ( - - - - - - - - $ S U h T $ S U h T $ S U h T ) 6 7 7 9 5 ( , ) 3 1 5 1 1 ( , ) 1 7 4 , 6 ( ) 3 5 3 , 8 ( 0 8 0 , 5 4 3 3 , 4 1 - - 0 1 3 , 8 2 ) 5 9 6 , 2 1 ( 0 8 0 1 , $ S U h T ) 3 0 2 ( ) 6 8 1 ( ) 9 0 1 ( 8 0 0 , 3 8 3 1 2 9 7 9 4 3 ) 5 6 1 ( ) 0 7 9 3 ( , ) 2 7 2 , 6 1 4 ( ) 5 9 6 , 2 1 ( ) 9 1 6 , 5 6 ( ) 6 4 3 ( $ S U h T ) 2 1 5 , 4 3 ( ) 3 3 5 1 3 ( , ) 4 1 6 , 8 1 ( 7 8 4 , 2 1 5 5 8 7 2 1 , 3 3 8 , 4 3 1 4 7 4 , 9 5 , ) 7 9 1 6 7 6 ( 7 7 5 , 4 3 ) 0 0 7 , 6 ( - - - - $ S U h T - - - ) 3 2 6 , 2 ( ) 4 3 7 2 ( , ) 7 5 3 , 5 ( i g n d n E e c n a l a b t e s s A ) y t i l i b a i l ( s r e h t O m o r f t c e f E e g n a h c x E n o i t a r o p r o c n I n i d e z i n g o c e R n i d e z i n g o c e R n i e g n a h c e t a r x a t e t a r n o i t a i r a v s s e n i s u b y b n o i t a n i b m o c e v i s n e h e r p m o c d e t a d i l o s n o c e m o c n i e m o c n i $ S U h T ) 6 6 0 1 2 ( , , ) 7 4 1 0 6 1 ( ) 7 5 1 9 2 ( , 0 4 0 , 6 8 ) 9 4 2 7 ( , 2 2 0 , 2 5 1 ) 1 3 9 6 3 ( , - 0 1 4 i g n 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 ) 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 , ) 8 7 0 , 6 1 ( ) 7 7 4 , 9 0 3 ( 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 a v e R l s e s s o l x a 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 i t n e m p u q e d n a t n a p l , y t e p o r p n o i t a u a v e R l i l s e b g n a t n I s r e h t O l a t o T : s w o l l o f s a e r a 3 1 0 2 , 1 3 r e b m e c e D o t 2 1 0 2 , 1 y r a u n a J m o r f s e i t i l i b a i l d n a s t e s s a x a t d e r r e f e D f o s t n e m e v o M 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 ) a ( ANNUAL REPORT 2013249 (b) From January 1 to December 31, 2013 Beginning balance asset (liability) Recognized in consolidated income Recognized in comprehensive income Exchange rate variation Others Ending balance asset (liability) ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Depreciation Leased assets Amortization Provisions Revaluation of financial instruments Tax losses Revaluation propety, plant and equipment Intangibles Others Total (268,619) (76,763) 555,423 36,919 420,578 22,892 (680,167) 28,310 (454,845) (124,584) 70,807 (49,985) 35,636 - - - - 146 (19,345) 148,266 3,290 - 9,543 - - - - 4,432 4,050 2,391 (65,818) (1,650) (17,316) (7,638) 86,842 - - - - - - - - (574,997) (193,762) (124,357) 525,241 16,070 551,528 18,544 (593,325) (28,070) 1,009 10,792 (416,272) 93,119 (19,345) (22,777) 1,009 (364,266) Deferred tax assets not recognized: Tax losses Total Deferred tax assets not recognized As of December 31, 2013 As of December 31, 2012 ThUS$ 6,538 6,538 ThUS$ 1,439 1,439 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$ 6,538 (ThUS$ 1,439 at December 31, 2012) compared to a loss of ThUS$ 28,855 (ThUS$ 5,265 at December 31, 2012) to offset against future years tax benefits. ANNUAL REPORT 2013250Expense (income) for deferred and current income taxes for the periods ended at December 31, 2013 and December 31, 2012, respectively, are as follows: Expense for current income tax Current tax expense Adjustment to previous period’s current tax Other current tax expense Total current tax expense, net Expense for deferred income taxes Deferred expense for taxes related to the creation and reversal of temporary differences Reduction (increase) in value of deferred tax assets during the evaluation of its usefulness Total deferred tax expense, net Income tax expense 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 periods ended December 31, 2013 ThUS$ 73,611 (561) - 2012 ThUS$ 34,563 (13,886) 12 73,050 20,689 (92,863) 80,293 (256) 1,404 (93,119) 81,697 (20,069) 102,386 For the periods ended December 31, 2013 ThUS$ 61,118 11,932 73,050 (112,047) 18,928 (93,119) 2012 ThUS$ 30,827 (10,138) 20,689 (53,842) 135,539 81,697 (20,069) 102,386 ANNUAL REPORT 2013251Reconciliation of tax expense using the legal rate to the tax expense using the effective rate: Tax expense using the legal rate Tax effect of legal rate change Tax effect of rates in other jurisdictions Tax effect of non-taxable operating revenues Tax effect of disallowable expenses Other increases (decreases) in legal tax charge For the periods ended December 31, 2013 ThUS$ (61,035) 2012 ThUS$ 22,633 - 70,441 (*) (34,287) (24,004) 98,211 1,046 (10,512) (7,029) 27,437 (584) Total adjustments to tax expense using the legal rate 40,966 79,753 Tax expense using the effective rate (20,069) 102,386 Reconciliation of legal tax rate to effective tax rate: For the periods ended December 31, 2013 % 20.00 - 11.24 7.87 (32.18) (0.34) (13.41) 6.59 (*) 2012 % 20.00 62.24 (9.28) (6.21) 24.24 (0.52) 70.47 90.47 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. 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 Other increase (decrease) in legal tax rate Total adjustment to the legal tax rate Total effective tax rate (*) 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. ANNUAL REPORT 2013252Deferred taxes related to items charged to net equity: Aggregate deferred taxation of components of other comprehensive income Aggregate deferred taxation related to items charged to net equity For the periods ended December 31, 2013 ThUS$ (19,345) (3,440) 2012 ThUS$ (5,357) (257) Total deferred taxes related to items charged to net equity (22,785) (5,614) Deferred tax effects of the components of other comprehensive income: Cash-flow hedges Translation adjustment Cash-flow hedges Translation adjustment As of December 31, 2013 Amount before taxes Income tax expense (income) Amount after taxes ThUS$ (128,166) 629,858 ThUS$ 19,345 - 19,345 ThUS$ (108,821) 629,858 As of December 31, 2012 Amount before taxes Income tax expense (income) Amount after taxes ThUS$ 2,510 (19,170) ThUS$ 2,623 2,734 5,357 ThUS$ 5,133 (16,436) ANNUAL REPORT 2013253NOTE 21 - OTHER FINANCIAL LIABILITIES The composition of Other financial liabilities is as follows: Current (a) Interest bearing loans (b) Derivatives not recognized as a hedge (c) Hedge derivatives Total current Non-current (a) Interest bearing loans (b) Derivatives not recognized as a hedge (c) Hedge derivatives Total non-current As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 1,969,281 1,977,255 4,040 66,466 4,477 65,598 2,039,787 2,047,330 7,803,588 7,582,302 1,491 54,906 5,515 111,040 7,859,985 7,698,857 ANNUAL REPORT 2013254(a) Interest bearing loans Obligations with credit institutions and debt instruments: Current Loans to exporters Bank loans Guaranteed obligations Other guaranteed obligations Subtotal bank loans Obligation with the public Financial leases Other loans Total current Non-current Bank loans Guaranteed obligations Other guaranteed obligations Subtotal bank loans Obligation with the public Financial leases Other loans Total non-current As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 401,263 602,618 455,512 31,109 242,955 519,762 411,313 - 1,490,502 1,174,030 21,761 273,682 423,537 471,896 33,481 57,647 1,969,281 1,977,255 322,207 219,319 3,776,910 3,432,919 64,247 - 4,163,364 3,652,238 1,116,671 1,123,840 1,902,715 2,615,924 620,838 190,300 7,803,588 7,582,302 Total obligations with financial institutions 9,772,869 9,559,557 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, 2013 and December 31, 2012, are as follows: Currency Argentine peso Brazilian real Chilean peso Euro US Dollar Total As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 43,335 76,674 267,554 2,029 - 326,394 - 1,785 9,383,277 9,231,378 9,772,869 9,559,557 ANNUAL REPORT 2013255i l a n m o N e t a r e u l a v g n i t n u o c c a e t a r l a t o T e v i t c e f E n o i t a z i t r o m A l a t o T i l a n 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 e n o n a h t e r o M s r a e y e e r h t o t 0 9 n a h t e r o M o t p U r a e y e n o o t s y a d 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 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 a v l l i a n m o n t a , 3 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 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 % 0 0 1 . 2 2 0 , 0 3 % 0 0 1 . n o i t a r i p x E t A 0 0 0 , 0 3 % 3 6 1 . 9 1 8 , 0 3 2 % 3 6 1 . n o i t a r i p x E t A 0 0 0 , 0 3 2 % 6 0 1 . 3 2 0 , 0 4 % 6 0 1 . n o i t a r i p x E t A 0 0 0 , 0 4 % 7 8 1 . 9 9 3 , 0 0 1 % 7 8 1 . n o i t a r i p x E t A 0 0 0 , 0 0 1 % 9 1 3 . 4 0 2 , 5 1 1 % 9 1 3 . n o i t a r i p x E t A 1 5 0 , 5 1 1 % 5 8 . 4 4 5 5 7 6 2 , % 5 8 . 4 y l r e t r a u Q 0 6 4 , 8 6 2 % 5 7 . 0 2 0 7 3 , 5 1 % 5 7 . 0 2 y l h t n o M 5 3 3 , 5 1 % 8 7 . 3 2 5 6 9 7 2 , % 8 7 . 3 2 y l h t n o M 3 0 6 7 2 , - - - - - - - - - - - - - - - - - 1 5 0 , 5 1 1 0 0 0 , 0 3 - 0 0 0 , 0 4 - - 0 0 0 , 0 3 2 - - - 0 0 0 , 0 0 1 - - - - 5 3 3 , 5 1 3 0 6 7 2 , - - 4 7 3 1 8 , 4 2 7 , 4 2 1 2 7 7 , 6 4 0 9 5 , 5 1 % 1 0 . 5 5 0 7 0 9 , % 9 6 . 5 y l r e t r a u Q 3 4 5 1 9 , 1 3 8 , 6 2 7 6 8 7 2 , 2 7 1 5 2 , 8 0 8 , 8 5 6 8 , 2 % 3 7 . 2 6 6 9 , 8 % 6 0 . 3 y l r e t r a u Q 4 6 9 , 8 % 9 9 1 . 1 0 6 , 0 4 1 % 9 9 1 . y l r e t r a u Q 2 1 3 , 0 4 1 - - 3 3 0 , 0 1 6 4 6 , 2 8 3 1 7 , 4 3 0 2 9 2 1 , - - 5 4 7 , 6 9 1 2 , 2 % 1 3 . 2 6 0 3 7 1 4 , % 5 4 . 2 y l r e t r a u Q 4 5 2 , 8 1 4 7 6 2 1 2 2 , 1 7 8 , 3 8 5 8 9 , 6 7 6 5 2 7 2 , 5 7 8 , 8 % 6 7 1 . 4 3 3 , 3 0 0 , 2 % 7 4 . 2 y l r e t r a u Q , 6 7 7 9 9 0 , 2 4 8 6 , 6 4 1 1 , , 9 5 7 9 8 3 4 1 3 , 8 7 3 2 1 0 , 9 3 1 7 0 0 , 6 4 % 4 0 . 2 8 6 0 , 4 6 3 % 4 6 . 2 y l r e t r a u Q , 1 9 1 2 7 3 9 9 3 , 4 6 1 9 8 1 7 8 , % 8 7 1 . 7 8 6 , 5 9 1 % 2 3 . 1 y l r e t r a u Q 9 9 5 , 0 0 2 2 2 0 , 5 9 2 5 5 , 3 4 % 4 0 1 . 4 8 4 , 4 1 1 % 4 6 1 . y l r e t r a u Q 0 7 0 , 8 1 1 9 8 1 3 6 , 1 0 8 , 2 2 % 4 0 1 . 0 8 7 , 6 5 % 3 6 1 . y l r e t r a u Q 2 0 5 , 8 5 4 4 5 1 3 , 0 1 2 1 1 , 1 8 6 1 8 , 7 6 7 1 4 , 5 5 6 1 2 , 6 3 6 , 0 1 5 1 3 , 9 2 7 3 2 , 5 1 6 4 8 7 , 8 4 8 , 3 7 0 6 , 9 1 2 0 , 5 9 7 5 , 2 4 6 2 1 , % 1 8 . 2 4 6 7 , 6 5 6 % 1 8 . 2 y l r e t r a u Q 2 9 9 , 3 0 7 4 8 6 1 1 4 , 4 2 9 0 2 1 , 9 4 5 , 5 1 1 5 9 9 1 4 , 0 4 8 , 3 1 % 7 2 . 3 , 1 4 7 3 7 1 % 7 2 . 3 y l r e t r a u Q 6 3 0 , 3 7 1 4 1 8 , 4 8 8 4 4 , 2 3 8 1 0 , 8 3 8 0 4 , 3 1 8 4 3 , 4 - 6 8 9 9 , - y l r e t r a u Q 6 8 9 9 , 5 6 7 1 2 5 , 2 4 0 1 4 , 5 1 9 1 , 1 8 6 % 9 9 1 . 6 5 3 , 5 9 % 9 9 1 . y l r e t r a u Q 2 9 2 , 5 9 % 3 0 . 3 6 2 2 , 5 6 % 3 2 . 3 y l r e t r a u Q 6 7 0 , 5 6 % 1 2 . 1 8 5 6 , 9 8 % 1 2 . 1 y l r e t r a u Q 4 1 5 , 9 8 - - - - 7 4 2 , 4 6 2 4 3 , 3 2 3 0 7 7 , 1 0 0 , 9 8 5 1 7 , 6 5 6 7 3 , 5 1 7 3 6 , 7 0 7 2 1 , 6 9 8 , 3 1 3 3 8 , 3 1 4 1 4 , 4 3 2 5 , 4 8 0 8 , 4 0 3 4 1 , % 5 6 . 5 8 3 1 0 4 , % 8 3 . 6 y l r e t r a u Q 4 6 5 , 0 4 9 5 7 7 , 4 5 2 , 4 1 % 3 2 . 4 2 3 5 , 6 0 3 % 5 3 . 5 y l r e t r a u Q 4 7 7 , 8 0 3 7 0 4 , 2 2 3 0 4 , 8 0 1 5 9 3 1 2 1 , 2 0 7 2 4 , 7 6 8 , 3 1 % 5 1 4 . 6 2 8 , 5 4 1 % 5 6 . 4 y l r e t r a u Q 4 3 3 7 4 1 , 9 2 1 7 , 4 3 9 , 6 5 9 8 9 , 6 5 9 3 8 , 9 1 3 4 4 , 6 % 3 4 1 . 0 3 9 7 , % 3 4 1 . y l h t n o M 9 9 8 7 , % 5 7 1 . 8 8 4 , 2 7 1 % 5 7 1 . n o i t a r i p x E t A 8 3 8 , 0 7 1 - - - - % 0 0 . 6 0 5 0 , 4 5 4 % 0 0 . 6 y l r e t r a u Q 0 0 0 , 0 5 4 1 1 2 , 6 9 1 , 8 7 1 4 7 1 8 3 8 , 0 7 1 1 1 6 , 9 7 - - - - 2 9 3 , 5 1 9 8 1 , 6 1 6 $ S U $ S U $ S U $ S U $ S U F U $ S R A $ S R A $ 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 c n a r F E L O C I R G A T I D E R C E - 0 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 U O C F E P E - 0 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 U S A B I R A P P N B E - 0 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 U O G R A F S L L E W E - 0 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 U e l i h C A . . S U A . . S U A . . S U 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 K N A B I T I C E - 0 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 K N A B E L P P A E - 0 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 K N A B S U E - 0 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 U M T B E - 0 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 U K N A B E H C S T U E D E - 0 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 - t f a r c r i A P A W S s l a v i r r a - 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 O D A T S E 7 - 0 0 0 , 0 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 X E D A L B 1 - 8 5 4 , 0 0 1 6 7 , 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 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 A V B B 8 - 0 0 0 , 2 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 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 A C N A B P R O C 9 - 0 0 0 , 3 2 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 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 2 - 0 0 2 . 2 6 8 . 9 8 s n a o l k n a B a n i t n e g r A K N A B I T I C E - 0 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 n i t n e g r A A . . S U A V B B G N I E - 0 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 - 0 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 d e e t n a r a u G s n o i t a g i l b o e c n a r F E L O C I R G A T I D E R C E - 0 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 U A . . S U K N A B I T I C E - 0 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 O C F E P E - 0 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 U S A B I R A P P N B E - 0 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 U A C I R E M A F O C N A B E - 0 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 U G N I E - 0 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 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 A . . S U E S K N A B B V D E - 0 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 d e e t n a r a u g r e h t O A . . S U A . . S U ) * ( K N A B I T I C E - 0 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 G N I E O B E - 0 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 s n a o l s r e h t O 2 8 9 , 6 3 4 , 6 5 6 9 , 6 9 5 , 6 5 0 7 , 9 7 4 , 2 7 7 4 , 3 8 2 , 1 2 5 8 , 8 2 7 , 1 5 2 7 , 9 0 6 6 0 2 , 5 9 4 l a t o T . a d a n a C d n a s e t a t S d e t i n U n i d r a c t i d e r c h t i w s e l a s e h t m o r f s w o fl e r u t u f e h t h t i w d n o b d e z i t i r u c e S ) * ( ANNUAL REPORT 2013256 % $ 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 i l a n m o N l a t o T e v i t c e f E e t a r g n i t n u o c c a e t a r e u l a v n o i t a z i t r o m A l a t o T i l a n 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 s r a e y n a h t e r o M 0 9 n a h t e r o M e e r h t o t e n o r a e y e n o o t s y a d 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 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 a v l l i a n m o n t a , 3 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 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 % 0 2 . 3 9 1 7 , 4 4 % 6 6 . 4 , 2 5 1 0 4 1 % 2 4 7 . 9 6 6 % 3 7 . 4 8 2 2 , 6 7 % 4 9 . 2 1 8 9 , 3 6 % 6 7 . 3 % 0 2 . 5 % 1 3 . 6 % 3 7 . 3 % 2 4 7 . n o i t a r i p x E t A n o i t a r i p x E t A n o i t a r i p x E t A n o i t a r i p x E t A y l h t n o M % 9 2 . 3 6 4 0 , 6 2 1 % 7 8 . 3 n o i t a r i p x E t A % 5 1 0 1 . 1 0 7 2 4 , % 3 6 . 0 1 n o i t a r i p x E t A 5 8 8 , 3 4 9 4 8 7 3 1 , 4 8 6 0 3 8 , 3 7 7 5 3 , 2 6 1 4 3 , 2 2 1 8 8 6 , 2 4 - - - - - - - - - - - - - - % 1 0 . 6 6 3 2 , 4 % 1 0 . 6 y l h t n o M 5 1 2 , 4 1 5 8 1 , 1 3 0 1 , % 1 4 . 8 2 3 4 , 8 3 1 1 , % 0 6 . 8 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 % 5 2 . 1 5 9 5 , 8 5 % 5 2 . 1 - 0 7 9 , 2 - % 2 4 1 . 8 8 4 , 5 7 % 2 4 1 . - 5 1 3 , 6 - % 0 0 1 . 3 5 1 2 2 , % 5 7 . 0 3 3 4 , 2 2 % 0 4 1 . 3 0 2 , 8 9 % 0 9 . 0 8 0 0 , 3 2 2 % 0 0 1 . % 6 8 . 0 % 3 0 1 . % 0 4 1 . 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 1 2 3 , 8 5 0 7 9 , 2 2 5 3 , 5 7 1 5 6 , 5 8 - 0 9 7 1 , - 6 1 4 , 5 1 2 8 0 , 2 2 8 4 4 , 8 9 5 3 , 2 2 3 9 6 , 9 - 0 4 5 7 1 , - 3 1 8 , 0 2 2 8 9 5 , 1 7 3 , 5 0 9 5 , 2 2 2 7 8 9 , 6 0 1 3 2 1 7 4 , 5 4 9 7 9 , 6 6 7 3 1 , 1 3 4 1 1 , % 5 6 . 0 9 1 8 , 5 9 1 % 5 7 . 0 l i a u n n a m e S / y l r e t r a u Q 6 9 3 , 5 9 1 7 1 7 2 5 , % 0 5 . 2 0 7 0 , 5 2 % 5 7 1 . 3 8 2 , 2 % 5 2 . 1 9 4 0 , 2 5 % 5 2 . 1 5 2 4 , 4 6 % 4 7 1 . 9 6 8 , 2 8 % 0 5 . 2 % 5 7 1 . % 5 2 . 1 % 5 4 1 . % 4 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 0 0 0 , 5 2 9 7 2 , 2 8 7 9 1 5 , - - - 9 - 6 4 2 - 8 2 , 0 5 y l r e t r a u Q / y l h t n o M 8 1 7 2 8 , 3 1 8 7 1 , 9 9 4 , 0 2 y l r e t r a u Q 6 9 2 , 4 6 7 9 4 , 6 3 3 3 5 1 1 , % 8 7 . 2 5 0 7 7 4 2 , % 1 8 . 2 l i a u n n a m e S / y l r e t r a u Q , 8 2 1 6 4 2 4 8 9 , 8 1 1 2 5 3 , 5 5 % 1 7 1 . 8 8 5 , 6 0 1 % 1 7 1 . y l h t n o M 3 0 4 , 6 0 1 5 1 6 7 3 , 1 7 1 7 1 , % 0 0 . 2 2 8 7 1 2 , % 0 0 . 2 y l r e t r a u Q 7 3 7 1 2 , 7 6 2 , 4 1 7 1 6 , 2 - - - - 8 - 4 - - 5 1 9 - 3 7 6 , 5 1 - 2 9 7 , 6 2 2 6 2 , 5 9 5 9 , 4 8 1 3 , 4 4 3 7 5 , 5 5 6 6 8 , 8 5 0 0 5 , 2 1 - 0 1 2 1 , 6 7 9 0 1 , 0 6 6 , 8 2 3 9 2 , 9 4 7 2 2 , 0 4 7 9 0 , 3 8 7 6 1 4 , 9 9 7 , 8 2 1 3 4 4 9 1 2 7 4 , 1 3 7 1 2 , 1 4 6 7 4 , 8 8 6 , 2 4 - 6 1 3 8 3 4 , 5 5 4 6 1 , 1 1 3 , 9 9 5 6 , 2 0 1 8 1 , 8 5 7 1 , 9 7 1 8 1 , 7 1 9 2 1 , 3 3 4 , 5 2 0 9 5 5 7 3 , 9 8 4 5 , 8 4 3 8 9 , 3 9 6 8 1 1 , 0 9 4 , 6 1 0 1 6 , 8 3 0 3 1 , 7 0 2 , 2 0 5 0 , 9 1 1 6 , 6 2 6 2 6 , 0 4 3 9 1 0 - 0 7 , 4 7 - 2 0 1 2 6 7 1 , 5 2 3 1 , 0 2 0 , 3 2 9 9 , 2 0 8 5 8 7 5 3 8 9 5 , 8 5 2 , 4 1 1 9 7 , 5 2 1 3 , 7 9 1 0 3 4 , 3 7 0 3 1 , 7 7 8 , 3 9 0 0 , 6 0 8 7 2 , 3 5 4 $ S U $ S U $ S U $ S U L R B $ 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 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 . A . . S U . A . . S U . A . . S U . A . . S U . A . . S U d n a l g n E e c n a r F . A . . S U e c n a r F y n a m r e G . A . . S U . A . S L I S A R B O D O C N A B K N A B I T I C A B B U A T I O C N A B A R F A S O C N A B A R F A S O C N A B O C S E D A R B O C N A B O C S E D A R B O C N A B I 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 J I P P A H C S T A A M 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 i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a 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 K R O Y W E N F O K N A B E H T E - 0 l i z a r B s e i i r a 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 h t i w s n o i t a g i l b O s c i l b u p e h t 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 S A B I R A P P N B S A B I R A P P N B K N A B I T I C S A W A 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 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 s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a 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 e s a e l l a i c n a n i F y n a m r e G e c n a r F e c n a r F . A . . S U g r u o b m e x u L . C N I , S U E C N A N I F R I A K P . A . S G N I S A E L U O P A C A W K N A B - X E P I W F K S I X I T A N C B S H . A . . S U 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 7 8 8 , 5 3 3 , 3 9 6 8 , 2 7 7 , 9 9 6 4 , 0 8 2 , 3 4 8 0 , 1 6 3 , 1 3 9 6 , 8 6 6 0 5 0 , 3 5 4 7 3 5 , 2 5 5 5 0 1 , 5 4 2 4 3 4 , 7 7 8 , 9 9 8 7 , 0 4 8 , 3 0 7 1 , 2 5 9 , 1 2 0 9 , 1 8 1 , 2 2 6 2 , 2 6 1 , 1 1 1 3 , 0 4 7 d e t a d i l o s n o C l a t o T l a t o T % 7 5 . 0 0 2 4 7 1 , % 7 5 . 0 y l r e t r a u Q 4 9 3 7 1 , 1 3 5 , 6 5 8 4 , 4 7 9 2 , 4 6 6 5 1 , % 5 2 . 1 8 9 1 3 , % 5 2 . 1 y l h t n o M 4 9 1 3 , - - - 5 2 4 1 , 9 6 7 1 , $ S U . A . . S U % 8 7 . 3 7 1 0 , 5 3 3 % 6 8 . 3 y l r e t r a u Q 5 9 0 , 4 3 3 1 9 5 , 2 0 1 3 7 4 , 6 9 5 5 6 7 8 , 4 0 6 , 5 3 2 7 7 1 1 , $ S U y l a t I K N A B O G R A F S L L E W E - 0 l i z a r B s e i i r a d i s b u S d n a . A . S M A T . . A N T S E W H T R O N E L A R É N É G É T É I C O S H C N A R B N A L I M E - 0 l i z a r B s e i i r a d i s b u S d n a . A . S M A T - O T N O R O T E H T E - 0 l i z a r B s e i i r a d i s b u S d n a . A . S M A T % 8 3 . 0 1 6 9 8 % 8 3 . 0 1 % 8 5 . 0 1 9 6 0 1 , % 8 5 . 0 1 % 0 9 9 . 8 5 5 , 3 % 2 8 . 6 9 2 0 , 2 % 0 9 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 3 6 9 0 5 0 1 , 9 5 5 , 3 9 7 3 1 , % 8 3 . 2 1 8 7 7 2 , % 8 3 . 2 y l h t n o M 1 8 7 7 2 , - - - - - - 3 1 2 8 0 3 - - - - - 1 1 5 8 1 2 , 2 4 2 7 2 9 1 6 4 7 0 1 3 1 , 5 1 5 9 3 2 4 3 1 7 8 2 9 6 $ S U L R B L R B L R B R U E . A . . S U l i z a r B l i z a r B l i z a r B e c n a r F 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 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 M B I O C N A B K N A B N O N M O D I I 7 3 5 4 4 2 7 2 , L R B l i z a r B S O I E M E D A R I E L I S A R B A H N A P M O C I O T N E M A G A P E D E - 0 E - 0 E - 0 E - 0 E - 0 l i z a r B s e i i r a 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 s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T l i z a r B s e i i r a 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 r e h t O ANNUAL REPORT 2013257 i l a n m o N e t a r l a t o T i l a n m o n e u l a v e v i t c e f E n o i t a z i t r o m a l a t o T e v fi n a h t e r o M n a h t e r o M n a h t e r o M e t a r g n i t n u o c c a s r a e y e v fi o t e e r h t e e r h t o t e n o e u l a v s r a e y 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 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 l s e u a v g n i t n u o c c a t a , 3 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 % 0 0 1 . 0 0 0 , 0 3 % 0 0 1 . n o i t a r i p x E t A 2 2 0 , 0 3 % 3 6 1 . 0 0 0 , 0 3 2 % 3 6 1 . n o i t a r i p x E t A 9 1 8 , 0 3 2 % 6 0 1 . 0 0 0 , 0 4 % 6 0 1 . n o i t a r i p x E t A 3 2 0 , 0 4 % 7 8 1 . 0 0 0 , 0 0 1 % 7 8 1 . n o i t a r i p x E t A 9 9 3 , 0 0 1 % 9 1 3 . 1 5 0 , 5 1 1 % 9 1 3 . n o i t a r i p x E t A 4 0 2 , 5 1 1 % 5 8 . 4 0 6 4 , 8 6 2 % 5 8 . 4 y l r e t r a u Q 4 5 5 7 6 2 , % 5 7 . 0 2 5 3 3 , 5 1 % 5 7 . 0 2 y l h t n o M 0 7 3 , 5 1 % 8 7 . 3 2 3 0 6 7 2 , % 8 7 . 3 2 y l h t n o M 5 6 9 7 2 , - - - - - - - - % 3 7 . 2 4 6 9 , 8 % 6 0 . 3 y l r e t r a u Q 6 6 9 , 8 % 9 9 1 . 2 1 3 , 0 4 1 % 9 9 1 . y l r e t r a u Q 1 0 6 , 0 4 1 - - % 1 0 . 5 3 4 5 1 9 , % 9 6 . 5 y l r e t r a u Q 5 0 7 0 9 , 2 8 6 , 6 2 - - - - - - - - - 1 5 0 , 5 1 1 3 2 0 , 0 4 - 2 2 0 , 0 3 - - 9 1 8 , 0 3 2 - - 3 5 1 9 9 3 , 0 0 1 8 2 5 , 0 8 0 8 7 2 2 1 , 1 7 7 , 6 4 5 7 4 7 1 , - - - 7 3 4 7 2 , 3 3 0 , 0 1 - - 5 3 3 , 5 1 3 0 6 7 2 , 5 3 2 6 3 4 4 1 4 2 , 7 0 8 , 8 5 3 6 , 3 6 4 6 , 2 8 3 1 7 , 4 3 9 0 2 , 3 1 ) 9 1 ( 6 4 7 , 6 9 3 2 , 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 $ S U h T % 1 3 . 2 4 5 2 , 8 1 4 % 5 4 . 2 y l r e t r a u Q 6 0 3 7 1 4 , 1 3 0 1 2 2 , 3 4 2 , 3 8 0 2 4 , 5 7 6 5 2 7 2 , 6 5 3 , 0 1 % 6 7 1 . , 6 7 7 9 9 0 , 2 % 7 4 . 2 y l r e t r a u Q 4 3 3 , 3 0 0 , 2 6 6 3 , 5 1 1 1 , 1 7 8 , 5 6 3 3 6 3 , 0 3 3 2 1 0 , 9 3 1 2 2 7 2 5 , % 4 0 . 2 , 1 9 1 2 7 3 % 4 6 . 2 y l r e t r a u Q 8 6 0 , 4 6 3 3 7 4 , 2 6 1 7 4 8 , 4 8 3 8 5 , 6 7 5 1 3 , 9 2 0 5 8 , 0 1 % 8 7 . 0 9 9 5 , 0 0 2 % 2 3 . 1 y l r e t r a u Q 7 8 6 , 5 9 1 0 8 8 , 3 9 % 4 0 1 . 0 7 0 , 8 1 1 % 4 6 1 . y l r e t r a u Q 4 8 4 , 4 1 1 6 6 1 2 6 , % 4 0 1 . 2 0 5 , 8 5 % 3 6 1 . y l r e t r a u Q 0 8 7 , 6 5 7 2 0 1 3 , 6 5 2 , 2 4 1 9 8 1 2 , 8 5 7 0 1 , 6 6 9 , 8 3 8 3 2 , 5 1 7 9 7 9 1 , 6 1 7 9 , 6 4 8 7 , 8 4 8 , 3 7 4 3 , 5 4 8 7 2 , 1 3 4 1 , % 1 8 . 2 2 9 9 , 3 0 7 % 1 8 . 2 y l r e t r a u Q 4 6 7 , 6 5 6 , 3 6 1 5 9 3 7 1 4 , 9 0 1 3 8 0 , 3 9 5 9 9 1 4 , 6 0 1 7 1 , % 7 2 . 3 6 3 0 , 3 7 1 % 7 2 . 3 y l r e t r a u Q , 1 4 7 3 7 1 4 1 8 , 4 8 9 4 4 , 2 3 7 1 0 , 8 3 8 0 4 , 3 1 3 5 0 , 5 - 6 8 9 9 , - y l r e t r a u Q 6 8 9 9 , 5 6 7 1 2 5 , 2 4 0 1 4 , 5 1 9 1 , 1 8 6 % 9 9 1 . 2 9 2 , 5 9 % 9 9 1 . y l r e t r a u Q 6 5 3 , 5 9 % 3 0 . 3 6 7 0 , 5 6 % 3 2 . 3 y l r e t r a u Q 6 2 2 , 5 6 % 1 2 . 1 4 1 5 , 9 8 % 1 2 . 1 y l r e t r a u Q 8 5 6 , 9 8 - - - - 7 4 2 , 4 6 3 4 3 , 3 2 6 6 7 7 , 1 7 9 , 8 7 5 1 7 , 5 9 3 7 3 , 6 9 8 , 3 1 5 1 7 3 6 , 4 3 8 , 3 1 4 6 9 , 4 2 5 9 , 4 1 5 6 1 , % 5 6 . 5 4 6 5 , 0 4 % 8 3 . 6 y l r e t r a u Q 8 3 1 0 4 , 1 3 7 7 , 9 8 0 , 4 1 4 5 2 , 2 1 3 1 4 , 4 % 3 2 . 4 4 7 7 , 8 0 3 % 5 3 . 5 y l r e t r a u Q 2 3 5 , 6 0 3 4 2 3 , 2 2 5 9 5 7 0 1 , 7 2 0 , 8 1 1 2 0 7 2 4 , 4 8 8 , 5 1 % 5 1 4 . 4 3 3 7 4 1 , % 5 6 . 4 y l r e t r a u Q 6 2 8 , 5 4 1 9 0 1 7 , 7 6 5 , 6 5 3 0 4 , 5 5 9 3 8 , 9 1 8 0 9 , 6 % 3 4 1 . 9 9 8 7 , % 3 4 1 . y l h t n o M 0 3 9 7 , % 5 7 1 . 8 3 8 , 0 7 1 % 5 7 1 . n o i t a r i p x E t A 8 8 4 , 2 7 1 - - - - 2 9 3 , 5 1 9 8 1 , 8 3 8 , 0 7 1 0 5 6 1 , - 7 4 6 % 0 0 . 6 0 0 0 , 0 5 4 % 0 0 . 6 y l r e t r a u Q 0 5 0 , 4 5 4 1 1 2 , 6 9 1 , 8 7 1 4 7 1 1 1 6 , 9 7 - 0 5 0 , 4 $ S U $ S U $ S U $ S U $ S U F U $ S R A $ S R A $ 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 c n a r F E L O C I R G A T I D E R C E - 0 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 U O C F E P E - 0 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 U S A B I R A P P N B E - 0 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 U O G R A F S L L E W E - 0 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 U K N A B I T I C E - 0 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 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 . A . . S U . A . . S U . A . . S U K N A B E L P P A E - 0 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 K N A B S U E - 0 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 U M T B E - 0 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 U K N A B E H C S T U E D E - 0 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 - t f a r c r i A P A W S s l a v i r r a - 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 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 O D A T S E 7 - 0 0 0 . 0 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 X E D A L B 1 - 8 5 4 . 0 0 1 6 7 . 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 V B B 8 - 0 0 0 . 2 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 2 - 0 0 2 . 2 6 8 . 9 8 A C N A B P R O C 9 - 0 0 0 . 3 2 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 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 2 - 0 0 2 . 2 6 8 . 9 8 t r o p x e o t s n a o L s n a o l k n a B a n i t n e g r A K N A B I T I C E - 0 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 n i t n e g r A . A . . S U A V B B G N I E - 0 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 - 0 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 s n o i t a g i l b o d e e t n a r a u G . A . . S U E S K N A B B V D E - 0 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 d e e t n a r a u g r e h t O e c n a r F E L O C I R G A E T I D E R C E - 0 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 U . A . . S U K N A B I T I C E - 0 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 O C F E P E - 0 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 U S A B I R A P P N B E - 0 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 U A C I R E M A F O C N A B E - 0 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 U G N I E - 0 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 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 . A . . S U G N I E O B E - 0 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 . A . . S U ) * ( K N A B I T I C E - 0 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 s n a o l r e h t O 5 6 9 , 6 9 5 , 6 2 8 9 , 6 3 4 , 6 2 4 7 , 6 2 4 , 2 8 0 8 , 9 3 2 , 1 3 3 5 , 7 3 6 , 1 1 2 4 , 1 1 6 8 7 4 , 1 2 5 l a t o T . a d a n a C d n a s e t a t S d e t i n U n i d r a c t i d e r c h t i w s e l a s e h t m o r f s w o fl e r u t u f e h t h t i w d n o b d e z i t i r u c e S ) * ( ANNUAL REPORT 2013258 i l a n m o N l a t o T e v i t c e 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 n a h t e r o M e r o M e t a r i l a n m o n e u l a v g n i t n u o c c a s r a e y e v fi e v fi o t e e r h t e n o n a h t e u l a v s r a e y e e r h t o t e r o M 0 9 n a h t o t s y a d o t p U 0 9 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 s r a e y r a e y e n o 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 l e u a v g n i t n u o c c a t a , 3 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 % 0 2 . 3 5 8 8 , 3 4 % 6 6 . 4 9 4 8 7 3 1 , % 3 7 . 4 0 3 8 , 3 7 % 4 9 . 2 7 5 3 , 2 6 % 2 4 7 . 4 8 6 % 9 2 . 3 1 4 3 , 2 2 1 % 6 7 . 3 % 0 2 . 5 % 1 3 . 6 % 3 7 . 3 % 2 4 7 . % 7 8 . 3 % 5 1 0 1 . 8 8 6 , 2 4 % 3 6 . 0 1 n o i t a r i p x e t A n o i t a r i p x e t A n o i t a r i p x e t A n o i t a r i p x e t A y l h t n o M n o i t a r i p x e t A n o i t a r i p x e t A 9 1 7 , 4 4 , 2 5 1 0 4 1 8 2 2 , 6 7 1 8 9 , 3 6 9 6 6 1 0 7 2 4 , 6 4 0 , 6 2 1 - - - - - - - - - - - - - - - - - - - 1 5 - 3 1 4 , 2 4 , 2 4 7 0 3 1 4 2 4 , 8 4 3 1 2 , 2 2 1 3 4 8 2 8 , 8 4 1 0 7 2 4 , 6 0 3 , 2 0 1 4 , 9 4 0 8 7 2 , 8 6 7 1 4 , 7 8 1 8 - 1 2 7 7 , % $ 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 0 . 6 5 1 2 , 4 % 1 0 . 6 y l h t n o M 6 3 2 , 4 1 5 8 1 , 1 3 0 1 , 5 1 9 6 1 3 3 2 1 $ S U $ S U $ S U $ S U L R B $ S U L R B $ 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 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 K N A B I T I C A B B U A T I O C N A B A R F A S O C N A B A R F A S O C N A B O C S E D A R B O C N A B O C S E D A R B O C N A B d n a l l o H J I P P A H C S T A A M I 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 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 i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a 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 % 5 6 . 0 6 9 3 , 5 9 1 % 5 7 . 0 l i a u n n a m e S / y l r e t r a u Q 9 1 8 , 5 9 1 , 0 5 6 6 8 , 8 5 3 3 4 , 5 2 % 5 2 . 1 1 2 3 , 8 5 % 5 2 . 1 - 0 7 9 , 2 - % 2 4 1 . 2 5 3 , 5 7 % 2 4 1 . - 1 5 6 , 5 % 0 0 1 . 2 8 0 , 2 2 % 5 7 . 0 9 5 3 , 2 2 % 0 4 1 . 5 4 9 7 9 , % 0 9 . 0 0 9 5 , 2 2 2 - % 0 0 1 . % 6 8 . 0 % 3 0 1 . % 0 4 1 . 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 3 0 2 , 8 9 0 7 9 , 2 5 9 5 , 8 5 8 8 4 , 5 7 5 1 3 , 6 3 5 1 2 2 , 3 3 4 , 2 2 8 - 0 9 7 1 , - 7 1 4 , 5 1 8 4 4 , 8 3 9 6 , 9 8 0 0 , 3 2 2 7 8 9 , 6 0 1 % 0 5 . 2 0 0 0 , 5 2 % 5 7 1 . 9 7 2 , 2 % 5 2 . 1 8 7 9 1 5 , % 5 2 . 1 6 9 2 , 4 6 % 4 7 1 . 8 1 7 2 8 , % 8 7 . 2 , 8 2 1 6 4 2 % 1 7 1 . 3 0 4 , 6 0 1 % 5 2 . 1 4 9 1 3 , % 0 0 . 2 7 3 7 1 2 , % 7 5 . 0 4 9 3 7 1 , % 8 7 . 3 5 9 0 , 4 3 3 % 8 3 . 0 1 3 6 9 % 8 5 . 0 1 0 5 0 1 , % 0 9 9 . 9 5 5 , 3 % 2 8 . 6 9 7 3 1 , % 0 5 . 2 % 5 7 1 . % 5 2 . 1 % 5 4 1 . % 4 7 1 . % 1 8 . 2 % 1 7 1 . % 0 0 . 2 % 5 2 . 1 % 6 8 . 3 % 7 5 . 0 % 8 3 . 0 1 % 8 5 . 0 1 % 0 9 9 . % 2 8 . 6 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 r e t r a u Q / y l h t n o M 3 8 2 , 2 0 7 0 , 5 2 9 4 0 , 2 5 5 2 4 , 4 6 9 6 8 , 2 8 l i a u n n a m e S / y l r e t r a u Q 5 0 7 7 4 2 , 4 8 9 , 8 1 1 - - - 6 6 7 3 1 , 7 1 7 2 5 , 7 9 4 , 6 3 3 1 8 7 1 , 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 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 6 9 8 9 6 0 1 , 8 5 5 , 3 9 2 0 , 2 - - - - - 8 9 1 3 , 2 8 7 1 2 , 8 8 5 , 6 0 1 5 1 6 7 3 , - 7 6 2 , 4 1 0 2 4 7 1 , 1 3 5 , 6 7 1 0 , 5 3 3 1 9 5 , 2 0 1 1 - 4 5 7 1 , 2 - 1 8 , 0 2 2 8 9 5 , 1 7 3 , 5 3 2 1 7 4 , 1 3 4 1 1 , 9 - 6 4 2 - 8 2 3 3 5 1 1 , 0 0 5 , 0 2 2 5 3 , 5 5 1 7 1 7 1 , 7 1 6 , 2 - 5 8 4 , 4 3 7 4 , 6 9 - 3 1 2 8 0 3 - - - 3 7 6 , 5 1 7 3 4 , 5 5 4 6 1 , , 6 2 1 1 3 , 9 - 2 9 7 2 6 2 , 5 9 5 9 , 4 9 5 6 , 2 0 1 8 1 , 8 5 7 1 , 8 1 3 , 4 4 9 7 1 8 1 , 3 7 5 , 5 5 7 1 9 2 1 , 0 0 5 , 2 1 5 7 3 , 9 - 0 1 2 1 , 0 9 5 8 4 5 , 8 4 6 7 9 0 1 , 3 8 9 , 3 0 6 6 , 8 2 9 6 8 1 1 , 3 9 2 , 9 4 0 9 4 , 6 1 7 2 2 , 0 4 1 1 6 , 8 - 7 9 0 , 3 3 0 3 1 , 5 2 4 1 , - - - 1 1 5 0 2 2 , 2 4 7 6 2 9 1 5 4 7 5 0 2 1 , 6 3 0 , 2 5 2 3 1 , 6 5 1 3 , 6 5 6 , 3 1 5 6 2 5 6 1 0 4 , 6 6 1 5 , 4 4 3 3 , 8 5 9 1 3 , 1 0 2 1 0 5 , 3 6 3 4 1 , 7 2 0 , 4 6 8 5 7 , 4 6 9 2 , 8 9 4 3 7 7 1 , 1 4 5 2 2 2 3 5 1 5 8 2 4 2 8 7 9 2 , 4 6 6 5 1 , 5 5 6 7 8 , 4 0 6 , 5 3 4 9 6 , 2 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 L R B L R B L R B R U E % 8 3 . 2 1 8 7 7 2 , % 8 3 . 2 y l h t n o M 1 8 7 7 2 , 7 3 5 4 4 2 7 2 , L R B 9 6 4 , 0 8 2 , 3 4 3 4 , 7 7 8 , 9 7 8 8 , 5 3 3 , 3 9 5 8 , 6 6 3 , 1 8 4 2 , 4 7 6 8 9 3 , 8 5 4 5 3 9 , 9 5 5 7 4 4 , 6 7 2 9 6 8 , 2 7 7 , 9 1 0 6 , 3 9 7 , 3 6 5 0 , 4 1 9 , 1 1 3 9 , 5 9 0 , 2 6 5 3 , 1 7 1 , 1 5 2 9 , 7 9 7 . A . . S U . A . . S U . A . . S U . A . . S U . A . . S U . A . . S U d n a l g n E e c n a r F . A . . S U e c n a r F y n a m r e G . 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 g r u o b m e x u L . A . . S U y l a t I . A . . S U 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 U 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 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 S A B I R A P P N B S A B I R A P P N B K N A B I T I C S A W A . . 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 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 . C N I . S U E C N A N I F R I A K P . A . S G N I S A E L U O P A C A W K N A B - X E P I W F K S I X I T A N C B S H 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 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 M B I O C N A B K N A B N O N M O D I I - 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 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 i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a 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 d e t a d i l o s n o C l a t o T O T N E M A G A P l a t o T E D S O I E M E D A R I E L I S A R B A H N A P M O C I E - 0 l i s a r B s e i i r a 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 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 % 1 4 . 8 0 0 0 , 0 0 1 1 , % 0 6 . 8 n o i t a r i p x e t A 2 3 4 , 8 3 1 1 , , 4 7 7 5 0 8 4 5 5 , 5 0 3 3 4 3 , 5 1 0 0 , 2 0 6 7 9 1 , $ S U K R O Y W E N F O K N A B E H T E - 0 l i z a r B s e i i r a 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 h t i w s n o i t a g i l b O ANNUAL REPORT 2013259 , 1 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 , l a t o T i l a n m o N l a t o T e v i t c e 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 n a h t e r o M n a h t e r o M n a h t e r o M e t a r g n i t n u o c c a e t a r e u l a v i l a n m o n e u l a v e v fi s r a e y e v fi o t e e r h t e e r h t o t e n o s r a e y s r a e y 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 % $ 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 % 7 1 2 . 3 5 2 , 0 3 % 7 1 2 . l a u n n a m e S i 0 0 0 , 0 3 % 0 7 1 . 6 5 0 , 5 3 % 0 7 1 . l a u n n a m e S i 0 0 0 , 5 3 % 2 3 . 1 4 8 0 , 5 7 % 2 3 . 1 y l r e t r a u Q 0 0 0 , 5 7 % 9 7 1 . 2 6 5 , 2 0 1 % 3 8 1 . l a u n n A 0 0 0 , 2 0 1 % 7 5 . 2 6 8 5 , 4 1 2 % 7 5 . 2 - 3 7 3 . 4 1 2 % 4 7 1 . 2 7 9 , 4 4 % 6 7 1 . l a u n n a m e S i 8 4 8 . 4 4 - - - - - - - - - - - - - - - - 3 7 3 , 4 1 2 - - - - - - 8 4 8 , 4 4 - - 0 0 0 , 0 3 0 0 0 , 5 3 0 0 0 , 5 7 0 0 0 , 2 0 1 % 1 0 . 5 1 6 4 1 0 1 , % 9 6 . 5 y l r e t r a u Q 9 4 6 , 2 0 1 4 1 1 1 4 , 8 7 4 , 6 2 1 5 9 , 3 2 4 7 3 , 8 2 3 7 2 , % 7 3 . 3 9 1 7 7 8 , % 2 4 . 3 y l r e t r a u Q 8 4 4 7 8 , - 4 1 7 , 6 9 2 1 5 3 , 2 0 4 , 3 3 3 0 2 , 2 1 % 1 4 . 4 4 9 4 , 5 6 % 6 9 . 4 y l r e t r a u Q 8 4 1 6 6 , 1 1 2 , 8 1 4 1 0 , 3 1 3 5 7 0 2 , 6 9 6 , 0 1 4 7 4 , 3 % 7 6 . 3 0 0 7 , 4 4 4 % 5 1 4 . y l r e t r a u Q 0 9 0 1 5 4 , 1 3 2 , 6 4 1 7 7 8 , 0 3 1 9 6 7 , 8 1 1 5 3 6 1 4 , 8 7 5 , 3 1 % 6 7 1 . 6 1 6 , 2 7 8 1 , % 7 5 . 2 y l r e t r a u Q 3 6 4 , 9 5 9 1 , , 2 6 1 1 4 1 1 , 7 0 4 , 4 3 3 0 9 8 , 4 2 3 8 5 4 , 9 1 1 6 4 5 , 9 3 % 0 1 2 . 4 5 8 , 9 9 3 % 1 7 . 2 y l r e t r a u Q , 8 0 9 9 0 4 0 1 7 , 8 0 2 9 6 3 , 4 8 2 1 1 9 7 , 6 0 4 , 8 2 1 1 3 , 9 % 5 8 . 0 5 3 4 , 4 1 2 % 9 3 . 1 y l r e t r a u Q 9 4 4 , 0 2 2 4 2 0 7 1 1 , 5 4 6 , 2 4 0 3 9 0 4 , 9 1 9 , 4 1 1 3 9 , 4 % 3 1 1 . 0 2 9 , 3 2 1 % 3 7 1 . y l r e t r a u Q 2 2 2 , 8 2 1 3 3 7 , 4 7 1 2 2 , 2 2 6 1 1 1 2 , 8 3 6 7 , 4 1 5 , 2 % 1 1 1 . 1 1 4 1 6 , % 1 7 1 . y l r e t r a u Q 0 8 4 , 3 6 3 2 2 7 3 , 9 1 9 0 1 , 9 5 3 , 0 1 8 4 7 3 , 1 3 2 1 , % 6 2 . 1 4 9 3 , 5 6 1 % 7 9 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 , 8 8 3 , 6 2 2 0 6 , 9 9 5 1 3 , % 7 2 . 1 2 6 6 , 2 0 1 % 8 9 1 . y l r e t r a u Q 2 7 0 7 0 1 , 9 7 5 , 5 6 3 5 1 7 1 , 4 0 4 , 6 1 4 7 9 5 , 2 6 9 1 , % 5 3 . 3 3 1 8 , 0 9 1 % 5 3 . 3 y l r e t r a u Q 0 0 0 , 0 9 1 6 0 9 , 6 9 1 9 7 9 3 , 9 3 3 , 6 3 3 1 8 , 2 1 1 5 1 4 , - 4 5 7 3 1 , - - 4 5 7 3 1 , 6 1 9 1 , 9 4 5 , 3 8 5 1 5 , 6 1 3 , 2 5 1 8 % 2 4 . 3 0 7 6 , 5 8 % 1 7 . 3 y l r e t r a u Q 1 9 4 , 5 8 4 4 8 1 , 3 6 5 , 5 2 9 9 4 , 5 3 5 7 0 , 6 1 0 1 5 , 6 % 9 2 . 1 9 6 8 , 3 0 1 % 2 3 . 1 y l r e t r a u Q 4 8 6 , 3 0 1 5 8 4 , 5 2 6 1 2 , 0 3 5 4 1 9 2 , 2 9 1 4 1 , 6 4 6 , 4 % 5 6 . 5 0 8 4 , 5 4 % 8 3 . 6 y l r e t r a u Q 6 8 0 , 6 4 9 8 0 , 5 1 1 6 4 , 3 1 4 1 0 , 2 1 4 6 1 4 , 8 5 3 1 , % 1 3 . 1 6 6 4 7 , % 1 3 . 1 y l r e t r a u Q 2 6 4 7 , - - - 7 3 6 , 5 5 2 8 1 , % 0 7 . 4 8 1 4 1 1 3 , % 9 2 . 5 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 , % 6 8 1 . 2 8 5 , 8 4 1 % 6 8 1 . - , 9 8 1 6 4 1 % 8 0 . 2 0 4 3 , 8 5 % 8 0 . 2 y l r e t r a u Q 0 6 9 , 8 5 - - - , 9 8 1 6 4 1 - - 8 5 2 , 5 1 2 7 4 , 9 2 6 0 7 0 1 , 4 2 5 , 3 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 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 a v l l i a n 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 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 $ 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 c n a r F E L O C I R G A T I D E R C E - 0 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 U O C F E P E - 0 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 U S A B I R A P P N B E - 0 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 U O G R A F S L L E W E - 0 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 U K N A B I T I C E - 0 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 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 . A . . S U . A . . S U K N A B E L P P A E - 0 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 U M T B E - 0 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 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 . A . . S U T N E M P O L E V E D N A P A J F O K N A B E - 0 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 - 0 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 U K N A B E H C S T U E D E - 0 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 D O C N A B 5 - 0 0 0 . 4 0 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 2 - 0 0 2 . 2 6 8 . 9 8 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 I C B 6 - 0 0 0 . 6 0 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 U A T I K - 0 3 0 . 5 4 6 . 6 7 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 V B B 8 - 0 0 0 . 2 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 O D A T S E 7 - 0 0 0 . 0 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 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 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 . A . . S U G N I E - 0 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 d e e t n a r a u G s n o i t a g i l b o e c n a r F E L O C I R G A E T I D E R C E - 0 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 U K N A B I T I C E - 0 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 U D E R E T R A H C S . E - 0 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 U - t f a r c r i A P A W S s l a v i r r a - 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 G N I E - 0 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 . A . . S U . A . . S U . A . . S U O C F E P E - 0 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 S R E H T O - 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 G N I E O B E - 0 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 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 ANNUAL REPORT 2013260 % $ 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 i l a n m o N l a t o T e v i t c e f E n o i t a z i t r o m A l a t o T e r o M n a h t e r o M e r o M e t a r g n i t n u o c c a e t a r e u l a v i l a n m o n e v fi n a h t o t e e r h t e u l a v s r a e y s r a e y e v fi e n o n a h t e e r h t o t e r o M 0 9 n a h t o t s y a d o t p U 0 9 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 s r a e y r a e y e n o % 1 8 . 2 % 3 0 . 4 % 5 3 . 5 % 2 7 . 0 1 % 5 6 . 5 6 3 3 0 8 4 , 4 6 9 1 4 , 0 3 7 1 5 , 2 5 1 6 1 9 , 6 6 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 m e S i n o i t a r i p x E t A 2 9 2 2 3 , 0 5 6 8 9 9 2 , 0 8 9 1 5 1 , 1 9 3 , 3 6 1 % 1 0 . 4 / % 9 6 7 . 6 9 5 , 2 3 % 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 6 4 4 , 2 3 % 4 9 . 8 % 4 3 . 3 8 7 6 0 5 7 2 , % 4 9 . 8 % 4 3 . 3 y l h t n o M n o i t a r i p x E t A 8 8 4 8 4 7 2 , - - - - - - - - - - - - - - - - - - - - - - - 4 8 7 A / N A / N % 5 2 . 2 A / N % 0 5 1 . % 4 8 . 3 % 9 6 . 3 % 9 2 . 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 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 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 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 , 7 5 6 , 4 3 2 9 2 1 1 8 , 0 1 8 , 4 1 1 9 8 6 , 9 1 7 2 6 , 0 1 - 5 3 5 1 1 , 9 2 9 , 3 4 - 9 0 6 , 5 4 8 3 7 1 , 1 5 6 , 5 9 3 9 , 4 4 6 0 7 1 , 3 9 5 , 2 8 9 2 6 7 6 , - - - 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 % 6 5 . 8 1 7 2 1 5 2 , % 6 9 . 8 l a u n n a m e S i 8 7 6 , 4 4 2 - - % 1 4 . 8 1 5 2 , 6 4 1 1 , % 0 6 . 8 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 - - - % 5 9 . 0 4 7 6 , 4 % 6 9 . 0 y l h t n o M 8 0 6 , 4 3 8 3 , 2 1 7 9 1 6 8 7 9 2 % 7 3 . 0 / % 1 0 . 2 6 8 9 7 9 4 , % 2 8 . 0 / % 1 0 . 2 l i a u n n a m e S / y l r e t r a u Q 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 4 9 5 1 , % 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 . 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 % 1 2 . 2 / % 1 1 2 . 1 1 1 8 9 , % 1 2 . 2 / % 1 1 2 . y l r e t r a u Q / y l h t 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 , - - - - - 6 5 7 4 3 3 , 2 4 8 8 8 , 6 2 9 4 2 1 1 , 4 0 6 , 3 2 % 2 3 . 3 / % 2 6 . 2 2 0 0 , 9 1 3 % 2 3 . 3 / % 2 6 . 2 l i a u n n a m e S / y l r e t r a u Q 5 2 4 , 6 1 3 4 6 4 , 3 6 1 9 8 9 , 6 6 % 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 4 4 5 , 9 1 7 4 8 1 8 3 , 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 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 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 5 2 0 , 2 5 5 2 , 2 3 5 7 4 7 2 7 5 1 , 0 2 5 , 2 - - - - - - - - - - - - - - 7 4 6 , 3 2 1 7 2 , 0 1 - - 1 2 5 , 5 1 7 4 8 , 2 2 9 0 7 1 1 , 0 0 5 , 6 4 3 7 3 , 6 3 1 3 4 , 9 1 8 9 7 , 8 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 , 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 6 5 4 5 2 1 3 , 0 4 1 9 , 5 7 2 1 , 9 0 7 3 , 2 7 9 5 , 9 0 6 , 2 3 9 4 9 6 7 1 , 7 0 2 , 4 5 1 0 1 , 1 8 - 4 7 0 2 3 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 5 2 0 , 0 8 3 8 6 9 1 5 1 , 4 6 9 1 9 , 4 6 1 0 9 , 4 7 5 , 4 3 5 5 3 1 1 , 6 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 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 3 2 6 , 5 4 7 8 , 9 0 1 - 2 5 8 7 1 1 , 6 5 3 , 4 1 7 2 4 8 4 7 2 , 2 2 3 , 0 5 - 3 6 3 , 4 2 6 0 1 2 4 , 2 9 9 3 5 , 5 4 6 0 3 7 1 , - 1 6 - 6 9 0 1 2 , 0 2 2 8 6 4 , 4 2 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 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 , $ 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 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 d n a l l o H . A . . S U l i z a r B . A . . S U . A . . S U . A . . S U . A . . S U . A . . S U d n a l g n E e c n a r F . A . . S U e c n a r F y n a m r e G . A . . S U % 0 2 . 2 5 2 0 1 4 , % 0 2 . 2 y l h t 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 y n a m r e G e c n a r F e c n a r F . A . . S U g r u o b m e x u L . A . . S U y l a t I . . A . . S U l i z a r B l i z a r B . . 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 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 . C N I , S U E C N A N I F R I A K P . A . S G N I S A E L U O P A K A W K N A B - X E P I W F K S I X I T A N C B S H . 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 . A . S M B I O C N A B K N A B N O N M O D I I - O T N O R O T E H T . A . . S U 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 c n a r F l i z a r B l i z a r 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 l i z a r B . A . S L I T N A C R E M O T N E M A D N E R R A A N I T A L S I C 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 S A B I R A P P N B S A B I R A P P N B K N A B I T I C S A W A 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 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 i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a 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 E D S O I E M E D A R E L I S A R B A H N A P M O C I d e t a d i l o s n o C l a t o T O T N E M A G A P l a t o T E - 0 l i z a r B s e i i r a 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 r e h t O . A . S L I S A R B O D O C N A B E - 0 l i z a r B s e i i r a d i s b u S d n a . A . S M A T 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 a v l l i a n 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 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 . 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 I G N R E K E Z R E V T E I D E R C J I P P A H C S T A A M 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 z a r B s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a 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 K R O Y W E N F O K N A B E H T E - 0 l i z a r B s e i i r a 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 h t i w s n o i t a g i l b O s c i l b u p e h t s e s a e l l a i c n a n i F ANNUAL REPORT 2013261 i l a n m o N l a t o T e v i t c e 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 n a h t e r o M n a h t e r o M e t a r i l a n m o n e u l a v e t a r g n i t n u o c c a e u l a v e v fi s r a e y o t e e r h t e v fi s r a e y 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 0 9 s y a d % $ 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 % 7 1 2 . 0 0 0 , 0 3 % 7 1 2 . l a u n n a m e S i 3 5 2 , 0 3 % 0 7 1 . 0 0 0 , 5 3 % 0 7 1 . l a u n n a m e S i 6 5 0 , 5 3 % 2 3 . 1 0 0 0 , 5 7 % 2 3 . 1 y l r e t r a u Q 4 8 0 , 5 7 % 9 7 1 . 0 0 0 , 2 0 1 % 3 8 1 . l a u n n A 2 6 5 , 2 0 1 % 7 5 . 2 3 7 3 , 4 1 2 % 7 5 . 2 - 6 8 5 , 4 1 2 % 4 7 1 . 8 4 8 , 4 4 % 6 7 1 . l a u n n a m e S i 2 7 9 , 4 4 - - - - - - - - - - - - - - - - 2 7 3 , 4 1 2 - - - - - 3 5 2 , 0 3 6 5 0 , 5 3 4 8 0 , 5 7 4 1 2 2 6 5 , 2 0 1 ) 6 1 ( 8 8 9 , 4 4 - % 1 0 . 5 9 4 6 , 2 0 1 % 9 6 . 5 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 % 7 3 . 3 8 4 4 7 8 , % 2 4 . 3 y l r e t r a u Q 9 1 7 7 8 , - 4 1 7 , 6 8 2 1 5 3 , 2 0 4 , 3 3 5 7 4 , 2 1 % 1 4 . 4 8 4 1 6 6 , % 6 9 . 4 y l r e t r a u Q 4 9 4 , 5 6 9 7 0 , 8 1 4 6 7 2 1 , 6 2 1 0 2 , 6 9 6 , 0 1 9 2 8 , 3 % 7 6 . 3 0 9 0 1 5 4 , % 5 1 4 . y l r e t r a u Q 0 0 7 , 4 4 4 4 2 2 , 5 4 1 5 6 7 , 8 2 1 8 4 6 , 3 1 1 5 3 6 1 4 , 8 2 4 , 5 1 % 6 7 1 . 3 6 4 , 9 5 9 1 , % 7 5 . 2 y l r e t r a u Q 6 1 6 , 2 7 8 1 , , 6 2 9 9 0 1 1 , 0 0 7 3 1 3 , 3 2 4 , 4 8 2 8 5 4 , 9 1 1 9 0 1 5 4 , % 0 1 2 . , 8 0 9 9 0 4 % 1 7 . 2 y l r e t r a u Q 4 5 8 , 9 9 3 , 7 2 7 5 0 2 8 8 5 1 8 , 2 2 4 , 3 7 6 0 4 , 8 2 1 1 7 0 1 , % 5 8 . 0 9 4 4 , 0 2 2 % 9 3 . 1 y l r e t r a u Q 5 3 4 , 4 1 2 3 9 2 , 5 1 1 7 1 1 1 4 , 8 9 7 7 3 , 9 1 9 , 4 1 8 0 3 , 5 % 3 1 1 . 2 2 2 , 8 2 1 % 3 7 1 . y l r e t r a u Q 0 2 9 , 3 2 1 9 8 2 , 3 7 7 7 1 1 2 , 0 7 0 , 9 1 8 3 6 7 , % 1 1 1 . 0 8 4 , 3 6 % 1 7 1 . y l r e t r a u Q 1 1 4 1 6 , 7 9 4 , 6 3 1 0 4 , 0 1 7 4 3 , 9 8 4 7 3 , 6 4 7 2 , 8 1 4 1 , % 6 2 . 1 9 8 7 2 7 1 , % 7 9 1 . y l r e t r a u Q 4 9 3 , 5 6 1 8 7 2 , 3 0 1 0 6 8 , 5 2 8 8 0 , 3 2 2 0 6 , 9 6 6 5 , 3 % 7 2 . 1 2 7 0 7 0 1 , % 8 9 1 . y l r e t r a u Q 2 6 6 , 2 0 1 0 7 8 , 3 6 5 8 0 , 6 1 0 6 3 , 4 1 4 7 9 5 , 3 7 3 , 2 % 5 3 . 3 0 0 0 , 0 9 1 % 5 3 . 3 y l r e t r a u Q 3 1 8 , 0 9 1 6 0 9 , 6 9 1 9 7 9 3 , 9 3 3 , 6 3 3 1 8 , 2 1 4 6 9 , 4 - 4 5 7 3 1 , - - 4 5 7 3 1 , 6 1 9 1 , 9 4 5 , 3 8 5 1 5 , 6 1 3 , 2 5 1 8 % 2 4 . 3 1 9 4 , 5 8 % 1 7 . 3 y l r e t r a u Q 0 7 6 , 5 8 1 4 8 1 , 1 3 4 , 5 2 5 5 1 5 3 , 6 7 0 , 6 1 7 6 1 7 , % 9 2 . 1 4 8 6 , 3 0 1 % 2 3 . 1 y l r e t r a u Q 9 6 8 , 3 0 1 6 8 4 , 5 2 6 1 2 , 0 3 5 4 1 9 2 , 1 9 1 4 1 , 1 3 8 , 4 % 5 6 . 5 6 8 0 , 6 4 % 8 3 . 6 y l r e t r a u Q 0 8 4 , 5 4 5 9 9 , 4 1 7 3 2 , 3 1 1 8 4 1 1 , 4 6 1 4 , % 1 3 . 1 2 6 4 7 , % 1 3 . 1 y l r e t r a u Q 6 6 4 7 , - - - 8 3 6 , 5 3 0 6 1 , 8 2 8 1 , % 0 7 . 4 1 6 2 , 4 1 3 % 9 2 . 5 y l r e t r a u Q 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 % 6 8 1 . , 9 8 1 6 4 1 % 6 8 1 . - 2 8 5 , 8 4 1 % 8 0 . 2 0 6 9 , 8 5 % 8 0 . 2 y l r e t r a u Q 0 4 3 , 8 5 - - - , 0 9 1 6 4 1 9 2 8 1 , 3 6 5 8 3 6 , 4 1 2 7 4 , 9 2 6 0 7 0 1 , 4 2 5 , 3 6 2 8 , 5 3 2 , 5 1 7 5 , 7 0 1 , 5 0 7 4 , 2 0 1 , 2 1 6 9 , 1 2 9 7 8 9 , 0 6 2 , 1 6 7 1 , 3 3 4 7 7 9 , 8 8 3 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 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 l s e u 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 $ 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 . 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 S A B I R A P P N B E - 0 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 O G R A F S L L E W E - 0 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 O C F E P E - 0 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 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 K N A B I T I C E - 0 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 U M T B E - 0 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 K N A B E L P P A E - 0 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 C I R E M A F O K N A B H C N Y L L I R R E M E - 0 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 U N A P A J F O K N A B T N E M P O L E V E D E - 0 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 U K N A B E H C S T U E D E - 0 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 - s l a v i r r a t f a r c r i A p a w S - 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 E D O C N A B 5 - 0 0 0 . 4 0 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 2 - 0 0 2 . 2 6 8 . 9 8 I C B 6 - 0 0 0 . 6 0 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 U A T I K - 0 3 0 . 5 4 6 . 6 7 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 V B B 8 - 0 0 0 . 2 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 O D A T S E 7 - 0 0 0 . 0 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 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 2 - 0 0 2 . 2 6 8 . 9 8 e c n a r F E L O C I R G A T I D E R C E - 0 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 U G N I E - 0 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 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 e c n a r F E L O C I R G A T I D E R C E - 0 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 U G N I E - 0 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 . 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 . E - 0 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 K N A B I T I C E - 0 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 O C F E P E - 0 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 G N I E O B S R E H T O l a t o T - 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 - 0 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 s e s a e l l a i c n a n i F s n a o l r e h O ANNUAL REPORT 2013262 i l a n m o N e t a r l a t o T i l a n 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 n a h t e r o M n a h t e r o M n a h t e r o M n a h t e r o M 0 9 o t p U y c n e r r u C e u l a v s r a e y s r a e y r a e y e n o g n i t n u o c c a s r a e y e v fi e v fi o t e e r h t e e r h t o t e n o o t s y a d 0 9 s y a d 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 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 l e u 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 % 1 8 . 2 % 3 0 . 4 % 5 3 . 5 % 2 7 . 0 1 % 5 6 . 5 2 9 2 2 3 , 0 5 6 8 9 9 2 , 0 8 9 1 5 1 , 1 9 3 , 3 6 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 m e S i n o i t a r i p x E t A 6 3 3 0 8 4 , 4 6 9 1 4 , 0 3 7 1 5 , 2 5 1 6 1 9 , 6 6 1 % 1 0 . 4 / % 9 6 7 . 6 4 4 , 2 3 % 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 6 9 5 , 2 3 % 4 9 . 8 % 4 3 . 3 8 8 4 8 4 7 2 , % 4 9 . 8 % 4 3 . 3 y l h t n o M n o i t a r i p x E t A 8 7 6 0 5 7 2 , - - - - - - - - - - - - - - - - - - - - - - - 8 4 7 7 4 7 3 6 , 4 8 6 , 5 3 7 0 1 1 1 , - 1 1 7 9 1 1 , 0 6 5 , 4 1 8 2 6 0 5 7 2 , 3 3 7 5 3 7 , 4 2 4 4 4 1 4 , 6 3 3 5 0 2 7 4 , 8 8 2 7 1 , - 0 5 % $ 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 % 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 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 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 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 5 3 5 1 1 , 9 2 9 , 3 4 9 8 6 , 9 1 7 5 6 , 4 3 2 0 7 0 7 2 , 7 5 3 , 5 2 - 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 , % 7 3 . 0 / % 1 0 . 2 1 2 7 , 4 9 4 % 2 8 . 0 / % 1 0 . 2 l i a u n n a m e S / y l r e t r a u Q 6 8 9 7 9 4 , 2 6 5 , 2 8 1 2 9 3 1 2 1 , 9 2 9 , 6 2 1 % 9 8 . 2 % 5 2 . 2 % 9 5 . 2 % 5 8 . 0 0 0 5 7 3 , 2 0 4 , 5 6 8 0 1 8 , 8 5 4 , 9 6 % 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 % 1 2 . 2 / % 1 1 2 . 0 7 7 7 9 , % 1 2 . 2 / % 1 1 2 . y l r e t r a u Q / y l h t n o M 0 7 5 7 3 , 0 2 4 , 5 9 7 3 1 8 , 6 9 5 , 9 6 1 1 1 8 9 , - - - 4 3 3 , 2 4 8 8 8 , 6 2 % 2 3 . 3 / % 2 6 . 2 5 2 4 , 6 1 3 % 2 3 . 3 / % 2 6 . 2 l i a u n n a m e S / y l r e t r a u Q 2 0 0 , 9 1 3 4 6 4 , 3 6 1 % 6 9 1 . % 2 4 . 2 2 9 0 7 1 1 , 7 4 6 , 3 2 % 6 9 1 . % 2 4 . 2 y l h t n o M y l r e t r a u Q 0 2 5 7 1 1 , 4 4 8 , 3 2 0 0 5 , 6 4 8 1 0 , 5 1 - 6 5 7 - 9 4 2 1 1 , 5 0 6 , 3 2 9 8 9 , 6 6 3 7 3 , 6 3 7 4 8 , 2 1 2 8 , 2 0 0 0 , 5 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 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 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 , 1 7 5 , 2 1 2 5 , 3 8 3 2 , 3 2 6 9 , 3 7 9 6 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 , 3 1 4 1 , 9 4 0 , 4 9 4 5 , 8 7 3 0 , 3 2 9 1 1 , 6 3 5 , 0 1 % 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 , % 1 4 . 8 % 6 5 . 8 8 7 6 , 4 4 2 0 0 0 , 0 0 1 1 , % 0 6 . 8 % 6 9 . 8 l a u n n a m e S i 1 7 2 1 5 2 , - - - 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 0 1 2 , 0 2 2 9 5 7 2 1 , 1 6 0 1 3 , % 8 0 . 0 1 3 4 , 9 1 % 8 8 . 0 y l r e t r a u Q 4 4 5 , 9 1 8 9 7 , 8 0 9 3 , 4 5 0 2 , 4 3 3 5 1 , % 1 5 7 . % 8 5 . 0 1 5 2 0 , 2 5 5 2 , 2 % 1 5 7 . % 8 5 . 0 1 % 1 3 . 5 % 8 0 . 9 % 2 8 . 6 3 5 7 4 7 2 7 5 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 % 0 0 . 0 0 2 5 , 2 % 0 0 . 0 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 5 3 2 7 4 - 8 1 6 3 0 1 5 0 5 7 3 8 5 1 2 0 6 4 3 5 1 , $ 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 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 . A . S L I S A R B O D O C N A B 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 d n a l l o H J I P P A H C S T A A M I 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 . 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 C L L X I T N E M T S E V N I S F A . A . . S U . A . . S U . A . . S U . A . . S U d n a l g n E e c n a r F L A I C N A N I F S U B R I A A D A N A C R I A S A B I R A P P N B S A B I R A P P N B K N A B I T I C S E C I V R E S S A W A y n a m r e G . A . . S U E S K N A B B V D E S K N A B B V D . A . . S U B I C - E L O C I R G A T I D E R C e c n a r F B I C - E L O C I R G A T I D E R C . A . . S U 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 y n a m r e G e c n a r F e c n a r F K N A B - X E P I W F K S I X I T A N C B S H g r u o b m e x u L . A . S G N I S A E L U O P A K A W . A . . S U . C N I , S U E C N A N I F R I A K P K N A B O G R A F S L L E W . . A N T S E W H T R O N E L A R É N É G É T É I C O S H C N A R B N A L I M . A . . S U y l a t I . 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 E C N A R F R I A E T E I C O S l i z a r B E L A R E N E G E T E I C O S . A . S G N I S A E L E D A R I E L I Z A R B I A H N A P M O C E C I V R E S L A I C N A N I F P H O T N E M A D N E R R A . A . S L I T N A C R E M A N I T A L S I C . A . S M B I O C N A B . A . S L I S A R B 3 3 0 , 9 6 3 , 4 9 5 8 , 4 0 6 , 9 6 8 9 , 1 5 4 , 4 3 2 9 , 9 0 8 , 1 6 0 7 , 5 2 8 5 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 O T N E M A G A P E D S O I E M E - 0 l i z a r B s e i i r a d i s b u S d n a . A . S M A 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 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 i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a 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 s e i i r a d i s b u S d n a . A . S M A T c i l b u p e h t s e i i r a 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 h t i w s n o i t a g i l b O s e i i r a 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 e s a e l l a i c n a n i F E - 0 E - 0 l i z a r B l i z a r B s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T E - 0 E - 0 E - 0 l i z a r B l i z a r B l i z a r B s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T s e i i r a d i s b u S d n a . A . S M A T E - 0 l i z a r B s e i i r a 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 s r e h t O N E D N A L E G A L E D O C N A B E - 0 l i z a r B s e i i r a d i s b u S d n a . A . S M A T K N A B N O N M O D I I - O T N O R O T E H T E - 0 l i z a r B s e i i r a d i s b u S d n a . A . S M A T ANNUAL REPORT 2013263 Summary of other financial non-current loans (other than bank loans, obligations with the public and financial leases) As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 33,481 4,040 66,466 103,987 620,838 1,491 54,906 677,235 57,647 4,477 65,598 127,722 190,300 5,515 111,040 306,855 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, 2013 and December 31, 2012, respectively, is as follows: Current Interest rate derivative not recognized as a hedge Total currents Non-current Interest rate derivative not recognized as a hedge Total non-currents Total other financial liabilities As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 4,040 4,040 1,491 1,491 5,531 4,477 4,477 5,515 5,515 9,992 ANNUAL REPORT 2013264(c) Hedge derivatives Hedge derivatives as of December 31, 2013 and December 31, 2012 are as follows: Current Accrued interest from the last date of interest rate swap Fair value of 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 Total hedging liabilities As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 5,775 32,070 - 28,621 66,466 54,906 - - 54,906 121,372 4,660 37,076 10,502 13,360 65,598 104,547 4,530 1,963 111,040 176,638 The foreign currency derivatives exchange are collars and cross currency swap. ANNUAL REPORT 2013265Hedging operation The fair values of assets/(liabilities), by type of derivative, of the contracts held as hedging instruments are presented below: As of December 31, 2013 ThUS$ (26,028) 6 (92,088) 1,878 13,990 32,058 (1,121) (1,652) As of December 31, 2012 ThUS$ - 6 (146,283) (911) (9,000) - - (15,228) (5) Covers the significant variations in cash flows associated with market risk in the purchases. price implicit of in the changes future fuel (6) Covers the foreign exchange risk exposure of operating cash flows fluctuations caused R$/US$. in mainly exchange rate the by (7) Covers the investments denominated in Chilean pesos to Dollar- Chilean to peso exchange Dollars. secure in order in investment rate, (8) Covers the foreign exchange risk exposure of Multiplus income caused by fluctuations in the exchange rate R$/US$. Cross currency swaps (CCS) (1) Interest rate options (2) Interest rate swaps (3) Fuel collars (4) Fuel swap (5) Currency forward R$/US$ (6) Currency forward CLP/US$ (7) Currency collars (8) (1) Covers the significant variations in cash flows associated with market risk implicit in the changes in the 3-month LIBOR interest rate and the exchange rate dollar-UF of bank loans. These contracts are recorded as cash flow hedges. (2) Covers the significant variations implicit in cash flows associated with market in the risk for 3-month the long-term acquisition of aircraft. These contracts are recorded as cash flow hedges. in the changes interest incurred LIBOR loans rate in (3) Covers the significant variations in cash flows associated with market risk implicit in the increases in the 3 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. ANNUAL REPORT 2013266During 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 in the next 6 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: For the periods ended December 31, 2013 ThUS$ 2012 ThUS$ Debit (credit) recognized in comprehensive income during the period 128,166 (2,510) Debit (credit) transferred from net equity to income during the period (18,688) (26,470) ANNUAL REPORT 2013267NOTE 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 As of December 31, 2013 ThUS$ 1,264,395 293,341 1,557,736 As of December 31, 2012 ThUS$ 1,403,546 286,444 1,689,990 (a) Trade and other accounts payable as of December 31, 2013 and December 31, 2012 are as follows: Trade creditors Leasing obligation Other accounts payable (*) Total As of December 31, 2013 As of December 31, 2012 ThUS$ 969,260 44,756 250,379 ThUS$ 1,069,345 30,818 303,383 1,264,395 1,403,546 (*) Includes agreement entitled "Plea Agreement" with the Department of Justice of the United States of America. See detail in Note 23. ANNUAL REPORT 2013268The details of Trade and other accounts payables are as follows: As of December 31, 2013 As of December 31, 2012 Aircraft Fuel Boarding Fee Other personnel expenses Airport charges and overflight Suppliers' technical purchases Professional services and advisory Marketing Handling and ground handling Land services Leases, maintenance and IT services Aircraft and engines leasing Services on board U.S.A. Department of Justice (**) Maintenance Taxrecovery program(*) Crew Aviation insurance Achievement of goals Airlines Communications Distrubution sistem Fleet ( JOL) Others Total trade and other accounts payables ThUS$ 302,419 217,389 117,418 98,560 67,995 63,082 50,009 48,797 47,046 46,163 44,756 29,940 18,290 15,793 14,569 14,040 10,665 9,806 5,054 4,578 3,103 - 34,923 ThUS$ 360,618 182,185 134,357 125,402 64,981 46,934 51,360 49,738 38,436 34,903 84,729 26,674 18,387 5,305 19,668 16,233 7,465 5,024 9,362 4,948 1,389 59,181 56,267 1,264,395 1,403,546 (*) 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. Includes agreement entitled "Plea Agreement" with the Department of Justice of the (**) United States of America. See detail in Note 23. ANNUAL REPORT 2013269(b) The liabilities accrued at December 31, 2013 and December 31, 2012, are as follows: Accrued personnel expenses Accounts payable to personnel (*) Aircraft and engine maintenance Others accrued liabilities As of December 31, As of December 31, 2013 ThUS$ 151,586 110,147 3,741 27,867 2012 ThUS$ 171,873 70,625 22,053 21,893 Total accrued liabilities 293,341 286,444 (*) Profits and bonds participation (Note 26 letter b) ANNUAL REPORT 2013270NOTE 23 . OTHER PROVISIONS The detail of Other provisions as of December 31, 2013 and December 31, 2012 is as follows: As of December 31, 2013 ThUS$ As of December 31 2012 ThUS$ Current Provision for contingencies (1) Tax contingencies Civil contingencies Labor contingencies Total other provisions, current Non-current Provisions for contingencies (1) Tax contingencies Civil contingencies Labor contingencies Other Provisions for European Commision investigation (2) Total other provisions, non-current Total other provisions (3) 7,092 13,430 7,334 27,856 968,211 50,022 64,895 27,770 11,349 1,122,247 1,150,103 6,774 23,880 28,920 59,574 1,137,961 60,732 91,248 6,066 10,865 1,306,872 1,366,446 ANNUAL REPORT 2013271(2) Provision made for proceedings brought by the European Commission free of for freight market. competition breaches possible in the the from those (3) Total other provision at December 31, 2013, and at December 31, 2012, fair value correspond include to the contingencies business combination with TAM S.A and subsidiaries, with a probability of loss under 50%, which are not provided for the normal application of IFRS enforcement and that only must be recognized in the context of a business combination in accordance with IFRS 3. (1) Provisions for contingencies: (1) The tax contingencies correspond to litigation and tax criteria related to the tax treatment applicable to direct and indirect taxes, which are found in both administrative and judicial stage. The civil contingencies correspond civil of different to the company. order filed against demands The to order filed against labor contingencies correspond labor demands different the company. of in recognized The Provisions are income statement the consolidated in administrative expenses or tax expenses, as appropriate, except for the fair value by application of IFRS 3 business combination, in which case the recognition is in the State of Financial Position in the heading of Goodwill. ANNUAL REPORT 2013272 The movement of provisions between January 1, 2012 and December 31, 2013 is as follows: Opening balance as of January 1, 2012 Increase is provisions Provision used (*) Additions due to business combination Subsidiaries conversion difference Reversal of provisions Exchange difference Legal claims ThUS$ 19,073 30,399 (131,136) 1,429,012 8,391 (449) 291 European Commission Investigation(**) ThUS$ 10,675 - - - - - 190 Total ThUS$ 29,748 30,399 (131,136) 1,429,012 8,391 (449) 481 Closing balance as of December 31, 2012 1,355,581 10,865 1,366,446 Opening balance as of January 1, 2013 Increase in provisions Provision used Reversal of provision Subsidiaries conversion difference Exchange difference 1,355,581 65,107 (57,192) (53,459) (170,452) (831) 10,865 1,366,446 - - - - 484 65,107 (57,192) (53,459) (170,452) (347) Closing balance as of December 31, 2013 1,138,754 11,349 1,150,103 (*) the Tribunal judicial deposit in guarantee, The related to the Fundo Aeroviário (FA), in the amount of ThUS$ 102, was done in order to suspend the enforceability of the tax credit. The company is discussing over 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. ANNUAL REPORT 2013273(c) Jointly, LATAM Airlines 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 Airlines 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. investigation. cooperated during the (d) On January 24, 2011, LATAM Airlines Group S.A. and Lan Cargo S.A. appealed the decision before the Court of Justice of the European Union. At December 31, 2013, the provision reached the amount of ThUS$ 11,349 (ThUS$ 10,865 at December 31, 2012). (**) 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 (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 Airlines 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. ANNUAL REPORT 2013274 NOTE 24. TAX LIABILITIES The composition of Tax liabilities is as follow: Current Income tax provision Additional tax provision Total current As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 9,919 1,664 11,583 13,152 1,360 14,512 ANNUAL REPORT 2013275NOTE 25. OTHER NON-FINANCIAL LIABILITIES Other non-financial liabilities as of December 31, 2013 and December 31, 2012 are as follows: Current Deferred revenues (*) Sales tax Retentions Others taxes Dividends payable Other sundry liabilities As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 2,739,125 2,360,151 52,576 49,355 12,294 275 18,015 47,122 45,413 8,434 4,023 20,744 Total other non-financial liabilities, current 2,871,640 2,485,887 Non-current Deferred revenues (*) Other sundy liabilities Total other non-financial liabilities, non-current 77,513 54 77,567 99,261 62 99,323 Total other non-financial liabilities 2,949,207 2,585,210 (*) Note 2.20. The balance comprises, among other, programs such as: LANPASS, TAM Fidelidade y Multiplus. LANPASS is the frequent flyer program created by LAN to reward the preference and loyalty its customers with many benefits and privileges, through the accumulation of kilometers that can be exchanged for tickets to fly free or for a wide range of products and services. Customers accumulate LANPASS kilometers every time they fly with LAN, TAM, in companies oneworld ® members and other airlines associated with the program, as well as buy on the stores or use the services of a vast network of companies that have an agreement with the program around the world. For its part, TAM, thinking people who travel constantly, created the program TAM Fidelidade, in order to improve care and give recognition to those who choose the company. Through the program, customers accumulate points in a variety of programs loyalty in a single account and can redeem them at all TAM destinations and companies airline partners, and even more, participate in the Red Multiplus Fidelidade. Multiplus is a coalition of loyalty program, with the aim of operating activities accumulation and redemption of points TAM Fidelidade. This program has an integrated network by associates including hotels, financial institutions, retail companies, supermarkets, vehicle rentals and magazines, among many other partners from different segments. ANNUAL REPORT 2013276NOTE 26. EMPLOYEE BENEFITS Liability for employee benefits as of December 31, 2013 and December 31, 2012, respectively, are as follows: Pension payments Termination payments Other obligations Total liability for employee benefits As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 9,639 493 35,534 45,666 32,323 240 5,532 38,095 (a) The movement in Pension and termination payments and other obligations between January 1, 2012 and December 31, 2013 is as follows: Opening balance as of January 1, 2012 Increase (decrease) current service provision Benefits paid Closing balance as of December 31, 2012 Opening balance as of January 1, 2013 Increase (decrease) current service provision Benefits paid Closing balance as of December 31, 2013 ThUS$ 13,132 25,003 (40) 38,095 38,095 9,866 (2,295) 45,666 ANNUAL REPORT 2013277(b) The liability for short-term benefits as of December 31, 2013 and December 31, 2012 respectively, is detailed below: Profit-sharing and bonuses (*) As of December 31, 2013 ThUS$ 110,147 As of December 31, 2012 ThUS$ 70,625 (*) Accounts payables to employees (Note 22 letter b) The participation in profits and bonuses corresponds to an annual incentives plan for achievement of objectives. (c) Employment expenses are detailed below: Salaries and wages Short-term employee benefits Termination benefits Other personnel expenses Total For the periods ended December 31, 2013 ThUS$ 2012 ThUS$ 1,720,513 1,296,101 452,158 67,508 252,590 397,824 32,864 182,126 2,492,769 1,908,915 ANNUAL REPORT 2013278NOTE 27. ACCOUNTS PAYABLE, NON-CURRENT Non-current accounts payable as of December 31, 2013 and December 31, 2012 are as follows: Aircraft and enginee maintenance Tax recovery program (*) Fleet financing ( JOL) Provisión for vacations and bonuses Other accounts payable (**) Other sundry liabilities As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 663,837 176,666 57,997 9,879 2,654 11,854 685,441 207,089 140,769 9,954 26,354 15,994 Total accounts payable, non-current 922,887 1,085,601 (*) 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. ANNUAL REPORT 2013279NOTE 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, 2013 amounts to ThUS$ 2,389,384 divided into 535,243,229 common stock of a same series (ThUS$ 1,501,018, divided into 479,098,052 shares as of December 31, 2012), 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 (b.1) At December 31, 2013: The total number of ordinary shares authorized stands at 551,847,819 shares with no par value, in accordance with the increase in equity approved at the Extraordinary Shareholders’ Meeting held on June 11, 2013 issuing 63,500,000 ordinary shares with no par value. As of the close of this period, 400,124,163 are fully paid up and 135,119,066 were subject to exchange for shares in the companies Sister Holdco S.A. and Holdco II S.A. Totaling 535,243,229 shares fully paid. As reported by Essential Matter dated on April 30, 2013, on that date the Board approved an Extraordinary Shareholders’ Meeting to be held on June 11, 2013, to address matters including the following: 1. To increase corporate equity by the amount of US$ 1,000,000,000 (one billion United States Dollars), with the objective of financing part of the investment plan for upcoming years, particularly requirements for fleet renewal and growth, and to strengthen the company’s financial position, through the issuance of a number of ordinary shares with no par value, as determined at the meeting; 2. To destine a part of said new capital to compensation plans, under the in Article 24 of terms Law 18,046, the Corporations Law; specified 3. To set the price, manner, time, and procedure for the placement of the shares issued relating to this increase in equity; or to delegate to the Board the faculty of determining the price, manner, time, and procedure, and other conditions for the placement of said shares, including but not limited to setting the terms and conditions of the company’s compensation plans. ANNUAL REPORT 2013280the aforementioned On June 20, 2013, information was presented to the Superintendency of Securities and Insurance in order to request the registration of the share issuance approved at Extraordinary Shareholders’ Meeting. On July 22, 2013 the Superintendency of Securities and Insurance remitted the Company providing comments for said registration by Deed No. 16,141. The Company replied to these submissions on October 16, 2013. the Finally, on November 11, 2013, Superintendency of Securities and Insurance issued the certificate that approved the registration of that issuance under the number 987. On November 20, 2013, began the preferential subscription period of the 62,000,000 shares not destined for the above compensation plans, settling the price that these shares would be offered to shareholders in US$ 15,17. On December 19, 2013, ended the preferential subscription period, have been subscribed and paid the total of 51,695,410 shares and collected the equivalent of ThUS$ 784,219, the unsubscribed remainder of 10,304,590 shares shall be offered and placed on the general market. (b.2) At December 31, 2012: The total number of ordinary shares authorized stands at 488,355,791 shares with no par value, in accordance with the increase in equity approved at the Extraordinary Shareholders’ Meeting held on December 21, 2011 issuing 147,355,882 ordinary shares with no par value. Of this increase, 142,555,882 shares, were destined to the merge with Sister Holdco S.A. and Holdco II S.A. 4,800,000 shares, were destined to compensation plans for employees of the Company and its subsidiaries. As of the close of this period, 343,978,986 shares are fully paid and 135,119,066 were subject to exchange for shares in the companies Sister Holdco S.A. and Holdco II S.A., totaling 479,098,052 shares fully paid. 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. to the information shareholders of intended to According 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 to be offered the preferentially 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 ANNUAL REPORT 2013281CLP$ 11,921 per share. The following table shows the movement of the authorized and fully paid shares described above between January 1, 2012 and December 31, 2013. 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 the end of the period of first refusal, that is, to January 19, 2013, were 6,857,190 shares subscribed and paid the said remnant, leaving a balance of 579,626 shares to be subscribed. This balance was auctioned on the Santiago Stock Exchange - Stock Exchange dated January 23, 2013 at a value of Movement of authorized shares Nro. Of shares Authorized shares as of January 1, 2012 Increase capital option closing year 2007 options over canceled shares Authorized shares as of December 31, 2012 Authorized shares as of January 1, 2013 Increase capital approved at Extraordinary Shareholders meeting dated June 11, 2013 Full right decrease of treasury stock Authorized shares as of December 31, 2013 488,355,882 (91) 488,355,791 488,355,791 63,500,000 (7,972) 551,847,819 ANNUAL REPORT 2013282Movement fully paid shares Nº of shares Movement value of shares (*) Cost of issuance and placement of shares (**) Paid - in Capital ThUS$ ThUS$ ThUS$ Paid shares as of January 1, 2012 340,326,431 476,579 (2,672) Exercise stock options increase capital 2007 673,478 10,226 Exchange of shares for merger Companies Sister Holdco S.A and Holdco II S.A. 135,119,066 951,409 - - 473,907 10,226 951,409 Capitalization of reserves - - (3,510) (3,510) Placement of the remaining preferential shares issued for merger Companies Sister Holdco S.A. y Holdco II S.A. 2,979,077 68,986 - 68,986 Paid shares as of December 31, 2012 479,098,052 1,507,200 (6,182) 1,501,018 Paid shares as of January 1, 2013 479,098,052 1,507,200 (6,182) 1,501,018 Placement of the remaining preferred shares issued for merger Companies Sister Holdco S.A. y Holdco II S.A. Full right decrease of treasury stock Capitalization of reserves Preferential placement capital increase approved at Extraordinary Shareholders meeting dated June 11, 2013 4,457,739 (7,972) - 51,695,410 104,351 (25) - - - (179) 104,351 (25) (179) 784,219 - 784,219 Paid shares as of December 31, 2013 535,243,229 2,395,745 (6,361) 2,389,384 (*) Amounts reported represent only those arising from the payment of the shares subscribed. (**) Decrease of capital by capitalization of reserves for cost of issuance and placement of shares established according to Extraordinary Shareholder´s Meetings, where such decreases were authorized. (c) Treasury stock At December 31, 2013, as per minutes of the Extraordinary Shareholder´s Meeting held on June 11, 2013, the company relinquished all right to 7,972 stocks of its portfolio, this date the Company does not maintain treasury stock. At December 31, 2012, the total subscribed and paid shares of the company acquired 7,972 shares, shareholders who exercised the right to withdraw an amount of US$203. ANNUAL REPORT 2013283(d) Reserve of share- based payments The movement of Reserves of share- based payments between January 1, 2012 and December 31, 2013, is as follows: Opening balance as of January 1, 2012 Stock option plan Deferred tax Closing balance as of December 31, 2012 Opening balance as of January 1, 2013 Stock option plan Deferred tax Closing balance as of December 31, 2013 Reserve of share - based payments ThUS$ 7,130 (1,299) (257) 5,574 5,574 18,877 (3,440) 21,011 These reserves are related to the “Share-based payments” explained in Note 38. ANNUAL REPORT 2013284(e) Other sundry reserves The movement of Other sundry reserves between January 1, 2012 and December 31, 2013, is as follows: Opening balance as of January 1, 2012 Transactions with non-controlling interest Cost of issuance and placement of shares (1) Capitalization share issuance and placement cost (1) Higher value for TAM S.A. share exchange Legal reserves Closing balance as of December 31, 2012 Opening balance as of January 1, 2013 Transactions with non-controlling interest Cost of issuance and placement of shares (2) Capitalization share issuance and placement cost (2) Legal reserves Closing balance as of December 31, 2013 Other sundry reserves ThUS$ 1,362 (1,604) (3,510) 3,510 2,665,692 1,232 2,666,682 2,666,682 (1,950) (5,443) 179 (1,668) 2,657,800 (1) 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 the Extraordinary Meeting of Shareholders held on September 4, 2012. to (2) The costs incurred through the issuance and placement correspond to ThUS$ 5,264 and ThUS$179 corresponding at increase of capital according to the Extraordinary Meeting of Shareholders held on June 11, 2013 and at the remaining 7,436,816 shares, not used in this exchange, reallocated as agreed at the Extraordinary Shareholders' Meeting held on September 4, 2012, The cost of ThUS$ 179, were capitalized during June 2013, according to the Extraordinary Shareholders' Meeting held on June 11, 2013. ANNUAL REPORT 2013285(e.1) Other sundry reserves The balance of Other sundry reserves comprises the following: As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ Higher value for TAM S.A. share exchange (1) 2,665,692 2,665,692 Reserve for the adjustment to the value of fixed assets (2) Transactions with non-controlling interest (3) Cost of issuance and placement of shares Others Total 2,620 (5,355) (5,264) 107 2,620 (3,405) - 1,775 2,657,800 2,666,682 (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) The balance at December 31, 2013, correspond to the loss generated by the participation by Lan Pax Group S.A. in the acquisition of shares of Aerovías de Integració n Regional Aires of ThUS$ (1,065), the acquisition of TAM S.A. of the minority holding of Aerolinhas Brasileiras S.A. of ThUS(885) and accumulated losses from transactions with minority shareholders of ThUS$ (3,405) at December 31, 2012. The corresponding accumulated losses of ThUS$ (2,422) in Lan Pax Group S.A. for increases of capital held by Aerovías de Integración Regional Aires S.A. and the accumulated losses of ThUS$ (983) Lan Cargo Inversiones S.A. for the capital increase made by Línea Aérea Carguera de Colombia S.A. ANNUAL REPORT 2013286(f) Reserves with effect in other comprehensive income. The movement of Reserves with effect in other comprehensive income between January 1, 2012 and December 31, 2013 is as follows: Opening balance as of January 1, 2012 Derivatives valuation gains (losses) Deferred tax Conversion difference subsidiaries Closing balance as of December 31, 2012 Opening balance as of January 1, 2013 Derivatives valuation gains (losses) Deferred tax Conversion difference subsidiaries Closing balance as of December 31, 2013 Currency translation reserve ThUS$ (13,317) - (2,727) 19,618 3,574 3,574 - - (593,565) (589,991) Cash flow hedging reserve ThUS$ Total ThUS$ (140,556) (153,873) 5,003 (5,177) - 5,003 (7,904) 19,618 (140,730) (137,156) (140,730) 124,227 (18,005) - (34,508) (137,156) 124,227 (18,005) (593,565) (624,499) (f.1) Currency translation reserve (f.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. 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. ANNUAL REPORT 2013287 (g) Retained earnings The movement of Retained earnings between January 1, 2012 and December 31, 2013, is as follows: Opening balance as of January 1, 2012 Result for the period Other increase (decreases) Dividends Closing balance as of December 31, 2012 Opening balance as of January 1, 2013 Result for the period Other increase (decreases) Closing balance as of December 31, 2013 (h) Dividends per share As of December 31, 2013 Description of dividend Date of dividend Amount of the dividend (ThUS$) Number of shares among which the dividend is distributed Dividend per share (US$) As of December 31, 2012 Description of dividend Date of dividend Amount of the dividend (ThUS$) Number of shares among which the dividend is distributed Dividend per share (US$) ThUS$ 1,116,798 (19,076) 163 (21,749) 1,076,136 1,076,136 (281,114) 281 795,303 Final dividend 2012 04-29-2013 3,288 483,547,819 0,0068 Final dividend 2011 Minimum mandatory dividend 2012 04-26-2012 18,462 340,999,909 0,05414 12-31-2012 3,287 479,098,052 0,00686 ANNUAL REPORT 2013288The 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, 2013, mandatory minimum dividend was not applicable; therefore no provision was made for. ANNUAL REPORT 2013289NOTE 29. REVENUE The detail of revenues is as follows: Passengers Cargo Total For the periods ended December 31, 2013 ThUS$ 11,061,557 1,862,980 2012 ThUS$ 7,966,846 1,743,526 12,924,537 9,710,372 ANNUAL REPORT 2013290NOTE 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, 2013 ThUS$ 1,373,061 4,414,249 408,671 1,644,827 441,077 477,086 331,405 2012 ThUS$ 1,048,342 3,434,569 308,941 1,316,095 313,038 297,618 239,848 9,090,376 6,958,451 For the periods ended December 31, 2013 ThUS$ 985,317 56,416 1,041,733 2012 ThUS$ 739,973 31,140 771,113 (*) Includes the depreciation of Property, plant and equipment and the maintenance cost of aircraft held under operating leases. The amount of maintenance cost included within the depreciation line item at December 31, 2013 is ThUS$396,974 (ThUS$315,206 at December 31, 2012). ANNUAL REPORT 2013291(c) Personnel expenses The costs for personnel expenses are disclosed in Liability for employee benefits (See Note 26). (d) Financial costs The detail of financial costs is as follows: Bank loan interest Financial leases Other financial instruments Total For the periods ended December 31, 2013 ThUS$ 382,969 76,343 3,212 462,524 2012 ThUS$ 185,013 44,717 64,868 294,598 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. ANNUAL REPORT 2013292NOTE 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, 2013, and 2012 are as follows: Property, plant and equipment Total For the periods ended December 31, 2013 ThUS$ 2,545 2,545 2012 ThUS$ (2,836) (2,836) ANNUAL REPORT 2013293NOTE 32 .OTHER INCOME, BY FUNCTION Other income by function is as follows: Duty free Aircraft leasing Customs and warehousing Tours Maintenance Multiplus Other miscellaneous income Total For the periods ended December 31, 2013 ThUS$ 14,748 36,614 24,281 105,449 12,392 68,925 79,156 2012 ThUS$ 17,463 28,863 24,537 74,226 5,358 26,696 43,013 341,565 220,156 ANNUAL REPORT 2013294NOTE 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. a) Foreign currency The foreign currency detail of balances of monetary items in current and non-current assets is as follows: Current assets Cash and cash equivalents 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 As of December 31, 2013 ThUS$ 538,213 41,092 3,683 229,913 5,254 16,571 44,656 162,809 34,235 51,082 885 - 25,854 2,039 6 22,035 14 249 As of December 31, 2012 ThUS$ 337,223 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 ANNUAL REPORT 2013295Current assets Other non - financial assets Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency As of December 31, 2013 As of December 31, 2012 ThUS$ 56,218 5,310 846 16,846 1,011 3,052 2,221 102 26,830 ThUS$ 53,493 3,740 10,037 15,310 909 4,598 1,649 351 16,899 Trade and other accounts receivable 417,775 503,601 Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S dollar Strong bolivar Other currency Accounts receivable from related entities Chilean peso Tax assets Brazilian real Chilean peso Colombian peso Euro U.S. dollar Other currency Total assets Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency 11,387 19,986 80,461 2,240 21,479 114,372 2,353 165,497 466 466 14,836 - 3,398 787 35 515 10,101 9,441 33,313 130,736 3,153 67,287 116,758 2,759 90,154 14,565 14,565 11,060 716 9,454 15 20 - 855 1,078,590 950,878 58,674 24,515 356,938 11,331 41,143 183,799 165,278 236,912 81,886 49,541 210,706 6,895 87,415 280,462 55,057 178,916 ANNUAL REPORT 2013296Non-current assets Other financial assets Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Other currency Other non - financial assets Other currency Accounts receivable Chilean peso U.S. dollar Other currency Deferred tax assets U.S. dollar Other currency Total assets Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Other currency As of December 31, 2013 As of December 31, 2012 ThUS$ 17,517 24 597 1,701 254 5,488 8,625 828 18,006 18,006 13,429 8,227 5,000 202 4,460 2,056 2,404 53,412 24 597 9,928 254 5,488 15,681 21,440 ThUS$ 31,329 8 3,505 98 524 7,817 15,895 3,482 22,063 22,063 14,812 9,564 5,000 248 4,203 - 4,203 72,407 8 3,505 9,662 524 7,817 20,895 29,996 ANNUAL REPORT 2013297The 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, 2013 As of December 31, 2012 As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ ThUS$ ThUS$ Other financial liabilities 303,626 241,473 561,428 589,105 Chilean peso Euro U.S. dollar 53,619 824 249,183 - 602 240,871 46,772 1,205 513,451 - 35 589,070 Trade and other accounts payables 679,769 899,536 20,676 19,850 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 Chilean peso Colombian peso Other currency 31,603 9,671 29,560 14,445 19,373 433,377 4,024 137,716 318 14 304 134 4 - 130 21,398 38,506 72,643 29,268 38,540 283,003 2,710 413,468 14 14 - 302 21 150 131 - 8 11,975 422 3,316 4,902 - 53 - - - - - - - - 8 11,938 - 1,695 6,157 - 52 - - - - - - - ANNUAL REPORT 2013298Up to 90 days 91 days to 1 year Current liabilities As of December 31, 2013 As of December 31, 2012 As of December 31, 2013 As of December 31, 2012 Other non-financial liabilities Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency ThUS$ 76,040 10,710 3,746 37,227 6,069 8,382 1,272 637 7,997 ThUS$ 14,337 2,125 3,023 3,478 50 3,261 325 1,211 864 ThUS$ ThUS$ 72 - 52 19 - - - - 1 13 - 10 2 - - - - 1 Total liabilities 1,059,887 1,155,662 582,176 608,968 Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency 42,313 13,417 120,424 20,514 28,579 684,136 4,661 145,843 23,523 41,529 76,156 29,468 42,403 524,199 3,921 414,463 - 60 58,766 422 4,521 - 18 11,940 - 1,730 518,353 595,227 - 54 - 53 ANNUAL REPORT 2013299s r a e y 5 n a h t e r o M s r a e y 5 o t 3 n a h t e r o M s r a e y 3 o t 1 n a h t e r o M f o s A f o s A f o s A f o s A f o s A f o s A , 1 3 r e b m e c e D , 1 3 r e b m e c e D , 1 3 r e b m e c e D , 1 3 r e b m e c e D , 1 3 r e b m e c e D , 1 3 r e b m e c e D s e i t i l i b a i l t n e r r u c - n o N - - - - 2 1 0 2 $ S U h T 3 1 0 2 $ S U h T 0 6 6 , 1 1 8 , 1 0 6 8 , 6 6 3 , 1 - - 2 1 0 2 $ S U h T 6 2 5 , 9 5 8 - - - - - - - - - - - - - , 0 6 6 1 1 8 1 , 1 1 1 1 - - - - - - - - - - - - - - - - - - - - - - 8 3 1 8 3 1 0 6 8 , 6 6 3 1 , 6 2 5 , 9 5 8 3 1 0 2 $ S U h T 8 2 5 , 0 8 6 5 2 , 4 5 7 - , 8 2 7 3 7 6 1 4 6 1 4 6 - - - - - - - - - - - 2 1 0 2 $ S U h T 8 2 8 , 3 2 6 - 8 4 1 1 , 0 8 6 , 2 2 6 2 8 5 , 7 6 6 6 8 2 , 8 8 9 9 7 5 6 , 8 9 2 1 , 7 8 1 , 6 1 4 6 6 8 0 8 6 3 5 6 8 , 0 1 - 4 1 8 , 3 6 8 6 8 3 1 0 2 $ S U h T 0 8 7 2 2 1 , 3 9 3 , 8 7 5 - 3 1 6 , 5 5 4 0 8 8 , 7 4 6 7 8 1 7 , 9 8 4 1 , 4 0 2 , 9 3 6 9 2 9 , 1 1 - 0 1 4 6 4 1 9 4 3 1 1 , - 4 2 6 3 6 6 3 6 s e i t i l i b a i l l a i c n a n fi r e h t O e l b a y a p s t n u o c c A o s e p n a e l i h C r a l l o d . . S U y c n e r r u c r e h t O s n o i s i v o r p r e h t O o s e p n a e l i h C r a l l o d . . S U o r u E o s e p e n i t n e g r A l a e r n a i l l i z a r B o s e p n a e l i h C r a l l o d . . S U o r u E y c n e r r u c r e h t O s t fi e n e b s e e y o l p m e r o f s n o i s i v o r P r a l l o d . . S U 0 6 6 , 1 1 8 , 1 1 7 8 , 6 6 3 , 1 4 6 6 , 9 5 8 7 9 8 , 4 5 7 3 8 6 , 7 0 3 , 1 8 3 8 , 8 3 2 , 1 s e i t i l i b a i l t n e r r u c - n o n l a t o T - - - - - - - , 0 6 6 1 1 8 1 , - - - 1 1 - - - 8 3 1 0 6 8 , 6 6 3 1 , 6 2 5 , 9 5 8 - - - - 9 6 1 1 8 , , 8 2 7 3 7 6 4 6 6 8 0 8 2 2 3 , 8 3 1 0 , 2 1 2 1 1 5 , , 4 6 7 0 8 2 1 , 0 1 4 6 4 1 7 6 9 9 2 1 , 9 4 3 1 1 , 9 8 4 1 , 7 7 4 , 5 9 0 1 , o s e p e n i t n e g r A l a e r n a i l i z a r B o s e p n a e l i h C r a l l o d . . S U o r u E y c n e r r u c r e h t O ANNUAL REPORT 2013300 General summary of foreign currency: Total assets Argentine peso Brazilian real Chilean peso Colombian peso Euro U.S. dollar Strong bolivar Other currency As of December 31, 2013 ThUS$ 1,132,002 As of December 31, 2012 ThUS$ 1,023,285 58,698 25,112 366,866 11,585 46,631 199,480 165,278 258,352 81,894 53,046 220,368 7,419 95,232 301,357 55,057 208,912 Total liabilities 5,002,669 5,743,637 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 42,723 13,623 390,337 20,936 44,449 4,338,554 4,661 147,386 15,975 11,489 (23,471) (9,351) 2,182 (4,139,074) 160,617 110,996 24,187 42,355 96,556 29,468 56,146 5,071,376 3,921 419,628 57,707 10,691 123,812 (22,049) 39,086 (4,770,019) 51,136 (210,716) ANNUAL REPORT 2013301(b) Exchange differences in the Exchange differences recognized income statement, except for financial instruments measured at fair value through profit or loss, for the period ended December 31, 2013 and 2012, generated a loss of ThUS$ 482,174 and a gain of ThUS$ 66,685, respectively. Exchange differences recognized in equity as reserves for currency translation differences for the period ended December 31, 2013 and 2012, represented a loss of ThUS$ 629,858 and a gain of ThUS$ 19,170, respectively. 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, 2013 As of December 31, 2012 6,52 2,36 524,61 1,925,52 0,72 6,30 1,12 6,86 13,07 1,22 2,80 21,49 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 ANNUAL REPORT 2013302NOTE 34. EARNINGS PER SHARE Basic earnings For the periods ended December 31, 2013 2012 Earnings attributable to controlling company’s equity holders (ThUS$) (281,114) (19,076) Weighted average number of shares, basic 487,930,977 412,267,624 Basic earnings per share (US$) (0.57613) (0.04627) Diluted earnings For the periods ended December 31, 2013 2012 Earnings attributable to controlling company’s equity holders (ThUS$) (281,114) (19,076) Weighted average number of shares, basic 487,930,977 412,267,624 Weighted average number of shares, diluted 487,930,977 412,267,624 Diluted earnings per share (US$) (0.57613) (0.04627) ANNUAL REPORT 2013303NOTE 35. CONTINGENCIES Lawsuits (i). Lawsuits filed by LATAM Airlines Group S.A. and Subsidiaries Company Court Case Number Origin Stage of trial 07-6022920 Atlantic Aviation Investments LLC (AAI) S u p r e m e C o u r t the of State of New York County of New York. 602286-09 Atlantic Aviation Investments LLC (AAI) S u p r e m e C o u r t the of State of New York County of New York. S.A., ("Variglog") ("AAI"), an Atlantic Aviation Investments LLC. indirect subsidiary LATAM Airlines Group incorporated under the laws of the State of Delaware, sued in August 29th, 2007 Varig Logistics S.A. 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. Advisers Atlantic Aviation Investments July (“AAI”) sued on LLC. 24, 2009 Matlin Patterson Global LLC, Patterson Global Matlin Opportunities Partners II LP, Matlin Patterson Global Partners Opportunities (Cayman) II LP and Logistics LLC Volo (a) as alter egos of non- payment of the four loans mentioned in the previous note and (b) for breach of its obligation to guarantee other and obligations the Memorandum under of Understanding signed between the parties on September 29, 2006. Variglog for Amounts Committed ThUS$ 17,100 Plus and interests costs and costs In implementation stage in Switzerland, the conviction stated Variglog that should pay the principal, interest in favor of AAI. It keeps the embargo of Variglog funds in Switzerland with AAI. Variglog is in the process of judicial recovery in Brazil and has asked Switzerland to recognize the judgment the state that declared of judicial recovery and subsequent the bankruptcy. 17,100 interest Plus costs and c o m p e n s a t i o n for damage. was "summary AAI filed a (abbreviated judgment" trial) which the court ruled favorably. The defendants decision appealed this ultimately which dismissed by the High Court. The cause was turned back to the lower court for determination of the amount actually payable by the applicants (damages) ongoing proceedings before the court. ANNUAL REPORT 2013304Company Court Case Number Origin Stage of trial Amounts Committed ThUS$ Aerotransportes Mas de Carga S.A. Federal Court of Fiscal and Administrative Justice. 31698/11-17-01-8 Nullity trial against the tax authority's refusal to restore balance in favor of VAT. Pleadings stage. 4,900 Aerolane LineasAéreas Nacionales del Ecuador S.A. 2nd District Court Guayaquil. 09504-2010-0114 Order Determining the Value Added Tax (VAT) 2006. 4,565 The Ruling was adverse to the Company. On November 15, 2013, the Company extraordinary proposed appeal. Which has been accepted for consideration by the Fourth Chamber of the District Court No. 2 Contencios Tax Guayaquil. Aerolane LineasAéreas Nacionales del Ecuador S.A. Tribunal Fiscal de Guayaquil. 6319-4064-05 proceedings Judicial the Regional against the Director Internal Revenue Services Guayaquil, for overpayment of taxes. of 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. I n t e r n a l Revenue Service. 17502-2012-0082 Aerolane, Líneas Aéreas Nacionales del Ecuador S.A. I n t e r n a l Revenue Service. 1720130100068 Determination Act for 2006 Income Tax, which have unknown CEDT requesting certification of branch expenses, ARC commissions without Withholding Income Tax, etc. of Process in initiated 2012. in IR Determination Act of 2008. Glosses are caused by lack of supports rebills, audit certificates, no withholdings on commissions, and lack of means of payment. exempt Unaware the income because federal return is not translated into Spanish. Sentence pending. Appeal for Review. 8,064 On October 9, 2013, the IRS confirmed the contents of Determination Act. On November 11, 2013, the Company filed a motion for review. Now awaiting resolution. 6,047 (income tax 5,039; surcharge 20% 1,008) ANNUAL REPORT 2013305Company Court Case Number Origin Stage of trial Lan Argentina S.A. National Administrative Chamber 36337/13 ORSNA Resolution No. 123 which directs Lan Argentina to the hangar vacate located the Metropolitan Airport. in rescind appealed the ORSNA that ordered injunction to the eviction. Lan Argentina filed suit against Resolution No. 123 of ORSNA. On December the 23, Second 2013, Division of the National Court of Appeals in Federal Matters Administrative confirmed injunction the decided in First Instance in favor of Lan Argentina S.A., being suspended eviction order formalized by ORSNA respect Aeroparque Jorge Newbery hangar. Amounts Committed ThUS$ Undetermined Tam Linhas Aéreas S.A. Wollerau Court - Switzerland. Claim the amount withheld by TOP AIR AGENCY AG (GSA in Switzerland, Austria, Norway, Denmark and Eastern Europe) after completion of the GSA contract with TAM in 2008. 1,747 Filed suit in November 2013 in the Swiss court to recover the amount that arbitration in Switzerland in May 2011 recognized that corresponds to TAM. ANNUAL REPORT 2013306(ii). Trials received by LATAM Airlines Group S.A. and Subsidiaries Company saCourt Case Number Origin Stage of trial Amounts Committed ThUS$ 11,349 LATAM Airlines Group S.A. y Lan Cargo S.A. E u r o p e a n Commission . - Lan Cargo S.A. y LATAM Airlines Group S.A. - High In the Court of Justice Chancery Division (Inglaterra) and DirectieJuridische ZakenAfdeling CeveilRecht (Netherlands). On April 14, 2008, the notification of the European Commission was answered. The appeal was filed on January 24, 2011. of Investigation for possible airline violations competition freighters, especially fuel surcharge. On December 26, 2007, the Directorate General the for Competition of Commission European 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 competition in the European air cargo market, especially the alleged fixing a fuel surc harge and freight. On November 9, 2010, the Directorate General for Competition of the European Commission notified Lan Cargo S.A. and LATAM Airlines Group S.A. the imposition of a fine in the amount of ThUS$ 11,349. This penalty is being appealed by Lan Cargo S.A. and LATAM Airlines Group S.A. The outcome of this appeal cannot be predicted. Case is discovery process. in evidence Undetermined filed airline airlines against Lawsuits European by users of freight services in private prosecutions as a result of the investigation violations for possible of 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. ANNUAL REPORT 2013307 Amounts Committed ThUS$ 51,020 Company Court Case Number Origin Stage of trial Aerolinhas Brasileiras S.A. - Administrative Council for E c o n o m i c D e f e n s e , Brazil. Investigation for possible violations of competition airline freighters, especially fuel surcharge. of decision in On September 3, 2013, CADE's was the Diario published da Uniao confirming the sentencing violation imposition of fines and to ABSA for the amount of ThUS$51,020. This fine will be appealed by ABSA. In turn CADE fined also a current director of ABSA and two former officials for the respective amounts of ThUS$ 971, ThUS$ 486 and ThUS$ 486. On December 5 was filed application for administrative reconsideration to the CADE. There is also the possibility of further appeal through the judicial process in the courts. We cannot predict the outcome of these appeals process. Aerolinhas Brasileiras S.A. F e d e r a l R e v e n u e Secretary of Brazil. 10831-005.704/2006-43 9,391 DRJ performed collection of PIS and COFINS, keeping only the debts related to II, IPI and the 50% penalty in the second. Awaiting trial by CARF. taxes of Collection import and penalties owed to the verification of declared and volumes loss transported allegedly The the Administrative Court of São Paulo started collection of PIS and COFINS, keeping only the debts related to II, IPI and the 50% penalty in the second. country. Aerolinhas Brasileiras S.A. F e d e r a l R e v e n u e Secretary of Brazil. 10831-008.687/2006-04 Collection of import taxes and fines due the determination to of storage when end of manifest information. charge 12/08/2010 CARF On the Voluntary dismissed Action. an extraordinary appeal, which is pending trial. Filed 5,122 ANNUAL REPORT 2013308Company Court Case Number Origin Stage of trial 374-2012 LA C i v i Court Pichincha. l 20 2001.51.01.012530-0 LATAM Airlines Group S.A. - Tenth Civil Court of Santiago. Aerolane, Líneas Aéreas Nacionales del Ecuador S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. T r i b u n a l R e g i o n a l F e d e r a l da 2 da R e g i ã o t h e (Court of the Second Region). S e c r e t a r y of Federal R e v e n u e s Brazil of ( I n t e r n a l R e v e n u e Service of Brazil). S e c r e t a r y of Federal R e v e n u e s of Brazil ( I n t e r n a l R e v e n u e Service of Brazil). The company Jara&Jara Limited LATAM sues Airlines Group S.A. based on they the damage 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. their affected prestige and business continuity. Passenger demand for misuse by counter agent of credit card. Ordinary judicial action declare to brought legal that there is no relationship obligating the Company to raise the Air Fund. Amounts Committed ThUS$ 11,935 5,500 120,460 30,921 28,426 First instance. discharge In step test, hearing in New appearance (for judicial confession)of the legal representative set for February 13, 2014. First instance sentence not favorable. Currently awaiting the decision of the appeal filed by the company. To suspend the tax application credit to the Court was delivered by guarantee ThUS$ 102 which is revealed in more detail in Note 23. . Decisions of first and second administrative instance adverse to interests of the the Company. Currently awaiting the decision of the new action brought by the Company. of to Court decision was the unfavorable the interests company, so it was appealed. At present, pending the trial of the appeal, the Board of Tax Appeals (CARF). 16643.000087/2009-36 Notice of Violation of the requirement to pay the social contribution on net profit ("CSL"). 10880.725950/2011-05 Compensation claims of social contributions PIS and COFINS. ANNUAL REPORT 2013309Amount Committed ThUS$ 5,233 14,192 13,684 Company Court Case number Origin Stage of trial Pantanal Linhas Aéreas S.A. R e g i o n a l of Court the Third District. 1997.0002503-9 Tam Linhas Aéreas S.A. 6th Public rod of Sao Paulo. 0012938- 14.2013.8.26.0053 collect filed Execution tax to penalties for breach of special regime customs temporary of admission. J u d g m e n t proposed to cancel the collection of incident Service Tax on amounts paid to Infraero. Tam Linhas Aéreas S.A. S e c r e t a r y of Federal R e v e n u e s of Brazil ( I n t e r n a l R e v e n u e of Service Brazil). 16643.000085/2009-47 Auto compound to demand and collection of income tax and detail CSL derived royalties and fees the mark using TAM. for the second Waiting of Favorable sentence. the decision instance. ruling overturned The injunction previously the granted, and granted in part the action proposed by the company. Opposing a motion for clarification, which was rejected. Both parties filed motions, both of which received the double effect (suspension and forwarding). Currently waiting for the referral to the Court of Justice of the State of São Paulo and therefore appeals trial. partially instance decision First unfavorable to the interests of the company. On March 14, 2012, the application of business and voluntary action were judged by CARF, so that was adduced the resource trade to restore the expenditure to the royalties, and provided voluntary action of TAM to (i) rescind the compensation for tax losses and (ii) apart calculating default interest Selic rate effect on the government claim. It, currently expects the ruling on the admissibility of the special appeal filed by the Special Attorney for Finance and the notification of the decision. the ANNUAL REPORT 2013310Company Court Case Number Origin Stage of trial Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. S e c r e t a r y of Federal R e v e n u e s of Brazil ( I n t e r n a l R e v e n u e Service of Brazil). S e c r e t a r i a da Fazenda do Estado de São Paulo ( S e c r e t a r y of Finance of the State of Sao Paulo). 10831.012344/2005- 55 II Infraction to presented payment demand social and of contributions COFINS PIS arising the loss of unidentified international cargo. from and 3.123.785-0 of to payment ICMS governing importation of Order infringement demand of the aircraft. Partially favorable decision in the first administrative and supportive in the second instance. However, the upper chamber of the Board of Tax Appeals was to the special appeal filed by the Union. Currently pending resolution of the motion for clarification with the opposition of the company. Under the laws of the state of São Paulo, the Administrative Court was to declare the agreement of the matter discussed in the infraction and the related injunction, so the case was referred to the State Attorney and a determination is expected on that demand. 3.130.043-1 3.099.486-0 Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. S e c r e t a r i a da Fazenda do Estado de São Paulo ( S e c r e t a r y of Financeof the State of Sao Paulo). S e c r e t a r i a da Fazenda do Estado de São Paulo ((S e c re t a r y of Finance of the State of Sao Paulo). of to payment ICMS governing importation of Order infringement demand of the aircraft. On June 4, 2013, the decision the issued denying was special appeal filed by the company. Currently, waiting for the demarcation of the court order regarding the administrative process. of to payment ICMS governing importation of Order infringement demand of the aircraft. Under the laws of the state of São Paulo, the Administrative Court was to declare the the matter agreement of discussed in the infraction and the related injunction, so the case was referred to the State Attorney and a determination is expected on that demand. Amounts Committed ThUS$ 11,008 9,553 9,187 6,952 ANNUAL REPORT 2013311Company Court Case Number Origin Stage of trial 11610.001360/2001- 56 3.117.001-8 Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. S e c r e t a r y Federal of Revenues of Brazil (Internal Revenue Service of Brazil). of Secretary the Finance of State Sao of Paulo (Secretary of Finance of the State of Sao Paulo). Application for r e i m b u r s e m e n t of social security contributions of PIS. Notice of i n f r i n g e m e n t d e m a n d i n g payment of ICMS on of imports aircraft. and first ruling in Unfavorable second the administrative instances. Currently expecting fiscal execution ruling. the the Under laws of state of São Paulo, the Administrative Court was to declare the agreement of the matter discussed in the infraction and the related so the case was referred to the State Attorney and a determination is expected on that demand. injunction, Amounts Committed ThUS$ 7,732 7,599 Tam Linhas Aéreas S.A. T r i b u n a l Regional Federal da 3a Região the (Court of Third Region). 2006.03.00.022504-6 3.120.286-0 990.172 3.123.000-3 Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. da Secretaria do Fazenda Estado de São Paulo (Secretary of Finance of the State of Sao Paulo). Governo do Estado de São Paulo (State Government of Sao Paulo). da Secretaria Fazenda do Estado de São Paulo (Secretary of Finance of the State of Sao Paulo). Pending first instance ruling. 7,036 Trial suspended. It now expects the end of main trial. 6,311 Trial suspended. It now expects the end of main trial. 5,971 Trial suspended. It now expects the end of main trial. 5,749 forcing Penalty in IRPJ collection the months of February, March and August 1998. of Order to infringement demand payment of ICMS governing the importation of aircraft. Fiscal Execution to demand payment of that ICMS affects the import of aircraft. of Order infringement to demand payment of ICMS governing the importation of aircraft. ANNUAL REPORT 2013312Company Court Case Number Origin Stage of trial 004960- 83.2013.8.26.0053 Currently awaiting a ruling of first instance. Judgment proposed to cancel the charge to demand and payment of ICMS and fine affects import of aircraft. Amounts Committed ThUS$ 5.797 2002.61.19.001123-1 Injunction filed to prevent recovery of IPI on imports of aircraft. Currently awaiting a ruling on the appeal filed by the Company. 5.540 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. S e c r e t a r i a Fazenda da do Estado de São Paulo (Secretary of Finance of the State of Sao Paulo). I n t e r n a l R e v e n u e Service. S e c r e t a r i a Fazenda da do Estado de São Paulo (Secretary of Finance of the State of Sao Paulo). 4.002.475-1 6th Public rod of Sao Paulo 0013306-23.2013.8- 26.0053 3.019.886-0 93300008.09.0000088 3/2009-31 da Secretaria F a z e n d a d o Estado da P a r a í b a (Secretary of Finance of the State of Sao Paulo). S e c r e t a r i a Fazenda da Estado do Paraíba da of (Secretary Finance of the State of Paraiba). of Order infringement to demand payment of ICMS governing the importation of aircraft. Judgment proposed the to cancel of collection Service incident Tax on amounts received as discount on the go over the shipping rates to Infraero. of Order infringement to demand payment of ICMS governing the importation of aircraft. of Order infringement to demand payment of ICMS in particular operations. ruling on the Expected impeachment filed by the Company. 5.336 Currently decision of first instance. awaiting the 4.907 suspended. It now Trial expects the end of main trial. 4.892 Currently awaiting a ruling on the appeal filed by the Company. 4.835 ANNUAL REPORT 2013313Company Court Case Number Origin Stage of trial Amounts Committed ThUS$ 4,814 4,708 Under the laws of the state of São Paulo, the Administrative Court was to declare the agreement of the matter discussed in the infraction and the related injunction, so the case was referred to the State Attorney and a determination is expected on that demand. Expected ruling on the impeachment filed by the Company. suspended. Trial It now expects the end of main trial. 4,562 3.123.770-8 3.154.701-1 3.146.575-4 of Order infringement to demand payment of ICMS governing the importation of aircraft. Order of to infringement demand payment of ICMS governing the importation of aircraft. of Order infringement to demand payment of ICMS governing the importation of aircraft. 10880-676.339/2009-13 of Order infringement to demand payment of IRPJ. ruling on the Expected impeachment filed by the Company. 4,523 3.146.651-5 3032722060291 of Order infringement to demand payment of ICMS governing the importation of aircraft. Order of i n f r i n g e m e n t to demand payment of ICMS in particular operations. suspended. It now Trial expects the end of main trial. 4,445 Currently awaiting a ruling on the appeal filed by the Company. 4,218 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. S e c r e t a r i a Fazenda da do Estado de São Paulo (Secretary of Finance of the State of Sao Paulo). S e c r e t a r i a Fazenda da do Estado de São Paulo (Secretary of Finance of the State of Sao Paulo). S e c r e t a r i a Fazenda da do Estado de São Paulo (Secretary of Finance of the State of Sao Paulo). da Secretaria Receita Federal ( I n t e r n a l R e v e n u e Service). S e c r e t a r i a Fazenda da do Estado de São Paulo (Secretary of Finance of the State of Sao Paulo). da Secretaria Fazenda do Estado de Goiás ( S e c r e t a r y of Finance of Estado de Goias). ANNUAL REPORT 2013314S e c r e t a r i a Fazenda da do Estado de São Paulo (Secretary of Finance of the State of Sao Paulo). S e c r e t a r i a Fazenda da do Estado de São Paulo (Secretary of Finance of the State of Sao Paulo). Public Rod of Florianopolis- SC. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Company Court Case Number Origin Stage of trial Tam Linhas Aéreas S.A. S e c r e t a r i a da Receita F e d e r a l ( I n t e r n a l R e v e n u e of Service Brazil). 16643.000088/2009-81 Order of infringement to demand payment of IRPJ and CSLL. to assert On November 26, 2013, in order the benefits of art. 40 of Law No. 12865/13, the company applied for exemption and, cumulatively, waived any claim of right on which the appeal is based. At present, pending the exemption request. review of Amounts Committed ThUS$ 4,167 3.117.801-7 3.129.987-8 Order of infringement to demand payment ICMS governing of the importation of aircraft. Trial suspended. It now expects the end of main trial. 4,139 Order of infringement to demand payment ICMS governing of importation of the aircraft. Procedure suspended. Presently waiting for an end to the main proceedings. 3,899 4,269 3,986 023.12.036784-2 filed Lawsuit by InstitutoLiberdade on the product Espaço+. Currently awaiting convocation of the other companies, for us to answer. 1st Civil Court of the District of Navegantes / SC. 033.03.013110-6 (precautionary) 033.03.014870-0 (ordinary). We are currently awaiting the evaluation of our objection to the expert report. the filed former by Action sales a of representative TAM demanding c o m p e n s a t i o n and moral for economic damage consequence in of alleged wrongful termination and of contract trade unfounded representative land freight transport other than agreeing in the advance e s t a b l i s h m e n t protection of enforceable court. ANNUAL REPORT 2013315Company Court Case Number Origin Stage of trial Amounts Committed ThUS$ Tam Linhas Aéreas S.A. do Tribunal Trabalho de Porto Alegre - Labor Court of Porto Alegre. 0001611- 93.2012.5.04.0013 in Civil Action the Ministry of Labour, the which black granting shoes, and socks for employees who wear uniforms. requires of belts Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. 0000504- 79.2010.5.04.0014 0000033- 78.2011.5.05.0021 do Tribunal Trabalho de Porto Alegre - Labor Court of Porto Alegre. Justice Labor / Salvador BA Labor J u r i s d i c t i o n Salvador / BA. - Labor Brasilia. Court 01683.2009.015.10.00.3 of Secretary Finance of Sao Paulo. 4.023.832-5 Lawsuit filed by the Union of Aviation / RS Porto Alegre demanding payment for additional hazard. the Class action by the National Union of workers, Aviation which requires payment of risk bonus for all employees of the SSA base. Action by the Union Aerovias Brasilia/ demanding DF payment of hazard compensation for all maintenance employees. Notice of infraction to demand payment of import tax that rules aircraft. Process in the first instance, waiting judgment of appeal. 10,375 Approximate value Judgment Final instance. in appeal stage. 6,098 Approximate value Process in the first instance. Awaiting sentencing. 19,083 Approximate value Process in the last instance. Awaiting the outcome of the appeal. 5,559 Approximate value 5,501 After the adverse decision in the first instance, the company filed an ordinary appeal. Currently, pending the decision of the appeal the Administrative before Tribunal. ANNUAL REPORT 2013316Company Court Case Number Origin Stage of trial Florida USA. 2013-20319 CA 01 Aerovías de Integración Regional, AIRES S.A. initiated July 30, 2012 LAN AIRLINES In legal COLOMBIA proceedings in Colombia against regional One Inc. and Volvo Aero Services LLC, in order to declare that these companies are civilly liable for moral and material damages caused to LAN AIRLINES COLOMBIA , arising from breach of contractual obligations of the aircraft HK In June 20, 2013 AIRES SA AND / OR LAN AIRLINES COLOMBIA was notified of the lawsuit filed in the U.S. by INC and Dash regional One 224 LLC for damages caused by the aircraft HK claiming COLOMBIA LAN AIRLINES had the requirement to obtain customs import declaration in April 2010 when the aircraft entered Colombia for maintenance required by Regional One. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. S e c r e t a r i a da Receita F e d e r a l ( I n t e r n a l R e v e n u e of Service Brazil). S e c r e t a r i a da Receita F e d e r a l ( I n t e r n a l R e v e n u e Service of Brazil). 10880-926.383/2013 -66 Internal Revenue Decision of the Service approve does compensation made by the company in the application for refund of income tax for 2009. not 1720130100068 Notice of infraction to demand tax credit is due, as the company would have improperly excluded amounts paid as interest on own capital for the years 2010 and 2011. Tam Linhas Aéreas S.A. Secretary of Finance of Rio de Janeiro. 03.431129-0 It is an infraction, for which the State of Rio de Janeiro requires the VAT tax credit for purchasing fuel kerosene (jet fuel). According to a report, the auditor notes that there is no legislation in Rio de Janeiro for the appropriation of this credit, so the credit has been rejected and required tribute. in process pending Colombia The is of preliminary objections filed by the defendant resolution is As for the process in the U.S. deciding Federal Court whether the process follows on as a court with jurisdiction in Colombia is resolving a parallel demand in Colombia Although continues pending the decision to declare or not without case in the U.S. by the judge, the court has noted a date for trial in August 2014 if the decision is to grant the request to the case in the U.S.. the result of Pending the dissatisfaction expressed by the company. Pending objection filed by the company. result of the the Waiting presented by the company. the contestation for Amounts Committed ThUS$ 12,443 6,826 5,234 97,179 In order to deal with any financial obligations arising from legal proceedings outstanding at December 31, 2013, whether civil, labor or tax, LATAM Airlines Group S.A., has made provisions, which are included in heading Other provisions, non-current, 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. ANNUAL REPORT 2013317NOTE 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. The Company and its subsidiaries do not maintain financial credit contracts with local banks that indicate some limits on financial indicators of the Company or its subsidiaries. At December 31, 2013, the Company is in compliance with all indicators detailed above. ANNUAL REPORT 2013318(b) Commitments under operating leases as lessee Details of the main operating leases are as follows: Lessor Aircraft ACS Aircraft Finance Bermuda Ltd. - Aircastle (WFBN) Boeing 737 Air Canada (Sublessor) Airbus Financial Services Aircraft 76B-26261 Inc. (ILFC) Aircraft 76B-26329 Inc. (ILFC) Aircraft 76B-27613 Inc. (ILFC) Aircraft 76B-27615 Inc. (ILFC) Aircraft 76B-28206 Inc. (ILFC) Airbus A340 Airbus A340 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 Avolon Aerospace AOE 62 Limited Avolon Aerospace AOE 63 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 Boeing 777 Boeing 787 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, 2013 As of December 31, 2012 1 - 3 - 1 1 1 1 - - 3 1 1 1 3 1 1 1 1 1 - 1 1 1 1 2 1 - 1 1 4 1 7 1 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 10 ANNUAL REPORT 2013319Lessor 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 (*) Aircraft Airbus A330 Airbus A320 Boeing 737 Boeing 767 Airbus A320 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) Orix Aviation Systems Limited Pembroke B737-7006 Leasing Limited RBS Aerospace Limited (*) SKY HIGH V LEASING COMPANY LIMITED (*) Sky High XXIV Leasing Company Limited Sky High XXIV 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) (*) Airbus A320 Airbus A320 Airbus A320 Airbus A320 Boeing 737 Airbus A320 Boeing 737 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A319 Airbus A320 Airbus A319 Airbus A320 Wells Fargo Bank North National Association (BAKER & SPICE) (*) Airbus A320 Wells Fargo Bank North National Association (BOC) (*) Wells Fargo Bank North National Association (BOC) (*) Wells Fargo Bank Northwest N.A (AVOLON) (*) Wells Fargo Bank North National Association (ACG) (*) Airbus A319 Airbus A320 Airbus A320 Airbus A320 As of December 31, 2013 As of December 31, 2012 2 1 1 1 1 3 1 1 1 1 1 3 2 6 1 3 2 2 2 2 1 2 1 2 - 3 - 4 2 1 1 1 4 2 1 1 1 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 Wells Fargo Bank Northwest National Association (AerCap) (*) Airbus A330 10 Wells Fargo Bank Northwest National Association (BBAM) Boeing 777 Wells Fargo Bank Northwest National Association (BBAM) Boeing 787 Wells Fargo Bank Northwest National Association (BOC) (*) Airbus A320 Wells Fargo Bank Northwest, N.A. (GECAS) Wells Fargo Bank Northwest, N.A. (GECAS) Wilmington Trust Company (ILFC) (*) Yamasa Singapore Pte. Ltd. Zipdell Limited (BBAM) (*) Total Boeing 767 Boeing 777 Airbus A319 Airbus A340 Airbus A320 128 123 ANNUAL REPORT 2013320The composition of the fleet as operating leases at December 31, 2013, 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. 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 As of December 31, 2013 ThUS$ 475,762 1,101,741 335,019 1,912,522 As of December 31, 2012 ThUS$ 380,713 852,659 235,658 1,469,030 The minimum lease payments charged to income are the following: Minimum operating lease payments Total For the periods ended December 31, 2013 ThUS$ 441,077 441,077 2012 ThUS$ 310,496 310,496 ANNUAL REPORT 2013321In 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 six and eight years. In addition, two Boeing 767-300 aircraft and two Airbus A320-200 were returned given the end of the lease contract. During the fourth quarter of 2012, were returned four Airbus A320-200 on lease term. In the first quarter of 2013, it returned an Airbus A320-200, while during the second quarter of 2013 two Airbus A319-100, one Airbus A320-200 and one Bombardier Dhc8-200 were returned as their leasing contracts had ended. During June 2013 the contracts system applied to ten Airbus A330-200 aircraft was changed from financial leasing to operative leasing, with each aircraft being leased for a period of forty months. During the third quarter of 2013, two Airbus A320-200 aircraft was leased for a period of 8 years each, one Boeing 787 aircraft was leased for a period of 12 years and two Boeing 777 aircraft were leased for a period of 5 years each. Moreover, one Airbus A320-200, two Boeing 767-300 aircraft and one Bombardier Dhc8-400 aircraft were returned. Additionally, during July of 2013 two Dhc8-200 aircraft were acquired on leasing. In the fourth quarter of 2013, three Airbus A320-200 aircraft was leased for a period of 8 years each, one Boeing 787 aircraft was leased for a period of 12 years. Moreover, two Airbus A320-200, one Airbus A319-100, one Airbus A340-300, one Boeing 737-700 aircraft and one Bombardier Dhc8-400 aircraft were returned. 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 unrestricted and may not be netted against other accounts receivable or payable between the lessor and lessee. ANNUAL REPORT 2013322At December 31, 2013 the Company has existing letters of credit related to operating leasing as follows: Creditor Guarantee Debtor Type AFS Investments 48 LLC. Lan Cargo S.A. Two letter of credit Air Canada LATAM Airlines Group S.A. One letter of credit CIT Aerospace International LATAM Airlines Group S.A. Two letter of credit GE Capital Aviation Services Limited LATAM Airlines Group S.A. Three letter of credit GE Capital Aviation Services Limited Lan Cargo S.A. Six letter of credit International Lease Finance Corp LATAM Airlines Group S.A. Five letter of credit Orix Aviation System Limited LATAM Airlines Group S.A. One letter of credit PB Leasing Aircraft, No 28 (UK) Limited LATAM Airlines Group S.A. One letter of credit LATAM Airlines Group S.A. One letter of credit LATAM Airlines Group S.A. One letter of credit TAF Mercury TAF Venus Wells Fargo Bank Nortwest, National Association Value ThUS$ 3,500 1,800 3,240 12,134 17,965 2,300 3,255 3,265 4,000 4,000 Release date Jan 25, 2014 Jun 30, 2014 May 13, 2014 Dec 04, 2014 Apr 25, 2014 Feb 24, 2014 Jul 31, 2014 May 5, 2014 Dec 04, 2014 Dec 04, 2014 Lan Cargo S.A. One letter of credit 2,530 Jun 30, 2014 Baker & Spice Aviation Limited Tam Linhas Aéreas S.A. Two letter of credit 32,733 Apr 13, 2014 BOC Aviation (USA) Corporation Tam Linhas Aéreas S.A. One letter of credit 5,500 Nov 29, 2014 Cit Aerospace International Tam Linhas Aéreas S.A. Three letter of credit 15,281 Jan 31, 2014 DVB Group Merchant Bank (Asia) Ltd. Tam Linhas Aéreas S.A. One letter of credit PK Airfinance US, Inc. Tam Linhas Aéreas S.A. One letter of credit Royal Bank Of Scotland Aerospace Tam Linhas Aéreas S.A. Twelve letter of credit SMBC Aviation Capital Ltd. Tam Linhas Aéreas S.A. One letter of credit 5,500 1,600 5,360 6,262 Dec 04, 2014 Dec 19, 2014 Feb 20, 2014 Feb 28, 2014 Wells Fargo Bank Northwest, National Association Tam Linhas Aéreas S.A. Two letter of credit 6,000 Mar 28, 2014 Wilmington Trust SP Services Ltd. Tam Linhas Aéreas S.A. Two letter of credit 11,281 Jan 31, 2014 147,506 ANNUAL REPORT 2013323(c) Other commitments At December 31, 2013 the Company has existing letters of credit, certificates of deposits and warranty insurance policies as follows: Creditor Guarantee Debtor Type Value ThUS$ Release date American Alternative Insurance Corporation LATAM Airlines Group S.A. Four letter of credit 2,910 Apr 05, 2014 Citibank N.A. LATAM Airlines Group S.A. One letter of credit Comisión Europea LATAM Airlines Group S.A. One letter of credit 9,750 8,220 Dec 20, 2014 Feb 11, 2015 Deutsche Bank A.G. LATAM Airlines Group S.A. Three letter of credit 40,000 Jun 01, 2014 Dirección General de Aviación Civil de Chile LATAM Airlines Group S.A. Sixty four ticket guarantee 16,917 Mar 31, 2014 Dirección Seccional de Aduanas de Bogotá Línea Aérea Carguera de colombia S.A Two insurance policies guarantee 3,755 Apr 07, 2014 Empresa Pública de Hidrocarburos del Ecuador EP Petroecuador LATAM Airlines Group S.A. One letter of credit 5,500 Jun 21, 2014 Metropolitan Dade County LATAM Airlines Group S.A. Five letter of credit Servicio Nacional de Aduanas LATAM Airlines Group S.A. Three letter of credit 1,675 1,333 May 31, 2014 Jun 28, 2014 The Royal Bank of Scotland plc LATAM Airlines Group S.A. Two letter of credit 18,000 May 20, 2014 Washington International Insurance LATAM Airlines Group S.A. Two letter of credit Westpac Banking Corporation LATAM Airlines Group S.A. One letter of credit 6ª Vara de Execuções Fiscais Federal de Campo Grande/MS Tam Linhas Aéreas S.A. (Pantanal) Two insurance policies guarantee 2,100 1,066 Apr 05, 2014 Apr 04, 2014 31,728 Jan 04, 2016 8 Vara da Fazenda Pública da Co marca de São Paulo Tam Linhas Aéreas S.A. (Pantanal) One insurance policies guarantee 15,389 Apr 12, 2015 Fundação de Protação e Defesa do Consumidor Procon Tam Linhas Aéreas S.A. Vara da Fazenda Pública da Comarca de São Paulo Tam Linhas Aéreas S.A. Vara De Execuções Fiscais Estaduais de São Paulo Tam Linhas Aéreas S.A. União Federal Tam Linhas Aéreas S.A. One insurance policies guarantee One insurance policies guarantee One insurance policies guarantee One insurance policies guarantee 1,837 May 16, 2016 3,274 Mar 29, 2016 15,395 Apr 16, 2016 1,061 Jul 24, 2015 179,910 ANNUAL REPORT 2013324NOTE 37. TRANSACTIONS WITH RELATED PARTIES (a) Transactions with related parties for the period ended December 31, 2013 Tax No. Related party Nature of relationship with related parties Country of origin Explanation of other information about related parties Nature of related parties transactions Currency Transaction amount with related parties 96.810.370-9 Inversiones Costa Verde Ltda. y CPA. Controlling shareholder Chile Investments Revenue from services provided 96.847.880-K Lufthansa Lan Technical Training S.A. Associate Chile Training center Leases as lessor Services received Services received 65.216.000-K Comunidad mujer Other related parties Chile Promotion and training of women Revenue from services provided Services received 78.591.370-1 Bethia S.A. y Filiales Other related parties Chile Investments Leases as lessor Revenue from services provided Services received Sale of Property plant and equip- ment (1) 79.773.440-3 Transportes San Felipe S.A. Other related parties Chile Transport Revenue from services provided Services received Commitments made on behalf of the entity 87.752.000-5 Granja Marina Tornagaleones S.A. Other related parties Chile Pisciculture Revenue from services provided Foreign Foreign Foreign Inversora Aeronáutica Argentina Other related parties Jochmann Participações Ltda. Other related parties TAM Aviação Executiva e Taxi Aéreo S.A. Other related parties Argentina Investments Revenue from services provided Leases as lessor Brazil Transport Services received Brazil Transport Revenue from services provided Commitments made on behalf of the entity CLP CLP CLP US$ CLP CLP CLP CLP CLP CLP CLP CLP CLP CLP US$ US$ US$ BRL BRL ThUS$ 17 253 (1,186) (1,146) 10 (11) (6) 2,726 (883) 14,217 17 (142) (84) 231 9 (358) (27) 485 (17) Foreign Prismah Fidelidade S.A. Joint Venture Brazil Marketing Liabilities settlement on behalf of BRL (499) the entity for the related party 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. On December 31, 2013, this balance is paid. ANNUAL REPORT 2013325(b) Transactions with related parties for the period ended December 31, 2012 Tax No. Related party Nature of relationship with related parties Country of origin Explanation of other information about related parties Nature of related parties transactions Currency Transaction amount with related parties 96.810.370-9 Inversiones Costa Verde Ltda. y CPA. Controlling shareholder Chile Investments Revenue from services provided 96.847.880-K Lufthansa Lan Technical Training S.A. Associate Chile Training center Leases as lessor Services received Services received 65.216.000-K Comunidad mujer Other related parties Chile Promotion and training of women Revenue from services provided Services received 78.591.370-1 Bethia S.A. y Filiales Other related parties Chile Investments Leases as lessor Revenue from services provided Commitments made on behalf of the entity Services received Sale of Property plant and equipment (1) 79.773.440-3 Transportes San Felipe S.A. Other related parties 87.752.000-5 Granja Marina Tornagaleones S.A. Other related parties Chile Transport Services received Chile Pisiculture Revenue from services provided 96.812.280-0 San Alberto S.A. y Filiales Other related Chile Investments Services received Foreing Inversora Aeronáutica Argentina Other related parties parties Foreing Tadef-Transporte Administração e Participação Ltda. Other related parties Foreing TAM Aviação Executiva e Taxi Aéreo S.A. Other related parties Argentina Investments Leases as lessee Liabilities settlement on behalf of the entity for the related party Brazil Transport Services received Brazil Transport Revenue from services provided Liabilities settlement on behalf of the entity for the related party Foreing Made In Everywhere Repr.Com.Distr.Ltda Other related parties Brazil Transport Services received Foreing Prismah Fidelidade S.A. Joint Venture Brazil Marketing Liabilities settlement on behalf of the entity for the related party CLP CLP CLP US$ CLP CLP CLP CLP CLP CLP CLP CLP CLP US$ US$ US$ US$ BRL BRL BRL BRL ThUS$ 11 411 (1,101) (803) 13 (13) 741 897 3 (786) 14,217 (279) 243 (29) (442) 11 (18) 306 3 (211) 419 (1) 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. ANNUAL REPORT 2013326Operations corresponding to holders of common stock in TAM S.A. and subsidiaries are included following the date of the business combination, on June 22, 2012. The balances of Accounts receivable and accounts payable to related parties are disclosed in Note 9. Transactions between related parties have been carried out on free-trade conditions between interested and duly-informed parties. (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. Remuneration Management fees Non-monetary benefits Short-term benefits Share-based payments Total For the periods ended December 31, 2013 ThUS$ 15,148 368 565 4,056 17,709 2012 ThUS$ 15,146 653 395 5,060 1,412 37,846 22,666 ANNUAL REPORT 2013327 NOTE 38. SHARE-BASED PAYMENTS (a) Compensation plan for increase of capital in LATAM Airlines Group S.A. (a.1) Compensation plan 2011 implemented by Compensation plans providing options for the subscription and payment of shares that have been granted from the first quarter of 2013 are recognized in the financial statements in accordance with the provisions of IFRS 2 "Share-based Payment”, showing the effect of the fair value of the options granted under compensation in linear between the date of grant of such options and the date on which these irrevocable. 21, the allocated shares were At a Special Shareholders Meeting held Company’s 2011, December shareholders among other approved, matters, an increase of capital of which 4,800,000 to compensation plans for employees of the Company and its subsidiaries, pursuant to Article 24 of the Companies Law. In this compensation plan no member of the controlling group would be benefited. The granting of options for the subscription and payment of shares has been formalized through conclusion of contracts of options to subscribe for shares, according to the proportions shown in the following schedule of accrual and is related to the permanence condition of the executive as employee of the Company at these dates for the exercise of the options: Percentage 30% 30% 40% Period From December 21, 2014 and until December 21, 2016. From December 21, 2015 and until December 21, 2016. From June 21, 2016 and until December 21, 2016. Share options in agreements of share- based payments, as of January 1, 2013 Share options granted Share options in agreements of share- based payments, as of December 31, 2013 Number of share options - 4,497,000 4,497,000 These options have been valued and recorded at fair value at the grant date, determined by the "Black-Scholes-Merton”. The effect on income to December 2013 corresponds to ThUS$ 17,200. ANNUAL REPORT 2013328The input data of option pricing model used for share options granted are as follows: Weighted average share price Exercise price Expected volatility Life of option Dividends expected Risk-free interest US$ 23.55 US$ 24.97 61.52% 3.6 years 0% 0.0055 (a.2) Compensation plan 2013 shares were At the Extraordinary Shareholders’ Meeting June 11, 2013, the Company’s held on shareholders approved motions including increasing corporate equity, of which 1,500,000 to compensation plans for employees of the Company and its affiliates, in conformity with the stipulations established in Article 24 of the Corporations Law. Regard to this compensation plan, not exist yet a defined date for implementation. allocated The granting of options for the subscription and payment of shares has been formalized through conclusion of contracts of options to subscribe for shares, according to the proportions shown in the following schedule of accrual and is related to the permanence condition of the executive at these dates for the exercise of the options: Percentage 100% From November 15, 2017 and until June 11, 2018. Period ANNUAL REPORT 2013329(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, 2013, which amounted to 837,733 shares and 1,082,463 shares, respecti- vely. TAM Linhas Aéreas S.A. Description 1st Grant 2nd Grant 3rd Grant 4th Grant 1st Extraordinary Grant 3nd Extraordinary Grant 4th Extraordinary Grant Total Date 12-28-2005 11-30-2006 12-14-2007 05-28-2010 09-27-2007 04-01-2010 04-01-2010 Outstanding option number Multiplus S.A. - 119,401 259,857 228,475 230,000 - - 837,733 Description 1st Grant 2nd Grant 3rd Grant 4th Grant 1st Extraordinary Grant 2nd Extraordinary Grant 3nd Extraordinary Grant 4th Extraordinary Grant Total Date 10-04-2010 11-08-2010 04-16-2012 10-04-2010 10-04-2010 10-04-2010 04-16-2012 11-20-2013 Outstanding option number 11,289 2,245 166,236 334,207 362,911 - - 205,575 1,082,463 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. 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. ANNUAL REPORT 2013330As of December 31, 2013 the acquisition of the share's rights, in both companies is as follows: Company i. Number of shares accrued options TAM Linhas Aéreas S.A. Multiplus S.A. 609,258 161,294 Number of shares Non accrued options 228,475 921,169 In accordance with IFRS 2 - Share-based payments, the fair value of the option must be recalculated and recorded as a liability of the Company once payment is made in cash (cash-settled). The fair value of these options was calculated using the Black-Scholes method, where the cases were updated with information LATAM Airlines Group S.A. The fair value recorded in liabilities at December 31, 2013 is ThUS$ 1,493 and in income ThUS$ 509. ANNUAL REPORT 2013331NOTE 39. THE ENVIRONMENT S.A. manages LATAM Airlines Group environmental issues at the corporate, centralized in Environmental Management. To monitor the company and minimize their impact on the environment is a commitment to the highest level, where continuous improvement and contribute to the solution of the problem of global climate change, generating added value to the company and the region, are the pillars of his administration. One function of Environmental Management, in conjunction with the various areas of the Company, is to ensure environmental compliance, implementing a management system programs that meet the increasingly demanding requirements globally; well as continuous improvement programs in their internal processes that generate environmental benefits and to join the currently completed. environmental and The Environment Strategy LATAM Airlines Group S.A., is based on the following objectives: - - - of the impact Minimize its operations by using a modern operational fleet, management continuous and incorporation of new technologies. efficient Promote resources of waste the efficient and in all use of minimization processes. Manage carbon responsibly our footprint by measuring, monitoring emissions. and reducing - - Promote the development and use of alternative energy more efficient impact. and less environmental Encourage sustainable tourism as a pillar for the development of the region. For 2013, we have established three priority areas of work to develop: 1. Implementing an Environmental Management System; 2. Management Carbon Footprint by measuring, verification and compensation of our emissions; 3. Promoting biofuels market development in the region. Similarly, during 2013, activities were conducted in the following initiatives: - - - The environmental management of LATAM was an important part again for maintain recognition as industry in the subgroup Emerging Markets of Dow of Index. Jones Sustainability leaders The environmental management of LATAM was recognized by the Carbon Disclosure Project obtaining a classification B80, the highest in Chile and one of the highest in the region. Implementation of an Environmental Management System for LAN Airlines and LAN Cargo, and specific to the offices of Miami, USA and Quito, Ecuador; ANNUAL REPORT 2013332 - - - - - - - - The corporation’s carbon footprint was externally measured and verified. Review the environmental standards suppliers. demanded ours at A biofuel study was conducted, application including benefits. potential, costs, and Active project participation Renewable in Bio the Chile. The first commercial flight with biofuel in Colombia was conducted. Spearheaded global discussion on how to regulate CO2 emissions from the international aviation industry, to achieve the commitment of IATA and ICAO respect to advance in a carbon-neutral growth from 2020. on Compliance was made with European regulations emissions, providing compensation to offset flights within the EU during 2012, 32,000. to corresponding CO2 US$ Energy efficiency projects were implemented in our operations. The total amount of the Environmental Division expenses for 2013 is US$ 427,704 (US$526,074 during 2012). ANNUAL REPORT 2013333NOTE 40. EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS (a) Term capital increase placement 2013 On January 10, 2014 were placed by the procedure of Auction Orders Book, according to the provisions of Section 2.4A of the Operations Manual in Shares by Stock Exchange Santiago, Stock Exchange, and the 10,314,872 cash shares that were not subscribed within the period of first refusal ended December 19, 2013. The placement price was US$ 15.17, the exchange rate observed dollar published by the Central Bank of Chile in force for Monday January 9, 2014 , equivalent to $8,072.60 , having raised therefore the equivalent today US$ 156.5 million, approximately . Thus concluded the process of placing 100 % of 62,000,000 shares for payment of first issue (not include the Employee Compensation Plan Company and its subsidiaries ) to be placed by the Company under the capital increase approved by the Extraordinary Shareholders' Meeting held on LATAM June 11, 2013 , total revenues of US$ 940.5 million having been achieved. for LATAM Airlines Group S.A. and Subsidiaries’ consolidated financial statements as at December 31, 2013, have been approved by the Board of Director’s in an extraordinary meeting held on March 17, 2014. ANNUAL REPORT 2013334Subsidiaries and Affiliated Companies LATAM AIRLINES GROUP S.A. Y Subsidiaries LATAM Airlines Group S.A. Name: LATAM Airlines Group S.A. Chilean Tax N° (RUT): 89.862.200-2 Incorporation: Established as a limited liability company by public deed of 30 December 1983, extended by Public Notary Eduardo 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 Línea Aérea Nacional de Chile S.A. (now LATAM Airlines Group S.A.). As regards aeronautical 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 under the name of Línea Aérea Nacional de Chile. 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. The change of name came into force on 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 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. information about Note: The financial subsidiaries presented below has been summarized. complete financial statements are available to the public at our corporate headquarters and at the Superintendencia de Valores y Seguros (SVS). Their ANNUAL REPORT 2013336TAM S.A. and Subsidiaries Incorporation: Joint established in Brazil in May 1997. stock company 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: Participation rate: % of consolidated assets: Board of Directors Chairwoman: Directors: Subsidiaries of TAM S.A. and participation rate: - TAM Linhas Aereas S.A. and Subsidiaries - Aerolinhas Brasileiras S.A. and Subsidiary - Multiplus S.A. - Transportes Aereos del Mercosur S.A. - Corsair Participações Ltda. - TP Franchising Limited ThUS$ 2,054,021 ThUS$ (428,491) 100.00% 3.15% Maria Cláudia Oliveira Amaro Maurício Rolim Amaro Noemy Almeida Oliveira Amaro Flávia Turci Enrique Cueto Plaza Ignacio Cueto Plaza 100.00% 100.00% 72.85% 94.98% 100.00% 100.00% ANNUAL REPORT 2013337TAM S.A. AND SUBSIDIARIES Consolidated Statement 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 As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 2,370,275 1,994,205 1,772 2,372,047 6,323,411 8,917 2,003,122 6,818,176 8,695,458 8,821,298 3,249,581 4,734,090 3,556,778 5,642,121 7,983,671 9,198,899 617,039 94,748 (480,634) 103,033 711,787 (377,601) TOTAL LIABILITIES AND EQUITY 8,695,458 8,821,298 Consolidated Statement of Income by Function For the period from January 1 to December 31, 2013 For the period from January 1 to December 31, 2012 Revenue Gross margin Income (loss) before taxes Income (loss) tax expense NET INCOME (LOSS) FOR THE PERIOD Income (loss) attributable to: Owners of the parent Non-controlling interest Net income (loss) of the period ThUS$ 6,791,104 1,302,493 (483,311) 54,820 (428,491) (458,475) 29,984 (428,491) ThUS$ 3,633,592 611,848 (52,028) (6,169) (58,197) (75,194) 16,997 (58,197) ANNUAL REPORT 2013338Consolidated Statement of Comprehensive Income For the period from January 1 to December 31, 2013 For the period from June 22 to December 31, 2012 NET INCOME (LOSS) Other comprehensive income (loss) Total comprehensive income (loss) Comprehensive income (loss) attributable to: Owners of the parent Non-controlling interest TOTAL COMPREHENSIVE INCOME (LOSS) Consolidated Statement of Changes in Equity Equity as of June 22, 2012 Total comprehensive income Dividends Other increases (decreases) in equity Closing balance as of December 31, 2012 Equity as of January 1, 2013 Total comprehensive income Equity issuance Dividends Other increases (decreases) in equity Closing balance as of December 31, 2013 ThUS$ (428,491) (23,006) (451,497) (468,760) 17,263 (451,497) ThUS$ (58,197) (8,867) (67,064) (85,388) 18,324 (67,064) Parent’s ownership interest Non- Controlling interest Total equity ThUS$ ThUS$ ThUS$ (233,750) (85,388) - (161,496) (480,634) (480,634) (468,760) 1,650,000 - (83,567) 617,039 102,927 18,324 (19,997) 1,779 103,033 103,033 17,263 (130,823) (67,064) (19,997) (159,717) (377,601) (377,601) (451,497) - 1,650,000 (26,070) 522 94,748 (26,070) (83,045) 711,787 Consolidated Statement of Cash Flow Direct - Method For the period from January 1 to December 31, 2013 For the period from June 22 to December 31, 2012 ThUS$ ThUS$ Net cash flows from (used in) operating activities Net cash flows from (used in) investing activities 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 Cash and cash equivalents at end of period 127,832 (1,056,225) 977,123 48,730 (1,078) 368,368 405,880 195,418 (537,981) 63,317 (6,587) 320,716 ANNUAL REPORT 2013339Purpose: 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 aeronautical 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 their forms whether consisting of ground support, maintenance, technical or any other type of consultancy, within and outside Chile, and all types of activities and services 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. LAN Cargo S.A. and Subsidiaries 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 minutes of 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 minutes of 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. ANNUAL REPORT 2013340Subscribed and paid-in capital: Net income: Participation rate: % of consolidated assets: Board of Directors Chairman: Directors: ThUS$ 83,226 ThUS$ 106,378 99.8980% 2.56% José Cox Donoso (until 1 October 2013) Juan José Cueto Plaza Ramón Eblen Kadis Ignacio Cueto Plaza Enrique Cueto Plaza Subsidiaries of LAN Cargo S.A. and participation rate: - 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. and Subsidiary - Lan Cargo Overseas Limited and Subsidiaries -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. and Subsidiary - Connecta Corporation 99.99% 99.98% 99.00% 99.00% 99.89% 100.00% 100.00% 99.99% 100.00% 100.00% 100.00% ANNUAL REPORT 2013341LAN CARGO S.A. AND SUBSIDIARIES (Closed joint stock company) Consolidated Statement 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 As of December 31, 2013 As of December 31, 2012 ThUS$ ThUS$ 315,616 484,594 85 2,291 315,701 757,942 486,885 716,666 1,073,643 1,203,551 214,272 279,531 296,223 455,291 493,803 751,514 577,948 1,892 579,840 447,028 5,009 452,037 TOTAL LIABILITIES AND EQUITY 1,073,643 1,203,551 Consolidated Statement of Income by Function Revenue Gross margin Income (loss) before taxes Income (loss) tax expense NET INCOME (LOSS) FOR THE PERIOD Income (loss) attributable to: Owners of the parent Non-controlling interest Net income (loss) of the period For the period ended December 31, 2013 ThUS$ 2012 ThUS$ 1,328,571 1,333,780 24,462 40,465 112,075 (5,697) (47,360) (7,996) 106,378 (55,356) 108,611 (2,233) (55,478) 122 106,378 (55,356) ANNUAL REPORT 2013342Consolidated Statement of Comprehensive Income NET INCOME (LOSS) Other comprehensive income (loss) Total comprehensive income (loss) Comprehensive income (loss) attributable to: Owners of the parent Non-controlling interest TOTAL COMPREHENSIVE INCOME (LOSS) For the period ended December 31, 2013 ThUS$ 106,378 (837) 2012 ThUS$ (55,356) 1,055 105,541 (54,301) 107,775 (2,234) 105,541 (54,308) 7 (54,301) Consolidated Statement of Changes in Equity ThUS$ ThUS$ ThUS$ Parent’s ownership interest Non- Controlling interest Total equity Equity as of January 1, 2012 Total comprehensive income Equity issuance Dividends Other increases (decreases) in equity Closing balance as of December 31, 2012 Equity as of January 1, 2013 Total comprehensive income Equity issuance Other increases (decreases) in equity Closing balance as of December 31, 2013 518,600 (54,308) 2 (15,901) (1,365) 447,028 447,028 107,775 (1) 23,146 577,948 3,543 7 - - 1,459 5,009 5,009 (2,234) - (883) 1,892 522,143 (54,301) 2 (15,901) 94 452,037 452,037 105,541 (1) 22,263 579,840 ANNUAL REPORT 2013343Consolidated Statement of Cash Flow Direct - Method Net cash flows from (used in) operating activities Net cash flows used in investing activities 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 Cash and cash equivalents at end of period For the period ended December 31, 2013 ThUS$ (101,453) 181,521 (72,667) 2012 ThUS$ 125,990 (11,677) (118,848) 7,401 (4,535) 149 20,238 (2) 12,688 ANNUAL REPORT 2013344Lan Perú S.A. Incorporation: Established as a joint stock company in Peru on 14 February 1997. 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: Participation rate: % of consolidated assets: Board of Directors Chairman: Directors: ThUS$ 4,341 ThUS$ 3,877 70.00% 0.13% Emilio Rodríguez Larraín Salinas Enrique Cueto Plaza Ignacio Cueto Plaza Armando Valdivieso Montes Jorge Harten Costa Alejandro García Vargas Luis Enrique Gálvez de la Puente ANNUAL REPORT 2013345LAN PERÚ S.A. (Closed joint stock company) Statement of Financial Position Assets Liabilities Equity Liabilities and equity Income Statement Operating revenues Operating income Non-operating income Income tax Net income As of December 31, As of December 31, 2013 ThUS$ 281,800 252,735 29,065 281,800 2012 ThUS$ 166,676 146,610 20,066 166,676 For the period ended December 31, 2013 ThUS$ 2012 ThUS$ 1,268,567 1,119,644 11,081 (5,900) (1,304) 3,877 4,336 78 (1,731) 2,683 Statement of Changes in Equity Share capital ThUS$ Other sundry reserve ThUS$ Legal reserve Retained earnings Total equility ThUS$ ThUS$ ThUS$ Equity as of January 1, 2012 4,341 Land revaluation Distribution of dividends Deferred tax on revaluation Net income of the period Closing balance as of December 31, 2012 Equity as of January 1, 2013 Land revaluation Distribution of dividends Deferred tax on revaluation Net income of the period Closing balance as of December 31, 2013 - - - - 4,960 7,760 - (2,328) - 4,341 10,392 4,341 - - - 10,392 9,302 - (2,790) - 4,341 16,904 868 - - - - 868 868 - - - - 868 6,162 - (4,380) - 2,683 16,331 7,760 (4,380) (2,328) 2,683 4,465 20,066 4,465 - (1,390) - 3,877 20,066 9,302 (1,390) (2,790) 3,877 6,952 29,065 ANNUAL REPORT 2013346Statement of Cash Flow Direct - Method Net cash flows from (used in) operating activities Net cash flows from (used in) investing activities Net cash flows from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at end of period For the period ended December 31, 2013 ThUS$ 131,456 (1,387) (1,390) 128,679 170,661 2012 ThUS$ (3,134) (6,636) (4,380) (14,150) 41,982 ANNUAL REPORT 2013347Inversiones Lan S.A. and Subsidiaries 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: Participation rate: % of consolidated assets: Board of Directors Chairman: Directors: ThUS$ 458 ThUS$ 526 99.71% 0.03% Enrique Cueto Plaza Ignacio Cueto Plaza Andrés Osorio Hermansen Roberto Alvo Milosawlewitsch Enrique Elsaca Hirmas Subsidiaries of Inversiones Lan S.A. and participation rate: Transport Aviation Leasing Limited Aviation Administration Services Ltd Passenger Aircraft Leasing Limited Andes Airport Services S.A. 100.00% 100.00% 100.00% 98.00% ANNUAL REPORT 2013348INVERSIONES LAN S.A. AND SUBSIDIARIES (Closed joint stock company) Consolidated Statement 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 LIABILITIES AND EQUITY Consolidated Statement of Income by Function Revenue Gross margin Income (loss) before taxes Income (loss) tax expense NET INCOME (LOSS) FOR THE PERIOD income (loss) attributable to: Owners of the parent Non - Controlling Interest Net income (loss) of the period As of December 31, As of December 31, 2013 ThUS$ 2012 ThUS$ 2,536 5,001 572 3,108 12,254 15,362 7,718 1,215 8,933 6,429 - 6,429 15,362 573 5,574 10,607 16,181 9,158 556 9,714 6,466 1 6,467 16,181 For the period ended December 31, 2013 ThUS$ 31,735 8,649 633 (107) 526 517 9 526 2012 ThUS$ 24,667 4,854 (201) 90 (111) (112) 1 (111) ANNUAL REPORT 2013349 Consolidated Statement of Comprehensive Income NET INCOME (LOSS) Other comprehensive income (loss) Total comprehensive income (loss) Comprehensive income (loss) attributable to: Owners of the parent Non-controlling interest TOTAL COMPREHENSIVE INCOME (LOSS) Consolidated Statement of Change in Equity Equity as of January 1, 2012 Total comprehensive income Other increases (decreases) in equity Closing balance as of December 31, 2012 Equity as of January 1, 2013 Total comprehensive income Other increases (decreases) in equity Closing balance as of Decemeber 31, 2013 Consolidated Statement of Cash Flow Direct - Method Net cash flows from (used in) operating activities Net cash flows from (used in) investing activities 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 Cash and cash equivalents at end of period For the period ended December 31, 2013 ThUS$ 2012 ThUS$ 526 (109) 417 410 7 417 Parent’s ownership interest Non- controlling Interest ThUS$ ThUS$ 6,476 37 (47) 6,466 6,466 410 (455) 6,421 2 4 (5) 1 1 7 - 8 (111) 152 41 37 4 41 Total Equity ThUS$ 6,478 41 (52) 6,467 6,467 417 (455) 6,429 For the period ended December 31, 2013 ThUS$ 1,419 (1,480) - (61) (22) 207 2012 ThUS$ 4,677 (4,547) 96 226 (2) 290 ANNUAL REPORT 2013350Inmobiliaria Aeronáutica S.A. Incorporation: Established as a closed joint stock company by public deed of 1 August 1995, extended by Public Notary Gonzalo de la Cuadra Fabres, 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: Participation rate: % of consolidated assets: Board of Directors Chairman: ThUS$ 1,147 ThUS$ 1,231 100.00% 0.12% Enrique Cueto Plaza Andrés Osorio Hermansen Armando Valdivieso Montes ANNUAL REPORT 2013351INMOBILIARIA AERONÁUTICA S.A. (Closed joint stock company) Statement 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 LIABILITIES AND EQUITY Statement of Income by Function Revenue Gross margin Income (loss) before taxes Income (loss) tax expensive NET INCOME (LOSS) FOR THE PERIOD Statement of Comprehensive Income NET INCOME (LOSS) Total comprehensive income (loss) As of December 31, As of December 31, 2013 ThUS$ 2012 ThUS$ 1,028 37,525 38,553 15,620 41,607 57,227 4,808 7,316 12,124 17,226 5,803 23,029 26,429 38,553 34,198 57,227 For the period ended December 31, 2013 ThUS$ 4,797 3,352 3,050 (1,819) 1,231 2012 ThUS$ 50,256 24,671 23,514 (5,795) 17,719 For the period ended December 31, 2013 ThUS$ 1,231 1,231 2012 ThUS$ 17,719 17,719 ANNUAL REPORT 2013352Statement of Changes in Equity Equity as of January 1, 2012 Total comprehensive income Dividends Closing balance as of December 31, 2012 Equity as of January 1, 2013 Total comprehensive income Dividends Closing balance as of December 31, 2013 Share capital ThUS$ 1,147 - - 1,147 1,147 - - 1,147 Retained earning ThUS$ 30,332 17,719 (15,000) 33,051 33,051 1,231 (9,000) 25,282 Total equity ThUS$ 31,479 17,719 (15,000) 34,198 34,198 1,231 (9,000) 26,429 Statement of Cash Flow Direct - Method Net cash flows from (used in) operating activities Net cash flows from (used in) investing activities 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 Cash and cash equivalents at end of period For the period ended December 31, 2013 ThUS$ (14,163) 14,073 - (90) (23) 29 2012 ThUS$ (22,860) 22,986 1 127 1 142 ANNUAL REPORT 2013353Lantours División Servicios Terrestres S.A. and Subsidiary Incorporation: Established as a closed joint stock company by public deed of 22 June 1987, extended by Santiago Public Notary Raúl Undurraga Laso, 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 24 August 1999, extended by Santiago Public Notary Eduardo Pinto Peralta, recorded at Folio 21,042 N° 16,759 of 1999 of the Santiago Business Register and published in the Official Gazette of 8 September 1999. 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: Participation rate: % of consolidated assets: Board of Directors Chairman: Directors: ThUS$ 225 ThUS$ 787 100.00% 0.00% Damián Scokin Rimolo Armando Valdivieso Montes Andrés del Valle Eitel Subsidiary of Lantours División Servicios Terrestres S.A. and participation rate: Lantours División Servicios Terrestres II S.A. 100.00% ANNUAL REPORT 2013354 LANTOURS DIVISIÓN SERVICIOS TERRESTRES S.A. AND SUBSIDIARY (Closed joint stock company) Statement 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 LIABILITIES AND EQUITY Statement of Income by Function Revenue Gross margin Income (loss) before taxes Income (loss) tax expense NET INCOME (LOSS) FOR THE PERIOD Statement of Comprehensive Income NET INCOME (LOSS) Total comprehensive income (loss) As of December 31, 2013 ThUS$ As of December 31, 2012 ThUS$ 2,478 244 2,722 2,203 7 2,210 512 2,722 2,411 267 2,678 2,121 32 2,153 525 2,678 For the period ended December 31, 2013 ThUS$ 10,365 5,781 1,017 (230) 787 2012 ThUS$ 9,399 5,600 1,598 (298) 1,300 For the period ended December 31, 2013 ThUS$ 787 787 2012 ThUS$ 1,300 1,300 ANNUAL REPORT 2013355Statement of Changes in Equity Equity as of January 1, 2012 Total comprehensive income Dividends Closing balance as of December 31, 2012 Equity as of January 1, 2013 Total comprehensive income Dividends Closing balance as of December 31, 2013 Statement of Cash Flow Direct - Method Net cash flows from (used in) operating activities Net cash flows from (used in) investing activities Net cash flows from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at end of period Share capital ThUS$ Retained earning ThUS$ 225 - - 225 225 - - 225 560 1,300 (1,560) 300 300 787 (800) 287 Total equity ThUS$ 785 1,300 (1,560) 525 525 787 (800) 512 For the period ended December 31, 2013 ThUS$ 18 15 (800) (3) 8 2012 ThUS$ 1,604 (41) (1,560) 3 11 ANNUAL REPORT 2013356Lan Pax Group S.A. and Subsidiaries 27 Incorporation: Established as a closed joint stock company by public deed of September 2001, extended by Santiago Public Notary Patricio Zaldivar Mackenna, 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; its area in addition, within of activity, 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 purpose. 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: Participation rate: % of consolidated assets: Board of Directors Chairman: Directors: ThUS$ 424 ThUS$ (116,657) 100.00% 0.00% Ignacio Cueto Plaza Andrés del Valle Enrique Elsaca Hirmas Subsidiaries of LanPax Group S.A. and participation rate: - Inversora Cordillera S.A.and Subsidiary - 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% ANNUAL REPORT 2013357 LAN PAX GROUP S.A. AND SUBSIDIARIES (Closed joint stock company) Consolidated Statement 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 Non-controlling interest Total equity TOTAL LIABILITIES AND EQUITY Consolidated Statement of Income by Function Revenue Gross margin Income (loss) before taxes Income (loss) tax expense NET INCOME (LOSS) FOR THE PERIOD Income (loss) attributable to: Owners of the parent Non-controlling interest Net income (loss) of the period As of December 31, 2013 ThUS$ As of December 31, 2012 ThUS$ 326,373 315,216 641,589 228,849 293,559 522,408 378,370 523,481 901,851 582,742 55,109 637,851 (246,521) (112,385) (13,741) (3,048) (260,262) (115,443) (641,589) 522,408 For the period ended December 31, 2013 ThUS$ 2012 ThUS$ 1,140,255 1,130,295 95,188 128,389 (143,800) (114,478) 27,143 32,201 (116,657) (82,777) (104,966) 11,691 (77,269) (5,008) (116,657) (82,277) ANNUAL REPORT 2013358Consolidated Statement of Comprehensive Income NET INCOME (LOSS) Other comprehensive income (loss) Total comprehensive income (loss) Comprehensive income (loss) attributable to: Owners of the parent Non-controlling interest TOTAL COMPREHENSIVE INCOME (LOSS) For the period ended December 31, 2013 ThUS$ 2012 ThUS$ (116,657) (82,277) (27,036) 6,087 (143,693) (76,190) (131,495) (70,823) (12,198) (5,367) (143,693) (76,190) Parent’s ownership Interest Non- controlling interest Total equity Consolidated Statement of Changes in Equity Equity as of January 1, 2012 Total comprehensive income Other increases (decreases) in equity Closing balance as of December 31, 2012 Equity as of January 1, 2013 Total comprehensive income Other increases (decreases) in equity Closing balance as of December 31, 2013 ThUS$ (41,935) (70,823) 363 (112,395) (112,395) (131,495) (2,631) (246,521) Consolidated Statement of Cash Flow Direct - Method Net cash flows from (used in) operating activities Net cash flows from (used in) investing activities Net cash flows from (used in) financing activities Net increase (decrease) in cash and cash equivalents before effect of exchanges rate change ThUS$ ThUS$ 4,440 (5,367) (2,121) (3,048) (3,048) (12,198) 1,505 (13,741) (37,495) (76,190) (1,758) (115,443) (115,443) (143,693) (1,126) (260,262) For the period ended December 31, 2013 ThUS$ 2012 ThUS$ (110,576) (134,249) (75,586) 200,403 4,310 116,611 14,241 (13,328) Effects of variation in the exchange rate on cash and cash equivalents (66) (144) Cash and cash equivalents at end of period TOTAL RESULTADO INTEGRAL 56,510 (143.693) 42,335 (76.190) ANNUAL REPORT 2013359 Lan Chile Investments Limited and Subsidiary 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: Participation rate: % of consolidated assets: Board of Directors Chairman: Directors: ThUS$ 10 ThUS$ (1) 100.00% 0.00% Enrique Cueto Plaza Andrés Osorio Hermansen Andrea Williams Subsidiary of Lan Chile Investments Limited and participation rate: - Inversiones La Burguería S.A. 99.90% ANNUAL REPORT 2013360 LAN CHILE INVESTMENTS LIMITED AND SUBSIDIARY (Limited liability company) Consolidated Statement 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 LIABILITIES AND EQUITY Consolidated Statement of Income by Function Revenue Gross margin Income (loss) before taxes Income (loss) tax expense NET INCOME (LOSS) FOR THE PERIOD Income (loss) attributable to: Owners of the parent Non-controlling interest Net income (loss) of the period As of December 31 2013 ThUS$ As of December 31 2012 ThUS$ 2,015 2,404 4,419 12 5,236 5,248 (829) (829) 4,419 4,419 - 4,419 11 5,236 5,247 (828) (828) 4,419 For the period ended December 31, 2013 ThUS$ 2012 ThUS$ - - (1) - (1) (1) - (1) - - (10) - (10) (10) - (10) ANNUAL REPORT 2013361Consolidated Statement of Comprehensive Income NET INCOME (LOSS) Total comprehensive income (loss) Comprehensive income (loss) attributable to: Owners of the parent Non-controlling interest TOTAL COMPREHENSIVE INCOME (LOSS) For the period ended December 31, 2013 ThUS$ 2012 ThUS$ (1) (1) (1) - (1) (10) (10) (10) - (10) Parent’s ownership Interest Non- controlling Interest Total equity Consolidated Statement of Changes in Equity ThUS$ ThUS$ ThUS$ Equity as of January 1, 2012 Total comprehensive income Closing balance as of December 31, 2012 Equity as of January 1, 2013 Total comprehensive income Closing balance as of December 31, 2013 (818) (10) (828) (818) (1) (829) - - - - - - (818) (10) (828) (818) (1) (829) Consolidated Statement of Cash Flow Direct - Method Net cash flows from (used in) operating activities Net cash flows from (used in) investing activities Net cash flows from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at end of period TOTAL RESULTADO INTEGRAL For the period ended December 31, 2013 ThUS$ 2012 ThUS$ (1) - - (1) - - - - - 1 (143.693) (76.190) ANNUAL REPORT 2013362 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. ANNUAL REPORT 2013363ANNUAL REPORT 2013364

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