Sociedad Quimica y Minera S.A.
Annual Report 2020

Plain-text annual report

Sociedad Química y Minera de Chile S.A. Annual Report 2020 1) INDEX 2) IDENTIFICATION OF THE ENTITY .......................................................................................................... 3 2) A) IDENTIFICATION OF THE ENTITY: BASIC IDENTIFICATION ................................................................................ 3 2) B) IDENTIFICATION OF THE ENTITY: LEGAL CONSTITUTION ................................................................................. 3 2) C) IDENTIFICATION OF THE ENTITY: CONTACT INFORMATION.............................................................................. 3 3) DESCRIPTION OF BUSINESS ENVIRONMENT ....................................................................................... 4 3) A) DESCRIPTION OF BUSINESS ENVIRONMENT: HISTORICAL INFORMATION ......................................................... 4 3) B) DESCRIPTION OF BUSINESS ENVIRONMENT: INDUSTRIAL SECTOR ................................................................... 6 3) C) DESCRIPTION OF BUSINESS ENVIRONMENT: ACTIVITIES AND BUSINESSES .................................................... 10 3) D) DESCRIPTION OF BUSINESS ENVIRONMENT: PROPERTY AND FACILITIES ....................................................... 37 3) E) DESCRIPTION OF BUSINESS ENVIRONMENT: RISK FACTORS .......................................................................... 56 3) F) DESCRIPTION OF BUSINESS ENVIRONMENT: CAPITAL EXPENDITURE ............................................................. 75 4) OWNERSHIP AND SHARES ....................................................................................................................... 77 4) A) OWNERSHIP AND SHARES: OWNERSHIP ......................................................................................................... 77 4) B) OWNERSHIP STRUCTURE AND SHARES: SHARES AND THEIR CHARACTERISTICS AND RIGHTS ............... 82 5) SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT .................................................. 86 5) A) SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT: DIVERSITY WITHIN THE BOARD OF DIRECTORS AS OF DECEMBER 31, 2020 ......................................................................................... 86 5) B) SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT: DIVERSITY WITHIN EXECUTIVE MANAGEMENT AS OF DECEMBER 31, 2020 ................................................................................. 87 5) C) SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT: DIVERSITY WITHIN THE ORGANIZATION AT DECEMBER 31, 2020 ....................................................................................................... 87 5) D) SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT: SALARY GAP BY GENDER .. 89 6) A) MANAGEMENT AND PERSONNEL: ORGANIZATIONAL CHART ..................................................... 91 6) B) MANAGEMENT AND PERSONNEL: INFORMATION ABOUT THE BOARD OF DIRECTORS ......... 92 6) C) MANAGEMENT AND PERSONNEL: INFORMATION ABOUT THE DIRECTORS’ COMMITTEE ... 95 6) D) MANAGEMENT AND PERSONNEL: MAIN EXECUTIVES ................................................................... 98 6) E) MANAGEMENT AND PERSONNEL: NUMBER OF EMPLOYEES ........................................................ 99 6) F) MANAGEMENT AND PERSONNEL: SHARE OWNERSHIP OF EXECUTIVE OFFICERS AND BOARD MEMBERS ....................................................................................................................................................... 100 7) INFORMATION ABOUT SUBSIDIARIES AND ASSOCIATES ........................................................... 101 7) A) INFORMATION ABOUT SUBSIDIARIES AND ASSOCIATES: SUBSIDIARIES AND ASSOCIATES101 8) INFORMATION ABOUT RELEVANT OR ESSENTIAL FACTS ......................................................... 113 9) SUMMARY OF COMMENTS AND PROPOSALS BY SHAREHOLDERS AND THE DIRECTORS’ COMMITTEE ................................................................................................................................................... 117 10) FINANCIAL REPORTS ............................................................................................................................ 118 10) A) FINANCIAL REPORTS OF THE REPORTING ENTITY ...................................................................... 118 10) B) SUMMARY FINANCIAL STATEMENTS ............................................................................................. 335 11) RESPONSIBILITY STATEMENT ..................................................................................................... 378 2 2) IDENTIFICATION OF THE ENTITY 2) IDENTIFICATION OF THE ENTITY 2) A) IDENTIFICATION OF THE ENTITY: BASIC IDENTIFICATION Company Name: Sociedad Química y Minera de Chile S.A. Abbreviated Company Name: SQM Legal Address: El Trovador 4285, Las Condes, Santiago, Chile Chilean Taxpayer ID: 93.007.000-9 Type of Entity: Open stock corporation 2) B) IDENTIFICATION OF THE ENTITY: LEGAL CONSTITUTION SQM was founded under the laws of the Republic of Chile. The Company was constituted by public deed issued on June 17, 1968 by Mr. Sergio Rodríguez Garcés, Public Notary of Santiago. Its existence was approved by Decree No. 1,164 of June 22, 1968, of the Ministry of Finance, and it was registered on June 29, 1968, in the Business Registry of Santiago, on page 4,537 No. 1,992. 2) C) IDENTIFICATION OF THE ENTITY: CONTACT INFORMATION Corporate Headquarters: Address: El Trovador 4285, Las Condes, Santiago, Chile Telephone: +56 2 24252000 Fax: +56 2 24252268 Website: www.sqm.com To contact our investor relations team: Gerardo Illanes CFO and Vice President of Corporate Finance gerardo.illanes@sqm.com Telephone: +56 2 24252485 Kelly O’Brien Head of Investor Relations kelly.obrien@sqm.com Telephone: +56 2 24252074 Irina Axenova Investor Relations irina.axenova@sqm.com Telephone: +56 2 24252280 3 3) DESCRIPTION OF BUSINESS ENVIRONMENT 3) DESCRIPTION OF BUSINESS ENVIRONMENT 3) A) DESCRIPTION OF BUSINESS ENVIRONMENT: HISTORICAL INFORMATION Commercial exploitation of the caliche ore deposits in northern Chile began in the 1830s, when sodium nitrate was extracted from the ore for use in the manufacturing of explosives and fertilizers. By the end of the nineteenth century, nitrate production had become the leading industry in Chile, and the country was the world’s leading supplier of nitrates. The accelerated commercial development of synthetic nitrates in the 1920s and the global economic depression in the 1930s caused a serious contraction of the Chilean nitrate business, which did not recover significantly until shortly before the Second World War. After the war, the widespread commercial production of synthetic nitrates resulted in a further contraction of the natural nitrate industry in Chile, which continued to operate at depressed levels into the 1960s. We were formed in 1968 through a joint venture between Compañía Salitrera Anglo Lautaro S.A. (“Anglo Lautaro”) and the Production Development Corporation (Corporación de Fomento de la Producción or “Corfo”), a Chilean government entity. Three years after our formation, in 1971, Anglo Lautaro sold all of its shares to Corfo, and we were wholly owned by the Chilean Government until 1983. In 1983, Corfo began a process of privatization by selling our shares to the public and subsequently listing such shares on the Santiago Stock Exchange. By 1988, all of our shares were publicly owned. Our Series B ADSs have traded on the NYSE under the ticker symbol “SQM” since 1993. We accessed international capital markets again for the issuance of additional ADSs in 1995 and 1999. On December 21, 2006, two groups of shareholders, the “Pampa Group” (which includes the company Sociedad de Inversiones Pampa Calichera S.A. and its related companies, Inversiones Global Mining Chile Limitada and Potasios de Chile S.A.) and Kowa Group (which includes the companies Kowa Company Ltd., Inversiones La Esperanza (Chile) Limitada, Kochi S.A and La Esperanza Delaware Corporation) signed a joint agreement and became the controlling group of SQM. Since our inception, we have produced nitrates and iodine, which are obtained from the caliche ore deposits in northern Chile. In 1985, we began to use heap leaching processes to extract nitrates and iodine, and in 1986 we started to produce potassium nitrate at our Coya Sur facility. Between 1994 and 1999, we invested approximately US$300 million in the development of the Salar de Atacama project in northern Chile, which enabled us to produce potassium chloride, lithium carbonate, potassium sulfate and boric acid. From 2000 through 2004, we principally consolidated the investments carried out in the preceding five years. We focused on reducing costs and improving efficiencies throughout the organization. In addition, in 2001, we signed a commercial distribution agreement with the Norwegian company Yara International ASA, in order to take advantage of cost synergies in the Specialty Plant Nutrition business line. Starting in 2005, we began strengthening our leadership position in our core businesses through a combination of capital expenditures and advantageous acquisitions and divestitures. Our acquisitions have included the Kemira Emirates Fertiliser Company (“Kefco”) in Dubai in 2005 and the iodine business of Royal DSM N.V. (“DSM”) in 2006. We also entered into a number of joint ventures, including a joint venture with Migao Corporation (“Migao”), signed in 2008, for the production of potassium nitrate, and SQM VITAS, our joint venture with the French Roullier Group. Pursuant to the latter joint venture, in 2010, we launched a new line of soluble phosphate products, and in 2012 we built new plants for the production of water-soluble fertilizers in Brazil (Candeias), Peru and South Africa (Durban). We have also sold: (i) Fertilizantes Olmeca, our former Mexican subsidiary, in 2006, (ii) our stake in Impronta S.R.L., our former Italian subsidiary, in 2007 and (iii) our former butyllithium plant located in Houston, Texas, in 2008. These sales allowed us to concentrate our efforts on our core products. The capital expenditure program has allowed us to add new products to our product lines and increase the production capacity of our existing products. In 2005, we started production of lithium hydroxide at a 4 3) DESCRIPTION OF BUSINESS ENVIRONMENT plant in the Salar del Carmen, near the city of Antofagasta in the north of Chile. In 2007, we completed the construction of a new prilling and granulating plant. In 2011, we completed expansions of our lithium carbonate capacity, achieving 48,000 metric tons of capacity per year. Since 2010, we have continued to expand our production capacity of potassium products in our operations in the Salar de Atacama. In 2011, we completed the construction of a new potassium nitrate facility in Coya Sur, increasing our overall production capacity of potassium nitrate by 300,000 metric tons per year. In 2013, we completed expansions in the production capacity of our iodine plants in Nueva Victoria. Our capital expenditure program also includes exploration for metallic minerals. Our exploration efforts have led to discoveries that in some cases may result in sales of the discovery and the generation of royalty income in the future. Within this context, in 2013 we sold our royalty rights to the Antucoya mining project to Antofagasta Minerals. In 2013 we also opened a trading office in Thailand. In 2014, we invested in the development of new extraction sectors and production increases in both nitrates and iodine at Nueva Victoria, reaching an approximate production capacity (including the Iris facility) of 8,500 metric tons per year of iodine at the facility. We also issued a bond in the international capital markets for US$250 million, primarily to refinance existing indebtedness. In 2015, we focused on increasing the efficiency of our operations. Within this context, we announced a plan to restructure our iodine and nitrate operations. In an effort to take advantage of our highly efficient production facilities at our Nueva Victoria site, we decided to suspend the mining and nitrate operations and reduce iodine production at our Pedro de Valdivia site. During the year, we increased our iodine production capacity at Nueva Victoria to approximately 9,000 metric tons per year. In 2015, we focused on increasing the efficiency of our operations. Within this context, we announced a plan to restructure our iodine and nitrate operations. In an effort to take advantage of our highly efficient production facilities at our Nueva Victoria site, we decided to suspend the mining and nitrate operations and reduce iodine production at our Pedro de Valdivia site. During 2017, we increased our iodine production capacity at Nueva Victoria to approximately 10,000 metric tons per year. We continued expanding in 2018, and today, including Pedro de Valdivia and Nueva Victoria, our current effective iodine capacity is approximately 14,000 metric tons per year. In 2016, we entered into a 50/50 joint venture with Lithium Americas to develop the Minera Exar lithium project in Caucharí-Olaroz in the Jujuy province of Argentina. Our interest was sold to Ganfeng Lithium Netherlands Co., BV in 2018. Ganfeng is responsible for a US$50 million deferred payment to us if certain sales goals are met by the project. In 2016, we also made a capital contribution of US$20 million to Elemental Minerals Limited (“Elemental Minerals”), an Australian based company whose main assets are various potassium deposits in the Republic of Congo. We invested approximately US$20 million in exchange for 18% of the company, and a right of first refusal for approximately 20% of the total potash production of Elemental Minerals. Following this transaction at the end of 2016, Elemental Minerals changed its name to Kore Potash Limited. The State General Reserve Fund of Oman invested US$20 million. In 2017, we continued to expand our operations outside Chile and, together with our subsidiary SQM Australia Pty, we entered into an agreement to acquire 50% of the assets of the Mt. Holland lithium project in Western Australia. We entered into a 50/50 unincorporated joint venture with Kidman Resources Limited (“Kidman”), with respect to the Mt. Holland lithium project, to design, construct and operate a mine, concentrator and refinery to produce approximately 45,000 metric tons of lithium hydroxide per year. SQM Australia Pty committed to pay a price of US$110 million for the 50% of the Mt. Holland assets, which was split into an initial payment of US$25 million and a deferred payment of US$87.5 million, both payments subject to certain conditions precedent. SQM Australia Pty paid an additional (i) US$10 million as part of the initial payment, and (ii) US$30 million once the deferred payment took place. All payments subject to conditions under the purchase agreement with Kidman were executed by 5 3) DESCRIPTION OF BUSINESS ENVIRONMENT December 2018. These investments are not included in the capital expenditure program amounts discussed in the section below. These investments were carried out with internal financing. On September 23, 2019, Wesfarmers Limited (“Wesfarmers”) acquired all the issued ordinary shares in Kidman, becoming a 50% partner in the Mt. Holland lithium project in the joint venture with SQM Australia Pty. In September 2020, in the Salar de Atacama, we began a self-assessment process, which is the first step in the Initiative for Responsible Mining Assurance’s (“IRMA”) rigorous responsible mining certification process. In October 2020, we announced our Sustainable Development Plan, which includes voluntarily expanding our monitoring systems, promoting better and more meaningful conversations with neighboring communities, becoming carbon neutral and reducing water by 65% and brine extraction by 50%. As part of this plan, we also set a goal to obtain international certifications and participate in international sustainability indices. In November 2020, we were accepted into the Dow Jones Sustainability Chile and the Dow Jones Sustainability MILA Pacific Alliance Indices. On February 16, 2021, our Board approved the investment of approximately US$700 million for our 50% share of the development costs of the Mt. Holland lithium hydroxide project in the joint venture with Wesfarmers. 3) B) DESCRIPTION OF BUSINESS ENVIRONMENT: INDUSTRIAL SECTOR i) PRODUCTS AND SERVICES SQM is an integrated producer and seller of specialty plant nutrients, iodine, lithium, potassium fertilizers, and industrial chemicals. Our products are based on the development of high quality natural resources that make us a cost leader, supported by an international trading network specialized in sales in approximately 110 countries. SQM’s development strategy aims to maintain and enhance our global leadership in all of our business lines. For further information, see section 3) C) Description of Business Environment: Activities and Businesses. ii) COMPETITION AND MARKET SHARE See section 3) C) Description of Business Environment: Activities and Businesses. iii) LEGAL FRAMEWORK Government Regulations Regulations in Chile Generally We are subject to the full range of government regulations and supervision generally applicable to companies engaged in business in Chile, including labor laws, social security laws, public health laws, consumer protection laws, tax laws, environmental laws, free competition laws and securities laws. These include regulations to ensure sanitary and safety conditions in manufacturing plants. We conduct our mining operations pursuant to judicial exploration concessions and exploitation concessions granted pursuant to applicable Chilean law. Exploitation concessions essentially grant a 6 3) DESCRIPTION OF BUSINESS ENVIRONMENT perpetual right (with the exception of the Salar de Atacama rights, which have been leased to us until 2030) to conduct mining operations in the areas covered by such concessions, provided that annual concession fees are paid. Exploration concessions permit us to explore for mineral resources on the land covered thereby for a specified period of time, and to subsequently request a corresponding exploitation concession. Under Law No. 16,319 that created the Chilean Nuclear Energy Commission (Comisión Chilena de Energía Nuclear or “CCHEN”), we have an obligation to the CCHEN regarding the exploitation and sale of lithium from the Salar de Atacama, which prohibits the use of lithium for nuclear fusion. In addition, CCHEN has imposed annual quotas that limit the total tonnage of lithium authorized to be sold. We also hold water use rights granted by the respective administrative authorities and which enable us to have a supply of water from rivers or wells near our production facilities sufficient to meet our current operating requirements. See section 3) E) Description of Business Environment: Risk Factors. The Chilean Constitution, the Water Code and related regulations are subject to change, which could have a material adverse impact on our business, financial condition and results of operations. We operate port facilities at Tocopilla, Chile for the shipment of products and the delivery of raw materials in conformity with maritime concessions, which have been granted by the respective administrative authority. These concessions are normally renewable on application, provided that such facilities are used as authorized and annual concession fees are paid. In 2005, Law No. 20,026, known as the Law to Establish a Specific Tax on Mining Activity” (Ley que Establece un Impuesto Específico a la Actividad Minera or the “Royalty Law”), established a royalty tax to be applied to mining activities developed in Chile. In 2010, modifications were made to the law and taxes were increased. On September 29, 2014, the Tax Reform was published, introducing significant changes to the Chilean taxation system and strengthening the powers of the SII to control and prevent tax avoidance. Subsequently, on February 8, 2016, Law No. 20,899 that simplifies the income tax system and modifies other legal tax provisions was published. On February 24, 2020, Law No. 21,210 to modernize the tax legislation was published. As a result of these reforms, open stock corporations, such as SQM, are subject to the shareholder tax regime. The corporate tax rate that applies to us increased to 27% in 2018. The Chilean government may again decide to levy additional taxes on mining companies or other corporations in Chile, and such taxes could have a material adverse impact on our business, financial condition and results of operations. We are also subject to the Chilean Labor Code and the Subcontracting Law, which are overseen by the Labor Authority (Dirección del Trabajo), the National Geology and Mining Service (Servicio Nacional de Geología y Minería or “Sernageomin”), and the National Health Service. Recent changes to these laws and their application may have a material adverse effect on our business, financial condition and results of operations. See “Section 3E. Description of Business Environment: Risk Factors – We are exposed to labor strikes and labor liabilities that could impact our production levels and costs”. In addition, we are subject to Law No. 20,393, which establishes criminal liability for legal entities, for the crimes of (a) asset laundering, (b) financing terrorism and (c) bribery. Potential sanctions for violations under this law could include (i) fines, (ii) loss of certain governmental benefits during a given period, (iii) a temporary or permanent bar against the corporation executing contracts with governmental entities, and (iv) dissolution of corporation. Finally, we are governed by the Securities Law and Law No. 18,046 on Corporations (Ley de Sociedades Anónimas or the “Chilean Corporations Act”), which regulates corporate governance. Specifically, the 7 3) DESCRIPTION OF BUSINESS ENVIRONMENT Chilean Corporations Act regulates, among other things, independent director requirements, disclosure obligations to the general public and to the CMF, as well as regulations relating to the use of inside information, the independence of external auditors, and procedures for the analysis of transactions with related parties. There are currently no material legal or administrative proceedings pending against us except as discussed in Note 22.1 and 23 to our Consolidated Financial Statements and below under “Safety, Health and Environmental Regulations in Chile.” Safety, Health and Environmental Regulations in Chile Our operations in Chile are subject to both national and local regulations related to safety, health and environmental protection. In Chile, the main regulations on these matters that are applicable to us are the Mine Health and Safety Act of 1989 (Reglamento de Seguridad Minera or the “Mine Health and Safety Act”), the Health Code (Código Sanitario), the Health and Basic Conditions Act of 1999 (Reglamento sobre Condiciones Sanitarias y Ambientales Básicas en los Lugares de Trabajo or the “Health and Basic Conditions Act”), the Subcontracting Law and the Environmental Law of 1994, amended in 2010 (Ley sobre Bases Generales del Medio Ambiente or the “Environmental Law”). Health and safety at work are fundamental aspects in the management of mining operations, which is why we have made constant efforts to maintain good health and safety conditions for the people working at our mining sites and facilities. In addition to the role played by us in this important matter, the Chilean government has a regulatory role, enacting and enforcing regulations in order to protect and ensure the health and safety of workers. The Chilean government, acting through the Ministry of Health and the Sernageomin, performs health and safety inspections at the mining sites and oversees mining projects, among other tasks, and it has exclusive powers to enforce standards related to environmental conditions and the health and safety of the people performing activities related to mining. The Mine Health and Safety Act protects workers and nearby communities against health and safety hazards, and it provides for enforcement of the law where compliance has not been achieved. Our Internal Mining Standards (Reglamentos Internos Mineros) establish our obligation to maintain a workplace where safety and health risks are managed appropriately. We are subject to the general provisions of the Health and Basic Conditions Act, our own internal standards and the provisions of the Mine Health and Safety Act. In the event of non-compliance, the Ministry of Health and particularly the Sernageomin are entitled to use their enforcement powers to ensure compliance with the law. In November 2011, the Ministry of Mining enacted Law No. 20,551 that Regulates the Closure of Mining Sites and Facilities (Ley que Regula el Cierre de Faenas e Instalaciones Mineras). This statute entered in force in November 2012 and required all mining sites to present or update their closure plans as of November 2014. SQM has fulfilled this requirement for all of its mining sites and facilities. The main requirements of the law are related to disclosures to the Sernageomin regarding decommissioning plans for each mining site and its facilities, along with the estimated cost to implement such plans. The mining site closure plans are approved by Sernageomin and the corresponding financial assurances are subject to approval by the CMF. In both cases, SQM has received the requisite approvals. We continuously monitor the impact of our operations on the environment and on the health of our employees and other persons who may be affected by such operations. We have made modifications to our facilities in an effort to eliminate any adverse impacts. Also, over time, new environmental standards and regulations have been enacted, which have required minor adjustments or modifications of our operations. We anticipate that additional laws and regulations will be enacted over time with respect to environmental matters. There can be no assurance that future legislative or regulatory developments will not impose new restrictions on our operations. We are committed to continuously improving our environmental performance through our Environmental Management System (“EMS”). We strive to be 8 3) DESCRIPTION OF BUSINESS ENVIRONMENT leaders in sustainability at a national and international level. In 2020, we began the ISO 14.001 certification process for our operations in the Salar de Atacama and Salar del Carmen. This certification is being overseen by TÜV-Rheinland. We participate in voluntary evaluations with companies such as Ecovadis and seek international certifications such as the Responsible Conduct certification from the Chilean Industrial Chemicals Association, which applies to our operations at Nueva Victoria, and the Protect & Sustain certification from the International Fertilizer Association, which applies to our operations at Coya Sur, the Salar de Atacama, Tocopilla, Antofagasta and Santiago. In September 2020, in the Salar de Atacama, we began a self-assessment process, which is the first step in IRMA’s rigorous responsible mining certification process. We have submitted and will continue to submit several environmental impact assessment studies related to our projects to the governmental authorities. We require the authorization of these submissions in order to maintain and to increase our production capacity. International Regulations We are subject to complex regulatory requirements in the various jurisdictions in which we operate, including the following implemented during 2020: The European Union’s European Food Safety Authority initiated a revision of the perchlorate limits in food that have been in force and effect since June 2015. On May 20, 2020, the European Commission adopted Regulation (EU) 2020/685 which sets out limits for perchlorate in certain foods. Regulation (EU) 2020/685 did not alter the previously established limit of 50 parts-per-million for perchlorate in fertilizer (as set forth in Regulation (EU) 2019/1102), and thus will allow our fertilizer products to be sold in the European Union without issue. In addition, Regulation (EU) 2017/542 came into force in the European Union, pursuant to which SQM notified the European Union’s Poison Notification Centre (PCN) of the classification and labelling information for 83 mixtures from our specialty plant nutrition and potassium business lines sold by our three European subsidiaries. On March 12, 2019, Australia approved the new Industrial Chemicals (General) Rules 2019, which regulates the import and production of industrial chemicals and replaces the current regulations. This new regulation which entered into force on July 1, 2020, establishes the import requirements for chemical substances for the product and the importer. It applies to iodine imports by SQM Oceania in Australia. The SQM Oceania registry for the importation of iodine was updated under “Industrial Chemicals (General) Rules 2019”, in June 2020 and before the deadline of July 1, 2020. On May 25, 2019, Japan updated its standards for classification and labeling of chemical products (JIS Z 7252: 2019 and 7253: 2019) to certify them with the sixth version of the UN-GHS. This update has a transition period of three years and will require review of safety data sheets and labeling of the products that SQM sells in Japan, in 2020-2021. The process of reviewing Safety Data Sheets and labeling of the products that SQM markets in Japan began, under the JIS Z 7252: 2019 & 7253: 2019 standards, which has a deadline until May 2022. The safety sheets were updated in February 2021 and the labels will be updated to December 2021. In 2020 in South Korea, we began the registration process for three products under the K-REACH regulations, using an Exclusive Representative in order to facilitate the regulatory compliance of our customers in this market. Additionally, with the establishment of SQM’s commercial office in Seoul, South Korea in 2020, the Korean Chemical Management Association (KCMA) was notified of all products to be imported from our lithium and iodine business lines. In 2021, we will begin the process of providing 9 3) DESCRIPTION OF BUSINESS ENVIRONMENT the respective competent authorities, including the Korean Ministry of Labor and Employment, with safety data sheets for all products sold in South Korea under the K-OSHA regulations. In 2020 in China, we completed the standardization of the registration of all of our lithium, iodine and nitrate products. As a result of the occurrence of Brexit in 2020, the chemical regulations set forth in EU REACH (Registration, Evaluation, Authorisation and restriction of Chemicals) were brought into United Kingdom law on January 1, 2021 and entitled UK REACH. SQM will be required to complete a second registration process for products sold in the United Kingdom. We are currently preparing the relevant survey and expect to complete the pre-registration process in 2021. In compliance with the Technical Regulation of the Eurasian Economic Union on Safety of Chemical Products (TR EAEU 041/2017), also known as Eurasia REACH (Eurasia’s equivalent to EU REACH), in 2020 we reported all direct agricultural and industrial products, and also fertilizer mixtures, of all of our business lines sold in the Eurasian Economic Union, which includes Russia. With this reporting, we are not required to register under TR EAEU 041/2017. In December 2020, we completed the pre-registration of all of our products sold in Turkey in compliance with the deadline under Turkey’s “KKDIK” (Turkey’s equivalent to EU REACH). In October 2020, we provided an updated notification of all of our products sold in the United States under the TSCA-CDR regulations before the United States Environmental Protection Agency. On November 27, 2020, Chilean Customs issued exempt resolution No. 3421, pursuant to which Chile’s lithium export control procedures have been modified to include the export of lithium carnalite, lithium sulfate and lithium phosphate. 3) C) DESCRIPTION OF BUSINESS ENVIRONMENT: ACTIVITIES AND BUSINESSES The Company We believe that we are the world’s largest producer of potassium nitrate and iodine and one of the world´s largest lithium producers. We also produce specialty plant nutrients, iodine derivatives, lithium derivatives, potassium chloride, potassium sulfate and certain industrial chemicals (including industrial nitrates and solar salts). Our products are sold in approximately 110 countries through our worldwide distribution network, with 91% of our sales in 2020 derived from countries outside Chile. Our products are mainly derived from mineral deposits found in northern Chile. We mine and process caliche ore and brine deposits. The caliche ore in northern Chile contains the only known nitrate and iodine deposits in the world and is the world’s largest commercially exploited source of natural nitrates. The brine deposits of the Salar de Atacama, a salt-encrusted depression in the Atacama Desert in northern Chile, contain high concentrations of lithium and potassium as well as significant concentrations of sulfate and boron. From our caliche ore deposits, we produce a wide range of nitrate-based products used for specialty plant nutrients and industrial applications, as well as iodine and iodine derivatives. At the Salar de Atacama, we extract brines rich in potassium, lithium, sulfate and boron in order to produce potassium chloride, potassium sulfate, lithium solutions and bischofite (magnesium chloride). We produce lithium carbonate and lithium hydroxide at our plant near the city of Antofagasta, Chile, from the solutions brought from the Salar de Atacama. We market all of these products through an established worldwide distribution network. 10 3) DESCRIPTION OF BUSINESS ENVIRONMENT Our products are divided into six categories: specialty plant nutrients; iodine and its derivatives; lithium and its derivatives; potassium chloride and potassium sulfate; industrial chemicals and other commodity fertilizers. Specialty plant nutrients are premium fertilizers that enable farmers to improve yields and the quality of certain crops. Iodine and its derivatives are mainly used in the X-ray contrast media and biocides industries and in the production of polarizing film, which is an important component in LCD screens. Lithium and its derivatives are mainly used in batteries, greases and frits for production of ceramics. Potassium chloride is a commodity fertilizer that is produced and sold by us worldwide. Potassium sulfate is a specialty fertilizer used primarily in crops such as vegetables, fruits and industrial crops. Industrial chemicals have a wide range of applications in certain chemical processes such as the manufacturing of glass, explosives and ceramics, and, more recently, industrial nitrates are being used in concentrated solar power plants as a means for energy storage. In addition, we complement our portfolio of plant nutrients through the buying and selling of other commodity fertilizers for use mainly in Chile. For the year ended December 31, 2020, we had revenues of US$1,817.2 million, gross profit of US$482.9 million and profit attributable to controlling interests of US$164.5 million. Our worldwide market capitalization as of December 31, 2020 was approximately US$11.0 billion. Specialty Plant Nutrition: We produce four main types of specialty plant nutrients: potassium nitrate, sodium nitrate, sodium potassium nitrate and specialty blends. We also sell other specialty fertilizers including third party products. All of these specialty plant nutrients are used in either solid or liquid form mainly on high value crops such as vegetables, fruits and flowers. Our nutrients are widely used in crops that employ modern agricultural techniques such as hydroponics, green housing, fertigation (where fertilizer is dissolved in water prior to irrigation) and foliar application. Specialty plant nutrients have certain advantages over commodity fertilizers, such as rapid and effective absorption (without requiring nitrification), superior water solubility, increased soil pH (which reduces soil acidity) and low chloride content. One of the most important products in this business line is potassium nitrate, which is sold in crystalline or prill form, allowing for multiple application methods. Crystalline potassium nitrate products are ideal for application by fertigation and foliar sprays, and potassium nitrate prills are suitable for soil applications. We have developed brands for marketing according to the different applications and uses of our products. Our main brands are: UltrasolR (fertigation), QropR (soil application), SpeedfolR (foliar application) and AllganicR (organic agriculture). The new needs of more sophisticated customers demand that the industry provide integrated solutions rather than individual products. Our products, including customized specialty blends that meet specific needs along with the agronomic service provided, allow to create plant nutrition solutions that add value to crops through higher yields and betterquality production. Because our products are derived from natural nitrate compounds or natural potassium brines, they have certain advantages over synthetically produced fertilizers, including the presence of certain beneficial trace elements, which makes them more attractive to customers who prefer products of natural origin. As a result, specialty plant nutrients are sold at a premium price compared to commodity fertilizers. Iodine and its Derivatives: We believe that we are the world’s leading producer of iodine and iodine derivatives, which are used in a wide range of medical, pharmaceutical, agricultural and industrial applications, including x-ray contrast media, polarizing films for LCD/LED, antiseptics, biocides and disinfectants, in the synthesis of pharmaceuticals, electronics, pigments and dye components. Lithium and its Derivatives: We are a leading producer of lithium carbonate, which is used in a variety of applications, including electrochemical materials for batteries used in electric vehicles, portable computers, tablets, cellular telephones and electronic apparatus, frits for the ceramic and enamel industries, heat-resistant glass (ceramic glass), air conditioning chemicals, continuous casting powder for steel extrusion, pharmaceuticals and lithium derivatives. We are also a leading supplier of lithium 11 3) DESCRIPTION OF BUSINESS ENVIRONMENT hydroxide, which is primarily used as an input for the lubricating greases industry and for cathodes for high energy capacity batteries. Potassium: We produce potassium chloride and potassium sulfate from brines extracted from the Salar de Atacama. Potassium chloride is a commodity fertilizer used to fertilize a variety of crops including corn, rice, sugar, soybean and wheat. Potassium sulfate is a specialty fertilizer used mainly in crops such as vegetables, fruits and industrial crops. Industrial Chemicals: We produce and sell three industrial chemicals: sodium nitrate, potassium nitrate and potassium chloride. Sodium nitrate is used primarily in the production of glass, explosives, and metal treatment, metal recycling and the production of insulation materials, among other uses. Potassium nitrate is used in the manufacturing of specialty glass, and it is also an important raw material for the production of frits for the ceramics, enamel industries, metal treatment and pyrotechnics. Solar salts, a combination of potassium nitrate and sodium nitrate, are used as a thermal storage medium in concentrated solar power plants. Potassium chloride is a basic chemical used to produce potassium hydroxide, and it is also used as an additive in oil drilling as well as in food processing, among other uses. Other Products and Services: We also sell other fertilizers and blends, some of which we do not produce. We are the only company that produces and distributes the three main potassium sources: potassium nitrate, potassium sulfate and potassium chloride. The following table shows the percentage breakdown of our revenues for 2020, 2019 and 2018 according to our product lines: Specialty Plant Nutrition ........... Iodine and Derivatives ............... Lithium and Derivatives ............ Potassium .................................. Industrial Chemicals .................. Other ......................................... Total 2020 39% 18% 21% 12% 9% 2% 100% 2019 37% 19% 26% 11% 5% 2% 100% 2018 35% 14% 32% 12% 5% 2% 100% Business Strategy SQM is a global company that develops and produces diverse products for several industries essential for human progress, such as health, nutrition, renewable energy and technology through innovation and technological development. We aim to maintain our leading world position in the lithium, potassium nitrate, iodine and thermo-solar salts markets by: • Ensuring access to the best assets related to our current business lines by expanding our global presence; • Actively searching for attractive minerals allowing us diversification opportunities to replicate and expand our existing mining capacities; • Strengthening our operational, logistical and commercial excellence process from beginning to end, while looking to be a cost leader; and • Maintaining a conservative financial policy which allows us to successfully endure economic cycles that could impact the markets in which we sell. We are a dynamic company. In pursuit of our objectives, we expect to acquire and develop projects and interests that are consistent with our existing and new businesses, either alone or with joint venture partners. We may also divest or sell-down interests that we have acquired to deploy funds for other investments or other purposes in pursuit of our objectives or to adjust risk or diversify our asset base. 12 3) DESCRIPTION OF BUSINESS ENVIRONMENT We are a company built and managed by a culture based on excellence, safety, sustainability and integrity. We work every day to expand this culture through the attraction, retention and development of talent as well encouraging an inclusive and diverse work environment ensuring the unique knowledge and innovation needed to sustain our business. We strive for safe and accident-free operations by promoting conduct that favors the physical safety and psychological well-being of everyone who works directly and indirectly with the Company. We position ourselves as leaders in sustainability and commit to a sustainable future where we constantly work to responsibly manage natural resources, protect human rights, care for the environment, form close and trusting relationships with our neighboring communities and create value. Within these communities, we support projects and activities with a focus on education, business development, and protection of the environment and historical heritage. We create value for our clients through established commercial models and the production and development of differentiated products that respond to their industry and market specific needs, constantly creating and providing a sustainable improvement in the quality of life. We will continue to create value for all of our stakeholders through responsible management of natural resources, sustainable expansion projects and improvement of our existing operations, with a focus on minimizing our environmental impacts by reducing our carbon, energy and water footprints and working together with our shareholders, employees, customers, suppliers and communities. Specialty Plant Nutrition Our strategy in our specialty plant nutrition business is to: (i) leverage the advantages of our specialty products over commodity-type fertilizers; (ii) selectively expand our business by increasing our sales of higher margin specialty plant nutrients based on potassium and natural nitrates, particularly soluble potassium nitrate and specialty blends; (iii) pursue investment opportunities in complementary businesses to enhance our product portfolio, increase production, reduce costs, and add value to the marketing of our products; (iv) develop new specialty nutrient blends produced in our mixing plants that are strategically located in or near our principal markets in order to meet specific customer needs; (v) focus primarily on the markets where we can sell our plant nutrients in soluble and foliar applications in order to establish a leadership position; (vi) further develop our global distribution and marketing system directly and through strategic alliances with other producers and global or local distributors; (vii) reduce our production costs through improved processes and higher labor productivity so as to compete more effectively and (viii) supply a product with consistent quality according to the specific requirements of our customers. Iodine and its Derivatives Our strategy in our iodine business is to: (i) reach and maintain a sufficient market share of the iodine market in order to optimize the use of our available production capacity; (ii) encourage demand growth and promote new iodine uses; (iii) participate in iodine recycling projects through the Ajay-SQM Group (“ASG”); (iv) reduce our production costs through improved processes and higher productivity in order to compete more effectively and (v) supply a product with consistent quality according to the requirements of our customers. Lithium and its Derivatives Our strategy in our lithium business is to: (i) strategically allocate our sales of lithium carbonate and lithium hydroxide; (ii) encourage demand growth and promote new lithium uses; (iii) selectively pursue opportunities in the lithium derivatives business by creating new lithium compounds; (iv) reduce our production costs through improved processes and higher productivity in order to compete more effectively; (v) supply a product with consistent quality according to the requirements of our customers; (vi) diversify our operations geographically and jurisdictionally; and (vii) diversifying our asset base or adjusting risk by acquiring new projects and interests (either alone or with joint venture partners), divesting existing projects or selling down our interests in projects. Potassium 13 3) DESCRIPTION OF BUSINESS ENVIRONMENT Our strategy in our potassium business is to: (i) offer a portfolio of potassium products, including potassium sulfate, potassium chloride and other fertilizers, to our traditional markets; (ii) have flexibility to offer crystalized (standard) or granular (compacted) form products according to market requirements; (iii) focus on markets where we have logistical advantages and synergies with our specialty plant nutrition business and (iv) supply a product with consistent quality according to the specific requirements of our customers. Industrial Chemicals Our strategy in our industrial chemical business is to: (i) maintain our leadership position in the industrial nitrates market; (ii) encourage demand growth in different applications as well as exploring new potential ones; (iii) become a long-term, reliable supplier for the thermal storage industry, maintaining close relationships with R&D programs and industrial initiatives; (iv) reduce our production costs through improved processes and higher productivity in order to compete more effectively and (v) supply a product with consistent quality according to the requirements of our customers. New Business Ventures We constantly evaluate opportunities that are consistent with our existing and new businesses. We seek to acquire interests in projects both inside and outside of Chile where we believe we have sustainable competitive advantages, and we hope to continue doing so in the future. In addition, we are actively conducting exploration for metallic minerals in the mining properties we own. If such minerals are found, we may decide to exploit, sell or enter into an association to extract these resources. Our exploration efforts are currently focused on the layer of bedrock that lies beneath the caliche ore that we use as the primary raw material in the production of iodine and nitrates. This bedrock has significant potential for metallic mineralization, particularly copper and gold. A significant portion of our mining properties are located in the Antofagasta region of Chile, where many large copper producers operate. We have an in-house geological exploration team that explores the area directly, identifying drilling targets and assessing new prospects. In 2020, the team identified six new targets and confirmed mineralization in several of the targets. The number of perforated meters reached 33,523 meters and were made with four internal machines. We also have a metal business development team that works to engage partners interested in investing in metal exploration within our mining properties. As of December 31, 2020, we had five option agreements in place with four mining companies and private equity firms. We participated in the formation of two joint ventures as a result of exercising an option agreement with a junior mining company. Main Business Lines Specialty Plant Nutrition In 2020, specialty plant nutrients revenues decreased to US$701.7 million, representing 38.6% of our total revenues for that year. We believe that we are the world’s largest producer of potassium nitrate. We estimate that our 2020 sales volume represented approximately 51% of the total global potassium nitrate used for all applications, remaining flat with our sales volume in 2019. We estimate that our sales accounted for approximately 48% of global potassium nitrate sales for all agricultural uses by volume in 2020. During 2020, the agricultural potassium nitrate market increased approximately 5% when compared to 2019. These estimates do not include potassium nitrate produced and sold locally in China, only Chinese net imports and exports. In addition to potassium nitrate, we produce the following specialty plant nutrients: sodium nitrate, sodium potassium nitrate and specialty blends (containing various combinations of nitrogen, phosphate and potassium and generally known as “NPK blends”). 14 3) DESCRIPTION OF BUSINESS ENVIRONMENT Our specialty plant nutrients have specific characteristics that increase productivity and enhance quality when used on certain crops and soils. Our specialty plant nutrients have significant advantages for certain applications over commodity fertilizers based on nitrogen and potassium, such as urea and potassium chloride. Our specialty plant nutrients advantages include that they: • • are fully water soluble, allowing their more efficient use in hydroponics, fertigation, foliar applications and other advanced agricultural techniques thus improving the water use efficiency of crops to help conserve water; are chloride-free, which prevents chloride toxicity in certain crops associated with high levels of chlorine in plant nutrients; • provide nitrogen in nitric form, thereby allowing crops to absorb nutrients faster than they absorb urea- or ammonium-based fertilizers; • do not release hydrogen after application, thereby avoiding increased soil acidity; • possess trace elements, which promote disease resistance in plants; and • are more attractive to customers who prefer products of natural origin. Specialty Plant Nutrition: Market The target market for our specialty plant nutrients includes producers of high-value crops such as vegetables, fruits, industrial crops, flowers, cotton and others. Furthermore, we sell specialty plant nutrients to producers of chloride-sensitive crops. Since 1990, the international market for specialty plant nutrients has grown at a faster rate than the international market for commodity-type fertilizers. This is mostly due to: (i) the application of new agricultural technologies such as fertigation and hydroponics, and the increasing use of greenhouses; (ii) the increase in the cost of land and the scarcity of water, which has forced farmers to improve their yields and reduce water use; and (iii) the increase in demand for higher quality crops, such as fruits and vegetables. Over the last ten years, the compound annual growth rate for vegetable production per capita was 3% while the compound annual growth rate for the world population was closer to 1%. Worldwide scarcity of water and arable land drives the development of new agricultural techniques to maximize the use of these resources. A good example of this is the more efficient use of water through irrigation, which has grown at an average annual rate of 1% during the last 20 years (a pace similar to population growth). Micro-irrigation, which results in even more efficient use of water, has grown at 10% per year over the same period. Micro-irrigation systems, which include drip irrigation and micro- sprinklers, are the most efficient forms of technical irrigation. These applications require fully water- soluble plant nutrients. Our nitrate-based specialty plant nutrients are fully soluble in water and provide nitrogen in nitric form, which helps crops absorb these nutrients faster than they absorb urea- or ammonium-based fertilizers, facilitating a more efficient application of nutrients to the plant and thereby increasing the crop’s yield and improving its quality. The lowest global share of hectares under micro-irrigation over total irrigated hectares is in Asia, with a figure of approximately 3%. This represents a high potential for the introduction of micro-irrigation in that region, which is reflected in the high growth rates in Asia in recent years. Potassium nitrate is an important market in China, although currently its demand is largely fulfilled by domestic producers. Total demand of potassium nitrate in Asian countries totals approximately 400,000 to 420,000 metric tons, of which approximately 130,000 metric tons is needed for the tobacco industry and approximately 120,000 metric tons is related to the horticulture business. Of the total, between 15,000 and 35,000 metric tons of potassium nitrate are imports. 15 3) DESCRIPTION OF BUSINESS ENVIRONMENT Specialty Plant Nutrition: Our Products Potassium nitrate, sodium potassium nitrate, and specialty blends are higher margin products that use sodium nitrate as a feedstock. These products can be manufactured in crystallized or prilled form. Specialty blends are produced using our own specialty plant nutrients and other components at blending plants operated by us or our affiliates and related companies in Brazil, Chile, China, Italy, Mexico, the Netherlands, Peru, South Africa, Spain, and the United States. The following table shows our sales volumes of and revenues from specialty plant nutrients for 2020, 2019 and 2018: Sales volumes (Th. MT) Sodium nitrate Potassium nitrate and sodium potassium nitrate Specialty blends(1) Other specialty plant nutrients(2) Revenues (in US$ millions) 2020 2019 2018 25.6 575.2 271.3 164.4 701.7 30.2 617.4 238.9 155.3 25.0 673.4 242.5 141.6 723.9 781.8 (1) Includes Yara’s products sold pursuant to our commercial agreement. (2) Includes trading of other specialty fertilizers. In 2020, our specialty plant nutrients revenues decreased to US$701.7 million, representing 39% of our total revenues for that year and a 3.1% decrease from US$723.9 million in specialty plant nutrients revenues in 2019. Prices decreased approximately 2.6% in 2020. Depending on the systems used to apply specialty nutrients, fertilizers can be classified as specialty field fertilizers or water-soluble fertilizers. Specialty field fertilizers are applied directly to the soil, manually or in a mechanized fashion. Their high solubility levels, lack of chloride and absence of acidic reactions make them particularly advantageous for tobacco, potatoes, coffee, cotton, and certain fruits and vegetables. Water-soluble fertilizers are specialty nutrients that are delivered to the crops using modern irrigation systems. As these systems feature refined technology, the products used in them must be highly soluble, rich in nutrients, free of impurities and insoluble substances, and with a low salinity index. The leading nutrient in this segment is potassium nitrate, whose optimal balance of nitric nitrogen and chloride-free potassium (the two macronutrients most needed by plants) make it an indispensable source of nutrition for crops that use modern irrigation systems. Potassium nitrate is widely known to be a vital component in foliar feeding applications, where usage is recommended in order to stave off nutritional deficiencies before the first symptoms appear, correct any deficiencies that arise and prevent physiological stress. This nutrient also helps promote a suitable balance between fruit production and/or growth, and plant development, particularly in crops with physiological disorders. Foliar feeding with potassium nitrate can have beneficial effects: 16 3) DESCRIPTION OF BUSINESS ENVIRONMENT • when soil chemistry limits nutrient solubility and availability (pH, organic matter, type and percentage of clay); • when nutrient absorption through the roots is limited as a result of conditions that hamper root growth (temperature, moisture, oxygen and loss of soil structure); • when the plant’s local internal demand may surpass real internal nutrient redistribution capacity, leaving the demand unsatisfied; • when nutrient mobility is limited, such as when plants flower before the leaf growth phase, • imposing limiting factors on xylem nutrient transport; to achieve rapid recovery from leaf stress caused by climatic conditions, soil conditions and irrigation management. SQM has consolidated a product portfolio of over 200 specialty fertilizer blends, including top brands such as Ultrasol®, for fertigation; Qrop®, for application to the soil; Speedfol®, for foliar feeding and Allganic® for organic crops. In recent years, we have added several products to our portfolio such as QropTMKS in 2015 and Ultrasol®ution K in 2018. We have restructured the Qrop products portfolio to include a chloride-free line for direct application to the soil with a variety of specialized formulas and unique mixtures, which make these products highly accurate and quickly available for the plant. Ultrasolution K® addresses the need for potassium-free chloride and a nitrate safe for handling in the liquid fertilizer market, opening new opportunities for SQM in in the cultivation of almonds and strawberries, in which water quality and efficiency are very important. Other products developed by our research and development team during 2020 include Ultrasoline®, Ultrasol K Acid®, ProP® and Prohydric®. Ultrasoline® is a new product that, together with potassium nitrate, incorporates iodine, an essential element for plants, allowing better root growth, optimal photosynthesis and better tolerance to oxidative stress, among other advantages. Specialty Plant Nutrition: Marketing and Customers In 2020, we sold our specialty plant nutrients in approximately 102 countries and to more than 1,100 customers. No customer represented more than 10% of our specialty plant nutrition revenues during 2020, and our ten largest customers accounted in the aggregate for approximately 33% of revenues during that period. No supplier accounted for more than 10% of the costs of sales for this business line. The table below shows the geographical breakdown of our revenues: Revenues breakdown North America ............................... Europe ........................................... Chile .............................................. Central and South America ........... Asia and Others ............................. 2020 35% 21% 14% 10% 20% 2019 34% 21% 15% 11% 20% 2018 31% 26% 14% 10% 19% We sell our specialty plant nutrition products outside Chile mainly through our own worldwide network of representative offices and through our distribution affiliates. We maintain inventory of our specialty plant nutrients in our commercial offices in the main markets of the Americas, Asia, Europe, the Middle East and Africa in order to facilitate prompt deliveries to customers. In addition, we sell specialty plant nutrients directly to some of our large customers. Sales are made pursuant to spot purchase orders and short-term contracts. 17 3) DESCRIPTION OF BUSINESS ENVIRONMENT As part of our marketing strategy, we provide technical and agronomical assistance and support to our clients. We have specific knowledge resulting from extensive research and numerous studies conducted by our agronomical teams in close contact with producers throughout the world. The solid agronomical knowledge is key for the development of specific formulas and hydroponic and fertirrigation nutritional plans, which allows us to provide expert advice for producing crops that meet high quality standards for the most efficient markets and in the most environmentally challenging conditions. By working closely with our customers, we are able to identify their needs for new products and a possible existence of higher-value-added markets. Our specialty plant nutrients are used on a wide variety of crops, particularly value-added crops, where the use of our products enables our customers to increase yields and achieve a premium price for their own products. Our customers are located in both the northern and southern hemispheres. Consequently, we do not believe there are any seasonal or cyclical factors that can materially affect the sales of our specialty plant nutrients. Specialty Plant Nutrition: Fertilizer Sales in Chile We market specialty plant nutrients in Chile through our subsidiary Soquimich Comercial S.A. (“SQMC”). SQMC is one of the main players in the Chilean market, offering a wide range of products developed specifically for the crops grown in the country which require specialty plant nutrients. SQMC sells local products as well as products imported from different countries around the world. All contracts and agreements between SQMC and its foreign suppliers of fertilizers contain standard and customary commercial terms and conditions. SQMC has been able to obtain adequate supplies of these products with good pricing conditions. SQMC’s total sales reached US$118 million and US$128 million in 2020 and 2019, respectively. During 2020, no client represented more than 10% of the sales of the Company. According to the customs information related to fertilizers, the market participation of fertilizers imported directly by SQMC during 2020 was approximately 22%. Specialty Plant Nutrition: Competition The principal means of competition in the sale of potassium nitrate are product quality, customer service, location, logistics, agronomic expertise and price. We believe that we are the world’s largest producer of sodium nitrate and potassium nitrate for agricultural use. Our sodium nitrate products compete indirectly with specialty and commodity substitutes, which may be used by some customers instead of sodium nitrate depending on the type of soil and crop to which the product will be applied. Such substitute products include calcium nitrate, ammonium nitrate and calcium ammonium nitrate. In the potassium nitrate market, our largest competitor is Haifa Chemicals Ltd. (“Haifa”), in Israel, which is a subsidiary of Trans Resources International Inc. We estimate that sales of potassium nitrate by Haifa accounted for approximately 18% of total world sales during 2020 (excluding sales by Chinese producers to the domestic Chinese market). Our sales accounted for approximately 48% of global potassium nitrate sales by volume for the period. ACF, another Chilean producer, mainly oriented to iodine production, has produced potassium nitrate from caliche ore and potassium chloride since 2005. Kemapco, a Jordanian producer owned by Arab Potash, produces potassium nitrate in a plant located close to the Port of Aqaba, Jordan. In addition, there 18 3) DESCRIPTION OF BUSINESS ENVIRONMENT are several potassium nitrate producers in China, the largest of which are Yuantong and Migao. Most of the Chinese production is consumed by the Chinese domestic market. In Chile, our products mainly compete with imported fertilizer blends that use calcium ammonium nitrate or potassium magnesium sulfate. Our specialty plant nutrients also compete indirectly with lower-priced synthetic commodity-type fertilizers such as ammonia and urea, which are produced by many producers in a highly price-competitive market. Our products compete on the basis of advantages that make them more suitable for certain applications as described above. Iodine and its Derivatives We believe that we are the world’s largest producer of iodine. In 2020, our revenues from iodine and iodine derivatives amounted to US$334.7 million, representing 18.4% of our total revenues in that year. We estimate that our sales accounted for approximately 28% of global iodine sales by volume in 2020. Iodine: Market Iodine and iodine derivatives are used in a wide range of medical, agricultural and industrial applications as well as in human and animal nutrition products. Iodine and iodine derivatives are used as raw materials or catalysts in the formulation of products such as X-ray contrast media, biocides, antiseptics and disinfectants, pharmaceutical intermediates, polarizing films for LCD and LED screens, chemicals, organic compounds and pigments. Iodine is also added in the form of potassium iodate or potassium iodide to edible salt to prevent iodine deficiency disorders. X-ray contrast media is the leading application of iodine, accounting for approximately 23% of demand. Iodine’s high atomic number and density make it ideally suited for this application, as its presence in the body can help to increase contrast between tissues, organs, and blood vessels with similar X-ray densities. Other applications include pharmaceuticals, which we believe account for 13% of demand; LCD and LED screens, 12%; iodophors and povidone-iodine, 9%; animal nutrition, 8%; fluoride derivatives, 7%; biocides, 6%; nylon, 4%; human nutrition, 4% and other applications, 14%. During 2020, iodine demand was impacted significantly due to the economic crisis caused by Covid-19, with total global demand decreasing by approximately 9% to 33,200 metric tons. Although the decrease in demand occurred across product lines, two uses of iodine had growth compared to 2019: the use of povidone-iodine grew by 6%, and the use of iodine for human nutrition grew by 1%. It is expected that the majority of iodine applications will begin to recover demand during the course of 2021. Iodine: Our Products We produce iodine in our Nueva Victoria plant, near Iquique, and our Pedro de Valdivia plant, close to María Elena. We have a total effective production capacity of approximately 14,800 metric tons per year of iodine, including the Iris plant, which is located close to the Nueva Victoria plant. Through ASG, we produce organic and inorganic iodine derivatives. ASG was established in the mid- 1990s and has production plants in the United States, Chile and France. ASG is the world’s leading inorganic and organic iodine derivatives producer. Consistent with our business strategy, we are constantly working on the development of new applications for our iodine-based products, pursuing a continuing expansion of our businesses and maintaining our market leadership. We manufacture our iodine and iodine derivatives in accordance with international quality standards and have qualified our iodine facilities and production processes under the ISO-9001:2015 program, providing 19 3) DESCRIPTION OF BUSINESS ENVIRONMENT third party certification of the quality management system and international quality control standards that we have implemented. The following table shows our total sales volumes and revenues from iodine and iodine derivatives for 2020, 2019 and 2018: Sales volumes (Th. MT) Iodine and derivatives Revenues (in US$ millions) 2020 2019 2018 9.7 334.7 12.7 371.0 13.3 325.0 Our revenues decreased to US$334.7 million in 2020 from US$371.0 million in 2019. This decrease was primarily attributable to lower sales volumes during 2020. Average iodine prices were more than 18.9% higher in 2020 than in 2019. Our sales volumes decreased 24.1% in 2020. Iodine: Marketing and Customers In 2020, we sold our iodine products in approximately 47 countries to approximately 250 customers, and most of our sales were exports. Two customers each accounted for more than 10% of our iodine revenues in 2020. These two customers accounted for approximately 42% of revenues, and our ten largest customers accounted in the aggregate for approximately 77% of revenues. No supplier accounted for more than 10% of the cost of sales of this business line. The following table shows the geographical breakdown of our revenues: 2020 Revenues breakdown North America ............................ 27% Europe ......................................... 42% Chile ........................................... 0% Central and South America ......... 3% Asia and Others .......................... 27% 2019 24% 33% 0% 2% 40% 2018 26% 34% 0% 2% 37% We sell iodine through our own worldwide network of representative offices and through our sales, support and distribution affiliates. We maintain inventories of iodine at our facilities throughout the world to facilitate prompt delivery to customers. Iodine sales are made pursuant to spot purchase orders or within the framework of supply agreements. Supply agreements generally specify annual minimum and maximum purchase commitments, and prices are adjusted periodically, according to prevailing market prices. Iodine: Competition The world’s main iodine producers are based in Chile, Japan and the United States. Iodine is also produced in Russia, Turkmenistan, Azerbaijan, Indonesia and China. Iodine is produced in Chile using a unique mineral known as caliche ore, whereas in Japan, the United States, Russia, Turkmenistan, Azerbaijan, and Indonesia, producers extract iodine from underground brines that are mainly obtained together with the extraction of natural gas and petroleum. In China, iodine is extracted from seaweed. Five Chilean companies accounted for approximately 55% of total global sales of iodine in 2020, including SQM, with approximately 28%, and four other producers accounting for the remaining 27%. The other Chilean producers are Atacama Chemical S.A. (Cosayach), controlled by the Chilean holding company Inverraz S.A.; ACF Minera S.A., owned by the Chilean Urruticoechea family; Algorta Norte S.A., a joint 20 3) DESCRIPTION OF BUSINESS ENVIRONMENT venture between ACF Minera S.A. and Toyota Tsusho; and Atacama Minerals, which is owned by Chinese company Tewoo. We estimate that eight Japanese iodine producers accounted for approximately 28% of global iodine sales in 2020, including recycled iodine. We estimate that iodine producers in the United States (one of which is owned by Toyota Tsusho and another by Ise Chemicals Ltd., both of which are Japanese companies) accounted for nearly 5% of world iodine sales in 2020. Iodine recycling is a growing trend worldwide. Several producers have recycling facilities where they recover iodine and iodine derivatives from iodine waste streams. We estimate the 19% of the iodine supply comes from iodine recycling. Through ASG or alone, we are also actively participating in the iodine recycling business using iodinated side-streams from a variety of chemical processes in Europe and the United States. The prices of iodine and iodine derivative products are determined by market conditions. World iodine prices vary depending upon, among other things, the relationship between supply and demand at any given time. Iodine supply varies primarily as a result of the production levels of the iodine producers (including us) and their respective business strategies. Our annual average iodine sales prices increased to approximately US$35 per kilogram in 2020, from the average sales prices of approximately US$29 per kilogram observed in 2019. Demand for iodine varies depending upon overall levels of economic activity and the level of demand in the medical, pharmaceutical, industrial and other sectors that are the main users of iodine and iodine- derivative products. Certain substitutes for iodine are available for certain applications, such as antiseptics and disinfectants, which could represent a cost-effective alternative to iodine depending on prevailing prices. The main factors of competition in the sale of iodine and iodine derivative products are reliability, price, quality, customer service and the price and availability of substitutes. We believe we have competitive advantages compared to other producers due to the size and quality of our mining reserves and the available production capacity. We believe our iodine is competitive with that produced by other manufacturers in certain advanced industrial processes. We also believe we benefit competitively from the long-term relationships we have established with our largest customers. Lithium and its Derivatives In 2020, our revenues from lithium sales amounted to US$383.4 million, representing 21.1% of our total revenues. We believe we are one of the world’s largest producers of lithium carbonate and lithium hydroxide, and we estimate that our sales volumes accounted for approximately 19% of the global lithium chemicals sales volumes. Lithium: Market The lithium market can be divided into (i) lithium minerals for direct use (in which market SQM does not participate directly), (ii) basic lithium chemicals, which include lithium carbonate and lithium hydroxide (as well as lithium chloride, from which lithium carbonate may be made), and (iii) inorganic and organic lithium derivatives, which include numerous compounds produced from basic lithium chemicals (in which market SQM does not participate directly). Lithium carbonate and lithium hydroxide are principally used to produce the cathodes for rechargeable batteries, taking advantage of lithium’s extreme electrochemical potential and low density. Batteries are 21 3) DESCRIPTION OF BUSINESS ENVIRONMENT the leading application for lithium, accounting for approximately 75% of total lithium demand, including batteries for electric vehicles, which accounted for approximately 54% of total lithium demand. There are many other applications both for basic lithium chemicals and lithium derivatives, such as lubricating greases (approximately 5% of total lithium demand), heat-resistant glass (ceramic glass) (approximately 5% of total lithium demand), chips for the ceramics and glaze industry (approximately 2% of total lithium demand), chemicals for air conditioning (approximately 1% of total lithium demand), and many others, including pharmaceutical synthesis and metal alloys. Lithium’s main properties, which facilitate its use in this range of applications, are that it: is the lightest solid metal and element at room temperature; is low density; • • • has a low coefficient of thermal expansion; • has high electrochemical potential; and • has a high specific heat capacity. During 2020, lithium chemicals demand increased by approximately 6%, reaching approximately 330,000 metric tons. We expect applications related to energy storage to continue driving demand in the coming years. Lithium: Our Products We produce lithium carbonate at our Salar del Carmen facilities, near Antofagasta, Chile, from highly concentrated lithium chloride produced in the Salar de Atacama as a by-product of the potassium chloride production. The annual production capacity of our lithium carbonate plant at the Salar del Carmen was expanded and is now 70,000 metric tons per year. We are in the process of increasing our production capacity to 180,000 metric tons per year. We believe that the technologies we use, together with the high concentrations of lithium and the characteristics of the Salar de Atacama, such as high evaporation rate and concentration of other minerals, allow us to be one of the lowest cost producers worldwide. We also produce lithium hydroxide at the same plant at the Salar del Carmen, next to the lithium carbonate operation. The lithium hydroxide facility has a production capacity of 13,500 metric tons per year and we are in the process of increasing this production capacity to 30,000 metric tons per year. In addition, in February 2021 our Board approved the investment for our 50% share of the development costs in the Mt. Holland lithium project in our joint venture with Wesfarmers, which we expect will have a total production capacity of 50,000 metric tons. The following table shows our total sales volumes and revenues from lithium and its derivatives for 2020, 2019 and 2018: Sales volumes (Th. MT) Lithium and derivatives 2020 2019 2018 64.6 45.1 45.1 Revenues (in US$ millions) 383.4 505.7 734.8 Our revenues in 2020 were US$383.4 million, a 24.2% decrease from US$505.7 million in 2019, due to lower prices during the year. The average price for 2020 was approximately 47.1% lower than the average price in 2019. Lithium: Marketing and Customers 22 3) DESCRIPTION OF BUSINESS ENVIRONMENT In 2020, we sold our lithium products in approximately 42 countries to approximately 187 customers, and most of our sales were to customers outside of Chile. One customer accounted for more than 10% of our lithium revenues in 2020, accounting for approximately 12% of our lithium revenues. Our ten largest customers accounted in the aggregate for approximately 58% of revenues. No supplier accounted for more than 10% of the cost of sales of this business line. We make lease payments to Corfo which are associated with the sale of different products produced in the Salar de Atacama, including lithium carbonate, lithium hydroxide and potassium chloride. See Note 25.2 to our consolidated financial statements for the disclosure of lease payments made to Corfo for all periods presented. The following table shows the geographical breakdown of our sales for 2020, 2019 and 2018: Revenues breakdown North America .................................. Europe .............................................. Chile ................................................. Central and South America .............. Asia and Others ................................ 2020 7% 13% 0% 0% 80% 2019 9% 15% 0% 1% 75% 2018 9% 14% 0% 0% 76% We sell lithium carbonate and lithium hydroxide through our own worldwide network of representative offices and through our sales, support and distribution affiliates. We maintain inventories of these products at our facilities throughout the world to facilitate prompt delivery to customers. Sales of lithium carbonate and lithium hydroxide are made pursuant to spot purchase orders or within the framework of supply agreements. Supply agreements generally specify annual minimum and maximum purchase commitments, and prices are adjusted periodically, according to prevailing market prices. In December 2020, we signed a nine-year sales contract with LG Energy Solution for up to 55,000 metric tons of lithium carbonate equivalent. Lithium: Competition During 2020, the main lithium brines producers were Chile, Argentina and China, while the main lithium mineral producers were Australia and China. With total sales of approximately 64,600 metric tons of lithium carbonate and lithium hydroxide, SQM’s market share of lithium chemicals was approximately 19% in 2020. One of our main competitors is Albemarle Corporation (“Albemarle”), which produces lithium carbonate and lithium chloride in Chile and the United States, along with lithium derivatives in the United States, Germany, Taiwan and China, with a market share of approximately 22%. Albemarle also owns 49% of Talison Lithium Pty Ltd. (“Talison”), an Australian company, that is the largest producer of concentrated lithium minerals in the world, based in Western Australia. The remaining 51% of Talison is owned by Tianqi Lithium Corp. (“Tianqi”), a Chinese company producing basic lithium chemicals in China from concentrated lithium minerals. Talison sells a part of its concentrated lithium mineral production to the direct use market, but most of its production, representing approximately 21% of total lithium chemical demand, is converted into basic lithium chemicals in China by Tianqi and Albemarle. Currently, Tianqi is planning to begin production at its lithium hydroxide plant in Australia, which is expected to be operational during 2021. Tianqi is also a significant shareholder of ours, holding approximately 25.86% of our shares. Albemarle plans to begin production at its lithium hydroxide plant in Australia in late 2021. Another important competitor is Livent Corporation (“Livent”), with an estimated market share of approximately 6%. Livent has production facilities in Argentina through Minera del Altiplano S.A., where it produces lithium chloride and lithium carbonate. In addition, Livent produces lithium derivatives in the United States, the United Kingdom and China. Orocobre Ltd., based in Argentina, produces lithium carbonate, with a market share of approximately 3%. 23 3) DESCRIPTION OF BUSINESS ENVIRONMENT Australia is an important source of concentrated lithium minerals. Since 2018, two producers have doubled their production of concentrated mineral, which is then converted into lithium chemicals in China. One of these producers is a joint venture between Ganfeng Lithium Co. (“Ganfeng”) and Mineral Resources Ltd in the Mt. Marion project. Galaxy Resources Ltd. is another important producer with operations in Mt. Cattlin. Additionally, Pilbara Minerals (which recently acquired Altura Mining), both produce from the Pilgangoora deposit. In addition, there were at least ten other companies producing lithium in China from brines or minerals in 2020. We believe that lithium production will continue to increase in the near future, in response to an increase in demand growth. A number of new projects to develop lithium deposits has been announced recently. Some of these projects are already in the advanced stages of development and others could materialize in the medium term. Potassium In 2020, our potassium chloride and potassium sulfate revenues amounted to US$209.3 million, representing 11.5% of our total revenues and a 1.3% decrease compared to 2019, as a result of decreased average prices. We estimate that we accounted for approximately 1% of global sales of potassium chloride in 2020. We produce potassium chloride by extracting brines from the Salar de Atacama that are rich in potassium chloride and other salts. Potassium is one of the three macronutrients that a plant needs to develop. Although potassium does not form part of a plant’s structure, it is essential to the development of its basic functions. Potassium chloride is the most commonly used potassium-based fertilizer. It is used to fertilize crops that can tolerate relatively high levels of chloride, and to fertilize crops that are grown under conditions with sufficient rainfall or irrigation practices that prevent chloride from accumulating to excess levels in the rooting systems of the plant. Some benefits that may be obtained through the use of potassium are: • increased yield and quality; • increased production of proteins; • increased photosynthesis; • intensified transport and storage of assimilates; • prolonged and more intense assimilation period; • • • improved water efficiency; regulated opening and closure of stomata; and synthesis of lycopene. Potassium chloride is also an important component for our specialty plant nutrition product line, where it is used as a raw material to produce potassium nitrate. Since 2009, our effective end product capacity has increased to over 2 million metric tons per year, granting us improved flexibility and market coverage. Potassium: Market During the last decade, growth in demand for potassium chloride, and for fertilizers in general, has been driven by several key factors, such as a growing world population, higher demand for protein-based diets and less arable land. All of these factors contribute to fertilizer demand growth as a result of efforts to maximize crop yields and use resources more efficiently. For the last ten years, the compound annual 24 3) DESCRIPTION OF BUSINESS ENVIRONMENT growth for the global potassium chloride market was approximately 1 to 2%. We estimate that demand increased 3 million metric tons in 2020, reaching approximately 67 million metric tons. According to studies prepared by the International Fertilizer Industry Association, cereals account for approximately 45% of world potassium consumption, including corn (14%), rice (13%) and wheat (3%). Oilseeds, predominantly soybeans and palm oil, represent approximately 16% of total potassium demand. Fruits and vegetables account for approximately 22% of world potassium demand, and sugar crops account for close to 7%. Potassium: Our Products Potassium chloride differs from our specialty plant nutrition products because it is a commodity fertilizer and contains chloride. We offer potassium chloride in two grades: standard and compacted. Potassium sulfate is considered a specialty fertilizer and we offer this product in soluble grades. The following table shows our sales volumes of and revenues from potassium chloride and potassium sulfate for 2020, 2019 and 2018: Sales volumes (Th. MT) Potassium chloride and potassium sulfate 726.7 597.3 831.8 2020 2019 2018 Revenues (in US$ millions) 209.3 212.2 267.5 Our revenues in 2020 were US$209.3 million, a 1.3% decrease from US$212.2 million in 2019, due to significantly lower prices during the year. Our sales volumes in 2020 were approximately 21.7% higher than sales volumes reported last year. Potassium: Marketing and Customers In 2020, we sold potassium chloride and potassium sulfate to approximately 509 customers in approximately 41 countries. No individual customer accounted for more than 10% of our revenues of potassium chloride and potassium sulfate in 2020. We estimate that our ten largest customers accounted in the aggregate for approximately 38% of such revenues. One supplier accounted for more than 10% of the cost of sales of this business line, accounting for approximately 11% of the cost of sales for the business line. We make lease payments to Corfo which are associated with the sale of different products produced in the Salar de Atacama, including lithium carbonate, lithium hydroxide and potassium chloride. See Note 24.2 to our consolidated financial statements for the disclosure of lease payments made to Corfo for all periods presented. The following table shows the geographical breakdown of our sales for 2020, 2019 and 2018: Revenues breakdown 2020 2019 2018 North America ............................. Europe .......................................... Chile ............................................. Central and South America .......... Asia and Others ............................ 19% 14% 11% 35% 21% 20% 13% 13% 31% 23% 19% 17% 10% 30% 24% Potassium: Competition We estimate that we accounted for less than 1% of global sales of potassium chloride in 2020. Our main competitors are Nutrien, Uralkali, Belaruskali and Mosaic. We estimate that in 2020, Nutrien accounted 25 3) DESCRIPTION OF BUSINESS ENVIRONMENT for approximately 19% of global sales, Belaruskali accounted for approximately 18% of global sales, Uralkali accounted for approximately 16% of global sales, and Mosaic accounted for approximately 14% of global sales. Industrial Chemicals In 2020, our revenues from industrial chemicals were US$160.6 million, representing approximately 8.8% of our total revenues for that year. In addition to producing sodium and potassium nitrate for agricultural applications, we produce different grades of these products, including prilled grades, for industrial applications. The grades differ mainly in their chemical purity. We enjoy certain operational flexibility producing industrial nitrates, because they are produced from the same process as their equivalent agricultural grades, needing only an additional step of purification. We may, with certain constraints, shift production from one grade to the other depending on market conditions. This flexibility allows us to maximize yields and to reduce commercial risk. In addition to producing industrial nitrates, we produce, market and sell industrial-grade potassium chloride. Industrial Chemicals: Market Industrial sodium and potassium nitrates are used in a wide range of industrial applications, including the production of glass, ceramics, explosives, metal recycling, insulation materials, and metal treatments together with various chemical processes. In addition, this product line has also experienced growth from the use of industrial nitrates as thermal storage in concentrated solar power plants (commonly known as “CSP”). Solar salts for this specific application contain a blend of 60% sodium nitrate and 40% potassium nitrate by weight ratio and are used as a storage and heat transfer medium. Unlike traditional photovoltaic plants, these new plants use a “thermal battery” that contains molten sodium nitrate and potassium nitrate, which store the heat collected during the day. The salts are heated up during the day, while the plants are operating under direct sunlight, and at night they release the solar energy that they have captured, allowing the plants to operate even during hours of darkness. Depending on the power plant technology, solar salts are also used as a heat transfer fluid in the plant system and thereby make CSP plants even more efficient, increasing their output and reducing the Levelized Cost of Electricity (LCOE). We see a growing trend for the CSP application as a result of its economical long duration electricity storage. The thermal storage of CSP plants helps to improve the stabilization of the electricity grid. Like all large power generation plants, such large CSP power plants are capital intensive and require a relatively long development period. We supply solar salts to CSP projects around the world. In 2020, we sold approximately 160,000 metric tons of solar salts to supply a CSP project in the Middle East. We expect to supply over 400,000 metric tons to this project between 2020-2022. In addition, we believe there are ten major projects currently under development worldwide that we believe we could supply between 2020-2025. As a result, we expect our sales volumes of this product to surpass 1 million metric tons during the 2020-2025 period. We are also experiencing a growing interest in using solar salts in thermal storage solutions not related to CSP technology. Due to their proven performance, solar salts are being tested in industrial heat processes and heat waste solutions. These new applications may open new opportunities for solar salts uses in the near future. Industrial Chemicals: Our Products 26 3) DESCRIPTION OF BUSINESS ENVIRONMENT The following table shows our sales volumes of industrial chemicals and total revenues for 2020, 2019 and 2018: Sales volumes (Th. MT) Industrial chemicals 2020 2019 2018 225.1 123.5 135.9 Revenues (in US$ millions) 160.6 94.9 108.3 Revenues for industrial chemicals increased to US$160.6 million in 2020 from US$94.9 million in 2019, as a result of higher sales volumes in this business line. Sales volumes in 2020 increased 82.3% compared to sales volumes reported last year. Industrial Chemicals: Marketing and Customers We sold our industrial nitrate products in approximately 54 countries in 2020 to approximately 268 customers. One customer accounted for more than 10% of our revenues of industrial chemicals in 2020, accounting for approximately 69%, and our ten largest customers accounted in the aggregate for approximately 79% of such revenues. No supplier accounted for more than 10% of the cost of sales of this business line. We make lease payments to CORFO which are associated with the sale of different products produced in the Salar de Atacama, including lithium carbonate, lithium hydroxide and potassium chloride. See Note 25.2 to our consolidated financial statements for the disclosure of lease payments made to CORFO for all periods presented. The following table shows the geographical breakdown of our sales for 2020, 2019 and 2018: Revenues breakdown 2020 North America ............................ 15% Europe ......................................... 7% Chile ............................................ 3% Central and South America ......... 3% Asia and Others ........................... 72% 2019 29% 16% 42% 7% 6% 2018 25% 16% 4% 11% 43% Our industrial chemical products are marketed mainly through our own network of offices, representatives and distributors. We maintain updated inventories of our stocks of sodium nitrate and potassium nitrate, classified according to graduation, to facilitate prompt dispatch from our warehouses. We provide support to our customers and continuously work with them to develop new products and applications for our products. Industrial Chemicals: Competition We believe that we are one of the world's largest producers of industrial sodium nitrate and potassium nitrate. In 2020, our estimated market share by volume for industrial potassium nitrate was 73% and for industrial sodium nitrate was 44% (excluding domestic demand in China and India). Our competitors are mainly based in Europe and Asia, producing sodium nitrate as a by-product of other production processes. In refined grade sodium nitrate, BASF AG, a German corporation, and several producers in China and Eastern Europe are highly competitive. They produce industrial sodium nitrate as a by-product of other production processes. Our industrial sodium nitrate products also compete indirectly with substitute chemicals, including sodium carbonate, sodium sulfate, calcium nitrate and ammonium nitrate, which may be used in certain applications instead of sodium nitrate and are available from a large number of producers worldwide. 27 3) DESCRIPTION OF BUSINESS ENVIRONMENT Our main competitor in the industrial potassium nitrate business is Haifa, which we estimate had a market share of 16% for 2020. We estimate that our market share was approximately 73% for 2020. Other competitors are mostly based in China. Producers of industrial sodium nitrate and industrial potassium nitrate compete in the marketplace based on attributes such as product quality, delivery reliability, price, and customer service. Our operation offers both products at high quality and with low cost. In addition, our operation is flexible, allowing us to produce industrial or agricultural nitrates, maximizing our yields and reducing commercial risk. In addition, with certain restrictions, we are able to adapt production from one grade to another depending on market needs. In the potassium chloride market, we are a relatively small producer, mainly focused on supplying regional needs. Other Products SQM also receives income from the commercialization of third-party fertilizers (specialty and commodity). These fertilizers are traded in large volumes worldwide and are used as raw material for our specialty mixes or to complement our product portfolio. We have developed commercial management, supply, flexibility and inventory management capabilities that allow us to adapt to the changing fertilizer market in which we operate and obtain profits from these transactions. Trend Information Our revenues decreased 6.5% to US$1,817.2 million in 2020 from US$1,943.7 million in 2019. Gross profit reached US$482.9 million (26.6% of revenues) in 2020, lower than US$560.1 million (28.8% of revenues) recorded in 2019. Profit attributable to controlling interests decreased 40.8% to US$164.5 million in 2020 from US$278.1 million in 2019. In January 2020 the World Health Organization deemed COVID-19 a global pandemic. In March 2020, the Chilean Ministry of Health (Ministerio de Salud) declared a nationwide State of Emergency. In response to the spread of COVID-19, the Chilean government has closed its borders for entry by non- resident foreigners for a specified period of time, prohibited the docking of cruise ships at Chilean ports, imposed quarantines on certain neighborhoods of the capital of Santiago and other cities and imposed a nationwide curfew. These measures have not impacted imports or exports to or from Chile. However, while we did see some impacts related to the shipment of products in and out of various other countries and regions, particularly in the first half of 2020 with the information available today, we believe impacts related to operations and demand on our products will be minimally impacted by COVID-19 in 2021. Our Board and management continue to constantly monitor the situation and the potential impact that this unprecedented event could have on SQM. As a precaution, our management has implemented several measures to help reduce the spread COVID-19 at SQM, including the following measures to mitigate the spread in the workplace: (i) flexible working day together with the incentive to work from home in those cases where this is possible, (ii) avoidance of crowds, seminars and large meetings in the Company´s offices and operating facilities, (iii) strengthening of personal hygiene protocols (use of hand sanitizer, masks, etc.) and sanitation in plants, cafeterias and offices, and (iv) significant reductions in domestic and international travel, along with mandatory quarantines for people who have arrived from high risk destinations. We will continue to implement measures consistent with the evolving COVID-19 situation, with reference to governmental and international health organization guidelines. Revenues from lithium and derivatives totaled US$383.4 million during 2020, a decrease of 24.2% compared to the US$505.7 million in 2019. During 2020, our sales volumes were 43% higher than sales 28 3) DESCRIPTION OF BUSINESS ENVIRONMENT volumes reported in 2019. This was in line with our strategy to increase our market participation in an effort to expand and maintain our relationship with important customers in the lithium market. . During 2020, we believe total lithium market demand reached approximately 330,000 metric tons, a 6% growth compared to 2019, but lower than demand growth originally expected as a result of COVID-19. However, we believe that market demand during the second half of the year was significantly higher than market demand in the second half of 2019, mostly related to growth of electric vehicle sales volumes. We believe that electric vehicle sales growth during 2020 increased over 40% when compared to 2019, and this growth reached approximately 120% during the fourth quarter 2020 when compared to the same period in 2019. We expect this momentum to continue into 2021 and believe that lithium demand growth will reach almost 25% in 2021, and ultimately reach between 900,000 to 1 million metric tons in 2025. Given these strong market growth indicators, our installed capacity and the quality of our production, we believe that our 2021 sales volumes will increase, reaching more than 80,000 metric tons for the year. During the fourth quarter of 2020, our average price reached just over US$5,300/metric ton, similar to the average price seen during the third quarter of the same year. We believe that this could be the bottom of the decreasing pricing trend and that we could see higher prices during the first half of 2021. We remain particularly optimistic about the long-term growth of the lithium market. For this reason, we expect to increase our lithium carbonate and lithium hydroxide capacity significantly in the coming year. We expect our installed capacity of lithium carbonate and lithium hydroxide in Chile to reach approximately 180,000 and 30,000 metric tons by the end of 2023. In addition, in February 2021 our Board approved the investment for our 50% share of the development costs in the Mt. Holland lithium project, our 50/50 joint venture with Wesfarmers, which we expect will have an initial production capacity of 50,000 metric tons of battery grade lithium hydroxide. Revenues from sales of iodine and derivatives during 2020 were US$334.7 million, a decrease of 9.8% compared to US$371.0 million generated in 2019. Our sales volumes in the iodine business line decreased 24% in 2020, but we saw prices remain stable throughout the year, hovering around US$35/kilogram. Average prices in 2020 were 19% higher than the average prices seen in 2019. Iodine and derivative market growth is particularly sensitive to the trends in the medical industry, specifically X-ray contrast media, the pharmaceutical industry and the LCD polarizing market. As a result of the spread of COVID-19, non-essential medical services declined during 2020, and we saw demand related to these important markets decrease, leading to a total market decrease of about 9% when comparing 2020 to 2019. We believe we will see a significant recovery during 2021 as the impact of the pandemic fades away, mostly led by the X-ray contrast media, LCD and pharmaceutical markets and we hope to increase market share during the year. We have announced plans to increase our capacity in this business line to ensure that we have appropriate capacity available to meet future demand needs. Revenues from the SPN business line in 2020 totaled US$701.7 million, a decrease of 3.1% compared to $723.9 million reported in 2019.Our sales volumes in the specialty plant nutrition business line in 2020 were similar to sales volumes reported during 2019, decreasing slightly by 0.5%. Average prices in this business lines decreased approximately 3% in 2020 when compared to 2019. In the potassium nitrate market, demand growth was approximately 5% in 2020. We believe that this market growth was not impacted significantly because the fertilizer industry in some geographical markets was deemed an essential industry during the COVID-19 outbreak. In 2021, we expect to see similar demand growth. We analyze the potassium nitrate market by assessing, among other things, arable land availability, global crop production, and localized irrigation rates As an integrated producer of potassium chloride and potassium nitrate, the higher prices of potassium chloride we are seeing in the market should not have a significant impact on our production cost, while at the same time, our consolidated distribution network should help insulate us from some of the higher cost of transportation we are seeing in the market. Consequently, even 29 3) DESCRIPTION OF BUSINESS ENVIRONMENT though we believe we are the lowest cost producer in this market, we believe our competitive position in this market should be stronger in 2021. Potassium chloride and potassium sulfate revenues for 2020 totaled US$209.3 million, a 1.3% decrease compared to the US$212.2 million reported in 2019. Revenues in this business line during 2020 were impacted by lower average prices when compared to 2019, which were not offset by the higher sales volumes in the business line. We believe that the potassium chloride market surpassed 67 million metric tons in 2020, an increase of approximately 3 million metric tons compared to 2019. Average prices for potassium chloride during the fourth quarter of 2020 were about US$244/metric ton, flat when compared to the third quarter of 2020. During the first two months of 2021 we have seen higher prices, letting us believe we will see higher prices throughout the rest of the year given the demand growth expected for 2021. In October 2020, we announced our Sustainable Development Plan, which included voluntarily expanding our monitoring systems, promoting better and more profound conversations with neighboring communities and becoming carbon neutral and reducing water use by 65% and brine extraction by 50%. The reduction of brine extraction described above will not have an impact on our capacity to produce potassium salts to feed our potassium nitrate production in Coya Sur. However, it will have an impact on our sales volumes available to third parties, gradually decreasing them year by year. Although in the first years of brine extraction we expect to see a minor impact on the Company's gross margin (as a result of accumulated inventories among other factors), the average impact over the next ten years on the gross margin will be between US$25 million and US$30 million per year due to lower volumes of potassium chloride available for sale. Industrial chemicals revenues in 2020 reached US$160.6 million, a 69.3% increase compared to US$94.9 million in 2019. Our sales volumes in the industrial chemicals product line increased 82% in 2020 compared to 2019, as a result of higher sales volumes of solar salts. Our solar salt sales volumes were up over 230% in 2020 when compared to 2019 reaching 160,000 metric tons. We expect industrial chemical sales volumes in 2021 will increase again when compared to 2020, as we continue the delivery of almost 200,000 metric tons of solar salts in 2021 for a project requiring over 400,000 metric tons. Production Process Our integrated production process can be classified according to our natural resources: caliche ore deposits, which contain nitrates, iodine and potassium; and • • brines from the Salar de Atacama, which contain potassium, lithium, sulfate, boron and magnesium. Caliche Ore Deposits Caliche ore deposits are located in the First and Second Regions in northern Chile. During 2020, our mining operations concentrated in the First Region where we mainly worked in the mining sector Tente en el Aire and in the mining sectors Nueva Victoria Oeste, Norte and Sur. The Second Region mining operations at the Pampa Blanca site, the El Toco mine (which is part of the María Elena site) and the Pedro de Valdivia site were suspended in March 2010, November 2013 and November 2015, respectively, in an effort to optimize our production facilities with lower production costs. Caliche ore is found under a layer of barren overburden in seams with variable thickness from twenty centimeters to four meters, and with the overburden varying in thickness between half a meter and two meters. 30 3) DESCRIPTION OF BUSINESS ENVIRONMENT Before proper mining begins, the exploration stage is carried out, including complete geological reconnaissance, sampling and drilling caliche ore to determine the quality and characteristics of each deposit. Drill-hole samples are properly identified and tested at our chemical laboratories. With the exploration information on a closed grid pattern of drill holes, the ore evaluation stage provides information for mine planning purposes. Mine planning is done on a long-term basis (ten years), medium- term basis (three to five years) and short-term basis (one year). Once all of this information has been compiled, detailed planning for the exploitation of the mine takes place. The mining process generally begins with bulldozers first removing the overburden in the mining area. This process is followed by an inspection and review of the drill holes before production drilling and blasting occurs to break the caliche seams. Front-end loaders and bulldozers load the ore onto off-road trucks, which take it to the leaching heaps to be processed. During 2020, SQM continued working with mining equipment to replace the drilling and blasting process for mining some of the caliche ore and obtaining a smaller ore size (under 6 ½ inches) that allows a better metallurgical recovery. The run of mine ore is loaded in heaps and leached with water to produce concentrated solutions containing iodine, nitrate and potassium. These solutions are then sent to plants where iodine is extracted through both solvent-extraction and blow out processes. The remaining solutions are subsequently sent to solar evaporation ponds where the solutions are evaporated and salts rich in nitrate and potassium are produced. These concentrated salts are then sent to Coya Sur where they are used to produce potassium nitrate. During 2020, the Pedro de Valdivia site generated solutions produced by leaching the mine tailings. These solutions are treated at the iodide plant at Pedro de Valdivia. After iodide is obtained, the remaining solutions, which are rich in nitrate and potassium, are sent to the solar evaporation ponds at Coya Sur in order to be used in the production of potassium nitrate. Caliche Ore-Derived Products Caliche ore-derived products are sodium nitrate, potassium nitrate, sodium potassium nitrate and iodine. Sodium Nitrate During 2020, sodium nitrate for both agricultural and industrial applications was produced from nitrate salts from our mining operations at Sur Viejo and fed to our new crystallization plant located in Coya Sur, which began operating in December 2019. Crystallized sodium nitrate is an intermediate product that is subsequently processed further at the Coya Sur production plants to produce sodium nitrate and sodium potassium nitrate in different chemical and physical forms, including crystallized and prilled products. Finally, the products are transported by truck to our port facilities in Tocopilla for shipping to customers and distributors worldwide. Potassium Nitrate Potassium nitrate is produced at our Coya Sur facility using a production process developed in-house. The brines generated by the leaching process at Pedro de Valdivia are pumped to Coya Sur’s solar evaporation ponds for a nitrate concentration process. After the nitrate concentration process, the brine is pumped to a conversion plant where potassium salts from the Salar de Atacama and nitrate and potassium salts produced at Nueva Victoria or Coya Sur are added. A chemical reaction begins, transforming sodium nitrate into potassium nitrate and discarding formed sodium chloride. This brine is pumped to a crystallization plant, which crystallizes the potassium nitrate by cooling it at atmospheric pressure and separating it from the liquid by centrifuge. 31 3) DESCRIPTION OF BUSINESS ENVIRONMENT Our current potassium nitrate production capacity at Coya Sur is approximately 1,300,000 metric tons per year. During 2020, we worked on several initiatives to improve productivity, including the commencement of the construction of a new magnesium abatement plant in Sur Viejo which will allow for high content potassium nitrate salt recovery from potassium salts from the Salar de Atacama. This plant will begin the commissioning process in mid-2021. We also began the removal of magnesium in nitrates from Pedro de Valdivia by using high sulfate salts from Pampa Blanca that allow for improved nitrate recovery during the evaporation ponds process. The potassium nitrate produced at Coya Sur is transported to Tocopilla for shipping and delivery to customers and distributors. All potassium nitrate produced in crystallized or prilled form at Coya Sur has been certified by TÜV-Rheinland under the quality standard ISO 9001:2015. Sodium Potassium Nitrate Sodium potassium nitrate is a mixture of approximately two parts sodium nitrate per one part potassium nitrate. We produce sodium potassium nitrate at our Coya Sur prilling facilities using standard, non- patented production methods we have developed. Crystallized sodium nitrate is supplied together with the crystallized potassium nitrate to the prilling plant where it is mixed producing sodium potassium nitrate, which is then melted and prilled. The prilled sodium potassium nitrate is transported to Tocopilla for bulk shipment to customers. The production process for sodium potassium nitrate is basically the same as that for sodium nitrate and potassium nitrate. With certain production restraints and following market conditions, we may supply sodium nitrate, potassium nitrate or sodium potassium nitrate, either in prilled or crystallized form. The sodium potassium nitrate produced at Coya Sur is transported to Tocopilla for shipping and delivery to customers and distributors. Iodine and Iodine Derivatives During 2020, we produced iodine at our facilities at Nueva Victoria (including the Iris facility) and Pedro de Valdivia. Iodine is extracted from solutions produced by leaching caliche ore. As in the case of nitrates, the process of extracting iodine from the caliche ore is well established, but variations in the iodine and other chemical contents of the treated ore and other operating parameters require a high level of know-how to manage the process effectively and efficiently. The solutions resulting from the leaching of caliche ore carry iodine in iodate form. Part of the iodate solution is reduced to iodide using sulfur dioxide, which is produced by burning sulfur. The resulting iodide is combined with the rest of the untreated iodate solution to release elemental iodine in low concentrations. The iodine is then extracted from the aqueous solutions and concentrated in iodide form using a solvent extraction and stripping plant in the Pedro de Valdivia and Nueva Victoria facilities and using a blow out plant in the Iris facility. The concentrated iodide is oxidized to metallic iodine, which is then refined through a smelting process and prilled. We have obtained patents in the United States and Chile (Chilean patent number 47,080) for our iodine prilling process. Prilled iodine is tested for quality control purposes, using international standard procedures that we have implemented. It is then packed in 20 to 50-kilogram drums or 350-to-700-kilogram maxi bags and transported by truck to Antofagasta, Mejillones, or Iquique for export. Our iodine and iodine derivatives production facilities have qualified under the ISO 9001:2015 program, providing third-party certification—by TÜV-Rheinland—of the quality management system. The last recertification process was approved in November 2020. 32 3) DESCRIPTION OF BUSINESS ENVIRONMENT Our total iodine production in 2020 was 12,118 metric tons: 9,362 metric tons from Nueva Victoria, 1,250 metric tons from Iris, and 1,506 metric tons from Pedro de Valdivia. Nueva Victoria is also equipped to toll iodine from iodide delivered from our other facilities. We have the flexibility to adjust our production according to market conditions. Following the production facility restructuring at Pedro de Valdivia and Nueva Victoria, along with the ramp-up of our new iodide plant in Nueva Victoria, our total current effective production capacity at our iodine production plants is approximately 14,800 metric tons per year. During 2020, we continued the development of the Tente en el Aire project, progressing with making necessary environmental notices and obtaining permits required by governmental authorities. This project expects to incorporate the use of 900 liters per second of seawater, increasing the mine area by more than 40,000 hectares and allowing for increased in production in the project’s first stage of 3,000 tons of iodine and 250,000 tons of nitrate salts. We use a portion of the iodine we produce to manufacture inorganic iodine derivatives, which are intermediate products used for manufacturing agricultural and nutritional applications, at facilities located near Santiago, Chile. We also produce inorganic and organic iodine derivative products together with Ajay, which purchases iodine from us. In the past, we have primarily sold our iodine derivative products in South America, Africa and Asia, while Ajay and its affiliates have primarily sold their iodine derivative products in North America and Europe. In September 2010, the Chilean Environmental Evaluation Service approved the environmental study of our Pampa Hermosa project in the Tarapacá Region of Chile. This environmental permit allows for an increase in the production capacity of our Nueva Victoria operations to 11,000 metric tons of iodine per year and to produce up to 1.2 million metric tons of crystallized nitrates, mine up to 37 million metric tons of caliche per year and use new water rights of up to 665.7 liters per second. In Iris, we are approved for 2,000 metric tons of iodine production per year, with an annual extraction of caliche ore up to 6.48 million metric tons per year. In recent years, we have made investments in order to increase the water capacity in the Nueva Victoria operations from two water sources approved by the environmental study of Pampa Hermosa, expand the capacity of solar evaporation ponds, and implement new areas of mining and collection of solutions. Our current production capacity at Nueva Victoria is approximately 13,000 metric tons per year of iodine (including the Iris operations) and 1,000,000 metric tons per year of nitrates. Additional expansions may be implemented from time to time in the future, depending on market conditions. Salar de Atacama Brine Deposits The Salar de Atacama, located approximately 210 kilometers east of Antofagasta, is a salt-encrusted depression in the Atacama Desert, within which lies an underground deposit of brines contained in porous sodium chloride rock fed by an underground inflow from the Andes mountains, which is the result of millions of years of climatic and tectonic impacts. Brines are pumped from depths of 15 to 150 meters below surface, through a field of wells that are located in the Salar de Atacama, distributed in areas authorized for exploitation, and which contain relatively high concentrations of potassium, lithium, sulfates, boron and other minerals. The brines are estimated to cover a surface of approximately 2,800 square kilometers and contain commercially exploitable deposits of potassium, lithium, sulfates and boron. Concentrations vary at different locations throughout the Salar de Atacama. Our mining exploitation rights to the Salar de Atacama are pursuant to the Lease Agreement, which expires in 2030. The Lease Agreement, as amended in January 2018, permits the CCHEN to establish a total accumulated production and sales limit of up to 349,553 metric tons of lithium metallic equivalent (1,860,670 tons of lithium carbonate equivalent), which is in addition to the approximately 64,816 metric tons of lithium metallic equivalent (345,015 tons of lithium carbonate equivalent) remaining from the originally authorized amount. 33 3) DESCRIPTION OF BUSINESS ENVIRONMENT For the year ended December 31, 2020, revenues related to products originating from the Salar de Atacama represented 33% of our consolidated revenues, consisting of revenues from our potassium business line and our lithium and derivatives business line for the period. All of our products originating from the Salar de Atacama are derived from our extraction operations under the Lease Agreement. As of December 31, 2020, only 10 years remain on the term of the Lease Agreement. Products Derived from the Salar de Atacama Brines The products derived from the Salar de Atacama brines are potassium chloride, potassium sulfate, lithium carbonate, lithium hydroxide, lithium chloride, lithium sulfate, boric acid and bischofite (magnesium chloride). Potassium Chloride We use potassium chloride in the production of potassium nitrate. Production of our own supplies of potassium chloride provides us with substantial raw material cost savings. We also sell potassium chloride to third parties, primarily as a commodity fertilizer. In order to produce potassium chloride, brines from the Salar de Atacama are pumped to solar evaporation ponds. Evaporation of the water contained in the brine, results in a crystallized mixture of salts with various content levels of potassium, sodium and magnesium. In the first stage of the evaporation process, sodium chloride salts (halite) precipitate, they are then harvested are removed; these salts are not used in the production process of other products. In the second stage of the evaporation process, the remaining brine from the first stage is transferred to other evaporation ponds where potassium chloride salts together with sodium chloride (silvinite) precipitate, these salts are harvested and then sent for treatment at one of the wet potassium chloride plants where potassium chloride is separated by a grinding, flotation, and filtering process. In the final evaporation stage, salts containing magnesium are harvested and eventually can be treated at one of the cold leach plants where magnesium is removed. Part of the potassium chloride is transported approximately 300 kilometers to our Coya Sur facilities via a dedicated truck transport system, where it is used in the production of potassium nitrate. The use of potassium chloride salts as a raw material in Coya Sur allows us to capture significant savings, as it allows us to use potassium salts with different qualities and to avoid buying and importing potassium chloride from external sources. The remainder of the potassium chloride produced at the Salar de Atacama is shipped to our port in Tocopilla in either crystalized (standard) or granular (compacted) form and then shipped and sold as a commodity fertilizer to third parties. All of our potassium-related plants in the Salar de Atacama currently have a nominal production capacity of up to 2.6 million metric tons per year. Actual production capacity depends on volume, metallurgical recovery rates quality of the salts used in the process and quality of the mining resources pumped from the Salar de Atacama. The brine that remain in the evaporation pond system after removal of the sodium chloride and potassium chloride generates a concentrated lithium chloride solution, which is used to produce lithium carbonate (as described below) and generates salts rich in magnesium chloride (bischfite) as a by-product. Lithium Chloride Solution and Lithium Carbonate After the production of potassium chloride, a portion of the solutions remaining is sent to additional solar concentration ponds adjacent to the potassium concentration ponds. At this stage, the solution is purified and concentrated by precipitation to remove impurities it may still contain, including calcium, sulfate, potassium, sodium and magnesium, reaching a lithium concentration level of approximately 6%. Next is the process of concentration and purification of the remaining concentrated solution of lithium chloride, which is transported by truck to the Salar del Carmen production facility located near Antofagasta, approximately 195 kilometers southeast of the Salar de Atacama. At this plant, the solution is further 34 3) DESCRIPTION OF BUSINESS ENVIRONMENT purified and treated with sodium carbonate to produce lithium carbonate, which is dried and then, if necessary, compacted and finally packaged for shipment to customers. The production capacity of our lithium carbonate facility since the end of 2019 has been 70,000 metric tons per year. We are now expanding lithium carbonate capacity to reach 120,000 metric tons per year during 2021. Future production will depend on the actual volumes and quality of the lithium solutions sent by the Salar de Atacama operations, as well as prevailing market conditions. Our future production will also be subject to the extraction limit described in the Lease Agreement mentioned above. Our lithium carbonate production quality assurance program has been certified by TÜV-Rheinland under ISO 9001:2015 since September 2018. Lithium Hydroxide Lithium carbonate is sold to customers, and we also use it as a raw material for our lithium hydroxide production, which started operations at the end of 2005. We currently have two lithium hydroxide plants, one of which entered into operations at the end of 2018, and a total production capacity of 13,500 metric tons per year. These plants are located in the Salar del Carmen, adjacent to our lithium carbonate operations. In the production process, lithium carbonate is reacted with a lime solution to produce lithium hydroxide brine and calcium carbonate salt, which is filtered and piled in reservoirs. The lithium hydroxide solution is evaporated in a multi-effect evaporator and crystallized to produce the lithium hydroxide, which is filtered, dried and packaged for shipment to customers. During 2019 and 2020, we moved forward on an expansion plan which will allow us to produce an additional 8,000 metric tons per year of lithium hydroxide, reaching a total capacity of 21,500 metric tons per year. We believe this capacity level will be reached by the end of 2021. Our lithium hydroxide production quality assurance program has been certified by TÜV-Rheinland under ISO 9001:2015 since September 2018. Potassium Sulfate and Boric Acid Approximately 12 kilometers northeast of the potassium chloride facilities at the Salar de Atacama, we use the brines from the Salar de Atacama to produce potassium sulfate, potassium chloride (as a by-product of the potassium sulfate process) and, depending on market conditions, boric acid. The plant is located in an area of the Salar de Atacama where high sulfate and potassium concentrations are found in the brines to produce potassium sulfate. The brine is pumped to solar evaporation ponds, where sodium chloride salts are precipitated, harvested and put into piles. After further evaporation, the sulfate and potassium salts precipitate in different concentrations and are harvested and sent for processing to the potassium sulfate plant. Potassium sulfate is produced using flotation, concentration and reaction processes, after which it is crystallized, filtered, dried, classified and packaged for shipment. Production capacity for the potassium sulfate plant is approximately 340,000 metric tons per year, of which approximately 95,000 metric tons correspond to potassium chloride obtained as a byproduct of the potassium sulfate process. This capacity is part of the total nominal plant capacity of 2.6 million metric tons per year. In our dual plant complex, we may switch, to some extent, between potassium chloride and potassium sulfate production. Part of the pond system in this area is also used to process potassium chloride brines extracted from the low sulfate concentration areas found in the Salar de Atacama. Depending on the conditions for the optimization of the deposit operation and/or market conditions, potassium sulfate production can be modified to produce potassium chloride. 35 3) DESCRIPTION OF BUSINESS ENVIRONMENT The principal by-products of the production of potassium sulfate are: (i) non-commercial sodium chloride, which is deposited at sites near the production facility and (ii) remaining solutions, which are re-injected into the Salar de Atacama or returned to the evaporation ponds. The principal by-products of the boric acid production process are remaining solutions that are treated with sodium carbonate to neutralize acidity and then are reinjected into the Salar de Atacama. Raw Materials The main raw material that we require in the production of nitrate and iodine is caliche ore, which is obtained from our surface mines. The main raw material in the production of potassium chloride, lithium carbonate and potassium sulfate is the brine extracted from our operations at the Salar de Atacama. Other important raw materials are sodium carbonate (used for lithium carbonate production and for the neutralization of iodine solutions), sulfuric acid, kerosene, anti-caking and anti-dust agents, ammonium nitrate (used for the preparation of explosives in the mining operations), woven bags for packaging our final products, electricity acquired from electric utilities companies, and liquefied natural gas and fuel oil for heat generation. Our raw material costs (excluding caliche ore and salar brines and including energy) represented approximately 16% of our cost of sales in 2020. Since 2017, we have been connected to the central grid, which supplies electricity to the majority of cities and industries in Chile. We have several electricity supply agreements signed with major producers in Chile, which are within the contract terms. Our electricity needs are primarily covered by the Electrical Energy Supply Agreement that we entered into with AES Gener S.A. on December 31, 2012. Pursuant to the terms of the Electrical Energy Supply Agreement, we are required to purchase an amount of electricity that exceeds the amount that we estimate we will need for our operations. The excess amount is sold at marginal cost, which could result in a material loss for us. For our supply of liquefied natural gas, we maintain a five-year contract with Engie, which was executed in 2019. In addition, we have a supply of liquefied petroleum gas (LPG) from Lipigas in the Salar del Carmen and the Salar de Atacama. We obtain ammonium nitrate, sulfuric acid, kerosene and soda ash from several large suppliers, mainly in Chile and the United States, under long-term contracts or general agreements, some of which contain provisions for annual revisions of prices, quantities and deliveries. Diesel fuel is obtained under contracts that provide fuel at international market prices. We believe that all of our contracts and agreements with third-party suppliers with respect to our main raw materials contain standard and customary commercial terms and conditions. Water Supply We hold water rights for the supply of surface and subterranean water near our production facilities. The main sources of water for our nitrate and iodine facilities at Pedro de Valdivia, María Elena and Coya Sur are the Loa and San Salvador rivers, which run near our production facilities. Water for our Nueva Victoria and Salar de Atacama facilities is obtained from wells near the production facilities. In addition, we buy water from third parties for our production processes at the Salar del Carmen lithium carbonate and lithium hydroxide plants, and we also purchase potable water from local utility companies. We have not experienced significant difficulties obtaining the necessary water to conduct our operations. Research and Development, Patents and Licenses, etc. One of the main objectives of our research and development team is to develop new processes and products in order to maximize the returns obtained from the resources that we exploit. Our research is performed 36 3) DESCRIPTION OF BUSINESS ENVIRONMENT by three different units, whose research topics cover all of the processes involved in the production of our products, including chemical process design, phase chemistry, chemical analysis methodologies and physical properties of finished products. Our research and development policy emphasizes the following: (i) optimizing current processes in order to decrease costs and improve product quality through the implementation of new technology, (ii) developing higher-margin products from current products through vertical integration or different product specifications, (iii) adding value to inventories and (iv) using renewable energy in our processes. Our research and development activities have been instrumental in improving our production processes and developing new value-added products. As a result, new methods of extraction, crystallization and finishing products have been developed. Technological advances in recent years have enabled us to improve process efficiency for the nitrate, potassium and lithium operations, improve the physical quality of our prilled products and reduce dust emissions and caking by applying specially designed additives to our products handled in bulk. Our research and development efforts have also resulted in new, value-added markets for our products. One example is the use of sodium nitrate and potassium nitrate as thermal storage in solar power plants. We have patented several production processes for nitrate, iodine and lithium products. These patents have been filed mainly in the United States, Chile and in other countries when necessary. The patents used in our production processes include Chilean patent No. 47,080 for iodine (production of spherical granules of chemicals that sublime) and Japanese patent No. 4,889,848 for nitrates (granular fertilizers). Licenses, Franchises, and Royalties We do not have contracts that give rise to an obligation for the Company to make payments for licenses, franchises or royalties in any of our business lines, other than payments provided for in the Royalty Law. We have subscribed purchase option contracts for mining concessions such that, in the event that third parties exercise the respective option, we have the right to receive royalty payments as a result of the exploitation of such concessions. See section 3) D) Description of Business Environment: Property and Facilities for information about our concessions. 3) D) DESCRIPTION OF BUSINESS ENVIRONMENT: PROPERTY AND FACILITIES We carry out our operations through the use of mining rights, production facilities and transportation and storage facilities. Discussion of our mining rights is organized below according to the geographic location of our mining operations. Our caliche ore mining interests are located throughout the valley of the Tarapacá and Antofagasta regions of northern Chile (in a part of the country known as “el Norte Grande”). From caliche ore, we produce products based on nitrates and iodine, and caliche also contains concentrations of potassium. Our mining interests in the brine deposits of the Salar de Atacama are found within the Atacama Desert, in the eastern region of el Norte Grande. From these brines we produce products based on potassium, sulfate, lithium and boron. The map below shows the location of our principal mining operations and the exploitation and exploration mining concessions that have been granted to us, as well as the mining properties that we lease from Corfo: 37 3) DESCRIPTION OF BUSINESS ENVIRONMENT 38 3) DESCRIPTION OF BUSINESS ENVIRONMENT Mining Concessions Mining Concessions for the Exploration and Exploitation of Caliche Ore Mining Resources We hold our mining rights pursuant to mining concessions for exploration and exploitation of mining resources that have been granted pursuant to applicable law in Chile: (1) “Mining Exploitation Concessions”: entitle us to use the land in order to exploit the mineral resources contained therein on a perpetual basis, subject to annual payments to the Chilean government. (2) “Mining Exploration Concessions”: entitle us to use the land in order to explore for and verify the existence of mineral resources for a period of two years, at the expiration of which the concession may be extended one time only for two additional years, if the area covered by the concession is reduced by half. We may alternatively request an exploitation concession in respect of the area covered by the original exploration concession, which must be made within the timeframe established by the original exploration concession. A Mining Exploration Concession is generally obtained for purposes of evaluating the mineral resources in a defined area. If the holder of the Mining Exploration Concession determines that the area does not contain commercially exploitable mineral resources, the Mining Exploration Concession is usually allowed to lapse. An application also can be made for a Mining Exploitation Concession without first having obtained a Mining Exploration Concession for the area involved. As of December 31, 2020, the surface area covered by Mining Exploitation Concessions that have been granted in relation to the caliche resources of our mining sites is approximately 558,562 hectares. In addition, as of December 31, 2020, the surface area covered by Mining Exploration Concessions in relation to the caliche resources of our mining sites is approximately 400 hectares. We have not requested additional mining rights. Mining Concessions for the Exploitation of Brines at the Salar de Atacama As of December 31, 2020, our subsidiary SQM Salar held exclusive rights to exploit the mineral resources in an area covering approximately 140,000 hectares of land in the Salar de Atacama in northern Chile, of which SQM Salar is only entitled to exploit the mineral resources in 81,920 hectares. These rights are owned by Corfo and leased to SQM Salar pursuant to the Lease Agreement. Corfo cannot unilaterally amend the Lease Agreement, and the rights to exploit the resources cannot be transferred. The Lease Agreement provides for SQM Salar to (i) make quarterly lease payments to Corfo based on product sales from leased mining properties and annual contributions to research and development, to local communities, to the Antofagasta Regional Government and to the municipalities of San Pedro de Atacama, María Elena and Antofagasta, (ii) maintain Corfo’s rights over the Mining Exploitation Concessions and (iii) make annual payments to the Chilean government for such concession rights. The Lease Agreement was entered into in 1993 and expires on December 31, 2030. Under the terms of the Project Agreement, Corfo has agreed that it will not permit any other person to explore, exploit or mine any mineral resources in the approximately 140,000 hectares area of the Salar de Atacama mentioned above. The Project Agreement expires on December 31, 2030. The Project Agreement expires on December 31, 2030. SQM Salar holds an additional 239,942 hectares of constituted Mining Exploitation Concessions in areas near the Salar de Atacama, which correspond to mining reserves that have not been exploited. SQM Salar 39 3) DESCRIPTION OF BUSINESS ENVIRONMENT also holds Mining Exploitation Concessions that are in the process of being granted covering 1,430 hectares in areas near the Salar de Atacama. In addition, as of December 31, 2020, SQM Salar held Mining Exploration Concessions covering approximately 8,200 hectares and had applied for additional Mining Exploration Concessions of approximately 8,700 hectares. Exploration rights are valid for a period of two years, after which we can (i) request a Mining Exploitation Concession for the land, (ii) request an extension of the Mining Exploration Concession for an additional two years (the extension only applies to a reduced surface area equal to 50% of the initial area) or (iii) allow the concession to expire. According to the terms of the Lease Agreement, with respect to lithium production, the CCHEN established a total accumulated extraction limit set as amended by the Corfo Arbitration Agreement in January 2018, up to 349,553 metric tons of lithium metallic equivalent (1,860,670 tons of lithium carbonate equivalent), which is in addition to the approximately 64,816 metric tons of lithium metallic equivalent (345,015 tons of lithium carbonate equivalent) remaining from the originally authorized amount in the aggregate for all periods while the Lease Agreement is in force. As of December 31, 2020, only 10 years remain on the term of the Lease Agreement. Concessions Generally As of December 31, 2020, approximately 98% of SQM’s mining interests were held pursuant to Mining Exploitation Concessions and 1% pursuant to Mining Exploration Concessions. Of the Mining Exploitation Concessions, approximately 97% already have been granted pursuant to applicable Chilean law, and approximately 3% are in the process of being granted. Of the Mining Exploration Concessions, approximately 8|% already have been granted pursuant to applicable Chilean law, and approximately 19% are in the process of being granted. In 2020, we made payments of US$6.5 million to the Chilean government for Mining Exploration and Exploitation Concessions, including the concessions we lease from Corfo. These payments do not include the payments we made directly to Corfo pursuant to the Lease Agreement, according to the percentages of the sales price of products produced using brines from the Salar de Atacama. The following table shows the Mining Exploitation and Exploration Concessions held by SQM, including the mining properties we lease from Corfo, as of December 31, 2020: Exploitation Concessions Exploration Concessions Total Region of Chile Region I..……………. Region II…………….. Region III and others…... Total……………...…… Total Number 2,863 8,864 477 12,204 Hectares 539,131 2,322,904 107,988 2,970,023 Total Number 5 133 2 140 Hectares 1,000 46,800 400 48,200 Total Number 2,868 8,997 479 12,344 Hectares 540,131 2,369,704 108,388 3,018,223 The majority of the Mining Exploitation Concessions held by SQM were requested primarily for non- metallic mining purposes. However, a small percentage of our Mining Concessions were requested for metallic mining purposes. The annual payment to the Chilean government for this group of concessions is higher. Geological studies over mining properties that were requested primarily for non-metallic mining purposes may show that the concession area is of interest for metallic mining purposes, in which case we must 40 3) DESCRIPTION OF BUSINESS ENVIRONMENT inform the Sernageomin, indicating that the type of substance contained by such Mining Concessions has changed, for purposes of the annual payment for these rights. Caliche: Facilities and Reserves Caliche: Facilities During 2020, our mining operations concentrated in the First Region where we mainly worked in the mining sector Tente en el Aire and in the mining sectors Nueva Victoria Norte. In November 2015, the mining and nitrate operations at Pedro de Valdivia were suspended, and iodine production was reduced at the Pedro de Valdivia site, in order to take advantage of the highly efficient production facilities at Nueva Victoria. Operations at the Pampa Blanca site were suspended in 2010, and heap leaching operations at the María Elena site were suspended in October 2013, although iodine processing continued until 2017. Nueva Victoria The Nueva Victoria mine and facilities are located 140 kilometers southeast of Iquique and are accessible by highway. Since 2007, the Nueva Victoria mine includes the mining properties Soronal, Mapocho and Iris. At this site, we use caliche to produce salts rich in nitrates and iodine, through heap leaching and the use of solar evaporation ponds. The main production facilities at this site include the operation centers for the heap leaching process, the iodide and iodine plants at Nueva Victoria and Iris and the evaporation ponds at the Sur Viejo sector of the site. The areas currently being mined are located approximately 25 kilometers northeast of Nueva Victoria. Solar energy and electricity are the primary sources of power for this operation. Pampa Blanca The mining facilities at Pampa Blanca, which is located 100 kilometers northeast of Antofagasta, have been suspended since March 2010. At this site, we used caliche to produce nitrates and iodine through heap leaching and the use of solar evaporation ponds. The main production facilities at this site included the operation centers for the heap leaching system and the iodide plant. Electricity was the primary source of power for this operation. Pedro de Valdivia The Pedro de Valdivia mine and facilities are located 170 kilometers northeast of Antofagasta and are accessible by highway. At this site, we used caliche to produce nitrates and iodine through vat leaching and solar evaporation ponds. The main production facilities at this site include the crushing, vat leaching, fines processing, nitrate crystallization plant, and iodide and iodine plants. In November 2015, the mining and nitrate operations at Pedro de Valdivia were suspended, and iodine production was reduced. Electricity, natural gas and fuel oil are the primary sources of power for this operation. María Elena The María Elena mine and facilities, named El Toco, are located 220 kilometers northeast of Antofagasta and are accessible by highway. Until February 2010, caliche was used at this facility to produce nitrates and iodine through vat leaching. Subsequently, these facilities were equipped to produce nitrates and iodine through the use of heap leaching and solar evaporation ponds. Heap leaching operations at this site were suspended in October 2013. During 2017, we continued to produce solutions rich in iodine and nitrates by leaching the mine tailings. which were treated at the iodide plant at María Elena, and subsequently the prilled iodine is produced at Pedro de Valdivia. This process was discontinued at the end of 2017. Caliche: Reserves Our in-house staff of geologists and mining engineers prepares our estimates of caliche ore reserves. The Proven and Probable Reserve figures presented below are estimates and may be subject to modifications 41 3) DESCRIPTION OF BUSINESS ENVIRONMENT due to natural factors that affect the distribution of mineral grades, which would, in turn, modify the recovery of nitrate and iodine. Therefore, no assurance can be given that the indicated levels of recovery of nitrates and iodine will be realized. We estimate ore reserves based on evaluations, performed by engineers and geologists, of assay values derived from sampling of drill-holes and other openings. Drill-holes have been made at different space intervals in order to recognize mining resources. Normally, we start with 400x400 meters and then we reduce spacing to 200x200 meters, 100x100 meters and 50x50 meters. The geological occurrence of caliche ore is unique and different from other metallic and non-metallic minerals. Caliche ore is found in large horizontal layers at depths ranging from one to four meters and has an overburden between zero and two meters. This horizontal layering is a natural geological condition and allows the Company to estimate the continuity of the caliche bed based on surface geological reconnaissance and analysis of samples and trenches. Mineral resources can be calculated using the information from the drill-hole sampling. A Mineral Resource is a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form or quantity and of such grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological, metallurgical and technological evidence. A Measured Resource is the part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. The estimate is based on detailed exploration, sampling and testing information gathered through appropriate sampling techniques from locations such as outcrops, trenches, and exploratory drill holes. An Indicated Mineral Resource is the part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. The estimate is based on detailed exploration, sampling and testing information gathered through appropriate sampling techniques from locations such as outcrops, trenches and exploratory drill holes. According to our experience in caliche ore, the grid pattern drill-holes with spacing equal to or less than 100 meters produce data on the caliche resources that is sufficiently defined to consider them Measured Resources and then, adjusting for technical, economic and legal aspects, as Proven Reserves. These reserves are obtained using the Kriging Method and the application of operating parameters to obtain economically profitable reserves. Similarly, the information obtained from detailed geologic work and samples taken from grid pattern drill- holes with spacing equal to or less than 200 meters can be used to determine Indicated Resources. By adjusting such Indicated Resources to account for technical, economic and legal factors, it is possible to calculate Probable Reserves. Probable Reserves are calculated by using a polygon-based methodology and have an uncertainty or margin of error greater than that of Proven Reserves. However, the degree of certainty of Probable Reserves is high enough to assume continuity between points of observation. Proven Reserves are the economically mineable part of a Measured Resource. The calculation of the reserves includes the application of mining parameters including maximum overburden, minimum thickness of caliche ore, stripping ratio, cutoff grade and application of dilution factors to the grade values. Appropriate assessments, including pre-feasibility studies or feasibility studies, have been carried out and include consideration of metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction is reasonably justified. Probable Reserves are the economically mineable part of an Indicated Resource and in some cases a Measured Resource. The calculation of the reserves includes the application of mining parameters 42 3) DESCRIPTION OF BUSINESS ENVIRONMENT including maximum overburden, minimum thickness of caliche ore, stripping ratio, cutoff grade and application of dilution factors to the grade values. Appropriate assessments, including pre-feasibility studies, have been carried out or are in process and include consideration of metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction is reasonably justified. The estimates of Proven Reserves of caliche ore at each of our mines as of December 31, 2020 are set forth below. The Company holds 100% of the concession rights for each of these mines. Proven Reserves (1) (millions of metric tons) Nitrate Average Grade (percentage by weight) Iodine Average Grade (parts per million) Cutoff Grade Average for Mine (2) 91.9 83.3 54.7 279.6 6.9% 7.2% 5.7% 5.6% 424 436 538 439 Nitrate 6.0 % Iodine 300 ppm Iodine 300 ppm Iodine 300 ppm Mine Pedro de Valdivia María Elena Pampa Blanca Nueva Victoria In addition, the estimates of our Probable Reserves of caliche ore at each of our principal mines as of December 31, 2020, are as follows: Probable Reserves (3) (millions of metric tons) Nitrate Average Grade (percentage by weight) Iodine Average Grade (parts per million) Cutoff Grade Average for Mine (2) 240.9 148.8 535.5 989.7 6.2% 7.2% 5.3% 5.2% 414 381 497 421 Nitrate 6.0 % Iodine 300 ppm Iodine 300 ppm Iodine 300 ppm Mine Pedro de Valdivia María Elena Pampa Blanca Nueva Victoria Notes on reserves: (1) The Proven Reserves set forth in the table above are shown before losses related to exploitation and mineral treatment. Proven Reserves are affected by mining exploitation methods, which result in differences between the estimated reserves that are available for exploitation in the mining plan and the recoverable material that is finally transferred to the leaching vats or heaps. The average mining exploitation factor for each of our different mines ranges between 80% and 90%, whereas the average global metallurgical recoveries of processes for nitrate and iodine contained in the recovered material vary between 60% and 70%. (2) The cutoff grades for the Proven and Probable Reserves vary according to the objectives of each mine. These amounts correspond to the averages of the different areas. (3) Probable Reserves can be expressed as Proven Reserves using a conversion factor, only for purposes of obtaining a projection to be used for long-term planning purposes. On average, this conversion factor is higher than 60%, depending on geological conditions and caliche ore continuity, which vary from mine to mine (Pedro de Valdivia 60%, María Elena 50%, Pampa Blanca 70% and Nueva Victoria 60%). The complete technical supporting documentation for the information set forth in the table above was prepared for each mine by the geologist Vladimir Tejerina and other engineering professionals employed by SQM and validated by Ms. Marta Aguilera and Mr. Marco Lema. Ms. Marta Aguilera is a geologist with more than 35 years of experience in the field. She is currently employed by SQM as a Senior Consultant for the Mining Production area. Ms. Aguilera is a Competent Person (Persona Competente), as that term is defined under Chilean Law No. 20,235, known as the Law that Regulates the Position of Competent Persons and Creates the Qualifying Committee for Competencies in Mining Resources and Reserves (Ley que Regula la Figura de las Personas Competentes y Crea la Comisión Calificadora de Competencias de Recursos y Reservas Mineras or “Competent Person 43 3) DESCRIPTION OF BUSINESS ENVIRONMENT Law”). She is registered under No. 163 in the Public Registry of Competent Persons in Mining Resources and Reserves in accordance with the Competent Person Law and related regulations. She has worked as a geologist with both metallic and non-metallic deposits, with vast experience in the latter. Mr. Marco Lema is a civil mining engineer with more than 35 years of experience. He works for SQM as Superintendent of Geology and Engineering in the mining production area. Mr. Lema is a Competent Person (Persona Competente), as that term is defined under Chilean Law No. 20,235, known as the Law that Regulates the Position of Competent Persons and Creates the Qualifying Committee for Competencies in Mining Resources and Reserves (Ley que Regula la Figura de las Personas Competentes y Crea la Comisión Calificadora de Competencias de Recursos y Reservas Mineras or “Competent Person Law”). He has experience working on metallic and non-metallic mine deposits. Copies of the certificates of qualified competency issued by the Chilean Mining Commission are presented below: 44 3) DESCRIPTION OF BUSINESS ENVIRONMENT 45 3) DESCRIPTION OF BUSINESS ENVIRONMENT 46 3) DESCRIPTION OF BUSINESS ENVIRONMENT The proven and probable reserves shown above are the result of the evaluation of approximately 18.5% of the total caliche-related mining property of our Company. However, we have explored more intensely the areas in which we believe there is a higher potential of finding high-grade caliche ore minerals. The remaining 81.5% of this area has not been explored or has had limited reconnaissance, which is not sufficient to determine the potential and hypothetical resources. In 2020, we did not carry out basic reconnaissance of new mining properties. With respect to detailed explorations, in 2020, we did not carry out recategorizations of indicated resources. Our 2021 exploration program includes the exploration of the Tente en el Aire sector, which totals 658 hectares, and the basic study of 4,100 hectares of the Mina Oeste and Tente en el Aire Oeste sectors. The reserves shown in these tables are calculated based on properties that are not involved in any legal disputes between SQM and other parties. Caliche ore is the key raw material used in the production of iodine, specialty plant nutrients and industrial chemicals. The following gross margins for the business lines specified were calculated on the same basis as cut off grades used to estimate our reserves. We expect costs to remain relatively stable in the near future. Iodine and Derivatives..... Specialty Plant Nutrition . Industrial Chemicals ........ 2020 Gross Margin 50% 23% 26% Price US$35/kg US$677/ton US$713/ton 2019 Gross Margin 38% 21% 33% Price US$29/kg US$695/ton US$768/ton 2018 Gross Margin 33% 22% 33% Price US$24/kg US$722/ton US$797/ton We maintain an ongoing program of exploration and resource evaluation on the land surrounding our production mines, and other sites for which we have the appropriate concessions. Brines from the Salar de Atacama: Facilities and Reserves Salar de Atacama: Facilities Salar de Atacama Our facilities at the Salar de Atacama are located 210 kilometers to the east of the city of Antofagasta and 188 kilometers to the southeast of the city of María Elena. At this site we use brines extracted from the salar to produce potassium chloride, potassium sulfate, boric acid, magnesium chloride salts and lithium solutions, which are subsequently sent to our lithium carbonate plant at the Salar del Carmen for processing. The main production plants at this site include the potassium chloride flotation plants (MOP- H I and II), the potassium carnallite plants (PC I and extension), the potassium sulfate flotation plant (SOP- H), the boric acid plant (ABO), the potassium chloride drying plant (Dual Plant or MOP-S), the potassium chloride compacting plant (MOP-G), the potassium sulfate drying plant (SOP-S) and the potassium sulfate compacting plant (SOP-G). Solar energy is the primary energy source used for the Salar de Atacama operations. Salar de Atacama: Reserves Our in-house staff of hydrogeologists and geologists prepares our estimates of the reserve base of potassium, sulfate, lithium and boron dissolved in brines at the Salar de Atacama. We have exploitation concessions covering an area of 81,920 hectares, in which we have carried out geological exploitation, brine sampling and geostatistical analysis. We estimate that our proven and probable reserves as of December 31, 2020 are as follows: Proven Reserves (1) Probable Reserves (1) Total Reserves (millions of metric tons) (millions of metric tons) (millions of metric tons) Potassium (K+) (2) 56.2 32.8 89.0 47 3) DESCRIPTION OF BUSINESS ENVIRONMENT Sulfate (SO4-2) (3) Lithium (Li+) (4) Boron (B3+) (5) Notes on reserves: 42.9 6.0 1.6 31.7 3.1 1.0 74.6 9.1 2.7 (1) Metric tons of potassium, sulfate, lithium and boron considered in the proven and probable reserves are shown before losses from evaporation processes and metallurgical treatment. The recoveries of each ion depend on both brine composition and the process applied to produce the desired commercial products. (2) Recoveries for potassium vary from 53% to 77%. (3) Recoveries for sulfate vary from 27% to 45%. (4) Recoveries for lithium vary from 34% to 60%. (5) Recoveries for boron vary from 28% to 32%. The information set forth in the table above was validated in February 2021 by Messrs. Andrés Fock and Orlando Rojas using information that was prepared by SQM’s hydrogeologists, geologists and engineers and external advisors. Mr. Fock is a geologist with more than 16 years of experience in the field of mining hydrogeology. He is currently employed by WSP as a Geologist. He is a Competent Person and is registered under No. 226 in the Public Registry of Competent Persons in Mining Resources and Reserves, in accordance with the Competent Person Law. As a hydrogeologist in Chile and abroad, he has evaluated multiple brine-based projects and has experience evaluating resources and reserves. Mr. Orlando Rojas is a civil mining engineer and independent consultant. He is Partner and Chief Executive Officer of EMI-Ingenieros y Consultores S.A., whose offices are located at Los Domínicos No 7772, Las Condes, Santiago, Chile. He is a member of the Institute of Mining Engineers and is registered under No. 118 in the Public Registry of Competent Persons in Mining Resources and Reserves in accordance with the Competent Person Law and related regulations. He has worked as a mining engineer for 40 years since graduating from university, including more than 34 years working on estimates for reserves and resources. Copies of the certificates of qualified competency issued by the Chilean Mining Commission are provided below: 48 3) DESCRIPTION OF BUSINESS ENVIRONMENT 49 3) DESCRIPTION OF BUSINESS ENVIRONMENT 50 3) DESCRIPTION OF BUSINESS ENVIRONMENT The cutoff grade for lithium extraction is set at 0.05% Li. The cost of the process is competitive in the market despite a small cost increase due to the expansions in the evaporation area (to reach the required Li concentration) and to the use of additives to maintain the quality of the brine that is used to feed the plant. A cutoff grade of 1.0% K is used in the calculation, considering a low margin scenario using only MOP- S as and using diluted brine with higher levels of contaminants as the raw material and with recovery yields of approximately 47%, which is on the lower end of the range. In this scenario, considering current market conditions and market conditions from recent years, the production cost of MOP production is still competitive. The proven and probable reserves are based on production experience, drilling, brine sampling and geo- statistic reservoir modeling in order to estimate brine volumes and their composition. We calculate the reserve base, which is the volume of brine effectively drainable or exploitable in each evaluation unit, by building a three-dimensional block model. The following variables are used to populate the model: • Porosity: obtained from measurements of drainable porosity in core rocks, test pumping data, geophysical records and changes in the level of the brine. The volume of brine is estimated on the basis of the interpolation of the drainable porosity data. • Grades: The brine chemistry is subjected to an exploratory data analysis and a variographic analysis, in order to determine the chemical populations in the Salar. Subsequently, the grades are interpolated using the Kriging method. Based on the chemical characteristics, and the volume of brine, we determine the number of metric tons for each of the chemical ions being evaluated. Reserve classification is finally achieved by using geostatistical criteria and hydrogeological knowledge of the units that have been explored, as an indicator between proven and probable reserves. In order to carry out a quantitative evaluation of the lithium and potassium reserves, the Salar Hydrogeology Management used a tool, a numerical model of groundwater flow and transport, which allows evaluating the evolution of the reservoir over time when stressed with different mining extraction plans. This model is calibrated annually and is used for the projection and optimization of the brine supply in the short (2 years) and medium (5 years) term in the Salar de Atacama. Proven reserves are defined as hydrogeological units with proven historical brine yield production, and a quality and piezometric brine monitoring network to control brine evolution over time, and that they have a monitoring network to control the chemical and piezometric evolution of the brine over time. Probable reserves are concentrated in those hydrogeological units identified with exploration data that support the continuity of the resource and its extraction capacity by pumping, but without historical brine production. Probable reserves and inferred resources are being continually explored in order to be able to reclassify them as proven reserves and indicated or measured resources, respectively. This exploration includes systematic packer testing, chemical brine sampling and long-term pilot production pumping tests. We consider chemical parameters to determine the process to be applied to the brines. These parameters are used to estimate potential restrictions on production yields, and the economic feasibility of producing such commercial products as potassium chloride, potassium sulfate, lithium carbonate and boric acid is determined on the basis of the evaluation. Considering the authorized maximum net brine production rates under (RCA 226/06) and a voluntary extraction under RCA 226/06, a total of 492 million cubic meters of brine is expected to be extracted from the producing wells, corresponding to 1.05 million metric tons of lithium. Considering the voluntary reduction plan announced by SQM during 2020, a total of 342 million cubic meters of brine will be extracted from the producing wells, corresponding to 0.82 million metric tons of lithium. On the other hand, the proven and probable in situ base reserve, within the authorized environmental extraction area 51 3) DESCRIPTION OF BUSINESS ENVIRONMENT (RCA 226/06), corresponds to 1,533 million cubic meters of brine, corresponding to 5.3 million metric tons of lithium, sufficient to satisfy the demand in both cases (RCA 226/06 and the Voluntary Extraction Reduction Plan) for the project until the end of the concession. Brines from the Salar de Atacama are the key raw material used in the production of potassium chloride and potassium sulfate, and lithium and its derivatives. The following gross margins for the business lines specified were calculated on the same basis as cut off grades used to estimate our reserves. We expect costs to remain relatively stable in the near future. 2020 Gross Margin Price 2019 Gross Margin Price 2018 Gross Margin Price Potassium Chloride and Potassium Sulfate. Lithium and Derivatives ................. 11% 23% US$288/ton 17% US$355/ton 19% US$322/ton US$5,931/ton 39% US$11,212/ton 57% US$16,289/ton Other Production Facilities Coya Sur The Coya Sur site is located approximately 15 kilometers south of María Elena, and production activities undertaken there are associated with the production of potassium nitrate and finished products. The main production plants at this site include four potassium nitrate plants with a total capacity of 1,300,000 metric tons per year. There are also five production lines for crystallized nitrates, with a total capacity of 1,200,000 metric tons per year, and a prilling plant with a capacity of 360,000 metric tons per year. The potassium nitrate produced at Coya Sur is an intermediate product that is used as a raw material for the production of finished products (crystallized nitrates and prilled nitrates). Therefore, the production capacities listed above are not independent of one another and cannot be added together to obtain an overall total capacity. Natural gas is the main source of energy for our Coya Sur operation. Salar del Carmen The Salar del Carmen site is located approximately 15 kilometers to the east of Antofagasta. The production plants at this facility include the lithium carbonate plant, with a production capacity of 70,000 metric tons per year, and the lithium hydroxide plant, with a production capacity of 13,500 metric tons per year. Electricity and natural gas are the main sources of energy for our Salar del Carmen operation. 52 3) DESCRIPTION OF BUSINESS ENVIRONMENT The following table provides a summary of our production facilities as of December 31, 2020: Facility Type of Facility Approximate Size (hectares) (1) Nominal Production Capacity (thousands of metric tons/year) Weighted Average Age (years) (2) Gross Book Value (millions of US$) (2) Coya Sur (3) (4) ........ Nitrates production 1.518 María Elena (5) (6) Nitrates and iodine 35.830 Nueva Victoria (5) (7) Pampa Blanca (5) (7) (8) Pedro de Valdivia (3) (9) ....................... Salar de Atacama (3) (10) ......................... production Concentrated nitrate salts and iodine production Concentrated nitrate salts and iodide production Nitrates and iodine production Potassium chloride, potassium sulfate, lithium chloride, and boric acid production 47.492 10.441 253.880 35.911 Salar del Carmen, Antofagasta (3) ....... Lithium carbonate and lithium hydroxide production Tocopilla (11) ......... Port facilities 126 22 Potassium nitrate: 1,300 Crystallized nitrates: 1,200 Prilled nitrates: 360 Nitrates: n/a Iodine: 1.6 Prilled nitrates: 300 Iodine: 13.0 Nitrates: n/a Iodine: n/a Nitrates: n/a Iodine: 3.2 Potassium chloride: 2,680 Potassium sulfate: 245 Boric acid: 15 Lithium carbonate: 70 Lithium hydroxide: 13.5 - 7.03 638.7 15.95 415.9 6.36 573.2 1.94 8.1 14.70 229.6 11.52 1,581.8 5.98 422.0 13.22 167.9 (1) Approximate size considers both the production facilities and the mine for María Elena, Nueva Victoria, Pampa Blanca, Pedro de Valdivia and the Salar de Atacama. Mining areas are those authorized for exploitation by the environmental authority and/or Sernageomin. (2) Weighted average age and gross book value correspond to production facilities, excluding the mine, for María Elena, (3) Nueva Victoria, Pampa Blanca, Pedro de Valdivia and the Salar de Atacama. Includes production facilities and solar evaporation ponds. During 2019, we began to work on the expansion of discard deposit area of the new lithium hydroxide plant and accumulation ponds. (4) The potassium nitrate produced at Coya Sur is an intermediate product that is used as a raw material for the production of finished products (crystallized nitrates and prilled nitrates). Therefore, the production capacities listed above are not independent of one another and cannot be added together to obtain an overall total capacity. Includes production facilities, solar evaporation ponds and leaching heaps. (5) (6) Operations at the El Toco mine at María Elena were suspended in November 2013. (7) The nominal production capacity for iodine considers the capacity of our plants. The effective capacity is 14,800 metric tons per year. (8) Operations at Pampa Blanca were suspended in March 2010. (9) In November 2015, the mining and nitrate operations at Pedro de Valdivia were suspended, and iodine production was reduced at the Pedro de Valdivia site, in order to take advantage of the highly efficient production facilities at Nueva Victoria. (10) Potassium chloride and potassium sulfate are produced in a dual plant, and the production capacity for each of these products depends on the production mix. Therefore, the production capacities for these two products are not independent of one another and cannot be added together to obtain an overall total capacity. (11) The Tocopilla port facilities were originally constructed in 1961 and have been refurbished and expanded since that time. We directly or indirectly through subsidiaries own, lease or hold concessions over the facilities at which we carry out our operations. Such facilities are free of any material liens, pledges or encumbrances, and we believe they are suitable and adequate for the business we conduct in them. 53 3) DESCRIPTION OF BUSINESS ENVIRONMENT Extraction Yields The following table shows certain operating data relating to each of our mines for 2020, 2019 and 2018: (in thousands, unless otherwise stated) Pedro de Valdivia(1) Metric tons of ore mined .......................................................... Average grade nitrate (% by weight) ....................................... Iodine (parts per million (ppm)) ............................................... Metric tons of crystallized nitrate produced ............................. Metric tons of iodine produced ................................................ Maria Elena(2) Metric tons of ore mined .......................................................... Average grade nitrate (% by weight) ....................................... Iodine (ppm) ............................................................................ Metric tons of crystallized nitrate produced ............................. Metric tons of iodine produced ................................................ Coya Sur(3) 2020 2019 2018 – – – – 1.5 – – – – – – – – – 1.4 – – – – – – – – – 1.0 – – – – – Metric tons of crystallized nitrate produced ............................. 935 763 699 Pampa Blanca(2) Metric tons of ore mined .......................................................... Iodine (ppm) ............................................................................ Metric tons of iodine produced ................................................ – – – – – – – – – Nueva Victoria Metric tons of ore mined .......................................................... Iodine (ppm) ............................................................................ Metric tons of iodine produced ................................................ 43,420 42,196 42,753 452 10.6 465 10.7 461 10.2 Salar de Atacama (4) Metric tons of lithium carbonate produced .............................. Metric tons of potassium chloride and potassium sulfate and potassium salts produced ...................................................... 72.2 62.3 62.3 1,476 1,049 1,049 (1) In November 2015, mining and nitrate operations at Pedro de Valdivia were suspended, and iodine production was reduced at the Pedro de Valdivia site, in order to take advantage of the highly efficient production facilities at Nueva Victoria. (3) (2) Operations at the Pampa Blanca mine and Maria Elena were suspended in March 2010 and November 2013, respectively. In María Elena, production of nitrate and iodine solutions continued in subsequent years from caliche ore exploited in prior years. Includes production at Coya Sur from treatment of nitrates solutions from María Elena and Pedro de Valdivia, nitrate salts from pile treatment at Nueva Victoria, and net production from NPT, or technical grade potassium nitrate, plants. (4) Lithium carbonate is extracted at the Salar de Atacama and processed at our facilities at the Salar del Carmen. Potassium salts include synthetic sylvinite produced in the plant and other harvested potassium salts (natural sylvinite, carnalites and harvests from plant ponds) that are sent to Coya Sur for the production of crystallized nitrates. 54 3) DESCRIPTION OF BUSINESS ENVIRONMENT Transportation and Storage Facilities The transportation of our products is carried out by trucks that are operated by dedicated third parties through long-term contracts. Furthermore, we own port and storage facilities for the transportation and management of finished products and consumable materials. Our main centers for the production and storage of raw materials are the Nueva Victoria, Coya Sur and Salar de Atacama facilities. Other facilities include chemical plants for the finished products of lithium carbonate and lithium hydroxide at the Salar del Carmen plant. The Port of Tocopilla terminal, which we own, has a surface area of approximately 22 hectares and is the principal facility for the storage and shipment of our bulk products and packaged potassium chloride (MOP) and nitrates. The nitrate finished products are produced at our Coya Sur facilities and then transported via trucks to the Port of Tocopilla terminal where they are stored and shipped in bulk or packaged in polypropylene bags, polyethylene or polypropylene FIBC big bags. The latter can also be transported and stored in an alternative port (Mejillones) for later shipment. The potassium chloride is produced at our Salar de Atacama facilities and we transport it by truck, either to the Port of Tocopilla terminal or the Coya Sur facility. The product transported to Coya Sur is an intermediate product that is used as a raw material for the production of potassium nitrate. On the other hand, the product transported to the Port of Tocopilla is a final product that will be shipped or transported to the client or affiliate. The raw material of nitrate for the production of potassium nitrate in Coya Sur is currently produced at Nueva Victoria. The lithium chloride solution, which contains a high concentration of boron, produced at our Salar de Atacama facilities, is transported to the lithium carbon plant in the Salar del Carmen area where the finished lithium carbonate is produced. Part of the lithium carbonate is provided to the adjacent lithium hydroxide plant where the finished lithium hydroxide is produced. These two products are packed in packaging of distinct characteristics (polyethylene bags, multi-layer or polypropylene FIBC big bags), stored within the same facilities and secured in storerooms. Thereafter, they are consolidated into containers that are transported by trucks to a transit warehouse or directly to port terminals for their subsequent shipment. The port terminals used are currently suited to receive container ships and are situated in Antofagasta, Mejillones and Iquique. Iodine obtained from the same caliche used for the production of nitrates, is processed, packaged and stored exclusively in the Pedro de Valdivia and Nueva Victoria facilities. The packaging used for iodine are drums and polypropylene FIBC big bags with an internal polyethylene bag and oxygen barrier, which at the time of transportation are consolidated into containers and sent by truck to port terminals suited for their management, principally located in Antofagasta, Mejillones and Iquique. Thereafter, they are sent to distinct markets by container ship or by truck to Santiago where iodine derivatives are produced in the Ajay-SQM Chile plants. The Port of Tocopilla terminal facilities are located approximately 186 kilometers north of Antofagasta, approximately 124 kilometers west of María Elena and Coya Sur and 372 kilometers to the west of Salar de Atacama. Our affiliate, Servicios Integrales de Tránsitos y Transferencias S.A. (SIT), operates facilities for the shipment of products and the delivery of certain raw materials based on renewable concessions granted by Chilean regulatory authorities, provided that the facilities are used in accordance with the authorization granted and we pay an annual concession fee. The Port of Tocopilla terminal facilities include a truck weighing machine that confirms product entry into the port and transfers the product to distinct storage zones, a piezometer within the shipping system to carry out bulk product loaded onto ships, a crane with a 40 ton capacity for the loading of sealed product onto ships and a nitrate mixing facility. 55 3) DESCRIPTION OF BUSINESS ENVIRONMENT The storage facilities consist of a system of six silos, with a total storage capacity of 55,000 metric tons, and a mixed storage area of open storehouses with a total storage capacity of approximately 250,000 metric tons. In addition, to fulfill future storage needs, we will continue to make investments in accordance with the investment plan outlined by management. The products are also put into bags at the Port of Tocopilla terminal facilities where the bagging capacity is established by two bag packaging machines, one for sacks and polypropylene FIBC big bags and one for FFS polyethylene. The products that are packaged in Tocopilla may be subsequently shipped at the same port or may also be consolidated into trucks or containers for its subsequent dispatch to clients by land or sea through containers from other ports, principally located in Antofagasta, Mejillones and Iquique. For the transportation of bulk product, the transportation belt system extends across the coastline to deliver products directly to the hatches of bulk cargo ships. The nominal load capacity of this shipping system is 1,200 tons per hour. The transportation of packaged product is carried out utilizing the same bulk cargo ships using trailers without motors located in the dock and loaded by a crane with a 40 ton capacity from the Port of Tocopilla terminal. Thereafter, they are towed and unloaded using ship cranes to the respective warehouses. We normally contract bulk cargo ships to transfer the product from the Port of Tocopilla terminal to our hubs around the world or to clients directly, who, in certain instances, use their own contracted vessels for delivery. Tocopilla processes related to the reception, handling, storage and shipment of bulk/packaged nitrates produced at Coya Sur are certified by the third-party organization TÜV-Rheinland under the quality standard ISO 9001:2015. Computer System In addition to the above-listed facilities, we operate varies computer and information systems linking our principal subsidiaries to our operating and administrative facilities throughout Chile, and other parts of the world. The computer and information system is used mainly for accounting, monitoring of supplies and inventories, billing, quality control, research activities and production process and maintenance control. The mainframe computing system is located at our offices in Santiago and our Chilean and international subsidiaries are interconnected with each other, through data links. In addition, we have cloud technologies, which allow us to support new business processes and respond quickly and at low cost to changing conditions of our business and of the market. A cyber security review is being carried out to highlight possible risks and mitigate them, including raising awareness among our users related to best process and computational use practices. 3) E) DESCRIPTION OF BUSINESS ENVIRONMENT: RISK FACTORS Risk Factors Our operations are subject to certain risk factors that may affect SQM’s business financial condition or results of operations. In addition to other information contained in this Annual Report, you should carefully consider the risks described below. These risks are not the only ones we face. Additional risks not currently known to us or that are known but that we currently believe are not significant may also affect our business operations. Our business, financial condition, cash flows or results of operations could be materially affected by the occurrence any of these risks. Risks Relating to our Business 56 3) DESCRIPTION OF BUSINESS ENVIRONMENT Our inability to extend or renew the mineral exploitation rights relating to the Salar de Atacama concession, upon which our business is substantially dependent, beyond their current expiration date in December 2030 could have a material adverse effect on our business, financial condition and results of operations. Our subsidiary SQM Salar S.A. (“SQM Salar”), as leaseholder, holds exclusive and temporary rights to exploit mineral resources in the Salar de Atacama in northern Chile. These rights are owned by Corfo, a Chilean government entity, and leased to SQM Salar pursuant to (i) a 1993 lease agreement over mining exploitation concessions between SQM Salar and Corfo, as amended from time to time (the “Lease Agreement”), and (ii) the Salar de Atacama project agreement between Corfo and SQM Salar, as amended from time to time (the “Project Agreement”). The Lease Agreement provides for SQM Salar to (i) make quarterly lease payments to Corfo based on product sales from leased mining properties and annual contributions to research and development, to local communities, to the Antofagasta Regional Government and to the municipalities of San Pedro de Atacama, María Elena and Antofagasta, (ii) maintain Corfo’s rights over the mining exploitation concessions and (iii) make annual payments to the Chilean government for such concession rights. The Lease Agreement expires on December 31, 2030. Our business is substantially dependent on the exploitation rights under the Lease Agreement and the Project Agreement, since all of our products originating from the Salar de Atacama are derived from our extraction operations under the Lease Agreement. For the year ended December 31, 2020, revenues related to products originating from the Salar de Atacama represented 33% of our consolidated revenues, consisting of revenues from our potassium business line and our lithium and derivatives business line for the period. As of December 31, 2020, only 10 years remain on the term of the Lease Agreement and we had extracted approximately 28% of the total permitted accumulated extraction and sales limit of lithium under the lithium extraction and sales limits. Although we expect to begin the process of discussing the extension or renewal of the mineral exploitation rights in the Salar de Atacama under the Lease Agreement and Project Agreement with Corfo well in advance of the December 2030 expiration date, we cannot assure you that we will successfully reach an agreement with Corfo to extend or renew our mineral exploitation rights beyond 2030. Any negotiation with Corfo for an extension or renewal could involve renegotiation of any or all of the terms and conditions of the Lease Agreement and Project Agreement, including, among other things, the lithium and potassium extraction and sales limits, the lease payment rates and calculations, or other payments to Corfo. In the event that we are not able to extend or renew the Lease Agreement beyond the current expiration date of the Lease Agreement in 2030, we would be unable to continue extraction of lithium and potassium under the Lease Agreement, which could have a material adverse effect on our business, financial condition and results of operations. Volatility of world lithium, fertilizer and other chemical prices and changes in production capacities could affect our business, financial condition and results of operations. The prices of our products are determined principally by world prices, which, in some cases, have been subject to substantial volatility in recent years. World lithium, fertilizer and other chemical prices constantly vary depending upon the relationship between supply and demand at any given time. Supply and demand dynamics for our products are tied to a certain extent to global economic cycles and have been impacted by circumstances related to such cycles. Furthermore, the supply of lithium, certain fertilizers, or other chemical products, including certain products that we provide, varies principally depending on the production of the major producers, (including us) and their respective business strategies. We expect that prices for the products we manufacture will continue to be influenced, among other things, by worldwide supply and demand and the business strategies of major producers. Some of the major 57 3) DESCRIPTION OF BUSINESS ENVIRONMENT producers (including us) have increased or decreased production and have the ability to increase or decrease production. Since we sell our products worldwide, with Asia, Europe and North America constituting our main markets, border closures, decrease in commercial activity and difficulties and disruptions in the supply chains in the markets in which we operate as a result of COVID-19 could materially affect our business. We believe the impact on demand growth in the markets in which we sell our products, our sales volumes and our average prices will depend on the duration of COVID-19 in the various regions in which we operate, the efficiency of the measures implemented to contain the spread of COVID-19 in each country and relevant fiscal incentives that may be implemented in such jurisdictions to promote economic recovery. Most, if not all, of these factors are currently evolving on a rapid basis and we are currently unable to predict with certainty the full potential magnitude of the impacts of the COVID-19 pandemic on forecasts of market demand or our estimates of our sales volumes and average sale prices. As a result of the above, the prices of our products may be subject to substantial volatility. High volatility or a substantial decline in the prices or sales volumes of one or more of our products could have a material adverse effect on our business, financial condition and results of operations. Our sales to emerging markets and expansion strategy expose us to risks related to economic conditions and trends in those countries. We sell our products in more than 110 countries around the world. In 2020, approximately 44% of our sales were made in emerging market countries: 8% in Latin America (excluding Chile); 12% in Africa and the Middle East (excluding Israel); 9% in Chile and 14% in Asia and Oceania (excluding Australia, Japan, New Zealand, South Korea and Singapore). In Note 25.1 to our consolidated financial statements, we reported revenues from Chile, Latin America and the Caribbean and Asia and others of US$1.0 billion. We expect to expand our sales in these and other emerging markets in the future. In addition, we may carry out acquisitions or joint ventures in jurisdictions in which we currently do not operate, relating to any of our businesses or to new businesses in which we believe we may have sustainable competitive advantages. The results of our operations and our prospects in other countries in which we establish operations will depend, in part, on the general level of political stability, economic activity and policies in those countries as well as the duration of COVID-19 in the various regions in which we operate, the efficiency of the measures implemented to contain the spread of COVID-19 in each country and relevant fiscal incentives that may be implemented in such jurisdictions to promote economic recovery. Future developments in the political systems or economies of these countries or the implementation of future governmental policies in those countries, including the imposition of withholding and other taxes, restrictions on the payment of dividends or repatriation of capital, the imposition of import duties or other restrictions, the imposition of new environmental regulations or price controls or changes in relevant laws or regulations, could have a material adverse effect on our business, financial condition and results of operations in those countries. Our inventory levels may vary for economic or operational reasons. In general, economic conditions or operational factors can affect our inventory levels. Higher inventories carry a financial risk due to increased need for cash to fund working capital and could imply an increased risk of loss of product. At the same time, lower levels of inventory can hinder the distribution network and process, thus impacting sales volumes. There can be no assurance that inventory levels will remain stable. These factors could have a material adverse effect on our business, financial condition and results of operations. New production of iodine, potassium nitrate or lithium from current or new competitors in the markets in which we operate could adversely affect prices. 58 3) DESCRIPTION OF BUSINESS ENVIRONMENT In recent years, new and existing competitors have increased the supply of iodine, potassium nitrate and lithium, which has affected prices for those products. Further production increases could negatively impact prices. There is limited information on the status of new iodine, potassium nitrate or lithium production capacity expansion projects being developed by current and potential competitors and, as such, we cannot make accurate projections regarding the capacities of possible new entrants into the market and the dates on which they could become operational. If these potential projects are completed in the short term, they could adversely affect market prices and our market share, which, in turn, could have a material adverse effect on our business, financial condition and results of operations. We have a capital expenditure program that is subject to significant risks and uncertainties. Our business is capital intensive. Specifically, the exploration and exploitation of reserves, mining and processing costs, the maintenance of machinery and equipment and compliance with applicable laws and regulations require substantial capital expenditures. We must continue to invest capital to maintain or to increase our exploitation levels and the amount of finished products we produce. For example, we have a US$1.9 billion investment plan for the years 2021-2024. The plan will allow us to expand our operations of lithium, iodine and nitrate by accessing natural resources both in the Salar de Atacama and caliche ore deposits in Chile as well as through the 50,0000 metric ton Mt. Holland lithium hydroxide project in Western Australia (a joint venture that we are developing with our partner Wesfarmers). The plan also aims to increase our mining capacity while protecting the environment, reduce operational costs and increase our annual production capacity of nitrates and iodine to meet expected growth in those markets. Mining industry development projects typically require a number of years and significant expenditures before production can begin. Such projects could experience unexpected problems and delays during development, construction and start-up. Our decision to develop a project typically is based on the results of feasibility studies, which estimate the anticipated economic returns of a project. The actual project profitability or economic feasibility may differ from such estimates as a result of any of the following factors, among others: changes in tonnage, grades and metallurgical characteristics of ore or other raw materials to be mined and processed; estimated future prices of the relevant products; changes in customer demand; higher construction and infrastructure costs; the quality of the data on which engineering assumptions were made; higher production costs; adverse geotechnical conditions; availability of adequate labor force; availability and cost of water and energy; availability and cost of transportation; fluctuations in inflation and currency exchange rates; availability and terms of financing; and potential delays relating to social and community issues. In addition, we require environmental permits for our new projects. Obtaining permits in certain cases may cause significant delays in the execution and implementation of new projects and, consequently, may require us to reassess the related risks and economic incentives. This may require modifying our operations to incorporate the use of seawater and updating our mining equipment and operational centers. We cannot assure you that we will be able to maintain our production levels or generate sufficient cash flow, that the proposed US$1.1 billion capital increase approved by our shareholders on January 22, 2021 will be successful or that we will have access to sufficient investments, loans or other financing alternatives, to continue our activities at or above present levels, or that we will be able to implement our projects or receive the necessary permits required for them in time. If the capital increase is not successful, it may affect our ability to grow and maintain our leading world position in the lithium, potassium nitrate, iodine and thermo-solar salts markets. Any or all of these factors may have a material adverse effect on our business, financial condition and results of operations. 59 3) DESCRIPTION OF BUSINESS ENVIRONMENT High raw materials and energy prices could increase our production costs and cost of sales, and energy may become unavailable at any price. We rely on certain raw materials and various energy sources (diesel, electricity, liquefied natural gas, fuel oil and others) to manufacture our products. Purchases of energy and raw materials we do not produce constitute an important part of our cost of sales, approximately 16% in 2020. In addition, we may not be able to obtain energy at any price if supplies are curtailed or otherwise become unavailable. To the extent we are unable to pass on increases in the prices of energy and raw materials to our customers or we are unable to obtain energy, our business, financial condition and results of operations could be materially adversely affected. Our reserve estimates are internally prepared and not subject to review by external geologists or an external auditing firm and could be subject to significant changes, which may have a material adverse effect on our business, financial condition and results of operations. Our caliche ore mining reserve estimates and our Salar de Atacama brine mining reserve estimates are prepared by our own geologists and hydrogeologists and are not subject to authentication by external geologists or an external auditing firm. However, our reserve estimates in the Salar de Atacama were reviewed by qualified persons and this information is presented to Corfo. In the past, our reserve estimates in the Salar de Atacama were also reviewed by the Superior Council for Scientific Investigations (Consejo Superior de Investigaciones Científicas) or CSIC, and this information was presented to CCHEN. Estimation methods involve numerous uncertainties as to the quantity and quality of the reserves, and reserve estimates could change upwards or downwards. A downward change in our estimates and/or quality of our reserves could affect future volumes and costs of production and therefore have a material adverse effect on our business, financial condition and results of operations. Chemical and physical properties of our products could adversely affect their commercialization. Since our products are derived from natural resources, they contain inorganic impurities that may not meet certain customer or government standards. As a result, we may not be able to sell our products if we cannot meet such requirements. In addition, our cost of production may increase in order to meet such standards. Failure to meet such standards could materially adversely affect our business, financial condition and results of operations if we are unable to sell our products in one or more markets or to important customers in such markets. Changes in technology or other developments could result in preferences for substitute products. Our products, particularly iodine, lithium and their derivatives, are preferred raw materials for certain industrial applications, such as rechargeable batteries and liquid-crystal displays (LCDs). Changes in technology, the development of substitute products or other developments could adversely affect demand for these and other products which we produce. In addition, other alternatives to our products may become more economically attractive as global commodity prices shift. Any of these events could have a material adverse effect on our business, financial condition and results of operations. We are exposed to labor strikes and labor liabilities that could impact our production levels and costs. Over 92% of our employees are employed in Chile, of which approximately 67% were represented by 20 labor unions as of December 31, 2020. As of December 31, 2020, 13 collective bargaining agreements had been renegotiated in advance, leaving the remaining seven to be renegotiated during 2021. We are exposed to labor strikes and illegal work stoppages by both our own employees and our independent contractors’ employees that could impact our production levels in both our own plants and our independent contractors’ plants. If a strike or illegal work stoppage occurs and continues for a sustained 60 3) DESCRIPTION OF BUSINESS ENVIRONMENT period of time, we could be faced with increased costs and even disruption in our product flow that could have a material adverse effect on our business, financial condition and results of operations. We are and might be subject to new and upcoming labor laws and regulations in Chile and may be exposed to liabilities and potential costs for non-compliance. We are subject to recently enacted and might be subject to new local labor laws and regulations that govern, among other things, the relationship between us and our employees and will be subject to new labor bills currently under discussion in the national congress, mainly as a result of the impact of the global novel coronavirus (COVID-19) pandemic as well as to the economic and political volatility and civil unrest in Chile beginning in October and November 2019. There have been changes and proposed changes to various labor laws which include, but are not limited to, modifications related to teleworking, inclusion of workers with disabilities, minimum wage, unemployment insurance benefits, employee and employer relationships, pensions, profit sharing, regular work hours and other matters related to COVID- 19. Any changes to regulations to which we are subject could have a material adverse effect on our business, financial condition and results of operations. Lawsuits and arbitrations could adversely impact us. We are party to a range of lawsuits and arbitrations involving different matters as described in Note 22.1 to our Consolidated Financial Statements. Although we intend to defend our positions vigorously, our defense of these actions may not be successful and responding to such lawsuits and arbitrations diverts our management’s attention from day-to-day operations. Adverse judgments or settlements in these lawsuits may have a material adverse effect on our business, financial condition and results of operations. In addition, our strategy of being a world leader includes entering into commercial and production alliances, joint ventures and acquisitions to improve our global competitive position. As these operations increase in complexity and are carried out in different jurisdictions, we may be subject to legal proceedings that, if settled against us, could have a material adverse effect on our business, financial condition and results of operations. We have operations in multiple jurisdictions with differing regulatory, tax and other regimes. We operate in multiple jurisdictions with complex regulatory environments that are subject to different interpretations by companies and respective governmental authorities. These jurisdictions may have different tax codes, environmental regulations, labor codes and legal framework, which adds complexity to our compliance with these regulations. Any failure to comply with such regulations could have a material adverse effect on our business, financial condition and results of operations. Environmental laws and regulations could expose us to higher costs, liabilities, claims and failure to meet current and future production targets. Our operations in Chile are subject to national and local regulations relating to environmental protection. In accordance with such regulations, we are required to conduct environmental impact studies or statements before we conduct any new projects or activities or significant modifications of existing projects that could impact the environment or the health of people in the surrounding areas. We are also required to obtain an environmental license for certain projects and activities. The Chilean Environmental Evaluation Service (Servicio de Evaluación Ambiental) evaluates environmental impact studies submitted for its approval. The public, government agencies or local authorities may review and challenge projects that may adversely affect the environment, either before these projects are executed or once they are operating, if they fail to comply with applicable regulations. In order to ensure compliance with 61 3) DESCRIPTION OF BUSINESS ENVIRONMENT environmental regulations, Chilean authorities may impose fines up to approximately US$9 million per infraction, revoke environmental permits or temporarily or permanently close facilities, among other enforcement measures. Chilean environmental regulations have become increasingly stringent in recent years, both with respect to the approval of new projects and in connection with the implementation and development of projects already approved, and we believe that this trend is likely to continue. Given public interest in environmental enforcement matters, these regulations or their application may also be subject to political considerations that are beyond our control. We regularly monitor the impact of our operations on the environment and on the health of people in the surrounding areas and have, from time to time, made modifications to our facilities to minimize any adverse impact. Future developments in the creation or implementation of environmental requirements or their interpretation could result in substantially increased capital, operation or compliance costs or otherwise adversely affect our business, financial condition and results of operations. The success of our current investments at the Salar de Atacama and Nueva Victoria is dependent on the behavior of the ecosystem variables being monitored over time. If the behavior of these variables in future years does not meet environmental requirements, our operation may be subject to important restrictions by the authorities on the maximum allowable amounts of brine and water extraction. For example, on December 13, 2017, the First Environmental Court of Antofagasta ordered the temporary and partial closure of certain water extraction wells located in the Salar de Llamara. In October 2018, the First Environmental Court of Antofagasta accepted our claim, and dismissed the restrictions without prejudice. It is possible that third parties could seek to reinstate these restrictions in the future. On December 26, 2019, the First Environmental Court of Antofagasta ruled that the environmental compliance plan presented by SQM Salar S.A. with respect to the Salar de Atacama and approved by the Chilean Environmental Authority (Superintendencia del Medio Ambiente) or SMA, in January 2019 did not comply with certain proposed measures of the completeness and efficiency requirements of the Chilean environmental legislation. SQM Salar S.A. has proposed to the SMA a new environmental compliance plan, which is currently subject to review. We believe that the new proposed environmental compliance plan, safeguards the protection of the environment and is evaluating all courses of action available under applicable law with respect to this ruling. Our future development depends on our ability to sustain future production levels, which requires additional investments and the submission of the corresponding environmental impact studies or statements. If we fail to obtain approval or required environmental licenses, our ability to maintain production at specified levels will be seriously impaired, thus having a material adverse effect on our business, financial condition and results of operations. In addition, our worldwide operations are subject to international and other local environmental regulations. Since environmental laws and regulations in the different jurisdictions in which we operate may change, we cannot guarantee that future environmental laws, or changes to existing environmental laws, will not materially adversely impact our business, financial condition and results of operations. A significant percentage of our shares are held by two principal shareholder groups who may have interests that are different from that of other shareholders and of each other. Any change in such principal shareholder groups may result in a change of control of the Company or of its Board of Directors or its management, which may have a material adverse effect on our business, financial condition and results of operations. 62 3) DESCRIPTION OF BUSINESS ENVIRONMENT As of December 31, 2020, two principal shareholder groups held in the aggregate 57.86% of our total outstanding shares, including a majority of our Series A common shares, and have the power to elect six of our eight directors. The interests of the two principal shareholder groups may in some cases differ from those of other shareholders and of each other. As of December 31, 2020, one principal shareholder group is Sociedad de Inversiones Pampa Calichera S.A. and its related companies, Inversiones Global Mining Chile Limitada and Potasios de Chile S.A. (together, the “Pampa Group”), owned approximately 32% of the total outstanding shares of SQM. As reported to the CMF by Inversiones TLC SpA, a subsidiary of Tianqi Lithium Corporation (“Tianqi”), on December 5, 2018, Inversiones TLC SpA currently owns 25.86% of the total shares of SQM. Until November 30, 2018, the CMF considered the Pampa Group the controller of SQM. On this date, the CMF determined that in accordance with the distribution of the shares of SQM, “the Pampa Group does not exert decisive power over the management of the Company, and is therefore not considered a controlling shareholder”. The CMF could change its decision in the future if circumstances change. The divestiture by the Pampa Group or Tianqi, or potential changes in the circumstances that have led to the determination of the CMF related to the controller status of the shareholders of the Company, or a combination thereof, may have a material adverse effect on our business, financial condition and results of operations. Tianqi is a significant shareholder and a competitor of the Company, which could result in risks to free competition. Tianqi is a competitor in the lithium business, and as a result of the number of SQM shares that it owns, it has the right to choose up to three Board members. Under Chilean law, we are restricted in our ability to decline to provide information about us, which may include competitively sensitive information, to a director of our company. On August 27, 2018, Tianqi and the Chilean antitrust regulator, the Chilean National Economic Prosecutor’s Office (Fiscalía Nacional Económica), or FNE, entered into an extrajudicial agreement, under which certain restrictive measures were implemented in order to (i) maintain the competitive conditions of the lithium market, (ii) mitigate the risks described in the agreement and (iii) limit Tianqi’s access to certain information of the Company and its subsidiaries, which is defined as “sensitive information” under the agreement. During the approval process of the extrajudicial agreement before the FNE, we expressed our concerns regarding the measures contained in the extrajudicial agreement since, in the Company’s opinion, the measures (i) could not effectively resolve the risks that Tianqi and the FNE have sought to mitigate, (ii) are not sufficient to avoid access to our “sensitive information” that, in the possession of a competitor, could harm us and the proper functioning of the market and (iii) could contradict the Chilean Corporations Act. The presence of a shareholder which is at the same time a competitor of ours and the right of this competitor to choose Board members could generate risks to free competition and/or increase the risks of an investigation of free competition against us, whether in Chile or in other countries, all of which could have a material adverse effect on our business, financial condition and results of operations. Our information technology systems may be vulnerable to disruption which could place our systems at risk from data loss, operational failure, or compromise of confidential information. We rely on various computer and information technology systems, and on third party developers and contractors, in connection with our operations, including two networks that link our principal subsidiaries to our operating and administrative facilities in Chile and other parts of the world and ERP software systems, which are used mainly for accounting, monitoring of supplies and inventories, billing, quality 63 3) DESCRIPTION OF BUSINESS ENVIRONMENT control, research activities, and production process and maintenance control. In addition, we use cloud technologies, which allows us to support new business processes and respond quickly and at low cost to changing conditions in our business and of the markets. Our information technology systems are susceptible to disruption, damage or failure from a variety of sources, including errors by employees or contractors, computer viruses, cyber-attacks, misappropriation of data by outside parties, and various other threats. We have taken measures to identify and mitigate these risks with the object of reducing operational risk and improving security and operational efficiency, which also includes modernization of existing information technology infrastructure and communications systems. However, we cannot guarantee that due to the increasing sophistication of cyber-attacks our systems will not be compromised and because we do not maintain specialized cybersecurity insurance, our insurance coverage for protection against cybersecurity risk may not be sufficient. During the 2020, and as a result of the Covid- 19 pandemic we renewed the perimeter security platform, implemented security updates and applications through the cloud, and the remote network access platform was strengthened and a plan to raise awareness of best practices in the use of telework was also provided. Cybersecurity breaches could result in losses of assets or production, operational delays, equipment failure, inaccurate recordkeeping, or disclosure of confidential information, any of which could result in business interruption, reputational damage, lost revenue, litigation, penalties or additional expenses and could have a material adverse effect on our business, financial condition and results of operations. Recent international trade tensions could have a negative effect on our financial performance. Economic conditions in China, an important market for the Company, are sensitive to global economic conditions. The global financial markets have experienced significant disruptions in the past, including the recent international trade disputes and tariff actions announced by the United States, China and certain other countries. The U.S. government has imposed significant tariffs on Chinese goods, and Chinese government has, in turn, imposed tariffs on certain goods manufactured in the United States. There is no assurance that the list of goods impacted by additional tariffs will not be expanded or the tariffs will not be increased materially. We are unable to predict how China or U.S. government policy, in particular, the outbreak of a trade war between China and the United States and additional tariffs on bilateral imports, may continue to impact global economic conditions. If the list of goods is further expanded or the tariff is further increased, global economic conditions of both countries could be impacted, and growth in demand for lithium or other commodities could decrease, which may have a material adverse effect on our business, financial condition and results of operations. Outbreaks of communicable infections or diseases, or other public health pandemics, such as the outbreak of the novel coronavirus (COVID-19) currently being experienced around the world, have impacted and may further impact the markets in which we, our customers and our suppliers operate or market and sell products and could have a material adverse effect on our operations business, financial condition and results of operations. Disease outbreaks and other public health conditions, such as the global outbreak of COVID-19 currently being experienced, in markets in which we, our customers and our suppliers operate, could have a significant negative impact on our revenues, profitability and business. Due to the COVID-19 outbreak, there has been a substantial curtailment and disruption of business activities around the world. These curtailments and disruptions include: manufacturing and other work stoppages, factory and other business closings, slowdowns or delays; restrictions and limitations placed on workers and factories, including quarantines and other limitations on the ability to travel and return to work; shortages and delays in production or shipment of products or raw materials; and border closures. In response to the spread of COVID-19, the Chilean government closed its borders for entry by non-resident foreigners for an extended period of time, prohibited the docking of cruise ships at Chilean ports, from time to time imposed quarantines on certain regions of Chile and imposed a nationwide curfew. These measures have not materially impacted imports or exports to or from Chile. However, we have seen some impacts related to the shipment of products in and out of various other countries and regions, which could further negatively 64 3) DESCRIPTION OF BUSINESS ENVIRONMENT impact our ability to ship products to customers and receive supplies from suppliers. Furthermore, the COVID-19 outbreak could disrupt the supply chain for materials we need to implement the planned expansions of our production capacity. As a precaution, our management has implemented several measures to help reduce the speed at which COVID-19 may spread in our Company, including measures to mitigate the spread in the workplace, significant reductions in employee travel and a mandatory quarantine for people who have arrived from high-risk destinations, in consultation with governmental and international health organization guidelines, and will continue to implement measures consistent with the evolving COVID-19 situation. While these measures have been implemented to reduce the risk of the spread of the virus in our facilities, there can be no assurance that these measures will reduce or limit the impact of COVID-19 on our operations, business, financial condition or results of operations. Our operations could be stopped as a result of, among other reasons, regulatory restrictions or a significant outbreak of the virus among our staff, which could prevent employees from reporting to shifts. While the global impacts of the COVID-19 pandemic are constantly changing, international financial markets have reflected the uncertainty associated with the slowdown of the global economy and the potential impact if businesses, workers, customers and others are prevented or restricted from conducting business activities due to quarantines, business closures or other restrictions imposed by businesses or governmental authorities in response to the COVID-19 outbreak. An economic downturn could affect demand for the products of our customers by their end-users and, in turn, demand from our customers for our products. If our stakeholders and other constituencies believe we fail to appropriately address sustainability and other environmental, social and governance (ESG) concerns it may adversely affect our business. In October 2020, we announced our sustainable development plan, which includes voluntarily expanding our monitoring systems, promoting better and more profound conversations with neighboring communities and becoming carbon neutral and reducing water by 65% and brine extraction by 50%. We also announced a goal of obtaining international certifications and participating in international sustainability indices which we consider essential for a sustainable future. While we are dedicated to our efforts related to sustainability, if we fail to address appropriately all relevant stakeholders’ concerns in connection with ESG criteria, we may face opposition, which could negatively affect our reputation, delay operations, or lead to litigation threats or actions. If we do not maintain our reputation with key stakeholders and constituencies and effectively manage these sensitive issues, they could adversely affect our business, results of operations, and financial condition. Climate change can create physical risks and other risks that could adversely affect our business and operations and adverse weather conditions or significant changes in weather patterns could have a material adverse impact on our results of operations. The impact of climate change on our operations and our customers’ operations remains uncertain, but the physical effects of climate change could have an adverse effect on us and our customers as experts believe that climate change may be associated with more extreme weather conditions. These effects could include, but may not be limited to, changes in regional weather patterns, including drought and rainfall levels, water availability, sea levels, storm patterns and intensities and temperature levels, including increased volatility in seasonal temperatures via excessively hot or cold temperatures. These extreme weather conditions could vary by geographic location. Severe climate change could have an adverse effect on our costs, production, or sales, especially with respect to our solar operations in the Salar de Atacama, which require hot, arid summer weather conditions. Prolonged periods of precipitation or cooler weather during the evaporation season could reduce 65 3) DESCRIPTION OF BUSINESS ENVIRONMENT evaporation rates, leading to decreases in our production levels. Similarly, changes in hydrology could affect brine levels, impacting our mineral harvesting process. The occurrence of these climate events at our solar operations could lead to decreased production levels, increased operating costs and require us to make significant additional capital expenditures. Weather conditions have historically caused volatility in the agricultural industry (and indirectly in our results of operations) by causing crop failures or significantly reduced harvests, which can adversely affect application rates, demand for our plant nutrition products and our customers’ creditworthiness. Weather conditions can also lead to a reduction in farmable acres, flooding, drought or wildfires, which could also adversely impact growers’ crop yields and the uptake of plant nutrients, reducing the need for application of plant nutrition products for the next planting season which could result in lower demand for our plant nutrition products and negatively impact the prices of our products. Any prolonged change in weather patterns in our markets, as a result of climate change or otherwise, could have a material adverse impact on the results of our operations. Risks Relating to Financial Markets Currency fluctuations may have a negative effect on our financial performance. We transact a significant portion of our business in U.S. dollars, and the U.S. dollar is the currency of the primary economic environment in which we operate. In addition, the U.S. dollar is our functional currency for financial statement reporting purposes. A significant portion of our costs, however, is related to the Chilean peso. Therefore, an increase or decrease in the exchange rate between the Chilean peso and the U.S. dollar would affect our costs of production. The Chilean peso has been subject to large devaluations and revaluations in the past and may be subject to significant fluctuations in the future. As of December 31, 2020, the Chilean peso exchange rate was Ch$710.95 per U.S. dollar, while as of December 31, 2019 the Chilean peso exchange rate was Ch$748.74 per U.S. dollar. The Chilean peso therefore appreciated against the U.S. dollar by 5.0% in 2020. As an international company operating in several other countries, we also transact business and have assets and liabilities in other non-U.S. dollar currencies, such as, among others, the Euro, the South African rand, the Mexican peso, the Chinese yuan, the Thai baht and the Brazilian real. As a result, fluctuations in the exchange rates of such foreign currencies to the U.S. dollar may have a material adverse effect on our business, financial condition and results of operations. We may be subject to risks associated with the discontinuation, reform or replacement of benchmark indices. Interest rate, foreign exchange rate and other types of indices which are deemed to be “benchmarks” are the subject of increased regulatory scrutiny and may be discontinued, reformed or replaced. For example, in 2017, the U.K. Financial Conduct Authority announced that it will no longer persuade or compel banks to submit rates for the calculation of the London interbank offered rate (“LIBOR”) benchmark after 2021. This reform will, and other future reforms may, cause benchmarks to be different than they have been in the past, or to disappear entirely, or have other consequences which cannot be fully anticipated which introduces a number of risks for our business. These risks include (i) legal risks arising from potential changes required to document new and existing transactions; (ii) financial risks arising from any changes in the valuation of financial instruments linked to benchmark rates; (iii) pricing risks arising from how changes to benchmark indices could impact pricing mechanisms on some instruments; (iv) operational risks arising from the potential requirement to adapt IT systems, trade reporting infrastructure and operational processes; and (v) conduct risks arising from the potential impact of communication with customers and engagement during the transition period. Various replacement benchmarks, and the timing 66 3) DESCRIPTION OF BUSINESS ENVIRONMENT of and mechanisms for implementation are being considered. The transition away from LIBOR to risk- free reference rates (RFRs) requires financial firms to make a variety of internal changes, for example updating front-and back-office systems, retraining staff and redesigning processes, as well as potentially modifying or renegotiating potentially thousands of LIBOR-linked contracts. All banks and other financial market participants must eliminate their dependence on LIBOR by this date if they are to avoid disruption when the publication of LIBOR ceases. Although as of December 31, 2020 we had approximately US$70 million short- and long-term debt that use a LIBOR benchmark, it is not currently possible to determine whether, or to what extent, any such changes would affect us. However, the discontinuation or reformation of existing benchmark rates or the implementation of alternative benchmark rates may have a material adverse effect on our business, financial condition and results of operations. Risks Relating to Chile As we are a company based in Chile, we are exposed to political risks and civil unrest in Chile. Our business, financial condition and results of operations could be affected by changes in policies of the Chilean government, other political developments in or affecting Chile, legal changes in the standards or administrative practices of Chilean authorities or the interpretation of such standards and practices, over which we have no control. The Chilean government has modified, and has the ability to modify, monetary, fiscal, tax, social and other policies in order to influence the Chilean economy or social conditions. We have no control over government policies and cannot predict how those policies or government intervention will affect the Chilean economy or social conditions, or, directly and indirectly, our business, financial condition and results of operations. Changes in policies involving exploitation of natural resources, taxation and other matters related to our industry may adversely affect our business, financial condition and results of operations. We are exposed to economic and political volatility and civil unrest in Chile. Changes in social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in Chile, as well as crises and political uncertainties in Chile, could adversely affect economic growth in Chile. In October and November 2019, Chile experienced riots and widespread mass demonstrations in Santiago and other major cities in Chile, triggered by an increase in public transportation fares in the city of Santiago, which involved violence and significant property damage and caused commercial disruptions throughout the country. As a result, on October 18, 2019 the Chilean government declared a 15-day period state of emergency and imposed a nighttime curfew in the greater Santiago region and other cities. The state of emergency has since been lifted and the Chilean government has introduced several social reforms, including (i) an immediate 20% increase in government-subsidized pensions; (ii) new insurance programs to cover catastrophic illnesses and medication; (iii) a guaranteed minimum monthly income for wage earners of Ch$350,000 (approximately US$460.95), with the difference between such guaranteed minimum monthly income and the minimum monthly wage (Ch$301,000) to be borne by the Chilean government; (iv) the reversal of a previously announced 9.2% price increase in energy tariffs; and (v) a 40% income tax bracket for individuals earning over Ch$15.0 million (approximately US$19,755.04) a month, increased from 35%. In addition, President Piñera announced a pay cut for members of the Chilean Congress and the highest-paid civil servants and replaced eight ministers of his government. On November 15, 2019, representatives of Chile’s leading political parties agreed to hold a referendum, allowing Chileans to vote on whether to replace the Chilean Constitution. In November 2020, a referendum was held to vote on two matters: (i) whether a new constitution should be enacted and (ii) if so, whether a constituent convention should be comprised of an elected mixed assembly of current Congress members and newly elected persons or entirely comprised of newly-elected citizens. This referendum resulted in strong support for convening a fully elected Constitutional Convention to draft Chile’s new constitution. The election of the members of this convention will be held in April 2021. Each new article of the Constitution would have to be approved by two thirds of the convention. The Constitutional Convention will have approximately one year, starting in 67 3) DESCRIPTION OF BUSINESS ENVIRONMENT April 2021, to complete the draft of the Constitution. An exit referendum with compulsory participation will then be held to ratify the new Constitution. The long-term effects of this social unrest are hard to predict, but could include slower economic growth, which could adversely affect our profitability and prospects. Changes to the Chilean Constitution could impact a wide range of rights, including mining rights, water rights and property rights generally, and could affect our business, financial condition and results of operations. In response to the riots and mass demonstrations that occurred during October and November 2019, the Chilean government held a national referendum in November 2020 which decided that a new Chilean Constitution would be drafted by a special constituent assembly comprised entirely of citizens elected for that task (“Elected Citizens”). As decided in the referendum, all Elected Citizens are to be elected in April 2021 and the draft Chilean Constitution will be presented by the drafters in September or December 2021 (depending on whether an extension is requested) for approval by the citizens of Chile in May or August 2022 (depending on whether an extension is requested). It is expected that the final draft of the new Chilean Constitution will be submitted to a public referendum for approval. The existing Chilean Constitution has been in place since 1980 and any new Chilean Constitution could change the political situation of Chile, potentially changing a wide range of rights, including mining rights, water rights and property rights generally, which could affect the Chilean economy and the business outlook for the country generally and our business, financial condition and results of operations in particular. Changes in regulations regarding, or any revocation or suspension of mining, port or other concessions could affect our business, financial condition and results of operations. We conduct our mining operations, including brine extraction, under exploitation and exploration concessions granted in accordance with provisions of the Chilean Constitution and related laws and statutes. Our exploitation concessions essentially grant a perpetual right (with the exception of the rights granted to SQM Salar with respect to the Salar de Atacama concessions under the Lease Agreement described above, which expires in 2030) to conduct mining operations in the areas covered by the concessions, provided that we pay annual concession fees. Our exploration concessions permit us to explore for mineral resources on the land covered thereby for a specified period of time and to subsequently request a corresponding exploitation concession. Any changes to the Chilean Constitution with respect to the exploitation and exploration of natural resources and concessions granted as a result of the proposed Constitutional referendum could materially adversely affect our existing exploitation and exploration concessions or our ability to obtain future concessions and could have a material adverse effect on our business, financial condition and results of operations. We also operate port facilities at Tocopilla, Chile, for the shipment of products and the delivery of raw materials pursuant to maritime concessions, which have been granted under applicable Chilean laws and are normally renewable on application, provided that such facilities are used as authorized and annual concession fees are paid. Any significant adverse changes to any of these concessions, any changes to regulations to which we are subject or adverse changes to our other concession rights, or a revocation or suspension of any of our concessions, could have a material adverse effect on our business, financial condition and results of operations. Changes in water rights laws and other regulations could affect our business, financial condition and results of operations. 68 3) DESCRIPTION OF BUSINESS ENVIRONMENT We hold water use rights that are key to our operations. These rights were obtained from the Chilean Water Authority (Dirección General de Aguas) for supply of water from rivers and wells near our production facilities, which we believe are sufficient to meet current operating requirements. However, the Chilean Water Rights Code (Código de Aguas or the “Water Code”) is subject to changes, which could have a material adverse impact on our business, financial condition and results of operations. For example, a series of bills are currently being discussed by the Chilean National Congress that seek to desalinate seawater for use in mining production processes, amend the Mining Code for water use in mining operations, amend the Chilean Constitution on water and introduce changes to the regulatory framework governing the terms of inspection and sanction of water. As a result, the amount of water that we can actually use under our existing rights may be reduced or the cost of such use could increase. In addition, any changes to the Chilean Constitution with respect to water rights as a result of the proposed Constitutional referendum could restrict our access to water required for our production operations and materially adversely affect our existing operations or our ability to expand our operations in the future. These and potential future changes to the Water Code, the Chilean Constitution or other relevant regulations could have a material adverse effect on our business, financial condition and results of operations. The Chilean National Congress is considering a draft bill that declares lithium mining to be in the national interest, which if passed in its current form, could enable the expropriation of our lithium assets. The Chilean National Congress is currently processing a bill, bulletin 10,638-08, which “Declares the exploitation and commercialization of lithium and Sociedad Química y Minera de Chile S.A. to be of national interest.” The purpose of this bill is to enable the potential expropriation of our assets, or our lithium operations in general. The bill is subject to further discussion in the Chilean National Congress, which includes several possible changes to its current wording. We cannot guarantee that the bill will not eventually be approved by the Chilean National Congress, nor that its final wording will not refer to us or our lithium operations. If the bill is approved as currently drafted, it could have a material adverse effect on our business, financial condition and results of operations. The Chilean government could levy additional taxes on mining companies operating in Chile. In Chile, there is a royalty tax that is applied to mining activities developed in the country. The Chilean National Congress is currently processing a bill, bulletin 12,093-08, which proposes to institute a royalty fee of 3% on the value of extracted minerals. The bill is subject to further discussion in the Chilean National Congress, which includes several possible changes to its current wording. We cannot guarantee that the bill will not eventually be approved by the Chilean National Congress. If the bill is approved as currently drafted, it could have a material adverse effect on our business, financial condition and results of operations. Ratification of the International Labor Organization’s Convention 169 concerning indigenous and tribal peoples might affect our development plans. Chile, a member of the International Labor Organization (“ILO”), has ratified the ILO’s Convention 169 (the “Indigenous Rights Convention”) concerning indigenous and tribal people. The Indigenous Rights Convention established several rights for indigenous people and communities. Among other rights, the Indigenous Rights Convention states that (i) indigenous groups should be notified and consulted prior to the development of any project on land deemed indigenous, although veto rights are not mentioned, and (ii) indigenous groups have, to the extent possible, a stake in benefits resulting from the exploitation of natural resources in indigenous land. The extent of these benefits has not been defined by the Chilean government. The Chilean government has addressed item (i) above through Supreme Decree No. 66, issued by the Social Development Ministry. This decree requires government entities to consult 69 3) DESCRIPTION OF BUSINESS ENVIRONMENT indigenous groups that may be directly affected by the adoption of legislative or administrative measures, and it also defines criteria for the projects or activities that must be reviewed through the environmental evaluation system that also require such consultation. To the extent that the new rights outlined in the Igndigenous Rights Convention become laws or regulations in Chile, judicial interpretations of the convention of those laws or regulations could affect the development of our investment projects in lands that have been defined as indigenous, which could have a material adverse effect on our business, financial condition and results of operations. The Chilean Supreme Court has consistently held that consultation processes must be carried out in the manner prescribed by Indigenous Rights Convention. The consultation process may cause delays in obtaining regulatory approvals, including environmental permits, as well as public opposition by local and/or international political, environmental and ethnic groups, particularly in environmentally sensitive areas or in areas inhabited by indigenous populations. Furthermore, the omission of the consultation process when required by law may result in the revocation or annulment of regulatory approvals, including environmental permits already granted. Consequently, operating projects may be affected since the omission of the consultation process, when required by law, could lead to public law annulment actions pursuing the annulment of the environmental permits granted. However, this risk frequently arises during the environmental assessment phase when the environmental permits are to be obtained. In such scenario, affected parties may take several legal actions to declare null or void the environmental permits that omitted the consultation process, and in some cases, courts have overturned environmental approvals in which consultation was not made as prescribed in the Indigenous Rights Convention. If the Indigenous Rights Convention affects our development plans, it could have a material adverse effect on our business, financial condition and results of operations. Chile has different corporate disclosure and accounting standards than those you may be familiar with in the United States. Accounting, financial reporting and securities disclosure requirements in Chile differ in certain significant respects from those required in the United States. Accordingly, the information about us available to you will not be the same as the information available to holders of securities issued by a U.S. company. In addition, although Chilean law imposes restrictions on insider trading and price manipulation, applicable Chilean laws are different from those in the United States, and the Chilean securities markets are not as highly regulated and supervised as the U.S. securities markets. Chile is located in a seismically active region. Chile is prone to earthquakes because it is located along major fault lines. During 2017-2020, Chile has experienced several earthquakes which had a magnitude of over 6.0 on the Richter scale. There were also earthquakes in the past decade that caused substantial damage to some areas of the country. Chile has also experienced volcanic activity. A major earthquake or a volcanic eruption could have significant negative consequences for our operations and for the general infrastructure, such as roads, rail, and access to goods, in Chile. Although we maintain industry standard insurance policies that include earthquake coverage, we cannot assure you that a future seismic or volcanic event will not have a material adverse effect on our business, financial condition and results of operations. Risks Relating to our Shares and to our ADSs 70 3) DESCRIPTION OF BUSINESS ENVIRONMENT The price of our ADSs and the U.S. dollar value of any dividends will be affected by fluctuations in the U.S. dollar/Chilean peso exchange rate. Chilean trading in the shares underlying our ADSs is conducted in Chilean pesos. The depositary for our ADSs will receive cash distributions that we make with respect to the shares in Chilean pesos. The depositary will convert such Chilean pesos to U.S. dollars at the then prevailing exchange rate to make dividend and other distribution payments in respect of ADSs. If the value of the Chilean peso falls relative to the U.S. dollar, the value of the ADSs and any distributions to be received from the depositary will decrease. Developments in other emerging markets could materially affect the value of our ADSs and our shares. The Chilean financial and securities markets are, to varying degrees, influenced by economic and market conditions in other emerging market countries or regions of the world. Although economic conditions are different in each country or region, investor reaction to developments in one country or region can have significant effects on the securities of issuers in other countries and regions, including Chile and Latin America. Events in other parts of the world may have a material effect on Chilean financial and securities markets and on the value of our ADSs and our shares. The prices of securities issued by Chilean companies, including banks, are influenced to varying degrees by economic and market considerations in other countries. We cannot assure you that future developments in or affecting the Chilean economy, including consequences of economic difficulties in other markets, will not materially and adversely affect our business, financial condition or results of operations. We are exposed to risks related to the weakness and volatility of the economic and political situation in Asia, the United States, Europe, other parts of Latin America and other nations. Although economic conditions in Europe and the United States may differ significantly from economic conditions in Chile, investors’ reactions to developments in these other countries may have an adverse effect on the market value of securities of Chilean issuers. If these, or other nations’ economic conditions deteriorate, the economy in Chile, as both a neighboring country and a trading partner, could also be affected and could experience slower growth than in recent years, with possible adverse impact on our borrowers and counterparties. Chile has considerable economic ties with China, the United States and Europe. In 2020, approximately 37.2% of Chile’s exports went to China, mainly copper. China’s economy has grown at a strong pace in recent times, but a slowdown in economic activity in China may affect Chile’s GDP and export growth as well as the price of copper, which is Chile’s main export. Chile exported approximately 14.0% of total exports to the United States and 8.8% to Europe in 2020. Chile was recently involved in international litigation with Bolivia regarding maritime borders. We cannot assure you that crises and political uncertainty in other Latin American countries will not have an adverse effect on Chile, the price of our securities or our business. The volatility and low liquidity of the Chilean securities markets could affect the ability of our shareholders to sell our ADSs. The Chilean securities markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. The volatility and low liquidity of the Chilean markets could increase the price volatility of our ADSs and may impair the ability of a holder to sell our ADSs or to sell the shares underlying our ADSs into the Chilean market in the amount and at the price and time the holder wishes to do so. 71 3) DESCRIPTION OF BUSINESS ENVIRONMENT Our share or ADS price may react negatively to future acquisitions, divestitures, capital increases and investments. As world leaders in our core businesses, part of our strategy is to look for opportunities that will allow us to consolidate and strengthen our competitive position in jurisdictions in which we currently do not operate. Pursuant to this strategy, we may carry out acquisitions or joint ventures relating to any of our businesses or to new businesses in which we believe we may have sustainable competitive advantages. We may also seek to strengthen our leadership position in our core businesses through divestitures of certain assets or stakes in subsidiaries that we believe will allow us to concentrate our efforts on our core businesses. Depending on our capital structure at the time of any acquisitions or joint ventures, we may need to raise significant debt and/or equity which will affect our financial condition and future cash flows. We may also carry out capital increases in order to raise capital for our capital plan. In addition, any divestitures we effect may not result in strengthening our position in our core businesses as anticipated. Any change in our financial condition could affect our results of operations and negatively impact our share or ADS price. ADS holders may be unable to enforce rights under U.S. securities laws. Because we are a Chilean company subject to Chilean law, the rights of our shareholders may differ from the rights of shareholders in companies incorporated in the United States, and ADS holders may not be able to enforce or may have difficulty enforcing rights currently in effect under U.S. federal or state securities laws. Our company is an open stock corporation incorporated under the laws of the Republic of Chile. Most of our directors and officers reside outside the United States, principally in Chile. All or a substantial portion of the assets of these persons are located outside the United States. As a result, if any of our shareholders, including holders of our ADSs, were to bring a lawsuit against our officers or directors in the United States, it may be difficult for them to effect service of legal process within the United States upon these persons. Likewise, it may be difficult for them to enforce judgments obtained in United States courts based upon the civil liability provisions of the federal securities laws in the United States against them in the United States. In addition, there is no treaty between the United States and Chile providing for the reciprocal enforcement of foreign judgments. However, Chilean courts have enforced judgments rendered in the United States, provided that the Chilean court finds that the United States court respected basic principles of due process and public policy. Nevertheless, there is doubt as to whether an action could be brought successfully in Chile in the first instance on the basis of liability based solely upon the civil liability provisions of the United States federal securities laws. As preemptive rights may be unavailable for our ADS holders, they have the risk of their holdings being diluted if we issue new stock. Chilean laws require companies to offer their shareholders preemptive rights whenever issuing new shares of capital stock so shareholders can maintain their existing ownership percentage in a company. If we increase our capital by issuing new shares, a holder may subscribe for up to the number of shares that would prevent dilution of the holder’s ownership interest. If we issue preemptive rights, United States holders of ADSs would not be able to exercise their rights unless a registration statement under the Securities Act were effective with respect to such rights and the shares issuable upon exercise of such rights or an exemption from registration were available. We cannot assure holders of ADSs that we will file a registration statement or that an exemption from registration will be available. We may, in our absolute discretion, decide not to prepare and file such a registration statement. Although in connection with the pending capital increase approved by our shareholders on 72 3) DESCRIPTION OF BUSINESS ENVIRONMENT January 22, 2021, we expect to file a registration statement that would permit holders of ADSs to exercise preemptive rights, if our ADS holders were unable to exercise their preemptive rights because we did not file a registration statement, the ADS depositary would attempt to sell their rights and distribute the net proceeds from the sale to them, after deducting the depositary’s fees and expenses. If the depositary could not sell the rights, they would expire and have no further value and holders of ADSs would not realize any value from them. In either case, ADS holders’ equity interests in us would be diluted in proportion to the increase in our capital stock. If we were classified as a Passive Foreign Investment Company by the U.S. Internal Revenue Service, there could be adverse consequences for U.S. investors. We believe that we were not classified as a Passive Foreign Investment Company (“PFIC”) for 2020. Characterization as a PFIC could result in adverse U.S. tax consequences to a U.S. investor in our shares or ADSs. For example, if we (or any of our subsidiaries) are a PFIC, our U.S. investors may become subject to increased tax liabilities under U.S. tax laws and regulations and will become subject to burdensome reporting requirements. The determination of whether or not we (or any of our subsidiaries or portfolio companies) are a PFIC is made on an annual basis and will depend on the composition of our (or their) income and assets from time to time. Changes in Chilean tax regulations could have adverse consequences for U.S. investors. Currently cash dividends paid by us to foreign shareholders are subject to a 35% Chilean withholding tax. When the Company pays a corporate income tax on the income from which the dividend is paid, known as a “First Category Tax”, a credit for all or a portion of the amount of the First Category Tax, depending on the jurisdiction of the foreign shareholder, effectively reduces the rate of Withholding Tax, which was equivalent of 23.90411% during 2020. Foreign shareholders resident in a jurisdiction with a tax treaty in force with Chile will be credited with 100% of the Chilean corporate tax paid by us against the final taxes at the shareholder level. Foreign shareholders resident in a non-treaty jurisdiction will be subject to a higher effective tax rate on dividends because only a portion of the Chilean corporate tax paid by us will be credited against the final taxes at the shareholder level. There is a temporary rule in effect since January 1, 2017, which has been extended to December 31, 2026, that provides that treaty jurisdictions for this purpose will include jurisdictions with tax treaties signed with Chile prior to January 1, 2020, even if such treaties are not in force. This is currently the status of the treaty signed between the United States and Chile. Additionally, pursuant to the current social and political agenda, it is expected that the Chilean Government, based on a report prepared on January 2021 by a commission of experts, will introduce a new tax reform bill aimed at limiting tax exemptions and/or preferential tax treatments contained in the Chilean tax legislation, such as the exemption on capital gains arising from the sale of shares that are publicly traded and have a high presence in the stock exchange. Changes in Chilean tax regulations could have adverse consequences for U.S. investors. General Risk Factors Our measures to minimize our exposure to bad debt may not be effective and a significant increase in our accounts receivable coupled with the financial condition of customers may result in losses that could have a material adverse effect on our business, financial condition and results of operations. Potentially negative effects of global economic conditions on the financial condition of our customers may include the extension of the payment terms of our accounts receivable and may increase our exposure to bad debt. While we have implemented certain safeguards, such as using credit insurance, letters of 73 3) DESCRIPTION OF BUSINESS ENVIRONMENT credit and prepayment for a portion of sales, to minimize the risk, we cannot assure you that such safeguards will be effective and a significant increase in our accounts receivable coupled with the financial condition of customers may result in losses that could have a material adverse effect on our business, financial condition and results of operations. Quality standards in markets in which we sell our products could become stricter over time. In the markets in which we do business, customers may impose quality standards on our products and/or governments may enact stricter regulations for the distribution and/or use of our products. As a result, if we cannot meet such new standards or regulations, we may not be able to sell our products. In addition, our cost of production may increase in order to meet any such newly imposed or enacted standards or regulations. Failure to sell our products in one or more markets or to important customers could materially adversely affect our business, financial condition and results of operations. Our business is subject to many operating and other risks for which we may not be fully covered under our insurance policies. Our facilities and business operations in Chile and abroad are insured against losses, damage or other risks by insurance policies that are standard for the industry and that would reasonably be expected to be sufficient by prudent and experienced persons engaged in businesses similar to ours. We may be subject to certain events that may not be covered under our insurance policies, which could have a material adverse effect on our business, financial condition and results of operations. Additionally, as a result of major earthquakes and unexpected rains and flooding in Chile, as well as other natural disasters worldwide, conditions in the insurance market have changed and may continue to change in the future, and as a result, we may face higher premiums and reduced coverage, which could have a material adverse effect on our business, financial condition and results of operations. Our water supply could be affected by geological changes or climate change. Our access to water may be impacted by changes in geology, climate change or other natural factors, such as wells drying up or reductions in the amount of water available in the wells or rivers from which we obtain water, that we cannot control. The use of seawater for future or current operations could increase our operating costs. Any such change may have a material adverse effect on our business, financial condition and results of operations. Any loss of key personnel may materially and adversely affect our business. Our success depends in large part on the skills, experience and efforts of our senior management team and other key personnel. The loss of the services of key members of our senior management or employees with critical skills could have a negative effect on our business, financial condition and results of operations. If we are not able to attract or retain highly skilled, talented and qualified senior managers or other key personnel, our ability to fully implement our business objectives may be materially and adversely affected. We are subject to Chilean and international anti-corruption, anti-bribery, anti-money laundering and international trade laws. Failure to comply with these laws could adversely impact our business, financial condition and results of operations. We are required to be in compliance with all applicable laws and regulations in Chile and internationally with respect to anti-corruption, anti-money laundering and other regulatory matters, including the FCPA. Although we and our subsidiaries maintain policies and processes intended to comply with these laws, 74 3) DESCRIPTION OF BUSINESS ENVIRONMENT we cannot ensure that these compliance policies and processes will prevent intentional, reckless or negligent acts committed by our officers or employees. If we or our subsidiaries fail to comply with any applicable anti-corruption, anti-bribery, anti-money laundering or other similar laws, we and our officers and employees may be subject to criminal, administrative or civil penalties and other remedial measures, which could have material adverse effects on our and our subsidiaries’ business, financial condition and results of operations. Any investigation of potential violations of anti-corruption, anti-bribery or anti-money laundering laws by governmental authorities in Chile or other jurisdictions could result in an inability to prepare our consolidated financial statements in a timely manner. This could adversely impact our reputation, ability to access the financial markets and ability to obtain contracts, assignments, permits and other government authorizations necessary to participate in our and our subsidiaries’ industry, which, in turn, could have adverse effects on our and our subsidiaries’ business, financial condition and results of operations. 3) F) DESCRIPTION OF BUSINESS ENVIRONMENT: CAPITAL EXPENDITURE PROGRAM We regularly review different opportunities to improve our production methods, reduce costs, increase production capacity of existing products and develop new products and markets. Additionally, significant capital expenditures are required every year in order to sustain our production capacity. We are focused on developing new products in response to identified customer demand, as well as new products that can be derived as part of our existing production or other products that could fit our long-term development strategy. Our capital expenditures in Chile have been mainly related to the organic growth and sustainability of our business, including the construction of new facilities and the renovation of plants and equipment. In 2020, we also worked on the expansion of our lithium carbonate and lithium hydroxide capacity in Chile, which we believe will reach 120,000 metric tons and 21,500 metric tons respectively by the end of 2021. We also began expansions related to the mining and production facilities of nitrates and iodine in Chile. Our capital expenditures for the years ended December 31, 2020, 2019 and 2018 were as follows: (in millions of U.S. dollars) Capital Expenditures 2020 322.2 2019 321.3 2018 244.7 During 2020, we had total capital expenditures of US$322.2 million, a decrease compared to the US$450 million that was originally expected as a result in the delay of the purchasing of equipment. Our 2020 capital expenditure is primarily related to: • Capacity expansion projects related to the increase of our lithium carbonate production from 70,000 metric tons per year to 120,000 metric tons per year in Chile; • Capacity expansion of lithium hydroxide production from 13,500 metric tons per year to 21,500 metric tons per year in Chile; • Optimization projects related to potassium nitrate production plants in Coya Sur; and • General maintenance of all production units in order to ensure the fulfillment of production and sales targets. During 2019, we had total capital expenditures of US$321.3 million, primarily related to: • Capacity expansion projects related to the completion of the increase of our lithium carbonate production to 70,000 metric tons per year and the commencement of our lithium carbonate expansion project to reach 120,000 metric tons per year. 75 3) DESCRIPTION OF BUSINESS ENVIRONMENT • Capacity expansion of lithium hydroxide production from 13,500 metric tons per year to 21,500 • metric tons per year in Chile; Investments to increase iodine capacity to 14,800 metric tons per year in the Nueva Victoria mine; and • Capacity expansion and optimization projects related to potassium nitrate production plants II, III and IV in Coya Sur. During 2018, we had total capital expenditure of US$244.7 million, primarily related to: • Capacity expansion projects related to increasing lithium carbonate production to 70,000 metric tons per year and lithium hydroxide production to 13,500 metric tons per year in Chile; Investments to increase iodine capacity to 14,000 in the Nueva Victoria mine; • • Capacity expansion project related to potassium nitrate production plants III and IV in Coya Sur; and • General maintenance of all production units and the Port of Tocopilla in order to ensure the fulfillment of production and sales targets. We believe that our capital expenditures for 2021 could reach approximately US$500 million focused on the maintenance of our production facilities in order to strengthen our ability to meet our production goals and to increase our production capacity, primarily related to lithium carbonate and lithium hydroxide capacity expansions and nitrates and iodine capacity in Chile and development of our lithium project in Australia. We expect our installed capacity of lithium carbonate and lithium hydroxide in Chile to reach approximately 120,000 and 21,500 metric tons respectively by the second half of 2021, an increase of 50,000 metric tons of lithium carbonate and of 8,000 metric tons of lithium hydroxide compared to our current effective capacity. We will also begin the development and purchase of long-lead time equipment in connection with the Mt. Holland lithium project in Western Australia. 76 4) OWNERSHIP AND SHARES 4) OWNERSHIP AND SHARES 4) A) OWNERSHIP AND SHARES: OWNERSHIP i) OWNERSHIP CONTROL SITUATION As of December 31, 2020, SQM does not have a “controlling group” as such term is defined in Title XV of Chilean Law No. 18,045. ii) IDENTIFICATION OF NON-CONTROLLING MAJORITY SHAREHOLDERS SQM has been informed that, as of December 31, 2020, Mr. Julio Ponce Lerou (ID No. 4.250.719-9) and related persons control 100% of Inversiones SQYA Ltda. (“SQYA”) and 100% of Inversiones SQ Ltda. These two companies control indirectly 32.00% of all shares of SQM (consisting of 71,871,838 Series A shares and 12,341,049 Series B shares), as follows: (i) Inversiones SQ Ltda. controls 0.0258% of Norte Grande S.A. (“Norte Grande”) and SQYA controls 67.59% of Norte Grande, which controls 76.82% of Sociedad de Inversiones Oro Blanco S.A., which controls 88.64% of Sociedad de Inversiones Pampa Calichera S.A. (“Pampa Calichera”), which controls 21.75% of SQM, as of December 31, 2020; (ii) Pampa Calichera controls 99.99% of Inversiones Global Mining Chile Limitada, which controls 3.34% of SQM and (iii) Norte Grande controls 76.34% of Nitratos de Chile S.A., which controls 98.89% of Potasios de Chile S.A., which controls 10.07% of Pampa Calichera and 6.91% of SQM. Thus, Pampa Calichera and its related companies, Inversiones Global Mining Chile Limitada and Potasios de Chile S.A. (together, “Pampa Group”), control 32.00% of SQM. As reported by Depósito Central de Valores S.A. (“DCV”), which keeps formal records of the shareholders of the Company, as of December 31, 2020, Inversiones TLC SpA, a subsidiary of Tianqi Lithium Corporation (“Tianqi”), is a direct owner of 62,556,568 of SQM´s shares, equivalent to 23.77% of SQM´s total shares. In addition, as reported by Inversiones TLC SpA, Tianqi, through its subsidiaries, owns 5,516,772 Series B shares of SQM. Therefore, as of December 31, 2020, Tianqi beneficially owns 25.86%, of SQM’s total shares. As of December 31, 2019, Kowa Company Ltd., Inversiones La Esperanza (Chile) Limitada, Kochi S.A., and Kowa Holding America Inc. (together, “Kowa Group”) are owners of 2.35% of all shares in SQM. For the breakdown by series of share of the Pampa Group, Tianqi and Kowa Group ownership of shares in SQM, see Section 4) A) iii) Identification of 12 Largest Shareholders. iii) IDENTIFICATION OF 12 LARGEST SHAREHOLDERS As of December 31, 2020, the 12 largest shareholders including both Series A and Series B shares were: Series A + Series B INVERSIONES TLC SPA THE BANK OF NEW YORK MELLON ADRS1 SOCIEDAD DE INVERSIONES PAMPA CALICHERA SA2 POTASIOS DE CHILE SA INV GLOBAL MINING CHILE LTDA EUROAMERICA C DE B S.A. Taxpayer ID 76,902,021-7 59,030,820-K Number of Shares 62,556,568 50,792,452 96,511,530-7 45,817,123 76,165,311-3 18,179,147 96,863,960-9 8,798,539 96,899,230-9 8,789,935 BANCO SANTANDER POR CUENTA DE INV EXTRANJEROS 97,036,000-K BANCO DE CHILE POR CUENTA DE STATE STREET 97,004,000-5 7,294,827 6,971,782 % Ownership 23.77% 19.30% 17.41% 6.91% 3.34% 3.34% 2.77% 2.65% 77 4) OWNERSHIP AND SHARES BANCO DE CHILE POR CUENTA DE TERCEROS NO RESIDENTES 97,004,000-5 6,129,339 INVERSIONES LA ESPERANZA CHILE LIMITADA 79,798,650-K BANCHILE CORREDORES DE BOLSA S A 96,571,220-8 BANCO DE CHILE POR CUENTA DE CITI NA NEW YORK CLIENT 97,004,000-5 4,193,763 2,885,960 1,909,712 Subtotal 12 Largest Shareholders, Series A and B Total Shares, Series A and B 1 The Bank of New York Mellon is the depositary bank for the Company’s ADSs traded on the New York Stock 224,319,147 263,196,524 2.33% 1.59% 1.10% 0.73% 85.23% 100.00% Exchange. Information about ADS holders is provided at the end of this section. 2 Total Sociedad de Inversiones Pampa Calichera S.A. 57,235,201 Series A and B shares; 11,418,078 Series B shares are in the custody of various brokers. As of December 31, 2020, the 12 largest shareholders of Series A shares were: Series A INVERSIONES TLC SPA Taxpayer ID 76,902,021-7 SOCIEDAD DE INVERSIONES PAMPA CALICHERA SA 96,511,530-7 POTASIOS DE CHILE SA INV GLOBAL MINING CHILE LTDA 76,165,311-3 96,863,960-9 INVERSIONES LA ESPERANZA CHILE LIMITADA 79,798,650-K KOCHI SA KOWA CO LTD 96,518,570-4 59,046,730-8 BANCHILE CORREDORES DE BOLSA S A 96,571,220-8 LARRAIN VIAL S A CORREDORA DE BOLSA 80,537,000-9 Number of Shares 62,556,568 44,894,152 18,179,147 8,798,539 4,147,263 945,490 781,429 459,202 327,898 227,550 % Ownership 43.80% 31.43% 12.73% 6.16% 2.90% 0.66% 0.55% 0.32% 0.23% 0.16% 0.13% 0.12% 141,678,334 142,819,552 99.20% 100.00% 59,023,690-K 76,237,243-6 183,633 97,004,000-5 177,463 KOWA HOLDINGS AMERICA INC SOC ADM DE FDOS DE CESANTIA DE CHILE II SA FDO SOLIDARIO BANCO DE CHILE POR CUENTA DE CITI NA NEW YORK CLIENT Subtotal 12 Largest Shareholders, Series A Total Shares, Series A 78 4) OWNERSHIP AND SHARES As of December 31, 2020, the 12 largest shareholders of Series B shares were: Series B THE BANK OF NEW YORK MELLON ADRS1 Taxpayer ID Number of Shares % Ownership 50,792,452 59,030,820-K 42.19% EUROAMERICA C DE B S.A. BANCO SANTANDER POR CUENTA DE INV EXTRANJEROS 96,899,230-9 8,788,517 97,036,000-K BANCO DE CHILE POR CUENTA DE STATE STREET 97,004,000-5 BANCO DE CHILE POR CUENTA DE TERCEROS NO RESIDENTES 97,004,000-5 AFP HABITAT S. A. AFP PROVIDA S.A. AFP CAPITAL S. A. AFP CUPRUM S. A. 98,000,100-8 76,265,736-8 98,000,000-1 76,240,079-0 BANCHILE CORREDORES DE BOLSA S A 96,571,220-8 BANCO DE CHILE POR CUENTA DE CITI NA NEW YORK CLIENT 97,004,000-5 LARRAIN VIAL S A CORREDORA DE BOLSA 80,537,000-9 7,294,827 6,971,782 6,129,339 4,854,276 4,283,483 4,199,918 3,629,239 2,426,758 1,732,249 1,523,391 7.30% 6.06% 5.79% 5.09% 4.03% 3.56% 3.49% 3.01% 2.02% 1.44% 1.27% Subtotal 12 Largest Shareholders, Series B2 102,626,231 85.25% Total Shares, Series B 1 The Bank of New York Mellon is the depositary bank for the Company’s ADSs traded on the New York Stock 120,376,972 100.00% Exchange. Information about ADS holders is provided at the end of this section. 2 Not included the total of 12,341,049 of Series B shares owned by Sociedad de Inversiones Pampa Calichera S.A., of which 11,418,078 Series B shares are in the custody of various brokers. 79 4) OWNERSHIP AND SHARES The Bank of New York Mellon is the depositary bank for the Company’s ADSs traded on the New York Stock Exchange. According to public 13F filings with the U.S. Securities and Exchange Commission, the 12 largest ADS holders as of December 31, 2020 were: ADSs (Series B) BlackRock Investment Management (U.K.), LTD ClearBridge Investments, LLC Aberdeen Standard Investments (U.K.) EARNEST Partners, LLC Macquarie Investment Management The Vanguard Group, Inc. Azvalor Asset Management, S.G.I.I.C., S.A. State Street Global Advisors (SSgA) Grantham Mayo Van Otterloo & Co., LLC FIAM, LLC Arrowstreet Capital, L.P. BlackRock Advisors, LLC Subtotal 12 Largest ADS Holders Total ADSs as of December 31, 2020 Taxpayer ID Number of ADSs % Ownership Series B N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 2,479,422 2,244,296 1,922,700 1,704,818 1,414,524 1,284,767 1,070,469 1,051,669 1,049,823 905,454 863,295 833,865 2.06% 1.86% 1.60% 1.42% 1.18% 1.07% 0.89% 0.87% 0.87% 0.75% 0.72% 0.69% % Ownership Total Shares 0.94% 0.85% 0.73% 0.65% 0.54% 0.49% 0.41% 0.40% 0.40% 0.34% 0.33% 0.32% 16,825,102 50,792,452 13.98% 42.19% 6.39% 19.30% iv) TOTAL NUMBER OF SHAREHOLDERS The following table shows the total number of SQM´s shareholders as of December 31, 2020: Total Number of Shareholders, Series A and B Total Number of Shareholders, Series A Total Number of Shareholders, Series B Shareholders Registry ADS Holders Registry Total Holders 1,358 374 1,262 82 - 82 1,440 374 1,344 v) SIGNIFICANT CHANGES IN SHARE OWNERSHIP There has not been any significant change in share ownership of the Company during 2020. The last important change in share ownership of the Company happened during 2018 when Nutrien Ltd., which was one of the main shareholder groups with 32% of SQM's total shares as of December 31, 2017, divested all its ownership in SQM. This was through the sale of its Series B shares on the Chilean securities market in May 2018, and a sale of its Series A shares on the Chilean securities market to Inversiones TLC SpA, a subsidiary of Tianqi Lithium Corporation, in December 2018. As of December 31, 2018, Nutrien Ltd. had 0% of the total shares of SQM, and Inversiones TLC SpA had 25.86% of the total shares issued by SQM. Until November 30, 2018, the Pampa Group was considered by the CMF as the Company's controller. However, starting from that date, the CMF determined that in accordance with the distribution of the 80 4) OWNERSHIP AND SHARES shares of SQM, “the Pampa Group does not exert decisive power over the management of the Company, and is therefore not considered a controlling shareholder”. The CMF could change its decision in the future if circumstances change. Tianqi Extrajudicial Agreement with the FNE In August 2018, after an investigation by the FNE in connection with the proposed acquisition by Tianqi of 23.77% of the Company’s Series A shares, Tianqi and the FNE entered into an extrajudicial agreement (the “Extrajudicial Agreement”) which implemented certain restrictive measures in order to (i) maintain the competitive conditions of the lithium market, (ii) mitigate the risks described in the Extrajudicial Agreement and (iii) limit Tianqi’s access to certain information of the Company and its subsidiaries, which are defined as sensitive under the Extrajudicial Agreement (“Sensitive Information”) (collectively, the “Purpose”). Pursuant to the Extrajudicial Agreement, Tianqi agreed that, among other things: • Tianqi will not nominate any of its directors, executives or employees to the SQM Board of Directors; • Tianqi and the directors nominated by it will not influence or intervene for the benefit of Tianqi and prejudice the interests of SQM; • The directors nominated by Tianqi will not participate nor will they be part of any committees, the management or other decision-making bodies related to lithium of SQM or of any companies controlled by SQM, unless nominated by independent directors; • Tianqi will inform the FNE of any agreement in the lithium market, with Albemarle and/or SQM, prior to its execution; • Tianqi will notify the FNE of any event from which it acquires control or decisive influence in SQM; • Tianqi will disassociate any of its directors, executives or employees appointed by third parties, who assumes a position described above in SQM; • Tianqi will not request access to Sensitive Information from SQM; • The directors nominated by Tianqi will not disclose Sensitive Information of SQM; • The directors nominated by Tianqi will personally bind themselves to the obligations assumed by Tianqi with the FNE; and • Tianqi will report to the FNE the appointments and periodic compliance with its obligations. The restrictions will remain in place for a period of four years and be automatically renewed for two more years according to the terms of the Extrajudicial Agreement. During the approval process for the Extrajudicial Agreement before the FNE, the Company expressed its concerns to the Chilean Antitrust Court regarding the measures contained in the Extrajudicial Agreement of since (i) it could not effectively resolve the risks that Tianqi and the FNE sought to mitigate, (ii) the restrictions are not correctly oriented to avoid the access to Sensitive Information that, in the possession of a competitor, could damage the Company and the proper functioning of the market and (iii) it could contradict the Chilean Corporations Act (Law No. 18,046 on Corporations). The Extrajudicial Agreement was approved in October 2018 by the Chilean Antitrust Court. A copy of the Extrajudicial Agreement, in Spanish, at https://s25.q4cdn.com/757756353/files/doc_news/archive/c64b6ddc-7f23-44d9-8d7b-a20eeb3184a4.pdf http://www.fne.gob.cl/wp- the and content/uploads/2018/09/Acuerdo-Extrajudicial-FNE-Tianqi-con-firma-27.08.18.pdf. the Company’s website FNE’s website been made available available publicly also has on on at is Pampa Group and Tianqi Shareholders’ Agreement On April 10, 2019, the Pampa Group and Inversiones TLC SpA, a subsidiary of Tianqi, entered into a shareholders’ agreement, with respect to certain corporate governance matters. The matters addressed by the shareholders’ agreement include: (i) the management of the business and affairs of the Company by 81 4) OWNERSHIP AND SHARES the Board of Directors, (ii) the election of replacement directors in the event of resignation of any of the directors elected by each party to the Board of Directors as director elected by Series A, (iii) election of certain directors elected by Tianqi to the Company’s Directors’ Committee, Corporate Governance Committee and Safety, Health and Environmental Committee, (iv) access for Tianqi’s internal or external auditors to SQM’s management and internal and external auditors for purposes of fulfilling Tianqi’s accounting and disclosure obligations with respect to its investment in SQM, (v) support for having a bilingual (Spanish/English) translator attend all SQM Board and Committee meetings to assist directors who are not bilingual and (vi) support of the Company’s dividend policy for 2019, as proposed by the Board of Directors in March 2019 for approval at the 2019 annual ordinary shareholders’ meeting. The agreement has a term of one year. An English language copy of the agreement is included in an essential fact (hecho esencial) filing made by Sociedad de Inversiones Pampa Calichera S.A. with the CMF on April 11, 2019 available on the CMF’s website at www.cmfchile.cl. On March 26, 2020, the Pampa Group and Inversiones TLC SpA amended the shareholders’ agreement entered into on April 10, 2019 to (i) extend the term to the earliest of (A) our 2021 annual ordinary shareholders’ meeting or (B) written notice of termination given by the Pampa Group or Tianqi in the event that a director nominated by the non-notifying party ceases to serve as a director for any reason and (ii) to agree to support the Company’s 2020 dividend policy, as proposed by the Board of Directors for approval at the 2020 annual ordinary shareholders’ meeting. An English language copy of the amendment is included in an essential fact (hecho esencial) filing made by Sociedad de Inversiones Pampa Calichera S.A. with the CMF on March 26, 2020 and is available on the CMF’s website at www.cmfchile.cl. Board Protocol for Presentation and Use of Sensitive Information Following the acquisition by Tianqi of SQM´s shares from Nutrien Ltd. and Tianqi entering into the Extrajudicial Agreement with the FNE, the Company’s Board of Directors deemed it necessary to adopt measures aimed at achieving the purpose of the Extrajudicial Agreement, avoiding greater points of contact between Sensitive Information and Tianqi, to complement the Extrajudicial Agreement. On January 23, 2019, the Board of Directors approved a protocol for the presentation and use of Sensitive Information, which amendment was subsequently approved by the Board on September 30, 2019. The complete at https://s25.q4cdn.com/757756353/files/doc_news/archive/36421175-3a3d-4f36-88ae- 7302953d538d.pdf. the Company's website available protocol version the on of is 4) B) OWNERSHIP STRUCTURE AND SHARES: SHARES AND THEIR CHARACTERISTICS AND RIGHTS i) DESCRIPTION OF SERIES OF SHARES Dividends are annually distributed to the Series A and Series B shareholders of record on the fifth business day prior to the date for payment of the dividends. The By-laws do not specify a time limit after which dividend entitlement elapses but Chilean regulations establish that after 5 years, unclaimed dividends are to be donated to the Chilean Fire Department. Article 5 of the Company’s By-laws establishes that Series B shares may in no case exceed fifty percent of the issued, outstanding and paid shares of SQM. Series B shares have a restricted right to vote as they can only elect one Director of the Company, regardless of their capital stock’s share. Series B shares have the right to call for an Ordinary or Extraordinary Shareholders’ Meeting when the shareholders of at least 5% of the Series B shares request so and to call for an Extraordinary Board of Directors Meeting without the Chairman’s authorization when it is requested by the Director elected by the shareholders of the Series B shares. Series A shares have the option to exclude the Director elected by Series B shareholders from the voting process in which the Chairman of the Board is to be elected, if there is a tie in the first voting process. The second transitory article and articles 31 and 31 bis of the Company’s By-laws establish that in General Shareholders’ Meetings each shareholder will have a right to one vote for each share he owns 82 4) OWNERSHIP AND SHARES or represents and (a) that no shareholder will have the right to vote for himself or on behalf of other shareholders of the same Series A or Series B shares representing more than 37.5% of the total outstanding shares with right to vote of each Series and (b) that no shareholder will have the right to vote for himself or on behalf of other shareholders representing more than 32% of the total outstanding shares with a right to vote. In calculating a single shareholder’s ownership of Series A or B shares, the shareholder’s stock and those pertaining to third parties related to them are to be added. The second transitory article provides as follows: “Throughout the period running from the date of the extraordinary shareholders’ meeting at which this transitory article is incorporated, and December 31, 2030, the restriction against voting on behalf of more than 37.5% of any series of shares in the Company, established in Article 31 hereof, shall be subject to the following exception, applicable only to the election of board members by means of Series A shares in the Company: If two or more persons, regardless of whether or not they are related parties to each other (the incoming shareholders), act prior to December 31, 2030 such as to acquire a sufficient number of Series A shares to allow them to hold voting powers for the selection of directors of the Company amounting to more than 37.5% of that series, then any registered shareholder or group of shareholders holding more than 37.5% of all Series A shares in the Company shall be entitled to vote for the selection of directors of the Company amounting to whichever is less, between a number of the Series A shares that are held (i) by existing shareholders as of that date, and (ii) by the incoming shareholders with voting rights. Similarly, if for any reason a registered shareholder in the Company as of the date hereof who holds more than 37.5% of Series A shares in the company between the date hereof and December 31, 2030, comes to hold more voting shares for the selection of directors of the Company than the votes allocated for holding 37.5% of said Series A shares, either through a joint action agreement with other shareholders, including existing shareholders, or by any other means, then any other shareholder or group of shareholders in the Company that is not a related party to the same and holds more than 37.5% of all voting Series A shares in the Company, including both existing and incoming shareholders, shall be entitled to vote for the selection of directors of the Company in accordance with whichever number of Series A shares in the Company is the lesser, between (i) the number held by this shareholder or group of shareholders, and (ii) the existing shareholder may have the capacity to vote in excess of the restriction amounting to 37.5% of said shares.” Article 5 bis of the Company’s By-laws establishes that no person may directly or by means of related third persons concentrate more than 32% of the Company’s total shares with right to vote. Each Series A share and Series B share is entitled to share equally in the Company’s profits, i.e., they have the same rights on any dividends declared on the outstanding shares of SQM. The Company By-laws do not contain any provision relating to (a) redemption provisions (b) sinking funds or (c) liability to capital calls by the Company. As established in article 103 of Law No. 18,046, a company subject to the supervision of the SVS may be liquidated in the following cases: • Expiration of the duration term, if any, as established in its By-laws; • All the shares end up in the possession of one individual for more than ten continuous days; • By agreement of an Extraordinary Shareholders Meeting; • By abolition, pursuant to applicable laws, of the decree that authorized its existence; • Any other reason contemplated in its By-laws. Article 40 of the Company’s By-laws states that in the event of liquidation, the Shareholders’ Meeting will appoint a three-member receiver committee that will have the authority to carry out the liquidation process. Any surplus will be distributed equally among the shareholders. 83 The only way to change the rights of the holders of the SQM shares, including holders of our ADSs, is by modifying its By-laws, which can only be carried out by an Extraordinary Shareholders’ Meeting, as established in article 28 of the Company By-laws. 4) OWNERSHIP AND SHARES Total number of shares: • Series A: 142,819,552 • Series B: 120,376,972 ii) DIVIDEND POLICY SQM's dividend policy for 2020, reported at the Shareholders' Meeting held on April 23, 2020 and modified as a result of the approval of the distribution and payment of a special dividend equivalent to US$0.37994 per share charged to the retained earnings of the Company (the “Special Dividend”) by the Extraordinary Shareholders' Meeting held on September 29, 2020, included the following: (a) Distribute and pay to the corresponding shareholders, a percentage of the net income that shall be determined per the following financial parameters as a final dividend (dividendo definitivo): (i) 100% of the 2020 net income, when the following financial parameters are met: (a) that the total current assets, divided by the total current financial liabilities is equal to or greater than 2.5 times, and (b) the sum of the total current liabilities and total non-current liabilities, excluding both cash and cash equivalents and other current financial assets, divided by the total equity is equal to or less than 0.8 times. (ii) 80% of the 2020 net income, when the following financial parameters are met: (a) that the total current assets, divided by the total sum of the total current financial liabilities is equal to or greater than 2.0 times, and (b) the total sum of the current liabilities and total non-current liabilities, excluding both cash and cash equivalents and other current financial assets divided by the total equity is equal to or less than 0.9 times. (iii) 60% of the 2020 net income, when the following financial parameters are met: (a) that the total current assets, divided by the total sum of the total current financial liabilities is equal to or greater than 1.5 times, and (b) the total sum of the current liabilities and total non-current liabilities, excluding both cash and cash equivalents and other current financial assets divided by the total equity is equal to or less than 1.0 times. (iv) If none of the foregoing financial parameters are met, the Company shall distribute and pay 50% of the 2020 net income in favor of the respective shareholders as a final dividend. (b) Distribute and pay only one interim dividend during 2020, which will be charged against the aforementioned final dividend and that will be charged to the retained earnings reflected in the consolidated financial statements as of March 31, 2020, the percentage distributed shall be determined per the financial parameters expressed in letter a) above. It is recorded that on May 19, 2020 the Company's Board of Directors agreed to distribute and pay an interim dividend equivalent to US$0.17092 per share, charged to the Company's 2020 retained earnings. Said amount was paid in its equivalent in Chilean pesos according to the official exchange rate on May 29, 2020 (the “Interim Dividend”). (c) The Board of Directors will not approve the payment of other interim dividends charged against the 2020 net income. (d) At the ordinary general shareholders’ meeting that will be held in 2021, the Board of Directors shall propose a final dividend pursuant to the percentages in financial parameters described in in letter a) above discounting the Special Dividend and Interim Dividend. If the amount is equal to 84 4) OWNERSHIP AND SHARES or less than the amount of the sum of the Special Dividend and the Interim Dividend, then no additional amount will be distributed and the Interim Dividend will be understood to be paid as a definitive dividend. In any case, the final dividend may not be less than the mandatory minimum dividend that corresponds in accordance with Chilean law or the Company bylaws. (e) If there is an excess of net income in 2020, this may be retained and assigned or allocated for financing its own operations, to one or more investment projects of the Company, notwithstanding a future distribution of special dividends (dividendos eventuales) charged to the retained earnings previously approved at the shareholders’ meeting, or the possible and future capitalization of all or part of the latter. (f) The payment of additional dividends (dividendos adicionales) is not considered. On September 29, 2020, the Extraordinary Shareholders' Meeting approved the payment of a special dividend of US$100 million, equivalent to US$0.37994 per share, charged to the accumulated earnings of the Company. This amount was paid on October 8, 2020. iii) (1) STATISTICAL INFORMATION: DIVIDENDS All series A and series B shares carry equal rights to share in any dividend declared on SQM’s shareholder capital in circulation. During the past three years, the Company has paid out the following dividends: Payout Year US$ Total (in millions) US$/Share 2018 2018 (Special) 2018 (Interim) 2018 (Interim) 2018 (Interim) 2019 2019 (Interim) 2019 (Interim) 2019 (Interim) 2020 2020 (Provisorio) 2020 (Eventual) 110.5 100.0 113.8 133.9 83.5 108.6 80.5 70.2 60.5 66.9 45.0 100.0 0.41968 0.37994 0.43247 0.50864 0.31726 0.41274 0.30598 0.26669 0.22987 0.25414 0.17092 0.37994 iii) (2) STATISTICAL INFORMATION: SHARE TRANSACTIONS SQM’s Series A and Series B shares are traded on the Santiago Stock Exchange and the Santiago Electronic Stock Exchange. The Company’s Series B shares have been traded as ADSs on the New York Stock Exchange since September 20, 1993. Information on SQM’s shares on Chilean stock exchanges: Average Price (Ch$/Share) Number of Shares Traded 2020 I Quarter II Quarter SQM-A 20,969.54 19,939.50 18,751.57 SQM-B 24,357.87 21,614.45 19,735.70 SQM-A SQM-B 845,864 365,108 82,727 98,885,057 25,332,679 25,218,551 85 SQM-A Amount Traded (Millions of Ch$) SQM-B 2,421,473 533,173 501,990 17,222 7,211 1,545 4) OWNERSHIP AND SHARES III Quarter IV Quarter 19,679.42 23,178.37 24,273.25 31,824.76 202,792 195,237 20,235,881 28,097,946 3,996 4,470 483,710 902,600 Source: Bloomberg, Composite Exchange Information on SQM’s shares on the New York Stock Exchange: Average Price (US$/ADS) Number of Shares Traded Amount Traded (Millions of US$) 2020 I Quarter II Quarter III Quarter IV Quarter SQM-B 31.14 26.97 24.04 31.16 42.12 SQM-B 246,579,825 77,223,924 50,922,179 48,206,058 70,227,664 Source: Bloomberg, Composite Exchange SQM-B 7,710 2,045 1,233 1,491 2,940 5) SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT 5) A) SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT: DIVERSITY WITHIN THE BOARD OF DIRECTORS AS OF DECEMBER 31, 2020 i) NUMBER OF PERSONS BY GENDER Number of female directors Number of male directors: Female participation, % ii) NUMBER OF PERSONS BY NATIONALITY Number of Chilean directors: Number of foreign directors: Foreign directors, % iii) NUMBER OF PERSONS BY AGE Number of directors whose age is: Under 30 years: 30 to 40 years: 41 to 50 years: 51 to 60 years: 61 to 70 years: Over 70 years: Average age, years 0 8 0% 6 2 25% 0 1 2 2 1 2 57 iv) NUMBER OF PERSONS BY YEARS OF SERVICE Number of directors who, as of December 31, 2020, have held the position of director of SQM for: 86 5) SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT Less than 3 years: Between 3 and 6 years: More than 6 and less than 9 years: Between 9 and 12 years: More than 12 years: Average tenure, years 3 5 0 0 0 3 5) B) SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT: DIVERSITY WITHIN EXECUTIVE MANAGEMENT AS OF DECEMBER 31, 2020 i) NUMBER OF PERSONS BY GENDER Number of female executive officers: Number of male executive officers: Female participation, % ii) NUMBER OF PERSONS BY NATIONALITY Number of Chilean executive officers: Number of foreign executive officers: Foreign executive officers, % iii) NUMBER OF PERSONS BY AGE Number of executive officers whose age is: Under 30 years: 30 to 40 years: 41 to 50 years: 51 to 60 years: 61 to 70 years: Over 70 years: Average age, years 2 10 17% 10 1 8% 0 4 6 1 1 0 46 iv) NUMBER OF PERSONS BY YEARS OF SERVICE Number of executive officers who, as of December 31, 2020, have worked at SQM for: Less than 3 years: Between 3 and 6 years: More than 6 and less than 9 years: Between 9 and 12 years: More than 12 years: Average tenure, years 1 3 0 1 7 15 5) C) SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT: DIVERSITY WITHIN THE ORGANIZATION AS OF DECEMBER 31, 2020 i) NUMBER OF PERSONS BY GENDER Total number of female employees: Total number of male employees: 934 4,573 87 5) SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT ii) NUMBER OF PERSONS BY NATIONALITY Total number of Chilean employees: Total number of foreign employees: 5,079 428 iii) NUMBER OF PERSONS BY AGE Total number of employees whose age is: Under 30 years: 30 to 40 years: 41 to 50 years: 51 to 60 years: 61 to 70 years: Over 70 years: 803 2,179 1,439 861 220 5 iv) NUMBER OF PERSONS BY YEARS OF SERVICE Total number of employees who, as of December 31, 2020, have worked at SQM for: Less than 3 years: Between 3 and 6 years: More than 6 and less than 9 years: Between 9 and 12 years: More than 12 years: 1,607 1,970 393 724 813 88 5) SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT 5) D) SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT: SALARY GAP BY GENDER Proportion of the average gross base salary represented by female employees compared to male employees, disclosed according to the type of position: 89 Position Type Administrative Senior Manager Chief Executive Officer Operations Manager Manager Head of Department Operator Profesional Senior Profesional Deputy Senior Manager Supervisor Technical Operator Vicepresident 6) MANAGEMENT AND PERSONNEL Hay Methodology Group Level (1) Female Employees (%) 12 103% 13 (2) 18 (3) 19 109% 26 (3) 19 (3) 20 (3) 13 14 15 16 15 16 11 12 13 12 (2) 13 14 15 16 (3) 14 15 16 16 17 18 19 (3) 13 12 13 20 (3) 21 22 (3) 23 (3) 95% 106% 102% 101% 92% 107% 95% 92% 111% 100% 92% 120% 94% 96% 132% 101% 80% 103% 91% 104% 96% 79% (1) The Hay Methodology is a system that is used at companies around the world in order to evaluate positions in such a way that they can be compared among companies of different sizes and industries. Group levels are determined on the basis of multiple variables, including company size and the level of responsibility assigned to the position (defined primarily as a function of knowledge, autonomy and responsibility for results). 90 6) MANAGEMENT AND PERSONNEL (2) All employees at this position/group level are women. (3) All employees at this position/group level are men. 6) MANAGEMENT AND PERSONNEL 6) A) MANAGEMENT AND PERSONNEL: ORGANIZATIONAL CHART Organizational Chart g (1) On February 1, 2021, Raul Puerto left the Company. (2) On March 23, 2020, Rodrigo Vera became VP of Mining Operations. 91 6) MANAGEMENT AND PERSONNEL 6) B) MANAGEMENT AND PERSONNEL: INFORMATION ABOUT THE BOARD OF DIRECTORS i) GENERAL INFORMATION ABOUT THE BOARD OF DIRECTORS SQM’s Board of Directors comprises 8 members, none of which are alternate directors. The entire Board of Directors is regularly elected every three years at our ordinary shareholders’ meeting. The Board of Directors may appoint replacements to fill any vacancies that occur during periods between elections. If a vacancy occurs, the entire Board must be elected or re-elected at the next regularly scheduled meeting of shareholders. The last election of the Board of Directors took place at the ordinary shareholders’ meeting held on April 25, 2019. ii) IDENTIFICATION OF THE BOARD MEMBERS Directors as of December 31, 2020: Name Title Profession Chilean Taxpayer ID Date of Original Election Alberto Salas Muñoz Chairman. Independent Civil Engineer 6.616.233-0 Apr. 2018 Date of Last Reelection Apr. 2019 Board Tenure 3 years Economist Director Patricio Contesse Fica Vice Chairman Lawyer Georges de Bourguignon Arndt Hernán Büchi Buc Laurence Golborne Riveros Gonzalo Guerrero Yamamoto Francisco Ugarte Larrain Robert J. Zatta Director Independent Director Director Director Director Lawyer Civil Engineer Industrial Civil Engineer Lawyer Business Administration 15.315.085-0 7.269.147-4 Apr. 2018 Apr. 2019 Apr. 2019 N/A 3 years 2 years 5.718.666-6 8.170.562-3 Apr. 2017 Apr. 2018 Apr. 2019 Apr. 2018 4 years 3 years 10.581.580-8 Apr. 2016 Apr. 2017 5 years 10.325.736-0 Apr. 2019 N/A 2 years 48.211.511-K Apr. 2019 N/A 2 years Average board tenure: 3 years. Percentage of independent directors: 25%. Percentage of non-executive directors: 100%. Directors not on the Board as of December 31, 2020 but who were on the Board within the last two years: Name Title Profession Chilean Taxpayer ID Arnfinn F. Prugger Director Geoscientist 48.187.981-7 Date of Original Election Apr. 2015 Date of Last Reelection Apr. 2018 Date Left Board Apr. 2019 92 6) MANAGEMENT AND PERSONNEL iii) REMUNERATIONS OF THE DIRECTORS Summary of remunerations paid to members of the Board of Directors between January and December 2020 (in Ch$): Board of Directors SQM S.A. Directors’ Committee SQM S.A. Corporate Governance Committee SQM S.A. Safety, Health and Environment Committee SQM S.A. Total Directors Fixed Variable Fixed Variable Fixed Fixed Alberto Salas Muñoz 298,245,488 285,849,934 74,561,372 47,641,656 706,298,450 Patricio Contesse Fica 260,964,802 285,849,934 37,280,686 37,280,686 621,376,108 Georges de Bourguignon Arndt 206,698,152 142,924,967 68,899,384 47,641,656 Hernán Büchi Buc 223,684,116 142,924,967 37,280,686 Laurence Golborne Riveros 223,684,116 142,924,967 74,561,372 47,641,656 466,164,159 403,889,769 488,812,111 Gonzalo Guerrero Yamamoto 206,698,152 142,924,967 34,449,692 384,072,811 Francisco Ugarte Larrain 206,698,152 142,924,967 34,449,692 384,072,811 Robert J. Zatta TOTAL 206,241,918 142,924,967 34,373,653 383,540,538 1,832,914,896 1,429,249,670 218,022,128 142,924,968 109,011,064 106,104,031 3,838,226,757 93 6) MANAGEMENT AND PERSONNEL Summary of remunerations paid to members of the Board of Directors between January and December 2019 (in Ch$): Board of Directors SQM S.A. Directors’ Committee SQM S.A. Corporate Governance Committee SQM S.A. Safety, Health and Environment Committee SQM S.A. Total Directors Fixed Variable Fixed Variable Fixed Fixed Alberto Salas Muñoz 211,917,584 355,116,983 54,772,055 59,186,164 680,992,786 Patricio Contesse Fica 185,427,887 355,116,983 19,594,856 26,489,699 586,629,425 Georges de Bourguignon Arndt 134,555,100 44,851,700 Hernán Büchi Buc 165,833,031 177,558,483 15,582,343 59,186,161 26,489,699 Mark Fracchia 9,648,027 92,911,790 1,378,290 Laurence Golborne Riveros 165,833,031 177,558,491 54,772,054 59,186,164 179,406,800 444,649,717 103,938,107 457,349,740 Gonzalo Guerrero Yamamoto 182,818,995 177,558,491 Arnfinn F. Prugger 48,263,895 177,558,483 Darryl Stann 9,648,027 92,911,790 Francisco Ugarte Larrain Robert J. Zatta TOTAL 134,555,100 117,569,136 29,320,693 389,698,179 6,894,843 232,717,221 1,378,290 22,425,850 103,938,107 156,980,950 19,594,856 137,163,992 1,366,069,813 1,606,291,494 169,978,152 177,558,489 71,266,985 82,300,091 3,473,465,024 94 6) MANAGEMENT AND PERSONNEL iv) ADVISORY SERVICES CONTRACTED BY THE BOARD OF DIRECTORS During 2020, the Board of Directors contracted the following advisory services: Entity PriceWaterhouseCoopers Others TOTAL Type of Service Financial statement audit Legal and other Amount (US$) US$1.34 million US$0.10 million US$1.44 million v) BOARD OF DIRECTORS TRAINING During 2020, the Board of Directors received annual training on the U.S. Foreign Corrupt Practices Act (“FCPA”). v) BOARD OF DIRECTORS ATTENDANCE As discussed in article 15 of the Company’s By-laws, the Board will meet or be in session at least once a month. Directors are expected to attend Board meetings in person or via telephone or video conference, in which proper means are in place. Members of the Board and the Committees, upon which they serve, are expected to attend meetings fully prepared and to remain in attendance for the duration of the meeting. Board meeting attendance will be disclosed annually in the Board Report Card, which is published on the Company website. According to article 13 of the Company By-laws, a Director who does not attend 3 consecutive meetings due to reasons not considered reasonable by the Board, will as a matter of fact stop performing his or her functions, and must be replaced without delay and formalities. In this case, and in the event of conflict of duties, resignation, dismissal, death, bankruptcy, or any other inability disabling a Director to perform his duties, the Board will proceed to appoint the replacement Director(s) pursuant to the Law who will stay in office and perform his or her duties until the next shareholder’s meeting to be held by the Company and at which all Directors are to be re-elected. During 2020, the Company's Board of Directors met 16 times through 13 ordinary meetings and three extraordinary meetings. No director attended less than 85% of the total ordinary board meetings. Average Board attendance was 96%. 6) C) MANAGEMENT AND PERSONNEL: INFORMATION ABOUT THE DIRECTORS’ COMMITTEE i) DIRECTORS’ COMMITTEE FORMED IN ACCORDANCE WITH ARTICLE 50 PART TWO OF LAW NO, 18,046 As of December 31, 2020, the Company had a Directors’ Committee to carry out the functions established under Article 50, part two, of Law No. 18,046. ii) IDENTIFICATION OF MEMBERS OF THE DIRECTORS’ COMMITTEE As of December 31, 2020, the Company’s Directors’ Committee was comprised of three Directors: Georges de Bourguignon A., Laurence Golborne R. and Alberto Salas M. Under the regulations in force as of December 31, 2020, Messrs. Golborne and Salas held and continue to hold the position of Independent Director. Mr. Salas held and continues to hold the position of Chairman of the Directors’ Committee. 95 6) MANAGEMENT AND PERSONNEL The members of this Directors’ Committee were elected on April 25, 2019. On that date, the elected director Georges de Bourguignon A. became a new member of the Directors´ Committee, replacing Hernan Büchi B. The Directors’ Committee had previously remained unchanged since April 27, 2018. iii) REMUNERATIONS OF THE DIRECTORS’ COMMITTEE On April 23, 2020, it was agreed at the SQM Ordinary Shareholders’ Meeting that each Director sitting on the Directors’ Committee would receive monthly remunerations of 200 UF, and annual remunerations equivalent to 0,015% of the Company’s liquid net earnings for the 2020 financial year. This compensation package is fixed regardless of the number of sessions held by the Committee during the period and separate to the remunerations received by the members in their capacity as members of the Company’s Board of Directors. For further information about remunerations paid to the members of the Directors’ Committee during 2020 and 2019, see section 5) B) iii) Remunerations of the Directors. iv) ACTIVITIES OF THE DIRECTORS’ COMMITTEE During 2020, the Directors’ Committee of SQM (the “Committee”) analyzed (i) the Company’s Unaudited Financial Statements and Reports; (ii) the Company’s Audited Financial Statements and Reports; (iii) the Reports and proposals of external auditors, accounts inspectors and independent risk rating agencies for the Company; (iv) the proposal to SQM’s Board of Directors about the external auditors and independent rating agencies that the Board could recommend to the respective shareholders’ meeting for their subsequent appointment; (v) the tax and other services, other than audit services, provided by the Company’s external auditors and its subsidiaries in Chile and abroad; (vi) the remuneration and compensation plans for the Company’s main executives; (vii) the Company's risk matrix; (viii) the activity related to the Company's compliance program; (ix) the report on internal control of the Company and (x) the various matters referred to in the Chapter titled “Directors’ Committee” included in SQM’s Financial Statements at December 31, 2020. Regarding the above, the Committee: (a) (b) (c) Examined the information regarding the financial statements of SQM for the 2020 fiscal year and the report issued thereon by the external auditors of SQM, Similarly, it also examined the Company’s Interim Consolidated Financial Statements for the 2020 fiscal year. Proposed to the Company’s Board of Directors the names of the External Auditors and the Independent Credit Rating Agencies for SQM and the Company’s Board of Directors, in turn, suggested their appointment to the respective Annual Ordinary Shareholders Meeting of SQM. The Company’s Board of Directors approved said suggestions and the Shareholders’ Meeting also ratified them. Examined and approved the remuneration system and the compensation plans for the Company’s employees and senior executives. The Committee also (i) authorized the contracting by the Company of various consulting services with PwC on non-audit related matters, (ii) reviewed the expenses of the Company's CEO, (iii) reviewed the reports from the Company’s internal audit and risk and compliance areas; and (iv) examine the information presented by the External Auditors in connection with critical audit mattes, this is audit matters that involves especially challenging, subjective, or complex auditor judgments, that are required to be communicated to the Committee. The Committee issued the Annual Management Report referred to in Law No. 18,046. 96 6) MANAGEMENT AND PERSONNEL During 2020, the Company did not enter into related party transactions which require to follow the requirements and procedures established in title XVI of the Corporations Law, therefore the Committee was not required to examine information regarding related party transactions, but did review a potential transaction that was not entered into by the Company. On April 23, 2020, the Annual General Shareholders’ Meeting of SQM approved an operational budget for the Committee; the operational budget is equivalent to the sum of the annual remunerations of the members of the Committee and US$250,000. The activities carried out by the Committee, as well as the expenses incurred by it, are disclosed at the General Shareholders Meeting. Article 50 bis of the Chilean Corporations Act states that the Committee should consist of three Directors, of which at least one member should preferably be independent from the controller (i.e., any person or entity who “controls” the company for Chilean law purposes), if any, and that their functions be remunerated. v) ADVISORY SERVICES CONTRACTED BY THE DIRECTORS’ COMMITTEE During 2020, the Committee incurred expenses of approximately US$441,000 related to the advisory services of Internal Audit and SOX Audit. 97 6) MANAGEMENT AND PERSONNEL 6) D) MANAGEMENT AND PERSONNEL: MAIN EXECUTIVES i) IDENTIFICATION OF EXECUTIVE OFFICERS As of December 31, 2020, the following executives served on the Company’s executive management team: Name Position Profession Ricardo Ramos R. Chief Executive Officer Gerardo Illanes G. Gonzalo Aguirre T. Pablo Altimiras C. Jose Miguel Berguño C. Frank Biot Carlos Díaz O. Ignacia López B. Natalia Pizarro G. Raúl Puerto M. Vice President of Corporate Finance and Chief Financial Officer General Counsel Vice President of Lithium and Iodine Business Vice President of Operations, Nitrates and Iodine Vice President of Nitrates and Potassium Business Vice President of Operations, Potassium and Lithium Public Affairs Manager Vice President of People and Performance Internal Audit Manager Francisco Sanchez V. Rodrigo Vera D. Risk Management and Compliance Officer Vice President of Mining Operations Chilean Taxpayer ID 8.037.690-1 In Position Since Jan. 2019 13.904.120-8 Oct. 2018 Industrial Civil Engineer Industrial Civil Engineer Lawyer 13.441.419-7 Sep. 2016 Industrial Civil Engineer Industrial Civil Engineer Economist Industrial Civil Engineer Journalist Civil Engineer Industrial Engineer Industrial Civil Engineer Industrial Civil Engineer 13.657.862-6 Oct. 2018 10.903.992-6 Mar.2019 N/A Oct. 2018 10.476.287-5 Mar. 2019 10.777.962-0 14.167.897-3 Oct. 2019 Abr. 2019 14.757.436-K Jan. 2016 15.381.281-0 Apr. 2019 9.120.446-0 Apr.2020 ii) REMUNERATIONS OF MAIN EXECUTIVES Remunerations for the main executives for 2020 and 2019 were as follows: Year Number of Executives (1) 2020 2019 126 124 Fixed Salary (Millions of Ch$) 13,694 13,422 Variable Salary (Millions of Ch$) 3,036 3,916 Total Salary (Millions of Ch$) 16,730 17,338 (1) Considers the average number of executives during the period. iii) COMPENSATION PLANS Executive incentive plans: the organization’s goal is to create value for its interest groups, and to this end SQM S.A. has developed a variable incentives system that recognizes people’s commitment to the organization and its operating results. Directors: the only remunerations assigned to the Board of Directors are disclosed in section 5) B) iii) Remunerations of the Directors. The Company has not implemented any incentive plans for its Directors. SQM Executive Officers: the Company provides executives with an annual and a long-term bonus plan. Their incentives are based on target achievement, individual contribution to the Company’s operating results, and 98 6) MANAGEMENT AND PERSONNEL the Company’s performance. These incentives are structured in a minimum and maximum gross remuneration and are paid once a year. SQM also operates a compensation plan designed to retain its executives by providing bonuses linked to the to the Company’s performance through the SQM Series B share price (Santiago Stock Exchange). A total of 29 Company executives are entitled to this compensation plan, as long as they remain a part of the Company until a given date. This includes a 2020 bonus equivalent to 177,905 shares, which is effective for those people still with the Company through the end of 2020, and a 2021 bonus for US$8.5 million, which will go into effect in equal parts for those who remain with the Company at the end of each of the four quarters in 2021. The payment dates, where relevant, will be during the quarter following the quarter when the benefit is made effective. 6) E) MANAGEMENT AND PERSONNEL: NUMBER OF EMPLOYEES As of December 31, 2020, SQM and its subsidiaries had 5,507 employees, detailed as follows: Employee Type Executives Professionals Technicians and operators Foreigners Total Parent Subsidiaries Total 30 94 267 17 408 85 1,156 3,310 548 5.099 115 1,250 3,577 565 5.507 99 6) MANAGEMENT AND PERSONNEL 6) F) MANAGEMENT AND PERSONNEL: SHARE OWNERSHIP OF EXECUTIVE OFFICERS AND BOARD MEMBERS We have been informed that the following Directors own shares of SQM as of December 31, 2020: Name Position Alberto Salas Muñoz Patricio Contesse Fica Georges de Bourguingnon Arndt Hernán Büchi Buc Laurence Golborne Riveros Gonzalo Guerrero Yamamoto Francisco Ugarte Larrain Robert J. Zatta Chairman. Independent Vice Chairman Director Director Independent Director Director Director Director Percentage of Shares in SQM 0% 0% <1% 0% 0% <1% 0% 0% We have been informed that the following executive officers own shares of SQM as of December 31, 2020: Name Ricardo Ramos R. Gerardo Illanes G. Gonzalo Aguirre T. Pablo Altimiras C. Jose Miguel Berguño C. Frank Biot Carlos Díaz O. Ignacia Lopez B. Natalia Pizarró G. Raúl Puerto M. Francisco Sanchez V. Position Percentage of Shares in SQM Chief Executive Officer Vice President of Corporate Finance and Chief Financial Officer General Counsel Vice President of Lithium and Iodine Business Vice President of Operations, Nitrates and Iodine Vice President of Nitrates and Potassium Business Vice President of Operations, Potassium and Lithium Public Affairs Manager Vice President of Human Resources and Performance Internal Audit Manager Risk Management and Compliance Officer 0% <1% 0% 0% <1% 0% 0% 0% 0% 0% 0% 100 7) INFORMATION ABOUT SUBSIDIARIES AND ASSOCIATES 7) A) INFORMATION ABOUT SUBSIDIARIES AND ASSOCIATES: SUBSIDIARIES AND ASSOCIATES 7) INFORMACIÓN SOBRE SUBSIDIARIAS Y ASOCIADAS Subsidiaries in Chile Name of Company Type of Company Capital Ownership AGRORAMA S.A. Corporation US$140,660 AJAY-SQM CHILE S.A. Corporation US$5,313,794 ALMACENES Y DEPOSITOS LTDA. Limited liability corporation US$1,092,724 COMERCIAL AGRORAMA LTDA Limited liability corporation US$1,125,280 COMERCIAL HYDRO S.A. Corporation US$4,818,186 EXPLORACIONES MINERAS S.A. Corporation US$30.100.000 99.999% SQMC S.A. 0.001% SQM Industrial S.A. 51% SQM S.A. 49% Otros no relacionados 99% SQM Potasio S.A. 1% SQM S.A. 70% SQMC S.A. 30% Otros no relacionados 99.9999% SQMC S.A. 0.0001% Agrorama S.A. 0.269103% SQM S.A. 99.730897% SQM Potasio S.A. * Director, Gerente General o Ejecutivo Principal de SQM S.A. Investment as % of SQM S.A.’s individual assets 0.00131% 0.32995% Corporate Purpose Board of Directors CEO / Legal Representative Relations / Contracts with parent company Sales and distribution of fertilizers, pesticides and agricultural inputs Iodine derivatives production, sales and marketing Rodrigo Millán Riffo Rodrigo Real Ibaceta Enrique Olivares Carlini Rodrigo Real Ibaceta Distribución Pablo Altimiras C.* Andres Fontannaz Alec Poitevint Matt Webb None Carlos Grez Ricardo Ramos R.* Production and distribution / Commercial agreement Support 0.00735% General deposit activities 0.02773% Sales and distribution of fertilizers, pesticides and agricultural inputs Rodrigo Real Ibaceta Rodrigo Millán R. Enrique Olivares C. Tullio Callegari P. Rodrigo Real Ibaceta Distribution 0.11622% Import and marketing of fertilizers Carlos Ríos M. Roberto Campusano B. Rodrigo Real Ibaceta Rodrigo Real Ibaceta Support 0.93163% Explotation of other mines and quarries José Miguel Berguño C.* Ricardo Ramos R.* Gerardo Illanes G. * Ricardo Ramos R.* Support 101 Name of Company Type of Company Capital Ownership INSTITUCION DE SALUD PREVISIONAL NORTE GRANDE LTDA. ORCOMA ESTUDIOS SPA Limited liability corporation Joint stock company US$70,330 99% SQM Industrial S.A. 1% SQM S.A. US$4,631,507 100% SQM S.A. 0.10938% ORCOMA SPA Joint stock company US$2,357,731 100% SQM S.A. 0.05677% SERVICIOS INTEGRALES DE TRANSITOS Y TRANSFERENCIAS S.A. SOCIEDAD PRESTADORA DE SERVICIOS DE SALUD CRUZ DEL NORTE S.A. SOQUIMICH COMERCIAL S.A. Corporation US$9,873,573 Corporation US$70,330 Open Srock Corporation US$61,745,898 99.99966% SQM Industrial S.A. 0.00034% SQM S.A. 99% SQM Industrial S.A. 1% SQM Potasio S.A. 60.6383212% SQM Industrial S.A. 0.0000004% SQM S.A. 39.3616784% Otros no relacionados 7) INFORMACIÓN SOBRE SUBSIDIARIAS Y ASOCIADAS Corporate Purpose Board of Directors CEO / Legal Representative Relations / Contracts with parent company Investment as % of SQM S.A.’s individual assets 0.03958% Not applicable Humberto Riquelme Support José Miguel Berguño B.* Pablo Altimiras C.* Gerardo Illanes G.* Carlos Diaz O. * Rodrigo Vera D.* Not applicable / None None Ricardo Ramos R.* José Miguel Berguño C.* Not applicable / None Ricardo Ramos R.* Distribution Sergio Figueroa Rodríguez Support Rodrigo Real Ibaceta Distribution / Supply José Miguel Berguño B.* Ricardo Ramos R.* Pablo Altimiras C.* Gerardo Illanes G.* Carlos Diaz O. * Mauricio Guerra Oliveros Sergio Figueroa Rodriguez Raquel Ahumada Cabrera Bogdan Borkowski S. Carlos Díaz O.* Alfredo Doberti D. Francisco Javier Fontaine S. Gerardo Illanes G.* Christian Lüders M. Eugenio Ponce L. Administration of health matters for SQM S.A. Exploration, measurement, prospection and research of mineral deposits for extraction, production and mineral processing Exploration, measurement, prospection, research, development and operation of mineral deposits for extraction, production and processing Transport and storage of merchandise 2.19170% 0.00204% Provision of health- related services 2.18640% Production and marketing of fertilizers 102 7) INFORMACIÓN SOBRE SUBSIDIARIAS Y ASOCIADAS Corporate Purpose Board of Directors CEO / Legal Representative Relations / Contracts with parent company Name of Company Type of Company Capital Ownership SQM INDUSTRIAL S.A. Corporation US$715,066,287 99.047043% SQM S.A. 0.952957% SQM Potasio S.A. Investment as % of SQM S.A.’s individual assets 39.05785% SQM MAG SPA Joint stock company US$10,000 100% SQM Potasio S.A. 0.04822% Operation of extraction plants, holdings and transfer of mineral substances and raw materials Mining exploration and exploitation José Miguel Berguño C.* Carlos Diaz O.* Ricardo Ramos R.* None SQM NITRATOS S.A. Corporation US$30,349,981 SQM POTASIO S.A. Corporation US$257,010,492 99.99999782% SQM S.A. 0.00000218% SQM Potasio S.A. 99.999999% SQM S.A. 0.000001% Otros no relacionados 26.97320% 12.91972% Production and sale of fertilizers SQM SALAR S.A. Corporation US$38,000,000 81.82% SQM Potasio S.A. 18.18% SQM S.A. 45.32301% Pablo Altimiras C.* José Miguel Berguño C.* Carlos Diaz O.* Gerardo Illanes G.* Ricardo Ramos R.* Pablo Altimiras C.* José Miguel Berguño C.* Carlos Diaz O.* Gerardo Illanes G.* Ricardo Ramos R.* Patricio Contesse F.* Laurence Golborne R.* Gonzalo Guerrero Y.* Alberto Salas M.* Ricardo Ramos R.* None Extraction of minerals for fertilizer and chemical production Exploitation and marketing of potassium, lithium and other products SOCIEDAD CONTRACTUAL MINERA BÚFALO Sociedad Contractual Minera US$22,949 99.9% SQM S.A. 0.1% SQM Potasio S.A. 0.00894% Export recognize prosper investigate and explore deposits 103 Ricardo Ramos R.* Production Ricardo Ramos R.* José Miguel Berguño C.* Carlos Díaz O.* Gerardo Illanes G.* Pablo Altimiras C.* Gonzalo Aguirre T.* Actuando dos cualquiera de ellos en forma conjunta Ricardo Ramos R.* Production Production Ricardo Ramos R.* Production Ricardo Ramos R.* Production Ricardo Ramos R.* Production Filiales Internacionales Name of Company Type of Company Capital Ownership ADMINISTRACION Y SERVICIOS SANTIAGO S.A. DE C.V. Variable capital corporation US$6,612 99.998% SQM Industrial S.A. 0.002% SQM North America Corporation Investment as % of SQM S.A.’s individual assets 0.00641% Services 7) INFORMACIÓN SOBRE SUBSIDIARIAS Y ASOCIADAS Corporate Purpose Board of Directors CEO / Legal Representative Relations / Contracts with parent company Christian Lüders M. Ricardo Ramos R.* Frank Biot* Gerardo Illanes G.* Gonzalo Aguirre T.* Alvaro Fernandez G. Patricio de Solminihac T. Domingo Aguirre F. Christian Lüders M. Matías Murillo G. Andrés Yaksic B. None Christian Lüders M. Support Christian Lüders M. Support Martim de Almeida Sampaio Support Pablo Altimiras C.* Gerardo Illanes G.* Pablo Hernandez Support Corporation US$1,000 Limited liability corporation US$774,294 100% SQM Investment Corporation N.V. 29.18% SQM Industrial S.A. 70.82% SQM Brasil Ltda. 0.00619% Marketing, importing and exporting 0.00308% Marketing advisory services, representation of other foreign and local companies, administrative support in general Investment company Corporation US$338,124 100% SQM North America Corporation 0.00721% COMERCIAL CAIMÁN INTERNACIONAL S.A. NITRATOS NATURAIS DO CHILE SERVICIOS LTDA. NORTH AMERICAN TRADING COMPANY ROYAL SEED TRADING A.V.V. RS AGRO CHEMICAL TRADING CORP. A.V.V. Limited liability corporation Limited liability corporation US$6,000 US$6,000 1.67% SQM S.A. 98.33% SQM Potasio S.A. 0.00050% 98.3333% SQM S.A. 1.6667% SQM Potasio S.A. 0.12357% Investment and marketing of moveable property and real estate Investment and marketing of moveable property and real estate IMC International Management & Trust Company N.V. IMC International Management & Trust Company N.V. Support Support IMC International Management & Trust Company N.V. IMC International Management & Trust Company N.V. 104 Name of Company Type of Company Capital Ownership 7) INFORMACIÓN SOBRE SUBSIDIARIAS Y ASOCIADAS Corporate Purpose Board of Directors CEO / Legal Representative Relations / Contracts with parent company Investment as % of SQM S.A.’s individual assets 4.26682% 1.16230% SOQUIMICH EUROPEAN HOLDINGS B.V. SQM AFRICA PTY LTD SQM AUSTRALIA PTY LTD SQM (BEIJING) COMMERCIAL CO. LTDA. SQM BRASIL LTDA. Limited liability corporation Limited liability corporation Limited liability corporation Limited liability corporation Limited liability corporation US$49,265,296 US$70,699 25.23% SQM Corporation N.V. 74.77% SQM Investment Corporation N.V. 100% Soquimich European Holdings B.V. US$155,585,000 100% SQM Potasio S.A. 3.64118% Investment company Marketing of specialty plant nutrients and industrial products Mining – Specifically lithium Kris Van den Bruel Patrick Vanbeneden Paul van Duuren Dennis Beets Frank Biot* Patrick Vanbeneden Emmanuel de Marez Jay Leary Pablo Altimiras C.* Gonzalo Aguirre T.* US$1,600,000 100% SQM Industrial S.A. 0.29045% Commission agent and marketing of chemical products Patricio de Solminihac T.* Frank Biot* Ricardo Ramos R.* US$2,890,000 99.29% SQM Industrial 0.71% SQM S.A. 0.00524% None Investment Ettienne Strydom Distribution Jay Leary Victor Larrondo G. Martim de Almeida Sampaio Investment and exploration activities Distribution / Commercial agency agreement Support None Marketing advisory services, representation of other foreign and domestic companies, administrative support in general Manufacturing, import, sales and export of fertilizers Christian Luders M. Matias Murillo G. Support Christian Luders M. Matias Murillo G. Patricio de Solminihac T. Gonzalo Aguirre T.* Gerardo Illanes G.* Frank Biot* Sebastian Sanchez SQM COLOMBIA LTDA. Join stock company US$1,291,915 100% SQM Industrial S.A. 0.28279% 105 Name of Company Type of Company Capital Ownership SQM COMERCIAL DE MEXICO S.A. de C.V. Variable capital corporation US$22,044,533 SQM CORPORATION N.V. SQM ECUADOR S.A. Corporation US$12,939,718 Corporation US$416,900 SQM EUROPE N.V. Corporation US$18,656,745 99.94% SQM Industrial S.A. 0.05% SQM Potasio S.A. 0,01% SQM S.A. 99.9998% SQM Industrial S.A. 0.0002% SQM S.A. 99.996% SQM Industrial S.A. 0.004% SQM S.A. 99.42% Soquimich European Holdings B.V. 0.58% SQM S.A. Investment as % of SQM S.A.’s individual assets 2.76566% 1.53535% 0.65699% 11.03132% SQM FRANCE S.A. Corporation US$204,061 SQM HOLLAND B.V. Corporation US$17,319,735 100% Soquimich European Holdings NV 100% Soquimich European Holdings NV 0.00842% 0.47975% 7) INFORMACIÓN SOBRE SUBSIDIARIAS Y ASOCIADAS Corporate Purpose Board of Directors CEO / Legal Representative Relations / Contracts with parent company Christian Luders M. Distribution Import, export and marketing of fertilizers Christian Lüders M. Ricardo Ramos R.* Frank Biot* Gerardo Illanes G.* Gonzalo Aguirre T.* Alvaro Fernandez G. Patricio de Solminihac T. Domingo Aguirre F. Investment in moveable goods and real estate Wholesale fertilizer sales Distribution and marketing of specialty plant nutrients and industrial products in Europe, Northern Africa and the Middle and Far East Distribution Plant for the production and distribution of specialty plant nutrients soluble in water TMF Group TMF Group Support None Christian Luders M. Distribution Ricardo Ramos R.* Gonzalo Aguirre T.* Pablo Altimiras C.* Gerardo Illanes G.* Frank Biot* Support and distribution None Oliver Lecaplain Support Erik Borghijs Patrick Vanbeneden Kris Van den Bruel Marc Goetschalckx None Production and distribution 106 7) INFORMACIÓN SOBRE SUBSIDIARIAS Y ASOCIADAS Corporate Purpose Board of Directors CEO / Legal Representative Relations / Contracts with parent company Distribution Distribution and marketing of specialty plant nutrients and technical products in Spain Import trading and distribution services Distribution and sales of specialty plant nutrients and industrial products in Europe, North Africa and the Middle and Far East Investment and marketing of moveable goods and real estate Marketing of products in Asia/Oceania and marketing assistance Frank Biot* Erik Borghys Gerardo Illanes G.* José Andrés Cayuela Enrique Torras Erik Lütken R. Frank Biot* Patrick Vanbeneden Rudy Ismanto Ricardo Ramos R.* Gonzalo Aguirre T.* Pablo Altimiras C.* Gerardo Illanes G.* Not applicable Not aplicable Frank Biot* Support and distirbution TMF Group TMF Group Support Pablo Altimiras C.* Gerardo Illanes Andrés Stocker Andrés Stocker Distribution and marketing / Commercial agency agreement Name of Company Type of Company Capital Ownership SQM IBERIAN S.A. Corporation US$9,933,128 100% Soquimich European Holdings NV Investment as % of SQM S.A.’s individual assets 1.05098% SQM INDONESIA S.A. Corporation US$31,448 SQM INTERNATIONAL N.V. Corporation US$3,079,827 SQM INVESTMENT CORPORATION N.V. SQM JAPAN CO. LTD. Corporation US$50,000 Limited liability corporation US$87,413 0.00006% 0.78915% 3.52271% 0.60802% 80% Soquimich European Holding B.V. 20% Interés Minoritario 99.42% Soquimich European Holdings B.V. 0.58% SQM S.A. 99.00% SQM Potasio S.A. 1.00% SQM S.A. 15.8147% SQM Potasio S.A. 84.0256% Soquimich European Holdings B.V. 0.1597% SQM S.A. 107 7) INFORMACIÓN SOBRE SUBSIDIARIAS Y ASOCIADAS Investment as % of SQM S.A.’s individual assets 0.01700% 0.37752% Corporate Purpose Board of Directors CEO / Legal Representative Relations / Contracts with parent company Sales, import and export of chemical products Production and marketing of lithium derivatives Pablo Altimiras C. Gerardo Illanes G. Pablo Altimiras Distribution None Pablo Hernandez Support 0.00369% Services Christian Lüders M. Ricardo Ramos R.* Frank Biot* Gerardo Illanes G.* Gonzalo Aguirre T.* Alvaro Fernandez G. Patricio de Solminihac T. Domingo Aguirre F. Gonzalo Aguirre T.* Pablo Altimiras C. * Frank Biot* Gerardo Illanes G.* Ricardo Ramos R.* Frank Biot* Patrick Vanbeneden Gerardo Illanes G.* Carlos Díaz O.* David Masters Stefan Debruyne None Christian Lüders M. Not aplicable Pablo Hernandez Distribution None Distribution Abdon Jesus Rojas Lagos Support Name of Company Type of Company Capital Ownership SOQUIMICH LLC SQM LITHIUM SPECIALTIES LIMITED PARTNERSHIP, L.L.P SQM NITRATOS MEXICO S.A. de C.V. Limited liability corporation Limited liability corporation Variable capital corporation US$700,000 100% SQM Industrial S.A. US$33,712,430 US$5,636 99% SQM Virginia LLC 1% North American Trading Co. 99.998% SQM Industrial S.A. 0.002% SQM North America Corporation SQM NORTH AMERICA CORPORATION Corporation US$79,576,550 SQM OCEANIA PTY LIMITED Limited liability corporation US$1 51% SQM Industrial S.A. 40% SQM S.A. 9% Soquimich European Holdings B.V. 100% SQM Soquimich European Holdings B.V. 3.49405% 0.09472% Marketing of nitrates, fertilizers, iodine and lithium in North America Import, export and distribution of fertilizers and industrial products SQM PERÚ S.A. Corporation US$1,110,627 99.99093% SQM Industrial S.A. 0.00907% SQM S.A. 0.00060% Marketing of agricultural and industrial inputs 108 Name of Company Type of Company Capital Ownership SQM (THAILAND) LIMITED Corporation US$3,364,341 99.996% SQM European Holdings NV 0.004% Interés Minoritario Investment as % of SQM S.A.’s individual assets 0.08482% Corporation US$2,499,995 100% SQM Industrial S.A. 2.03025% Corporation US$33,375,305 100% SQM North America Corporation 0.69847% SQM SHANGHAI CHEMICALS CORPORATION SQM VIRGINIA L.L.C. SQMC HOLDING CORPORATION 7) INFORMACIÓN SOBRE SUBSIDIARIAS Y ASOCIADAS Corporate Purpose Board of Directors CEO / Legal Representative Relations / Contracts with parent company Marketing of fertilizers and industrial chemicals Patrick Vanbeneden Andrés Stocker Pablo Altimiras C. Sales, import and export, marketing of chemical products Investment company Gonzalo Aguirre T.* Gerardo Illanes G.* Daniel Jimenez S. Pablo Altimiras C.* Gerardo Illanes G.* None Distribution Aaron Lee Distribution Pablo Hernandez Support Corporation US$3,000,000 99.9% SQM Potasio S.A. 0.1% SQM S.A. 1.13121% Investment company Carlos Diaz O.* Felipe Smith de A. Pablo Hernandez Support 109 7) INFORMACIÓN SOBRE SUBSIDIARIAS Y ASOCIADAS Corporate Purpose Board of Directors CEO / Legal Representative Not applicable Not applicable Production, distribution, sales and marketing of specialty plant nutrients Production and distribution of iodine derivatives Production, sales and marketing of iodine derivatives Exploration of mineral resources and project development Pablo Altimiras* Andrés Fontannaz Alec Poitevint Matt Webb Pablo Altimiras* Andrés Fontannaz Alec Poitevint Matt Webb David Hathorn Timothy Keating Trinidad Reyes P. David Netherway Bradley Sampson Jonathan Trollip Relations / Contracts with parent company Production and distribution / Commercial agreement Production and distribution / Commercial agreement Production and distribution / Commercial agreement Michel Pichon Matt Webb Bradley Sampson Support International Associates Name of Company Type of Company Capital Ownership ABU DHABI FERTILIZER INDUSTRIES CO. W.L.L. (U.A.E.) AJAY EUROPE SARL Corporation US$1,443,047 Corporation US$3,975,721 AJAY NORTH AMERICA L.L.C. Corporation US$10,383,786 KORE POTASH PLC Corporation US$1,556,531 37% SQM Corporation N.V. 63% Otros no relacionados 50% Soquimich European Holdings B.V. 50% Otros no relacionados 49% SQMC Holding Corporation L.L.P. 51% Otros no relacionados 20.20% SQM S.A. 79.80% Otros no relacionados Investment as % of SQM S.A.’s individual assets 0.33613% 0.28195% 0.40243% 0.62852% 110 7) INFORMACIÓN SOBRE SUBSIDIARIAS Y ASOCIADAS 7) B) INFORMATION ABOUT OTHER INVESTEES Joint Ventures or Joint Control Name of Company Type of Company Capital Ownership COVALENT LITHIUM PTY LTD Limited liability corporation US$7 SICHUAN SQM- MIGAO CHEMICAL FERTILIZER CO. LTD. PAVONI & C. SPA SQM VITAS BRASIL SQM VITAS FZCO Limited liability corporation Limited liability corporation Limited liability corporation Sociedad de zona franca US$28,000,000 US$7,140,808 US$4,300,597 US$1,415,820 50% SQM Australia Pty Ltd 50% Otros no relacionados 50% SQM Industrial S.A. 50% Otros no relacionados 50% Soquimich European Holdings B.V. 50% Otros no relacionados 99.99% SQM Vitas FZCO 0.01% Otros no relacionados 48.0769231% SQM Industrial S.A. 1.92307692% SQM S.A. Investment as % of SQM S.A.’s individual assets 0.04254% 0.40653% 0.21739% 0.54642% 0.23893% Corporate Purpose Board of Directors CEO / Legal Representative Administration, design, execution, construction and operation of projects Ian Hansen Aaron Hood Pablo Altimiras C.* Eugenio Ponce L. Ross Martelli Production, distribution, sales and marketing of specialty fertilizers Alfredo Doberti Frank Biot* Liu Yaqin Sun Pingfu Production, distribution, sales and marketing of specialty fertilizers Production, distribution, sales and marketing of specialty fertilizers Production, distribution, sales and marketing of specialty fertilizers Patrick Vanbeneden Frank Biot* Giuseppe Casubolo Aldo Bonaccorsi Riccardo Carbone Sara Pavoni Patrick Vanbeneden Karina Kuzmak- Bourdet Alfredo Doberti Patrick Vanbeneden Karina Kuzmak- Bourdet Frank Biot* Sun Pingfu Sara Pavoni Leandro Ries Patrick Vanbeneden SQM VITAS PERÚ S.A.C. Sociedad anónima cerrada US$4,063,802 99.99999% SQM Vitas FZCO 0.00001% SQM Industrial S.A. 0.50909% Production, distribution, sales and marketing of specialty fertilizers Patrick Vanbeneden Karina Kuzmak- Bourdet Alfredo Doberti Diego San Martin Relations / Contracts with parent company Administration, design, execution, construction and operation of projects services Production and distribution / Commercial agreement Production and distribution / Commercial agreement Production and distribution / Commercial agreement Production and distribution / Commercial agreement Production and distribution / Commercial agreement 111 7) INFORMACIÓN SOBRE SUBSIDIARIAS Y ASOCIADAS 112 8) INFORMATION ABOUT RELEVANT OR ESSENTIAL FACTS 8) INFORMATION ABOUT RELEVANT OR ESSENTIAL FACTS Relevant or Essential Facts Pertaining to SQM S.A. The events indicated below occurred or were reported as essential or of interest to the CMF, to the stock exchanges and incorporated into the Company's website. • On January 16, 2020, the Company announced the placement in international markets US$400 million principal amount of its senior unsecured notes due 2050 at an annual interest rate of 4.25%, under the of Rule 144-A and SEC Regulation S, under the United States Securities Act of 1933. The Company expects to use the net proceeds from the offering of the notes for general corporate purposes, including funding its capital expenditure program and reducing its outstanding indebteness, including the payment of its US$250 million of 5.50% notes due April 21, 2020 at maturity. • On January 22, 2020, the Company informs the CMF of the issuance of US$400 million principal amount of its senior unsecured notes. • On January 23, 2020, the Company published new information on the Mount Holland lithium project in Western Australia. Following the completion of the final feasibility study, the Company and its project partner Wesfarmers Limited have decided to postpone the final investment decision until the first quarter of 2021. The feasibility study confirmed that this project is one of the most competitive spodumene deposits in the world and both parties remain committed to the project. In the coming months, the Company and Wesfarmers will continue to evaluate new opportunities that will potentially enable the project to improve its infrastructure and operating expenses, reduce capital expenditures, and continue to work with key customers to ensure alignment with product specification requirements. • On February 26, 2020, the Company reported that the Board of Directors agreed to call an ordinary shareholders' meeting at 10:00 a.m. on Thursday, April 23, 2020. • On March 16, 2020, the Company responded to a letter from the CMF regarding the outbreak of the COVID 19 virus, in which the following was mentioned: 1. Regarding the financial and operational effects that this situation could mean for the Company, it is worth noting that the Company sells its products worldwide, with Asia, Europe and North America being its main markets. Border closures, decrease in commercial activity and difficulties and disruptions in the supply chains in the markets in which we sell have impacted our ability to fulfill our previous sales volume estimates for the first quarter, with the main impact so far being a reduction of approximately 2,000 metric tons of lithium sales volumes in China. For the rest of the year, the impact on our sales volumes and average prices will depend on the duration of the Virus in different markets, the efficiency of the measures implemented to contain the spread of the Virus in each country and fiscal incentives that may be implemented in different jurisdictions to promote economic recovery. For now, our operations have not seen any material impacts related to the outbreak of COVID-19 virus. We have taken measures to mitigate the impacts of this health emergency on our employees and limit the impact it could have on our operations (described below in point 2). As of today, we do not expect this impact to be significant. 2. Regarding the measures that management has adopted or intends to adopt to mitigate possible financial and / or operational effects, we inform that the Company has implemented a series of measures in its operations in Chile and abroad that seek to protect its workers and reduce the speed at which the Virus spreads. The measures adopted by the Company are: a. home in those cases where this is possible. b. The flexibility of the working day, arrival and departure times, together with the incentive to work from Avoidance of crowds, seminars and large meetings in the Company´s offices and operating facilities. 113 8) INFORMATION ABOUT RELEVANT OR ESSENTIAL FACTS Strengthening of personal hygiene protocols (use of alcohol gel, masks, etc.) and sanitation in plants, Significant reduction in domestic and international travel, along with obligatory quarantine for people who c. cafeterias and offices. d. have arrived from high risk destinations 3. Regarding the existence of committed insurance and its level of coverage, we inform that as of today, we have not identified any events which would trigger coverage from the insurance policies that the Company has contracted. 4. Finally, we hereby inform that we do not currently have any other information that management believes is relevant to provide. • On March 25, 2020, the Company reported as an essential fact: That the Company's board of directors unanimously agreed to recommend to the ordinary shareholders' meeting of the Company that was held on April 23, 2020, the distribution and payment, by concept of the definitive dividend for fiscal year 2019, 100% of the net distributable profit obtained by the Company during the business year 2019. The final dividend, calculated on the net profit of US$278,114,994, corresponded to an amount of US$1.05668 per share. However, the amount of US$0.80254 per share was deducted from said final dividend, which was already paid as interim dividends during 2019, leaving a balance of US$0.25414 per share. The final dividend balance for business year 2019 was paid in its equivalent in pesos in national currency according to the value of the observed dollar that appears published in the Official Gazette of April 23, 2020, in favor of those shareholders of the Company who were registered in the respective Registry on the fifth business day prior to the one on which it will be paid. Said amounts were proposed to be paid in favor of the shareholders, personally or through their duly authorized representatives, starting at 9:00 a.m. on May 7, 2020. • On March 27, 2020, the Company reported that management became aware of a modification to the agreement reported as an event of interest to the Company on April 11, 2019, entered into between Sociedad de Inversiones Pampa Calichera SA, Potasios de Chile SA and Inversiones Global Mining (Chile) Limitada, on the one hand and, on the other, Inversiones TLC Spa, a subsidiary of Tianqi Lithium Corp. The modification of the agreement was disclosed by Sociedad de Inversiones Pampa Calichera S.A. to the Chilean market through an essential fact. • On April 23, 2020, the 45th ordinary general meeting of shareholders of the Company was held, in which the following matters were agreed, among others: (a) To approve the Company’s Balance Sheet, the Annual Report, the Financial Statements and the External Auditors’ Report for the year ending on December 31, 2019. (b) To appoint PricewaterhouseCoopers Consultores Auditores SpA as the Company’s External Auditors for the period January 1 through December 31, 2020. (c) To approve the distribution of a final dividend as recommended by the Board of Directors and communicated as an essential fact (hecho esencial) on March 25, 2020. (d) To approve the remuneration structure for the Board members, and the members of the Board committees, and expenses associated with each. • On May 19, 2020, the Company's board of directors agreed to pay a provisional dividend equivalent to US$0.17092 per share, charged to the Company's profits for fiscal year 2020. Said amount will be paid in its equivalent in pesos, national currency, according to the value of the Observed Dollar that appears published in the Official Gazette on May 29, 2020. • On August 25, 2020, the board of directors agreed to call an extraordinary shareholders' meeting to discuss the approval and distribution of a special dividend (dividend eventual). The meeting was held on September 29, 2020, to submit to the shareholders' consideration the distribution and payment of a special dividend equivalent to US$0.37994 per share charged to the retained earnings of the Company. 114 8) INFORMATION ABOUT RELEVANT OR ESSENTIAL FACTS • Additionally, the board of directors agreed to modify the dividend policy agreed on March 25 for the business year 2020 and to be informed at the ordinary shareholders' meeting held on April 23. • On September 29, 2020, the shareholders of the Company, meeting in an extraordinary shareholders' meeting, approved the distribution and payment of a special dividend equivalent to US$0.37994 per share charged to the retained earnings of the Company. • On October 8, 2020, the Company announced that it decided to deepen its commitment to the environment and the sustainability of its operations and the entire value creation cycle in which the company participates. • On October 30, 2020, the Company paid settlements issued by the Internal Revenue Service for ThUS$63,900. • On November 11, 2020, the Company signed a binding term summary (the “Term Summary”) providing for a settlement of the class action litigation with Lead Plaintiff Council of the Borough of South Tyneside, acting in its capacity as the Administering Authority of the Tyne and Wear Pension Fund, captioned Villella v. Chemical and Mining Company of Chile, Inc., 1:15-cv-02106-ER (S.D.N.Y.) (the “Class Action”). The Class Action settlement will resolve the claims by class plaintiffs relating to alleged noncompliance with the securities laws and regulations in the United States in connection with certain disclosures made by the Company. Pursuant to the Term Summary, the Company has agreed to pay 62,500,000 United States dollars. The parties will negotiate in good faith to execute a definitive stipulation of settlement and related documents to be filed for Court approval. The amount to be paid under the settlement will be reflected as an expense in the financial statements of the Company as of the third quarter of 2020, in the account “Other Expenses by Function”. • On November 11, 2020, the DOJ filed a motion to dismiss the criminal information against the Company reported in Note 23. • On December 14, 2020, the Company was informed through a press release published today, that Kore Potash has received correspondence from the Minister of Mines of the Republic of Congo expressing disappointment at the speed of progress on the development of the projects in the Sintoukola Basin and questioning Kore Potash’s compliance with its obligations to the Government of Congo. Kore Potash continues its discussions with the Minister of Mines in relation to this matter, and SQM is monitoring the evolution of this dialogue. SQM's financial statements as of September 30, 2020 reflect an investment in Kore Potash of approximately US$27 million in investment in associates for SQM’s 20.26% ownership interest in Kore Potash. • On December 22, 2020, the Company announced that it has reached a long-term agreement to supply lithium products to LG Energy Solution (LGES). As part of the agreement which will run from 2021 to 2029, SQM will supply battery grade lithium carbonate and lithium hydroxide for the production of high-quality cathode material, a key component of electric car battery cells. In total, the contract considers, approximately, 55,000 MT of lithium carbonate equivalent (LCE). The signing of this large-scale long-term supply agreement is an important milestone for SQM not only because it is part of its growth strategy, but also because it solidifies its prominent position as a high-quality lithium supplier for the production of batteries for electric vehicles. LGES and SQM are two significant players in the electromobility industry who are both fully committed to the development of the industry’s future. • On December 23, 2020, the Company informed the CMF that its board of directors had approved initiating the process to increase the company’s capital of up to US$1.1 billion through the issuance of up to 22.4 million Series B shares of common stock. The process will begin with an extraordinary shareholders’ meeting, in which the shareholders will be asked to approve the capital increase. This vote will require approval of 2/3 of the Series A shares, granting withdrawal rights to dissident Series A shareholders, and a majority of the Series A and Series B shares voting together as a single class. The extraordinary shareholders’ meeting will be held on January 22, 115 8) INFORMATION ABOUT RELEVANT OR ESSENTIAL FACTS 2021. The capital increase will be subject to a mandatory 30-day preemptive rights offering period for existing shareholders under Chilean law, and it is expected that a parallel preemptive rights offering will be made to existing holders of the company’s American Depositary Receipts. As a global company that develops and produces diverse products for several industries essential for human progress, such as health, nutrition, renewable energy and technology, through innovation and technological development, our need to invest in growth projects and new technologies is fundamental. The capital increase proposed by the board of directors is intended to finance part of our ambitious US$1.9 billion investment plan for the years 2021-2024 which will allow us to expand our operations of lithium, iodine and nitrates. Most of this capex will be executed in Chile where we have access to great natural resources such as the Salar de Atacama and our Caliche ore deposits. This plan also includes the 50,000 metric ton Mt. Holland lithium hydroxide project in Western Australia, a 50/50 joint venture that we are developing with our partner Wesfarmers. We believe all of these investments are necessary to grow and maintain our leading world position in the lithium, potassium nitrate, iodine and thermo-solar salts markets: o approximately US$1 billion is related to lithium carbonate expansion in Chile, from 70,000 metric tons to 180,000 metric tons, the lithium hydroxide production expansions from 13,500 metric tons to 30,000 metric tons in Chile and the Mount Holland project in Australia, o approximately US$440 million will be invested in our mining operations of caliche ore and plant capacity for nitrates and iodine, of which US$150 million is related to a seawater pipeline project, and o maintenance capex is expected to remain at approximately US$120 million per year while depreciation is expected to average US$250 million per year. The final investment decision on Mt. Holland project is expected to be taken by the board during the first quarter 2021, before the preemptive rights offering period. Relevant or Essential Facts Pertaining to Soquimich Comercial S.A. (SQMC) On March 24, 2020, it was reported that the board of directors of Soquimich Comercial S.A. agreed (1) to modify the “Dividend Policy for Business Year 2019” in order to incorporate into said Policy the payment of the eventual dividend for US$5,000,000. - equivalent to the amount of US$0.01837 per share, to be paid out of the accumulated earnings of SQMC; (2) propose to the next Ordinary Shareholders' Meeting of the Company to be held in April 2020, which approves the distribution and payment of definitive dividends for the business year 2019, 100% of the net profit for the year commercial of 2019, which reached the sum of US$5,078,587.13, which corresponds to a final dividend of US$0.01866 per share; (3) accordingly, propose to the Ordinary Shareholders' Meeting to be held next April, the payment of an eventual dividend of US$0.01837 per share, to be paid out of the accumulated profits of SQMC, and a final dividend of US$0.01866 per share, corresponding to 100% of the net profits obtained by SQMC in the 2019 business year. On November 17, 2020, it was reported that the board of directors of Soquimich Comercial S.A. agreed (1) to modify the “2020 Business Year Dividend Policy” in order to incorporate into said Policy the payment of the eventual dividend for US$10,000,000. - equivalent to the amount of US$0.03675 per share, to be paid out of the accumulated earnings of SQMC. Said payment will be submitted to the consideration of the next Extraordinary Shareholders' Meeting of the Company, which was called for December 11, 2020 at 10:00 a.m. at Los Militares 4290, 1st floor, Las Condes, Santiago, so that it resolves in this regard and, if applicable, such eventual dividend will be paid on December 21, 2020; (2) The amount of US$0.03675 per share corresponding to the eventual dividend indicated, if applicable, will be paid in its equivalent in pesos, national currency, according to the dollar exchange rate observed on the day on which said dividend is approved by the Extraordinary Shareholders' Meeting, in favor of those SQMC shareholders who are registered in the respective Registry on the fifth business day prior to the one on which the same will be paid. 116 8) INFORMATION ABOUT RELEVANT OR ESSENTIAL FACTS On December 11, 2020, it was reported that the shareholders of Soquimich Comercial SA, met in an Extraordinary Shareholders´ Meeting called for 10:00 am today, Friday, December 11, 2020, unanimously agreed to approve the distribution of a eventual dividend, charged to the accumulated profits of the Company, in the amount of $27.12775 (twenty-seven point one two seven seven five) pesos per share. Said eventual dividend will be paid starting on December 21, 2020, in favor of those SQMC shareholders who are registered in the respective Registry on the fifth business day prior to that. 9) SUMMARY OF COMMENTS AND PROPOSALS BY SHAREHOLDERS AND THE DIRECTORS’ COMMITTEE According to Chilean Law No, 18,046, section 3, article 74, there have been no comments or proposals from SQM’s shareholders or Directors’ Committee regarding the Company’s business. 117 10) FINANCIAL REPORTS 10) FINANCIAL REPORTS 10) A) FINANCIAL REPORTS OF THE REPORTING ENTITY Report of Independent Auditors 118 10) FINANCIAL REPORTS 119 10) FINANCIAL REPORTS Table of Contents –Consolidated Financial Statements CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION CONSOLIDATED STATEMENTS OF INCOME CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENTS OF CASH FLOWS CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY NOTE 1 IDENTIFICATION AND ACTIVITIES OF THE COMPANY AND SUBSIDIARIES 124 125 126 127 128 130 133 HISTORICAL BACKGROUND .................................................................................................................................133 MAIN DOMICILE WHERE THE COMPANY PERFORMS ITS PRODUCTION ACTIVITIES ..................................................133 CODES OF MAIN ACTIVITIES ................................................................................................................................133 DESCRIPTION OF THE NATURE OF OPERATIONS AND MAIN ACTIVITIES ..................................................................133 OTHER BACKGROUND .........................................................................................................................................135 COVID-19 ..........................................................................................................................................................136 1.1 1.2 1.3 1.4 1.5 1.6 NOTE 2 BASIS OF PRESENTATION FOR THE CONSOLIDATED FINANCIAL STATEMENTS 138 ACCOUNTING PERIOD .........................................................................................................................................138 CONSOLIDATED FINANCIAL STATEMENTS ............................................................................................................138 BASIS OF MEASUREMENT ....................................................................................................................................139 ACCOUNTING PRONOUNCEMENTS .......................................................................................................................139 BASIS OF CONSOLIDATION ..................................................................................................................................141 INVESTMENTS IN ASSOCIATES AND JOINT VENTURES ............................................................................................142 2.1 2.2 2.3 2.4 2.5 2.6 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES 143 CLASSIFICATION OF BALANCES AS CURRENT AND NON-CURRENT .........................................................................143 3.1 FUNCTIONAL AND PRESENTATION CURRENCY .....................................................................................................143 3.2 ACCOUNTING POLICY FOR FOREIGN CURRENCY TRANSLATION .............................................................................143 3.3 CONSOLIDATED STATEMENT OF CASH FLOWS ......................................................................................................145 3.4 ACCOUNTING POLICY FOR FINANCIAL ASSETS .....................................................................................................145 3.5 3.6 FINANCIAL LIABILITIES .......................................................................................................................................147 3.7 RECLASSIFICATION OF FINANCIAL INSTRUMENTS ......................................................................................................147 3.8 FINANCIAL INSTRUMENT DERECOGNITION.................................................................................................................147 3.9 DERIVATIVE AND HEDGING FINANCIAL INSTRUMENTS ...............................................................................................147 3.10 DERIVATIVE FINANCIAL INSTRUMENTS NOT CONSIDERED AS HEDGES ......................................................................149 3.11 DEFERRED ACQUISITION COSTS FROM INSURANCE CONTRACTS ................................................................................149 3.12 LEASES ..............................................................................................................................................................149 3.13 INVENTORY MEASUREMENT ....................................................................................................................................150 3.14 TRANSACTIONS WITH NON-CONTROLLING INTERESTS ..............................................................................................151 3.15 RELATED PARTY TRANSACTIONS ............................................................................................................................151 3.16 PROPERTY, PLANT AND EQUIPMENT ........................................................................................................................151 3.17 DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT ............................................................................................152 3.18 GOODWILL .........................................................................................................................................................152 3.19 INTANGIBLE ASSETS OTHER THAN GOODWILL ..........................................................................................................153 RESEARCH AND DEVELOPMENT EXPENSES ...........................................................................................................154 3.20 EXPLORATION AND EVALUATION EXPENSES ........................................................................................................154 3.21 3.22 IMPAIRMENT OF NON-FINANCIAL ASSETS ............................................................................................................154 3.23 MINIMUM DIVIDEND ...........................................................................................................................................155 3.24 EARNINGS PER SHARE .............................................................................................................................................155 3.25 CAPITALIZATION OF INTEREST EXPENSES ................................................................................................................155 3.26 OTHER PROVISIONS ................................................................................................................................................156 3.27 OBLIGATIONS RELATED TO EMPLOYEE TERMINATION BENEFITS AND PENSION COMMITMENTS ..................................156 COMPENSATION PLANS .......................................................................................................................................156 3.28 REVENUE RECOGNITION .....................................................................................................................................157 3.29 FINANCE INCOME AND FINANCE COSTS................................................................................................................157 3.30 3.31 CURRENT INCOME TAX AND DEFERRED ..............................................................................................................157 3.32 OPERATING SEGMENT REPORTING .........................................................................................................................158 120 3.33 PRIMARY ACCOUNTING CRITERIA, ESTIMATES AND ASSUMPTIONS ...........................................................................158 ENVIRONMENT ...................................................................................................................................................159 3.34 NOTE 4 CHANGES IN ACCOUNTING ESTIMATES AND POLICIES 160 10) FINANCIAL REPORTS CHANGES IN ACCOUNTING ESTIMATES ................................................................................................................160 CHANGES IN ACCOUNTING POLICIES ....................................................................................................................160 4.1 4.2 NOTE 5 FINANCIAL RISK MANAGEMENT 161 FINANCIAL RISK MANAGEMENT POLICY ..............................................................................................................161 RISK FACTORS ...................................................................................................................................................161 RISK MEASUREMENT ..........................................................................................................................................165 5.1 5.2 5.3 NOTE 6 SEPARATE INFORMATION ON THE MAIN OFFICE, PARENT ENTITY AND JOINT ACTION AGREEMENTS 166 6.1 PARENT’S STAND-ALONE ASSETS AND LIABILITIES ....................................................................................................166 6.2 PARENT ENTITY ..................................................................................................................................................166 NOTE 7 BOARD OF DIRECTORS, SENIOR MANAGEMENT AND KEY MANAGEMENT PERSONNEL 167 REMUNERATION OF THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT .......................................................167 7.1 7.2 KEY MANAGEMENT PERSONNEL COMPENSATION .................................................................................................169 NOTE 8 BACKGROUND ON COMPANIES INCLUDED IN CONSOLIDATION AND NON-CONTROLLING INTERESTS 170 BACKGROUND ON COMPANIES INCLUDED IN CONSOLIDATION ..............................................................................170 8.1 8.2 ASSETS, LIABILITIES, RESULTS OF CONSOLIDATED SUBSIDIARIES AS OF DECEMBER 31, 2020. ..............................173 8.3 BACKGROUND ON NON-CONTROLLING INTERESTS ....................................................................................................177 NOTE 9 EQUITY-ACCOUNTED INVESTEES 178 9.1 INVESTMENTS IN ASSOCIATES RECOGNIZED ACCORDING TO THE EQUITY METHOD OF ACCOUNTING ............................178 9.2 ASSETS, LIABILITIES, REVENUE AND EXPENSES OF ASSOCIATES .................................................................................180 OTHER INFORMATION .........................................................................................................................................181 9.3 9.4 DISCLOSURES ON INTEREST IN ASSOCIATES .........................................................................................................181 NOTE 10 JOINT VENTURES 182 10.1 POLICY FOR THE ACCOUNTING OF EQUITY ACCOUNTED INVESTMENT IN JOINT VENTURES .....................................182 10.2 DISCLOSURES OF INTEREST IN JOINT VENTURES ...................................................................................................182 INVESTMENT IN JOINT VENTURES ACCOUNTED FOR UNDER THE EQUITY METHOD OF ACCOUNTING ........................183 10.3 10.4 ASSETS, LIABILITIES, REVENUE AND EXPENSES FROM JOINT VENTURES ................................................................185 10.5 OTHER JOINT VENTURE DISCLOSURES ................................................................................................................186 10.6 JOINT VENTURES ................................................................................................................................................187 NOTE 11 CASH AND CASH EQUIVALENTS 188 TYPES OF CASH AND CASH EQUIVALENTS ............................................................................................................188 11.1 SHORT-TERM INVESTMENTS, CLASSIFIED AS CASH EQUIVALENTS .........................................................................188 11.2 11.3 INFORMATION ON CASH AND CASH EQUIVALENTS BY CURRENCY .........................................................................189 11.4 AMOUNT RESTRICTED CASH BALANCES ...............................................................................................................189 11.5 SHORT-TERM DEPOSITS, CLASSIFIED AS CASH EQUIVALENTS ................................................................................190 11.6 NET DEBT RECONCILIATION ...............................................................................................................................192 NOTE 12 INVENTORIES 193 NOTE 13 RELATED PARTY DISCLOSURES 195 13.1 RELATED PARTY DISCLOSURES ...........................................................................................................................195 13.2 RELATIONSHIPS BETWEEN THE PARENT AND THE ENTITY .....................................................................................195 13.3 DETAILED IDENTIFICATION OF RELATED PARTIES AND SUBSIDIARIES ...................................................................196 13.4 DETAIL OF RELATED PARTIES AND RELATED PARTY TRANSACTIONS.....................................................................199 TRADE RECEIVABLES DUE FROM RELATED PARTIES, CURRENT: ............................................................................200 13.5 13.6 TRADE PAYABLES DUE TO RELATED PARTIES, CURRENT:......................................................................................200 13.7 OTHER DISCLOSURES: .........................................................................................................................................200 NOTE 14 FINANCIAL INSTRUMENTS 201 TYPES OF OTHER CURRENT AND NON-CURRENT FINANCIAL ASSETS ......................................................................201 14.1 14.2 TRADE AND OTHER RECEIVABLES .......................................................................................................................202 14.3 HEDGING ASSETS AND LIABILITIES ..........................................................................................................................205 FINANCIAL LIABILITIES .......................................................................................................................................206 14.4 121 10) FINANCIAL REPORTS 14.5 TRADE AND OTHER PAYABLES ............................................................................................................................217 14.6 FINANCIAL ASSET AND LIABILITY CATEGORIES .......................................................................................................218 14.7 FAIR VALUE MEASUREMENT OF FINANCE ASSETS AND LIABILITIES .......................................................................220 14.8 ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS .........................................................................................223 NOTA 15 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES 224 15.1 RIGHT-OF-USE ASSETS .............................................................................................................................................224 15.2 LEASE LIABILITIES ..............................................................................................................................................225 NOTE 16 INTANGIBLE ASSETS AND GOODWILL 231 16.1 NOTE 17 BALANCES .........................................................................................................................................................231 PROPERTY, PLANT AND EQUIPMENT 238 TYPES OF PROPERTY, PLANT AND EQUIPMENT .....................................................................................................238 17.1 17.2 CONCILIATION OF CHANGES IN PROPERTY, PLANT AND EQUIPMENT BY TYPE: .......................................................240 17.3 DETAIL OF PROPERTY, PLANT AND EQUIPMENT PLEDGED AS GUARANTEE .................................................................244 IMPAIRMENT OF ASSETS ......................................................................................................................................244 17.4 17.5 COST OF CAPITALIZED INTEREST, PROPERTY, PLANT AND EQUIPMENT ..................................................................244 NOTE 18 OTHER CURRENT AND NON-CURRENT NON-FINANCIAL ASSETS 245 MINERAL RESOURCE EXPLORATION AND EVALUATION EXPENDITURE ...............................................................................246 NOTE 19 EMPLOYEE BENEFITS 247 PROVISIONS FOR EMPLOYEE BENEFITS ................................................................................................................247 19.1 19.2 POLICIES ON DEFINED BENEFIT PLAN ...................................................................................................................247 19.3 OTHER LONG-TERM BENEFITS .............................................................................................................................248 POST-EMPLOYMENT BENEFIT OBLIGATIONS .........................................................................................................248 19.4 STAFF SEVERANCE INDEMNITIES .........................................................................................................................250 19.5 19.6 EXECUTIVE COMPENSATION PLAN .......................................................................................................................251 NOTE 20 PROVISIONS AND OTHER NON-FINANCIAL LIABILITIES 252 TYPES OF PROVISIONS .........................................................................................................................................252 20.1 20.2 DESCRIPTION OF OTHER PROVISIONS ...................................................................................................................253 20.3 OTHER NON-FINANCIAL LIABILITIES, CURRENT ...................................................................................................254 20.4 CHANGES IN PROVISIONS ....................................................................................................................................255 NOTE 21 DISCLOSURES ON EQUITY 256 CAPITAL MANAGEMENT ......................................................................................................................................256 21.1 21.2 DISCLOSURES ON PREFERRED SHARE CAPITAL .....................................................................................................257 21.3 DISCLOSURES ON RESERVES IN EQUITY ...................................................................................................................258 21.4 DIVIDEND POLICIES ............................................................................................................................................260 21.5 INTERIM AND PROVISIONAL DIVIDENDS ...................................................................................................................262 21.6 POTENTIAL AND PROVISIONAL DIVIDENDS ...........................................................................................................262 NOTE 22 CONTINGENCIES AND RESTRICTIONS 263 LAWSUITS AND OTHER RELEVANT EVENTS ..........................................................................................................263 22.1 RESTRICTIONS TO MANAGEMENT OR FINANCIAL LIMITS .......................................................................................265 22.2 ENVIRONMENTAL CONTINGENCIES ......................................................................................................................266 22.3 TAX CONTINGENCIES .........................................................................................................................................266 22.4 CONTINGENCIES REGARDING TO THE CONTRACTS WITH CORFO: .........................................................................267 22.5 CONTINGENCIES RELATED TO THE CLASS ACTION LAWSUIT ................................................................................267 22.6 CONTINGENCIES ASSOCIATED WITH CONFLICTS BETWEEN SHAREHOLDERS OF THE ABU DHABI FERTILIZER 22.7 INDUSTRIES COMPANY ....................................................................................................................................................267 RESTRICTED OR PLEDGED CASH ..........................................................................................................................267 22.8 SECURITIES OBTAINED FROM THIRD PARTIES .......................................................................................................268 22.9 22.10 INDIRECT GUARANTEES ......................................................................................................................................268 NOTE 23 LAWSUITS AND COMPLAINTS 269 NOTE 24 ENVIRONMENT 270 24.1 DISCLOSURES OF DISBURSEMENTS RELATED TO THE ENVIRONMENT ....................................................................270 24.2 DETAILED INFORMATION ON DISBURSEMENTS RELATED TO THE ENVIRONMENT ...................................................271 24.3 DESCRIPTION OF EACH PROJECT, INDICATING WHETHER THESE ARE IN PROCESS OR HAVE BEEN FINISHED .............278 NOTE 25 GAINS (LOSSES) FROM OPERATING ACTIVITIES IN THE STATEMENT OF INCOME OF EXPENSES, INCLUDED ACCORDING TO THEIR NATURE 283 122 10) FINANCIAL REPORTS 25.1 REVENUE FROM OPERATING ACTIVITIES CUSTOMER ACTIVITIES ...........................................................................283 COST OF SALES ...................................................................................................................................................285 25.2 25.3 OTHER INCOME ..................................................................................................................................................286 25.4 ADMINISTRATIVE EXPENSES ...............................................................................................................................286 25.5 OTHER EXPENSES ...............................................................................................................................................287 25.6 OTHER GAINS (LOSSES).......................................................................................................................................287 (IMPAIRMENT) /REVERSION OF VALUE OF FINANCIAL ASSETS IMPAIRMENT LOSSES ...............................................288 25.7 SUMMARY OF EXPENSES BY NATURE ...................................................................................................................288 25.8 25.9 FINANCE EXPENSES ............................................................................................................................................289 25.10 FINANCE INCOME ...............................................................................................................................................289 NOTE 26 REPORTABLE SEGMENTS 290 26.1 26.2 26.3 REPORTABLE SEGMENTS .....................................................................................................................................290 REPORTABLE SEGMENT DISCLOSURES: ................................................................................................................292 STATEMENT OF COMPREHENSIVE INCOME CLASSIFIED BY REPORTABLE SEGMENTS BASED ON GROUPS OF PRODUCTS ................................................................................................................................................................294 26.4 DISCLOSURES ON GEOGRAPHICAL AREAS ............................................................................................................296 26.5 DISCLOSURES ON MAIN CUSTOMERS ...................................................................................................................296 SEGMENTS BY GEOGRAPHICAL AREAS .................................................................................................................297 26.6 26.7 PROPERTY, PLANT AND EQUIPMENT CLASSIFIED BY GEOGRAPHICAL AREAS ..........................................................298 NOTE 27 EFFECT OF FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES 299 NOTE 28 DISCLOSURES ON THE EFFECTS OF FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES NOTE 29 INCOME TAX AND DEFERRED TAXES 301 307 CURRENT AND NON-CURRENT TAX ASSETS ..........................................................................................................307 29.1 29.2 CURRENT TAX LIABILITIES ..................................................................................................................................308 29.3 INCOME TAX AND DEFERRED TAXES ........................................................................................................................309 NOTE 30 ASSETS HELD FOR SALE 317 NOTE 31 EVENTS OCCURRED AFTER THE REPORTING DATE 318 31.1 AUTHORIZATION OF THE FINANCIAL STATEMENTS ...............................................................................................318 31.2 DISCLOSURES ON EVENTS OCCURRING AFTER THE REPORTING DATE ....................................................................318 123 Consolidated Classified Statements of Financial Position ASSETS Current Assets Cash and cash equivalents Other current financial assets Other current non-financial assets Trade and other receivables, current Trade receivables due from related parties, current Current inventories Current tax assets Total current assets other than those classified as held for sale or disposal Non-current assets or groups of assets classified as held for sale Total non-current assets held for sale Total current assets Non-current assets Other non-current financial assets Other non-current non-financial assets Trade receivables, non-current Investments classified using the equity method of accounting Intangible assets other than goodwill Goodwill Property, plant and equipment net Right-of-use assets Tax assets, non-current Total non-current assets Total assets 10) FINANCIAL REPORTS As of December 31, 2020 As of December 31, 2019 Note N° ThUS$ ThUS$ 11.1 14.1 18 14.2 13.5 12 29.1 30 14.1 18 14.2 9.1-10.3 16.1 16.1 17.1 15.1 29.1 509,102 348,069 57,399 365,206 62,601 1,093,028 132,224 2,567,629 1,629 1,629 588,530 505,490 50,552 399,142 61,227 983,338 91,433 2,679,712 2,454 2,454 2,569,258 2,682,166 51,925 22,042 11,165 85,993 178,407 41,966 8,778 19,729 1,710 109,435 188,358 34,726 1,737,319 1,569,906 30,024 90,364 2,249,205 4,818,463 37,164 32,179 2,001,985 4,684,151 The accompanying notes form an integral part of these consolidated financial statements. 124 10) FINANCIAL REPORTS Consolidated Classified Statements of Financial Position Liabilities and Equity As of December 31, 2020 As of December 31, 2019 Note N° ThUS$ ThUS$ Current liabilities Other current financial liabilities Lease liabilities, current Trade and other payables, current Trade payables due to related parties, current Other current provisions Current tax liabilities Provisions for employee benefits, current Other current non-financial liabilities Total current liabilities Non-current liabilities Other non-current financial liabilities Lease liabilities, non-current Trade and other payables, non-current Other non-current provisions Deferred tax liabilities Provisions for employee benefits, non-current Total non-current liabilities Total liabilities Equity Equity attributable to owners of the Parent Share capital Retained earnings Other reserves Equity attributable to owners of the Parent Non-controlling interests Total equity Total liabilities and equity 14.4 15.2 14.5 13.6 20.1 29.2 19.1 20.3 14.4 15.2 14.5 20.1 29.3 19.1 21 68,955 5,528 203,933 606 104,166 22,643 9,096 60,955 475,882 291,128 7,694 205,790 475 110,565 17,874 16,387 126,899 776,812 1,899,513 1,488,723 25,546 4,027 62,617 156,101 32,199 2,180,003 2,655,885 477,386 1,638,267 7,432 2,123,085 39,493 2,162,578 4,818,463 30,203 - 34,690 183,411 35,840 1,772,867 2,549,679 477,386 1,623,104 (14,223) 2,086,267 48,205 2,134,472 4,684,151 The accompanying notes form an integral part of these consolidated financial statements. 125 Consolidated Statements of Income Consolidated Statements of Income Note N° Revenue Cost of sales Gross profit Other income Administrative expenses Other expenses Impairment of financial assets and reversal of impairment losses Other losses Profit from operating activities Finance income Finance costs Share of profit of associates and joint ventures accounted for using the equity method Foreign currency translation differences Profit before taxes Income tax expense Profit net Profit attributable to: Profit attributable to Owners of the Parent Profit attributable to Non-controlling interests 25.1 25.2 25.3 25.4 25.5 25.7 25.6 25.10 17-25.9 9.1-10.3 27 29.3 Earnings per share Note N° Common shares Basic earnings per share (US$ per share) Diluted common shares Basic earnings per share (US$ per share) 10) FINANCIAL REPORTS For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 1,817,191 1,943,655 (1,334,321) (1,383,603) 482,870 26,893 (107,017) (99,612) 4,684 (5,313) 302,505 13,715 (82,199) 8,940 (4,423) 238,538 (70,179) 168,359 164,518 3,841 168,359 560,052 18,218 (117,180) (25,995) (1,057) (383) 433,655 26,289 (76,939) 9,786 (2,169) 390,622 (110,019) 280,603 278,115 2,488 280,603 For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 0.6251 1.0567 0.6251 1.0567 The accompanying notes form an integral part of these consolidated financial statements. 126 10) FINANCIAL REPORTS Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income Profit net Items of other comprehensive income that will not be reclassified to profit for the year, before taxes Gains (losses) from measurements of defined benefit plans Gains (losses) from financial assets measured irrevocably at fair value through other comprehensive income Total other comprehensive income (loss) that will not be reclassified to profit for the year, before taxes Items of other comprehensive income that will be reclassified to profit for the year, before taxes Foreign currency exchange gains (losses) (Losses) gains from cash flow hedges Total other comprehensive income that will be reclassified to profit for the year Other items of other comprehensive income, before taxes Income taxes related to items of other comprehensive income that will not be reclassified to profit for the year Income taxes relating to measurement of defined benefit pension plans through other comprehensive income Benefit (income tax) relating to (losses) gains on financial assets measured irrevocably at fair value through other comprehensive income For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 168,359 280,603 974 9,784 10,758 14,000 (3,706) 10,294 21,052 (145) (2,642) (3,310) 1,152 (2,158) 787 1,908 2,695 537 702 (311) Total income tax relating to components of other comprehensive income that will be not reclassified to profit for the year (2,787) 391 Income taxes relating to components of other comprehensive income that will be reclassified to profit for the year Income tax benefit (expense) related to (losses) gains from cash flow hedges Total income tax relating to components of other comprehensive income that will be reclassified to profit for the year Total other comprehensive income Total comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of the parent Comprehensive income attributable to non-controlling interest 1,001 (2,683) 1,001 (2,683) 19,266 187,625 (1,755) 278,848 183,941 276,137 3,684 2,711 187,625 278,848 The accompanying notes form an integral part of these consolidated financial statements. 127 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Cash flows from (used in) operating activities Classes of cash receipts from operating activities Cash receipts from sales of goods and rendering of services Cash receipts from premiums and benefits, annuities and other benefits from policies entered Cash receipts derived from sub-leases Classes of Payments Cash payments to suppliers for the provision of goods and services Cash payments to and on behalf of employees Cash payments relating to variable leases Other payments related to operating activities Net cash generated from operating activities Dividends received Interest paid Interest received Interest paid on lease liabilities Income taxes paid Other cash inflows (1) Net cash generated from operating activities Cash flows from (used in) investing activities Cash flows arising from the loss/gain of control of subsidiaries and other businesses Proceeds from the sale of property, plant and equipment Other payments to acquire interest in joint ventures Acquisition of property, plant and equipment Proceeds from sales of intangible assets Proceeds (payments) related to futures, forward options and swap contracts Purchases of intangible assets Loans to related parties Other cash inflows (outflows) (2) Net cash generated used in investing activities 10) FINANCIAL REPORTS Note N° For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 1,940,720 2,044,746 14,763 188 2,925 361 (1,358,347) (1,284,204) (161,862) (195,782) (1,117) (87,278) 347,067 5,387 (81,567) 17,046 (1,133) (1,037) (25,218) 541,791 14,449 (70,963) 25,809 (1,537) (200,624) (173,319) 96,058 182,234 90,741 426,971 20,996 1,680 (16,949) (322,242) 8,203 (6,902) (579) (15,000) 163,702 (167,091) 994 487 (2,600) (321,324) 28,126 1,403 (2,492) - (190,065) (485,471) (1) Other inflows of cash from operating activities include net increases (decreases) of value added tax, banking expenses, expenses associated with obtaining loans and taxes associated with interest payments. (2) Other inflows (outflows) of cash include investments and redemptions of time deposits and other financial instruments that do not qualify as cash and cash equivalent in accordance with IAS 7, paragraph 7, since they mature in more than 90 days from the original investment date. The accompanying notes form an integral part of these consolidated financial statements. 128 10) FINANCIAL REPORTS Note N° For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ (8,015) 400,000 (264,122) (221,995) (7,221) 450,000 (7,096) (329,787) (94,132) 105,896 (78,989) 47,396 (439) (79,428) 588,530 509,102 (14,932) 32,464 556,066 588,530 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Cash flows generated from (used in) financing activities Repayment of lease liabilities Proceeds from long-term loans Repayment of borrowings Dividends paid Net cash generated (used in) from financing activities Net (decrease) increase in cash and cash equivalents before the effect of changes in the exchange rate Effects of exchange rate fluctuations on cash and cash equivalents (Decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 11 The accompanying notes form an integral part of these consolidated financial statements. 129 10) FINANCIAL REPORTS Consolidated Statements of Changes in Equity Consolidated Statements of Changes in Equity Share capital Foreign currency translation reserves Hedge reserves Gains and losses from financial assets reserve Actuarial gains and losses from defined benefit plans reserve Other miscellaneous reserves Total reserves Retained earnings Equity attributable to owners of the Parent Non- controlling interests Total Equity ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Equity at January 1, 2020 477,386 (25,745) Net profit Other comprehensive income Comprehensive income Dividends (1) Other increases (decreases) in equity Total changes in equity - - - - - - - 14,176 14,176 - - 14,176 Equity as of December 31, 2020 477,386 (11,569) 7,196 - (2,705) (2,705) - - (2,705) 4,491 (270) - 7,142 7,142 - - 7,142 6,872 (9,490) 14,086 (14,223) 1,623,104 2,086,267 48,205 2,134,472 - 810 810 - - 810 (8,680) - - - - 2,232 2,232 16,318 - 164,518 19,423 19,423 - 2,232 21,655 - 164,518 (149,355) - 15,163 164,518 19,423 183,941 3,841 (157) 3,684 168,359 19,266 187,625 (149,355) (10,118) (159,473) 2,232 36,818 (2,278) (8,712) (46) 28,106 7,432 1,638,267 2,123,085 39,493 2,162,578 Consolidated Statements of Changes in Equity Share capital Foreign currency translation reserves Hedge reserves Gains and losses from financial assets reserve Actuarial gains and losses from defined benefit plans reserve Other miscellaneous reserves Total reserves Retained earnings Equity attributable to owners of the Parent Non- controlling interests Total Equity ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Equity at January 1, 2019 477,386 (26,307) Net Profit Other comprehensive income Comprehensive income Dividends (1) Other increases (decreases) in equity Total changes in equity - - - - - - - 562 562 - - 562 Equity as of December 31, 2019 477,386 (25,745) (1) See Note 21.6 7,971 - (775) (775) - - (775) 7,196 (1,111) (6,884) 11,332 (14,999) 1,623,104 2,085,491 52,311 2,137,802 - 841 841 - - 841 (270) - (2,606) (2,606) - - (2,606) (9,490) - - - - 2,754 2,754 - 278,115 (1,978) (1,978) - 2,754 776 - 278,115 (278,115) - - 278,115 (1,978) 276,137 2,488 223 2,711 280,603 (1,755) 278,848 (278,115) (6,817) (284,932) 2,754 776 - (4,106) 2,754 (3,330) 14,086 (14,223) 1,623,104 2,086,267 48,205 2,134,472 The accompanying notes form an integral part of these consolidated financial statements. 130 10) FINANCIAL REPORTS Glossary The Following capitalized terms un these notes will have the following meaning: “ADS’’ American Depositary Shares; “CAM’’ Arbitration and Mediation Center of the Santiago Chamber of Commerce; “CCHEN’’ Chilean Nuclear Energy Commission; “CCS’’ cross currency swap; “CINIIF’’ International Financial Reporting Interpretations Committee; “CMF’’ Financial Market Commission; “Directors’ Committee” The Company’s Directors’ Committee; “Corporate Governance Committee’’ The Company’s Corporate Governance Committee; “Health, Safety and Environment Committee’’ The Company’s Health, Safety and Environment Committee; “Lease Agreement’’ the mining concessions lease agreement signed by SQM Salar and Corfo in 1993, as subsequently amended; “Project Contract” project contract for Salar de Atacama undersigned by Corfo and SQM Salar in 1993, as subsequently amended”; “Corfo” Chilean Economic Development Agency; “DCV’’ Central Securities Depository; “DGA’’ General Directorate of Water Resources; “Board” The Company’s Board of Directors; “DOJ’’ United States Department of Justice; “Dollar’’ o “US$’’ Dollars of the United States of America; “DPA’’ Deferred Prosecution Agreement; “EIEP’’ Passive foreign investment company; “United States” United States of America; “FCPA’’ Foreign Corrupt Practices Act of the USA; “FNE’’ Chilean National Economic Prosecutor's Office; “Management’’ the Company’s management; "SQM Group’’ The corporate group composed of the Company and its subsidiaries “Pampa Group’’ Jointly the Sociedad de Inversiones Pampa Calichera S.A., Potasios de Chile S.A. and Inversiones Global Mining (Chile) Limitada; “IASB’’ International Accounting Standards Board; “SSI’’ Staff severance indemnities; 131 10) FINANCIAL REPORTS “IFRIC’’ International Financial Reporting Interpretations Committee; “IPC” Consumer Price Index; “IRS” interest rate swap; “Securities Market Law” Securities Market Law No. 18,045; “Corporate Law'' Ley 18,046 on corporations; “ThUS$'' thousands of Dollars; “MUS$'' millions of Dollars; “IAS” International Accounting Standard; “IFRS” International Financial Reporting Standard; “ILO” International Labour Organization; “WHO” World Health Organization; “Pesos’’ or “Ch$” Chilean pesos, legal tender in Chile; “SEC’’ Securities and Exchange Commission; “Sernageomin’’ National Geology and Mining Service; “SIC’’ Standard Interpretations Committee; “SII” Chilean Internal Revenue Service; “SMA” Environmental Superintendent’s Office; “Company” Sociedad Química y Minera de Chile S.A.; “SQM Industrial’’ SQM Industrial S.A.; “SQM NA’’ SQM North America Corporation; “SQM Nitratos’’ SQM Nitratos S.A.; “SQM Potasio’’ SQM Potasio S.A.; “SQM Salar’’ SQM Salar S.A.; “Tianqi’’ Tianqi Lithium Corporation; and “UF’’ Unidad de Fomento (a Chilean Peso based inflation indexed currency unit); “WACC’’ Weighted Average Cost of Capital. 132 10) FINANCIAL REPORTS Note 1 Identification and Activities of the Company and Subsidiaries 1.1 Historical background Sociedad Química y Minera de Chile S.A. is an open stock corporation founded under the laws of the Republic of Chile and its Chilean Tax Identification Number is 93.007.000-9. The Company was incorporated through a public deed dated June 17, 1968 by the public notary of Santiago Mr. Sergio Rodríguez Garcés. Its existence was approved by Decree No. 1,164 of June 22, 1968 of the Ministry of Finance, and it was registered on June 29, 1968 in the Registry of Commerce of Santiago, on page 4,537 No. 1,992. SQM’s headquarters are located at El Trovador 4285, Floor 6, Las Condes, Santiago, Chile, The Company's telephone number is +(56 2) 2425-2000. The Company is registered in the CMF under number 184 of March 18, 1983 and is therefore subject to oversight by that entity. 1.2 Main domicile where the Company performs its production activities The Company’s main domiciles are: Calle Dos Sur plot No. 5 - Antofagasta; Arturo Prat 1060 - Tocopilla; Administration Building w/n - Maria Elena; Administration Building w/n Pedro de Valdivia - María Elena, Anibal Pinto 3228 - Antofagasta, Kilometer 1378 Ruta 5 Norte Highway - Antofagasta, Coya Sur Plant w/n - Maria Elena, kilometer 1760 Ruta 5 Norte Highway - Pozo Almonte, Salar de Atacama (Atacama Saltpeter deposit) potassium chloride plant w/n - San Pedro de Atacama, potassium sulfate plant at Salar de Atacama w/n – San Pedro de Atacama, Minsal Mining Camp w/n CL Plant CL, Potassium– San Pedro de Atacama, formerly the Iris Saltpeter office w/n, Commune of Pozo Almonte, Iquique. 1.3 Codes of main activities The codes of the main activities as established by the CMF, as follows: - - - 1700 (Mining) 2200 (Chemical products) 1300 (Investment) 1.4 Description of the nature of operations and main activities The products of the Company are mainly derived from mineral deposits found in northern Chile where mining takes place and caliche and brine deposits are processed. (a) Specialty plant nutrition: Four main types of specialty plant nutrients are produced: potassium nitrate, sodium nitrate, sodium potassium nitrate and specialty blends. In addition, other specialty fertilizers are sold including third party products. (b) Iodine: The Company produces iodine and iodine derivatives, which are used in a wide range of medical, pharmaceutical, agricultural and industrial applications, including x-ray contrast media, polarizing films for LCD and LED, antiseptics, biocides and disinfectants, in the synthesis of pharmaceuticals, electronics, pigments and dye components. (c) Lithium: The Company produces lithium carbonate, which is used in a variety of applications, including electrochemical materials for batteries, frits for the ceramic and enamel industries, heat- resistant glass (ceramic glass), air conditioning chemicals, continuous casting powder for steel extrusion, primary aluminum smelting process, pharmaceuticals and lithium derivatives. We are also a leading supplier of lithium hydroxide, which is primarily used as an input for the lubricating greases industry and for certain cathodes for batteries. 133 10) FINANCIAL REPORTS (d) Industrial chemicals: The Company produces three industrial chemicals: sodium nitrate, potassium nitrate and potassium chloride. Sodium nitrate is used primarily in the production of glass, explosives, and metal treatment. Potassium nitrate is used in the manufacturing of specialty glass, and it is also an important raw material to produce of frits for the ceramics and enamel industries. Solar salts, a combination of potassium nitrate and sodium nitrate, are used as a thermal storage medium in concentrated solar power plants. Potassium chloride is a basic chemical used to produce potassium hydroxide, and it is also used as an additive in oil drilling as well as in food processing. (e) Potassium: The Company produces potassium chloride and potassium sulfate from brines extracted from the Salar de Atacama. Potassium chloride is a commodity fertilizer used to fertilize a variety of crops including corn, rice, sugar, soybean and wheat. Potassium sulfate is a specialty fertilizer used mainly in crops such as vegetables, fruits and industrial crops. (f) Other products and services: The Company also sells other fertilizers and blends, some of which we do not produce. Mainly potassium nitrate, potassium sulfate and potassium chloride. This business line also includes revenue from commodities, services, interests, royalties and dividends. 134 10) FINANCIAL REPORTS 1.5 (a) Other background Employees As of December 31, 2020, and 2019, the workforce was as follows: As of December 31, 2020 As of December 31, 2019 Employees SQM S.A. other subsidiaries Total SQM S.A. other subsidiaries Total Executives Professionals Technicians and operators Foreign employees Overall total 30 94 267 17 408 85 1,156 3,310 548 5,099 115 1,250 3,577 565 5,507 30 110 282 17 439 91 1,170 3,481 560 5,302 121 1,280 3,763 577 5,741 (b) Main shareholders As of December 31, 2020, there were 1,358 shareholders. Following table shows information about the main shareholders of the Company’s Series A or Series B shares in circulation as of December 31, 2020 and 2019, in line with information provided by the DCV, with respect to each shareholder that, to our knowledge, owns more than 5% of the outstanding Series A or Series B shares. The following information is derived from our registry and reports managed by the DCV and informed to the CMF and the Chilean Stock Exchange: Shareholders as of December 31, 2020 No. of Series A % of Series A shares No. of Series B % of Series B shares % of total shares Inversiones TLC SpA (1) The Bank of New York Mellon, ADRs Sociedad de Inversiones Pampa Calichera S.A. (2) Potasios de Chile S.A. Inversiones Global Mining (Chile) Limitada Euroamerica C de B S. A. Banco Santander via foreign investor accounts Banco de Chile via State Street Banco de Chile non-resident third party accounts Inversiones la Esperanza de Chile Limitada Banchile Corredora de Bolsa S. A. Banco de Chile on behalf of Citibank NA New York customers 62,556,568 43.80% - - - 50,792,452 44,894,152 18,179,147 8,798,539 1,418 - - - 4,147,263 459,202 177,463 31.43% 12.73% 6.16% - - - - 2.90% 0.32% 0.12% 922,971 - - 8,788,517 7,294,827 6,971,782 6,129,339 46,500 2,426,758 1,732,249 - 42.19% 0.77% - - 7.30% 6.06% 5.79% 5.09% 0.04% 2.02% 1.44% 23.77% 19.30% 17.41% 6.91% 3.34% 3.34% 2.77% 2.65% 2.33% 1.59% 1.10% 0.73% 135 10) FINANCIAL REPORTS Shareholders as of December 31, 2019 No. of Series A % of Series A shares No. of Series B % of Series B shares % of total shares Inversiones TLC SpA (1) Sociedad de Inversiones Pampa Calichera S.A. (2) The Bank of New York Mellon, ADRs Potasios de Chile S.A. Inversiones Global Mining (Chile) Limitada Banco Itaú via foreign investor accounts Banco de Chile non-resident third party accounts Banco Santander via foreign investor accounts Euroamerica C de B S. A. Banchile C de B S. A. Inversiones la Esperanza de Chile Limitada Bolsa de comercio de Santiago Bolsa de valores 62,556,568 44,894,152 - 18,179,147 8,798,539 - 109 - 3,056 491,729 4,147,263 30,590 43.80% 31.43% - 12.73% 6.16% - - - - 0.34% 2.90% 0.02% - 3,793,154 38,311,788 - - 7,373,216 6,842,746 6,618,416 4,863,467 4,285,696 46,500 3,077,930 - 3.15% 31.83% - - 6.13% 5.68% 5.50% 4.04% 3.56% 0.04% 2.56% 23.77% 18.50% 14.56% 6.91% 3.34% 2.80% 2.60% 2.51% 1.85% 1.82% 1.59% 1.18% (1) As reported by DCV, which records the Company's shareholders' register as of December 31, 2020 and December 31, 2019, Inversiones TLC SpA, a subsidiary of Tianqi, is the direct owner of 62,556,568 shares of SQM equivalent to 23.77% of SQM’s shares. Through Tianqi’s subsidiaries it owns 5,516,772 Series B SQM shares as reported by Inversiones TLC Spa. So as of December 31, 2020, Tianqi owns 25.86% of SQM's total Series A and B shares. (2) Total Sociedad de Inversiones Pampa Calichera S.A. 57,235,201 Series A and B shares; 11,418,078 Series B shares are held by different brokers. 1.6 Covid-19 In January 2020, the WHO deemed COVID-19 a global pandemic. In March 2020, the Chilean Ministry of Health declared a nationwide State of Emergency. As a precaution, our management has implemented several measures to help reduce the speed at which the coronavirus spreads, including measures to mitigate the spread in the workplace, significant reductions in employee travel and a mandatory quarantine for people who have arrived from high risk destinations, in consultation with governmental and international health organization guidelines, and will continue to implement measures consistent with evolving coronavirus situation. On March 16, 2020, the Company reported on various points in relation to the outbreak of the COVID-19 virus and its being declared to be a global pandemic by the WHO. (1) Regarding the financial and operational effects that this situation could mean for the Company, it is worth noting that the Company sells its products worldwide, with Asia, Europe and North America being its main markets. Border closures, decrease in commercial activity and difficulties and disruptions in the supply chains in the markets in which we sell have impacted our ability to fulfill our previous sales volume estimates, the impact on our sales volumes and average prices will depend on the duration of the virus in different markets, the efficiency of the measures implemented to contain the spread of the virus in each country and fiscal incentives that may be implemented in different jurisdictions to promote economic recovery. For now, our operations have not seen any material impacts related to the outbreak of COVID-19 virus. We have taken measures to mitigate the impacts of this health emergency on our employees and limit the impact it could have on our operations (described below in point 2). 136 10) FINANCIAL REPORTS (2) Regarding the measures that management has adopted or intends to adopt to mitigate possible financial and/or operational effects, we inform that the Company has implemented a series of measures in its operations in Chile and abroad that seek to protect its workers and reduce the speed at which the virus spreads. The measures adopted by the Company are: (a) The flexibility of the working day, arrival and departure times, together with the incentive to work from home in those cases where this is possible. (b) Avoidance of crowds, seminars and large meetings in the Company´s offices and operating facilities. (c) (d) (e) Strengthening personal hygiene protocols (use of alcohol-based gel, masks, etc.) and sanitation in plants, cafeterias and offices. Significant reduction in domestic and international travel, along with obligatory quarantine for people who have arrived from high risk destinations. The costs associated with the measures implemented by the company correspond primarily to increased expenses in transportation, supplies, room and board, among others. (3) Regarding the existence of committed insurance and its level of coverage, we inform that as of today, we have not identified any events which would trigger coverage from the insurance policies that the Company has contracted. (4) Finally, we hereby inform that we do not currently have any other information that management believes is relevant to provide. As of December 31, 2020, there have been no significant changes in the impacts associated with COVID-19 reported to the CMF. 137 10) FINANCIAL REPORTS Note 2 Basis of presentation for the consolidated financial statements 2.1 Accounting period These consolidated financial statements cover the following periods: (a) Consolidated Statements of Financial Position as of December 31, 2020 and 2019 (b) Consolidated Statements of Income for the periods from January 1 to December 31, 2020 and 2019. (c) Consolidated Statements of Comprehensive Income from January 1 to December 31, 2020 and 2019. (d) Consolidated Statements of Changes in Equity for the periods ended December 31, 2020 and 2019. (e) Consolidated Statements of Cash Flows for the periods ended December 31, 2020 and 2019. 2.2 Consolidated financial statements The consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with IFRS and represent the full, explicit and unreserved adoption of IFRS. These consolidated financial statements fairly reflect the Company’s financial position, as of December 31, 2020 and 2019, the comprehensive results of operations, changes in equity and cash flows occurring for the years then ended. IFRS establish certain alternatives for their application, those applied by the Company are detailed in this Note and Note 3. The accounting policies used in the preparation of these consolidated annual accounts comply with each IFRS in force at their date of presentation. Pursuant to CMF requirements, on December 31, 2020 the effects related to the application of IFRS 16 “Leases” are presented in separate items and the following reclassifications have been made with respect to the information reported on December 31, 2019 to ensure a consistent presentation between periods, which are considered not significant for the previously issued financial statements. See Note 4. Items Original balances reported as of December 31, 2019 Reclassification Balances reclassified as of December 31, 2019 Property, plant and equipment, (net) Right-of-use assets Other current financial liabilities Lease liabilities, current Other non-current financial liabilities Lease liabilities, non-current ThUS$ ThUS$ ThUS$ 1,607,070 - 298,822 - 1,518,926 - (37,164) 37,164 (7,694) 7,694 (30,203) 30,203 1,569,906 37,164 291,128 7,694 1,488,723 30,203 138 10) FINANCIAL REPORTS 2.3 Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for the following: (a) Inventories are recorded at the lower of cost and net realizable value. (b) Financial derivatives measured at fair value. (c) Certain financial investments measured at fair value with an offsetting entry in other comprehensive income. 2.4 Accounting pronouncements New accounting pronouncements (a) The following standards, interpretations and amendments are mandatory for the first time for annual periods beginning on January 1, 2020: Amendments and improvements Description Mandatory for annual periods beginning on or after Amendment to IAS 1 “Presentation of Financial Statements” and “IAS 8” Accounting Policies, Changes in Accounting Estimates and Errors - Published in October 2018. This amendment establishes a consistent definition of materiality in all the IFRCs and the Conceptual Framework for Financial Information; it clarifies the explanation of the definition of material; and it incorporates some of the guidelines in IAS 1 on immaterial information. Amendment to IFRS 3 “Definition of a Business” - Published in October 2018. This amendment revises the definition of a business. Based on the feedback received by the IASB, the application of the current guidance is frequently seen as too complex, and results in too many transactions that qualify as business combinations. Amendments to IFRS 9, IAS 39 and IFRS 7 “Reform to the referential interest rate” Published in September 2019. Amendment to IFRS 16 “Lease Concessions” - Published in May 2020. These amendments provide certain simplifications in relation to the reform to the referential interest rates. These simplifications relate to hedge accounting and affect the IBOR reform, which generally shouldn’t result in the finalization of hedge accounting. However, any hedge ineffectiveness should continue to be recorded in the results. This amendment provides lessees with an optional exemption regarding the assessment of whether a lease concession associated with COVID-19 is a lease modification. Lessees may opt to account for lease concessions as they would if there were no lease modifications. In many cases, this would give rise to the accounting for a concession as a variable lease payment. 01-01-2020 01-01-2020 01-01-2020 01-01-2020 Management confirm that the adoption of the aforementioned standards, amendments and interpretations did not significantly impact the company’s consolidated financial statements. 139 10) FINANCIAL REPORTS (b) Standards, interpretations and amendments issued that had not become effective for financial statements beginning on January 1, 2020 and which the Company has not adopted early are as follows: Standards and Interpretations Description Amendment to IAS 1 “Presentation of financial statements” on classification of liabilities. Reference Framework - Amendments to IFRS 3. Conceptual the to Amendment to IAS 16 “Property, plant and equipment” Amendment to IAS 37, “Provisions, contingent liabilities and contingent assets.” IFRS 9 Financial Instruments. IFRS 16 Leases. IFRS 1 International Standards. First-time Adoption of Reporting Financial Amendment to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures”, Published in September 2014. These limited scope amendments of IAS 1 “Presentation of financial statements” clarify that the liabilities will be classified as current or non- current depending on the rights that exist at the close of the reporting period. The classification is not affected by the expectations of the entity or the events subsequent to the report date (for example, the receipt of a waiver or noncompliance with the pact). The amendment also clarifies what IAS 1 means when referring to “liquidation” of a liability. The amendment must be applied retroactively in accordance with IAS 8. In May 2020, the IASB issued an “Exposure Draft” proposing deferral of the effective application date to January 1, 2023. Minor modifications were made to IFRS 3 “Definition of a Business” to update references to the conceptual framework for financial reporting and to add an exception to the recognition of contingent liabilities and contingent assets within the scope of IAS 37 “Provisions, contingent liabilities and contingent assets” and Interpretation 21 “Levies.” The modifications also confirm that contingent assets should not be recognized in the date of acquisition. This prohibits companies from deducting from the cost of the property any revenue received from the sale of articles produced while the company is preparing the asset for its anticipated use. The company must recognize this sales revenue and associated costs in the profit or loss for the fiscal year. This clarifies for onerous contracts which inevitable costs a company must include to assess whether a contract will result in a loss. This clarifies which fees must be included in the 10% test for the derecognition of financial liabilities. Modification of illustrative example 13 to eliminate the illustration of lessor payments in relation to improvements to rental properties, to eliminate any confusion as to the treatment of lease incentives. This enables entities that have measured their assets and liabilities against book values in their head office books to also measure the accumulated translation differences using the amounts notified by the head office. This amendment will also apply to associates and joint ventures that have taken the same IFRS 1 exemption. These amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not), A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. Mandatory for annual periods beginning on or after 01-01-2022 01-01-2022 01-01-2022 01-01-2022 01-01-2022 01-01-2022 01-01-2022 undetermined Management believes that the adoption of the above standards, amendments and interpretations will not have a significant impact on the Company’s financial statements. 140 10) FINANCIAL REPORTS 2.5 Basis of consolidation (a) Subsidiaries The Company established control as the basis of consolidation of its financial statements. The Company controls a subsidiary when it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The consolidation of a subsidiary starts when the Group controls it and it is no longer included in the consolidation when this control is lost. Subsidiaries are consolidated through a line by line method, adding items that represent assets, liabilities, income and expenses with a similar content, and eliminating operations between companies within the SQM Group. Results for dependent companies acquired or disposed of during the period are included in the consolidated accounts from the date on which control is transferred to the SQM Group or until the date when this control ends, as relevant. To account for an acquisition of a business, the Company uses the acquisition method. Under this method, the acquisition cost is the fair value of assets delivered, equity securities issued, and incurred or assumed liabilities at the date of exchange. Assets, liabilities and contingencies identifiable assumed in a business combination are measured initially at fair value at the acquisition date. For each business combination, the Company will measure the non-controlling interest of the acquiree either at fair value or as proportional share of net identifiable assets of the acquire. The details of the consolidated companies can be found in Note 8. 141 10) FINANCIAL REPORTS 2.6 Investments in associates and joint ventures (a) Joint ventures Investments in joint arrangements are classified as joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. With respect to joint operations, the Company recognizes its direct right to the assets, liabilities, income and expenses of the joint arrangement. (b) Joint ventures and investments in associates Interests in companies over which joint control is exercised (joint ventures) or where an entity has significant influence (associates) are recognized using the equity accounting method. Significant influence is presumed when the investor owns over 20% of the investee’s share capital. The investment is recognized using this method in the statement of financial position at cost plus changes subsequent to acquisition and includes the proportional share of the associate’s equity. For these purposes, the percentage interest in the associate is used. The associated acquired goodwill is included in the investee’s book value and is not amortized. The debit or credit to the income statement reflects the proportional share of the profit or loss of the associate or joint venture. Unrealized gains from transactions with joint ventures or associates are eliminated in accordance with the Company's percentage interest in such entities. Any unrealized losses are also eliminated, unless that transaction provides evidence that the transferred asset is impaired. Changes in associate’s or joint ventures equity are recognized proportionally with a charge or credit to "Other Reserves" and are classified according to their origin. The reporting dates of the associate or joint ventures, the Company and related policies are similar for equivalent transactions and events in similar circumstances. In the event that significant influence is lost, or the investment is sold, or held for sale, the equity method is suspended, not recognizing the proportional share of the gain or loss. If the resulting value under the equity method is negative, the share of profit or loss is reflected as zero in the consolidated financial statements, unless there is a commitment by the Company to restore the capital position of the Company, in which case the related risk provision and expense are recorded. Dividends received by these companies are recorded by reducing the value of the investment and are shown in cash flows from operating activities, and the proportional share of the gain or loss recognized in accordance with the equity method is included in the consolidated income statement under "Share of Gains (Losses) of Associates and Joint Ventures Accounted for Using the Equity Method''. 142 10) FINANCIAL REPORTS Note 3 Significant accounting policies 3.1 Classification of balances as current and non-current In the consolidated statement of financial position, balances are classified in consideration of their recovery (maturity) dates; i.e., those maturing within a period equal to or less than 12 months are classified as current counted from the closing date of the consolidated financial statements and those with maturity dates exceeding the aforementioned period are classified as non-current. The exception to the foregoing relates to deferred taxes, which are classified as non-current, regardless of the maturity they have. 3.2 Functional and presentation currency The Company’s consolidated financial statements are presented in United States dollars, without decimal places, which is the Company’s functional and presentation currency and is the currency of the main economic environment in which it operates. Consequently, the term foreign currency is defined as any currency other than the U.S. dollar. 3.3 Accounting policy for foreign currency translation (a) SQM group entities: The revenue, expenses, assets and liabilities of all entities that have a functional currency other than the presentation currency are converted to the presentation currency as follows: - - - Assets and liabilities are converted at the closing exchange rate prevailing on the reporting date. Revenues and expenses of each profit or loss account are converted at monthly average exchange rates. All resulting foreign currency translation gains and losses are recognized as a separate component in translation reserves. In consolidation, foreign currency differences arising from the translation of a net investment in foreign entities are recorded in shareholder’s equity (“other reserves”), At the date of disposal, such foreign currency translation differences are recognized in the statement of income as part of the gain or loss from the sale. 143 The main exchange rates and UF used to translate monetary assets and liabilities, expressed in foreign currency at the end and average of each period in respect to U.S. dollars, are as follows: 10) FINANCIAL REPORTS Currencies Brazilian real New Peruvian sol Argentine peso Japanese yen Euro Mexican peso Australian dollar Pound Sterling South African rand Chilean peso Chinese yuan Indian rupee Thai Baht Turkish lira UF (*) (*) US$ per UF Closing exchange rates Average exchange rates As of December 31, 2020 As of December 31, 2019 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ ThUS$ ThUS$ 5.18 3.62 84.14 105.56 0.81 19.93 1.30 0.74 14.61 710.95 6.51 73.30 29.94 7.36 40.89 4.02 3.31 59.83 108.90 0.89 18.89 1.43 0.76 14.06 748.74 6.98 71.31 29.97 5.94 37.81 5.14 3.60 82.62 103.81 0.82 19.97 1.33 0.74 14.88 731.92 6.53 73.65 30.08 7.70 39.73 4.11 3.35 59.86 109.12 0.90 19.11 1.45 0.76 14.42 767.22 7.01 71.16 30.22 5.85 36.90 (b) Transactions and balances The Company’s non-monetary transactions in currencies other than the functional currency (Dollar) are translated to the respective functional currencies of Group entities at the exchange rate on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. All differences are recorded in the statement of income except for all monetary items that provide an effective hedge for a net investment in a foreign operation. These items are recognized in other comprehensive income until disposal of the investment, when they are recognized in the statement of income. Charges and credits attributable to foreign currency translation differences on those hedge monetary items are also recognized in other comprehensive income. Non-monetary assets and liabilities that are measured at historical cost in a foreign currency are retranslated to the functional currency at the historical exchange rate of the transaction. Non-monetary items that are measured based on fair value in a foreign currency are translated using the exchange rate at the date on which the fair value is determined. 144 10) FINANCIAL REPORTS 3.4 Consolidated statement of cash flows Cash equivalents correspond to highly liquid short-term investments that are easily convertible into known amounts of cash and subject to insignificant risk of changes in their value and mature in less than three months from the date of acquisition of the instrument. For the purposes of the statement of cash flows, cash and cash equivalents comprise cash and cash equivalents as defined above. The statement of cash flows present cash transactions performed during the year, determined using the direct method. 3.5 Accounting policy for Financial assets Management determines the classification of its financial assets, in accordance with the provisions of IFRS 9, at fair value (either through other comprehensive income, or through profit or loss), and at amortized cost. The classification depends on the business model of the entity to manage the financial assets and the contractual terms of the cash flows. In the initial recognition, the Company measures its financial assets at fair value more or less, in the case of a financial asset that is not accounted for at fair value through profit or loss, the transaction costs that are directly attributable to the acquisition of the financial asset on the date when the Company commits to the purchase or sale of an asset. In the case of account receivables and other accounts receivables, the transaction price at the initial recognition is measured in accordance with the provisions of IFRS 15. After initial recognition, the Company measures its financial assets according to the Company's business model for managing its financial assets and the contractual terms of its cash flows: (a) Financial instruments measured at amortized cost. Financial assets that meet the following conditions are included in this category (i) the business model that supports it aims to maintain the financial assets to obtain the contractual cash flows and the contractual conditions of the financial asset give place, on specified dates, to cash flows that are only payments of the principal and interest on the outstanding principal amount. The Company’s financial assets that meet these conditions are: (ii) cash equivalents; (iii) related party receivables; (iv) trade debtors; (v) other receivables. (b) Financial instruments at fair value. A financial asset should be measured at fair value through profit or loss or fair value through other comprehensive income, depending on the following: (i) "Fair Value Through Other Comprehensive Income": Assets held to collect contractual cash flows and to be sold, where the asset cash flows are only capital and interest payments, are measured at fair value through other comprehensive income. Changes in book values are through other comprehensive income, except for the recognition of impairment losses, interest income and exchange gains and losses, which are recognized in the income statement. When a financial asset is derecognized, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to the income statement. Interest income from these financial assets is included in financial income using the effective interest method. Exchange gains and losses are presented in the income statement and impairment losses are separately presented in the income statement. (ii) "Fair Value Through Profit and Loss": Assets that do not meet the amortized cost or "Fair Value Through Other Comprehensive Income" criteria are valued at "Fair Value Through Profit and Loss". (c) Financial equity assets at fair value through other comprehensive income. Equity instruments that are not classified as held for trading and which the Group has irrevocably chosen to recognize in this category. 145 10) FINANCIAL REPORTS Financial asset impairment The Company evaluates expected credit losses associated with its debt instruments carried at amortized cost and fair value through other comprehensive income. The impairment method used depends on whether there has been a significant increase in credit risk. The Company applies the IFRS 9 simplified approach to measure expected credit losses using the lifetime expected loss on all trade receivables. Expected credit losses are measured by grouping receivables by their shared credit risk characteristics and days overdue. The Company has concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for these assets. Expected loss rates are based on sales payment profiles and historical credit losses within this period. Historical loss rates are adjusted to reflect current and expected information regarding macroeconomic factors that affect the ability of customers to meet their commitments. Impairment losses from receivables and contract assets are shown as net impairment losses in the line “Impairment of financial assets and reversal of impairment losses”, see Note 25.7. The subsequent recovery of previously canceled amounts is accredited in the same line. 146 10) FINANCIAL REPORTS 3.6 Financial liabilities Management determines the classification of its financial liabilities in accordance with the provisions of IFRS 9, at fair value or at amortized cost. The classification depends on the business model of the entity to manage the financial assets and the contractual terms of the cash flows. At the initial recognition, the Company measures its financial liabilities by their fair value more or less, in the case of a financial liability that is not accounted for at fair value through profit or loss, the transaction costs that are directly attributable to the acquisition of the financial liability. After initial recognition, the Company measures its financial liabilities at amortized cost unless the Company, at the initial moment, irrevocably designates the financial liability as measured at fair value through profit or loss. Financial liabilities measured at amortized cost are commercial accounts payable and other accounts payable and other financial liabilities. Valuation at amortized cost is made using the effective interest rate method. Amortized cost is calculated by considering any premium or discount on the acquisition and includes transaction costs that are an integral part of the effective interest rate. Financial liabilities are recorded as not current when they mature in more than 12 months and as current when they mature in less than 12 months. 3.7 Reclassification of financial instruments When the Company changes its business model for managing financial assets, it will reclassify all its financial assets affected by the new business model. Financial liabilities cannot be reclassified. 3.8 Financial instrument derecognition The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred; and the control of the financial assets has not been retained. The Company derecognizes a financial liability when its contractual obligations or a part of these are discharged, paid to the creditor or legally extinguished from the principle responsibility contained in the liability. 3.9 Derivative and hedging financial instruments Derivatives are recognized initially at fair value as of the date on which the derivatives contract is signed and, they are subsequently assessed at fair value. The method for recognizing the resulting gain or loss depends on whether the derivative has been designated as an accounting hedge instrument and, if so, it depends on the type of hedging, which may be as follows: a) Fair value hedge of assets and liabilities recognized (fair value hedges); b) Hedging of a single risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge). At the beginning of the transaction, the Company documents the relationship that exists between hedging instruments and those items hedged, as well as their objectives for risk management purposes and the strategy to conduct different hedging operations. 147 10) FINANCIAL REPORTS The Company also documents its evaluation both at the beginning and at the end of each period if the derivatives used in hedging transactions are highly effective to offset changes in the fair value or in cash flows of hedged items. The fair value of derivative instruments used for hedging purposes is shown in Note 14.3. Changes in the cash flow hedge reserve are classified as a non-current asset or liability if the remaining expiration period of the hedged item is more than 12 months, and as a current asset or liability if the remaining expiration period of the hedged item is less than 12 months. Derivatives that are not designated or do not qualify as hedging derivatives are classified as current assets or liabilities, and changes in the fair value are directly recognized through profit or loss. a) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The gain or loss relating to the effective portion of interest rate swaps that hedge fixed rate borrowings is recognized in profit or loss within finance costs, together with changes in the fair value of the hedged fixed rate borrowings attributable to interest rate risk. The gain or loss relating to the ineffective portion is recognized in profit or loss within other income or other expenses. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized to profit or loss over the period to maturity using a recalculated effective interest rate. b) Cash flow hedges The effective portion of the gain or loss on the hedging instrument is initially recognized with a debit or credit to other comprehensive income, while any ineffective portion is immediately recognized with a debit or credit to income, as appropriate depending on the nature of the hedged risk. The amounts accumulated in net equity are carried over to results when the hedged items are settled or when these have an impact on results. When a hedging instrument no longer meets the criteria for hedge accounting, any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately reclassified to profit or loss. 148 10) FINANCIAL REPORTS 3.10 Derivative financial instruments not considered as hedges Derivative financial instruments not considered as hedges are recognized at fair value with the effect in the results of the year. The Company has derivative financial instruments to hedge foreign currency risk exposure. The Company continually evaluates the existence of embedded derivatives in both its contracts and in its financial instruments. As of December 31, 2020, and December 31, 2019, the Company does not have any embedded derivatives. 3.11 Deferred acquisition costs from insurance contracts Acquisition costs from insurance contracts are classified as prepayments and correspond to insurance contracts in force, recognized using the straight-line method and on an accrual basis independent of payment date. These are recognized under other non-financial assets. 3.12 Leases (i) Right-of-use assets The Company recognizes right-of-use assets on the initial lease date (i.e., the date on which the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, adjusted by any new measurement of the lease liability. The cost of right-of-use assets includes the amount of recognized lease liabilities, direct initial costs incurred and lease payments made on the start date or sooner, less the lease incentives received. Unless the Company is reasonably sure it will take ownership of the leased asset at the end of the lease period, the assets recognized through right-of-use are depreciated in a straight line during the shortest period of their estimated useful life and lease period. Right-of-use assets are subject to impairment as per “IAS 36 Impairment of Assets”. (ii) Lease liabilities On the lease start date, the Company recognizes lease liabilities measured at present value of lease payments that will be made during the lease period. Lease payments include fixed payments (including payments that are essentially fixed), less incentives for lease receivables, variable lease payments that are dependent on an index or rate and amounts that are expected to be paid as guaranteed residual value. Lease payments also include the exercise price of a purchase option if the Company is reasonably sure it will exercise this and penalty payments for terminating a lease, if the lease period reflects that the Company will exercise the option to terminate. Variable lease payments that are not dependent on an index or rate are recognized as expenses in the period that produces the event or condition that triggers payment. When calculating the present value of lease payments, the Company uses the incremental borrowing rate on the initial lease date if the interest rate implicit in the lease cannot be determined easily. After the start date, the lease liability balance will increase to reflect the accumulation of interest and will diminish as lease payments are made. Furthermore, the book value of lease liabilities is remeasured in the event of an amendment, a change in the lease period, a change in the fixed lease payments in substance or a change in the assessment to buy the underlying asset. Payments made that affect lease liabilities are presented as part of the financing activities in the cash flow statement. (iii) Short-term leases and low-value asset leases The Company applies the short-term lease recognition exemption to leases with a lease term of 12 months or less starting on the start date and that don’t have a purchase option. It also applies the low-value asset lease recognition exemptions. Lease payments in short-term leases and low-value asset leases are recognized as lineal expenses during the lease term. 149 10) FINANCIAL REPORTS (d) Significant judgments in the determination of the lease term for contracts with renewal options The Company determines the lease term as the non-cancellable period of the lease, together with periods covered by an option to extend the lease if it is reasonably certain that this will be exercised, or any period covered by an option to terminate the lease, if it is reasonably certain that this will not be exercised. The Company has the option, under some of its leases, to lease assets for additional terms. The Company applies its judgment when assessing whether it is reasonably certain that it will exercise the option to renovate. In other words, it considers all the relevant factors that create an economic incentive for it to exercise the option to renovate. After the start date, the Company reevaluates the lease term if there is a significant event or change in the circumstances that are under its control and affect its capacity to exercise (or not exercise) the option to renovate. 3.13 Inventory measurement The method used to determine the cost of inventories is the weighted average monthly cost of warehouse storage. In determining production costs for own products, the company includes the costs of labor, raw materials, materials and supplies used in production, depreciation and maintenance of the goods that participate in the production process, the costs of product movement necessary to maintain stock on location and in the condition in which they are found, and also includes the indirect costs of each task such as laboratories, process and planning areas, and personnel expenses related to production, among others. For finished and in-process products, the company has four types of provisions, which are reviewed quarterly: 1. Provision associated with the lower value of stock: The provision is directly identified with the product that generates it and involves three types: (i) provision of lower realizable value, which corresponds to the difference between the inventory cost of intermediary or finished products, and the sale price minus the necessary costs to bring them to the same conditions and location as the product with which they are compared; (ii) provision for future uncertain use that corresponds to the value of those products in process that are likely not going to be used in sales based on the company’s long-term plans; (iii) reprocessing costs of products that are unfeasible for sale due to current specifications. 2. Provision associated with physical differences in inventory: A provision is made for differences that exceed the tolerance considered in the respective inventory process (physical and annual inventories are taken for the productive units in Chile and the port of Tocopilla, the business subsidiaries depend on the last zero ground obtained, but in general it is at least once a year), these differences are recognized immediately. 3. Potential errors in the determination of stock: The company has an algorithm that is reviewed at least once a year and corresponds to diverse percentages assigned to each inventory based on the product, location, complexity involved in the associated measurement, rotation and control mechanisms. 4. Provisions undertaken by business subsidiaries: these are historical percentages that are adjusted as zero ground is attained based on normal inventory management. Inventories of raw materials, materials and supplies for production are recorded at acquisition cost. Cyclical inventories are performed in warehouses, as well as general inventories every three years. Differences are recognized at the moment they are detected. The company has a provision that makes quarterly calculations from percentages associated with each type of material (classification by warehouse and rotation), these percentages use the lower value resulting from deterioration or obsolescence as well as potential losses. This provision is reviewed at least annually, and considers the historical profit and loss obtained in the inventory processes. 150 10) FINANCIAL REPORTS 3.14 Transactions with non-controlling interests Non-controlling interests are recorded in the consolidated statement of financial position within equity but separate from equity attributable to the owners of the Parent. 3.15 Related party transactions Transactions between the Company and its subsidiaries are part of the Company’s normal operations within its scope of business activities. Conditions for such transactions are those normally effective for those types of operations with regard to terms and market prices. The maturity conditions vary according to the originating transaction. 3.16 Property, plant and equipment Property, plant and equipment assets are stated at acquisition cost, net of the related accumulated depreciation, amortization and impairment losses that they might have experienced. In addition to the price paid for the acquisition of tangible property, plant and equipment, the Company has considered the following concepts as part of the acquisition cost, as applicable: (a) (b) Accrued interest expenses during the construction period that are directly attributable to the acquisition, construction or production of qualifying assets, which are those that require a substantial period prior to being ready for use. The interest rate used is that related to the project’s specific financing or, should this not exist, the average financing rate of the investor company. The future costs that the Company will have to experience, related to the closure of its facilities at the end of their useful life, are included at the present value of disbursements expected to be required to settle the and its subsequent variation is recorded directly in results. Having initially recognized provisions for closure and refurbishment, the corresponding cost is capitalized as an asset in “Property, plant and equipment” and amortized in line with the amortization criteria for the associated assets. Construction-in-progress is transferred to property, plant and equipment in operation once the assets are available for use and the related depreciation and amortization begins on that date. Extension, modernization or improvement costs that represent an increase in productivity, ability or efficiency or an extension of the useful lives of property, plant and equipment are capitalized as a higher cost of the related assets. All the remaining maintenance, preservation and repair expenses are charged to expense as they are incurred. The replacement of assets, which increase the asset’s useful life or its economic capacity, are recorded as a higher value of property, plant and equipment with the related derecognition of replaced or renewed elements. Gains or losses which are generated from the sale or disposal of property, plant and equipment are recognized as income (or loss) in the period and calculated as the difference between the asset’s sales value and its net carrying value. Costs derived from the daily maintenance of property, plant and equipment are recognized when incurred. 151 10) FINANCIAL REPORTS 3.17 Depreciation of property, plant and equipment Property, plant and equipment are depreciated through the straight-line distribution of cost over the estimated technical useful life of the asset, which is the period in which the Company expects to use the asset. When components of one item of property, plant and equipment have different useful lives, they are recorded as separate assets. Useful lives are reviewed on an annual basis. Fixed assets located in Salar de Atacama consider useful life to be the lesser value between the technical useful life and the years remaining until 2030. In the case of certain mobile equipment, depreciation is performed depending on the hours of operation. The useful lives used for the depreciation and amortization of assets included in property, plant and equipment in years are presented below: Classes of property, plant and equipment Minimum life or rate (years) Maximum life or rate (years) life or average rate in years Mining assets Energy generating assets Buildings Supplies and accessories Office equipment Transport equipment Network and communication equipment IT equipment Machinery, plant and equipment Other property, plant and equipment 3.18 Goodwill 3 3 3 2 5 5 4 5 5 3 7 16 25 10 5 8 10 11 25 15 6 9 13 7 5 6 8 7 13 10 Goodwill acquired represents the excess in acquisition cost on the fair value of the Company's ownership of the net identifiable assets of the subsidiary on the acquisition date. Goodwill acquired related to the acquisition of subsidiaries is included in the line item goodwill, which is subject to impairment tests annually or more frequently if events or changes in circumstances indicate that it might be impaired and is stated at cost less accumulated impairment losses. Gains and losses related to the sale of an entity include the carrying value of goodwill related to the entity sold. This intangible asset is assigned to cash-generating units with the purpose of testing impairment losses. It is allocated based on cash-generating units expected to obtain benefits from the business combination from which the aforementioned goodwill acquired arose. 152 10) FINANCIAL REPORTS 3.19 Intangible assets other than goodwill Intangible assets other than goodwill mainly relate to water rights, emission rights, commercial brands, costs for rights of way for electricity lines, license costs and the development of computer software and mining property and concession rights, client portfolio and commercial agent. (a) Water rights Water rights acquired by the Company relate to water from natural sources and are recorded at acquisition cost. Given that these assets represent legal rights granted in perpetuity to the Company, they are not amortized, but are subject to annual impairment tests. (b) Rights of way for electric lines As required for the operation of industrial plants, the Company has paid rights of way in order to install wires for the different electric lines on third party land. These rights are presented under intangible asset. Amounts paid are capitalized at the date of the agreement and amortized in the statement of income, according to the life of the right of way. (c) Computer software Licenses for IT programs acquired are capitalized based on their acquisition and customization costs. These costs are amortized over their estimated useful lives. Expenses related to the development or maintenance of IT programs are recognized as an expense as and when incurred. Costs directly related to the production of unique and identifiable IT programs controlled by the Group, and which will probably generate economic benefits that are higher than its costs during more than a year, are recognized as intangible assets. Direct costs include the expenses of employees who develop information technology software and general expenses in accordance with corporate charges received. The costs of development for IT programs are recognized as assets are amortized over their estimated useful lives. (d) Mining property and concession rights The Company holds mining property and concession rights from the Chilean and Western Australian Governments. Property rights from the State of Chile are usually obtained at no initial cost (other than the payment of mining patents and minor recording expenses) and once the rights on these concessions have been obtained, they are retained by the Company while annual patents are paid. Such patents, which are paid annually, are recorded as prepaid assets and amortized over the following twelve months. Amounts attributable to mining concessions acquired from third parties that are not from the Chilean Government are recorded at acquisition cost within intangible assets. (e) Estimated useful lives or amortization rates used for finite identifiable intangible assets Finite useful life measures the length of, or number of production or similar units constituting that useful life., except for the mining claims granted by Corfo, which correspond to assets subject to restitution. For this reason they are considered assets with a finite useful life and their useful life is assigned until the year 2030 when the contract ends. The estimated useful life for software which they are amortized corresponds to the periods defined by the contracts or rights from which they originate. a. Minimum and maximum amortization lives or rates of intangible assets: 153 10) FINANCIAL REPORTS Estimated useful life or amortization rate Minimum Life or Rate Maximum Life or Rate Water rights and rights of way Mining rights granted by Corfo Mining rights IT programs Indefinite 10 years Indefinite 10 years Unit-production method 2 years 8 years 3.20 Research and development expenses Research and development expenses are charged to profit or loss in the period in which the expenditure was incurred. 3.21 Exploration and evaluation expenses The Company holds mining concessions for exploration and exploitation of ore, the Company gives the following treatment to expenses associated with exploration and assessment of these resources: (a) Caliche Once the rights have been obtained, the Company records the disbursements directly associated with the exploration and assessment of the deposit as an at cost asset. These disbursements include the following items: geological surveys, drilling, borehole extraction and sampling, activities related to the technical assessment and commercial viability of the extraction, and in general, any disbursement directly related to specific projects where the objective is to find ore resources. If the technical studies determine that the ore grade is not economically viable, the asset is directly charged to profit and loss. If determined otherwise, the asset described above is associated with the extractable ore tonnage which is amortized as it is used. These assets are presented in the “other non-current non-financial assets” category, reclassifying the portion related to the area to be extracted that year as inventories. (b) Metal exploration Expenses related to metal exploration are charged to profit or loss in the period in which they are recognized if the project assessed doesn't qualify for consideration as advanced exploration, otherwise these are amortized during the development stage. (c) Salar de Atacama exploration Salar de Atacama exploration expenses are presented as non-current assets as the property, plant and equipment category and correspond mainly to wells that can also be used in the extraction of the deposit and/or monitoring, these are amortized over 10 years. (d) Mount Holland exploration Mount Holland exploration expenses are presented into “Property, Plant and Equipment”, specifically in Constructions in progress and primarily consider exploration boreholes and complementary studies for the lithium ore study of the area of Western Australia, Australia. These expenses will begin to be amortized in the development stage. 3.22 Impairment of non-financial assets Assets subject to depreciation and amortization are also subject to impairment testing, provided that an event or change in the circumstances indicates that the amounts in the accounting records may not be recoverable, an impairment loss is recognized for the excess of the book value of the asset over its recoverable amount. 154 10) FINANCIAL REPORTS For assets other than goodwill, the Group annually assesses whether there is any indication that a previously recognized impairment loss may no longer exist or may have decreased. Should such indications exist, the recoverable amount is estimated. The recoverable amount of an asset is the higher between the fair value of an asset or cash generating unit less costs of sales and its value in use, and is determined for an individual asset unless the asset does not generate any cash inflows that are clearly independent from other assets or groups of assets In evaluating value in use, estimated future cash flows are discounted using a pre-tax discount rate that reflects current market assessment, the value of money over time and the specific asset risks. Impairment losses from continuing operations are recognized with a debit to profit or loss in the categories of expenses associated with the impaired asset function. A previously recognized impairment loss is only reversed if there have been changes in the estimates used to determine the asset’s recoverable amount since the last time an impairment loss was recognized. If this is the case, the carrying value of the asset is increased to its recoverable amount. This increased amount cannot exceed the carrying value that would have been determined, net of depreciation, if an asset impairment loss had not been recognized in prior years. This reversal is recognized with a credit to profit or loss. Assets with indefinite lives are assessed for impairment annually. The current value of future cash flows generated by these assets has been estimated given the variation in sales volumes, market prices and costs, discounted with a WACC rate. For December 31, 2020, the WACC rate was 9.73%. 3.23 Minimum dividend As required by Chilean law and regulations, our dividend policy is decided upon from time to time by our Board of Directors and is announced at the Annual Ordinary Shareholders’ Meeting, which is generally held in April of each year. Shareholder approval of the dividend policy is not required. However, each year the Board must submit the declaration of the final dividend or dividends in respect of the preceding year, consistent with the then-established dividend policy, to the Annual Ordinary Shareholders’ Meeting for approval. As required by the Chilean Companies Act, unless otherwise decided by unanimous vote of the holders of issued shares, we must distribute a cash dividend in an amount equal to at least 30% of our consolidated net income for that year (determined in accordance with CMF regulations), unless and to the extent the Company has a deficit in retained earnings. (See Note 21.4). 3.24 Earnings per share The basic earnings per share amounts are calculated by dividing the profit for the year attributable to the ordinary owners of the parent by the weighted average number of ordinary shares outstanding during the year. The Company has not conducted any type of operation of potential dilutive effect that would entail the disclosure of diluted earnings per share. 3.25 Capitalization of interest expenses The cost of interest is recognized as an expense in the year in which it is incurred, except for interest that is directly related to the acquisition and construction of tangible property, plant and equipment assets and that complies with the requirements of IAS 23. The Company capitalizes all interest costs directly related to the construction or to the acquisition of property, plant and equipment, which require a substantial time to be suitable for use. 155 10) FINANCIAL REPORTS The financial expenses accrued during the construction period that are directly attributable to the acquisition, construction or production of assets that qualify for this, use the corresponding interest rate for the financing specific to the project; where this does not exist, the mean financing rate of the subsidiary that makes the investment is used. 3.26 Other provisions Provisions are recognized when: • The Company has a present,legal or constructive obligation as the result of a past event. • It is more likely than not that certain resources must be used, to settle the obligation. • A reliable estimate can be made of the amount of the obligation. In the event that the provision or a portion of it is reimbursed, the reimbursement is recognized as a separate asset solely if there is certainty of income. In the consolidated statement of income, the expense for any provision is presented net of any reimbursement. Should the effect of the value of money over time be significant, provisions are discounted using a discount rate before tax that reflects the liability’s specific risks. When a discount rate is used, the increase in the provision over time is recognized as a finance cost. The Company’s policy is to maintain provisions to cover risks and expenses based on a better estimate to deal with possible or certain and quantifiable responsibilities from current litigation, compensations or obligations, pending expenses for which the amount has not yet been determined, collaterals and other similar guarantees for which the Company is responsible. These are recorded at the time the responsibility or the obligation that determines the compensation or payment is generated. 3.27 Obligations related to employee termination benefits and pension commitments Obligations towards the Company’s employees comply with the provisions of the collective bargaining agreements in force, which are formalized through collective employment agreements and individual employment contracts, except for the United States, which is regulated in accordance with employment plans in force up to 2002. (See more details in Note 19.4). These obligations are valued using actuarial calculations, according to the projected unit credit method which considers such assumptions as the mortality rate, employee turnover, interest rates, retirement dates, effects related to increases in employees’ salaries, as well as the effects on variations in services derived from variations in the inflation rate. The criteria in force contained in the revised IAS 19 are also considered. Actuarial gains and losses that may be generated by variations in defined, pre-established obligations are directly recorded in “Other Comprehensive Income”. Actuarial losses and gains have their origin in deviations between the estimate and the actual behavior of actuarial assumptions or in the reformulation of established actuarial assumptions. The Company’s subsidiary SQM North America has established pension plans for its retired employees that are calculated by measuring the projected obligation using a net salary progressive rate net of adjustments for inflation, mortality and turnover assumptions, deducting the resulting amounts at present value. The net balance of this obligation is presented under the “Non-Current Provisions for Employee Benefits” (refer to Note 19.4). 3.28 Compensation plans Compensation plans implemented through benefits provided in share-based payments settled in cash are recognized in the financial statements at their fair value, in accordance with IFRS 2. Changes in the fair value of options granted are recognized with a charge to payroll in the results for the period (see Note 19.6). 156 10) FINANCIAL REPORTS 3.29 Revenue recognition Revenue includes the fair value of considerations received or receivable for the sale of goods and services during the performance of the Company's activities. Revenue is presented net of value added tax, estimated returns, rebates and discounts and after the elimination of sales among subsidiaries. Revenues are recognized when the specific conditions for each income stream are met, as follows: (a) Sale of goods The sale of goods is recognized when the Company has delivered products to the customer, and there is no obligation pending compliance that could affect the acceptance of products by the customer. The delivery does not occur until products have been shipped to the customer or confirmed as received by the customer, and the related risks of obsolescence and loss have been transferred to the customer and the customer has accepted the products in accordance with the conditions established in the sale, when the acceptance period has ended, or when there is objective evidence that those criteria required for acceptance have been met. Sales are recognized in consideration of the price set in the sales agreement, net of volume discounts and estimated returns at the date of the sale. Volume discounts are evaluated in consideration of annual foreseen purchases and in accordance with the criteria defined in agreements. (b) Sale of services Revenue associated with the rendering of services is recognized considering the degree of completion of the service as of the date of presentation of the consolidated classified statement of financial position, provided that the result from the transaction can be estimated reliably. (c) Income from dividends Income from dividends is recognized when the right to receive the payment is established. 3.30 Finance income and finance costs Finance income is mainly composed of interest income from financial instruments such as term deposits and mutual fund deposits. Interest income is recognized in profit or loss at amortized cost, using the effective interest rate method. Finance costs are mainly composed of interest on bank borrowing expenses, interest on bonds issued and interest capitalized for borrowing costs for the acquisition, construction or production or qualifying assets. Borrowing costs and bonds issued are also recognized in profit or loss using the effective interest rate method. 3.31 Current income tax and deferred Corporate income tax for the year is determined as the sum of current and deferred income taxes from the different consolidated companies. Current taxes are based on the application of the various types of taxes attributable to taxable income for the period. Differences between the book value of assets and liabilities and their tax basis generate the balance of deferred tax assets or liabilities, which are calculated using the tax rates expected to be applicable when the assets and liabilities are realized. In conformity with current tax regulations, the provision for corporate income tax and taxes on mining activity is recognized on an accrual basis, presenting the net balances of accumulated monthly tax provisional payments for the fiscal period and associated credits. The balances of these accounts are presented in current income taxes recoverable or current taxes payable, as applicable. The income tax and variations in deferred tax assets or liabilities that are not the result of business combinations are recorded in the statement of income accounts or equity accounts in the consolidated statement of financial position, considering the origin of the gains or losses which have generated them. 157 10) FINANCIAL REPORTS At each reporting period, the carrying amount of deferred tax assets is reviewed and recognized only if it is probable that future taxable amounts will be available to allow the recovery of all or a portion of the deferred tax assets. With respect to deductible temporary differences associated with investments in subsidiaries, associated companies and interest in joint ventures, deferred tax assets are recognized solely provided that it is more likely than not that the temporary differences will be reversed in the near future and that there will be taxable income with which they may be used. The deferred taxes related to items directly recognized in equity is registered with effect on other comprehensive income and not with effect on income. Deferred tax assets and liabilities are offset if there is a legally receivable right of offsetting tax assets against tax liabilities and the deferred tax is related to the same tax entity and authority. The recognized deferred tax assets refer to the amount of income tax to recover in future periods, related to: a) deductible temporary differences; b) compensation for losses obtained in prior periods, which have not yet been subject to tax deduction; and c) compensation for unused credits from prior periods. The Company recognizes deferred tax assets when it has the certainty that they can be offset with tax income from subsequent periods, unused tax losses or credits to date, but only when this availability of future tax income is probable and can be used for offsetting these unused tax losses or credits. The recognized deferred tax liabilities refer to the amount of income tax to pay in a future period, related to taxable temporary differences. 3.32 Operating segment reporting IFRS 8 requires that companies adopt a management approach to disclose information on the operations generated by its operating segments. In general, this is the information that management uses internally for the evaluation of segment performance and making the decision on how to allocate resources for this purpose. An operating segment is a group of assets and operations responsible for providing products or services subject to risks and performance that are different from those of other business segments. A geographical segment is responsible for providing products or services in a given economic environment subject to risks and performance that are different from those of other segments operating in other economic environments. Allocation of assets and liabilities, to each segment is not possible given that these are associated with more than one segment, except for depreciation, amortization and impairment of assets, which are directly allocated in accordance with the criteria established in the costing process for product inventories to the corresponding segments. 3.33 Primary accounting criteria, estimates and assumptions Management is responsible for the information contained in these consolidated financial statements, which expressly indicate that all the principles and criteria included in IFRS, as issued by the IASB, have been applied in full. In preparing the consolidated financial statements of Sociedad Química y Minera de Chile S.A. and its subsidiaries, management has made judgments and estimates to quantify certain assets, liabilities, revenues, expenses and commitments included therein. Basically, these estimates refer to: - Estimated useful lives are determined based on current facts and past experience and take into consideration the expected physical life of the asset, the potential for technological obsolescence, and regulations. (See Notes 3.22, 16 and 17). 158 10) FINANCIAL REPORTS - Impairment losses of certain assets - Goodwill and intangible assets that have an indefinite useful life are not amortized and are assessed for impairment on an annual basis, or more frequently if the events or changes in circumstances indicate that these may have deteriorated Other assets, including property, plant and equipment, exploration assets, goodwill and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts exceed their recoverable amounts. If an impairment assessment is required, the assessment of value in use often requires estimates and assumptions such as discount rates, exchange rates, commodity prices, future capital requirements and future operating performance. Changes in such estimates could impact the recoverable values of these assets. Estimates are reviewed regularly by management (See Notes 16 and 17). - Assumptions used in calculating the actuarial amount of pension-related and severance indemnity payment benefit commitments (See Note 19) and determination of long-term provisions. - Contingencies – The amount recognized as a provision, including legal, contractual, constructive and other exposures or obligations, is the best estimate of the consideration required to settle the related liability, including any related interest charges, considering the risks and uncertainties surrounding the obligation. In addition, contingencies will only be resolved when one or more future events occur or fail to occur. Therefore, the assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. The Company assesses its liabilities and contingencies based upon the best information available, relevant tax laws and other appropriate requirements (See Notes 22). - Volume determination for certain in-process and finished products is based on topographical measurements and technical studies that cover the different variables affecting products in stock (density and moisture, among others), and related allowance. - Estimates for obsolescence provisions to ensure that the carrying value of inventory is not in excess of the net realizable Inventory valuation. (See Note 12). Despite the fact that these estimates have been made on the basis of the best information available on the date of preparation of these consolidated financial statements, certain events may occur in the future and oblige their amendment (upwards or downwards) over the next few years, which would be made prospectively. 3.34 Environment In general, the Company follows the criteria of considering amounts used in environmental protection and improvement as environmental expenses. However, the cost of facilities, machinery and equipment used for the same purpose are considered property, plant and equipment, as the case may be. 159 10) FINANCIAL REPORTS Note 4 Changes in accounting estimates and policies 4.1 Changes in accounting estimates There have been no changes in the methodologies used to determine such estimates in the periods presented. 4.2 Changes in accounting policies The accounting principles and criteria were consistently applied in both periods, except for the new instructions established by the CMF for the taxonomy of the financial statements in 2020. The presentation of right-of-use assets and lease liabilities recognized under IFRS 16 has been modified. This change has been made as of January 01, 2020 and retroactively as of December 31, 2019. 160 10) FINANCIAL REPORTS Note 5 Financial risk management 5.1 Financial risk management policy The Company’s financial risk management policy is focused on safeguarding the stability and sustainability of the Company and its subsidiaries with regard to all such relevant financial uncertainty components. The Company’s operations are subject to certain financial risk factors that may affect its financial position or results. The most significant risk exposures are market risk, liquidity risk, currency risk, credit risk, and interest rate risk, among others. There could also be additional risks, which are either unknown or known but not currently deemed to be significant, which could also affect the Company’s business operations, its business, financial position, or profit or loss. The financial risk management structure includes identifying, determining, analyzing, quantifying, measuring and controlling these events. Management and in particular, Finance Management, is responsible for constantly assessing the financial risk. 5.2 Risk Factors (a) Credit risk A global economic contraction may have potentially negative effects on the financial assets of the Company, which are primarily made up of financial investments and trade receivables, and the impact on of our customers could extend the payment terms of the Company's receivables by increasing its exposure to credit risk. Although measures are taken to minimize the risk, this global economic situation could mean losses with adverse material effects on the business, financial position or profit and loss of the Company's operations. Trade receivables: to mitigate credit risk, the Company maintains active control of collection and requires the use of credit insurance. Credit insurance covers the risk of insolvency and unpaid invoices corresponding to 80% of all receivables with third parties. For the uncovered portion, the Company uses other instruments such as letters of credit and prepayments. The credit risk associated with receivables is analyzed in Note 14.2 b) and the associated accounting policy can be found in Note 3.5. The concentration of credit risk with respect to sales debtors is reduced, due to the large number of companies that comprise the Company's customer base and their distribution throughout the world. No significant modifications have been made during the period to risk models or parameters used in comparison to December 31, 2019, and no modifications have been made to contractual cash flows that have been significant during this period. Financial investments: correspond to time deposits whose maturity date is greater than 90 days and less than 360 days from the date of investment, so they are not exposed to excessive market risks. The counterparty risk in implementation of financial operations is assessed on an ongoing basis for all financial institutions in which the Company holds financial investments. 161 10) FINANCIAL REPORTS The credit quality of financial assets that are not past due or impaired can be evaluated by reference to external credit ratings (if they are available) or historical information on counterparty late payment rates: Financial institution Financial assets Rating As of December 31, 2020 Moody´s S&P Fitch ThUS$ Banco de Crédito e Inversiones Banco de Chile Banco Estado Banco Itau Corpbanca Banco Santander – Santiago Scotiabank Sud Americano Time deposits Time deposits Time deposits Time deposits Time deposits Time deposits P-1 P-1 P-1 P-2 P-1 - JP Morgan US dollar Liquidity Fund Institutional Legg Mason - Western Asset Institutional cash reserves Other banks with lower balances Total Investment fund Aaa-mf Investment fund Time deposits - - Financial institution Financial assets Banco de Crédito e Inversiones Banco Itaú Corpbanca Banco Santander – Santiago Banco Scotiabank Sud Americano JP Morgan Asset Management Total 90 days to 1 year 90 days to 1 year 90 days to 1 year 90 days to 1 year 90 days to 1 year Moody´s P-1 P-2 P-1 - P-1 Financial institution Financial assets A-1 A-1 A-1 A-2 A-1 - AAAm AAAm - Rating S&P A-1 A-2 A-1 - A-1 Rating - - - - - F1+ AAAmmf AAAmmf - 9,002 10,503 1,001 7,299 16,702 7,002 102,753 107,625 86 261,973 As of December 31, 2020 Fitch ThUS$ - - - F1+ N1+ 185,589 49,006 45,168 31,668 34,028 345,459 As of December 31, 2019 Moody´s S&P Fitch ThUS$ Banco de Chile Banco de Crédito e Inversiones Banco Itaú Corpbanca Banco Santander Scotiabank Sud Americano Banco Estado BBVA Banco Francés Time deposits Time deposits Time deposits Time deposits Time deposits Time deposits Time deposits P-1 P-1 P-2 P-1 - P-1 - A-1 A-1 A-2 A-1 - A-1 - - - - - F1+ - - JP Morgan US dollar Liquidity Fund Institutional Legg Mason - Western Asset Institutional cash reserves Total Investment fund Aaa-mf Investment fund - AAAm AAAm AAAmmf AAAmmf 50,221 42,096 39,093 2,708 14,428 500 53 181,155 146,078 476,332 162 Financial institution Financial assets 10) FINANCIAL REPORTS Rating As of December 31, 2019 Moody´s S&P Fitch ThUS$ Banco Scotiabank Sud Americano Banco de Crédito e Inversiones Banco Santander (*) Banco Itau Corpbanca Banco Security Banco de Chile Banco Estado Total 90 days to 1 year 90 days to 1 year 90 days to 1 year 90 days to 1 year 90 days to 1 year 90 days to 1 year 90 days to 1 year P-2 P-1 P-1 P-2 - - P-1 - A-1 A-1 A-2 A-2 - A-1 - - - - F2 - - 54,180 178,448 74,365 127,579 17,965 18,026 15,126 485,689 (*) This includes ThUS$ 1,870 associated with collateral in guarantee used to reduce the liquidity risk. (b) Currency risk The functional currency of the company is the US dollar, due to its influence on the determination of price levels, its relation to the cost of sales and considering that a significant part of the Company’s business is conducted in this currency. However, the global nature of the Company's business generates an exposure to exchange rate variations of several currencies with the US dollar. Therefore, the Company maintains hedge contracts to mitigate the exposure generated by its main mismatches (net between assets and liabilities) in currencies other than the US dollar against the exchange rate variation, updating these contracts periodically depending on the amount of mismatching to be covered in these currencies. Occasionally, subject to the approval of the Board, the Company ensures short-term cash flows from certain specific line items in currencies other than the US dollar. A significant portion of the Company’s costs, especially salary payments, is associated with the Peso. Therefore, an increase or decrease in its exchange rate with the US dollar would affect the Company's profit and loss. By the fourth quarter of 2020, approximately US$ 473 million accumulated in expenses are associated with the Peso. As of December 31, 2020, the Company held derivative instruments classified as hedges of foreign exchange risks associated with 100% of all of the bond liabilities denominated in UF, for an asset at fair value of US$ 18.41 million. As of December 31, 2019, a liability was recognized amounting to US$ 18.9 million. Furthermore, on December 31, 2020, the Company held derivative instruments classified as hedges of foreign exchange risks associated with 100% of all nominative term deposits in UF and in pesos, at a fair value of US$ 21 million in liabilities. On December 31, 2019, an asset was recognized for an amount of US$ 16.4 million. (c) Interest rate risk Interest rate fluctuations, primarily due to the uncertain future behavior of markets, may have a material impact on the financial results of the Company. Significant increases in the rate could make it difficult to access financing at attractive rates for the Company's investment projects. The Company maintains current and non-current financial debt at fixed rates and LIBOR rate plus spread. As of December 31, 2020, the Company has around 4% of its financial liabilities linked to variations in the LIBOR rate. 100% of these obligations are covered by derivative instruments classified as interest rate hedging; therefore, a significant rate increase would not impact our financial condition. 163 10) FINANCIAL REPORTS (d) Liquidity risk Liquidity risk relates to the funds needed to comply with payment obligations. The Company’s objective is to maintain financial flexibility through a comfortable balance between fund requirements and cash flows from regular business operations, bank borrowings, bonds, short term investments, and marketable securities, among others. For this purpose, the Company keeps a high liquidity ratio1, which enables it to cover current obligations with clearance. (On December 31, 2020, this was 5.40). The Company has an important capital expense program which is subject to change over time. On the other hand, world financial markets go through periods of contraction and expansion that are unforeseeable in the long-term and may affect SQM’s access to financial resources. Such factors may have a material adverse impact on the Company’s business, financial position and results of operations. The Company constantly monitors the matching of its obligations with its investments, taking due care of maturities of both, from a conservative perspective, as part of this financial risk management strategy. As of December 31, 2020, the Company had unused, available revolving credit facilities with banks, for a total of US$ 478 million. The position in other cash and cash equivalents are invested in highly liquid mutual funds with an AAA risk rating. (1) Unsecured obligations are presented on a contractual basis and have no effects related to anticipated redemptions. As of December 31, 2020 (figures expressed in millions of US dollars) Nature of undiscounted cash flows Carrying amount Less than 1 year 1 to 5 years Over 5 years Total Bank borrowings Unsecured obligations (1) Sub total Hedging liabilities Derivative financial instruments Sub total Current and non-current lease liabilities Trade accounts payable and other accounts payable Total 70.08 1,872.09 1,942.17 40.21 5.39 45.60 31.07 203.93 2,222.77 0.94 88.22 89.16 6.06 5.39 11.45 6.40 203.93 310.94 71.40 927.17 998.57 12.34 - 12.34 21.04 - 1,727.14 1,727.14 11.07 - 11.07 7.17 72.34 2,742.53 2,814.87 29.47 5.39 34.86 34.61 - 1,031.95 - 1,745.38 203.93 3,088.27 As of December 31, 2019 (figures expressed in millions of US dollars) Nature of undiscounted cash flows Carrying amount Less than 1 year 1 to 5 years Over 5 years Total Bank borrowings Unsecured obligations Sub total Hedging liabilities Derivative financial instruments Sub total Current and non-current lease liabilities Trade accounts payable and other accounts payable Total 70.19 1,697.11 1,767.30 23.66 3.17 26.83 37.90 205.79 2,037.82 2.17 326.34 328.51 6.57 3.17 9.74 8.90 205.79 552.94 74.87 614.29 689.16 24.33 - 24.33 23.01 - - 1,184.38 1,184.38 32.37 - 32.37 10.27 - 736.50 1,227.02 77.04 2,125.01 2,202.05 63.27 3.17 66.44 42.18 205.79 2,516.46 1 All current assets divided by all current liabilities. 164 10) FINANCIAL REPORTS 5.3 Risk measurement The Company has methods to measure the effectiveness and efficiency of financial risk hedging strategies, both prospectively and retrospectively. These methods are consistent with the risk management profile of the SQM Group. See Note 14.8 165 Note 6 Separate information on the main office, parent entity and joint action 10) FINANCIAL REPORTS agreements 6.1 Parent’s stand-alone assets and liabilities Parent’s stand-alone assets and liabilities Assets Liabilities Equity 6.2 Parent entity As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 4,173,308 (2,050,223) 2,123,085 4,069,649 (1,983,382) 2,086,267 Pursuant to Article 99 of the Securities Market Law, the CMF may determine that a company does not have a controlling entity in accordance with the distribution and dispersion of its ownership. On November 30, 2018, the CMF issued the ordinary letter No. 32,131 whereby it determined that the Pampa Group do not exert decisive power over the management of the Company since it does not have a predominance in the ownership that allows it to make management decisions. Therefore, the CMF has determined not to consider Pampa Group the controlling entity of the Company and that the Company does not have a controlling entity given its current ownership structure. 166 10) FINANCIAL REPORTS Note 7 Board of Directors, Senior Management and Key management personnel 7.1 Remuneration of the Board of Directors and Senior Management 1) Board of directors SQM S.A. is managed by a Board of Directors which is composed of 8 regular directors, who are elected for a three-year period. The Board of Directors was elected during the ordinary shareholders’ meeting held on April 25, 2019, which included the election of 2 independent directors. As of December 31, 2020, the Company included the following committees and committee members: - Directors’ Committee: This committee is comprised by Georges de Bourguignon, Laurence Golborne Riveros y Alberto Salas Muñoz, and fulfills the functions established in Article 50 bis of Chilean Law on publicly-held corporations. This committee takes on the role of the audit committee in accordance with the US-based Sarbanes Oxley law. - The Company’s Health, Safety and Environment Committee: This committee is comprised of Gonzalo Guerrero Yamamoto, Patricio Contesse Fica y Robert J. Zatta. - Corporate Governance Committee: This committee is comprised of Hernán Büchi Buc, Patricio Contesse Fica y Francisco Ugarte Larrain. During the periods covered by these financial statements, there are no pending receivable and payable balances between the Company, its directors or members of Senior Management, other than those related to remuneration, fee allowances and profit-sharing. In addition, there were no transactions conducted between the Company, its directors or members of Senior Management. 2) Board of Directors’ Compensation Directors’ compensation differs according to the period during the corresponding year. Thus, from April 25, 2019 to April 22, 2020 (Period 2019-2020), Directors’ compensation was determined by the annual general shareholders' meeting held on April 25, 2019. While for the following period (Period 2020-2021), Directors’ compensation was determined by the annual general shareholders' meeting held on April 23, 2020. For each of these periods, Directors’ compensation is detailed as follows: Period 2019-2020 a) The payment of a fixed, gross and monthly amount of UF 800 in favor of the Chairman of the Board of Directors, of UF 700 in favor of the vice-president of the board of directors and of UF 600 in favor of the remaining six directors and regardless of the number of Board of Directors’ Meetings held or not held during the related month. b) A variable gross amount payable in national currency to the Chairman and Vice President of the Company equivalent to 0.12% of the net liquid income earned by the Company in 2019; c) A variable gross amount payable in local currency to each Company director, excluding the Chairman and Vice President of the Company, equivalent to 0.06% of the net liquid income earned by the Company in 2019. Period 2020-2021: (i) The payment of a fixed, gross and monthly amount of UF 800 in favor of the Chairman of the Board of Directors, of UF 700 in favor of the vice-president of the board of directors and of UF 600 in favor of the remaining six directors and regardless of the number of Board of Directors’ Meetings held or not held during the related month. (ii) A variable gross amount payable in national currency to the Chairman and Vice President of the Company equivalent to 0.09% of the net liquid income that the Company effectively obtains during the 2020; (iii) A variable gross amount payable in local currency to each Company director, excluding the Chairman and Vice President of the Company, equivalent to 0.045% of the net liquid income that the Company effectively obtains during the 2020. 167 10) FINANCIAL REPORTS These fixed and variable amounts for both periods shall not be challenged and those expressed in percentage terms shall be paid immediately after the respective annual general shareholders meeting approves the financial statements, the annual report, the account inspectors report and the external auditors report for the respective year. All amounts expressed in UF shall be paid in Chilean pesos at its value on the last day of the respective calendar month, as determined by the CMF (formerly Superintendence of Banks and Financial Institutions) the Chilean Central Bank or any other relevant institution that replaces them. Accordingly, the compensation and profit sharing paid to members of the Directors' Committee and the directors as of December 31, 2020 amounted to ThUS$ 4,582 and as of December 31, 2019 to ThUS$ 5,168. 3) Directors’ Committee compensation Directors' Committee compensation differs according to the period during the corresponding year. Thus, for the Period 2019-2020, Directors’ Committee compensation was determined by the annual general shareholders' meeting held on April 25, 2019. While for the Period 2020-2021, Directors’ Committee compensation was determined by the annual general shareholders' meeting held on April 23, 2020. For each of these periods the compensation of the Directors Committee comprises: Period 2019-2020 a) The payment of a fixed, gross and monthly amount of UF 200 in favor of each of the 3 directors who were members of the Directors’ Committee, regardless of the number of meetings of the Directors’ Committee that have or have not been held during the month concerned. b) The payment in domestic currency and in favor of each of the 3 directors of a variable and gross amount equivalent to 0.02% of total net profit that the Company effectively obtains during the 2019 fiscal year. Period 2020-2021 (i) The payment of a fixed, gross and monthly amount of UF 200 in favor of each of the 3 directors who were members of the Directors’ Committee, regardless of the number of meetings of the Directors’ Committee that have or have not been held during the month concerned. (ii) The payment in domestic currency and in favor of each of the 3 directors of a variable and gross amount equivalent to 0.015% of total net profit that the Company effectively obtains during the 2020 fiscal year. These fixed and variable amounts for both periods shall not be challenged and those expressed in percentage terms shall be paid immediately after the respective annual general shareholders meeting approves the financial statements, the annual report, the account inspectors report and the external auditors report for the respective year. All amounts expressed in UF shall be paid in Chilean pesos at its value on the last day of the respective calendar month, as determined by the CMF (formerly Superintendence of Banks and Financial Institutions) the Chilean Central Bank or any other relevant institution that replaces them. 4) Health, Safety and Environmental Matters Committee: The remuneration of this committee for the 2019–2020 period was composed of the payment of a fixed, gross, monthly amount of UF 100 for each of the 3 directors on the committee regardless of the number of meetings it has held. For the 2020-2021 period, this remuneration remains unchanged. 5) Corporate Governance Committee The remuneration for this committee for the 2019–2020 period was composed of the payment of a fixed, gross, monthly amount of UF 100 for each of the 3 directors on the committees regardless of the number of meetings it has held. For the 2020-2021 period, this remuneration remains unchanged. 6) Guarantees constituted in favor of the directors No guarantees have been constituted in favor of the directors. 7) Senior management compensation: 168 10) FINANCIAL REPORTS a) This includes monthly fixed salary and variable performance bonuses. (See Note 7.2) b) The Company has an annual bonus plan based on goal achievement and individual contribution to the Company’s results. These incentives are structured as a minimum and maximum number of gross monthly salaries and are paid once a year. In addition, there are retention bonuses for its executives (see Note 19.6) c) 8) Guarantees pledged in favor of the Company’s management No guarantees have been pledged in favor of the Company’s management. 9) mentioned in the above points. Pensions, life insurance, paid leave, shares in earnings, incentives, disability loans, other than those The Company’s Management and Directors do not receive or have not received any benefit during the ended December 31, 2020 and the year ended December 31, 2019 or compensation for the concept of pensions, life insurance, paid time off, profit sharing, incentives, or benefits due to disability other than those mentioned in the preceding points. 7.2 Key management personnel compensation As of December 31, 2020 and 2019, the number of the key management personnel is 126 and 124, respectively. Key management personnel compensation Key management personnel compensation For the year ended December 31, 2020 For the year ended December 31, 2019 ThUS$ ThUS$ 22,858 22,598 Please also see the description of the compensation plan for executives in Note 19.6. 169 Note 8 Background on companies included in consolidation and non-controlling interests 8.1 Background on companies included in consolidation The following tables detail general information as of December 31, 2020 and, December 31, 2019, on the companies in which the group exercises control and significant influence: Subsidiaries TAX ID No. Address Country of Incorporation Functional Currency Ownership Interest Direct Indirect Total 10) FINANCIAL REPORTS SQM Nitratos S.A. SQM Potasio S.A. Serv. Integrales de Tránsito y Transf. S.A. Isapre Norte Grande Ltda. 96.592.190-7 El Trovador 4285, Las Condes 96.651.060-9 El Trovador 4285, Las Condes 79.770.780-5 Arturo Prat 1060, Tocopilla 79.906.120-1 Anibal Pinto 3228, Antofagasta Ajay SQM Chile S.A. 96.592.180-K Av. Pdte. Eduardo Frei 4900, Santiago Almacenes y Depósitos Ltda. 79.876.080-7 El Trovador 4285, Las Condes SQM Salar S.A. SQM Industrial S.A. 79.626.800-K El Trovador 4285, Las Condes 79.947.100-0 El Trovador 4285, Las Condes Exploraciones Mineras S.A. 76.425.380-9 El Trovador 4285, Las Condes Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A. Soquimich Comercial S.A. Comercial Agrorama Ltda. (1) Comercial Hydro S.A. Agrorama S.A. Orcoma Estudios SPA (2) Orcoma SPA SQM MaG SpA 76.534.490-5 Anibal Pinto 3228, Antofagasta 79.768.170-9 El Trovador 4285, Las Condes 76.064.419-6 El Trovador 4285, Las Condes 96.801.610-5 El Trovador 4285, Las Condes 76.145.229-0 El Trovador 4285, Las Condes 76.359.919-1 Apoquindo 3721 OF 131, Las Condes 76.360.575-2 Apoquindo 3721 OF 131, Las Condes 76.686.311-9 Los Militares 4290, Las Condes Sociedad Contractual Minera Búfalo 77.114.779-8 Los Militares 4290, Las Condes SQM Holland B.V. (3) SQM North America Corp. RS Agro Chemical Trading Corporation A.V.V. Nitratos Naturais do Chile Ltda. Nitrate Corporation of Chile Ltd. SQM Corporation N.V. Foreign foreign foreign foreign foreign foreign Herikerbergweg 238, 1101 CM Amsterdam Zuidoost 2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA Caya Ernesto O. Petronia 17, Orangestad Al. Tocantis 75, 6° Andar, Conunto 608 Edif. West Gate, Alphaville Barureri, CEP 06455-020, Sao Paulo Brazil Aruba 1 More London Place London SE1 2AF Pietermaai 123, P.O. Box 897, Willemstad, Curacao United Kingdom Curacao (1) SQM controls Soquimich Comercial, which in turn controls Comercial Agrorama Ltda, SQM has management control over Comercial Agrorama Ltda (2) In January 2020, SQM S.A. acquired 49% of Orcoma Estudio SPA, taking ownership of 100% of the company. (3) In June, 2020, SQM S.A. acquired the remaining 50% of SQM Holland B.V., taking ownership of 100% of the company. See Note 10.2 (a) 170 Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Dollar Dollar Dollar Peso Dollar Peso Dollar Dollar Dollar Peso Dollar Peso Dollar Peso Dollar Dollar Dollar Dollar 99.9999 99.9999 0.0003 1.0000 51.0000 0.0001 100.0000 - 100.0000 99.9997 100.0000 99.0000 - 100.0000 51.0000 1.0000 99.0000 100.0000 18.1800 81.8200 100.0000 99.0470 0.9530 100.0000 0.2691 99.7309 100.0000 - - - - - 100.0000 100.0000 60.6383 60.6383 70.0000 70.0000 100.0000 100.0000 100.0000 100.0000 100.0000 100.0000 - 99.9000 - - 100.0000 100.0000 100.000 100.0000 0.1000 100.0000 Netherlands Dollar - 100.0000 100.0000 USA Dollar Dollar Dollar Dollar Dollar 40.0000 60.0000 100.0000 98.3333 - 1.6667 100.0000 100.0000 100.0000 - 100.0000 100.0000 0.0002 99.9998 100.0000 Subsidiaries TAX ID No. Address 10) FINANCIAL REPORTS Country of Incorporation Functional Currency Direct Indirect Total Ownership Interest 0.0091 99.9909 100.0000 0.00401 99.9960 100.0000 0.7100 - 99.2900 100.0000 - - 0.1000 99.9000 100.0000 0.1597 99.8403 100.0000 0.5800 99.4200 100.0000 - - - - 80.0000 80.0000 - 100.0000 100.0000 - 100.0000 100.0000 0.0100 99.9900 100.0000 1.0000 99.0000 100.0000 1.6700 98.3300 100.0000 - 100.0000 100.0000 - - - - 100.0000 100.0000 - 100.0000 100.0000 - 100.0000 100.0000 - 100.0000 100.0000 - 100.0000 100.0000 SQM Perú S.A. SQM Ecuador S.A. SQM Brasil Ltda. SQI Corporation N.V. (4) SQMC Holding Corporation. SQM Japan Co. Ltd. SQM Europe N.V. SQM Italia SRL (5) SQM Indonesia S.A. North American Trading Company SQM Virginia LLC SQM Comercial de México S.A. de C.V. SQM Investment Corporation N.V. Royal Seed Trading Corporation A.V.V. SQM Lithium Specialties Limited Partnership Soquimich SRL Argentina (6) Comercial Caimán Internacional S.A. SQM France S.A. Administración y Servicios Santiago S.A. de C.V. SQM Nitratos México S.A. de C.V. SQM Australia PTY foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign Avenida Camino Real N° 348 of. 702, San Isidro, Lima Av. José Orrantia y Av. Juan Tanca Marengo Edificio Executive Center Piso 2 Oficina 211 Al. Tocantis 75, 6° Andar, Conunto 608 Edif. West Gate, Alphaville Barureri, CEP 06455-020, Sao Paulo Pietermaai 123, P.O. Box 897, Willemstad, Curacao 2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta From 1st Bldg 207, 5-3-10 Minami- Aoyama, Minato-ku, Tokio Houtdok-Noordkaai 25a B-2030 Amberes Via A. Meucci, 5 500 15 Grassina Firenze Perumahan Bumi Dirgantara Permai, Jl Suryadarma Blok Aw No 15 Rt 01/09 17436 Jatisari Pondok Gede 2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA 2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA Av. Moctezuma 144-4 Ciudad del Sol CP 45050, Zapopan, Jalisco México Pietermaai 123, P.O. Box 897, Willemstad, Curacao Caya Ernesto O. Petronia 17, Orangestad 2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA Espejo 65 Oficina 6 – 5500, Mendoza Edificio Plaza Bancomer ZAC des Pommiers 27930, FAUVILLE Av. Moctezuma 144-4 Ciudad del Sol CP 45050, Zapopan, Jalisco México Av. Moctezuma 144-4 Ciudad del Sol CP 45050, Zapopan, Jalisco México Level 16, 201 Elizabeth Street Sydney Peru Ecuador Brazil Curacao USA Japan Belgium Italy Indonesia USA USA Mexico Curacao Aruba USA Argentina Panama France Mexico Mexico Australia Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar (4) In July 2020, this Company was liquidated. (5) In July 2020, Soquimich European Holdings liquidated SQM Italia SRL. (6) In December 2020, this Company was Liquited. 171 Subsidiaries TAX ID No. Address 10) FINANCIAL REPORTS Country of Incorporation Functional Currency Direct Indirect Total Ownership Interest - 100.0000 100.0000 - 100.0000 100.0000 - 100.0000 100.0000 - 100.0000 100.0000 - 100.0000 100.0000 - 99.9960 - 100.0000 100.0000 99.9960 0.5800 99.4200 100.0000 - 100.0000 100.0000 - 100.0000 100.0000 Soquimich European Holding B.V. SQM Iberian S.A. SQM Africa Pty Ltd. SQM Oceanía Pty Ltd. SQM Beijing Commercial Co. Ltd. SQM Thailand Limited SQM Colombia SAS SQM International N.V. SQM (Shanghai) Chemicals Co. Ltd. SQM Korea LLC (7) foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign Loacalellikade 1 Parnassustoren 1076 AZ Amsterdan Provenza 251 Principal 1a CP 08008, Barcelona Tramore House, 3 Wterford Office Park, Waterford Drive, 2191 Fourways, Johannesburg Level 9, 50 Park Street, Sydney NSW 2000, Sydney Room 1001C, CBD International Mansion N 16 Yong An Dong Li, Jian Wai Ave Beijing 100022, P.R. Unit 2962, Level 29, N° 388, Exchange Tower Sukhumvit Road, Klongtoey Bangkok Cra 7 No 32 – 33 piso 29 Pbx: (571) 3384904 Fax: (571) 3384905 Bogotá D.C. – Colombia. Houtdok-Noordkaai 25a B-2030 Amberes Room 4703-33, 47F, No.300 Middle Huaihai Road, Huangpu district, Shanghai Suite 22, Kyobo Building, 15th Floor, 1 Jongno Jongno-gu, Seoul, 03154 South Korea Holland Spain South Africa Australia China Thailand Colombia Belgium China Korea Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar (7) This Company was formed in October 2020. 172 8.2 Assets, liabilities, results of consolidated subsidiaries as of December 31, 2020. Subsidiaries Currents Non-currents Currents Non-currents Assets Liabilities Revenue Profit (loss) Comprehensive income (loss) ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 10) FINANCIAL REPORTS SQM Nitratos S.A. SQM Potasio S.A. Serv. Integrales de Tránsito y Transf. S.A. Isapre Norte Grande Ltda. Ajay SQM Chile S.A. Almacenes y Depósitos Ltda. SQM Salar S.A. SQM Industrial S.A. Exploraciones Mineras S.A. Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A. Soquimich Comercial S.A. Comercial Agrorama Ltda. Comercial Hydro S.A. Agrorama S.A. Orcoma SpA Orcoma Estudio SpA SQM MaG SPA Sociedad Contractual Minera Búfalo SQM Holland B.V. SQM North America Corp. RS Agro Chemical Trading Corporation A.V.V. Nitratos Naturais do Chile Ltda. Nitrate Corporation of Chile Ltd. SQM Corporation N.V. SQM Perú S.A. SQM Ecuador S.A. SQM Brasil Ltda. Subtotal 475,132 16,680 55,142 812 25,441 256 855,683 950,058 16,572 279 136,623 683 4,834 55 3 4 1,491 50 3,767 124,679 5,155 - 5,076 7,696 25 26,490 217 63,848 1,108,579 36,291 839 1,549 51 1,035,088 679,345 22,293 571 13,796 970 15 - 2,365 4,559 521 323 16,248 21,085 - 128 - 56,356 - 918 1 395,914 155,379 75,848 795 9,563 - 814,686 634,105 9,010 305 56,293 4,215 14 5,631 35 411 1,129 350 460 5,047 23,323 6,485 181 713 - 214,914 113,230 - 396 12,630 23 4 10 - - 6 - 4 107,801 1,638 88 3,109 - 3,607 83 23,074 508 - - - - - 59 2,111 33,730 - 188,973 2,465 36,383 3,224 38,193 - 581,494 853,550 13,513 2,390 117,982 1,432 28 244 - - 2,559 - 1,227 212,410 - - - - - 40,570 29,791 6,067 71 1,857 (5) 51,849 150,594 1,972 55 7,560 (149) 12 175 (13) (496) 197 - (505) (1,059) (24) 195 - 40,489 29,722 6,060 79 1,857 50 51,517 151,442 1,972 32 7,606 (148) 12 179 (13) (496) 197 - (505) 1,828 (24) 195 - (5,318) (5,252) (8) 471 (16) (8) 471 (16) 2,712,903 3,065,739 2,302,413 380,774 2,089,797 283,843 287,246 173 10) FINANCIAL REPORTS Revenue Profit (loss) Comprehensive income (loss) Currents ThUS$ - 66,685 669,693 - - - 213,154 - - - - - 2,857 993 - 108,156 60,994 3,130 18,755 3,033 13,439 135,386 82,398 - - 1,378,673 3,468,470 ThUS$ ThUS$ 2,113 367 2,113 367 (12,791) (12,791) - 38 (5) 1,429 (12,265) (40) (5) 3 - 36 12 - 38 (5) 1,429 (12,071) (40) (5) 3 - 36 12 (20,411) (20,151) 504 (920) 400 126 (387) 528 2,587 3,195 (2,641) (33) (38,160) 245,683 504 (920) 400 126 (387) 528 2,587 3,195 (2,641) (33) (37,706) 249,540 Subsidiaries Currents Non-currents ThUS$ ThUS$ Currents ThUS$ Non-currents ThUS$ Assets Liabilities SQMC Holding Corporation L.L.P. SQM Japan Co. Ltd. SQM Europe N.V. SQM Indonesia S.A. North American Trading Company SQM Virginia LLC SQM Comercial de México S.A. de C.V. SQM Investment Corporation N.V. Royal Seed Trading Corporation A.V.V. SQM Lithium Specialties LLP Comercial Caimán Internacional S.A. SQM France S.A. Administración y Servicios Santiago S.A. de C.V. SQM Nitratos México S.A. de C.V. Soquimich European Holding B.V. SQM Iberian S.A. SQM Africa Pty Ltd. SQM Oceania Pty Ltd. SQM Beijing Commercial Co. Ltd. SQM Thailand Limited SQM Colombia SAS SQM International NV SQM Shanghai Chemicals Co. Ltd. SQM Australia Pty Ltd. SQM Korea LLC Subtotal Total 1,687 21,926 399,930 1 - 14,798 76,721 5,434 18,851 1,264 1,122 114 350 77 245 20,118 37,636 1,516 9,942 83 11,653 17,374 79,482 4,306 42 724,672 3,027,085 - 255 2,411 - - - 1,972 864 - - - - 188 20 - 4 - - - - - 4,027 - 158 - 9,899 390,673 30,777 25,122 456,357 3 156 14,798 107,803 13,965 21 15,746 258 345 221 141 5,046 41,485 47,069 3,951 12,086 3,539 11,621 31,998 84,318 21,749 587 929,162 3,642,065 16,414 243 3,844 - 145 14,340 7,574 132,994 - 3 - 6 47 13 172,956 2,359 1,420 - 30 - 176 923 379 130,152 122 484,140 3,549,879 174 10) FINANCIAL REPORTS 8.2 Assets, liabilities, results of consolidated subsidiaries as of December 31, 2019. Subsidiary SQM Nitratos S.A. Proinsa Ltda. SQM Potasio S.A. Serv. Integrales de Tránsito y Transf. S.A. Isapre Norte Grande Ltda. Ajay SQM Chile S.A. Almacenes y Depósitos Ltda. SQM Salar S.A. SQM Industrial S.A. Exploraciones Mineras S.A. Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A. Soquimich Comercial S.A. Comercial Agrorama Ltda. Comercial Hydro S.A. Agrorama S.A. Orcoma SpA Orcoma Estudio SpA SQM MaG SPA SQM North America Corp. RS Agro Chemical Trading Corporation A.V.V. Nitratos Naturais do Chile Ltda. Nitrate Corporation of Chile Ltd. SQM Corporation N.V. SQM Perú S.A. SQM Ecuador S.A. SQM Brasil Ltda. SQI Corporation N.V. Subtotal Assets Liabilities Revenue Profit (loss) Comprehensive income (loss) Current ThUS$ Non-current ThUS$ Current ThUS$ Non-current ThUS$ ThUS$ ThUS$ ThUS$ 368,474 - 14,983 19,317 809 17,780 243 734,837 833,283 3,099 184 134,808 862 4,791 669 - 156 1,955 115,924 5,155 2 5,076 7,696 29 31,603 194 56 41,688 - 978,525 36,025 604 1,259 45 886,099 766,097 31,081 570 15,448 1,313 21 - 2,360 4,522 615 19,656 - 135 - 160,381 - 712 - 34 292,535 - 116,734 50,229 684 1,284 - 549,726 497,377 6,296 305 41,104 4,467 12 6,133 14 29 1,888 98,332 64 3,314 - 3,594 80 28,508 598 77 3,521 - 23,317 2,075 153 374 - 201,273 120,741 - 338 12,349 19 6 9 - - 2 2,751 - - - - - 70 2,250 - 167,481 - 3,350 30,061 3,816 24,883 - 775,010 752,107 - 2,341 124,787 2,755 28 3,146 - - 2,888 241,102 - - - - - 38,131 - - 39,530 - 125,975 (2,650) 25 1,510 (8) 153,550 105,198 (213) 17 5,079 (836) 18 39,440 - 125,334 (2,703) (2) 1,510 (85) 152,781 103,894 (213) (14) 5,072 (837) 18 (1,407) (1,376) - - 412 537 (25) 7 - 12,376 (141) 818 (231) (3) - - 412 (214) (25) 7 - 12,308 (141) 818 (231) (3) 2,301,985 2,947,190 1,703,384 369,248 2,171,886 439,538 435,750 175 10) FINANCIAL REPORTS Revenue Profit (loss) Comprehensive income (loss) Currents Currents ThUS$ 1,687 66,015 361,059 15 1 39 14,804 72,023 5,518 18,834 1,264 165 1,122 114 402 97 1,299 41,680 47,594 3,459 9,695 1,081 10,089 - 32,549 34,367 5,661 Non-currents ThUS$ - 201 2,824 - - - - 2,387 975 - - - - - 211 18 30,802 4 - - - - 37 - - - 56 ThUS$ - 168,557 729,730 - - - - 216,185 - - - - - - 3,463 1,008 - 105,634 63,567 2,085 14,487 5,354 7,574 - 75,229 77,599 - 730,633 2,434,017 37,515 406,763 1,470,472 3,642,358 ThUS$ ThUS$ 2,585 270 5,387 5 - - (1) 2,983 (74) (42) (1) (24) (5) - 21 13 2,585 270 5,387 5 - - (1) 2,983 (74) (42) (1) (24) (5) - 21 13 11,750 11,682 361 (939) 444 (148) 369 (439) - 800 (73) (2,030) 21,212 460,750 361 (939) 444 (148) 369 (439) - 800 (74) (2,030) 21,143 456,893 Assets Liabilities Subsidiaries Currents Non-currents ThUS$ ThUS$ SQMC Holding Corporation L.L.P. SQM Japan Co. Ltd. SQM Europe N.V. SQM Italia SRL SQM Indonesia S.A. North American Trading Company SQM Virginia LLC SQM Comercial de México S.A. de C.V. SQM Investment Corporation N.V. Royal Seed Trading Corporation A.V.V. SQM Lithium Specialties LLP Soquimich SRL Argentina Comercial Caimán Internacional S.A. SQM France S.A. Administración y Servicios Santiago S.A. de C.V. SQM Nitratos México S.A. de C.V. Soquimich European Holding B.V. SQM Iberian S.A. SQM Africa Pty Ltd. SQM Oceania Pty Ltd. SQM Beijing Commercial Co. Ltd. SQM Thailand Limited SQM Colombia SAS Sacal S.A. SQM International SQM Shanghai Chemicals Co. Ltd. SQM Australia Pty Ltd. Subtotal Total 28,889 68,805 429,926 1,158 3 157 14,804 102,068 13,811 44 15,752 57 256 345 235 140 5,851 52,750 57,639 5,440 11,723 4,912 9,505 - 40,652 36,250 12,113 913,285 3,215,270 16,190 228 4,608 - - 145 14,345 7,597 30,888 - 3 - - 6 72 18 174,968 2,350 1,728 - 20 11 151 - 831 133 108,068 362,360 3,309,550 176 10) FINANCIAL REPORTS 8.3 Background on non-controlling interests Subsidiary SQM Potasio S.A. Ajay SQM Chile S.A. Soquimich Comercial S.A. Comercial Agrorama Ltda. Agrorama S.A. Orcoma Estudios SPA SQM Indonesia S.A. Total % of interests in the ownership held by non- controlling interests 0.0000001% 49.00000% 39.36168% 30.00000% 0.00000% 0.00000% 20.00000% Profit (loss) attributable to non-controlling interests for the period ended Equity, non-controlling interests for the period ended Dividends paid to non-controlling interests for the period ended As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ - 910 2,976 (45) - - - 3,841 - 740 1,999 (251) - - - 2,488 - 8,189 32,078 (775) - - 1 39,493 - 8,517 38,103 (693) - 2,277 1 48,205 - 1,238 8,880 - - - - - 882 5,935 - - - - 10,118 6,817 177 10) FINANCIAL REPORTS Note 9 Equity-accounted investees 9.1 Investments in associates recognized according to the equity method of accounting As of December 31, 2020, and December 31, 2019, in accordance with criteria established in Note 2: Associates Equity-accounted investees Share in profit (loss) of associates and joint ventures accounted for using the equity method for the period ended Share in other comprehensive income of associates accounted for using the equity method for the period ended Share in total other comprehensive income of associates accounted for using the equity method for the period ended Abu Dhabi Fertilizer Industries WWL Doktor Tarsa Tarim Sanayi AS (*) Ajay North America Ajay Europe SARL SQM Eastmed Turkey (*) Kore Potash PLC Total As of December 31, 2020 (**) ThUS$ As of December 31, 2019 (**) ThUS$ As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 11,505 - 14,468 7,875 - 26,175 60,023 11,609 26,001 14,669 7,451 623 24,739 85,092 (156) 4,031 2,191 1,029 247 (224) 7,118 634 3,912 2,871 1,165 354 (534) 8,402 - - - 756 - (374) 382 1 198 - (179) (42) (549) (571) (156) 4,031 2,191 1,785 247 (598) 7,500 635 4,110 2,871 986 312 (1,083) 7,831 (*) As of December 31, 2020, these investments no longer form part of the group. See Note 9.4 (a). (**) These investments include adjustments for unrealized results. 178 Associate Description of the nature of the relationship Address Country of incorporation Share of ownership in associates Abu Dhabi Fertilizer Industries WWL Ajay North America Ajay Europe SARL Kore Potash PLC Total Distribution and commercialization of specialty plant nutrients in the Middle East. Production and distribution of iodine and iodine derivatives. Production and distribution of iodine and iodine derivatives. Prospecting, exploration and mining development. PO Box 71871, Abu Dhabi United Arab Emirates 1400 Industry RD Power Springs GA 30129 Z.I. du Grand Verger BP 227 53602 Evron Cedex United States France L 3 88 William ST Perth, was 6000 United Kingdom 37% 49% 50% 20.20% The companies described in the table below are related parties of the following associates: (1) Doktor Tarsa Tarim Sanayi AS (2) Terra Tarsa B.V. (3) Abu Dhabi Fertilizer Industries WWL 10) FINANCIAL REPORTS Dividends received for the period ending As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ - 1,967 1,197 - 3,164 - 2,796 1,055 - 3,851 Associate Description of the nature of the relationship Domicile Country of incorporation Share of ownership in associates (*) Dividends received for the period ending As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ Distribution and trading of specialty plant nutrients. 74800 Ukraine, Kakhovka, 4 Yuzhnaya Terra Tarsa Ukraine LLC (2) Terra Tarsa BV (1) Distribution and trading of specialty plant nutrients in the Middle East. Plantacote NV (1) Sale of CRF and production and sales of WSNPK. Doctochem Tarim Sanayai Ticaret LTD (1) Terra Tarsa Don LLC (2) Doktolab Tarim Arastirma San. (1) International Technical and Trading Agencies Co WLL (3) Total Production, distribution and trading of specialty plant nutrition. Distribution and sale of specialty fertilizers. Laboratory services. Str. Herikerbergweg 238, Luna Arena, 1101CM Amsterdam PO Box 23393, 1100DW Amsterdam Zuidoost Houtdok-Noordkaai 25a, 2030 Antwerpen, Belgium Eski Büyükdere Cad No: 7 GIZ 2000 Plaza K:17 D:67-68 Maslak Sariyer Ístambul. Zorge Street, house 17, 344090, Rostov-on-Don 27. Cd. No:2, 07190 Aosb 2. Kısım/Döşemealtı, Antalya, Turkey Ukraine Holland Belgium Turkey Russian Federation Turkey Distribution and trading of specialty plant nutrients, in the Middle East. P.O Box: 950918 Amman 11195 Jordan 100% 50% 100% 100% 100% 100% 50% - - - - - - - - - - - - - - - - (*) This percentage does not consider the shareholdings of the holders of these subsidiaries. 179 10) FINANCIAL REPORTS 9.2 Assets, liabilities, revenue and expenses of associates Associate Current Non-current Current Non-current Assets Liabilities Revenue Gain (loss) from continuing operations Other comprehensive income Comprehensive income As of December 31, 2020 For the period ended as of December 31, 2020 Abu Dhabi Fertilizer Industries WWL Ajay North America Ajay Europe SARL Kore Potash PLC Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 29,313 18,513 22,032 5,691 75,549 8,586 15,749 1,493 124,112 149,940 6,706 4,737 7,773 786 20,002 101 - - - 101 6,641 42,920 41,950 - 91,511 (420) 4,471 2,058 (3,233) 2,876 - - 1,736 486 2,222 (420) 4,471 3,794 (2,747) 5,098 Associate Current Non-current Current Non-current Assets Liabilities Revenue Gain (loss) Other comprehensive income Comprehensive income As of December 31, 2019 For the period ended as of December 31, 2019 Abu Dhabi Fertilizer Industries WWL Doktor Tarsa Tarim Sanayi AS Ajay North America Ajay Europe SARL SQM Eastmed Turkey Kore Potash PLC Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 28,543 97,797 19,748 19,589 2,718 7,938 176,333 9,971 15,196 13,250 1,456 1,833 119,362 161,068 7,133 22,420 3,061 6,144 2,600 2,214 43,572 - 38,522 - - 704 - 31,588 93,768 38,833 35,709 3,086 - 39,226 202,984 1,713 7,824 5,860 2,329 709 (2,716) 15,719 4 396 - (358) (84) (2,791) (2,833) 1,717 8,220 5,860 1,971 625 (5,507) 12,886 180 10) FINANCIAL REPORTS 9.3 Other information The Company has no participation in unrecognized losses in investments in associates. The Company has no investments that are not accounted for according to the equity method. The basis of preparation of the financial information of associates corresponds to the amounts included in the financial statements in conformity with IFRS. 9.4 Disclosures on interest in associates (a) Transactions conducted in 2020: • During the second quarter, Kore Potash PLC made a share payment to its non-executive board members which resulted in a 0.60% share reduction for the company. This resulted in a transfer in equity of non- controlling interest to other reserves in an amount of ThUS$ 754. • During the third quarter of 2020 SQM S.A. increased its shares in Kore Potash PLC to 20.26% as a result of the acquisition of 260,598,591 shares out of 584,753,846 shares issued for a capital increase corresponding to ThUS$ 1,679. • During the third quarter of 2020, its interest in Doktor Tarsa Tarim and its subsidiaries were sold through Soquimich European Holdings B.V. at a value of ThUS$ 33,066, which brought about a loss of ThUS$ 11,408. As of the end of the fourth quarter of 2020, there was a balance of ThUS$ 4,745 in other current receivables and ThUS$ 9,491 in non-current receivables. • During the fourth quarter of 2020, SQM Holland B.V. acquired a WSNPK business from Plantacote N.V. at a value of ThUS$ 16,757, which generated goodwill of ThUS$7,380. • During the third quarter of 2020, shares held in SQM Eastmed Turkey were sold through Soquimich European Holdings B.V. at a value of ThUS$ 618, which brought about a loss of ThUS$ 408. • During the fourth quarter of 2020, Kore Potash PLC made a share-based payment to its non-executive board members, which resulted in a 0.06% share reduction for the company, finalizing with a share percentage of 20.20%. This resulted in a decrease in consolidated equity of non-controlling interests in other reserves of ThUS$ 79. (b) Transactions conducted in 2019: • SQM S.A. increased the capital of Kore Potash Ltd by ThUS$ 2,600 in July 2019, which increased its interest to 19.67% of the shareholder’s investment. • On December 11, 2019, Doktor Tarsa Tarim Sanayi AS acquired 100% of the shares in Doctochem Tarim Sanayi Ticaret LTD. 181 10) FINANCIAL REPORTS Note 10 Joint Ventures 10.1 Policy for the accounting of equity accounted investment in joint ventures This accounting policy is described in Note 2.6. For these joint ventures there is no quoted market price to measure these investments. At the date of issuance of these financial statements, the Company is not aware of the existence of any significant contingent liabilities associated with the partnerships in joint ventures. 10.2 Disclosures of interest in joint ventures a) Operations conducted in 2020 • • In the second quarter of 2020, the Company has taken 100% ownership of SQM Vitas BV through the subsidiary Soquimich European Holdings with a cost of ThUS$ 1,276 and its name has been changed to SQM Holland. (See Note 8.1) In the second quarter of 2020, shares held in Arpa Speciali S.R.L. were sold through SQM Pavoni & C., SpA. at a value of ThUS$ 56, which brought about a loss of ThUS$ 125. An initial installment of ThUS$ 17 was charged, leaving two pending installments of ThUS$ 20 maturing June 30, 2021 and June 30, 2022. The pending installments are classified as other accounts receivable. • In the third quarter of 2020, shares held in Coromandel SQM India were sold through Soquimich European Holdings B.V. at a value of ThUS$ 1,505, which brought about a loss of ThUS$ 643. • During fourth quarter of 2020, the shares in SQM Qingdao-Star Co, Ltd. were sold through SQM Industrial S.A. for ThUS$ 1,303, which brought about a gain of ThUS$ 62. As of December 31, 2020, the sale proceeds were recorded in other receivables. • A subsequent event associated with the joint venture with Sichuan SQM Migao Chemical Fertilizers Co Ltd. is reported in Note 31.2. Accordingly, the effect on the statement of income for the fourth quarter of 2020 under "Other gains (losses)" is a gain of ThUS$7,036 on the reversal of the impairment associated with this investment. b) Operations conducted in 2019 • On January 01, 2019, SQM Vitas Perú changed its functional currency from the Peruvian sol to Dollar. . 182 10) FINANCIAL REPORTS 10.3 Investment in joint ventures accounted for under the equity method of accounting Joint venture Description of the nature of the relationship Domicile Country of incorporation Share of interest in ownership Sichuan SQM Migao Chemical Fertilizers Co Ltd. Production and distribution of soluble fertilizers. Coromandel SQM India Production and distribution of potassium nitrate. Huangjing Road, Dawan Town, Qingbaijiang Dristrict, Chengdu Municipality, Sichuan Province 1-2-10, Sardar Patel Road, Secunderabad – 500003 Andhra Pradesh China India 50% 50% SQM Vitas Fzco. Production and commercialization of specialty plant, animal nutrition and industrial hygiene. Jebel ALI Free Zone P.O. Box 18222, Dubai United Arab Emirates 50% SQM Qingdao Star Corp Nutrition Co. Ltd. Production and distribution of nutrient plant solutions with specialties NPK soluble. Longquan Town, Jimo City, Qingdao Municipality, Shangdong Province China Pavoni & C. Spa Covalent Lithium Pty Ltd. Total Production of specialty fertilizers and others for distribution in Italy and other countries. Corso Italia 172, 95129 Catania (CT), Sicilia Italy Development and operation of the Mt Holland Lithium project, which will include the construction of a lithium extraction and refining mine. L18, 109 St Georges Tce Perth WA 6000 |PO Box Z5200 St Georges Tce Perth WA 6831 Australia 50% 50% 50% The companies described in the following table are related to the following joint ventures: (1) SQM Vitas Fzco. (2) Pavoni & C. Spa. Dividends received for the period ending As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ - - - 2,223 - - 2,223 - - 10,598 - - - 10,598 Joint venture Description of the nature of the relationship Domicile SQM Vitas Brasil Agroindustria (1) Production and trading of specialty vegetable and animal nutrition and industrial hygiene. Via Cndeias, Km. 01 Sem Numero, Lote 4, Bairro Cia Norte, Candeias, Bahia. SQM Vitas Perú S.A.C. (1) Arpa Speciali S.R.L. (2) Total Production and trading of specialty vegetable and animal nutrition and industrial hygiene Production of specialty fertilizers and others for distribution in Italy and other countries. Av. Juan de Arona 187, Torre B, Oficina 301-II, San Isidro, Lima Mantova (MN) Via Cremona 27 Int. 25 (*) The percentages presented correspond to the ownership used in the consolidation of the company. Country of incorporation Share of interest in ownership (*) Brazil Peru Italy 49.99% 50% 50,48% Dividends received for the period ending As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ - - - - - - - - 183 10) FINANCIAL REPORTS Joint Venture Coromandel SQM India (*) SQM Vitas Fzco. SQM Qingdao Star Corp Nutrition Co. Ltd. (*) SQM Vitas B.V. Pavoni & C. Spa Covalent Lithium Pty Ltd. (**) Sichuan SQM Migao Chemical Fertilizers Co Ltd.(***) Total Equity-accounted investees Share in profit (loss) of associates and joint ventures accounted for using the equity method, for the period ended Share on other comprehensive income of associates and joint ventures accounted for using the equity method, for the period ended Share on total other comprehensive income of associates and joint ventures accounted for using the equity method for the period ended As of December 31, 2020 (****) As of December 31, 2019 (****) As of December 31, 2020 As of December 31, 2019 As of December 31, 2020 As of December 31, 2019 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ - 9,720 - - 7,222 - 9,028 25,970 1,568 9,111 3,464 1,304 6,864 40 1,992 24,343 - 2,010 83 - 9 - (280) 1,822 (98) 1,797 296 (15) 36 - (632) 1,384 - (1,469) - - 349 16 - (1,104) (38) 437 - (27) (255) (13) - 104 - 541 83 - 358 16 (280) 718 (136) 2,234 296 (42) (219) (13) (632) 1,488 (*) As of December 31, 2020, these investments were no longer part of the group, see note 10.2 (a). (**) As of December 31, 2020, this joint venture has a negative value of ThUS$ (92), which is presented in Other non-current provisions. (***) See subsequent events in Notes 10.2 and 31.2. (****) These investments include adjustments for unrealized gains. The amounts described in the following box represent numbers used in the consolidation of the company: Equity-accounted investees Share in profit (loss) of associates and joint ventures accounted for using the equity method, for the period ended Share on other comprehensive income of associates and joint ventures accounted for using the equity method, for the period ended Share on total other comprehensive income of associates and joint ventures accounted for using the equity method for the period ended As of December 31, 2020 ThUS$ As of December 31, 2019 As of December 31, 2020 As of December 31, 2019 As of December 31, 2020 As of December 31, 2019 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 3,511 1,659 5,170 5,347 1,955 92 7,394 1,018 660 1,678 564 211 31 806 (1,469) - (1,469) (225) 661 (1) 435 (451) 660 - 209 339 872 30 1,241 Associates SQM Vitas Brasil Agroindustria (1) SQM Vitas Perú S.A.C. (1) Arpa Speciali S.R.L. (2)(*) Total The following companies are subsidiaries of: (1) SQM Vitas Fzco. (2) Pavoni & C. Spa 184 10) FINANCIAL REPORTS 10.4 Assets, liabilities, revenue and expenses from joint ventures Joint Venture Assets Liabilities Current Non-current Current Non-current Revenue Gain (loss) from continuing operations Other comprehensive income Comprehensive income As of December 31, 2020 For the period ended December 31, 2020 Sichuan SQM Migao Chemical Fertilizers Co Ltd. Coromandel SQM India SQM Vitas Fzco. SQM Qingdao Star Corp Nutrition Co. Ltd. SQM Vitas Brasil Agroindustria SQM Vitas Perú S.A.C. Pavoni & C. Spa Covalent Lithium Pty Ltd. Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 29,507 - (496) - 40,064 34,548 10,645 1,418 4,412 - 20,431 - 5,527 7,928 7,493 2,131 115,686 47,922 14,156 - 496 - 33,410 33,145 9,270 2,823 93,300 - - - - - 1,080 836 910 2,826 9 - - - 78,960 37,591 15,958 - 132,518 (562) - 4,019 - 2,036 1,319 16 (232) 6,596 - - - - (2,938) - 698 33 (2,207) (562) - 4,019 - (902) 1,319 714 (199) 4,389 Joint Venture Current Non-current Current Non-current Assets Liabilities Revenue Gain (loss) from continuing operations Other comprehensive income Comprehensive income As of December 31, 2019 For the period ended December 31, 2019 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Sichuan SQM Migao Chemical Fertilizers Co Ltd. Coromandel SQM India SQM Vitas Fzco. SQM Qingdao Star Corp Nutrition Co. Ltd. SQM Vitas B.V. SQM Vitas Brasil Agroindustria SQM Vitas Perú S.A.C. Pavoni & C. Spa Covalent Lithium Pty Ltd. Total 28,668 4,504 9,695 7,534 2,609 46,118 29,452 9,444 1,616 139,640 5,129 633 1 26 - 7,299 8,378 7,074 958 29,498 - - - - - - 6,044 735 383 7,162 7 8,197 36 12,003 - 87,901 28,590 14,296 - 151,030 (1,262) (197) 3,595 592 (30) 1,128 421 71 - 4,318 - (77) (876) - (53) (451) 1,322 (510) (25) (670) (1,262) (274) 2,719 592 (83) 677 1,743 (439) (25) 3,648 13,472 1,704 1,136 632 2 40,334 24,855 8,466 2,111 92,712 185 10.5 Other Joint Venture disclosures Joint Venture Sichuan SQM Migao Chemical Fertilizers Co Ltd. Coromandel SQM India SQM Vitas Fzco. SQM Qingdao Star Corp Nutrition Co. Ltd. SQM Vitas B.V. SQM Vitas Brasil Agroindustria SQM Vitas Perú S.A.C. Pavoni & C. Spa Covalent Lithium Pty Ltd. Total Joint Venture Sichuan SQM Migao Chemical Fertilizers Co Ltd. Coromandel SQM India SQM Vitas Fzco. SQM Qingdao Star Corp Nutrition Co. Ltd. SQM Vitas B.V. SQM Vitas Brasil Agroindustria SQM Vitas Perú S.A.C. Pavoni & C. Spa Covalent Lithium Pty Ltd. Total 10) FINANCIAL REPORTS Cash and cash equivalents Other current financial liabilities Other non-current financial liabilities As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 30 - 4,251 - - 4,065 1,043 767 653 10,809 33 2,240 3,071 4,640 2,609 2,101 225 314 693 15,926 - - - - - 6,820 227 5,573 953 13,573 - - - - - 9,106 258 5,509 472 15,345 - - - - - - 691 - - 691 - - - - - - 895 - - 895 Depreciation and amortization expense for the period ending As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ Interest expense for the period ending As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ Income tax benefit (expense) for the period ending As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ - - (2) - - (656) (326) (410) (18) (1,412) - (4) (7) - (1) (1,176) (435) - (32) (1,655) 244 - - - - (34) (197) (120) 714 607 153 (27) - (241) - 181 (316) (214) - (464) (394) - (1) - - (355) (257) (263) (213) (1,483) (743) (291) - (62) - (33) (287) (149) (126) (1,691) 186 10) FINANCIAL REPORTS 10.6 Joint Ventures In 2017, together with our subsidiary SQM Australia Pty, we entered into an agreement to acquire 50% of the assets of the Mt Holland lithium project in Western Australia. The Mt Holland Lithium Project consist, to design, construct and operate a mine, concentrator and refinery to produce approximately 50,000 metric tons of lithium hydroxide per year. On January 23, 2020, after finalizing the definitive feasibility study, the Company and its project partner Wesfarmers Limited, have decided to postpone the final investment decision to the first quarter of 2021. In addition, the Company will finance the activities of Mt Holland for a year in an amount of US$ 30 million. As of December 31, 2020, the Company had made contributions in the amount of US$ 30 million, of which, US$ 15 million was paid in favor of the partner in the project and presented as other receivables. If the Company does not approve the investment decision, Wesfarmers Limited does not have an obligation to pay the joint venture an amount equal to the amount contributed by the Company. See subsequent events in Note 31.2. 187 10) FINANCIAL REPORTS Note 11 Cash and cash equivalents 11.1 Types of cash and cash equivalents As of December 31, 2020, and December 31, 2019, cash and cash equivalents are detailed as follows: Cash on hand Cash in banks Other demand deposits Total Cash Cash Cash equivalents Short-term deposits, classified as cash equivalents Short-term investments, classified as cash equivalents Total cash equivalents Total cash and cash equivalents As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 54 244,848 2,227 247,129 71 105,141 6,986 112,198 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 51,595 210,378 261,973 509,102 149,099 327,233 476,332 588,530 11.2 Short-term investments, classified as cash equivalents As of December 31, 2020, and December 31, 2019, the short-term investments classified as cash and cash equivalents relate to mutual funds (investment liquidity funds) for investments in: Institution Legg Mason - Western Asset Institutional Cash Reserves JP Morgan US dollar Liquidity Fund Institutional Total As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 107,625 102,753 210,378 181,155 146,078 327,233 Short-term investments are highly liquid mutual funds that are basically invested in short-term fixed rate notes in the U.S. market. 188 10) FINANCIAL REPORTS 11.3 Information on cash and cash equivalents by currency As of December 31, 2020, and December 31, 2019, information on cash and cash equivalents by currency is detailed as follows: Currency Peso (*) Dollar Euro Mexican Peso South African Rand Japanese Yen Peruvian Sol Indian rupee Chinese Yuan Indonesian rupee Argentine Peso Pound Sterling Australian Dollar South Korean won Dirham United Arab Emirates Polish Zloty Total As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 7,190 454,402 17,144 1,378 14,286 1,646 3 6 11,597 3 - 19 8,240 558,572 3,131 2,103 3,929 1,559 4 6 2,484 3 3 3 1,411 8,492 16 - 1 - - 1 509,102 588,530 (*) The Company maintains financial derivative instruments policies which allow management to convert term deposits denominated in pesos and UF to Dollars. 11.4 Amount restricted cash balances As of December 31, 2020, and December 31, 2019, cash balances are presented with some form of restriction (see note 22.7). Financial assets pledged as collateral On November 4, 2004, Isapre Norte Grande has a guarantee equivalent to the total amount owed to its subsidiaries and medical suppliers, which is administered and maintained by Banco de Chile. As of December 31, 2020, and, December 31, 2019 pledged assets are as follows Restricted cash balances Isapre Norte Grande Ltda. Total As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 731 731 551 551 189 11.5 Short-term deposits, classified as cash equivalents The detail at the end of each period is as follows: Receiver of the deposit Type of deposit Original Currency Interest Rate Placement date Expiration date Principal Interest accrued to-date As of December 31, 2020 ThUS$ ThUS$ ThUS$ 10) FINANCIAL REPORTS Banco Santander - Santiago Scotiabank Sud Americano Banco de Chile Banco de Chile Banco crédito e inversiones Scotiabank Sud Americano Scotiabank Sud Americano Banco Santander - Santiago Scotiabank Sud Americano Banco Santander - Santiago Banco crédito e inversiones Banco crédito e inversiones Banco Estado Scotiabank Sud Americano Banco de Chile Banco Itaú Corpbanca Banco Itaú Corpbanca Banco crédito e inversiones Banco Itaú Corpbanca Banco Santander - Santiago Banco Santander - Santiago Banco Itaú Corpbanca BBVA Banco Francés Total Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Peso Dollar 0.35% 12-30-2020 03-30-2021 0.35% 0.61% 0.61% 0.46% 0.4% 0.4% 0.5% 0.5% 0.5% 0.51% 0.26% 0.14% 0.4% 0.56% 0.68% 0.68% 0.2% 0.4% 0.26% 0.15% 0.35% 1.8% 11-30-2020 01-08-2021 11-30-2020 01-08-2021 11-30-2020 01-08-2021 12-01-2020 01-15-2021 12-01-2020 01-15-2021 12-02-2020 01-20-2021 12-09-2020 01-25-2021 12-09-2020 01-25-2021 12-09-2020 01-25-2021 12-09-2020 01-25-2021 12-14-2020 01-29-2021 12-14-2020 01-29-2021 12-14-2020 01-29-2021 12-14-2020 12-18-2020 12-18-2020 12-23-2020 12-24-2020 12-29-2020 12-30-2020 12-29-2020 12-31-2020 01-29-2021 01-01-2021 02-01-2021 02-05-2021 02-08-2021 01-08-2021 02-12-2021 01-05-2021 03-06-2021 7,000 1,500 2,000 3,500 500 500 2,500 500 1,000 6,000 6,000 500 1,000 1,500 5,000 500 2,000 2,000 1,000 2,500 700 3,798 86 51,584 - 1 1 1 - - 1 - - 1 1 - 1 - 1 - 1 1 - 1 - - - 11 7,000 1,501 2,001 3,501 500 500 2,501 500 1,000 6,001 6,001 500 1,001 1,500 5,001 500 2,001 2,001 1,000 2,501 700 3,798 86 51,595 190 Banco crédito e inversiones Banco crédito e inversiones Banco de Chile Banco de Chile Banco de Chile Banco Itaú Corpbanca Scotiabank Sud Americano Banco crédito e inversiones Banco crédito e inversiones Banco crédito e inversiones Banco Estado Banco Santander - Santiago Banco Itaú Corpbanca Banco Itaú Corpbanca Banco Itaú Corpbanca Banco Santander - Santiago Scotiabank Sud Americano Scotiabank Sud Americano Scotiabank Sud Americano Scotiabank Sud Americano BBVA Banco Francés Banco Itaú S.A. Total Receiver of the deposit Type of deposit Original Currency Interest Rate Placement date Expiration date Principal Interest accrued to-date As of December 31, 2019 ThUS$ ThUS$ ThUS$ 10) FINANCIAL REPORTS 3.45% 2.85% 3.45% 3.50% 3.45% 2.90% 2.16% 3.51% 3.75% 3.60% 2.15% 2.55% 2.55% 3.64% 2.80% 2.33% 2.45% 3.20% 3.40% 3.45% 39% 8% 11-18-2019 02-13-2020 12-26-2019 02-20-2020 11-15-2019 01-23-2020 11-15-2019 01-09-2020 11-15-2019 01-16-2020 12-26-2019 02-20-2020 12-30-2019 01-08-2020 11-21-2019 01-28-2020 12-02-2019 02-27-2020 11-25-2019 01-28-2020 12-16-2019 01-06-2020 12-09-2019 02-04-2020 12-16-2019 01-06-2020 11-29-2019 02-13-2020 11-12-2019 01-28-2020 10-16-2019 01-12-2020 12-17-2019 01-13-2020 11-13-2019 01-30-2020 12-02-2019 02-27-2020 11-18-2019 01-30-2020 12-26-2019 01-27-2020 10-17-2019 01-17-2020 18,000 20,000 14,000 18,000 18,000 33,000 6,812 1,000 2,000 1,000 500 1,700 2,500 1,500 2,000 1,000 3,600 500 2,000 1,500 52 64 74 8 62 80 79 13 - 4 6 4 - 3 3 5 8 5 3 2 5 6 1 - 18,074 20,008 14,062 18,080 18,079 33,013 6,812 1,004 2,006 1,004 500 1,703 2,503 1,505 2,008 1,005 3,603 502 2,005 1,506 53 64 148,728 371 149,099 Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term Fixed term On demand Dollar Dollar Dollar Dollar Dollar Dollar Peso Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar 191 11.6 Net Debt reconciliation This section sets out an analysis of net debt and relating movements for each of the periods presented. The definition of the net debt is described in Note 21.1. 10) FINANCIAL REPORTS Net debt Cash and cash equivalents Other current financial assets Other non-current financial hedge assets Other current financial liabilities Lease liabilities, current Other non-current financial liabilities Lease liabilities, non-current Total As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 509,102 348,069 37,276 (68,955) (5,528) (1,899,513) (25,546) (1,105,095) 588,530 505,490 3,918 (291,128) (7,694) (1,488,723) (30,203) (719,810) Cash and cash equivalents As of December 31, 2019 Amounts from loans Amounts from interests Other cash income/expenses Hedging and non- hedging instruments Exchange rate differences Others As of December 31, 2020 From cash flow Not from cash flow ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Obligations with the public and bank loans (1,753,028) (136,692) Current and non-current lease liabilities Financial instruments derived from hedging Financial instruments derived from non-hedging (37,897) (23,655) (3,169) 8,015 814 - Current and non-current financial liabilities (1,817,749) (127,863) Cash and cash equivalents Deposits that do not qualify as cash and cash equivalents Derivatives from hedge assets Derivatives from other financial non-hedge assets 588,530 485,689 21,188 2,532 - - - - 73,933 1,133 7,634 - 82,700 - - (1,216) - 7,819 - - - 7,819 (78,988) (123,196) (39,290) 6,902 Total (719,810) (127,863) 81,484 (226,753) The definition of debt is described in Note 14. - - (20,909) (2,226) (23,135) - - 56,207 (6,824) 26,248 (33,280) - - - (33,280) (440) (14,032) - - (81,616) (2,325) (4,094) - (1,922,864) (31,074) (40,210) (5,395) (88,035) (1,999,543) - (3,002) 388 - 509,102 345,459 37,277 2,610 (47,752) (90,649) (1,105,095) 192 Note 12 Inventories The composition of inventory at each period-end is as follows: Type of inventory Raw material Production supplies Products-in-progress Finished product Total 10) FINANCIAL REPORTS As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 10,694 31,007 487,830 563,497 1,093,028 7,287 26,064 457,563 492,424 983,338 As of December 31, 2020, and December 31, 2019, the Company held caliche stockpiles, solutions in solar ponds and intermediary salts amounting ThUS$ 422,535 and ThUS$ 393,600, respectively (including products in progress). As of December 31, 2020, bulk inventories recognized within work in progress and finished goods were ThUS$ 108,909 and ThUS$ 176,561, respectively. As of December 31, 2019, bulk inventories recognized within work in progress and finished goods were ThUS$ 104,295 and ThUS$ 204,686, respectively. Bulk products in progress do not include ponds or stockpiles, but they do include intermediary salts on pads. As of December 31, 2020, and 2019, inventory allowances recognized, amounted to ThUS$ 80,930 and ThUS$ 88,174, respectively. For finished and in-process products, recognized allowances include the provision associated with the lower value of stock (considers lower realizable value, uncertain future use, reprocessing costs of off- specification products, etc.), provision for inventory differences and the provision for potential errors in the determination of inventories (e.g., errors in topography, grade, moisture, etc.), (see Note 3.13). For raw materials, supplies, materials and parts, the lower value provision was associated to the proportion of defective materials and potential differences. The breakdown of inventory allowances is detailed as follows: Type of inventory Raw material and supplies for production Products-in-progress Finished product Total As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 1,934 66,122 12,874 80,930 2,488 71,468 14,218 88,174 The Company has not pledged inventory as collateral for the periods indicated above. 193 10) FINANCIAL REPORTS As of December 31, 2020, and December 31, 2019, movements in provisions are detailed as follows: Conciliation Beginning balance Increase in Lower Value (1) Additional Provision Differences of Inventory (2) Increase / Decrease eventual differences and others (3) Provision Used Total changes Final balance As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 88,174 (5,404) (704) 1,244 (2,380) (7,244) 80,930 105,282 (6,987) (123) (6,262) (3,736) (17,108) 88,174 (1) There are three types of Lower Value Provisions: (a) Economic Realizable Lower Value, (b) Potential Inventory with Uncertain Future Use and (c) Reprocessing Costs of Off-Specification Products. (2) Provisions for Inventory Differences generated when physical differences are detected when taking inventory, which exceed the tolerance levels for this process. (3) This algorithm corresponds to the provision of diverse percentages based on the complexity in the measurement and rotation of stock, as well as standard differences based on previous results, as is the case with provisions relating to Commercial Offices. 194 10) FINANCIAL REPORTS Note 13 Related party disclosures 13.1 Related party disclosures Balances pending at period-end are not guaranteed, accrue no interest and are settled in cash, no guarantees have been delivered or received for trade and other receivables due from related parties or trade and other payables due to related parties. 13.2 Relationships between the parent and the entity Pursuant to Article 99 of Law of the Securities Market Law, the CMF may determine that a company does not have a controlling entity in accordance with the distribution and dispersion of its ownership. On November 30, 2018, the CMF issued the ordinary letter No. 32,131 whereby it determined that Pampa Group, do not exert decisive power over the management of the Company since it does not have a predominance in the ownership that allows it to make management decisions. Therefore, the CMF has determined not to consider Pampa Group as the controlling entity of the Company and that the Company does not have a controlling entity given its current ownership structure. 195 10) FINANCIAL REPORTS 13.3 Detailed identification of related parties and subsidiaries As of December 31, 2020 and December 31, 2019, the detail of entities that are identified as subsidiaries or related parties of the SQM Group is as follows: Tax ID No Name Country of origin Functional currency Nature Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign foreign 96.801.610-5 96.651.060-9 96.592.190-7 96.592.180-K 79.947.100-0 79.906.120-1 79.876.080-7 Nitratos Naturais Do Chile Ltda. Nitrate Corporation of Chile Ltd. SQM North America Corp. SQM Europe N.V. Soquimich European Holding B.V. SQM Corporation N.V. SQM Comercial De México S.A. de C.V. North American Trading Company Administración y Servicios Santiago S.A. de C.V. SQM Perú S.A. SQM Ecuador S.A. SQM Nitratos Mexico S.A. de C.V. SQMC Holding Corporation L.L.P. SQM Investment Corporation N.V. SQM Brasil Limitada SQM France S.A. SQM Japan Co. Ltd. Royal Seed Trading Corporation A.V.V. SQM Oceania Pty Limited Rs Agro-Chemical Trading Corporation A.V.V. SQM Indonesia S.A. SQM Virginia L.L.C. Comercial Caimán Internacional S.A. SQM África Pty. Ltd. SQM Colombia SAS SQM Internacional N.V. SQM (Shanghai) Chemicals Co. Ltd. SQM Lithium Specialties LLC SQM Iberian S.A. SQM Beijing Commercial Co. Ltd. SQM Thailand Limited SQM Australia PTY SQM Holland B.V. SQM Korea LLC Comercial Hydro S.A. SQM Potasio S.A. SQM Nitratos S.A. Ajay SQM Chile S.A. SQM Industrial S.A. Isapre Norte Grande Ltda. Almacenes y Depósitos Ltda. Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Peso Peso Brazil United Kingdom United States Belgium Netherlands Curacao Mexico United States Mexico Peru Ecuador Mexico United States Curacao Brazil France Japan Aruba Australia Aruba Indonesia United States Panama South Africa Colombia Belgium China United States Spain China Thailand Australia Netherlands Korea Chile Chile Chile Chile Chile Chile Chile 196 Tax ID No Name Country of origin Functional currency Nature 10) FINANCIAL REPORTS 79.770.780-5 79.768.170-9 79.626.800-K 76.534.490-5 Servicios Integrales de Tránsitos y Transferencias S.A. Soquimich Comercial S.A. SQM Salar S.A. Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A. 76.425.380-9 Exploraciones Mineras S.A. 76.064.419-6 Comercial Agrorama Ltda. 76.145.229-0 Agrorama S.A. 76.359.919-1 Orcoma Estudios SPA 76.360.575-2 Orcoma SPA 76.686.311-9 SQM MaG SpA 77.114.779-8 Sociedad Contractual Minera Búfalo Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Dollar Dollar Dollar Peso Dollar Peso Peso Dollar Dollar Dollar Dollar Abu Dhabi Fertilizer Industries WWL Ajay North America Ajay Europe SARL Kore Potash PLC Arab Emirates United States France United Kingdom Sichuan SQM Migao Chemical Fertilizers Co Ltda. China SQM Vitas Fzco. Arab Emirates Arab Emirates dirham Dollar Euro Dollar Dollar Arab Emirates dirham SQM Star Qingdao Corp Nutrition Co., Ltd. Covalent Lithium Pty Ltd. Pavoni & C, SPA Sociedad de Inversiones Pampa Calichera 96.529.340-K Norte Grande S.A. 79.049.778-9 Callegari Agrícola S.A. China Australia Italy Chile Chile Chile Brazil Peru SQM Vitas Brasil Agroindustria (1) SQM Vitas Perú S.A.C. (1) Abu Dhabi Fertilizer Industries WWL (2) Oman International Technical and Trading Agencies CO WLL (2) Jordan Dollar Dollar Euro Dollar Peso Peso Real brazilian Dollar United Arab Emirates dirham United Arab Emirates dirham foreign foreign foreign foreign foreign foreign foreign foreign foreign 96.511.530-7 foreign foreign foreign foreign Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Associate Associate Associate Associate Joint venture Joint venture Joint venture Joint venture Joint venture Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties (1) (2) These Companies are subsidiaries of the joint venture SQM Vitas Fzco. These Companies are subsidiaries of the joint venture Abu Dhabi Fertilizer Industries WWL Ltda. and therefore it absorbs these and takes responsibility of all of their assets and liabilities. * The following entities were considered related parties as of December 31, 2019 (see Note 9.4 letter a and Note 10.2): SQI Corporation N.V., SQM Italia SRL, Doktor Tarsa Tarim, SQM Eastmed Turkey, Terra Tarsa Ukraine LLC, Terra Tarsa B.V., Plantacote N.V., Terra Tarsa Don LLC, Doktolab Tarim Arastirma San., Doctochem Tarim Sanayi Ticaret Ltd. STI, Coromandel SQM India Sichuan SQM Migao Chemical Fertilizers Co Ltd. and Arpa Speciali S.R.L. 197 10) FINANCIAL REPORTS The following other related parties correspond to mining contractual corporations. Tax ID No. Name Country of origin Functional currency N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Ara Dos Primera del Salar de Pampa Blanca, Sierra Gorda Ara Tres Primera del Salar de Pampa Blanca, Sierra Gorda Ara Cuatro Primera del Salar de Pampa Blanca, Sierra Gorda Ara Cinco Primera del Salar de Pampa Blanca, Sierra Gorda Curicó Dos Primera del Salar de Pampa Alta, Sierra Gorda Curicó Tres Primera del Sector de Pampa Alta, Sierra Gorda Evelyn Veinticuatro Primera de Sierra Gorda Filomena Tres Primera de Oficina Filomena, Sierra Gorda Filomena Cuatro Primera de Oficina Filomena, Sierra Gorda Francis Cuatro Primera de Pampa Blanca, Sierra Gorda Francis Cuatro Segunda del Salar de Pampa Blanca, Sierra Gorda Francis Cuatro Tercera de Pampa Blanca, Sierra Gorda Francis Cuatro Cuarta de Pampa Blanca, Sierra Gorda Francis Cuatro Quinta de Pampa Blanca, Sierra Gorda Francis Primera del Salar de Pampa Blanca de Sierra Gorda Francis Segunda del Salar de Pampa Blanca de Sierra Gorda Francis Tercera del Salar de Pampa Blanca de Sierra Gorda Ivon Primera de Sierra Gorda Ivon Décima Segunda de Sierra Gorda Ivon Sexta de Sierra Gorda Julia Primera de Sierra Gorda Lorena Trigésimo Quinta de Sierra Gorda Perseverancia Primera de Sierra Gorda Tamara 40 Primera del Sector S.E. OF. Concepción, Sierra Gorda Tamara Tercera de Oficina Concepción, Sierra Gorda Tamara 40 Segunda del Sector S.E. OF Concepción, Sierra Gorda Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso Relationship Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties 198 10) FINANCIAL REPORTS 13.4 Detail of related parties and related party transactions Transactions between the Company and its subsidiaries, associated businesses, joint ventures and other related parties are part of the Company's common transactions. Their conditions are those customary for this type of transactions in respect of terms and market prices. Maturity terms for each case vary by virtue of the transaction giving rise to them. As of December 31, 2020 and 2019, the detail of significant transactions with related parties is as follows Tax ID No Name Nature Country of origin Transaction Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Doktor Tarsa Tarim Sanayi AS Ajay Europe S.A.R.L. Ajay Europe S.A.R.L. Ajay North America LL.C. Ajay North America LL.C. Abu Dhabi Fertilizer Industries WWL SQM Vitas Brasil Agroindustria SQM Vitas Perú S.A.C. SQM Vitas Fzco Coromandel SQM India SQM Star Qingdao Corp Nutrition Co., Ltd. Terra Tarsa Ukraine LLC Plantacote NV Pavoni & CPA Arpa Speciali S.R.L. Associate Associate Associate Associate Associate Associate Turkey France France USA USA Sale of products Sale of products Dividends Sale of products Dividends United Arab Emirates Sale of products Other related parties Other related parties Brazil Peru Sale of products Sale of products Joint venture Joint venture Joint venture Other related parties Other related parties Joint venture Other related parties United Arab Emirates Dividends India China Ukraine Belgium Italy Italy China Sale of products Sale of products Sale of products Sale of products Sale of products Sale of products Dividends SQM Star Qingdao Corp Nutrition Co., Ltd. Joint venture Terra Tarsa Don LLC SQM Eastmed Turkey Other related parties Russian Federation Sale of products Associate Turkey Sale of products As of December 31, 2020 As of December 30, 2019 ThUS$ ThUS$ 1,053 23,162 1,197 20,259 1,967 - 41,341 17,723 - 1,510 - 737 - 1,125 - 2,223 - - 14,767 21,348 1,055 16,932 2,796 3,749 46,876 24,138 10,598 3,955 1,929 1,280 4,096 3,152 2,359 - 40 47 Below is a list of transactions with clients and suppliers with whom a relationship with key Company personnel was identified: Tax ID No Name Nature Country of origin Transaction 10.581.580-8 71.644.300-0 72.012.000-3 76.389.727-3 76.825.265-3 76.839.170-k 90.193.000-7 92.580.000-7 96.806.980-2 97.004.000-5 99.012.000-5 90.266.000-3 92.580.000-7 96.529.340-K Gonzalo Guerrero Yamamoto Universidad del Desarrollo Universidad Tecnológica de Chile Sociedad Periodística El Libero Link Capital Partners SpA Proveedora Industrial Arrigoni El Mercurio S.A.P. Emp. Nac. Telecomunicaciones S.A. Entel PCS Telecomunicaciones S.A. Banco de Chile Cia. de Seg. de Vida Consorcio Nacional Enaex S.A. Emp. Nac. Telecomunicaciones S.A. Norte Grande S.A. Chairman / director Chairman / director Chairman / director Shareholders Family of director Director in common Family of director Family of director Family of director Director in common Family of director Director in common Family of director Director in common Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Services – Supplier Services – Supplier Services – Supplier Services – Supplier Services – Supplier Services – Supplier Services – Supplier Services – Supplier Services – Supplier Services – Supplier Services – Supplier Servicies – Client Servicies – Client Lease As of December 31, 2020 ThUS$ 20 125 41 - 224 5 36 1,847 264 44,696 71 19 43 135 199 10) FINANCIAL REPORTS 13.5 Trade receivables due from related parties, current: Tax ID No Name Nature Country of origin Currency Foreign Foreign Foreign Foreign 96.511.530-7 Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Total Doktor Tarsa Tarim Sanayi AS Ajay Europe S.A. R.L. Ajay North America LLC. Abu Dhabi Fertilizer Industries WWL Soc. de Inversiones Pampa Calichera SQM Vitas Brasil Agroindustria SQM Vitas Perú S.A.C. Coromandel SQM India SQM Vitas Fzco. Terra Tarsa Ukraine LLC Terra Tarsa Don LLC Plantacote NV SQM Eastmed Turkey Pavoni & C SpA Arpa Speciali S.R.L. Covalent Lithium Pty Ltd. Sichuan SQM Migao Chemical Fertilizers Co Ltd. Allowance Associate Associate Associate Turkey France Dollar Euro United States of America Dollar Associate United Arab Emirates United Arab Emirates Dirham Other related parties Chile Other related parties Brazil Other related parties Peru Joint venture India United Arab Emirates Joint venture Other related parties Ukraine Other related parties Federation of Russia Dollar Dollar Dollar Indian Rupee United Arab Emirates Dirham Ukrainian hryvnia Russian Ruble Other related parties Belgium Associate Joint venture Turkey Italy Other related parties Italy Joint venture Australia Joint venture China Euro Euro Euro Euro Australia Dollar As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ - 4,625 2,956 595 6 24,335 24,205 - 236 - - - - 1,095 - 84 4,464 - 62,601 110 3,712 2,290 803 6 27,275 23,475 1,792 234 7 13 657 47 1,028 134 - - (356) 61,227 The receivables for Sichuan SQM Migao Chemical Fertilizers Co Ltda. are presented net of provisions (provisions as of December 31, 2020 ThUS$ 6,502 and December 31, 2019 ThUS$ 10,965). 13.6 Trade payables due to related parties, current: Tax ID No Company Nature Country of origin Currency Foreign Foreign Foreign Foreign Total Ajay Europe S.A.R.L. Ajay North America LL.C. Associate Associate SQM Star Qingdao Corp Nutrition Co., Ltd. Covalent Lithium Pty Ltd Joint venture Joint venture France United States of America China Australia Euro Dollar Dollar Australian dollar As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 50 232 - 324 606 - - 243 232 475 13.7 Other disclosures: As of December 31, 2020, the Company has made contributions to Mt Holland in favor of Wesfarmers in the amount of US$ 15 million. This value is presented in the financial statements in the line “Trade and other accounts receivable.” For more details, see Note 10.6. Note 7 describes the remuneration of the Board of Directors, administration and key management personnel. 200 Note 14 Financial instruments 14.1 Types of other current and non-current financial assets Description of other financial assets Financial assets at amortized cost (1) Derivative financial instruments - For hedging - Non-hedging (2) Total other current financial assets Financial assets at fair value through other comprehensive income Derivative financial instruments - For hedging Other financial assets at amortized cost Total other non-current financial assets Institution Banco de Crédito e Inversiones Banco Santander (3) Banco Itau Corpbanca Banco Security Banco de Chile Banco Estado Scotiabank Sud Americano JP Morgan Asset Management Total 10) FINANCIAL REPORTS As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 345,459 485,689 - 2,610 348,069 14,569 37,276 80 51,925 17,270 2,531 505,490 4,785 3,918 75 8,778 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 185,589 45,168 49,006 - - - 31,668 34,028 345,459 185,400 74,365 120,628 17,964 18,026 15,126 54,180 - 485,689 (1) Corresponds to term deposits whose maturity date is greater than 90 days and less than 360 days from the investment date constituted in the aforementioned financial institutions: (2) Correspond to forwards and options that were not classified as hedging instruments (See detail in Note 14.3). (3) As of December 31, 2020, there were no margin calls and as of December 31, 2019, this value was ThUS$ 1,870. 201 14.2 Trade and other receivables Trade and other receivables Trade receivables, current Prepayments, current Other receivables, current Total trade and other receivables See discussion about credit risk in Note 5.2. Trade and other receivables Receivables related to credit operations, current Trade receivables, current Prepayments, current Other receivables, current Current trade and other receivables Other receivables, non-current Non-current receivables Total trade and other receivables 10) FINANCIAL REPORTS As of December 31, 2020 As of December 31, 2019 Current ThUS$ Non-current ThUS$ Total ThUS$ Current ThUS$ Non-current ThUS$ Total ThUS$ 313,265 19,900 32,041 365,206 - - 11,165 11,165 313,265 19,900 43,206 376,371 367,583 20,309 11,250 399,142 - - 1,710 1,710 367,583 20,309 12,960 400,852 As of December 31, 2020 As of December 31, 2019 Assets before allowances Allowance for doubtful trade receivables Assets for trade receivables, net Assets before allowances Allowance for doubtful trade receivables Assets for trade receivables, net ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 327,586 327,586 20,684 36,664 57,348 11,165 11,165 (14,321) (14,321) (784) (4,623) (5,407) - - 313,265 313,265 19,900 32,041 51,941 11,165 11,165 383,775 383,775 21,092 15,659 36,751 1,710 1,710 (16,192) (16,192) (783) (4,409) (5,192) - - 367,583 367,583 20,309 11,250 31,559 1,710 1,710 396,099 (19,728) 376,371 422,236 (21,384) 400,852 202 10) FINANCIAL REPORTS (a) Portfolio analysis As of December 31, 2020, and December 31, 2019 the detail of the renegotiated portfolio is as follows: As of December 31, 2020 Portfolio analysis Past due segments Number of customers with non-renegotiated portfolio Gross non-renegotiated portfolio ThUS$ Number of customers with renegotiated portfolio Gross renegotiated portfolio ThUS$ Current 1 - 30 days 31 - 60 days 61 - 90 days 91 - 120 days 121 - 150 days 151 - 180 days 181 - 210 days 211 - 250 days >250 days Total 1,281 119 12 5 5 2 3 1 3 156 1,587 301,939 12,140 1,226 159 1,448 2,384 1,398 - 2 5,030 325,726 As of December 31, 2019 Portfolio analysis 23 8 - - 1 2 4 2 6 64 110 179 60 - - 41 2 12 5 114 1,447 1,860 Past due segments Number of customers non- renegotiated portfolio Gross non-renegotiated portfolio ThUS$ Number of customers renegotiated portfolio Gross renegotiated portfolio ThUS$ Current 1 - 30 days 31 - 60 days 61 - 90 days 91 - 120 days 121 - 150 days 151 - 180 days 181 - 210 days 211 - 250 days >250 days Total 1,486 166 26 12 5 5 7 4 6 144 1,861 351,931 20,195 1,279 519 1,026 361 190 51 48 5,449 381,049 69 72 4 3 2 7 2 - 8 137 304 892 526 10 54 66 49 33 - 11 1,085 2,726 203 10) FINANCIAL REPORTS (b) Estimate for doubtful accounts As of December 31, 2020 Trade accounts receivable days past due Trade and other receivables Current 1 to 30 days 31 to 60 days 61 to 90 days Over 90 days Trade Trade receivables due from related parties ThUS$ ThUS$ Expected Loss Rate on Total Gross Book Value Deterioration Estimate 1% 10% 302,118 12,200 3,187 1,207 39% 1,226 477 52% 159 83 79% 11,883 9,367 - 327,586 14,321 - 70,145 7,545 As of December 31, 2019 Trade accounts receivable days past due Trade and other receivables Current 1 to 30 days 31 to 60 days 61 to 90 days Over 90 days Trade Trade receivables due from related parties ThUS$ ThUS$ Expected Loss Rate on Total Gross Book Value Deterioration Estimate 1% 18% 352,823 20,721 5,285 3,664 34% 1,288 440 44% 573 251 78% 8,370 6,552 - 383,775 16,192 - 72,550 11,323 As of December 31, 2020, and December 31, 2019, movements in provisions are as follows: Provisions Provision Impairment Accounts receivable at the beginning of the Period (Decrease) increase impairment of accounts receivable Use of Provision Applied to Accounts Receivable Impairment of Accounts Receivable Provision at the end of the Period (1) Trade and Other Receivables Provision (2) Current other Receivables Provision (3) Provision Trade payables due to related parties, current Recovery of Insurance Impairment of Accounts Receivable Provision Renegotiated Provision Non-renegotiated Provision As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 32,707 (4,684) (750) 27,273 14,321 5,407 7,545 347 27,273 1,728 25,545 32,634 1,057 (984) 32,707 16,192 5,192 11,323 320 32,707 1,905 30,802 204 10) FINANCIAL REPORTS 14.3 Hedging assets and liabilities The balance represents derivative financial instruments measured at fair value which have been classified as hedges for exchange and interest rate risks relating to the total obligations with the public associated with bonds in UF and investments in Chilean pesos. As of December 31, 2020, the notional amount of cash flows agreed upon in US dollars of the cross-currency swap contracts amounted to ThUS$ 565,295 (As of December 31, 2019 amounted to ThUS$ 435,167). Expressed in ThUS$ Assets / (Liabilities) Derivative Instrument Total Realized Hedging Reserve in Gross Equity Hedging with debt as underlying as of December 31, 2020 Hedging Assets Hedging Liabilities Underlying Debt Hedge Underlying Investment Coverage as of December 31, 2020 Hedging Assets Hedging Liabilities Underlying Investments Hedge 37,276 (19,195) 18,081 - (21,004) (21,004) 24,428 (12,956) 11,472 - (20,626) (20,626) 12,848 (6,239) 6,609 - (378) (378) Expressed in ThUS$ Assets / (Liabilities) Derivative Instrument Total Realized Hedging Reserve in Gross Equity Hedging with debt as underlying as of December 31, 2019 Hedging Assets Hedging Liabilities Underlying Debt Hedge Underlying Investment Coverage as of December 31, 2019 Hedging Assets Hedging Liabilities Underlying Investments Hedge 3,918 (22,771) (18,853) 17,270 (889) 16,381 (4,194) (25,363) (29,557) 17,857 (711) 17,146 8,112 2,592 10,704 (587) (178) (765) Hedging Effect in Profit and Equity for the period as of December 31, 2020 Variation Total Result Hedge Reserve Variation Analysis Effect by Type of Coverage Underlying Debt Hedge Underlying Investments Hedge Total hedging effect on profit or loss and equity in the period Analysis Effect by type of asset Hedging in Current and Non-Current Assets Hedging in Current and Non-Current Liabilities Total Hedge Effect in Profit or Loss and Equity for the period 36,935 (37,385) (450) 16,088 (16,538) (450) 41,029 (37,772) 3,257 10,765 (7,508) 3,257 (4,094) 387 (3,707) 5,323 (9,030) (3,707) 205 The balances in the “total realized” column consider the intermediate effects of the contracts in force from January 1 to December 31, 2020 and from January 1 to December 31, 2019. Derivative contract maturities are detailed as follows: 10) FINANCIAL REPORTS Contract amount ThUS$ 134,049 58,748 134,228 106,933 Currency Maturity date UF UF UF UF 01/04/2023 02/01/2022 01/15/2028 06/01/2030 Series H O P Q Effectiveness The Company uses cross currency swap derivative instruments to hedge the possible financial risk associated with the volatility of the exchange rate associated with Chilean pesos and UF. The objective is to hedge the exchange rate and inflation financial risks associated with bonds payable. Hedges are documented and tested to measure their effectiveness. Based on a comparison of critical terms, hedging is highly effective, given that the hedged amount is consistent with obligations maintained for bonds denominated in Pesos and UF. Likewise, hedging contracts are denominated in the same currencies and have the same maturity dates of bond principal and interest payments. Effectiveness tests have verified that hedges are effective as of the reporting date. 14.4 Financial liabilities Other current and non-current financial liabilities As of December 31, 2020, and December 31, 2019, the detail is as follows: Other current and non-current financial liabilities As of December 31, 2020 As of December 31, 2019 Currents Non-Current ThUS$ ThUS$ Total ThUS$ Currents Non-Current ThUS$ ThUS$ Total ThUS$ Liabilities at amortized cost Bank borrowings Obligations with the public Derivative financial instruments For hedging Non-Hedging Total 82 36,781 26,699 5,393 68,955 69,376 1,816,626 69,458 1,853,407 199 69,138 69,337 280,578 1,403,108 1,683,686 13,511 - 40,210 5,393 7,183 3,168 16,477 - 23,660 3,168 1,899,513 1,968,468 291,128 1,488,723 1,779,851 Current and non-current bank borrowings As of December 31, 2020, and 2019, the detail is as follows: Current and non-current bank borrowings Current loans Non-current loans Current and non-current loans As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 82 69,376 69,458 199 69,138 69,337 206 10) FINANCIAL REPORTS a) Bank borrowings, current: As of December 31, 2020, and December 31, 2019, the detail of this caption is as follows: Debtor Tax ID No. Company Country Tax ID No. Creditor Financial institution Country Currency or adjustment index Payment of interest Repayment Effective rate Nominal rate 93.007.000-9 SQM S.A. Chile O-E Scotiabank Cayman USA USD Upon maturity 05/30/2023 1.00% 1.36% Debtor Company Creditor Nominal amounts as of December 31, 2020 Current amounts as of December 31, 2020 Financial institution Up to 90 days 90 days to 1 year Total Up to 90 days 90 days to 1 year Subtotal Borrowing costs Total SQM S.A. Total Scotiabank Cayman ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ - - - - - - - - 82 82 82 82 - - 82 82 Debtor Creditor Tax ID No Company Country Tax ID No Financial institution Country Currency or adjustment index Repayment maturity Effective rate Nominal rate 93.007.000-9 SQM S.A. Foreign Nitratos Naturais do Chile Lim. Chile Brazil Foreign Foreign Scotiabank Cayman Banco ITAU Brasil USA Brazil US$ BRL Upon maturity Upon maturity 05/29/2023 12/31/2019 2.11% 13.57% 3.01% 4.25% Debtor Company SQM S.A. Nitratos Naturais do Chile Total Creditor Nominal amounts as of December 31, 2019 Current amounts as of December 31, 2019 Financial institution Scotiabank Cayman Banco ITAU Brasil Up to 90 days 90 days to 1 year Total Up to 90 days 90 days to 1 year Subtotal Borrowing costs Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ - - - - - - - - - - 12 12 187 - 187 187 12 199 - - - 187 12 199 207 10) FINANCIAL REPORTS b) Unsecured obligations, current: As of December 31, 2020, and December 31, 2019, the detail of current unsecured interest-bearing obligations is composed of promissory notes and bonds, as follows: Debtor Tax ID No. Company Country Number of registration or ID of the instrument Series Maturity date Currency or adjustment index 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. Chile Chile Chile Chile Chile Chile Chile Chile - - - - 564 699 563 700 MUS$250 MUS$300 MUS$450 MUS$400 H O P Q 01/28/2021 04/03/2021 05/07/2021 01/22/2021 01/05/2021 02/01/2021 01/15/2021 06/01/2021 US$ US$ US$ US$ UF UF UF UF Periodicity Payment of interest Semiannual Semiannual Semiannual Semiannual Semiannual Semiannual Semiannual Semiannual Repayment Upon maturity Upon maturity Upon maturity Upon maturity Semiannual Upon maturity Upon maturity Upon maturity Effective rate Nominal rate 1.95% 1.08% 3.59% 4.17% 0.58% 2.24% 2.37% 2.92% 4.38% 3.63% 4.25% 4.25% 4.90% 3.80% 3.25% 3.45% Effective rates of bonds in Pesos and UF are expressed and calculated in Dollars based on the flows agreed in Cross Currency Swap Agreements. Company Country Series SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. Total Chile Chile Chile Chile Chile Chile Chile Chile MUS$250 MUS$300 MUS$450 MUS$400 H O P Q Nominal amounts as of December 31, 2020 Carrying amounts of maturities as of December 31, 2020 Up to 90 days 90 days to 1 year Total Up to 90 days 90 days to 1 year Subtotal Borrowing costs Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 4,648 - 7,508 - 18,212 962 1,824 - 33,154 - 2,658 - 2,869 - - - 350 5,877 4,648 2,658 7,508 2,869 18,212 962 1,824 350 39,031 4,648 - 7,508 - 18,212 962 1,824 - 33,154 - 2,658 - 2,869 - - - 350 5,877 4,648 2,658 7,508 2,869 18,212 962 1,824 350 39,031 (433) (614) (679) (237) (172) (82) (12) (21) (2,250) 4,215 2,044 6,829 2,632 18,040 880 1,812 329 36,781 208 10) FINANCIAL REPORTS Debtor Tax I No. Company Country Number of registration or ID of the instrument Series Maturity date Currency or adjustment index 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. Chile Chile Chile Chile Chile Chile Chile Chile - - - - 564 699 563 700 MUS$250 MUS$250 MUS$300 MUS$450 H O P Q 04/21/2020 01/28/2020 04/03/2020 05/07/2020 01/05/2020 02/01/2020 01/15/2020 06/01/2020 US$ US$ US$ US$ UF UF UF UF Periodicity Payment of interest Semiannual Semiannual Semiannual Semiannual Semiannual Semiannual Semiannual Semiannual Repayment Upon maturity Upon maturity Upon maturity Upon maturity Semiannual Upon maturity Upon maturity Upon maturity Effective rate Nominal rate 0.43% 2.35% 1.42% 4.07% 1.36% 2.41% 2.71% 3.11% 5.50% 4.38% 3.63% 4.25% 4.90% 3.80% 3.25% 3.45% Company Country Series Up to 90 days 90 days to 1 year Total Up to 90 days 90 days to 1 year Subtotal Borrowing costs Total Nominal amounts as of December 31, 2019 Carrying amounts of maturities as of December 31, 2019 SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. Total Chile Chile Chile Chile Chile Chile Chile Chile MUS$250 MUS$250 MUS$300 MUS$450 H O P Q ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ - 252,674 252,674 - 252,674 252,674 4,648 - - 17,166 890 1,686 - 24,390 - 2,658 2,869 - - - 323 258,524 4,648 2,658 2,869 17,166 890 1,686 323 282,914 4,648 - - 17,166 890 1,686 - 24,390 - 2,658 2,869 - - - 323 258,524 4,648 2,658 2,869 17,166 890 1,686 323 282,914 (386) (433) (614) (679) (139) (67) (12) (6) (2,336) 252,288 4,215 2,044 2,190 17,027 823 1,674 317 280,578 Effective rates of bonds in Pesos and UF are expressed and calculated in Dollars based on the flows agreed in Cross Currency Swap Agreements. 209 10) FINANCIAL REPORTS c) Classes of interest-bearing loans, non-current The following table shows the details of bank loans as of December 31, 2020 and 2019: Tax ID No. 93.007.000-9 Debtor Company SQM S.A. Country Chile Creditor Tax ID No. Financial institution Country Currency or adjustment index Type of amortization Effective rate Nominal rate Foreign Scotiabank Cayman USA USD Maturity 1.98% 1.36% Debtor Creditor Nominal non-current maturities as of December 31, 2020 Carrying amounts of maturities as of December 31, 2020 Company Financial institution Between 1 and 2 Between 2 and 3 Between 3 and 4 Total Between 1 and 2 Between 2 and 3 Between 3 and 4 Subtotal ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Costs of obtaining loans ThUS$ Total ThUS$ SQM S.A. Total Scotiabank Cayman - - 70,000 70,000 - - 70,000 70,000 - - 70,000 70,000 - - 70,000 70,000 (624) (624) 69,376 69,376 Tax ID No. 93.007.000-9 Debtor Company SQM S.A. Country Chile Creditor Tax ID No. Financial institution Country Currency or adjustment index Type of amortization Effective rate Nominal rate Foreign Scotiabank Cayman USA USD Maturity 2.84% 3.01% Debtor Creditor Nominal non-current maturities as of December 31, 2019 Carrying amounts of maturities as of December 31, 2019 Company Financial institution Over 1 year to 2 Over 2 years to 3 Over 3 Years to 4 Over 4 Years to 5 ThUS$ ThUS$ ThUS$ ThUS$ Over 5 years ThUS$ Total Over 1 year to 2 Over 2 years to 3 ThUS$ ThUS$ ThUS$ Costs of obtaining loans ThUS$ Total ThUS$ SQM S.A. Total Scotiabank Cayman - - - - 70,000 70,000 70,000 70,000 - - - - 70,000 70,000 70,000 70,000 (862) (862) 69,138 69,138 210 10) FINANCIAL REPORTS d) Non-current unsecured interest-bearing bonds The following table shows the details of “unsecured debentures that accrue non-current interest” as of December 31, 2020, and 2019: Debtor Tax ID No. Company Country Number of registration or ID of the instrument Series Maturity date Currency or adjustment index 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. Chile Chile Chile Chile Chile Chile Chile Chile - - - - 564 699 563 700 MUS$250 MUS$300 MUS$450 MUS$400 H O P Q 01/28/2025 04/03/2023 05/07/2029 01/22/2050 01/05/2030 02/01/2033 01/15/2028 06/01/2038 US$ US$ US$ US$ UF UF UF UF Periodicity Payment of interest Semiannual Semiannual Semiannual Semiannual Semiannual Semiannual Semiannual Semiannual Repayment Upon maturity Upon maturity Upon maturity Upon maturity Semiannual Upon maturity Upon maturity Upon maturity Effective rate Nominal rate 4.08% 3.43% 4.18% 4.22% 4.76% 3.68% 3.24% 3.43% 4.38% 3.63% 4.25% 4.25% 4.90% 3.80% 3.25% 3.45% Series MUS$250 MUS$300 MUS$450 MUS$400 H O P Q Total Nominal non-current maturities as of December 31, 2020 Carrying amounts of maturities as of December 31, 2020 Over 1 year to 2 Over 2 years to 3 Over 3 Years to 4 Over 4 Years to 5 Over 5 years Total Over 1 year to 2 Over 2 years to 3 Over 3 Years to 4 Over 4 Years to 5 Over 5 years Subtotal ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Bond issuance costs ThUS$ Total ThUS$ - - - - - - - - - - 300,000 - - - - - - 300,000 - - - - - - - - - 250,000 - - - - - - - - - 450,000 400,000 126,386 250,000 300,000 450,000 400,000 126,386 61,334 61,334 122,668 122,668 122,668 122,668 250,000 1,283,056 1,833,056 - - - - - - - - - - 300,000 - - - - - - 300,000 - - - - - - - - - 250,000 - - - - - - - 250,000 - - 250,000 300,000 (1,336) 248,664 (781) 299,219 450,000 450,000 400,000 126,386 400,000 126,386 61,334 61,334 122,668 122,668 122,668 122,668 (5,020) (6,582) (1,378) (904) (77) (352) 444,980 393,418 125,008 60,430 122,591 122,316 1,283,056 1,833,056 (16,430) 1,816,626 211 10) FINANCIAL REPORTS Debtor Tax ID No. Company Country 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. Chile Chile Chile Chile Chile Chile Chile Number of registration or ID of the instrument Series Maturity date Currency or adjustment index - - - 564 699 563 700 MUS$250 MUS$300 MUS$450 H O P Q 01/28/2025 04/03/2023 05/07/2029 01/05/2030 02/01/2033 01/15/2028 06/01/2038 US$ US$ US$ UF UF UF UF Periodicity Payment of interest Semiannual Semiannual Semiannual Semiannual Semiannual Semiannual Semiannual Repayment Upon maturity Upon maturity Upon maturity Semiannual Upon maturity Upon maturity Upon maturity Effective rate Nominal rate 4.08% 3.43% 4.19% 4.78% 3.70% 3.24% 3.45% 4.38% 3.63% 4.25% 4.90% 5.50% 3.25% 3.45% Series MUS$250 MUS$300 MUS$450 H O P Q Total Nominal non-current maturities as of December 31, 2019 Carrying amounts of maturities as of December 31, 2019 Over 1 year to 2 Over 2 years to 3 Over 3 Years to 4 Over 4 Years to 5 Over 5 years Total Over 1 year to 2 Over 2 years to 3 Over 3 Years to 4 Over 4 Years to 5 Over 5 years Subtotal Bond issuance costs Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ - - - - - - - 300,000 - - - - 250,000 250,000 - 300,000 450,000 450,000 - - - - - - - 300,000 - - - - 13,749 13,749 13,749 13,749 - - - - - - - - - - - - 75,621 56,715 56,715 113,430 113,430 113,430 113,430 130,617 13,749 13,749 13,749 13,749 - - - - - - - - - - - - 250,000 250,000 - 300,000 450,000 450,000 75,621 56,715 130,617 56,715 113,430 113,430 113,430 113,430 (1,514) (1,393) (5,923) (1,253) (811) (89) (101) 248,486 298,607 444,077 129,364 55,904 113,341 113,329 13,749 13,749 313,749 13,749 1,059,196 1,414,192 13,749 13,749 313,749 13,749 1,059,196 1,414,192 (11,084) 1,403,108 212 10) FINANCIAL REPORTS e) Additional information Bonds As of December 31, 2020 and December 31, 2019, the details of each issuance are as follows: (i) Series “H” bonds On January 13, 2009, the Company placed the Series H bond for UF 4,000,000 (ThUS$ 139,216) at an annual interest rate of 4.9%, with a term of 21 years and amortizations of principal beginning in July, 2019. On July 5, 2019, amortization of principal amounted to UF 181,818.18, (ThUS$ 7,494) with an associated cross currency swap hedge income of ThUS$ 439. On January 5, 2020, amortization of principal amounted to UF 181,818.18. (ThUS$ 6,787) with an associated cross currency swap hedge loss of ThUS$ 268. On July 5, 2020, amortization of principal amounted to UF 181,818.18. (ThUS$ 6,509) with an associated cross currency swap hedge loss of ThUS$ 546. See more details in Note 21.1 For the periods ended December 31, 2020, and December 31, 2019, the Company has made the following payments with a charge to the Series H bonds and their associated CCS hedging: Payments made Payments of interest, Series H bonds CCS Coverage December 31, 2020 December 31, 2019 ThUS$ ThUS$ 6,601 2,575 7,868 1,952 (ii) Single series bonds, second issue MUS$ 250 On April 21, 2010, the Company informed the CMF of its placement in international markets of an unsecured bond of ThUS$ 250,000, pursuant to Rule 144 -A and Regulation S of the Securities and Exchange Commission with a maturity of 10 years with an annual interest rate of 5.5%. The Company paid the principal on April 21, 2020. For the periods ended December 31, 2020 and December 31, 2019, the detail of payments charged to the line of single series bonds, second issue is as follows Payments made Interest payment December 31, 2020 December 31, 2019 ThUS$ ThUS$ 6,875 13,750 213 10) FINANCIAL REPORTS (iii) Series “O” bonds On April 4, 2012, the Company issued “Series O” for UF 1,500,000 (ThUS$ 69,901) at a term of 21 years with a single payment at the maturity of the term and an annual interest rate of 3.80%. See more details in Note 21.1 For the periods ended December 31, 2020, and December 31, 2019, the Company has made the following payments with a charge to Series O bonds and their associated CCS hedging: Payments made Payment of interest, Series O bonds CCS Coverage December 31, 2020 December 31, 2019 ThUS$ ThUS$ 2,070 599 2,308 354 (iv) Single series bonds, third issue MUS$ 300 On April 3, 2013, the Company issued a non-secured bond in the United States with a value of US$ 300 million. pursuant to Rule 144-A and Regulation S of the SEC. The bond is for a 10-year term with an annual coupon rate of 3.625%. For the periods ended 31, 2020, and December 31, 2019, the following payments have been made with a debit to the line of single-series bonds, third issue: Payments made Payment of interest December 31, 2020 December 31, 2019 ThUS$ ThUS$ 10,875 10,875 214 10) FINANCIAL REPORTS (v) Single series bonds, fourth issuance MUS $250 On October 23, 2014, the Company issued unsecured bonds amounting ThUS$ 250,000 in international markets, pursuant to Rule 144-A and Regulation S of the Securities and Exchange Commission. These bonds mature in 2025 and have annual interest rate of 4.375%. For the periods ended on December 31, 2020 and December 31, 2019, the following payments have been made. Payments made Payment of interest (vi) Series “P” bonds December 31, 2020 December 31, 2019 ThUS$ ThUS$ 10,938 10,938 The Company on March 31, 2018 issued the placement on the stock market of the Series “P” bond (the "Bonds” Series P) with a value of UF 3,000,000, with a charge to the 10 year Bonds Line registered in the CMF Securities Registry under number 563. The bonds Series P (i) mature on January 15, 2028; (ii) will accrue on the unpaid principal, expressed in UF, at an annual interest rate of 3.25% from January 15, 2018; and (iii) can be early redeemed by the Company starting from the date of placement, that was, as of April 5, 2018. For the periods ended on December 31, 2020 and December 31, 2019, the following payments and their associated CCS have been made: Payments made December 31, 2020 December 31, 2019 Payment of interest series P CCS Coverage ThUS$ ThUS$ 3,534 3,439 3,960 2,995 215 10) FINANCIAL REPORTS (vii) Series Q bonds On October 31, 2018, the issuance of Series Q bonds was authorized in the general stock market for the amount of UF 3,000,000, which were registered in the Securities Registry of your Commission on February 14, 2012 under number 700. The bonds Series Q (i) mature on the first day of June 2038; (ii) will earn an interest rate of 3.45% per annum on the outstanding capital, expressed in Unidades de Fomento, from June 1, 2018 thereon; and (iii) may be early redeemed by the Company starting from the placement date, that was, as of November 8, 2018. On November 8, 2018, all the Series Q Bonds have been placed and sold to Euroamerica S.A. for a total amount of $ 83,567,623,842, which was paid in full and in cash by Euroamerica S.A. to the Company. See more details in Note 21.1 For the years ended December 31, 2020 and December 31, 2019, the following payments have been made: Payments made Payment of interest series Q CCS Coverage December 31, 2020 ThUS$ December 31, 2019 ThUS$ 3,769 1,021 3,791 - (viii) Single series fifth issue bonds ThUS$ 450,000 On May 7, 2019, the CMF was informed that the Company issued and placed unsecured bonds for ThUS$ 450,000 pursuant to Rule 144-A and Regulation S of the Securities and Exchange Commission on international markets. These bonds will mature in 2029 and carry an interest rate of 4.25% per annum. For the periods ended on December 31, 2020 and December 31, 2019, the following payments have been made: Payments made Payment of interest December 31, 2020 December 31, 2019 ThUS$ ThUS$ 19,125 9,563 (ix) Single series sixth issue bonds MUS$ 400 On January 22, 2020, the Company has placed unsecured bonds in international markets for US$ 400 million, pursuant to Rule 144-A and Regulation S of the Securities and Exchange Commission, at an annual interest rate of 4.250% and a maturity in the year 2050. Payments made Payment of interest December 31, 2020 December 31, 2019 ThUS$ ThUS$ 8,500 - 216 10) FINANCIAL REPORTS 14.5 Trade and other payables a) Details trade and other payables As of December 31, 2020 As of December 31, 2019 Details trade and other payables Current Non-current ThUS$ ThUS$ Total ThUS$ Current Non-current ThUS$ ThUS$ Total ThUS$ Accounts payable Other accounts payable Prepayments from customers Total 203,346 587 - 203,933 - - 4,027 4,027 203,346 205,414 587 4,027 376 - 207,960 205,790 - - - - 205,414 376 - 205,790 As of December 31, 2020, and December 31, 2019, the balance of current and past due accounts payable is made up as follows: Suppliers current on all payments Amounts according to payment periods as of December 31, 2020 Type of Supplier Up to 30 Days 31 - 60 days 61 - 90 Days 91 - 120 days 121 - 365 days 111,323 46,187 29,325 186,835 1,947 1,380 7 3,334 123 16 - 139 31 757 - 788 5 86 - 91 366 and more days 4,027 - - 4,027 Total ThUS$ 117,456 48,426 29,332 195,214 Type of Supplier Up to 30 Days 31 - 60 days 61 - 90 Days 91 - 120 days 121 - 365 days 366 and more days Total ThUS$ Amounts according to payment periods as of December 31, 2019 126,577 51,785 8,741 187,103 4,655 168 146 4,969 128 - - 128 116 - - 2,019 87 116 2,106 Goods Services Others Total Goods Services Others Total Suppliers past due on payments Type of Supplier Up to 30 Days 31 - 60 days 61 - 90 Days 91 - 120 days 121 - 365 days 366 and more days Amounts according to payment periods as of December 31, 2020 1,305 2,298 3,258 6,861 59 764 150 973 47 - 371 418 39 453 118 610 517 505 2,275 3,297 Type of Supplier Up to 30 Days 31 - 60 days 61 - 90 Days 91 - 120 days 121 - 365 days 366 and more days Amounts according to payment periods as of December 31 2019 2,086 3,073 1,918 7,077 264 329 45 638 35 116 311 462 65 387 215 667 1,060 580 508 2,148 Goods Services Others Total Goods Services Others Total Purchase commitments held by the Company are recognized as liabilities when the goods and services are received by the Company. As of December 31, 2020, the Company has purchase orders amounting to ThUS$ 55,516 and ThUS$ 89,391 as of December 31, 2019. 217 - - - - - - - - - - - - 133,495 52,040 8,887 194,422 Total ThUS$ 1,967 4,020 6,172 12,159 Total ThUS$ 3,510 4,485 2,997 10,992 10) FINANCIAL REPORTS 14.6 Financial asset and liability categories a) Financial Assets m Description of financial assets Current ThUS$ Non-current ThUS$ Total ThUS$ Current ThUS$ Non-current ThUS$ Total ThUS$ As of December 31, 2020 As of December 31, 2019 Cash and cash equivalent Trade receivables due from related parties at amortized cost Financial assets measured at amortized cost Loans and receivables measured at amortized cost Total financial assets measured at amortized cost Financial instruments for hedging purposes through equity Financial instruments held for trading at through profit or loss Financial assets classified as available for sale at fair value through equity Total financial assets at fair value Total financial assets 509,102 62,601 345,459 365,206 1,282,368 - 2,610 - 2,610 1,284,978 - - 80 11,165 11,245 37,276 - 14,569 51,845 63,090 509,102 62,601 345,539 376,371 588,530 61,227 485,689 399,142 1,293,613 1,534,588 37,276 2,610 14,569 54,455 17,270 2,531 - 19,801 - - 75 1,710 1,785 3,918 - 4,785 8,703 588,530 61,227 485,764 400,852 1,536,373 21,188 2,531 4,785 28,504 1,348,068 1,554,389 10,488 1,564,877 218 10) FINANCIAL REPORTS b) Financial Liabilities Description of financial liabilities Current ThUS$ Non-current ThUS$ Total ThUS$ Current ThUS$ Non-current ThUS$ Total ThUS$ As of December 31, 2020 As of December 31, 2019 For hedging purposes through equity Held for trading at fair value through profit or loss Financial liabilities at fair value through profit or loss Bank loans Obligations to the public Lease Liabilities Trade and other payables Trade payables due to related parties Total financial liabilities at amortized cost Total financial liabilities 26,699 5,393 32,092 82 36,781 5,528 203,933 606 246,930 279,022 13,511 - 13,511 69,376 40,210 5,393 45,603 69,458 1,816,626 1,853,407 25,546 4,027 - 1,915,575 1,929,086 31,074 207,960 606 2,162,505 2,208,108 7,183 3,168 10,351 199 280,578 7,694 205,790 475 494,736 505,087 16,477 - 16,477 69,138 23,660 3,168 26,828 69,337 1,403,108 1,683,686 30,203 - - 1,502,449 1,518,926 37,897 205,790 475 1,997,185 2,024,013 219 10) FINANCIAL REPORTS 14.7 Fair value measurement of finance assets and liabilities The fair value hierarchy is detailed as follows: a) Level 1: using quoted prices (unadjusted) only in active markets. b) Level 2: when in any phase in the valuation process inputs other than quoted prices have been used in Level 1 that are observable directly in markets. c) Level 3: inputs for the asset or liability that are not based on observable market data. 220 Fair value measurement of assets and liabilities Carrying Amount at Amortized Cost Fair value (informative) Book Value Fair value Level 1 Level 2 Level 3 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ As of December 31, 2020 Measurement Methodology 10) FINANCIAL REPORTS Financial Assets Cash and cash equivalents Other current financial assets - Time deposits - Derivative financial instruments - Forwards - Options Non-current accounts receivable Other non-current financial assets: - Other - Actions - Hedging assets – Swaps Other current financial liabilities - Bank loans - Derivative instruments - Forwards - Options -Hedging liabilities – Swaps -Inversions -Swaps - Unsecured obligations - Current lease liabilities Other non-current financial liabilities - Bank loans - Unsecured obligations - Non-current hedging liabilities - Non-current lease liabilities 509,102 509,102 345,459 345,459 - - - - 11,165 11,165 99 - - 82 - - - - - 99 - - 82 - - - - - 36,781 5,528 36,781 5,528 69,376 71,029 1,816,626 2,355,943 - 25,546 - 26,027 - - 2,263 347 - - 14,549 37,276 - - 4,614 780 5,695 21,004 - - - - 13,511 - - - - - - - 14,549 - - - - - - - - - - - - - 509,102 345,459 2,263 347 - 99 - 37,276 82 - 4,614 780 5,695 21,004 36,781 5,528 71,029 2,355,943 13,511 26,027 - - - - - - - - - - - - - - - - - - - - Fair value measurement of assets and liabilities As of December 31, 2019 Measurement methodology 221 Financial Assets Cash and cash equivalents Other current financial assets: - Time deposits -Derivative financial instruments - Forwards - Options -Investment hedge swaps Non-current accounts receivable Other non-current financial assets - Other - Actions - Hedging assets – Swaps Other current financial liabilities - Bank loans -Derivative instruments - Forwards - Options - Hedging liabilities – Swaps - Unsecured obligations -Current lease liabilities Other non-current financial liabilities: - Bank loans - Unsecured obligations - Non-current hedging liabilities - Non-current lease liabilities 10) FINANCIAL REPORTS Carrying Amount at Amortized Cost Fair value (informative) Book Value Fair value ThUS$ ThUS$ ThUS$ Level 1 ThUS$ Level 2 ThUS$ Level 3 ThUS$ 588,530 588,530 - 485,689 - - - - 1,710 94 - - 199 - - - - 280,578 7,694 69,138 1,403,108 - 30,203 485,689 - - - 1,710 94 - - 199 - - - - 280,578 7,694 71,033 1,658,506 - 33,187 - - 2,420 111 17,270 - - 4,785 3,918 - - 2,837 289 7,183 - - - - 16,477 - - - - - - - - - 4,785 - - - - - - - - - - - - 588,530 485,689 - 2,420 111 17,270 - 94 - 3,918 199 - 2,837 289 7,183 280,578 7,694 71,033 1,658,506 16,477 33,187 - - - - - - - - - - - - - - - - - - - - - 222 10) FINANCIAL REPORTS 14.8 Estimated fair value of financial instruments As required by IFRS 7, the following information is presented for the disclosure of the estimated fair value of financial assets and liabilities. Although inputs represent Management's best estimate, they are subjective and involve significant estimates related to the current economic and market conditions, as well as risk features. Methodologies and assumptions used depend on the risk terms and characteristics of instruments and include the following as a summary: Estimate of fair value for the record Financial assets and liabilities measured at fair value consist of forwards hedging the mismatch in the balance sheet and cash flows, options hedging the mismatch in the balance sheet and cross currency swaps to hedge bonds issued in local currency (Peso/UF). The fair value of the Company’s assets and liabilities recognized by cross currency swaps contracts is calculated as the difference between the present value of discounted cash flows of the asset (Ch/UF) and liability (US$) parts of the derivative. In the case of the IRS, the asset value recognized is calculated as the difference between the discounted cash flows of the asset (variable rate) and liability (fixed rate) parts of the derivative. Forwards are calculated as the difference between the strike price of the contract and the spot price plus the forwards points at the date of the contract. Financial options: the value recognized is calculated using the Black-Scholes method. In the case of CCS, the entry data used for the valuation models are UF, Peso, Dollar and basis swap rates. In the case of fair value calculations for interest rate swaps, the Forward Rate Agreement rate and ICVS 23 Curve (Bloomberg: cash/deposits rates, futures, swaps). In the case of forwards, the forwards curve for the currency in question is used. Finally, for options, the spot price, risk-free rate and volatility of exchange rate are used, all in accordance with the currencies used in each valuation. The financial information used as entry data for the Company’s valuation models is obtained from Bloomberg, the well-known financial software company. Conversely, the fair value provided by the counterparties of derivatives contracts is used only as a control and not for valuation. The effects on profit or loss of movements in these amounts is recognized in the caption finance costs, foreign currency translation gain (loss) or cash flow hedge reserve in the statement of comprehensive income, depending on each particular case. Estimate of fair value for reporting purposes • Cash equivalent approximates fair value due to the short-term maturities of these instruments. • The fair value of trade receivables, current is considered to be equal to the carrying amount due to the maturity of such accounts at short-term. • Payables, current lease liabilities and other current financial liabilities are considered fair value equal to book value due to the short-term maturity of these accounts. • The fair value of the debt (long-term secured and unsecured debentures; bonds denominated in local currency (Peso/UF) and foreign currency (Dollar), loans denominated in foreign currency (Dollar) and lease liabilities of the Company are calculated at current value of cash flows subtracted from market rates upon valuation, considering the terms of maturity and exchange rates. The UF and Peso rate curves are used as inputs for the valuation model. This information is obtained through from the renowned financial software company, Bloomberg, and the Chilean Association of Banks and Financial Institutions. 223 10) FINANCIAL REPORTS Nota 15 Right-of-use assets and Lease liabilities 15.1 Right-of-use assets Reconciliation of changes in right-of-use assets as of December 31, 2020, net value Land Buildings Other property, plant and equipment Transport equipment Supplies and accessories Office equipment Network and communication equipment Mining assets IT equipment Energy generating assets Constructions in progress Machinery, plant and equipment Buildings, plant and equipment ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Opening Balance Additions Depreciation expenses Other increases / decreases Total changes Closing balance - - - - - - 25,742 1,782 (3,535) (612) (2,365) 23,377 - - - - - - 3,356 - (877) - (877) 2,479 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 8,066 37,164 121 1,903 (4,019) (8,431) - (612) (3,898) (7,140) 4,168 30,024 Reconciliation of changes in right-of-use assets as of December 31, 2019, net value Land Buildings Other property, plant and equipment Transport equipment Supplies and accessories Office equipment Network and communication equipment Mining assets IT equipment Energy generating assets Constructions in progress Machinery, plant and equipment Buildings, plant and equipment ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Opening Balance Initial recognition of IFRS 16 Balance recognized in IFRS 16 Depreciation expenses Total changes Closing balance - - - - - - - 29,289 29,289 (3,547) (3,547) 25,742 - - - - - - - 3,893 3,893 (537) (537) 3,356 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 11,933 11,933 - 45,115 45,115 (3,867) (7,951) (3,867) (7,951) 8,066 37,164 The Company’s lease activities included the following aspects: (a) The nature of the Company’s lease activities is related to contracts focused primarily on business operations, mainly rights-of-use to equipment and real estate, (b) The Company does not estimate any significant future cash outflows that would potentially expose the Company, and these are likewise not reflected in the measurement of lease liabilities, related to concepts such as: (i) Variable lease payments, (ii) Expansion options and termination options, (iii) Guaranteed residual value and (iv) Leases not yet undertaken but committed by the Company. (c) These are not subject to restrictions or agreements imposed by contracts. There were no sales transactions with leases later in the period. 224 10) FINANCIAL REPORTS 15.2 Lease liabilities Lease liabilities Current Non-Current Current Non-Current As of December 31, 2020 As of December 31, 2019 Lease liabilities Total ThUS$ ThUS$ ThUS$ ThUS$ 5,528 5,528 25,546 25,546 7,694 7,694 30,203 30,203 i) Current and non-current lease liabilities Country TAX ID No. Creditor Supplier Contract indexation unit Type of amortization Maturity date Effective rate Country 83.776.000-3 Empresa Constructora Contex Ltda Chile 76.146.110-9 Transportes, Construcción y Servicios Cribach Ltda Chile Tax ID No. Debtor Company 79.626.800-K SQM Salar S.A. 79.626.800-K SQM Salar S.A. 79.626.800-K SQM Salar S.A. 79.626.800-K SQM Salar S.A. 79.947.100-0 SQM Industrial S.A. 79.947.100-0 SQM Industrial S.A. 79.768.170-9 Soquimich Comercial S.A. 79.768.170-9 Soquimich Comercial S.A. 79.768.170-9 Soquimich Comercial S.A. 79.768.170-9 Soquimich Comercial S.A. 79.768.170-9 Soquimich Comercial S.A. SQM North America Corp. SQM North America Corp. Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile USA USA Foreign Foreign Foreign Foreign Foreign Foreign Foreign SQM Comercial de México S.A. de C.V. Mexico SQM Comercial de México S.A. de C.V. Mexico SQM Comercial de México S.A. de C.V. Mexico SQM Europe N.V. SQM Australia PTY Belgium Australia 76.065.017-K SKM Industrial Ltda. 96.862.140-8 Ameco Chile S.A. 96.856.400-5 El Trovador S.A. 76.976.580-8 Sociedad Comercial Grandleasing Chile Ltda 76.729.932-K SAAM Logistics S.A. 91.577.000-2 Muelles de Penco S.A. 91.577.000-2 Muelles de Penco S.A. 76.722.280-7 Inmobiliaria Chincui SPA 96.565.580-8 Compañía de Leasing Tattersall S.A. Foreign Foreign Foreign Foreign Foreign Foreign Foreign Paces West LL. Hawkins Nunmber One, LLC Onni Ensenada S.A. de C.V. Madol Inmobiliaria S.A. de C.V. Madol Inmobiliaria S.A. de C.V. Straatsburgdok N.V. The trust Company (Australia) Pty Ltd 225 UF Peso Peso Peso UF UF UF UF UF UF UF Dollar Dollar Chile Chile Chile Chile Chile Chile Chile Chile Chile USA USA Mexico Mexico Mexico Belgium Australia Dollar Mexican Peso Mexican Peso Euro Australian dollar Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly 03-31-2021 09-01-2020 06-01-2022 04-24-2021 02-08-2030 08-26-2024 08-01-2022 07-06-2023 07-06-2023 05-01-2028 05-24-2021 12-31-2027 08-31-2024 12-03-2026 10-31-2023 10-31-2023 03-31-2027 01-31-2021 0% 8.93% 8.93% 4.07% 3.10% 2.72% 0.81% 1.30% 1.30% 3.38% 6.18% 3.36% 3.33% 3.45% 7.84% 7.84% 1.30% 3.60% (a) As of December 31, 2020 and December 31, 2019, current lease liabilities are analyzed as follows: 10) FINANCIAL REPORTS Creditor Supplier Nominal amounts as of December 31,2020 Amounts at amortized cost as of December 31, 2020 Up to 90 days 90 days to 1 year ThUS$ ThUS$ Total ThUS$ Up to 90 days 90 days to 1 year ThUS$ ThUS$ Total ThUS$ Debtor Company SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Industrial S.A. SQM Industrial S.A. Empresa Constructora Contex Ltda Transportes, Construcción y Servicios Cribach Ltda SKM Industrial Ltda. Ameco Chile S.A. El Trovador S.A. Sociedad Comercial Grandleasing Chile Ltda Soquimich Comercial S.A. SAAM Logistics S.A. Soquimich Comercial S.A. Muelles de Penco S.A. Soquimich Comercial S.A. Muelles de Penco S.A. Soquimich Comercial S.A. Inmobiliaria Chincui SPA Soquimich Comercial S.A. Compañía de Leasing Tattersall S.A. SQM North America Corp. Paces West LL. SQM North America Corp. SQM Comercial de México S.A. de C.V. SQM Comercial de México S.A. de C.V. SQM Comercial de México S.A. de C.V. SQM Europe N.V. SQM Australia PTY Total Hawkins Nunmber One, LLC Onni Ensenada S.A. de C.V. Madol Inmobiliaria S.A. de C.V. Madol Inmobiliaria S.A. de C.V. Straatsburgdok N.V. The trust Company (Australia) Pty Ltd - - 607 - 1,399 540 - 124 133 471 18 163 96 296 59 21 302 42 4,271 536 - 809 135 1,865 720 - 165 177 628 73 216 127 395 79 28 393 56 6,402 536 - 181 134 353 164 - 54 57 123 54 41 28 81 16 6 83 14 1,925 - - 566 - 1,076 498 - 107 115 376 18 128 85 246 49 18 279 42 3,603 536 - 747 134 1,429 662 - 161 172 499 72 169 113 327 65 24 362 56 5,528 536 - 202 135 466 180 - 41 44 157 55 53 31 99 20 7 91 14 2,131 226 Debtor Company Creditor Supplier Nominal amounts as of December 31,2019 Amounts at amortized cost as of December 31, 2019 Up to 90 days 90 days to 1 year ThUS$ ThUS$ Total ThUS$ Up to 90 days 90 days to 1 year ThUS$ ThUS$ Total ThUS$ 10) FINANCIAL REPORTS SQM Salar S.A. SQM Salar S.A. Empresa Constructora Contex Ltda Transportes, Construcción y Servicios Cribach Ltda SKM Industrial Ltda. SQM Salar S.A. Ameco Chile S.A. SQM Salar S.A. El Trovador S.A. SQM Industrial S.A. Sociedad Comercial Grandleasing Chile Ltda SQM Industrial S.A. SAAM Logistics S.A. Soquimich Comercial S.A. Muelles de Penco S.A. Soquimich Comercial S.A. Muelles de Penco S.A. Soquimich Comercial S.A. Inmobiliaria Chincui SPA Soquimich Comercial S.A. Compañía de Leasing Tattersall S.A. Soquimich Comercial S.A. Paces West LL. SQM North America Corp. SQM North America Corp. Hawkins Nunmber One, LLC SQM Comercial de México S.A. de C.V. Onni Ensenada S.A. de C.V. SQM Comercial de México S.A. de C.V. Madol Inmobiliaria S.A. de C.V. SQM Comercial de México S.A. de C.V. Madol Inmobiliaria S.A. de C.V. SQM Europe N.V. SQM Australia PTY Total Straatsburgdok N.V. The trust Company (Australia) Pty Ltd 554 74 202 135 466 180 106 45 48 157 55 49 31 99 20 7 91 16 2,335 1,662 124 607 404 1,399 540 142 60 64 471 164 156 93 296 59 21 273 32 6,567 2,216 198 809 539 1,865 720 248 105 112 628 219 205 124 395 79 28 364 48 8,902 506 71 166 129 343 159 103 44 47 119 51 34 26 78 15 5 82 16 1,994 1,578 121 519 394 1,044 485 140 59 64 363 157 116 81 238 46 16 247 32 5,700 2,084 192 685 523 1,387 644 243 103 111 482 208 150 107 316 61 21 329 48 7,694 227 As of December 31, 2020 and December 31, 2019, the Non-current lease liabilities are analyzed as follows: 10) FINANCIAL REPORTS Creditor Supplier Nominal amounts as of December 31,2020 Amounts at amortized cost as of December 31, 2020 1-2 Years 2-3 Years 3-4 Years Total 1-2 Years 2-3 Years 3-4 Years Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Debtor Company SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Industrial S.A. SQM Industrial S.A. Empresa Constructora Contex Ltda Transportes, Construcción y Servicios Cribach Ltda SKM Industrial Ltda. Ameco Chile S.A. El Trovador S.A. Sociedad Comercial Grandleasing Chile Ltda Soquimich Comercial S.A. SAAM Logistics S.A. Soquimich Comercial S.A. Muelles de Penco S.A. Soquimich Comercial S.A. Muelles de Penco S.A. Soquimich Comercial S.A. Inmobiliaria Chincui SPA Soquimich Comercial S.A. Compañía de Leasing Tattersall S.A. SQM North America Corp. Paces West LL. SQM North America Corp. Hawkins Nunmber One, LLC SQM Comercial de México S.A. de C.V. SQM Comercial de México S.A. de C.V. SQM Comercial de México S.A. de C.V. Onni Ensenada S.A. de C.V. Madol Inmobiliaria S.A. de C.V. Madol Inmobiliaria S.A. de C.V. SQM Europe N.V. SQM Australia PTY Total Straatsburgdok N.V. The trust Company (Australia) Pty Ltd - - 337 - 3,730 1,441 - 262 281 - - - - 5,594 420 - - - 1,255 1,883 - 452 263 789 144 52 816 11 9,833 - 730 90 1,151 - - 1,339 - 11,207 - - - - 5,905 - - - - 889 - 258 - - - - 113 - 7,165 - - 337 - 15,229 1,861 - 262 281 4,027 - 1,440 353 1,940 144 52 2,268 11 28,205 - - 330 - 2,993 1,379 - 163 175 1,047 - 377 249 689 133 48 768 11 8,362 - - - - 4,847 417 - 96 103 1,707 - 668 89 1,094 - - 1,308 - 10,329 - - - - 5,622 - - - - 867 - 253 - - - - 113 - 6,855 - - 330 - 13,462 1,796 - 259 278 3,621 - 1,298 338 1,783 133 48 2,189 11 25,546 228 Creditor Supplier Nominal amounts as of December 31,2019 Amounts at amortized cost as of December 31, 2019 1-2 Years 2-3 Years 3-4 Years Total 1-2 Years 2-3 Years 3-4 Years Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 10) FINANCIAL REPORTS 554 - 1,147 135 16,697 2,582 - - - 4,602 73 1,656 481 2,335 222 81 2,660 55 33,280 547 - 1,077 134 2,903 1,342 - - - - - - - 4,701 1,115 - - - - - - - 7,287 - - - - 1,013 1,651 1,455 72 351 234 665 135 49 744 55 9,321 - 627 217 1,088 63 23 1,248 - 10,733 - 492 - 356 - - 559 - 10,149 547 - 1,077 134 14,891 2,457 - - - 4,119 72 1,470 451 2,109 198 72 2,551 55 30,203 Debtor Company SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Industrial S.A. SQM Industrial S.A. Empresa Constructora Contex Ltda Transportes, Construcción y Servicios Cribach Ltda SKM Industrial Ltda. Ameco Chile S.A. El Trovador S.A. Sociedad Comercial Grandleasing Chile Ltda 554 - 1,147 135 3,730 1,441 - - - - - - - 5,594 1,141 - - - - - - - 7,373 - - - - Soquimich Comercial S.A. SAAM Logistics S.A. Soquimich Comercial S.A. Muelles de Penco S.A. Soquimich Comercial S.A. Muelles de Penco S.A. Soquimich Comercial S.A. Inmobiliaria Chincui SPA 1,255 1,883 1,464 Soquimich Comercial S.A. Compañía de Leasing Tattersall S.A. SQM North America Corp. Paces West LL. SQM North America Corp. Hawkins Nunmber One, LLC SQM Comercial de México S.A. de C.V. SQM Comercial de México S.A. de C.V. SQM Comercial de México S.A. de C.V. Onni Ensenada S.A. de C.V. Madol Inmobiliaria S.A. de C.V. Madol Inmobiliaria S.A. de C.V. SQM Europe N.V. SQM Australia PTY Total Straatsburgdok N.V. The trust Company (Australia) Pty Ltd 73 439 257 789 157 57 801 55 10,890 - 709 224 1,184 65 24 1,295 - 12,119 - 508 - 362 - - 564 - 10,271 229 10) FINANCIAL REPORTS Other lease disclosures Total lease expenses related to lease payments were ThUS$ 61,705 and ThUS$ 56,051 for the periods ended December 31, 2020 and 2019. See Note 25.8. Expenses related to variable payments not included in lease liabilities were MUS$ 1,133 and MUS$ 1,096 for the periods ending December 31, 2020 and 2019. Income from subleases on right-of-use assets were ThUS$ 176 and ThUS$ 261 as of December 31, 2020 and 2019, respectively. Payments for contractual operating leases are disclosed in Note 5.2 Liquidity Risk. 230 10) FINANCIAL REPORTS Note 16 Intangible assets and goodwill 16.1 Balances As of December 31, 2020 Intangible assets and goodwill Useful life IT programs Mining rights Water rights and rights of way. Customer-related intangible assets Other intangible assets Intangible assets other than goodwill Goodwill Total Intangible Asset Finite Finite Indefinite Finite Finite Indefinite As of December 31, 2019 Intangible assets and goodwill Useful life IT programs Mining rights Water rights and rights of way. Customer-related intangible assets Other intangible assets. Intangible assets other than goodwill Goodwill Total Intangible Assets Finite Finite Indefinite Finite Finite Indefinite Net Value ThUS$ 4,826 150,046 23,343 - 192 178,407 41,966 220,373 Net value ThUS$ 6,011 157,570 23,342 1,273 162 188,358 34,726 223,084 231 10) FINANCIAL REPORTS a) Movements in identifiable intangible assets as of December 31, 2020: Gross Value Movements in identifiable intangible assets IT programs Mining rights, Finite Water rights, and rights of way, Indefinite Customer-related intangible assets Other intangible assets Goodwill Identifiable intangible assets Opening Balance Additions Other increases / decreases for foreign currency exchange rates Decreases through sale Other increases (decreases) Total increases (decreases) Closing balance ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 34,471 508 5 - 297 810 35,281 158,337 2,295 - (136) - 2,159 160,496 25,423 1,778 - 1 - - 1 - - - - - 2,188 72 - - 14 86 25,424 1,778 2,274 38,120 7,380 - - - 7,380 45,500 260,317 10,255 6 (136) 311 10,436 270,753 Accumulated amortization and impairment Movements in identifiable intangible assets IT programs Mining rights, Finite Water rights, and rights of way, Indefinite Customer-related intangible assets Other intangible assets Goodwill Identifiable intangible assets Opening Balance Other increases / decreases for foreign currency exchange rates Other increases (decreases) Impairment losses recognized in profit for the year Amortization Total increases (decreases) Closing balance ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ (28,460) - - (14) (1,981) (1,995) (30,455) (767) - (2) (654) (9,027) (9,683) (10,450) (2,081) (505) (2,026) (3,394) (37,233) - - - - - (2,081) - - (990) (283) (1,273) (1,778) - - - (56) (56) (2,082) - - (140) - (140) (3,534) - (2) (1,798) (11,347) (13,147) (50,380) 232 10) FINANCIAL REPORTS Net value Movements in Identifiable intangible assets IT programs Mining rights, Finite Water rights, and rights of way, Indefinite Customer-related intangible assets Other intangible assets Goodwill Identifiable intangible assets ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Opening Balance Additions Amortization Impairment losses recognized in profit for the year Other increases / decreases for foreign currency exchange rates Decreases through sale Other increases (decreases) Total increases (decreases) Closing balance 6,011 508 (1,981) (14) 5 - 297 (1,185) 4,826 157,570 2,295 (9,027) (654) - (136) (2) (7,524) 150,046 23,342 - - - 1 - - 1 23,343 1,273 - (283) (990) - - - (1,273) - 162 72 (56) - - - 14 30 192 34,726 7,380 - (140) - - - 7,240 41,966 223,084 10,255 (11,347) (1,798) 6 (136) 309 (2,711) 220,373 Gross Value Movements in identifiable intangible assets IT programs Mining rights, Finite Water rights, and rights of way, Indefinite Customer-related intangible assets Other intangible assets Goodwill Identifiable intangible assets Opening Balance Additions Other increases / decreases of foreign currency Decreases through sale Other increases (decreases) Total increases (decreases) Closing balance ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 29,137 2,606 (7) - 2,735 5,334 34,471 159,424 227 - (1,314) - (1,087) 158,337 25,425 - (2) - - (2) 25,423 1,778 - - - - - 1,778 2,165 23 - - - 23 2,188 38,120 - - - - - 38,120 256,049 2,856 (9) (1,314) 2,735 4,268 260,317 233 Movements in identifiable intangible assets as of December 31, 2019: 10) FINANCIAL REPORTS Accumulated amortization and impairment Movements in identifiable intangible assets IT programs Mining rights, Finite Water rights, and rights of way, Indefinite Customer-related intangible assets Other intangible assets Goodwill Identifiable intangible assets Opening Balance Other increases / decreases of foreign currency Other increases (decreases) Impairment losses recognized in profit for the year Amortization Total increases (decreases) Closing balance ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ (24,569) 3 (256) - (3,638) (3,891) (28,460) (168) - - (481) (118) (599) (767) (1,649) - - (432) - (432) (2,081) (205) - - - (300) (300) (505) (1,988) - - - (38) (38) (2,026) (3,254) - - (140) - (140) (3,394) (31,833) 3 (256) (1,053) (4,094) (5,400) (37,233) Net value Movements in Identifiable intangible assets IT programs Mining rights, Finite Water rights, and rights of way, Indefinite Customer-related intangible assets Other intangible assets Goodwill Identifiable intangible assets Opening Balance Additions Amortization Impairment losses recognized in profit or loss for the year Other increases / decreases of foreign currency Decreases through sale Other increases (decreases) Total increases (decreases) Closing balance ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 4,568 2,606 (3,638) - (4) - 2,479 1,443 6,011 159,256 227 (118) (481) - (1,314) - (1,686) 157,570 23,776 - - (432) (2) - (434) 23,342 1,573 - (300) - - - - (300) 1,273 177 23 (38) - - - - (15) 162 34,866 - - (140) - - - (140) 34,726 224,216 2,856 (4,094) (1,053) (6) (1,314) 2,479 (1,132) 223,084 234 10) FINANCIAL REPORTS (b) Movements in identifiable goodwill as of December 31, 2020: Gross Value Movements in identifiable goodwill Goodwill at the start of the period January 01, 2020 Additional recognition Impairment losses recognized in profit or loss for the year (-) Total increase (decrease) Goodwill at end of period SQM Industrial S.A. SQM S.A. SQM Iberian S.A. SQM Investment Corporation Soquimich Comercial S.A. Soquimich European Holding B.V. SQM Holland B.V. SQM Potasio S.A. Total increases (decreases) Closing balance ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 3,214 22,255 148 86 320 11,373 - 724 38,120 38,120 - - - - - 10 7,370 - 7,380 7,380 - - - - - - - - - - - - - - - 10 7,370 - 7,380 7,380 3,214 22,255 148 86 320 11,383 7,370 724 45,500 45,500 Accumulated impairment Movements in identifiable goodwill Goodwill at the start of the period January 01, 2020 Additional recognition Impairment losses recognized in profit or loss for the year (-) Total increase (decrease) Goodwill at end of period SQM Industrial S.A. SQM S.A. SQM Iberian S.A. SQM Investment Corporation Soquimich Comercial S.A. Soquimich European Holding B.V. SQM Holland B.V. SQM Potasio S.A. Total increases (decreases) Closing balance ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ (3,214) - - - (180) - - - (3,394) (3,394) - - - - - - - - - - - - - - (140) - - - (140) (140) - - - - (140) - - - (140) (140) (3,214) - - - (320) - - - (3,534) (3,534) 235 10) FINANCIAL REPORTS Net Value Movements in identifiable goodwill Goodwill at the start of the period January 01, 2020 Additional recognition Impairment losses recognized in profit or loss for the year (-) Total increase (decrease) Goodwill at end of period SQM Industrial S.A. SQM S.A. SQM Iberian S.A. SQM Investment Corporation Soquimich Comercial S.A. Soquimich European Holding B.V. SQM Holland B.V. SQM Potasio S.A. Total increases (decreases) Closing balance ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ - 22,255 148 86 140 11,373 - 724 34,726 34,726 - - - - - 10 7,370 - 7,380 7,380 - - - - (140) - - - (140) (140) - - - - (140) 10 7,370 - 7,240 7,240 - 22,255 148 86 - 11,383 7,370 724 41,966 41,966 Movements in identifiable goodwill as of December 31, 2019 Gross Value Movements in identifiable goodwill Goodwill at the start of the period January 01, 2019 Additional recognition Impairment losses recognized in profit or loss for the year (-) Total increase (decrease) Goodwill at end of period SQM Industrial S.A. SQM S.A. SQM Iberian S.A. SQM Investment Corporation Soquimich Comercial S.A. Soquimich European Holding B.V. SQM Potasio S.A. Total increases (decreases) Closing balance ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 3,214 22,255 148 86 320 11,373 724 38,120 38,120 - - - - - - - - - - - - - - - - - - - - - - - - - - - 3,214 22,255 148 86 320 11,373 724 38,120 38,120 236 10) FINANCIAL REPORTS Accumulated impairment Movements in identifiable goodwill Goodwill at the start of the period January 01, 2019 Additional recognition Impairment losses recognized in profit or loss for the year (-) Total increase (decrease) Goodwill at end of period SQM Industrial S.A. SQM S.A. SQM Iberian S.A. SQM Investment Corporation Soquimich Comercial S.A. Soquimich European Holding B.V. SQM Potasio S.A. Total increases (decreases) Closing balance ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ (3,214) - - - (40) - - (3,254) (3,254) - - - - - - - - - - - - - (140) - - (140) (140) - - - - (140) - - (140) (140) (3,214) - - - (180) - - (3,394) (3,394) Net Value Movements in identifiable goodwill Goodwill at the start of the period January 01, 2019 Additional recognition Impairment losses recognized in profit or loss for the year (-) Total increase (decrease) Goodwill at end of period SQM Industrial S.A. SQM S.A. SQM Iberian S.A. SQM Investment Corporation Soquimich Comercial S.A. Soquimich European Holding B.V. SQM Potasio S.A. Total increases (decreases) Closing balance ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ - 22,255 148 86 280 11,373 724 34,866 34,866 - - - - - - - - - - - - - (140) - - (140) (140) - - - - (140) - - (140) (140) - 22,255 148 86 140 11,373 724 34,726 34,726 237 10) FINANCIAL REPORTS Note 17 Property, plant and equipment As of December 31, 2020, and December 31, 2019, the detail of property, plant and equipment is as follows: 17.1 Types of property, plant and equipment Description of types of property, plant and equipment Property, plant and equipment, net Land Buildings Other property, plant and equipment Transport equipment Supplies and accessories Office equipment Network and communication equipment Mining assets IT equipment Energy generating assets Constructions in progress Machinery, plant and equipment Total Property, plant and equipment, gross Land Buildings Other property, plant and equipment Transport equipment Supplies and accessories Office equipment Network and communication equipment Mining assets IT equipment Energy generating assets Constructions in progress Machinery, plant and equipment Total Accumulated depreciation and value impairment of property, plant and equipment, total Accumulated depreciation and impairment of buildings Accumulated depreciation and impairment of other property, plant and equipment Accumulated depreciation and impairment of transport equipment Accumulated depreciation and impairment of supplies and accessories Accumulated depreciation and impairment of office equipment Accumulated depreciation and impairment of network and communication equipment Accumulated depreciation and impairment of mining assets Accumulated depreciation and impairment of IT equipment Accumulated depreciation and impairment of energy generating assets Accumulated depreciation and impairment of machinery, plant and equipment Total 238 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 23,579 239,666 35,418 2,880 4,183 459 1,272 47,052 4,083 4,878 486,345 887,504 23,620 227,173 32,645 2,686 4,579 420 663 23,174 4,359 5,998 375,316 869,273 1,737,319 1,569,906 23,579 705,089 234,238 13,030 26,101 11,607 8,951 194,562 29,629 38,540 486,345 3,304,061 5,075,732 (465,423) (198,820) (10,150) (21,918) (11,148) (7,679) (147,510) (25,546) (33,662) 23,620 666,027 257,247 12,143 25,531 11,441 8,009 161,619 28,693 38,495 375,316 3,142,461 4,750,602 (438,854) (224,602) (9,457) (20,952) (11,021) (7,346) (138,445) (24,334) (32,497) (2,416,557) (3,338,413) (2,273,188) (3,180,696) Description of classes of property, plant and equipment Property, plant and equipment, net Pumps Conveyor Belt Crystallizer Plant Equipment Tanks Filter Electrical equipment/facilities Other Property, Plant & Equipment Site Closure Piping Well Pond Spare Parts (1) Total 10) FINANCIAL REPORTS As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 28,184 20,117 22,145 173,335 15,367 35,553 93,937 49,930 36,828 102,578 226,347 41,906 41,277 887.504 32,525 21,911 24,102 170,263 14,159 27,080 92,090 53,409 12,056 96,402 238,670 41,319 45,287 869,273 (1) Spare parts is presented net of provision. The reconciliation of the spare parts provision as of December 31, 2020 and 2019 is as follows: Reconciliation Opening balance Increase in provisions Closing balance As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 39,265 3,616 42,881 32,414 6,851 39,265 239 17.2 Conciliation of changes in property, plant and equipment by type: Reconciliation of changes in property, plant and equipment by class as of December 31, 2020 and December 31, 2019: Reconciliation of changes in property, plant and equipment by class as of December 31, 2020, gross amount Land Buildings Other property, plant and equipment Transport equipment Supplies and accessories Equipment office Network and communication equipment Mining assets IT equipment Energy generating assets Assets under construction Machinery, plant and equipment Property, plant and equipment 10) FINANCIAL REPORTS Opening balance Additions Disposals Increase (decrease) in foreign currency translation difference Reclassifications Other increases (decreases) Decreases for classification as held for sale Total changes Closing balance ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 23,620 666,027 257,247 12,143 25,531 11,441 8,009 161,619 28,693 38,495 375,316 3,142,461 4,750,602 - - 22 - (27) (36) (41) 838 278 - (33,048) 49 32,179 5,996 - 2 9,940 (181) - - - 1 886 - - 39,062 (23,009) 887 82 (1) 5 488 (4) - 570 33 - - 133 - - 166 386 - - 558 (2) - - - - 32,943 - - 942 32,943 429 - 12 548 (53) - 936 - - - 319,192 987 322,225 - - (149) (33,198) 53 144 - 45 (203,412) 125,692 - - (4,751) 35,017 35,995 - - (36) 45 111,029 161,600 325,130 23,579 705,089 234,238 13,030 26,101 11,607 8,951 194,562 29,629 38,540 486,345 3,304,061 5,075,732 Reconciliation of changes in property, plant and equipment by class as of December 31, 2020, accumulated depreciation Land Buildings Other property, plant and equipment Transport equipment Supplies and accessories Equipment office Network and communication equipment Mining assets IT equipment Energy generating assets Assets under construction Machinery, plant and equipment Property, plant and equipment ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Opening balance Changes Disposals Depreciation expense Impairment Increase (decrease) in foreign currency translation difference Reclassifications Other increases (decreases) (1) Decreases for classification as held for sale Total changes Closing balance - - - - - - - - - - (438,854) (224,602) (9,457) (20,952) (11,021) (7,346) (138,445) (24,334) (32,497) - (2,273,188) (3,180,696) - (26,779) (23) (20) - 253 - 33,048 (7,284) (21) (2) - 41 - - 1 - - - - - (692) (966) (126) (335) (9,065) (1,242) (1,165) - (1) - - - - (4) - 3 - - (1) - - - - - - 2 - - - - - - (12) (10) - 52 - - - - - - (26,569) 25,782 (693) (966) (127) (333) (9,065) (1,212) (1,165) (465,423) (198,820) (10,150) (21,918) (11,148) (7,679) (147,510) (25,546) (33,662) - - - - - - - - - 148 33,197 (134,230) (181,884) (9,507) (9,563) (28) - 248 - (66) - 599 - (143,369) (157,717) (2,416,557) (3,338,413) 240 Reconciliation of changes in property, plant and equipment by class as of December 31, 2020, net amount Land Buildings Other property, plant and equipment Transport equipment Supplies and accessories Equipment office Network and communication equipment Mining assets IT equipment Energy generating assets Assets under construction Machinery, plant and equipment Property, plant and equipment ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 10) FINANCIAL REPORTS Opening balance 23,620 227,173 32,645 2,686 4,579 5,998 375,316 869,273 1,569,906 838 - 278 - - - 82 - 420 33 - 663 386 - 23,174 - - 4,359 429 - (26,779) (7,284) (692) (966) (126) (335) (9,065) (1,242) (1,165) Additions Disposals Depreciation expense Deterioration Increase (decrease) in foreign currency translation difference Reclassifications Other increases (decreases) (1) Decreases for classification as held for sale (2) Total changes Closing balance - - - - 22 - (27) (36) (41) (23) 29 32,179 6,249 - (21) - 9,940 (140) - 12,493 2,773 - - 886 - - - 1 488 (1) - 194 2,880 (396) 4,183 - (1) 133 - - 39 459 23,579 239,666 35,418 - - - - 558 32,943 - - - - (12) 2 548 (1) - - - - - 319,192 - - - - 987 (1) 322,225 (1) (134,230) (181,884) (9,507) (9,563) 25 78 - 45 (203,412) 125,692 - - (4,751) 35,265 36,594 - - (36) 609 23,878 (276) (1,120) 111,029 18,231 167,413 1,272 47,052 4,083 4,878 486,345 887,504 1,737,319 (1) The net balance of “Other Increases (Decreases)” corresponds to all those items that are reclassified to or from “Property, Plant and Equipment”, They can have the following origin: (i) work in progress which is expensed to profit or loss, forming part of operating costs or other expenses per function, as appropriate; (ii) the variation representing the purchase and use of materials and spare parts; (iii) projects corresponding mainly to exploration expenditures and ground studies that are reclassified to the item other non-current financial assets; (iv) software that is reclassified to “Intangibles (v) Provisions related to the investment plan and assets related to closing the site. (2) The Company classifies as non-current held for sale property, plant and equipment (disposal group) that, at the closing date of the financial statements, is subject to a commitment for sale or where the sales process has been initiated and where the sale is expected to occur within twelve months of that date, is classified by the Company as non-current assets held for sale. These assets or disposal groups are valued at the lower of carrying amount or the estimated sales value less the costs to sell and stop being amortized from the moment they are classified as non-current assets held for sale. 241 Closing balance 23,620 666,027 257,247 12,143 11,441 8,009 161,619 Reconciliation of changes in property, plant and equipment by class as of December 31, 2019, gross amount Opening balance Additions Disposals Increase (decrease) in foreign currency translation difference Reclassifications Other increases (decreases) Decreases for classification as held for sale Total changes Reconciliation of changes in property, plant and equipment by class as of December 31, 2019, accumulated depreciation Opening balance Changes Disposals Depreciation expense Impairment Increase (decrease) in foreign currency translation difference Reclassifications Other increases (decreases) (1) Decreases for classification as held for sale Total changes Closing balance 10) FINANCIAL REPORTS Land Buildings Other property, plant and equipment Transport equipment Supplies and accessories Equipment office Network and communication equipment Mining assets IT equipment Energy generating assets Assets under construction Machinery, plant and equipment Property, plant and equipment ThUS$ ThUS$ ThUS$ ThUS$ ThUS$$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 24,695 - - 648,719 290 - 245,731 332 (858) 11,668 - - 24,456 37 - 11,377 43 - (35) 132 - (72) (4) 18,526 - 12,456 (410) (1,172) (1,436) - (1,075) 17,308 11,516 (2) 477 - - 475 (9) 745 302 - 1,075 25,531 (3) - 24 - 64 7,505 159 - - 89 256 - 132,309 - - - 16,901 12,409 - 504 29,310 29,955 492 (3) (6) 1,289 (3,034) - (1,262) 28,693 36,930 - - - 1,565 - - 1,565 38,495 207,830 314,236 - 3,068,862 6,077 (17) 4,450,037 321,666 (878) - (72) (203) (140,104) (6,646) 88,088 (20,477) 164 (17,576) - - (2,608) 167,486 73,599 300,565 375,316 3,142,461 4,750,602 Land Buildings Other property, plant and equipment Transport equipment Supplies and accessories Equipment office Network and communication equipment Mining assets IT equipment Energy generating assets Assets under construction Machinery, plant and equipment Property, plant and equipment ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ - (409,911) (217,556) (8,776) (19,734) (10,864) (6,813) (120,808) (24,975) (30,813) - (2,144,964) (2,995,214) - - - - - - - - - - 858 (29,000) (8,013) - (683) - (1,144) - (161) - - 1 - (426) (7,033) (1,158) (1,676) (49) 28 7 (209) 280 - 3 (6) 112 - - 1 1 - - - 7 6 (87) - - 1 - 3 - - - 1 - - - (108) (10,604) - - - 5 (5) 1,798 - 641 - - - (8) - (1,684) (28,943) (7,046) (438,854) (224,602) (681) (9,457) (1,218) (157) (533) (17,637) (20,952) (11,021) (7,346) (138,445) (24,334) (32,497) 242 - - - - - - - - - - 859 (138,999) (188,293) - 34 (207) 10,948 - (49) 79 (203) 1,845 280 (128,224) (185,482) (2,273,188) (3,180,696) Reconciliation of changes in property, plant and equipment by class as of December 31, 2019, net amount Land Buildings Other property, plant and equipment Transport equipment Supplies and accessories Equipment office Network and communication equipment Mining assets IT equipment Energy generating assets Assets under construction Machinery, plant and equipment Property, plant and equipment ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 10) FINANCIAL REPORTS Opening balance 24,695 238,808 28,175 2,892 4,722 Additions Disposals Depreciation expense Impairment Increase (decrease) in foreign currency translation difference Reclassifications Other increases (decreases) (1) Decreases for classification as held for sale (2) Total changes Closing balance - - - - (35) 132 - 290 - 332 - - - 37 - 513 43 - 692 159 - 11,501 - - 4,980 492 (2) 6,117 - - (29,000) (8,013) (683) (1,144) (161) (426) (7,033) (1,158) (1,676) (49) (44) 18,533 (209) - (1) 12,450 (298) - (1) 478 - - - (2) 751 215 - (1,172) (1,156) - (1,075) 23,620 (11,635) 227,173 4,470 32,645 (206) 2,686 (143) 4,579 - (2) - 27 - (93) 420 - - 90 148 - (29) 663 - - 16,901 1,805 - 11,673 23,174 - (1) 1,284 (1,236) - (621) 4,359 - - (8) - (119) 5,998 207,830 314,236 - - - - (6,646) 923,898 1,454,823 6,077 (17) 321,666 (19) (138,999) (188,293) - (38) 87,881 (9,529) (49) (124) (39) (15,731) - - (2,328) 167,486 (54,625) 115,083 375,316 869,273 1,569,906 1,565 (140,104) (1) The net balance of “Other increases (Decreases)” corresponds to all those items that are reclassified to or from property, plant and equipment, They can have the following origin: (i) work in progress which is expensed to profit or loss, forming part of operating costs or other expenses per function, as appropriate;, (ii) the variation representing the purchase and use of materials and spare parts; (iii) projects corresponding mainly to exploration expenditures and ground studies that are reclassified to the item other non-current financial assets; (iv) software that is reclassified to “Intangibles”, (v) Provisions related to the investment plan and assets associated to closing the site. (2) The Company classifies as non-current held for sale property, plant and equipment (disposal group) that, at the closing date of the financial statements, is subject to a commitment for sale or where the sales process has been initiated and where the sale is expected to occur within twelve months of that date, is classified by the Company as non-current assets held for sale. These assets or disposal groups are valued at the lower of carrying amount or the estimated sales value less the costs to sell and stop being amortized from the moment they are classified as non-current assets held for sale. 243 10) FINANCIAL REPORTS 17.3 Detail of property, plant and equipment pledged as guarantee There are no restrictions in title or guarantees for compliance with obligations that affect property, plant and equipment. 17.4 Impairment of assets As indicated in Note 3.16, the recoverable amounts of property, plant and equipment are evaluated when there is evidence that the asset may be impaired. The impairment effects for the periods ended December 31, 2020 and 2019 is ThUS$ 9,563 and ThUS$ 49 respectively. 17.5 Cost of capitalized interest, property, plant and equipment The cost of interest is recognized by applying an average or average weighted interest rate for all financing costs incurred by the Company to the final monthly balances for works underway and complies with the requirements of IAS 23. Financing costs are not activated for periods that exceed the normal term for acquisition, construction or installation of the property; such is the case for delays, interruptions or temporary suspension of the project due to technical, financial or other problems that make it impossible to leave the property in usable conditions. The rates and costs for capitalized interest of property, plant and equipment are detailed as follows: Costs of capitalized interest Capitalized interest rate Amount of costs for interest capitalized in ThUS$ As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 4% 8,462 4% 7,841 244 10) FINANCIAL REPORTS Note 18 Other current and non-current non-financial assets As of December 31, 2020, and December 31, 2019, the detail of “Other Current and Non-current Assets” is as follows: Other non-financial assets, current Domestic Value Added Tax Foreign Value Added Tax Prepaid mining licenses Prepaid insurance Other prepayments Refund of Value Added Tax to exporters Other taxes Other assets Total Other non-financial assets, non-current Exploration and evaluation expenses (1) Guarantee deposits Other assets Total As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 18,107 7,785 1,025 10,307 946 14,316 4,499 414 57,399 17,807 8,566 1,244 7,135 1,423 10,560 3,213 604 50,552 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 17,883 731 3,428 22,042 18,654 551 524 19,729 (1) Reconciliation of changes in assets for exploration and mineral resource evaluation, by type. Movements in assets for the exploration and evaluation of mineral resources as of December 31, 2020, and December 31, 2019: Conciliation Opening balance Change in assets for exploration and evaluation of mineral resources Additions Short term reclassifications Increase (decrease) due to transfers and other charges Total changes Total As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 18,654 26,189 - (526) (245) (771) 17,883 - (1,311) (6,224) (7,535) 18,654 As of the presentation date, no reevaluations of assets for exploration and assessment of mineral resources have been conducted. 245 10) FINANCIAL REPORTS Mineral resource exploration and evaluation expenditure Given the nature of operations of the SQM Group and the type of exploration it undertakes, disbursements for exploration can be found in 4 stages: Execution, economically feasible, not economically feasible and in exploitation: (a) determination of economic feasibility, are classified in accordance with Note 3.23. Execution: Disbursements for exploration and evaluation under implementation and therefore prior to For exploration purposes in Chile relating to caliche and brine exploration are ThUS$ 14,265 and ThUS$ 12,841 as of December 31, 2020 and December 31, 2019, respectively both are in the Property, Plant and Equipment caption as construction in progress. For Australia (Mt Holland), total disbursements corresponding to construction in progress (which includes exploration disbursements) amount to ThUS$ 50,127 as of December 31, 2020, and ThUS$ 30,475 as of December 31, 2019. (b) Economically feasible: Disbursements corresponding to caliche exploration, wherein the study concluded that its economic feasibility is viable, are classified under “Non-Current Assets in Other Non-current Non-Financial Assets”, The balance as of December 31, 2020, is ThUS$ 6,576 and as of December 31, 2019, it is ThUS$ 6,576. At December 31, 2020, ThUS$ 4,296 corresponding to advanced metallic exploration are also presented under the heading "Other Non-Current Non-Financial Assets", and as of December 31, 2019, it is ThUS$ 3,433. For the exploration of the Salar de Atacama, the associated assets correspond to wells that can be used both in monitoring and exploitation of the Salar, Therefore, once the studies are concluded, these are classified as “Non- current Assets” in “Properties, Plants and Equipment”, assigning them a technical useful life of 10 years. (c) Not economically feasible: Exploration and evaluation disbursements, once finalized and concluded to be not economically feasible, will be charged to profit and loss. As of December 31, 2020, there were no disbursements for this concept and for the year ended December 31, 2019, there was a total of ThUS$ 165 for this concept. (d) In Exploitation: Caliche exploration disbursements that are found in this area are amortized based on the material exploited, the portion that is exploited in the following 12 months is presented as “Current Assets” in the “Process Inventories”, the remaining portion is classified as “Other Non-current Non-Financial Assets”. As of December 31, 2020, the amount in “Process Inventories”, is ThUS$ 1,318 and the balance as of December 31, 2019 for this concept is ThUS$ 1,367, while in the item “Other Non-current Non-Financial Asset” as of December 31, 2020 is ThUS$ 7,011 and as of December 31, 2019 is ThUS$ 8,645. 246 Note 19 Employee benefits 19.1 Provisions for employee benefits Classes of benefits and expenses by employee Current Profit sharing and bonuses Performance bonds and operational targets Total Non-current Profit sharing and bonuses Severance indemnity payments Total 19.2 Policies on defined benefit plan 10) FINANCIAL REPORTS As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 7,770 1,326 9,096 - 32,199 32,199 - 16,387 16,387 8,026 27,814 35,840 This policy is applied to all benefits received for services provided by the Company's employees. This is divided as follows: a) Short-term benefits for active employees are represented by salaries, social welfare benefits, paid time off, sickness and other types of leave, profit sharing and incentives and non-monetary benefits; e.g., healthcare service, housing, subsidized or free goods or services. These will be paid in a term which does not exceed twelve months. The Company maintains incentive programs for its employees, which are calculated based on the net result at the close of each period by applying a factor obtained from an evaluation based on their personal performance, the Company’s performance and other short-term and long-term indicators. b) Staff severance indemnities are agreed and payable based on the final salary, calculated in accordance with each year of service to the Company, with certain maximum limits in respect of either the number of years or in monetary terms. In general, this benefit is payable when the employee or worker ceases to provide his/her services to the Company and there are a number of different circumstances through which a person can be eligible for it, as indicated in the respective agreements; e.g. retirement, dismissal, voluntary retirement, incapacity or disability, death, etc. See Note 19.3. c) Obligations after employee retirement, described in Note 19.4. d) Retention bonuses for a group of Company executives, described in Note 19.6. 247 10) FINANCIAL REPORTS 19.3 Other long-term benefits The actuarial assessment method has been used to calculate the Company’s obligations with respect to staff severance indemnities, which relate to defined benefit plans consisting of days of remuneration per year served at the time of retirement under conditions agreed in the respective agreements established between the Company and its employees. Under this benefit plan, the Company retains the obligation to pay staff severance indemnities related to retirement, without establishing a separate fund with specific assets, which is referred to as not funded. Benefit payment conditions The staff severance indemnity benefit relates to remuneration days for years worked for the Company without a limit being imposed in regard of amount of salary or years of service. It applies when employees cease to work for the Company because they are made redundant or in the event of their death. This benefit is applicable up to a maximum age of 65 for men and 60 for women, which are the usual retirement ages according to the Chilean pensions system as established in Decree Law 3,500 of 1980. (a) Methodology The determination of the defined benefit obligation is made under the requirements of IAS 19 “Employee benefits”. 19.4 Post-employment benefit obligations Our subsidiary SQM NA, together with its employees established a pension plan until 2002 called the “SQM North America Retirement Income Plan”. This obligation is calculated measuring the expected future forecast staff severance indemnity obligation using a net salary gradual rate of restatements for inflation, mortality and turnover assumptions, discounting the resulting amounts at present value using the interest rate defined by the authorities. Since 2003, SQM NA offers to its employees benefits related to pension plans based on the 401-K system, which do not generate obligations for the Company. Reconciliation Changes in the benefit obligation Benefit obligation at the beginning of the year Service cost Interest cost Actuarial loss Benefits paid Total As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 9,586 - 280 506 (508) 9,864 8,657 - 336 984 (391) 9,586 248 10) FINANCIAL REPORTS Reconciliation Changes in the plan assets Fair value of plan assets at the beginning of the year Actual return (loss) in plan assets Benefits paid Fair value of plan assets at the end of the year Financing status Items not yet recognized as net periodic pension cost components: Net actuarial loss at the beginning of the year Amortization during the year Net estimated gain or loss occurred during the year Adjustment to recognize the minimum pension obligation As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 8,754 4,642 (508) 12,888 3,025 (3,634) 326 3,500 192 8,404 741 (391) 8,754 (832) (3,022) 242 (854) (3,634) Service cost or benefits received during the year Service cost or benefits received during the year Interest cost in benefit obligation Actual return in plan assets Amortization of prior year losses Net gain during the year Net periodic pension expense As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ - 280 4,642 326 3,500 (31) - 336 741 242 (854) (33) 249 10) FINANCIAL REPORTS 19.5 Staff severance indemnities As of December 31, 2020, and 2019, severance indemnities calculated at the actuarial value are as follows: Staff severance indemnities Opening balance Current cost of Service Interest cost Actuarial gain/loss Exchange rate difference Benefits paid during the year Total (a) Actuarial assumptions As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ (27,814) (3,804) (1,486) (2,826) (1,513) 5,244 (32,199) (28,233) (2,880) (1,661) (2,514) 2,475 4,999 (27,814) The liability recorded for staff severance indemnity is valued at the actuarial value method, using the following actuarial assumptions: Actuarial assumptions Mortality rate Actual annual interest rate Voluntary retirement rate: Men Women Salary increase Retirement age: Men Women As of December 31, 2020 As of December 31, 2019 RV - 2014 3.65% RV - 2014 3.68% Annual/Years 6.49% 6.49% 3.00% 65 60 6.49% 6.49% 3.00% 65 60 Annual Annual Annual Years Years (b) Sensitivity analysis of assumptions As of December 31, 2020, and 2019, the Company has conducted a sensitivity analysis of the main assumptions of the actuarial calculation, determining the following: Sensitivity analysis as of December 31, 2020 Sensitivity analysis as of December 31, 2019 Discount rate Employee turnover rate Discount rate Employee turnover rate Sensitivity relates to an increase/decrease of 100 basis points. 250 Effect + 100 basis points Effect - 100 basis points ThUS$ ThUS$ (1,985) (261) 2,234 291 Effect + 100 basis points Effect - 100 basis points ThUS$ ThUS$ (1,796) (236) 2,021 263 10) FINANCIAL REPORTS 19.6 Executive compensation plan The Company currently has a compensation plan with the purpose of motivating the Company’s executives and encouraging them to remain with the Company, by granting payments based on the change in the price of SQM’s shares. There is a partial payment of the share benefit program in the event of termination of the contract for causes other than the resignation and application of Article 160 of the Labor Code. (a) Plan characteristics This compensation plan is related to the Company’s performance through the SQM Series B share price (Santiago Stock Exchange). (b) Plan participants A total of 29 Company executives are entitled to this compensation plan, as long as they remain a part of the Company until a given date. This includes a 2020 bonus equivalent to 177,905 shares, which is effective for those people still with the Company through the end of 2020, and a 2021 bonus for US$ 8.5 million, which will go into effect in equal parts for those who remain with the Company at the end of each of the four quarters in 2021. The payment dates, where relevant, will be during the quarter following the quarter when the benefit is made effective. (c) Compensation The compensation payable to each executive is calculated by multiplying: a) the average price of the series B shares on the Santiago Stock Exchange during the fourth quarter of 2020, in its US dollar equivalent (with a value of US$ 41.93 per share). b) By a number equal to the quantity of shares that have been individually assigned to each executive included in the plan. This compensation plan was approved by the Company’s Board of Directors and its application started on September 30, 2020. The plan that was in place on December 31, 2019 considered 427,652 shares. The effects on the income statement are equivalent to an expense of ThUS$ 875 and ThUS$ 117 in the income statement for the years ending December 31, 2020 and 2019 Executed shares during 2020 were 47,687. 251 10) FINANCIAL REPORTS Note 20 Provisions and other non-financial liabilities 20.1 Types of provisions Types of provisions Provision for legal complaints (1) Provision for dismantling, restoration and rehabilitation cost (2) Other provisions (3) Total As of December 31, 2020 As of December 31, 2019 Current ThUS$ Non-current ThUS$ Total ThUS$ Current ThUS$ Non-current ThUS$ Total ThUS$ 8,905 - 95,261 104,166 1,260 61,265 92 62,617 10,165 61,265 95,353 166,783 13,472 - 97,093 110,565 1,452 33,238 - 34,690 14,924 33,238 97,093 145,255 (1) These provisions correspond to legal processes that are pending resolution or that have not yet been disbursed, these provisions are mainly related to litigation involving the subsidiaries located in Chile, Brazil and the United States (see note 22.1). (2) The commitments related to Sernageomin have been incorporated through the issuance of the guarantee for the restoration of the place where the production sites are located. (3) See Note 20.2 252 20.2 Description of other provisions Current provisions, other short-term provisions Rent under Lease contract (1) Provision for additional tax related to foreign loans End of agreement bonus Directors’ per diem allowance Miscellaneous provisions Total 10) FINANCIAL REPORTS As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 85,167 740 8,159 698 497 95,261 90,320 543 3,641 1,802 787 97,093 (1) Payment Obligations for the lease contract with CORFO: These correspond to obligations assumed in the Lease Agreement. Our subsidiary SQM Salar holds exclusive rights to exploit the mineral resources in an area covering approximately 140,000 hectares of land in the Salar de Atacama in northern Chile, of which SQM Salar is only entitled to exploit the mineral resources in 81,920 hectares. These rights are owned by Corfo and leased to SQM Salar pursuant to the Lease Agreement. Corfo cannot unilaterally amend the Lease Agreement and the Project Agreement, and the rights to exploit the resources cannot be transferred. The Lease Agreement establishes that SQM Salar is responsible for making quarterly lease payments to Corfo according to specified percentages of the value of production of minerals extracted from the Salar de Atacama brines, maintaining Corfo’s rights over the Mining Exploitation Concessions and making annual payments to the Chilean government for such concession rights. The Lease Agreement was entered into in 1993 and expires on December 31, 2030. On January 17, 2018, SQM and CORFO reached an agreement to end an arbitration process directed by the arbitrator, Mr. Héctor Humeres Noguer, in case 1954-2014 of the Arbitration and Mediation Center of Santiago Chamber of Commerce and other cases related to it. The agreement signed in January 2018, includes important amendments to the lease agreement and project agreement signed between CORFO and SQM in 1993. The main modifications became effective on April 10, 2018 and requires an increase in the lease payments by increasing the lease rates associated with the sale of the different products produced in the Salar de Atacama, including lithium carbonate, lithium hydroxide and potassium chloride. This agreement has been amended since it was signed and it is reasonable to expect that it will continue to be amended as mutually agreed by the parties. Additionally, SQM Salar commits to contribute to research and development efforts, as well as to the communities in close proximity to the Salar de Atacama and provide a percentage of total annual sales of SQM Salar to regional development. SQM Salar commits to contribute between US$10.8 million and US$18.9 million per year to research and development efforts, between US$10 to US$15 million per year to the communities in close proximity to the Salar de Atacama, and 1.7% of total annual sales of SQM Salar to regional development. 253 20.3 Other non-financial liabilities, Current Description of other liabilities Tax withholdings VAT payable Guarantees received Accrual for dividend Monthly tax provisional payments Deferred income Withholdings from employees and salaries payable Accrued vacations (1) Other current liabilities Total 10) FINANCIAL REPORTS As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 1,208 1,642 2,636 8,027 8,407 6,435 5,017 24,003 3,580 60,955 3,345 3,465 2,641 68,890 16,659 3,033 4,575 21,686 2,605 126,899 (1) Vacation benefit (short-term benefits to employees, current) is in line with the provisions established in Chile’s Labor Code, which indicates that employees with more than a year of service will be entitled to annual vacation for a period of at least fifteen paid business days. The Company provides the benefit of two additional vacation days. 254 10) FINANCIAL REPORTS 20.4 Changes in provisions Description of items that gave rise to variations as of December 31, 2020 Legal complaints Provision for dismantling, restoration and rehabilitation cost Others provisions Total Total provisions, initial balance 14,924 33,238 97,093 145,255 ThUS$ ThUS$ ThUS$ ThUS$ Changes Additional provisions Provision used Increase(decrease) in foreign currency exchange Others Total Increase (decreases) Total 62,922 (67,685) 4 - (4,759) 10,165 30,974 - - (2,947) 28,027 61,265 60,685 (59,939) (2,486) - (1,740) 95,353 154,581 (127,624) (2,482) (2,947) 21,528 166,783 Description of items that gave rise to variations as of December 31, 2019 Legal complaints Provision for dismantling, restoration and rehabilitation cost Others provisions Total Total provisions, initial balance 14,862 28,822 94,335 138,019 ThUS$ ThUS$ ThUS$ ThUS$ Changes Additional provisions Provision used Increase(decrease) in foreign currency exchange Others Total Increase (decreases) Total 4,111 (4,049) - - 62 14,924 - - - 4,416 4,416 33,238 150,314 (147,532) (24) - 2,758 97,093 154,425 (151,581) (24) 4,416 7,236 145,255 255 10) FINANCIAL REPORTS Note 21 Disclosures on equity The detail and movements in the funds of equity accounts are shown in the consolidated statement of changes in equity. 21.1 Capital management The main object of capital management relative to the administration of the Company’s financial debt and equity is to ensure the regular conduct of operations and business continuity in the long term, with the constant intention of maintaining an adequate level of liquidity and in compliance with the financial safeguards established in the debt contracts in force. Within this framework, decisions are made in order to maximize the value of the company. Capital management must comply with, among others, the limits contemplated in the Financing Policy approved by the Shareholders’ Meeting, which establish a maximum consolidated indebtedness level of 1.5 times the debt to equity ratio. This limit can be exceeded only if the Company’s management has first obtained express approval at an Extraordinary Shareholders’ Meeting. Capital management must also comply with a debt ratio of less than 1.0, with respect to the series H, series O and series Q bonds. This ratio was redefined at the Bondholders' Meetings held in September 2020, as net financial debt divided by the company's total equity. Previously, it was defined as total liabilities divided by equity, and the limit for this ratio was 1.44, with a prepayment option for bondholders if this ratio was above 1.2. As of December 31, 2020, this ratio was 0.50. The Company’s management controls capital management based on the following ratios: Capital Management As of December 31, 2020 As of December 31, 2019 Description (1) Calculation (1) Net Financial Debt (ThUS$) Liquidity ROE Adjusted EBITDA (ThUS$) 1,074,020 681,912 Financial Debt – Financial Resources 5.40 3.45 7.79% 13.15% Current Assets divided by Current Liabilities Profit for the year divided by Total Equity 579,765 644,223 Adjusted EBITDA EBITDA (ThUS$) 524,650 668,912 EBITDA ROA 9.83% 12.76% Adjusted EBITDA – Depreciation divided by Total Assets net of financial resources less related parties’ investments Other current Financial Liabilities + Other Non-Current Financial Liabilities– Cash and Cash Equivalents – Other Current Financial Assets – Hedging Assets, non-current Total Current Assets / Total Current Liabilities LTM(2) Profit for the year / Equity Profit for the year + Depreciation and Amortization Expenses + Finance Costs + Income Tax – Other income and Share of profit of associates and joint ventures + Other expenses – Finance income – Currency differences Profit for the year + Depreciation and Amortization Expenses + Finance Costs + Income Tax (LTM Gross Profit – Administrative Expenses)/ (Total Assets – Cash and Cash Equivalents – Other Current Financial Assets – Other Non-Current Financial Assets – Equity-accounted Investments) Indebtedness 0.50 0.32 Total Liabilities on Equity Total Liabilities / Total Equity (1) Assumes the absolute value of the accounting records with the exception of exchange differences. 256 10) FINANCIAL REPORTS The Company’s capital requirements change according to variables such as: working capital needs, new investment financing and dividends, among others. The SQM Group manages its capital structure and makes adjustments bases on the predominant economic conditions so as to mitigate the risks associated with adverse market conditions and take advantage of the opportunities there may be to improve the liquidity position of the SQM Group. There have been no changes in the capital management objectives or policy within the years reported in this document, no breaches of external requirements of capital imposed have been recorded. There are no contractual capital investment commitments. 21.2 Disclosures on preferred share capital Issued share capital is divided into 142,819,552 Series A shares and 120,376,972 Series B shares. All such shares are nominative, have no par value and are fully issued, subscribed and paid. Series B shares may not exceed 50% of the total issued, subscribed and paid-in shares of the Company and have a limited voting right, in that all of them can only elect one director of the Company, regardless of their equity interest and preferences: (a) (b) require the calling of an Ordinary or Extraordinary Shareholders' Meeting when so requested by Series B shareholders representing at least 5% of the issued shares thereof; and require the calling of an extraordinary meeting of the board of directors, without the president being able to qualify the need for such a request, when so requested by the director who has been elected by the shareholders of said Series B. The limitation and preferences of Series B shares have a duration of 50 consecutive and continuous years as of June 3, 1993. The Series A shares have the preference of being able to exclude the director elected by the Series B shareholders in the voting process in which the president of the board of directors and of the Company must be elected and which follows the one in which the tie that allows such exclusion resulted. The preference of the Series A shares will have a term of 50 consecutive and continuous years as of June 3, 1993. The form of the titles of the shares, their issuance, exchange, disablement, loss, replacement, assignment and other circumstances thereof shall be governed by the provisions of Law No, 18,046 and its regulations. At December 31, 2020 and December 31, 2019, the Group does not hold shares of the Parent Company either directly or through its investees. 257 10) FINANCIAL REPORTS Detail of capital classes in shares: As of December 31, 2020, and December 31, 2019, the Company has not placed any new shares issues on the market Type of capital in preferred shares As of December 31, 2020 As of December 31, 2019 Series A Series B Series A Series B Description of type of capital in shares Number of authorized shares Number of fully subscribed and paid shares Number of subscribed, partially paid shares Par value of shares in US$ Increase (decrease) in the number of current shares Number of current shares Number of shares owned by the entity or its subsidiaries or associates Number of shares whose issuance is reserved due to the existence of options or agreements to dispose shares Capital amount in shares ThUS$ Amount of premium issuance ThUS$ Amount of reserves ThUS$ Total number of subscribed shares 21.3 Disclosures on reserves in Equity 142,819,552 142,819,552 - 0.9435 - 120,376,972 120,376,972 - 2.8464 - 142,819,552 142,819,552 - 0.9435 - 120,376,972 120,376,972 - 2.8464 - 142,819,552 120,376,972 142,819,552 120,376,972 - - - - - - - - 134,750 - - 142,819,552 342,636 - - 120,376,972 134,750 - - 142,819,552 342,636 - - 120,376,972 As of December 31, 2020, and December 31, 2019, this caption comprises the following: Disclosures on reserves in equity Reserve for currency exchange conversion (1) Reserve for cash flow hedges (2) Reserve for gains and losses from financial assets measured at fair value through other comprehensive income (3) Reserve for actuarial gains or losses in defined benefit plans (4) Other reserves Total As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ (11,569) 4,491 6,872 (8,680) 16,318 7,432 (25,745) 7,196 (270) (9,490) 14,086 (14,223) (1) This balance reflects retained earnings for changes in the exchange rate when converting the financial statements of subsidiaries whose functional currency is different from the US dollar. (2) The Company maintains, as hedge instruments, financial derivatives related to obligations with the public issued in UF and Chilean pesos, Changes from the fair value of derivatives designated and classified as hedges are recognized under this classification. (3) This caption includes the fair value of equity investments that are not held for trading and that the group has irrevocably opted to recognize in this category upon initial recognition. In the event that such equity instruments are fully or partially disposed of, the proportional accumulated effect of accumulated fair value will be transferred to retained earnings. (4) This caption reflects the effects of changes in actuarial assumptions, mainly changes in the discount rate. 258 Movements in other reserves and changes in interest were as follows: 10) FINANCIAL REPORTS Movements Balances as of January 1, 2019 Increase Decrease As of December 31, 2019 Increase Decrease Balances as of December 31, 2020 Foreign currency translation difference (1) Before taxes ThUS$ (26,307) 1,824 (1,262) (25,745) 15,732 (1,556) (11,569) Reserve for cash flow hedges Reserve for actuarial gains and losses from defined benefit plans Before taxes ThUS$ Tax ThUS$ Before taxes ThUS$ Deferred taxes ThUS$ Reserve for gains (losses) from financial assets measured at fair value through other comprehensive income Before taxes ThUS$ Deferred taxes ThUS$ Other reserves Before taxes ThUS$ Total reserves Reserves ThUS$ Deferred taxes ThUS$ Total reserves ThUS$ 7,971 8,628 (6,720) 9,879 - (3,706) 6,173 - (8,176) (2,683) - - (3,306) (2,683) (11,482) - 1,001 3,858 (2,903) (1,682) (10,527) 1,292 - 700 1,992 430 (575) 1,847 (760) 1,570 (418) 392 11,885 (2,101) 10,176 (351) (424) 113 (662) (3,180) 538 11,332 (15,940) 941 (14,999) 3,093 (339) 14,086 2,121 111 15,115 (12,045) (12,870) 33,596 (10,155) 10,571 (3,107) 813 (1,353) (2,750) 964 (3,139) 12,008 (11,232) (14,223) 30,846 (9,191) 7,432 (3,304) 16,318 (1) See details on reserves for foreign currency translation differences on conversion in Note 27, letter b). 259 10) FINANCIAL REPORTS Other reserves This caption corresponds to the legal reserves reported in the individual financial statements of the subsidiaries and associates that are mentioned below and that have been recognized in SQM’s equity through the application of the equity method. Subsidiary – Associate As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ SQM Iberian S.A. SQM Europe NV Soquimich European holding B.V. Abu Dhabi Fertilizer Industries WWL Doktor Tarsa Tarim Sanayi AS Kore Potash PLC Total Other derivative reserves of the acquisition of subsidiaries, which was already under Company ownership at the acquisition date (IAS 27R) SQM Iberian S.A. Orcoma Estudios SPA Total Other reserves 21.4 Dividend policies 9,464 1,957 828 455 - 3,170 15,874 (1,677) 2,121 16,318 9,464 1,957 828 455 305 2,754 15,763 (1,677) - 14,086 As required by Article 79 of the Chilean Companies Act, unless otherwise decided by unanimous vote of the holders of issued and subscribed shares, a publicly traded corporation must distribute dividends in accordance with the policy determined in the shareholder's meeting held each year, with at least 30% of our consolidated profit for each year. 260 10) FINANCIAL REPORTS Dividend policy for commercial year 2020 Company’s dividend policy for the 2020 business year was agreed upon by the Board of Directors on March 25, 2020 and later modified after the extraordinary shareholders’ meeting held on September 29, 2020. The current dividend policy establishes the following: a) Distribute and pay to the corresponding shareholders, a percentage of the net income that shall be determined per the following financial parameters as a final dividend: (I) (II) (III) (IV) 100% of the profit for 2020 if all the following financial parameters are met: (a) “all current assets” divided by “all current liabilities” is equal to or greater than 2.5 times, and (b) the sum of “all current liabilities” and “all non-current liabilities”, less “cash equivalents”, less “other current financial assets”, all of the above divided by “total equity” in equal or less than 0.8 times. 80% of the profit for 2020 if all the following financial parameters are met: (a) “all current assets” divided by “all current liabilities” is equal to or greater than 2.0 times, and (b) the sum of “all current liabilities” and “all non-current liabilities”, less “cash equivalents”, less “other current financial assets”, all of the above divided by “total equity” in equal or less than 0.9 times. 60% of the profit for 2020 if all the following financial parameters are met: (a) “all current assets” divided by “all current liabilities” is equal to or greater than 1.5 times, and (b) the sum of “all current liabilities” and “all non-current liabilities”, less “cash equivalents”, less “other current financial assets”, all of the above divided by “total equity” in equal or less than 1.0 times. If none of the foregoing financial parameters are met, the Company shall distribute and pay, as a final dividend, and in favor of the respective shareholders, 50% of the 2020 net income. Distribute and pay only one interim dividend during 2020, which will be charged against the aforementioned final dividend and that will be charged to the retained earnings reflected in the consolidated financial statements as of March 31, 2020, the percentage distributed shall be determined per the financial parameters expressed in letter a) above. It is recorded that on May 19, 2020 the Company's Board of Directors agreed to distribute and pay an interim dividend equivalent to US$ 0.17092 per share, charged to the Company's 2020 retained earnings. Said amount was paid in its equivalent in Chilean pesos according to the official exchange rate on May 29, 2020 (the “Interim Dividend”). The Board of Directors will not approve the payment of other interim dividends charged against the 2020 net income. At the ordinary general shareholders’ meeting that will be held in 2021, the Board of Directors shall propose a final dividend pursuant to the percentages in financial parameters described in in letter a) above discounting the Special Dividend and Interim Dividend. If the amount is equal to or less than the amount of the sum of the Special Dividend (see more details in Note 21.5) and the Interim Dividend, If the amount equivalent to the percentage of the 2020 fiscal year profits to be distributed in accordance with (a) above is equal to or less than the sum of the Special Dividend and the Interim Dividend, then no additional amount will be distributed and the Interim Dividend will be understood to be paid as a definitive dividend. In any case, the final dividend may not be less than the mandatory minimum dividend that corresponds in accordance with Chilean law or the Company bylaws. If there is an excess of net income in 2020, this may be retained and assigned or allocated for financing its own operations, to one or more investment projects of the Company, notwithstanding a future distribution of special dividends charged to the retained earnings previously approved at the shareholders’ meeting, or the possible and future capitalization of all or part of the latter. b) c) d) e) f) The payment of additional dividends is not considered. 261 10) FINANCIAL REPORTS It is expressly stated that the dividend policy described above corresponds to the intention of the Board of Directors, and the compliance of it shall depend on the net income that the Company ultimately obtains, as well as the results of projections that could periodically impact the Company, or to the existence of determined conditions that may affect it, as applicable. If the dividend policy exposed by the Board of Directors suffers a substantial change, the Company must communicate it as an essential fact. 21.5 Interim and provisional dividends The ordinary shareholders’ meeting held on April 23, 2020 agreed to distribute and pay 100% of the distributable net profit obtained by the Company during the 2019 fiscal year as final dividend. In consequence, in May 2020 the Company paid a final dividend of US$ 1.05668 per share from the distributable net profit obtained during the 2019 fiscal year, and the sum of US$ 0.80254 per share was discounted from this, as this was already paid as a provisional dividend in 2019. On May 19, 2020, the Board agreed to pay a provisional dividend equivalent to US$ 0.17092 per share with a charge to earnings for 2020. This amount was paid in its equivalent in Chilean pesos, according to the observed U.S. dollar exchange rate published in the Official Gazette on May 29, 2020. On September 29, 2020, Company shareholders met in an extraordinary shareholders’ meeting to approve the distribution and payment of a special dividend equivalent to US$ 0.37994 per share, to be paid out of the Company’s retained earnings. 21.6 Potential and provisional dividends Dividends discounted from equity from January to December 2020 and 2019 were the following: Dividends Ajay SQM Chile S.A. Dividends Ajay SQM Chile S.A Payable Dividend Soquimich Comercial S.A. Potential Dividend Soquimich Comercial S.A. Payable Dividend Non-controlling interests Interim dividend Potential dividend Dividends payable Owners of the Parent Dividends discounted from equity for the period December 31, 2020 December 31, 2019 ThUS$ ThUS$ 556 682 5,904 2,976 10,118 44,986 100,000 4,369 149,355 159,473 882 - 3,936 1,999 6,817 211,224 - 66,891 278,115 284,932 262 10) FINANCIAL REPORTS Note 22 Contingencies and restrictions In accordance with note 20.1, the Company has only registered a provision for those lawsuits in which there is a probability that the judgments will be unfavorable to the Company. The Company is party to the following lawsuits and other relevant legal actions: 22.1 Lawsuits and other relevant events (a) (b) (c) (d) (e) (f) (g) In August 1996, Nitratos Naturais do Chile Ltda. was fined by Fazenda do Estado de Sao Paulo for concluding activities without attaching the necessary documentation for submission to the competent authorities. The treasury of the State of Sao Paulo initiated legal actions to collect close to ThUS$ 492. Nitratos Naturais do Chile has presented a case to the federal court of Brazil to request a reduction in the fine, which is currently pending. In August 2004, Nitratos Naturais do Chile Ltda. was fined by Fazenda do Estado de Sao Paulo for failing to report trade activities. The treasury of the State of Sao Paulo initiated legal actions to collect close to ThUS$ 265. In 2018, the Court of Appeals agreed to a reduction in the fine and the Fazenda do Estado de Sao Paulo appealed to the Court of Brazil, and this appeal is still pending. In December 2010, the city of Pomona in the state of California, United States, filed a claim against SQM NA, which was heard before the US District Court for the Central District of California. The plaintiff requested the payment of expenses and other values related to treatment of groundwater to make it apt for consumption, which involved the extraction of perchlorate in this water, which allegedly came from Chilean fertilizers, for an approximate amount of US$ 36 million. On May 17, 2018, district judge Gary Klausner ruled in favor of SQM NA following the jury verdict. On February 6, 2020, the United States Court of Appeals for the Ninth Circuit demanded a retrial before the District Court, which has been postponed until the second quarter of 2021. In December 2010, the city of Lindsay in California, United States, filed a claim against SQM NA, which was heard before the US District Court for the Central District of California. The plaintiff requested the payment of expenses and other values related to treatment of groundwater to make it apt for consumption, which involved the extraction of perchlorate in this water, which allegedly came from Chilean fertilizers, the trial is currently suspended. In May 2014, a claim of compensation for damages was filed against SQM Nitratos for its alleged extracontractual liability derived from an explosion occurring in 2010 in the vicinity of the town of Baquedano, which caused the death of six workers. The portion of the claim that has not been settled in court is approximately US$ 1.2 million. On May 7, 2019, the 18th Civil Court of Santiago dismissed the claim. The case currently is in the Santiago Court of Appeals, which will make a determination on the motion for appeal and cassation brought about on behalf of the plaintiff. On October 2015, Tyne and Wear Pension Fund represented by the Council of the Borough of South Tyneside acting as lead plaintiff presented a claim against the Company with the US Federal Court of the Southern District of New York for potential damages to ADS Holders in the Company due to alleged noncompliance with the securities regulation in the United States. For more information, see Note 22.6. In May 2016, a claim for close to ThUS$ 515 was filed against SQM Salar and SQM Industrial for the alleged extracontractual liability derived from the accident occurring in July 2014 in the town of María Elena. On March 6, 2019, the 13th Civil Court of Santiago dismissed the claim. The case is currently in the Santiago Court of Appeals, which will decide on the motion for appeal brought about by the plaintiffs. (h) In January 2018, the company Transportes Buen Destino S.A. filed an arbitration claim under CAM (arbitration and mediation center) rules against SQM Salar for controversies resulting from the execution of 263 10) FINANCIAL REPORTS (i) (j) (k) (l) (m) (n) (o) transport contracts for lithium brine and transport of salts. The amount of the claim is close to US$ 3 million. The arbitration is currently in the evidence stage. In September 2018, representatives Claudia Nathalie Mix Jiménez, Gael Fernanda Yeomans Araya, Camila Ruslay Rojas Valderrama filed a public right annulment suit against Corfo regarding the Salar de Atacama Project Contract signed between Corfo and SQM Salar. The Company has intervened as an independent third party. This discussion stage has concluded. For more information, see Note 22.5. The Company and FPC Ingeniería y Construcción SpA were sued in May 2019 for compensation for damages resulting from alleged extracontractual liability derived from the traffic accident occurring on March 5, 2018, involving the overturn of a truck owned by FPC and the subsequent death of its two occupants, both employees of FPC. The four children of one of the deceased workers are the plaintiffs in this case and are seeking compensation for moral damages. The case is in the 19th Civil Court of Santiago and is in the evidence stage. The amount of the claim is close to US$ 1.2 million. On June 24, 2019, the company Servicios Logísticos Integrales Inversol SpA filed an arbitration claim under CAM rules against SQM Salar for controversies resulting from the execution of the salt transport contract. The trial is currently in the evidence stage. The amount of the claim is close to US$ 7 million. In April 2019, the company Fennix Industrial SpA filed a claim against SQM Salar with the First Civil Court of Concepción for controversies resulting from the execution of a civil works and electromechanical assembly contract. The trial is currently in the discussion stage. The amount of the claim is approximately ThUS$ 770. On December 18, 2020, the parties mutually agreed to terminate this lawsuit. The company Arrigoni Ingeniería y Construcción S.A. filed a claim in November 2019 against SQM Salar in arbitration court under CAM rules, requesting the conclusion of the Works Contract known as “Expansion of Lithium Carbonate Plant Phase II.” The trial is currently in the evidence stage. The amount of the claim is close to US$ 14,6 million. The Company has initiated an arbitration process against the company Sierra Gorda S.C.M. due to controversies originating from the Mining, Royalties and Other Sales Contract dated December 16, 2011. Sierra Gorda S.C.M. has filed counterclaims against the Company. The process has concluded its discussion stage. It is not possible to make an adequate determination of the amount involved. The Company has been sued in arbitration court under CAM rules by the company Rotto S.A. due to controversies occurring in relation to a contract for disarming and removing ferrous material. The case was presented in September 2020. The amount of the claim is approximately ThUS$ 713. On January 28, 2021, the parties mutually agreed to terminate this lawsuit. The Company and its subsidiaries have been involved and will probably continue to be involved either as plaintiffs or defendants in certain judicial proceedings that have been and will be heard by the arbitration or ordinary courts of justice that will make the final decision. Those proceedings that are regulated by the appropriate legal regulations are intended to exercise or oppose certain actions or exceptions related to certain mining claims either granted or to be granted and that do not or will not affect in an essential manner the development of the Company and its subsidiaries. Soquimich Comercial S.A. has been involved and will probably continue being involved either as plaintiff or defendant in certain judicial proceedings through which it intends to collect and receive the amounts owed, the total nominal value of which is approximately US$ 1.2 million. The Company and its subsidiaries have made efforts and continues making efforts to obtain payment of certain amounts that are still owed to the Company due to its activities. Such amounts will continue to be required using 264 10) FINANCIAL REPORTS judicial or non-judicial means by the plaintiffs, and the actions and exercise related to these are currently in full force and effect. 22.2 Restrictions to management or financial limits Bond issuance contracts in the local market require the Company to maintain a Total Indebtedness Level rate no higher than 1 for Series H, Series O and Series Q bonds, calculated for a mobile period that considers the last 12 months. For more information, see Note 21.1. As of December 31, 2020, the above-mentioned financial indicator has the following values: Indicator Leverage As of December 31, 2020 As of December 31, 2019 0.50 0.32 Bond issue agreements issued abroad require the Company to neither merge nor dispose of the whole or a substantial part of its assets, unless all the following conditions are met: (i) the legal successor company is an entity subject to either Chilean or United States law, and assumes SQM S.A.’s obligations under a complimentary contract, (ii) the Issuer does not fail to comply immediately after the merger or disposal, and (iii) the Issuer delivers a legal opinion stating that the merger or disposal and the complimentary contract meet the requirements described in the original contract. In addition, SQM S.A. is committed to disclosing financial information on quarterly basis. The Company and its subsidiaries have complied and are fully complying with all the aforementioned limitations, restrictions and obligations. 265 10) FINANCIAL REPORTS 22.3 Environmental contingencies The SMA issued a resolution dated November 28, 2016, rectified by a resolution dated December 23, 2016, which filed charges against SQM Salar for brine extraction in excess of authorized amounts, progressive impairment of the vitality of carob trees, providing incomplete information modification of follow-up plan variables, and other charges. SQM Salar S.A. presented a compliance program that was accepted by the SMA. On December 2019, the Environmental Court of Antofagasta rendered null. In October 2020, the SMA formulated new observations for the compliance program, which will enable the incorporation of improvements in line with the ruling of the Antofagasta Environmental Court, to then make a determination regarding approval or rejection. If a new compliance program is not approved by the SMA, or if approved and legally challenged and rendered null and void by the Chilean courts. This latter event may consider the application of fines up to US$9 million, temporary or permanent closure of facilities and in extreme circumstances, revocation of the respective environmental permit. 22.4 Tax Contingencies On August 26, 2016, SQM Salar filed a tax claim before the Third Tax and Customs Court of the Metropolitan Region against settlements 169, 170, 171 and 172 by the Chilean IRS, which extend the application of specific mining tax to lithium exploitation for the 2012, 2013 and 2014 tax years. The disputed amount is approximately US$17.8 million. On November 28, 2018, the Third Tax and Customs Court rejected the claim, and the case was transferred to the Santiago Court of Appeals, following an appeal filed by SQM Salar. On March 24, 2017, SQM Salar filed with the Third Tax and Customs Court of the Metropolitan Region a tax claim against tax assessment No. 207 and ruling No. 156, both issued by the Chilean IRS, which seek to expand application of the specific tax on mining activities to include lithium exploitation for tax years 2015 and 2016. The amount involved is approximately US$14.4 million, of this, US$ 7.0 million corresponding to the overcharge. On November 28, 2018, the Third Tax and Customs Court accepted SQM Salar's claim against the overcharge by the IRS and rejected the claim for the remaining part. The case is now with the Santiago Court of Appeals due to the appeal filed by SQM Salar. On October 17, 2019, the IRS recognized the overcharge of US$ 5.8 million, while the difference of US$ 1.2 million, is for corporate income tax plus associated interest and will be reimbursed at the end of the trial. SQM Salar filed inapplicability requirements with the Constitutional Court in the grounds of unconstitutionality with respect to article 64 bis of the Income Tax Law, with relation to two groups of previous tax claims. On June 18, 2020, the Constitutional Court rejected the requirements after reaching a tie vote among the members of this court, corresponding to its knowledge from the Santiago Court of Appeals. On September 30, 2020, the SII notified SQM Salar of liquidations No. 65 and 66 for the 2017 and 2018 business years, due to differences in the determination of the specific mining tax, totaling close to US$ 19.5 million and US$ 22.1 million, respectively plus interest for both periods of US$ 22.3 million. On October 30, 2020, SQM Salar paid these liquidations for a total of US$ 63.9 million (this amount includes an overcharge estimated at US$ 18 million, including interest). SQM Salar will reclaim these liquidations in the upcoming months. As of December 2020, the Company had non-current tax assets of US$ 90.3 million for tax settlements for 2012 to 2018 (including an overcollection of US$ 19.5 million) and US$ 5.8 million in recoverable taxes. As of December 2019, the Company the Company had non-current tax assets of US$ 32.2, (which included US$ 7 million for an overcollection by the IRS). As of December 31, 2020 and 2019, there was no effect on the income statement in this respect. The IRS has not settled differences with respect to specific mining tax for 2018 onwards. If the IRS uses a similar criterion to that used in previous years, it is possible that settlements will be issued in the future for those periods. This tax for 2018 to 2020 (commercial years) is estimated at US$ 43 million, (without interest or penalties, and net of corporate income tax). The company continues to undertake all legal efforts to actively and decidedly defend its interests. 266 10) FINANCIAL REPORTS 22.5 Contingencies regarding to the Contracts with Corfo: On September 6, 2018, representatives Claudia Nathalie Mix Jiménez, Gael Fernanda Yeomans Araya and Camila Ruslay Rojas Valderrama and the Poder Ciudadano political party filed an annulment suit against Corfo, which requested that the Contract for the Salar de Atacama Project between Corfo and the Company, SQM Potasio and SQM Salar be annulled. The Companies have taken part of the process as interested third parties. In the event that the annulment claim is approved for the Salar de Atacama Project Contract, SQM Salar may be prevented from exploit the mining claims in the Salar de Atacama that it has leased from Corfo. 22.6 Contingencies related to the Class Action lawsuit Since October 2015, a consolidated class action lawsuit has been pending against the Company before the District Court for the Southern District of New York of the United States, plenary case Villella v.Chemical and Mining Company of Chile, Inc., 1: 15-cv-02106 -ER (SDNY). The consolidated lawsuit alleges that certain statements made by the Company between September 30, 2010, and June 18, 2015, mainly in documents filed with the SEC and in Company press releases, were materially false and this constitutes a violation of Section 10 (b) of the Securities Exchange Act and of the correlative Standard 10b-5. Specifically, the consolidated lawsuit challenges certain statements issued by the Company associated with its compliance with or implementation of the laws and regulations that regulate it, the effectiveness of its internal controls, the adoption of a code of ethics consistent with SEC requirements, of its income or revenue and taxes paid, and of the applicable accounting standards On November 11, 2020, the Company reached an agreement that contains a summary of binding terms for concluding the trial. The agreement will conclude the action of the plaintiffs and under this, the Company agreed to pay the amount of US$ 62.5 million. The parties must negotiate in good faith the definitive documents of the transaction and the other related documents, which will be presented for their approval from the New York court that is hearing the trial. 22.7 Contingencies associated with conflicts between shareholders of the Abu Dhabi Fertilizer Industries Company Due to differences between shareholders of the company Abu Dhabi Fertilizer Industries Company, diverse lawsuits have arisen that may result in claims against SQM Corporation N.V. and by this company against the other shareholders. These disputes may materially affect the value of the investment of the Company in Abu Dhabi Fertilizer Industries Company. At this time, it is not possible to quantify the amounts of these claims. 22.8 Restricted or pledged cash The subsidiary Isapre Norte Grande Ltda., in compliance with the provisions established by the Chilean Superintendence of Healthcare, which regulates the running of pension-related health institutions, maintains a guarantee in financial instruments delivered in deposits, custody and administration to Banco de Chile. This guarantee, according to the regulations issued by the Chilean Superintendence of Healthcare is equivalent to the total amount owed to its members and medical providers, Banco de Chile reports the present value of the guarantee to the Chilean Superintendence of Healthcare and Isapre Norte Grande Ltda on a daily basis. As of December 31, 2020, the guarantee amounts to ThUS$ 731. 267 10) FINANCIAL REPORTS 22.9 Securities obtained from third parties The main security received (exceeding ThUS$ 100) from third parties to guarantee Soquimich Comercial S.A. their compliance with obligations in contracts of commercial mandates for the distribution and sale of fertilizers amounted to ThUS$ 10,114 and ThUS$ 9,611 on December 31, 2020 and December 31, 2019 respectively; which is detailed as follows: Grantor Relationship Ferosor Agrícola S.A. Tattersall Agroinsumos S.A. Covepa SPA Johannes Epple Davanzo Hortofrutícola La Serena Com. Serv Johannes Epple Davanz Juan Luis Gaete Chesta Arena Fertilizantes y Semillas Vicente Oyarce Castro Bernardo Guzmán Schmidt Total Unrelated Third party Unrelated Third party Unrelated Third party Unrelated Third party Unrelated Third party Unrelated Third party Unrelated Third party Unrelated Third party Unrelated Third party Unrelated Third party 22.10 Indirect guarantees As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 5,626 2,000 703 314 303 408 190 211 229 130 5,372 2,000 671 300 282 269 182 201 213 121 10,114 9,611 Guarantees without pending balance indirectly reflect that the respective guarantees are in force and approved by the Company’s Board of Directors and have not been used by the respective subsidiary. As of December 31, 2020, there are no indirect guarantees. 268 10) FINANCIAL REPORTS Note 23 Lawsuits and complaints Investigation by the Department of Justice and the Securities Exchange Commission and Agreements On January 13, 2017, the Company signed agreements with the DOJ and the SEC relating to their investigations into Company payments to suppliers and organizations that may have had links with politically exposed persons during the period from 2008 to 2015. As a result, the Company conducted its own internal investigation through an ad-hoc Board committee (The Company’s securities are traded in the USA, so the Company is subject to US law). The Company has voluntarily submitted the results of its internal investigation and supporting documents to the DOJ, the SEC and the relevant Chilean authorities. In accordance with the terms Agreement with the DOJ, (the “DPA”) the Company has accepted that the DOJ formulates a charge for infractions (i) for the lack of implementation of effective internal accounting systems and internal accounting controls and (ii) a charge for infractions for failure to adequately maintain books, records and accounting sections in relation to the events investigated, Under the DPA, the DOJ has agreed not to pursue such charges against the Company for a period of 3 years and release the Company from liability after such period, inasmuch as within that period the Company complies with the terms of the DPA, These include payment of a fine of US$15,487,500 and acceptance of an external monitor (the “Monitor”) for a period of 24 months that will assess the Company’s compliance program, and continue to report on the Company independently for an additional year. The three-year term of the DPA ended on April 30, 2020, and on June 1, 2020, the Company’s CEO and CFO submitted the certification regarding the Company’s disclosure obligations, as required under the DPA. On November 11, 2020, the DOJ presented a motion to dismiss the criminal information against the Company, which is subject to approval by the United States District Court of the District of Columbia. Following this approval, all charges against the Company will be dropped. Other Lawsuits and complaints In May 2019, the company Fennix Industrial SpA filed a claim against SQM Salar and employees for the alleged misappropriation of funds - controversies originating from contract execution for civil works and electromechanical assembly. The case is being tried before the Criminal Court of San Pedro de la Paz and is in the investigation stage. The amount of the alleged misappropriation of funds is close to US$ 436 million On December 18, 2020, the criminal proceedings, together with other civil disputes, were terminated through a settlement agreement. 269 10) FINANCIAL REPORTS Note 24 Environment 24.1 Disclosures of disbursements related to the environment Environmental protection, respect for human rights and overall impact on sustainability are ongoing concerns of the Company, both in its productive processes and throughout the supply chain. This commitment is supported by the principles indicated in the Company’s Sustainable Development Policy and human rights policy. The Company is currently operating under an Environmental Management System (EMS) that has allowed it to strengthen its environmental performance through the effective application of the Company’s Sustainable Development Policy. In 2020, the company announced an ambitious Sustainable Development Plan, which establishes specific measurable goals that seek to make SQM a leader in sustainability around the world. The main goals proposed are: i) ii) iii) iv) A 65% reduction in the use of fresh water by the year 2040 and 40% by 2030. A 50% reduction in brine extraction from the Salar de Atacama by 2030, starting with 20% by November 2020. Ensure that all our products are carbon neutral by 2040 and in the case of lithium, iodine and potassium chloride, this goal is for 2030. Stimulate more and better instances for dialog with the communities near the operations. Operations that use caliche as a raw material are carried out in desert areas with climatic conditions that are favorable for drying solids and evaporating liquids using solar energy. Operations involving the open-pit extraction of minerals. Many of the Company’s products are shipped in bulk at the Port of Tocopilla. In 2007, the city of Tocopilla was declared a “zone saturated with MP10 Particles” mainly due to the emissions from the electric power plants that operate in that city. In October 2010, the “Decontamination Plan for Tocopilla” was put in place. Accordingly, the Company has committed to taking several measures to mitigate the effects derived from bulk product movements in the port, these measures have been timely implemented since 2007. The Company carries out environmental follow-up and monitoring plans based on specialized scientific studies. Follow-up on relevant variables defined for each project enables the Company to verify the status, for example, of vegetation, flora, fauna and aquatic life in the ecosystems to protect. Follow-up plans are supported by a broad control network that includes monitoring points such as meteorological stations and wells, satellite images, plots for recording the status of vegetation and fauna, etc. The activities comprised in these plans are reported regularly to authorities based on the Company’s commitments made through resolutions that approve different SQM projects. For the specific case of the Salar de Atacama, the Company has implemented an online platform (www.sqmsenlinea.com), which enables any person to access all the environmental information compiled by the Company in keeping with its commitments. In this context, the Company maintains environmental monitoring across the systems where it operates, which is supported by numerous studies that integrate diverse scientific efforts from prestigious research centers on a national and international level, such as the Spanish National Research Council (CSIC) and the Universidad Católica del Norte. Furthermore, within the framework of the environmental studies which the Company is conducting, the Company performs significant activities in relation to the recording of Pre-Columbian and historical cultural heritage, as well as the protection of heritage sites, in accordance with current Chilean laws. These activities have been especially performed in the areas surrounding Maria Elena (ME) and the Nueva Victoria plant (NV). This effort is being accompanied by outreach activities for the community and development of sites of interest. As emphasized in its Sustainable Development Policy, the Company strives to maintain positive relationships with the communities surrounding the locations in which it carries out its operations, as well as to participate in communities’ development by supporting joint projects and activities which help to improve the quality of life for residents. For this purpose, the Company has focused its efforts on activities involving the rescue of historical heritage, education and culture, as well as development. In order to do so, it acts both individually and in conjunction with private and public entities. 270 10) FINANCIAL REPORTS 24.2 Detailed information on disbursements related to the environment The cumulative disbursements which the Company had incurred as of December 31, 2020 for the concept of investments in production processes, verification and control of compliance with ordinances and laws related to industrial processes and facilities amounted to ThUS$ 16,497 and are detailed as follows: 271 Accumulated expenses as of December 31, 2020 10) FINANCIAL REPORTS Parent Company or Subsidiary Miscellaneous SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. Subtotal Total Project Name Associated with Disbursement Reason for Disbursement Asset / Expense Disbursement ThUS$ Environment - Operating Area 01-I017200 - CEDAM at Puquíos at Llamara 01-I017600 - Regularization of Hazardous Substances Decree 01-I018700 – Penalization process for Salar de Llamara 01-I019400 - EIA Expansion of TEA and Seawater Impulsion 01-I028200 - EIA Llamara 01-I028300 - Implementation PDC 2019 01-I030700 - Permisos Sectoriales EIA Proye 01-I035800 – Sustainability DS43 Phase 2 01-I038400 – Update hydrogeological model 01-I039600 - New Warehouse Iodine Stock NV 01-P010400 - Adaptation of dispatch warehouse PV 01-S014200 – Projections 01-S015900 – SQM Sustainability 04-I017700 - Basic Engineering and EIA for TEA industrial area and seawater impulsion N.V. 04-I025000 - Re-perforation Pozo 2PL-2 y Ma 04-I032600 - Well Water Efficiency - Rec. 04-I038200 - Well water efficiency 2 04-I038600 - Monitoring extractions NV 04-J012200 - DIA and Regularization of CS Ponds 04-J015200 - Implementation Economizers 04-J015700 - Update of Closure Plans 04-J015800 - Other Sector Regulatory Measures 04-J017200 - Guarantee availability S 04-J022700 - DIA integration of Coya Sur site 04-J022800 - Adaptation light pollution 04-J023700 - Regularization Hazardous Substances Decree SQM Industrial 04-M004300 - Reduction of Industrial Waste 04-P010200 - Heap project PV(DAY)+ Analysis 19-C006800 - Renovation of lighting tower park 19-C008600 - Asphalting plants Salar del Carmen 19-L014700 - Industrial Waste Management 19-L018800 - UPC Consulting for NW and Others 19-L018900 - Evaporation 2018-2019 19-L019800 - Paleoclimate Study (Iberia) 19-L021400 - Environmental Monitoring 2019 19-L021700 - Upgrade RH y MA 2019 Expense Expense Assets Assets Expense Expense Expense Expense Expense Assets Assets Expense Expense Expense Not classified Sustainability: Environment and Risk Prevention Environmental processing Environmental processing Environmental processing Environmental processing Sustainability: Environment and Risk Prevention Environmental processing Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Environmental processing Environmental processing Environmental processing Environmental processing Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Assets Assets Environmental processing Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Assets Environmental processing Sustainability: Environment and Risk Prevention Assets Assets Environmental processing Expense Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Expense Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Environmental processing Environmental processing Expense Expense Expense Expense Expense Expense Expense Expense 6.205 Total 272 10,376 4 121 - 791 722 593 280 20 76 54 16 63 975 133 1 123 79 15 - - 83 42 109 87 48 35 77 57 19 432 45 26 1 14 11 40 15,568 6.205 Exact or Estimated Date of Disbursement 06-30-2020 11-12-2020 10-22-2020 03-31-2020 12-31-2020 12-30-2020 12-31-2020 11-20-2020 11-03-2020 12-31-2020 12-31-2020 12-06-2020 10-01-2020 10-26-2020 07-10-2020 02-29-2020 07-30-2020 12-31-2020 12-24-2020 02-25-2020 09-25-2020 12-31-2020 09-24-2020 07-02-2020 12-31-2020 11-30-2020 11-20-2020 12-31-2020 11-24-2020 09-07-2020 12-30-2020 09-30-2020 11-13-2020 12-31-2020 07-16-2020 12-31-2020 12-30-2020 Parent Company or Subsidiary Project Name Associated with Disbursement Reason for Disbursement 10) FINANCIAL REPORTS Asset / Expense Disbursemen ThUS$ Exact or Estimated Date of Disbursement 19-L023200 - Topographic Equipment 2019 19-L025300 - Compliance with Sanitary Resolution 19-L025600 - Purchase of Generators, Variators 19-L025800 - Normalization of Administration System 19-L026800 - - Removal of old dryers in Plant MOP G III 19-S013400- Online Monitoring 19-S016200 - Acquisiton of Hardware - Software 19-S016300 - Consulting 2020 19-S016400 - Implementation Acquiere Environmental DB 19-S016700 - Improvements understanding reload SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. Orcoma Estudios Spa 15-I039100 - Sector Permits and environmental compliance Minera Búfalo SQM Potasio S.A. Subtotal Total 20-A008200 – Búfalo proyect 14-I039800 - Sector Permits and environmental compliance Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Assets Assets Environmental processing Sustainability: Environment and Risk Prevention Expense Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Assets Sustainability: Environment and Risk Prevention Assets Environmental processing Environmental processing Environmental processing Expense Expense Assets 03-18-2020 12-13-2020 12-31-2020 12-31-2020 12-22-2020 12-15-2020 11-30-2020 11-30-2020 12-31-2020 12-31-2020 12-31-2020 11-19-2020 12-06-2020 3 51 62 14 20 363 8 33 4 49 252 61 9 929 16,497 273 10) FINANCIAL REPORTS Committed expenses for future periods as of December 31, 2020 Parent Company or Subsidiary Project Name Associated with Disbursement Reason for Disbursement Asset / Expense Disbursement ThUS$ Exact or Estimated Date of Disbursement Miscellaneous SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SIT S.A. SIT S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. Subtotal Environment - Operating Area 01-I017200 - CEDAM at Puquíos at Llamara 01-I017400 - Development of Pintados and deposit 01-I018700 - Penalization Process for Salar de Llamara 01-I019400 - EIA Expansion of TEA and Seawater Impulsion 01-I028300 - Implementation PDC 2019 01-I030700 - EIA Project Sector Permits 01-I031300 - DIA Update RCA TEA 01-I035800 - Sustainability DS43 Phase 2 01-I038400 - Update hydrogeological model 01-I039600 - New Warehouse Iodine Stock NV 01-I039700 - Adapting Pond Substances 01-P010300 - Adapting pond substances 01-P010400 - Adapting dispatch warehouse PV 01-S014200 - Proyecta 01-S015900 - SQM Sustainability 04-I025000 - Re-perforation Pozo 2PL-2 y Ma 04-I032600 - Well Water Efficiency – Rec 04-I038200 - Well Water Efficiency 2 04-I038600 - Monitoreo Extracciones N.V. 04-J015200 - Implementation Economizers 04-J015700 - Update of Closure Plans 04-J015800 - Other Sector Regulatory Measures 04-J017200 - Assurance Availability S 04-J019900 - Provisional Access to Cerro Dominador 04-J022700 - DIA Integración Faena Coya Sur 04-J022800 - Adaptation light pollution 04-J023700 - Regularization Hazardous Substances Decree SQM Industrial 04-M004300 - Reduction of Industrial Waste 04-P010200 - PV Heap Project (DIA)+ Studies 03-T009900 - Air quality monitoring system Tocopilla 03-T010500 - Hydrocarbon Detection System Tocopilla Port 19-C006800 - Renovation lighting towers 19-L014700 - Industrial Waste Management 19-L018800 - UPC Consulting for NW and Others 19-L018900 - Evaporation 2018-2019 19-L019800 - Paleoclimate Study Iberia 19-L020000 - Improvement of Operational Monitoring Network 19-L021400 - Environmental monitoring 2019 Not classified Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Environmental processing Environmental processing Sustainability: Environment and Risk Prevention Environmental processing Environmental processing Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Environmental processing Environmental processing Environmental processing Environmental processing Environmental processing Environmental processing Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Environmental processing Sustainability: Environment and Risk Prevention Environmental processing Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Environmental processing Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Expense Expense Expense Assets Assets Expense Expense Expense Assets Expense Assets Assets Assets Assets Expense Expense Expense Assets Assets Assets Assets Expense Expense Assets Expense Expense Assets Assets Expense Expense Assets Assets Assets Assets Expense Assets Expense Assets Assets 12,276 42 108 - 5 332 66 369 39 124 606 380 355 294 7 155 127 27 551 240 30 17 120 32 4 296 321 615 173 275 82 75 2 89 46 41 35 95 21 18,472 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 274 10) FINANCIAL REPORTS Committed expenses for future periods as of December 31, 2020 Parent Company or Subsidiary SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Nitratos S.A. Orcoma Estudios Spa Minera Búfalo SQM Potasio S.A. SQM Potasio S.A. Subtotal Total Project Name Associated with Disbursement Reason for Disbursement Asset / Expense Disbursement ThUS$ Exact or Estimated Date of Disbursement 19-L021700 - Update RH y MA 2019 19-L024200 - Environmental Risk Analysis Study 19-L025300 - Compliance with Sanitary Resolution 19-L025600 - Purchase of Generators, Variators 19-L025800 - Normalization of Admin. System 19-L026800 - Removal of old dryers at Plant MOP G III 19-L026900 - Cameras and Lighting Products 19-S013400- Online Monitoring 19-S016200 - Acquisition of Hardware- Software 19-S016300 - Consulting 2020 19-S016400 - Implementation Acquiere BD Amb 19-S016500 - Incorporation of test models 19-S016700 – Improvements to recharge understanding 19-S016900 - Water dynamics monitoring 12-I039000 - Adaptation of hazardous waste warehouse 15-I039100 - Sectoral Permits and compliance 20-A008200 - Búfalo Project 14-I039400 - Adapting Pond Iris 14-I039800 - Adapting hazardous substances warehouse IRIS Environmental processing Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Environmental processing Environmental processing Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Environmental processing Environmental processing Environmental processing Environmental processing Environmental processing Expense Expense Assets Assets Assets Assets Assets Expense Assets Assets Assets Assets Assets Assets Assets Expense Expense Assets Assets 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 12-31-2021 92 58 161 46 8 20 17 187 14 39 4 12 81 35 80 235 189 370 261 1,909 20,381 275 10) FINANCIAL REPORTS Accumulated expenses as of December 31, 2019 Parent Company or Subsidiary Miscellaneous SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. Total Project Name Reason for Disbursement A Asset / Expense Disbursement Exact or Estimated Date of Disbursement ThUS$ Not classified Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Environmental processing Environmental processing Environmental processing Environmental processing Sustainability: Environment and Risk Prevention Environmental processing Environment - Operating Area 01-I013800 - Increase height of Absorber Tower 01-I017200 - CEDAM at Puquíos (ponds) at Llamara 01-I017400 - Value Added Paints and Deposits 01-I017600 - Regularization of Substances Decree 01-I018700 - Penalization Process for Salar de Llamara 01-I019400 - EIA Expansion of TEA and Seawater Impulsion 01-I028200 - EIA Llamara 01-I028300 - Implementation of PDC 2019 01-I030700 - Sector Permits EIA Tente en el Aire Project 04-I017700 - Basic Engineering and EIA for TEA industrial area and seawater impulsion N.V. Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention 04-I025000 - Re-perforación Pozo 2PL-2 y Ma Environmental processing 04-J007000 - Environmental impact statement Sustainability: Environment and Risk Prevention 04-J010700 - Recovery Water Intake from Rivers Environmental processing 04-J012200 - Environmental Impact Statement and Regularization of CS Ponds Sustainability: Environment and Risk Prevention 04-J013500 - Handling of Equipment associated with PCBs Sustainability: Environment and Risk Prevention 04-J015200 - Implement Economizers Sustainability: Environment and Risk Prevention 04-J015700 - Update closure plans Sustainability: Environment and Risk Prevention 04-J017200 - Guarantee availability S Sustainability: Environment and Risk Prevention 04-J019900 - Provisional Access to Cerro Domina Sustainability: Environment and Risk Prevention 04-M002000 - Recovery of Potable Water at María Elena Sustainability: Environment and Risk Prevention 19-C005700 - Solar Electric Recharge Point Project- Sustainability: Environment and Risk Prevention 19-L012100 - Upgrade to weather stations Sustainability: Environment and Risk Prevention 19-L018000 - Upgrade TT illumination Environmental processing 19-L018700 - 5th Update of environmental modeling Sustainability: Environment and Risk Prevention 19-L018800 - UPC Consulting for NW and others Sustainability: Environment and Risk Prevention 19-L018900 - Evaporation 2018-2019 Sustainability: Environment and Risk Prevention 19-L019800 - Paleoclimate Study (Iberia) Sustainability: Environment and Risk Prevention 19-L020000 - Improvement of Operations Monitoring Network Sustainability: Environment and Risk Prevention 19-L020300 - Telemetry boreholes Environmental processing 19-L021400 - Environmental Monitoring 2019 Environmental processing 19-L021700 - Improvement of RH and MA 2019 Sustainability: Environment and Risk Prevention 19- S013400- Online Monitoring Expense Assets Expense Expense Expense Assets Assets Expense Expense Expense Assets Expense Expense Assets Assets Expense Assets Expense Assets Expense Assets Assets Assets Assets Expense Expense Assets Expense Assets Assets Expense Expense Expense 8,054 15 3 2 63 522 898 253 1,057 131 318 7 7 119 19 251 195 52 253 141 225 53 17 40 10 166 8 1 5 821 2,767 80 430 16,983 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 12-31-2019 276 10) FINANCIAL REPORTS Future expenses as of December 31, 2019 Parent Company or Subsidiary Miscellaneous SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. SQM Salar S.A. Total Project Name Reason for Disbursement A Asset / Expense Disbursement Exact or Estimated Date of Disbursement ThUS$ Environment - Operating Area 01-I017200 - CEDAM at Puquíos (ponds) at Llamara 01-I017400 - Development of Pintados and surrounding area. 01-I017600 - Regularization of Substances Decree 01-I019400 - EIA Expansion of TEA and Seawater Impulsion 01-I028200 - EIA Llamara 01-I028300 - Implementation of PDC 2019 01-I030700 - Sectorial Permits EIA Project Tente en el Aire 04-I025000 - Re-perforación Pozo 2PL-2 y Ma 04-J012200 - DIA and Regularization of CS Ponds 04-J013500 - Handling of Equipment associated with PCBs 04-J015200 - Implementation Economizers 04-J015700 - Update of Closure Plans 04-J015800 - Other Sector Regulatory Measures 04-J017200 - Guarantee availability S 04-J019900 - Provisional Access to Cerro Domina 04-M003900 - Revocation of PDME 19-L014700 - Industrial Waste Management 19-L018800 - UPC Consulting for NW and others 19-L018900 - Evaporation 2018-2019 19-L019800 - Paleoclimate Study (Iberia) 19-L020000 - Improvement of Operations Monitoring Network 19-L021400 - Environmental Monitoring 2019 19-L021700 - Improvement of RH and MA 2019 19- S013400- Online Monitoring Not classified Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Environmental processing Environmental processing Environmental processing Sustainability: Environment and Risk Prevention Environmental processing Sustainability: Environment and Risk Prevention Environmental processing Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Sustainability: Environment and Risk Prevention Environmental processing Environmental processing Sustainability: Environment and Risk Prevention Expense Expense Expense Expense Assets Expense Expense Expense Expense Assets Expense Assets Expense Expense Assets Expense Expense Expense Expense Assets Expense Assets Expense Expense Expense 10,085 28 108 75 426 1,527 1,231 284 128 35 303 59 127 237 104 95 47 135 238 172 49 95 33 132 300 16,053 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 12-31-2020 277 10) FINANCIAL REPORTS 24.3 Description of each project, indicating whether these are in process or have been finished Sociedad Quimca y Minera de Chile S.A. Environmental Commitments Implementation Projects I0172: The project includes the commitments the Tamarugos Environmental Management Plan, which contemplates an Environmental Education Program that includes the design, construction and start-up of an Environmental Education Center (CEDAM) at Puquios de Llamara. I0174: The Project include implementing "Value Added" at the former Pintados station. and a storage facility in Humberstone to store archaeological material, committed to in environmental assessments. I0187: The project involves the implementation of measures that were committed to during the penalty process, including urgent and transitory measures and the compliance program approved by SMA. I0283: The project involves the implementation of actions committed in the PDC. The implementation considers consulting with consultants (legal, hydrogeological and in processing with PDC), studies and additional follow-up. I0307: The project involves the preparation and processing of sectoral and environmental permits with the DGA and SERNAGEOMIN for the “Tente en el Aire” Project. I0384: The project contemplates updating the Conceptual and Numerical Hydrogeological Model for the Pampa del Tamarugal Aquifer.” Environmental Improvement Initiatives and Projects I0138: The project considers increasing the height of every SO2 absorption tower (regular and stand-by towers) to increase the SO2 absorption efficiency. I0176: The project involves diagnosis of works for their adaptation to the recently enacted Regulation of Hazardous Substances. I0396: The project involves improving NV's hazardous substances pond facilities, in accordance with the Adaptation Plan for Hazardous Substances Regulation DS 43. I0397: The project involves constructing a new NV warehouse, in accordance with the Hazardous Substances Regulation DS 43. P0103: The project involves improving the hazardous substances pond facilities at PV, in accordance with the Adaptation Plan for Hazardous Substances Regulation DS 43. P0104: The project involves adapting the PV warehouse, in accordance with the Hazardous Substances Regulation DS 43. Projects for the Studies and Presentations to the Environmental Assessment System I0194: The project consists of the preparation and processing of the Environmental Impact Study for Expansion of TEA and Impulsion. I0282: The project consists of the preparation and processing of the Environmental Impact Study for Llamara. I0313: The project involves a preliminary environmental characterization (terrestrial biota, archeology and paleontology) of 4 alternative sites. Once the alternative to use has been defined based on technical and environmental criteria, a DIA/EIA will be implemented. 278 10) FINANCIAL REPORTS I0358: The project contemplates standardizing facilities in accordance with standard DS43, Hazardous Substances regulation. S0142: The project considers SQM baseline survey in terms of ESG, we will compare ourselves to the industry and best practices to later plan how to reduce the gaps in the future with concrete initiatives. S0159: The project considers surveying all the company’s sustainability initiatives, integrating the different practices in the areas of the company, identifying its strengths and opportunities to strengthen the management of its sustainability, aligning the strategy with the SDGs for all SQM operations in Chile. Support in completing the DJSI survey. SQM Industrial S.A. Environmental Commitments Implementation Projects J0158: The project will prepare and process sectorial permits for favorable reports to construct in Coya Sur (CS) and permits for hydraulic works defined in Article 294 of the Water Code (evaporation wells) at CS and NV. Environmental Improvement Initiatives and Projects I0250: The project consists of re-drilling well 2Pl-2, with the relevant development work and pump tests. I0326: The project considers installation of floating covers to reduce evaporation in water collection wells in NV. I0382: The project consists of acquisition of floating covers to decrease evaporation, reducing the loss of water resources for the productive phase of iodine. I0386 The project considers a monitoring and transmission system for effective extractions and dynamic levels in extraction wells owned by SQM, which supply the Nueva Victoria site. J0107: The project looks to renovate and automate the operation of pump stations at the three water intakes, by incorporating automatic valves and smart controls for pumps. J0135: This project consists of dealing with all the oils and components that contain 50ppm or more of Policlorobife PCB by 2025 at the latest. J0152: The project will install exhaust gas heat recovery equipment in boilers and implement associated structural improvements. J0157: The project will update the closure plans in accordance with the normal regime established by current legislation. These requirements include an initial external audit, detailed risks analysis and their control, and other requirements. J0172: The project will ensure the availability of water resources in "CS, ME, VE and CV" adductions. J0199: The project considers obtaining a provisional roadway approval from the Ministry of Public Works to prepare and use the intersection access to Cerro Dominador. J0228: The project considers the installation and normalization of lighting in Coya Sur and María Elena. J0237: The project involves improving the hazardous substance pond facilities at CS and improvements to the hazardous substance storage facilities at CS and ME, in accordance with the Adaptation Plan for Hazardous Substances Regulation DS 43. 279 10) FINANCIAL REPORTS M0043: The project considers the removal of industrial waste to free up the sites defined for this purpose. Projects for the Studies and Presentations to the Environmental Assessment System I0177: The project will complete the basic engineering, execute the EIA Tente en el Aire, obtain the legal and sectorial permits for a second stage to secure the execution of the project. J0122: The project consists of entering the Coya Sur wells into the “environmental impact assessment system” and processing the permits for the Coya Sur wells with the General Directorate of Water Resources (DGA). J0227: The project consists of the preparation and processing of an Environmental Impact Declaration (DIA) to extend the useful life of the NPT2 plant and incorporate fuel with KNO3. Prepare and process a DIA for the expansion and updating of Coya Sur. P0102: The project considers developing the preliminary identification studies of the mine and PV heap area, identification of intake points and layouts for the sea water impulsion line. SIT S.A. Environmental Improvement Initiatives and Projects T0099: The project involves preparing a detailed emissions inventory, particulate matter dispersion model and protocol development. Measurement of fugitive emissions from Tocopilla Port operations and Air Quality Monitoring. T0105: The purpose of the project is to install a system that detects and issues early warnings of hydrocarbons in the sea near the facilities at Tocopilla Port. SQM Salar S.A. Environmental Commitments Implementation Projects L0198: The project will date sediment in the depositional environments of the last 50,000 years to complement the facies sedimentological model provided by the consultant. The project will try to reconstruct the variability history of the lagoon system with absolute ages. L0200: The project will identify an appropriate device. Field testing of sensors. Purchase of sensors for all points. Installation of sensors. Analyze remote data transmission (future project). L0214: The project consists of implementing a 2019 environmental monitoring plan to monitor an optimum compliance of current environmental regulations. L0217: The project involves quoting new equipment. Purchase of new equipment. Reparation of old equipment for use as backup in the event of unexpected failure of new equipment. S0134: The project involves showing information online regarding extractions and reinjections from the Salar. Additionally, it includes biotic and hydrogeological information to show authorities and the community the actions implemented by SQM for the environmental variable it has committed to. Environmental Improvement Initiatives and Projects C0068: The project consists of the renovation of 11 Maxi light towers, eliminating fuel consumption. 280 10) FINANCIAL REPORTS C0086: The project involves asphalting the Salar de Carmen plants to reduce the dust particles in suspension raised during the movement of trucks. L0147: This project contemplates the reduction of these industrial waste storage points and packaging of different industrial waste according to the RCA and legislation in force. L0188: The project involves the participation of an external consulting team to narrow down the sources of the risks identified, propose operational optimization plans, improvements to control systems (monitoring networks) and support in modeling this deposit with a view to a better evolution of short- and medium-term projections (5 years). L0189: It includes improving the current lysimeter stations and implementing new stations in important sectors that are not currently measured, with the ability to remotely transmit information. This will improve the spatial coverage of the stations that measure evaporation within the basin. This considers consulting with an expert to propose methodological improvements. L0232: This considers purchase of GPS and a Full Station for measuring stockpiles, salt height. Pursuant to CORFO requests, equipment is needed to provide information. L0242: This contemplates consulting to study the large-scale behavior of lagoon systems through the development of analytic or semi-analytic solutions. L0253: This considers the regularization of the potable water system and the disposal of sewage waters from management. L0256: This contemplates the renovation of generators in SQM Salar to extend their useful life and purchase variators and transformers in different strengths to have stock in the event of failures and thereby ensure ongoing operations. L0258: This considers the normalization of the Electricity System for maintaining and operating the transformer substations. L0268: This considers the removal of old dryers and their final disposal at authorized facilities. L0269: This considers improving controls over plant equipment and feed mixtures to keep products within specifications, to comply with current regulations regarding lighting and mitigate substandard conditions at the plant. S0162: This contemplates the acquisition of technology for optimization and traceability of GHS data. S0163: The project contains measurement methodology for different terrain parameters and subsequent conceptual modeling. S0164: This contemplates the unification of proprietary and third-party databases. S0165: This project takes responsibility for an opportunity to improve the speed of data analysis and efficiency in decision-making. S0167: This contemplates a series of measures in the conceptualization of the Salar de Atacama basin, as well as updating data sets, which must be implemented to strengthen the model and which will be the management tool model for the basin. S0169: The project aims to improve the understanding of dynamics between the vegetation and water bodies in the Aguas de Quelana sector. SQM Nitratos S.A. Environmental Improvement Initiatives and Projects 281 10) FINANCIAL REPORTS I0390: The project contemplates making improvements to the common warehouse in Mina Oeste based on the commitments defined in the adaptation plan presented to the Health SEREMI, thereby complying with DS43. Sociedad Contractual Minera Bufalo Environmental Improvement Initiatives and Projects A0082: The project contemplates the characterization of a potential copper deposit, through the execution of a 3D geophysics program, drilling and sample studies, decreasing the uncertainty of the geological model, as well as processing environmental and sectoral permits that enable the development of activities in the area. Orcoma Estudios Spa Environmental Commitments Implementation Projects I0391: The project consists of obtaining sectoral and environmental sectoral permits for the Orcoma Project. SQM Potasio S.A. Environmental Improvement Initiatives and Projects I0394: The project involves improving Iris's hazardous substances pond facilities, in accordance with the Adaptation Plan for Hazardous Substances Regulation DS 43. I0398: The project involves adapting the hazardous substances warehouse at the NV Iodine Plant, in accordance with Hazardous Substances Regulation DS 43. 282 10) FINANCIAL REPORTS Note 25 Gains (losses) from operating activities in the statement of income of expenses, included according to their nature 25.1 Revenue from operating activities customer activities The Group derives revenues from the sale of goods (which are recognized at one point in time) and from the provision of services (which are recognized over time) and are distributed among the following geographical areas and main product and service lines. (a) Geographic areas: Geographic areas Chile Latin America and the Caribbean Europe North America Asia and Others Total Geographic areas Chile Latin America and the Caribbean Europa North America Asia and Others Total For the period ended December 31, 2020 Specialty plant nutrition 100,353 69,535 145,896 246,737 139,167 701,688 Iodine and derivatives Lithium and derivatives Potassium Industrial chemicals Other Total ThUS$ 1,234 10,843 142,161 90,292 90,127 334,657 399 1,597 49,719 25,558 306,100 383,373 23,963 72,697 30,029 39,432 43,173 209,294 4,059 4,951 11,585 23,963 116,050 160,608 23,737 367 735 1,588 1,144 27,571 153,745 159,990 380,125 427,570 695,761 1,817,191 For the period ended as of December 31, 2019 Specialty plant nutrition 109,975 78,872 149,992 243,399 141,682 723,920 Iodine and derivatives Lithium and derivatives Potassium Industrial chemicals Other Total ThUS$ 1,064 7,972 123,525 90,070 148,389 371,020 599 3,593 76,250 45,810 379,462 505,714 27,371 64,868 27,973 43,312 48,627 212,151 39,512 6,354 15,289 27,798 5,922 94,875 33,336 269 735 883 752 211,857 161,928 393,764 451,272 724,834 35,975 1,943,655 283 (b) Main product and service lines: Products and Services Specialty plant nutrition - Sodium Nitrates -Potassium nitrate and sodium potassium nitrate - Specialty Blends - Other specialty fertilizers Iodine and derivatives Lithium and derivatives Potassium Industrial chemicals Other - Services - Income from property leases - Income from subleases on right-of-use assets - Commodities -Other ordinary income of Commercial Offices Total 10) FINANCIAL REPORTS For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 701,688 18,291 424,041 163,033 96,323 334,657 383,373 209,294 160,608 27,571 3,241 1,457 176 11,938 10,759 723,920 20,679 457,477 153,739 92,025 371,020 505,714 212,151 94,875 35,975 3,410 1,438 261 16,176 14,690 1,817,191 1,943,655 284 25.2 Cost of sales Cost of sales broken down by nature of expense Nature of expense Raw materials and consumables used Classes of employee benefit expenses Depreciation expense Depreciation of Right-of-use Assets (contracts under IFRS 16) Amortization expense Investment plan expenses Provision for site closure Provision for materials, spare parts and supplies Contractors Operating leases Mining concessions Operations transport Freight / product transport costs Purchase of products from third parties Insurance CORFO rights and other agreements Export costs Expenses related to Variable Parts Leases (contracts under IFRS 16) Variation in inventory Variation in inventory provision Other Total 10) FINANCIAL REPORTS For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ (287,877) (178,956) (182,410) (5,814) (12,655) (14,286) (911) 640 (142,001) (57,461) (6,645) (68,730) (52,156) (224,115) (17,657) (74,418) (71,718) (1,133) 97,467 7,244 (271,912) (178,493) (188,157) (5,450) (5,102) (18,367) (911) (7,500) (120,793) (47,708) (7,856) (56,376) (46,264) (210,583) (16,968) (143,861) (75,908) (1,037) 52,557 17,107 (40,729) (1,334,321) (50,021) (1,383,603) 285 25.3 Other income Other income Discounts obtained from suppliers Fines charged to suppliers Taxes recovered Amounts recovered from insurance Overestimate of provisions for third-party obligations Sale of assets classified as properties, plant and equipment Options on mining rights Easements, pipelines and roads Mining licenses and notary costs reimbursed Total 25.4 Administrative expenses Administrative expenses Employee benefit expenses Marketing costs Amortization expenses Entertainment expenses Advisory services Lease of buildings and facilities Insurance Office expenses Contractors Depreciation of Right-of-use Assets (contracts under IFRS 16) Other expenses, by nature Total 10) FINANCIAL REPORTS For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 665 267 346 14,719 118 3,222 5,852 1,619 85 26,893 676 483 457 492 983 2,422 5,298 7,204 203 18,218 For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ (55,152) (2,377) (91) (4,858) (13,880) (3,111) (3,478) (6,204) (5,079) (2,617) (10,170) (107,017) (60,255) (3,911) (5) (5,783) (13,862) (3,653) (2,553) (7,327) (4,874) (2,501) (12,456) (117,180) 286 10) FINANCIAL REPORTS For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ (42) (42) (9,563) (1,658) (140) (283) (11,644) (69,965) (626) (314) (864) (5,262) (8,793) (2,102) (87,926) (99,612) (136) (136) (49) (913) (140) - (1,102) (9,277) (613) (145) (1,693) (5,537) (5,026) (2,466) (24,757) (25,995) (985) - 631 - (29) (383) 25.5 Other expenses Other expenses Depreciation and amortization expense Depreciation of assets not in use Subtotal Impairment losses (reversals of impairment losses) recognized in profit for the year Properties, plant and equipment Intangible assets other than goodwill Goodwill Amortization of intangible assets Subtotal Other expenses, by nature Legal expenses VAT and other unrecoverable taxes Fines paid Investment plan expenses Exploration expenses Donations Other operating expenses Subtotal Total 25.6 Other gains (losses) Other income (expenses) Adjust previous year application method of participation Losses in the sale of investments in associates Impairment of interests in associates Losses in the sale of investments in joint Ventures Others Total For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ (49) (11,830) 7,235 (481) (188) (5,313) 287 10) FINANCIAL REPORTS 25.7 (Impairment) /reversion of value of financial assets impairment losses Description (Impairment) /reversion of value of financial assets impairment losses (See Note 14.2) Totals 25.8 Summary of expenses by nature The following summary considers notes 25.2, 25.4 and 25.5 For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 4,684 4,684 (1,057) (1,057) Expenses by nature For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ (287,877) (234,108) (182,452) (8,431) (1,658) (9,563) (140) (13,029) (69,965) (15,150) (5,262) (911) 640 (147,080) (60,572) (6,645) (68,730) (52,156) (224,115) (74,418) (71,718) (1,133) (21,135) (13,880) 97,467 7,244 (76,173) (271,912) (238,748) (188,293) (7,951) (913) (49) (140) (5,107) (9,277) (20,060) (5,537) (911) (7,500) (125,667) (51,361) (7,856) (56,376) (46,264) (210,583) (143,861) (75,908) (1,037) (19,521) (13,862) 52,557 17,107 (87,748) (1,540,950) (1,526,778) Raw materials and consumables Classes of Employee Benefit Expenses Depreciation and amortization expense Depreciation expense Depreciation of Right-of-use Assets Impairment of Value Properties, plant and equipment Goodwill Amortization expense Legal expenses Investment plan expenses Exploration expenses Provision for site closure Provision for materials, spare parts and supplies Contractors Operation leases Mining concessions Operation transport Freight and product transport costs Purchase of products from third parties CORFO rights y other agreements Export costs Expenses related to Variable Parts Leases (IFRS 16) Insurance Consultant and advisor services Variation in gross inventory Variation in provision on product inventory Other expenses Total expenses by nature 288 25.9 Finance expenses Finance expenses Interest expense from bank borrowings and overdrafts Interest expense from bonds Interest expense from loans Capitalized interest expenses Financial expenses for restoration and rehabilitation provisions Interest on lease agreement Other finance costs Total 25.10 Finance income Finance income Interest from term deposits Interest from marketable securities Interest from maintenance of minimum bank balance in current account Other finance income Other finance interest Total 10) FINANCIAL REPORTS For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ (2,797) (87,030) (1,598) 8,462 2,947 (1,133) (1,050) (82,199) For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 10,260 2,147 18 1,031 259 13,715 (2,133) (72,984) (2,682) 7,841 (4,417) (1,535) (1,029) (76,939) 15,345 6,765 - 4,130 49 26,289 289 10) FINANCIAL REPORTS Note 26 Reportable segments 26.1 Reportable segments (a) General information: The amount of each item presented in each operating segment is equal to that reported to the highest authority that makes decisions regarding the operation, in order to decide on the allocation of resources to the defined segments and to assess its performance. These operating segments mentioned are consistent with the way the Company is managed and how results will be reported by the Company. These segments reflect separate operating results that are regularly reviewed by the executive responsible for operational decisions in order to make decisions about the resources to be allocated to the segment and assess its performance (See Note 26.2). The performance of each segment is measured based on net income and revenues. Inter-segment sales are made using terms and conditions at current market rates. (b) Factors used to identify segments on which a report should be presented: The segments covered in the report are strategic business units that offer different products and services. These are managed separately because each business requires different technology and marketing strategies. (c) Description of the types of products and services from which each reportable segment obtains its income from ordinary activities The operating segments, which obtain income from ordinary activities, generate expenses and have its operating results reviewed on a regular basis by the highest authority who makes decisions regarding operations, relate to the following groups of products: 1. 2. 3. 4. 5. 6. Specialty plant nutrients Iodine and its derivatives Lithium and its derivatives Industrial chemicals Potassium Other products and services (d) Description of income sources for all the other segments Information regarding assets, liabilities, profits and expenses that cannot be assigned to the segments indicated above, due to the nature of production processes, is included under the "Unallocated amounts” category of the disclosed information. 290 10) FINANCIAL REPORTS (e) Description of the nature of the differences between measurements of results of reportable segments and the result of the entity before the expense or income tax expense of incomes and discontinued operations The information reported in the segments is extracted from the Company’s consolidated financial statements and therefore there is no need to prepare reconciliations between the data mentioned above and those reported in the respective segments, according to what is stated in paragraph 28 of IFRS 8, "Operating Segments". For the allocation of inventory valuation costs, we identify the direct expenses (can be directly allocated to products) and the common expenses (belong to coproduction processes, for example common leaching expenses for production of Iodine and Nitrates), Direct costs are directly allocated to the product and the common costs are distributed according to percentages that consider different variables in their determination, such as margins, rotation of inventories, revenue, production and etc. The allocation of other common costs that are not included in the inventory valuation process, but go straight to the cost of sales, use similar criteria: the costs associated with a product or sales in particular are assigned to that particular product or sales, and the common costs associated with different products or business lines are allocated according to the sales. (f) Description of the nature of the differences between measurements of assets of reportable segments and the Company´s assets Assets are not shown classified by segments, as this information is not readily available, some of these assets are not separable by the type of activity by which they are affected since this information is not used by management in decision-making with respect to resources to be allocated to each defined segment. All assets are disclosed in the "unallocated amounts" category. (g) Description of the nature of the differences between measurements of liabilities of reportable segments and the Company’s liabilities Liabilities are not shown classified by segments, as this information is not readily available, some of these liabilities are not separable by the type of activity by which they are affected, since this information is not used by management in decision-making regarding resources to be allocated to each defined segment. All liabilities are disclosed in the "unallocated amounts" category. 291 26.2 Reportable segment disclosures: Operating segment items as of December 31, 2020 Specialty plant nutrients Iodine and its derivatives Lithium and its derivatives Industrial chemicals Potassium Other products and services Reportable segments Operating segments Unallocated amounts Total as of December 31, 2020 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 10) FINANCIAL REPORTS Revenue 701,688 334,657 383,373 160,608 209,294 27,571 1,817,191 1,817,191 - - - - - - - - 701,688 334,657 383,373 160,608 209,294 27,571 1,817,191 1,817,191 - - - 1,817,191 - 1,817,191 (537,801) (168,499) (297,048) (119,092) (187,019) (24,862) (1,334,321) (1,334,321) - (1,334,321) - - - - - - - - - - - - - - - - (107,017) (107,017) (82,199) (82,199) (55,335) (40,687) (56,092) (14,136) (34,570) (3,092) (203,912) (203,912) - (203,912) - - - - - - - - 8,940 8,940 Revenues from transactions with other operating segments of the same entity Revenues from external customers and transactions with other operating segments of the same entity Costs of sales Administrative expenses Finance expense Depreciation and amortization expense The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method Income (loss) before taxes 163,887 166,158 86,325 41,516 22,275 2,709 482,870 482,870 (244,332) 238,538 Income tax expense Net income (loss) Assets Equity-accounted investees Incorporation of non-current assets other than financial instruments, deferred tax assets, net defined benefit assets and rights arising from insurance contracts Liabilities Impairment loss recognized in profit or loss Reversal of impairment losses recognized in profit or loss for the period Cash flows from (used in) operating activities Cash flows from (used in) investing activities Cash flows from (used in) financing activities - - - - - - - - (70,179) 163,887 166,158 86,325 41,516 22,275 2,709 482,870 482,870 (314,511) (70,179) 168,359 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4,818,463 4,818,463 85,993 85,993 358,009 358,009 2,655,885 4,684 2,655,885 4,684 (11,644) (11,644) 182,234 182,234 (167,091) (167,091) (94,132) (94,132) - - - - - - - 292 Operating segment items as of December 31, 2019 Specialty plant nutrients Iodine and its derivatives Lithium and its derivatives Industrial chemicals Potassium Other products and services Reportable segments Operating segments Unallocated amounts Total as of December 31, 2019 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 10) FINANCIAL REPORTS Revenue 723,920 371,020 505,714 94,875 212,151 35,975 1,943,655 1,943,655 Revenues from transactions with other operating segments of the same entity Revenues from external customers and transactions with other operating segments of the same entity Costs of sales Administrative expenses Finance expense Depreciation and amortization expense The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method - - - - - - - - 723,920 371,020 505,714 94,875 212,151 35,975 1,943,655 1,943,655 (573,808) (230,468) (306,250) (63,590) (176,199) (33,288) (1,383,603) (1,383,603) - - - - - - - - - - - - - - - - (117,180) (117,180) (76,939) (76,939) (67,700) (43,336) (45,238) (6,854) (37,691) (532) (201,351) (201,351) - (201,351) - - - - - - - - 9,786 9,786 - - - - 1,943,655 - 1,943,655 (1,383,603) Income tax expense, continuing operations 150,112 140,552 199,464 31,285 35,952 2,687 560,052 560,052 (169,430) 390,622 Income tax expense Net income (loss) Assets Equity-accounted investees Incorporation of non-current assets other than financial instruments, deferred tax assets, net defined benefit assets and rights arising from insurance contracts Liabilities Impairment loss recognized in profit or loss Reversal of impairment losses recognized in profit or loss for the period Cash flows from (used in) operating activities Cash flows from (used in) investing activities Cash flows from (used in) financing activities - - - - - - - - (110,019) (110,019) 150,112 140,552 199,464 31,285 35,952 2,687 560,052 560,052 (279,449) 280,603 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4,684,151 4,684,151 109,435 109,435 110,021 110,021 2,549,679 2,549,679 (1,057) (1,102) (1,057) (1,102) 426,971 426,971 (485,471) (485,471) 105,896 105,896 293 10) FINANCIAL REPORTS 26.3 Statement of comprehensive income classified by reportable segments based on groups of products Items in the statement of comprehensive income as of December 31, 2020 Specialty plant nutrients Iodine and its derivatives Lithium and its derivatives Industrial chemicals Potassium Other products and services Corporate Unit Total segments and Corporate unit Revenue Costs of sales Gross profit Other incomes by function Administrative expenses Other expenses by function Impairment of gains and review of impairment losses (impairment losses) determined in accordance with IFRS 9 Other gains (losses) Financial income Financial costs interest in the profit or loss of associates and joint ventures accounted for by the equity method Exchange differences Profit (loss) before taxes Income tax expense Profit (loss) from continuing operations Profit (loss) from discontinued operations Profit (loss) Profit, attributable to Profit (loss) attributable to the controller´s owners Profit (loss) attributable to the non-controllers Profit ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 701,688 (537,801) 163,887 334,657 (168,499) 166,158 383,373 (297,048) 86,325 160,608 (119,092) 41,516 209,294 (187,019) 22,275 27,571 (24,862) 2,709 - - - - - - - - - - - - - - - - - - 163,887 166,158 - - 163,887 166,158 - - 163,887 166,158 - - - - - - - - - - - - - - - 86,325 - 86,325 - 86,325 - - - - - - - - - - - - 41,516 - 41,516 - 41,516 - - - - - - - - - - - - 22,275 - 22,275 - 22,275 - - - - - - - - - - - - 2,709 - 2,709 - 2,709 - - - - - - 26,893 (107,017) (99,612) 4,684 (5,313) 13,715 (82,199) 8,940 (4,423) (244,332) (70,179) (314,511) - 1,817,191 (1,334,321) 482,870 26,893 (107,017) (99,612) 4,684 (5,313) 13,715 (82,199) 8,940 (4,423) 238,538 (70,179) 168,359 - (314,511) 168,359 164,518 3,841 168,359 164,518 3,841 168,359 294 10) FINANCIAL REPORTS Items in the statement of comprehensive income as of December 31, 2019 Specialty plant nutrients Iodine and its derivatives Lithium and its derivatives Industrial chemicals Potassium Other products and services Corporate Unit Total segments and Corporate unit Revenue Cost of sales Gross profit Other incomes by function Administrative expenses Other expenses by function Impairment of gains and review of impairment losses (impairment losses) determined in accordance with IFRS 9 Other gains (losses) Financial income Financial costs interest in the profit or loss of associates and joint ventures accounted for by the equity method Exchange differences Profit (loss) before taxes Income tax expense Profit (loss) from continuing operations Profit (loss) from discontinued operations Profit (loss) Profit (loss), attributable to Profit (loss) attributable to the controller´s owners Profit (loss) attributable to the non-controllers Profit (loss) ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 723,920 (573,808) 150,112 371,020 (230,468) 140,552 505,714 (306,250) 199,464 94,875 (63,590) 31,285 212,151 (176,199) 35,952 35,975 (33,288) 2,687 - - - - - - - - - - - - - - - - - - - - - - - - - - - 150,112 140,552 199,464 - - - 150,112 140,552 199,464 - - - 150,112 140,552 199,464 - - - - - - - - - - - - - - - - - - 31,285 - 31,285 - 31,285 - - - - - - - - - - - - 35,952 - 35,952 - 35,952 - - - - - - - - - - - - 2,687 - 2,687 - 2,687 - - - - - - 18,218 (117,180) (25,995) (1,057) (383) 26,289 1,943,655 (1,383,603) 560,052 18,218 (117,180) (25,995) (1,057) (383) 26,289 (76,939) (76,939) 9,786 9,786 (2,169) (169,430) (110,019) (279,449) - (2,169) 390,622 (110,019) 280,603 - (279,449) 280,603 278,115 2,488 280,603 278,115 2,488 280,603 295 10) FINANCIAL REPORTS 26.4 Disclosures on geographical areas As indicated in paragraph 33 of IFRS 8, the entity discloses geographical information on its revenue from operating activities with external customers and from non-current assets that are not financial instruments, deferred income tax assets, assets related to post-employment benefits or rights derived from insurance contracts. 26.5 Disclosures on main customers With respect to the degree of dependency of the Company on its customers, in accordance with paragraph 34 of IFRS 8, the Company has no external customers who individually represent 10% or more of its revenue. 296 10) FINANCIAL REPORTS 26.6 Segments by geographical areas Items as of December 31, 2020 Chile Latin America and the Caribbean Europe North America Asia and others Total Revenue Investment accounted for under the equity method Intangible assets other than goodwill Goodwill Property, plant and equipment, net Right-of-use assets Other non-current assets Non-current assets ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 153,745 - 95,934 23,065 1,667,824 23,461 19,377 1,829,661 159,990 - 565 - 642 2,298 17 3,522 380,126 41,273 825 18,901 12,592 2,428 7 76,026 427,572 14,468 2,274 - 3,494 1,776 2,641 24,653 695,758 30,252 78,809 - 52,767 61 - 161,889 1,817,191 85,993 178,407 41,966 1,737,319 30,024 22,042 2,095,751 Items as of December 31, 2019 Chile Latin America and the Caribbean Europe North America Asia and others Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Revenue Investment accounted for under the equity method Intangible assets other than goodwill Goodwill Property, plant and equipment, net Right-of-use assets Other non-current assets Non-current assets 211,857 - 106,910 23,205 1,526,919 29,427 20,321 1,706,782 393,764 42,243 1,397 11,521 3,424 2,817 4 61,406 451,272 14,669 2,683 - 6,250 2,083 (624) 25,061 724,834 52,523 76,948 - 32,800 103 - 1,943,655 109,435 188,358 34,726 1,569,906 37,164 19,729 162,374 1,959,318 161,928 - 420 - 513 2,734 28 3,695 297 26.7 Property, plant and equipment classified by geographical areas The company's main production facilities are located near their mines and extraction facilities in northern Chile. The following table presents the main production facilities as of December 31, 2020 and 2019: Location 10) FINANCIAL REPORTS Pedro de Valdivia - - María Elena - Coya Sur - Nueva Victoria - - - Tocopilla Salar de Atacama Salar del Carmen 298 10) FINANCIAL REPORTS Note 27 Effect of fluctuations in foreign currency exchange rates a) Foreign currency exchange differences recognized in profit or loss and other comprehensive income: Foreign currency exchange differences recognized in profit or loss and other comprehensive income Conversion foreign exchange gains (losses) recognized in the result of the year Conversion foreign exchange reserves Conversion foreign exchange reserves attributable to the owners of the controlling entity Conversion foreign exchange reserves attributable to the non-controlling entity Total b) Reserves for foreign currency exchange differences: As of December 31, 2020, and 2019, are detailed as follows: Details Changes in equity generated by the equity method value through conversion: Comercial Hydro S.A. SQMC Internacional Ltda. Proinsa Ltda. Comercial Agrorama Ltda. Isapre Norte Grande Ltda. Almacenes y Depósitos Ltda. Sacal S.A. Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A. Agrorama S.A. Doktor Tarsa SQM Vitas Fzco Ajay Europe SQM Eastmed Turkey Doctochem Coromandel SQM India SQM Italia SRL SQM Oceanía Pty Ltd. SQM Indonesia S.A. Abu Dhabi Fertillizers Industries WWL. SQM Vitas Holland SQM Thailand Limited SQM Europe SQM Australia Pty Ltd. Pavoni & C. Spa Terra Tarsa BV Plantacote NV Doktolab Tarim Arastirma San. Kore Potash PLC (a) SQM Colombia SAS Total 299 As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ (4,423) 14,176 (176) 14,000 (2,169) 562 225 787 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 1,004 1,004 (9) (10) (19) (14) 211 (3) (13) 92 - (3,736) (693) - - - - (579) (124) 372 99 (68) (1,983) (4,052) 164 - - - (1,128) (80) (11,569) (9) (10) 33 (44) 142 (3) (19) 231 (13,811) (2,267) (1,449) (155) 7 (431) (236) (634) (124) 372 (197) (68) (1,983) (4,035) (185) 116 (16) (54) (1,754) (166) (25,745) 10) FINANCIAL REPORTS c) Functional and presentation currency The functional currency of these companies corresponds to the currency of the country of origin of each entity, and its presentation currency is the dollar. d) Reasons to use one presentation currency and a different functional currency - A relevant portion of the revenues of these subsidiaries are associated with the local currency. - The cost structure of these companies is affected by the local currency. 300 10) FINANCIAL REPORTS Note 28 Disclosures on the effects of fluctuations in foreign currency exchange rates a) Assets held in foreign currency subject to fluctuations in exchange rates are detailed as follows: Class of Asset Currency As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents Subtotal cash and cash equivalents Other current financial assets Other current financial assets Other current financial assets Subtotal other current financial assets Other current non-financial assets Other current non-financial assets Other current non-financial assets Other current non-financial assets Other current non-financial assets Other current non-financial assets Other current non-financial assets Other current non-financial assets Other current non-financial assets Other current non-financial assets Other current non-financial assets Other current non-financial assets Other current non-financial assets Subtotal other non-financial current assets Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables Subtotal trade and other receivables Receivables from related parties Receivables from related parties Subtotal receivables from related parties 454,402 - 7,190 11,597 17,144 19 1,411 6 1,378 3 - 1,646 14,286 16 3 1 509,102 145,893 - 202,176 348,069 20,645 224 - 53 27,837 1,661 1,531 70 4,488 70 157 646 17 57,399 230,214 1 23 545 47,133 22,882 22,868 682 355 533 1,167 23,010 589 12,504 2,675 25 365,206 61,379 1,222 62,601 558,572 3 8,240 2,484 3,131 3 8,492 6 2,103 4 - 1,559 3,929 - 3 1 588,530 127,889 36,896 340,705 505,490 16,535 285 2 31 24,374 326 3,055 - 2,629 22 174 3,119 - 50,552 225,554 6 19 504 56,023 3,340 24,925 148 211 1,193 1,695 66,266 801 15,900 2,557 - 399,142 60,135 1,092 61,227 USD ARS CLP CNY EUR GBP AUD INR MXN PEN AED JPY ZAR KRW IDR PLN USD CLF CLP USD AUD BRL CLF CLP CNY EUR COP MXN THB JPY ZAR SEK USD PEN BRL CLF CLP CNY EUR GBP MXN AED THB JPY AUD ZAR COP SEK USD EUR 301 Class of assets Currency 10) FINANCIAL REPORTS As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ Current inventories Subtotal Current Inventories Current tax assets Current tax assets Current tax assets Current tax assets Current tax assets Current tax assets Current tax assets Current tax assets Current tax assets Subtotal current tax assets Non-current assets or groups of assets classified as held for sale Subtotal Non-current assets or groups of assets classified as held for sale Total current assets Other non-current financial assets Other non-current financial assets Other non-current financial assets Subtotal Other non-current financial assets Other non-current non-financial assets Other non-current non-financial assets Other non-current non-financial assets Other non-current non-financial assets Other non-current non-financial assets Subtotal Other non-current non-financial assets Other receivables, non-current Other receivables, non-current Other receivables, non-current Other receivables, non-current Subtotal Other receivables, non-current Investments classified using the equity method of accounting Investments classified using the equity method of accounting Investments classified using the equity method of accounting Investments classified using the equity method of accounting Investments classified using the equity method of accounting Investments classified using the equity method of accounting Subtotal Investments classified using the equity method of accounting Intangible assets other than goodwill Intangible assets other than goodwill Intangible assets other than goodwill Intangible assets other than goodwill Intangible assets other than goodwill Subtotal intangible assets other than goodwill Purchases goodwill, gross Purchases goodwill, gross Purchases goodwill, gross Subtotal Purchases goodwill, gross Property, plant and equipment Property, plant and equipment Property, plant and equipment Property, plant and equipment Property, plant and equipment Property, plant and equipment Property, plant and equipment Property, plant and equipment Subtotal property, plant and equipment Right-of-use assets Right-of-use assets Right-of-use assets Right-of-use assets Subtotal Right-of-use assets Current tax assets, non-current Subtotal Current tax assets, non-current Total non-current assets Total assets 302 USD USD ARS CLP EUR MXN PEN ZAR COP THB USD USD CLP JPY USD BRL COP EUR CLP USD CLF MXN CLP USD TRY AED EUR INR THB USD MXN CLP EUR CNY USD CLP EUR USD CLP EUR AED BRL MXN COP KRW USD EUR AED MXN USD 1,093,028 1,093,028 128,529 - 3,015 218 - 4 26 417 15 132,224 1,629 1,629 2,569,258 51,828 20 77 51,925 21,236 17 - 7 782 22,042 10,061 152 102 850 11,165 23,417 792 47,774 11,082 1,304 1,624 85,993 176,282 1,025 182 696 222 178,407 34,438 - 7,528 41,966 1,719,358 3,237 10,954 923 111 2,494 120 122 1,737,319 25,238 2,428 60 2,298 30,024 90,364 90,364 2,249,205 4,818,463 983,338 983,338 87,509 1 1,623 61 1,806 - 139 294 - 91,433 2,454 2,454 2,682,166 8,687 20 71 8,778 19,101 22 6 4 596 19,729 522 165 43 980 1,710 57,777 26,624 9,111 14,315 1,568 40 109,435 185,951 1,137 136 1,134 - 188,358 34,438 140 148 34,726 1,556,160 3,294 4,756 - - 5,588 108 - 1,569,906 37,164 - - - 37,164 32,179 32,179 2,001,985 4,684,151 10) FINANCIAL REPORTS Class of liability Currency Up to 90 days As of December 31, 2020 As of December 31, 2019 More than 90 days to 1 year Total Up to 90 days More than 90 days to 1 year ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Current liabilities Other current financial liabilities Other current financial liabilities Other current financial liabilities Subtotal other current financial liabilities Lease liabilities, current Lease liabilities, current Lease liabilities, current Subtotal Lease liabilities, current Trade and other payables Trade and other payables Trade and other payables Trade and other payables Trade and other payables Trade and other payables Trade and other payables Trade and other payables Trade and other payables Trade and other payables Trade and other payables Trade and other payables Trade and other payables Trade and other payables Trade and other payables Subtotal trade and other payables Trade payables due to related parties, current Trade payables due to related parties, current Subtotal Trade payables due to related parties, current Other current provisions Other current provisions Other current provisions Other current provisions Subtotal other current provisions USD CLF BRL USD MXN EUR USD CLF BRL THB CLP CNY EUR GBP INR MXN PEN AUD ZAR AED COP USD AUD USD ARS CLP EUR 4,676 329 - 5,005 4,750 416 362 5,528 - - - - - - - - - - - - - - - - 282 - 282 698 - - - 698 47,894 21,061 - 68,955 4,750 416 362 5,528 83,425 123 9 30 73,857 1,323 40,280 18 1 584 5 2,935 1,168 - 175 203,933 282 324 606 103,950 - 216 - 104,166 20,582 19,518 11 40,111 - - - - 44,146 - 10 53 73,703 - 58,538 17 1 5,122 5 4,442 2,260 188 192 188,677 475 - 475 109,650 7 82 6 109,745 250,694 323 - 251,017 7,694 - - 7,694 - - - - 17,108 - 5 - - - - - - - - 17,113 - - - 820 - - - 820 43,218 20,732 - 63,950 - - - - 83,425 123 9 30 73,857 1,323 40,280 18 1 584 5 2,935 1,168 - 175 203,933 - 324 324 103,252 - 216 - 103,468 303 Total ThUS$ 271,276 19,841 11 291,128 7,694 - - 7,694 44,146 - 10 53 90,811 - 58,543 17 1 5,122 5 4,442 2,260 188 192 205,790 475 - 475 110,470 7 82 6 110,565 Class of liability Currency Up to90 days 91 days to 1 year Total Up to90 days 91 days to 1 year Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ As of December 31, 2020 As of December 31, 2019 10) FINANCIAL REPORTS Current tax liabilities Current tax liabilities Current tax liabilities Current tax liabilities Subtotal current tax liabilities Provisions for employee benefits, current Provisions for employee benefits, current Provisions for employee benefits, current Provisions for employee benefits, current Provisions for employee benefits, current Subtotal Provisions for employee benefits, current Other current non-financial liabilities Other current non-financial liabilities Other current non-financial liabilities Other current non-financial liabilities Other current non-financial liabilities Other current non-financial liabilities Other current non-financial liabilities Other current non-financial liabilities Other current non-financial liabilities Other current non-financial liabilities Other current non-financial liabilities Other current non-financial liabilities Subtotal other current non-financial liabilities Total current liabilities USD CLP EUR MXN USD AUD CLP THB MXN USD THB BRL CLP CNY EUR MXN JPY PEN ZAR COP ARS 20,981 61 642 959 22,643 6,011 - - - - 6,011 397 - - 792 - 119 53 - - - - 117 1,478 41,645 20,981 61 642 959 22,643 8,992 58 3 - 43 9,096 52,392 - 2 7,056 60 1,032 174 52 70 - - 117 60,955 475,882 2,863 - - - 2,863 12,486 - - - - 12,486 117,136 30 3 5,969 - 842 129 21 70 10 - 20 124,230 478,587 14,994 17 - - 15,011 3,901 - - - - 3,901 154 - - 2,439 - - 64 12 - - - - 2,669 298,225 17,857 17 - - 17,874 16,387 - - - - 16,387 117,290 30 3 8,408 - 842 193 33 70 10 - 20 126,899 776,812 - - - - - 2,981 58 3 - 43 3,085 51,995 - 2 6,264 60 913 121 52 70 - - - 59,477 434,237 304 10) FINANCIAL REPORTS Class of liability Currency Over 1 year to 2 years Over 2 years to 3 years Over 3 years to 4 years Over 4 years to 5 years Over 5 years Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ As of December 31, 2020 Non-current liabilities Other non-current financial liabilities Other non-current financial liabilities Subtotal Other non-current financial liabilities Non-current lease liabilities Non-current lease liabilities Non-current lease liabilities Non-current lease liabilities Subtotal non-current lease liabilities Non-current Trade and other payables Subtotal Non-current Trade and other payables Other non-current provisions Subtotal Other non-current provisions Deferred tax liabilities Subtotal Deferred tax liabilities Provisions for employee benefits, non-current Provisions for employee benefits, non-current Provisions for employee benefits, non-current Provisions for employee benefits, non-current Subtotal Provisions for employee benefits, non-current Total non-current liabilities Total liabilities USD CLF USD UF MXN JPY USD USD USD USD CLP MXN JPY - - - 1,977 15,258 2,189 1,964 21,388 - - - - - - 31,585 610 - 4 32,199 53,587 312,730 - 312,730 - - - - - 4,027 4,027 36,391 36,391 919 919 - - - - - 354,067 69,376 - 69,376 - - - - - - - - - - - - - - - - 69,376 248,664 - 248,664 - - - - - - - - - - - - - - - - 248,664 838,399 430,344 1,268,743 4,158 - - - 4,158 - - 26,226 26,226 155,182 155,182 - - - - - 1,454,309 1,469,169 430,344 1,899,513 6,135 15,258 2,189 1,964 25,546 4,027 4,027 62,617 62,617 156,101 156,101 31,585 610 - 4 32,199 2,180,003 2,655,885 305 10) FINANCIAL REPORTS Class of liability Currency Over 1 year to 2 years Over 2 years to 3 years Over 3 years to 4 years Over 4 years to 5 years Over 5 years Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ As of December 31, 2019 Non-current liabilities Other non-current financial liabilities Other non-current financial liabilities Subtotal Other non-current financial liabilities Non-current lease liabilities Subtotal non-current lease liabilities Non-current Trade and other payables Subtotal Non-current Trade and other payables Other non-current provisions Subtotal Other non-current provisions Deferred tax liabilities Subtotal Deferred tax liabilities Provisions for employee benefits, non-current Provisions for employee benefits, non-current Provisions for employee benefits, non-current Provisions for employee benefits, non-current Subtotal Provisions for employee benefits, non-current Total non-current liabilities Total liabilities USD CLF USD USD USD USD USD CLP MXN JPY 89,896 - 89,896 - - - - 23,014 23,014 - - - - - - - 112,910 42,336 - 42,336 - - - - 167 167 - - - - - - - 42,503 313,749 - 313,749 - - - - - - - - - - - - - 313,749 13,749 - 13,749 - - - - 1,452 1,452 - - - - - - - 15,201 617,055 411,938 1,028,993 30,203 30,203 - - 10,057 10,057 183,411 183,411 34,884 519 236 201 35,840 1,288,504 1,076,785 411,938 1,488,723 30,203 30,203 - - 34,690 34,690 183,411 183,411 34,884 519 236 201 35,840 1,772,867 2,549,679 b) Effect of exchange rate changes on the statement of income Foreign currency exchange rate changes Profit (loss) in foreign currency Foreign currency translation reserve (*) Total For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ (4,423) 14,176 9,753 (2,169) 562 (1,607) (*) includes MUS$ 14,580, which were transferred through sale of Grupo Tarsa, SQM Eastmed and other smaller companies. The average and closing exchange rate for foreign currency is revealed in Note 3.3 306 Note 29 Income tax and deferred taxes Accounts receivable from taxes as of December 31, 2020 and December 31, 2019, are as follows: 10) FINANCIAL REPORTS 29.1 Current and non-current tax assets (a) Current Current tax assets Monthly provisional income tax payments, Chilean companies Monthly provisional income tax payments, foreign companies Corporate tax credits (1) 1st category tax absorbed by tax loss (2) Taxes in recovery process Total (b) Non-current Non-current tax assets Monthly provisional income tax payments, Chilean companies compensated by the specific tax on mining activity (Lithium) Specific tax on mining activities (IEAM) paid by Lithium (on consignment) Total (1) As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 37,123 1,265 1,566 2,322 89,948 132,224 47,283 124 1,262 916 41,848 91,433 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 6,398 83,966 90,364 6,398 25,781 32,179 These credits are available for Companies and are related to corporate tax payments in April of the following year. These credits include, among others, credits for training expenses (SENCE), credits for acquisition of fixed assets, donations and credits in Chile for taxes paid abroad. (2) This concept corresponds to the absorption of the tax losses determined by the company at the end of the year, which must be attributed to the dividends received during the year. 307 29.2 Current tax liabilities Current tax liabilities 1st Category income tax Foreign company income tax Article 21 single tax Total 10) FINANCIAL REPORTS As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 14,736 7,838 69 22,643 7,863 9,944 67 17,874 Income tax is calculated based on the profit or loss for tax purposes that is applied to the effective tax rate applicable in Chile. As established by Law No. 20,780 is 27%. The royalty is determined by applying the taxable rate to the net operating income obtained, according to the chart in force, the Company currently provisioned 5% for mining royalties that involve operations in the Salar de Atacama and 5.38% for caliche extraction operations. The income tax rate for the main countries where the Company operates is presented below: Country Income tax Income tax Spain Belgium Mexico United States South Africa 2020 2019 25% 25% 30% 25% 29.58% 30% 21% + 3,36% 21% + 3,25% 28% 28% 308 10) FINANCIAL REPORTS 29.3 Income tax and deferred taxes (a) Deferred tax assets and liabilities as of December 31, 2020 Description of deferred tax assets and liabilities as of December 31, 2020 Net liability position Assets ThUS$ Liabilities ThUS$ Unrealized loss Property, plant and equipment and capitalized interest Restoration and rehabilitation provision Manufacturing expenses Staff severance indemnities, unemployment insurance Vacation accrual Inventory provision Materials provision Forward Employee benefits Research and development expenses Bad debt provision Provision for legal complaints and expenses Loan acquisition expenses Financial instruments recorded at market value Specific tax on mining activity Tax loss benefit Other Foreign items (other) Balances to date Net balance 90,585 - 6,598 - - 6,138 22,200 8,812 - - - 5,072 19,637 - - - 844 1,454 - 161,340 - (187,168) - (107,215) (6,669) - - - - - (3,580) - - (5,212) (3,929) (3,014) - - (654) (317,441) (156,101) 309 (b) Deferred tax assets and liabilities as of December 31, 2019 Description of deferred tax assets and liabilities Unrealized loss Property, plant and equipment and capitalized interest Facility closure provision Manufacturing expenses Staff severance indemnities, unemployment insurance Vacation Inventory provision Materials provision Employee benefits Research and development expenses Bad debt provision Provision for legal complaints and expenses Loan acquisition expenses Financial instruments recorded at market value Specific tax on mining activity Tax loss benefit Other Foreign items (other) Balances to date Net balance 10) FINANCIAL REPORTS Net liability position Assets ThUS$ Liabilities ThUS$ 82,075 - 7,313 - - 5,591 23,885 7,982 2,689 - 3,542 2,546 - - - 2,296 - 311 138,230 - (197,167) - (106,420) (6,000) - - - - (3,533) - - (3,856) (1,287) (1,357) - (2,021) - (321,641) (183,411) 310 10) FINANCIAL REPORTS (c) Reconciliation of changes in deferred tax liabilities (assets) as of December 31, 2020 Reconciliation of changes in deferred tax liabilities (assets) Unrealized loss Property, plant and equipment and capitalized interest Facility closure provision Manufacturing expenses Staff severance indemnities, unemployment insurance Vacation accrual Inventory provision Materials provision Forward Employee benefits Research and development expenses bad debt provision Provision for legal complaints and expenses Loan approval expenses Junior mining companies (valued based on stock price) specific tax on mining activity Tax loss benefit Other Foreign items (other) Total temporary differences, unused losses and unused tax credits Deferred tax liability (asset) at beginning of period Deferred tax (expense) benefit recognized in profit (loss) for the year Deferred taxes related to items credited (charged) directly to equity Total increases (decreases) in deferred tax liabilities (assets) Deferred tax liability (asset) at end of period ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ (82,076) 197,167 (7,312) 106,420 6,000 (5,591) (23,885) (7,982) - (2,689) 3,534 (3,542) (2,546) 3,856 1,287 1,356 (2,296) 2,021 (311) (8,509) (9,999) 714 795 514 (547) 1,685 (830) 1,001 2,689 46 (1,530) (17,091) 1,356 - 1,668 1,452 (3,475) 965 - - - - 155 - - - (1,001) - - - - - 2,642 (10) - - - (8,509) (9,999) 714 795 669 (547) 1,685 (830) - 2,689 46 (1,530) (17,091) 1,356 2,642 1,658 1,452 (3,475) 965 (90,585) 187,168 (6,598) 107,215 6,669 (6,138) (22,200) (8,812) - - 3,580 (5,072) (19,637) 5,212 3,929 3,014 (844) (1,454) 654 183,411 (29,096) 1,786 (27,310) 156,101 311 10) FINANCIAL REPORTS (d) Reconciliation of changes in deferred tax liabilities (assets) as of December 31, 2019 Reconciliation of changes in deferred tax liabilities (assets) Unrealized loss Property, plant and equipment and capitalized interest Facility closure provision Manufacturing expenses Staff severance indemnities, unemployment insurance Vacation accrual Inventory provision Materials provision Forward Employee benefits Research and development expenses bad debt provisions Provision for legal complaints and expenses Loan approval expenses Financial instruments recorded at market value specific tax on mining activity Tax loss benefit Other Foreign items (other) Total temporary differences, unused losses and unused tax credits Deferred tax liability (asset) at beginning of period Deferred tax (expense) benefit recognized in profit (loss) for the year Deferred taxes related to items credited (charged) directly to equity Total increases (decreases) in deferred tax liabilities (assets) Deferred tax liability (asset) at end of period ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ (75,832) 196,843 (4,280) 103,760 5,679 (5,155) (28,155) (6,239) (2,169) (3,309) 2,216 (4,188) (4,013) 2,337 976 3,278 (1,124) (5,005) (259) 175,361 (6,243) 324 (3,033) 2,660 1,007 (436) 4,270 (1,743) (514) 620 1,317 646 1,467 1,519 - (1,905) (1,172) 7,026 (52) 5,758 - - - - (686) - - - 2,683 - - - - - 311 (16) - - - 2,292 (6,243) 324 (3,033) 2,660 321 (436) 4,270 (1,743) 2,169 620 1,317 646 1,467 1,519 311 (1,921) (1,172) 7,026 (52) 8,050 (82,075) 197,167 (7,313) 106,420 6,000 (5,591) (23,885) (7,982) - (2,689) 3,533 (3,542) (2,546) 3,856 1,287 1,357 (2,296) 2,021 (311) 183,411 (e) Deferred taxes related to benefits for tax losses The Company’s tax loss carryforwards were mainly generated by losses in Chile, which in accordance with current Chilean tax regulations have no expiration date. As of December 31, 2020, and December 31, 2019, tax loss carryforwards are detailed as follows: Deferred taxes related to benefits for tax losses Chile Foreign Total As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 818 26 844 2,296 - 2,296 The tax losses as of December 31, 2020 correspond mainly to SQM S.A., SQM Potasio S.A., SIT S.A., Orcoma SpA., and Orcoma Estudio SpA. The tax losses from foreign companies correspond mainly to SQM Africa Pty Ltd. And SQM (Shanghai) Chemicals. 312 10) FINANCIAL REPORTS (f) Movements in deferred tax assets and liabilities Movements in deferred tax assets and liabilities as of December 31, 2020 and December 31, 2019 are detailed as follows: Movements in deferred tax assets and liabilities Deferred tax assets and liabilities, net opening balance Increase (decrease) in deferred taxes in profit or loss Decrease in deferred taxes in equity Total (g) Disclosures on income tax (expenses) benefit Current and deferred tax (expenses) benefit are detailed as follows: Disclosures on income tax expense (benefit) Current income tax (expense) income Current tax expense Adjustments to prior year current income tax (expense) benefit Current income tax expense, net, total Deferred tax expense Deferred tax expense relating to the creation and reversal of temporary differences Tax adjustments related to the creation and reversal of temporary differences from the previous year Deferred tax expense, net, total Income tax expense Assets (liabilities) As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ (183,411) 29,096 (1,786) (156,101) (175,361) (5,758) (2,292) (183,411) (Expense) Income As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ (97,374) (1,901) (99,275) 26,219 2,877 29,096 (70,179) (116,483) 12,222 (104,261) 2,551 (8,309) (5,758) (110,019) 313 10) FINANCIAL REPORTS Tax (expenses) benefit for foreign and domestic parties are detailed as follows: Income tax (expense) benefit Current income tax benefit (expense) by foreign and domestic parties, net Current income tax expense, foreign parties, net Current income tax expense, domestic, net Current income tax expense, net, total Deferred tax benefit (expense) by foreign and domestic parties, net Current income tax benefit, foreign parties, net Current income tax benefit (expense), domestic, net Deferred tax expense, net, total Income tax expense (Expense) Income As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ (9,782) (89,493) (99,275) 10,284 18,812 29,096 (70,179) (7,394) (96,867) (104,261) 2,370 (8,128) (5,758) (110,019) (h) Equity interest in taxation attributable to equity-accounted investees The Company does not recognize any deferred tax liability in all cases of taxable temporary differences associated with investments in subsidiaries, branches and associated companies or interest in joint ventures, because as indicated in the standard, the following two conditions are jointly met: (i) the parent, investor or interest holder is able to control the time for reversal of the temporary difference; and (ii) It is more likely than not that the temporary difference will not be reversed in the foreseeable future. In addition, the Company does not recognize deferred income tax assets for all deductible temporary differences from investments in subsidiaries, branches and associated companies or interests in joint ventures because it is unlikely that they will meet the following requirements: (i) (ii) Temporary differences are reversed in a foreseeable future; and The Company has tax earnings, against which temporary differences can be used. 314 10) FINANCIAL REPORTS (i) Disclosures on the tax effects of other comprehensive income components: As of December 31, 2020 Income tax related to other income and expense components with a charge or credit to net equity Amount before taxes (expense) gain (Expense) income for income taxes Amount after taxes Gain (loss) from defined benefit plans Cash flow hedge Reserve for gains (losses) from financial assets measured at fair value through other comprehensive income Total ThUS$ ThUS$ ThUS$ 974 (3,706) 9,785 7,053 (145) 1,001 (2,642) (1,786) 829 (2,705) 7,143 5,267 As of December 31, 2019 Income tax related to other income and expense components with a charge or credit to net equity Amount before taxes (expense) gain (Expense) income for income taxes Amount after taxes Gain (loss) from defined benefit plans Cash flow hedge Reserve for gains (losses) from financial assets measured at fair value through other comprehensive income Total ThUS$ ThUS$ ThUS$ (3,310) 1,908 1,152 (250) 702 (2,683) (311) (2,292) (2,608) (775) 841 (2,542) (j) Explanation of the relationship between (expense) benefit for tax purposes and accounting income. Based on IAS 12, paragraph 81, letter “c”, the company has estimated that the method that discloses the most significant information for users of the financial statements is the numeric conciliation between the tax expense (income) and the result of multiplying the accounting profit by the current rate in Chile. The aforementioned choice is based on the fact that the Company and subsidiaries established in Chile generate a large part of the Company’s tax expense (benefit). The amounts provided by subsidiaries established outside Chile have no relative importance in the overall context. Reconciliation between the tax income (expense) and the tax calculated by multiplying accounting income by the Chilean corporate income tax rate. Income Tax Expense (Benefit) Consolidated income before taxes Income tax rate in force in Chile Tax expense using the statutory tax rate Net effect of royalty tax payments Effect of fines affected by article 21 and passive income Tax effect of revenue from regular activities exempt from taxation Tax rate effect of non-tax-deductible expenses for determining taxable profit (loss) Tax effect of tax rates supported abroad Effects of changes resulting from classifying a permanent item as a temporary one Other tax effects from reconciliation between accounting gains and tax expenses (Expense) Benefit As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 238,538 27% (64,405) (4,659) (1,804) 1,786 (2,987) (2,077) 4,826 (859) 390,622 27% (105,468) (4,314) (724) 2,376 (2,128) (252) - 491 Tax expense using the effective tax rate (70,179) (110,019) 315 10) FINANCIAL REPORTS (k) Tax periods potentially subject to verification: The Group’s Companies are potentially subject to income tax audits by tax authorities in each country These audits are limited to a number of interim tax periods, which, in general, when they elapse, give rise to the expiration of these inspections. Tax audits, due to their nature, are often complex and may require several years. Below, we provide a summary of tax periods that are potentially subject to verification, in accordance with the tax regulations in force in the country of origin: (i) Chile According to article 200 of Decree Law No 830, the taxes will be reviewed for any deficiencies in terms of payment and to generate any taxes that might arise. There is a 3-year prescriptive period for such review, dating from the expiration of the legal deadline when payment should have been made. This prescriptive period can be extended to 6 years for the revision of taxes subject to declaration, when such declaration has not been filed or has been presented with maliciously false information. (ii) United States In the United States, the tax authority may review tax returns for up to 3 years from the expiration date of the tax return. In the event that an omission or error is detected in the tax return of sales or cost of sales, the review can be extended for a period of up to 6 years. (iii) Mexico: In Mexico, the tax authority can review tax returns up to 5 years from the expiration date of the tax return. (iv) Spain: In Spain, the tax authority can review tax returns up to 4 years from the expiration date of the tax return. A subsidiary of the Company, SQM Iberian S.A., is being reviewed by the Spanish Tax Authority. This audit could involve adjustments to tax returns filed in Spain. (v) Belgium: In Belgium, the tax authority may review tax returns for up to 3 years from the expiration date of the tax return if no tax losses exist. In the event of detecting an omission or error in the tax return, the review can be extended for a period of up to 5 years. On December 31, 2019, a current tax of ThUS$ 1,068 was recognized, which corresponds to a difference in taxes in SQM Europe N.V. determined at the end of an audit of transfer prices in the 2017 trade year. (vi) South Africa: In South Africa, the tax authority may review tax returns for up to 3 years from the expiration date of the tax return. In the event that an omission or error in the tax return is detected, the review can be extended for a period of up to 5 years. A subsidiary of the Company, SQM Africa Pty., is being reviewed by the South African Tax Authority. This audit could involve adjustments to tax returns filed in South Africa. 316 10) FINANCIAL REPORTS Note 30 Assets held for sale The non-current assets held for sale and the components of the disposal groups classified as held for sale are presented in the Consolidated Statement of Financial Position under the item “Non-current assets or groups of assets classified as held for sale”. The following table shows the movements in assets held for sale: Assets held for sale Land Mining rights Total assets held for sale As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 1,493 136 1,629 2,454 - 2,454 317 10) FINANCIAL REPORTS Note 31 Events occurred after the reporting date 31.1 Authorization of the financial statements The consolidated financial statements of the Company and its subsidiaries, prepared for the period ended December 31, 2020, were approved and authorized for issuance by the Company´s Board of Directors on March 3, 2021. 31.2 Disclosures on events occurring after the reporting date The total financial impact of COVID-19 cannot be reasonably estimated at this time, due to uncertainty as to its severity and duration. It was anticipated that average sales volumes and prices will depend on the duration of the coronavirus in different markets, the efficiency of the measures implemented to contain the spread of the virus in each country, and the fiscal and national incentives that can be implemented in different jurisdictions to promote economic recovery. The Company continues to monitor and evaluate the spread of the coronavirus and its impact on our operations, business, financial condition and results of operations. On November 11, 2020, the DOJ presented a motion to dismiss the criminal information against the Company notified in Note 23. This motion was granted by the United States District Court for the District of Columbia on January 19, 2021. Note 23 contains further details. An extraordinary shareholders' meeting held on January 22, 2021 resolved, among other matters, to approve an increase in the Company’s capital of US$ 1,100,000,000 by issuing 22,442,580 Series B shares, to be offered preferentially and under the same conditions only to Series B shareholders. Pursuant to Article 69 N° 5 of Law 18,046 on Corporations, the approval of this resolution grants the dissenting Series A shareholders the right to withdraw from the Company, upon payment by the Company of the value of their shares. A dissenting shareholder will be considered to be a Series A shareholder who at the meeting has opposed the resolution giving the right to withdraw, or who did not attend the meeting, but expressed their dissent in writing to the Company within 30 days of the date of the extraordinary shareholders' meeting, which is by February 21, 2021. On January 7, 2021, Ocaña y Vega Limitada filed for arbitration against the Company to claim damages associated with the early termination of two construction contracts. The arbitration claim is valued at approximately ThUS$ 377. On January 25, 2020, a sub-contractor´s employee sued the Company for compensation for a work-related accident in the sum of approximately ThUS$718. On February 9, 2021, two of the Company´s subsidiaries signed an agreement to conclude a dispute related to sales contracts and share of the joint venture with Sichuan SQM Migao Chemical Fertilizers Co Ltd.The Company received US$ 11.5 million as a result of this settlement. On February 17, 2021, the Company reported that the Board of Directors approved the investment in the Mount Holland lithium project in Australia. This project is a joint venture with Wesfarmers Limited. The Company's share of the investment in the project is expected to reach approximately US$700 million between 2021 and 2025, according to information provided in the final feasibility study. On February 23, 2021, the Company informed the CMF that the declaratory public deed referred to in the extraordinary shareholders' meeting of the Company held on January 22, 2021, where it was agreed, among other matters, to increase the share capital by US$1,100,000,000, through the issuance of 22,442,580 Series B shares, to be issued, subscribed and paid within the term expiring on January 22, 2024, and which will be offered preferentially and under the same conditions to Series B assignees of the options and/or third parties, which was subject to the Resolutory Condition requiring the exercise of the aforementioned right to withdraw of more than 0.5% of the total Series A shares of the Company, all under the terms and conditions agreed at the Shareholders' Meeting. 318 10) FINANCIAL REPORTS The Declaratory Deed: (a) (b) (c) establishes the waiver by the Company's board of directors, at an extraordinary meeting held on February 20, 2021, of the Resolutory Condition; establishes that the legal term of 30 days for the exercise of the right to withdraw from the Capital Increase expired on February 21, 2021, and only one shareholder expressed their intention to exercise this right, for a total of 648 Series A shares, representing approximately 0.0004% of the total Series A shares. Therefore, the Resolutory Condition, had it not been for the waiver indicated above, would not have been fulfilled and would have deemed to have failed; and establishes that pursuant to the provisions of the Meeting: (i) the Capital Increase and related matters have become effective as of February 1, 2021, the date on which the minutes of the Meeting were legalized in a public deed; (ii) the Capital Increase and related matters have become final, since the Resolutory Condition was waived by the Company's board of directors and would have failed, in any case, as the right to withdraw was exercised for less than 0.5% of the total Series A shares within the legal term; and (iii) with the execution of the Declaratory Deed, the requirements and formalities contemplated in the Meeting were fully met. On March 3, 2021, the Board of Directors agreed to amend the general policy on regular transactions with related parties, approved at the meeting held on November 21, 2018, and it also approved a revised text of the policy, which is transcribed below: 1. Regular transactions between the Company and Soquimich Comercial S.A., Ajay SQM Chile S.A., Ajay North America, Ajay Europe SARL, SQM Vitas Fzco, SQM Vitas Holland, SQM Vitas Brasil Agroindustria, SQM Vitas Perú S.A.C., Abu Dhabi Fertilizer Industries WWL, Plantacote NV and Pavoni & C. SpA. are as follows: (a) (b) (c) (d) Any sale, marketing, distribution and supply of raw materials, by-products and products extracted, processed or marketed by the Company in any capacity by the aforementioned subsidiaries and affiliated companies. Any advisory services provided by the Company related to the activities referred to in (a) above, and the procurement of such services by the aforementioned subsidiaries and affiliated companies; legal, Any advisory services covering financial, accounting, administrative, infrastructure, advertising, IT, management, insurance, personnel selection, hiring, training and any general back office services provided by the Company, and the procurement of such services by the aforementioned subsidiaries and affiliated companies. taxation, Any working capital finance provided by the Company to the aforementioned subsidiaries and affiliated companies not exceeding US$ 5 million in a 12 consecutive month period, based on these subsidiaries as a whole. 2. 3. Any engineering, environmental and other specialized studies provided by the Company to study, develop and construct mines related to the Mt. Holland project, and all ancillary activities required to complete those studies are regular transactions between the Company and Covalent Lithium Pty Ltd. The following transactions with related parties may be performed without complying with the requirements and procedures of Article 147 of Corporation Law, if they are regular, ordinary and required for the Company's normal business: (a) Any procurement from Empresa Nacional de Telecomunicaciones S.A. and Entel PCS Telecomunicaciones S.A. of telecommunications, computer and technology services in general, including the purchase, sale, lease and supply of equipment and goods required to operate and maintain these services, for amounts not exceeding US$ 5 million over a 12 consecutive month period, and (b) Any procurement from Banco de Chile of any kind of financial or brokerage transactions, purchases and sales of foreign currencies and other usual treasury transactions. 319 10) FINANCIAL REPORTS 4. The Board of Directors also unanimously agreed to expressly adopt a generally applicable authorization that allows the Company to procure the following transactions (i) those that are not a material amount, and (ii) those between legal entities in which the Company directly or indirectly owns at least 95% of the counterparty, all without the need to comply with the requirements and procedures in paragraphs 1) to 7) of Article 147 of Corporation Law. The Board of Directors has defined transactions with related parties that are a material amount as (a) those that total over 3,000 UF over a 12 consecutive month period for directors, principal executives, their related persons, their spouses or relatives up to the second degree of consanguinity, and any entity controlled directly or indirectly by any of them, and (b) the threshold determined in accordance with paragraph a) of Article 147 of Corporation Law for all other counterparties. On March 3, 2021, the Board of Directors agreed to call an ordinary general shareholders' meeting for April 23, 2021. Management has no knowledge of other significant events occurring between December 31, 2020 and the date of issue of these consolidated financial statements, which could have a significant effect on these. 320 Report of Accounting Inspectors 10) FINANCIAL REPORTS 321 10) FINANCIAL REPORTS Reasoned Analysis of the Financial Situation 1 Analysis of the Consolidated Statements of Financial Position Consolidated Statements of Financial Position (in millions of US$) December 31, 2020 December 31, 2019 Total current assets Cash and cash equivalents Other current financial assets Accounts receivable (1) Current inventories Other current assets Total non-current assets Other non-current financial assets Investments in related companies Property, plant and equipment Right-of-use assets Other non-current assets Total assets Total current liabilities Other current financial liabilities Current lease liabilities Other liabilities Total non-current liabilities Other non-current financial liabilities Non-current lease liabilities Other non-current liabilities Total equity Equity attributable to the owners of the parent company Minority interests Total liabilities and equity Liquidity (2) 2,569.3 509.1 348.1 427.8 1,093.0 191.3 2,249.2 51.9 86.0 1,737.3 30.1 343.9 4,818.5 475.9 69.0 5.5 401.4 2,180.0 1,899.5 25.5 255.0 2,162.6 2,123.1 39.5 4,818.5 5.4 2,682.2 588.5 505.5 460.4 983.3 144.4 2,002.0 8.8 109.4 1,569.9 37.2 276.7 4,684.2 776.9 291.1 7.7 478.1 1,772.8 1,488.7 30.2 253.9 2,134.5 2,086.30 48.2 4,684.20 3.5 (1) Trade and other accounts receivable, current + Accounts receivable from related companies, current (2) Current assets / Current liabilities 322 10) FINANCIAL REPORTS 1.1 Analysis of Consolidated Statement of Financial Position As of December 31, 2020, the company’s total assets were MUS$ 4,818.5, which represents an increase of approximately 3% in comparison to MUS$ 4,684.2 as of December 31, 2019. This difference between the two periods is primarily due to the variation in the following items: Current assets decreased by approximately 4%, from MUS$ 2,682.2 registered at the close of the prior year to MUS$ 2,569.3 for the current period. • Cash and cash equivalents decreased by MUS$ 79.4 (13%), closing at MUS$ 509.1 on December 31. The account details can be found in Note No. 11. • Other current financial assets decreased by MUS$ 157.4 (31%), closing at MUS$ 348.1 on December 31. The account details can be found in Note No. 14. • Accounts receivable decreased by MUS$ 32.6 (7%), closing at MUS$ 427.8 on December 31. The account details can be found in Notes No. 13 and 14. • Current inventories increased by MUS$ 109.7 (11%), closing at MUS$ 1,093.0 on December 31. The account details can be found in Note No. 12. Non-current assets increased by approximately 12%, from MUS$ 2,002.0 registered at the close of the prior year to MUS$ 2,249.2 for the current quarter. • Other non-current financial assets increased by MUS$ 43.1 (492%), closing at MUS$ 51.9 on December 31. The account details can be found in Note No. 14. • Property, plant and equipment increased by MUS$ 167.4 (11%), closing at MUS$ 1,737.3 on December 31. The account details can be found in Note No. 17. As of December 31, 2020, the company’s total liabilities were MUS$ 2,655.9, which represents an increase of approximately 4% in comparison to MUS$ 2,549.7 as of December 31, 2019. This difference between periods is primarily due to the variation in the following items: Current liabilities decreased by approximately 39%, from MUS$ 776.8 registered at the close of December last year to MUS$ 475.9 for the current quarter. • Other current financial liabilities decreased by MUS$ 222.2 (76%), closing at MUS$ 69.0 on December 31. The account details can be found in Note No. 14. • Current lease liabilities decreased by MUS$ 2.2 (28%), closing at MUS$ 5.5 on December 31. The account details can be found in Note No. 15. • Other current liabilities decreased by MUS$ 76.6 (16%), closing at MUS$ 401.4 on December 31. The account details can be found in Notes No. 13, 14, 19, 20 and 29. Non-current liabilities increased by approximately 23%, from MUS$ 1,772.9 registered at the close of the prior year to MUS$ 2,180.0 for the current quarter. • Other non-current financial liabilities increased by MUS$ 410.8 (28%), closing at MUS$ 1,899.5 on December 31. The account details can be found in Note No. 14. • Non-current lease liabilities decreased by MUS$ 4.7 (15%), closing at MUS$ 25.5 on December 31. The account details can be found in Note No. 15. The consolidated financial statements of Sociedad Química y Minera de Chile S.A. and its subsidiaries have been prepared in accordance with the International Financial Reporting Standards (herein IFRS) and represent the comprehensive and explicit application without reserve of the cited international standards issued by the International 323 10) FINANCIAL REPORTS Accounting Standards Board (IASB). Should any discrepancies arise between IFRS and CMF instructions, the latter will prevail. These consolidated financial statements are a true reflection of the equity and financial situation of the company and the results of its operations, changes in the recognized income and expense statement and in the cash flow, which have arisen during the period ended on these dates. The main assets and liabilities have been valued in accordance with the following: Inventories: The Company measures inventories at the lower of the cost and net realizable value. The value of finished products and work in progress includes the direct cost of materials and, when applicable, labor costs, the indirect costs incurred in transforming raw materials into finished products, and general expenses incurred in carrying inventories to their current location and conditions. The method used to determine the cost of inventories is the weighted average cost. Commercial discounts, rebates obtained, and other similar entries are deducted in the determination of the acquisition value. The net realizable value represents the estimate of the sales price, less all the estimated costs involved in making the finished product and the costs that will be incurred in the commercialization, sales, and distribution processes. The Company conducts an evaluation of the net realizable value of inventories at the end of each year, recording an estimate with a charge to profit or loss when these are overvalued. When the circumstances that previously caused a decrease have ceased to exist, or when there is clear evidence of an increase in net realizable value due to a change in the economic circumstances or prices of primary raw materials, the previous estimate undergoes a modification. The valuation of obsolete, defective or slow-moving products has been reduced to its estimated realizable value. The provisions on company inventories have been constituted based on a technical study that covers the different variables that affect the products in stock (density, humidity, etc.). Raw materials, supplies and materials are recorded at the lower value between acquisition cost or market value. The acquisition cost is calculated according to the average annual price method. Property, plant and equipment: Tangible assets are valued at acquisition cost, net of accumulated depreciation and any impairment losses it may have experienced. 324 10) FINANCIAL REPORTS 1.1 Consolidated Income Statements Consolidated Income Statements (in millions of US$) Fourth quarter Accumulated as of December 31 2020 2019 2020 2019 Income 513.8 472.2 1,817.2 1,943.7 Lithium and Derivatives Specialty Plant Nutrition (1) Iodine and Derivatives Potassium Chloride and Potassium Sulfate Industrial Chemicals Other Income Cost of Sales Depreciation and Amortization Gross Profit Administrative Expenses Finance Costs Finance Income Exchange Differences Others 136.9 179.1 71.9 66.3 53.1 6.5 (335.3 (46.0) (338.1) 99.7 172.8 93.6 49.9 47.0 9.2 (282.7) (51.6) (338.9) 383.4 701.7 334.7 209.3 160.6 27.5 505.7 723.9 371.0 212.2 94.9 36.0 (1,130.4) (203.9) (1,182.3) (201.4) (953.0) (1,049.2) 132.5 137.8 482.9 560.1 (32.4) (17.1) 1.2 2.6 (0.7) (33.4) (18.0) 7.0 (1.1) 1.9 (107.0) (82.2) 13.7 (4.4) (64.4) (117.2) (76.9) 26.3 (2.2) 0.6 Profit (loss) before tax 86.1 94.1 238.5 390.6 Income tax expense (17.8) (26.0) (70.2) (110.0) Profit for the year 68.3 68.2 168.4 280.6 Profit attributable to non-controlling interest 1.3 1.3 3.8 2.5 Profit attributable to owners of the parent Earnings per share (US$) 67.0 0.25 66.9 0.25 164.5 0.63 278.1 1.06 (1) Includes other specialty plant nutrients 325 10) FINANCIAL REPORTS 1.2.1 Analysis based on business areas and market variations Lithium and its Derivatives Income from lithium and derivatives totaled US$ 383.4 million during the twelve months ended on December 31, 2020, a decrease of 24.2% over the US$ 505.7 million reported for the same period in 2019. Income from lithium and derivatives during the fourth quarter of 2020 increased by 37.3% over the fourth quarter of 2019. Total income was US$ 136.9 million during the fourth quarter of 2020 in comparison to the US$ 99.7 million during the fourth quarter of 2019. In 2020, we believe that the total market demand for lithium was approximately 330,000 metric tonnes, a growth of 6% over 2019, while our volumes in this market grew more than 40% over the same period. It is important to note that the growth in sales of electric vehicles in 2020 represented a 40% increase over 2019, and this increase in the fourth quarter of 2020 was approximately 120% higher than the same period the previous year. We hope that this growth continues in 2021 and we believe that the growth in demand for lithium will be almost 25% this year and will ultimately reach between 900,000 and 1 million metric tonnes in 2025. Given these strong market growth indicators, our installed capacity and the quality of our production, we believe that our sales volumes in 2021 will increase, reaching over 80,000 metric tonnes for the year. Our sales volumes grew almost 50% in the fourth quarter of 2020 in comparison to the third quarter of the same year, while our average price during this period was stable at around US$ 5,300 per metric tonne. We believe that this may be the end of the low-price trend and that we may see higher prices during the first half of 2021. Given these trends, we are still particularly optimistic about the long-term growth of the lithium market. For this reason, the Board of Directors recently approved the investment in the Mt. Holland lithium project in Western Australia, a 50/50 joint venture with our partner Wesfarmers Limited. Based on information provided in the Updated Definitive Feasibility Study (UDFS), it is expected that the participation of SQM in the investment of the project will reach approximately US$ 700 million between 2021-2025. The UDFS confirms an initial expected production of 50,000 metric tonnes of battery-grade lithium hydroxide with the first in line production during the second half of 2024 if all the necessary permits are received as anticipated. We plan to purchase the main equipment and start construction in the seco0nd half of 2021. We believe that we are one of the lower-cost lithium producers and we anticipate that the project will also be positioned competitively in terms of costs in comparison to other competitors. The gross margin of the lithium and derivatives segment(3) represented approximately 18% of the consolidated gross margin of SQM for the twelve months that ended on December 31, 2020. Specialty Plant Nutrition (SPN) Income from our second line of business, Specialty Plant Nutrition, for the twelve months ending on December 31, 2020 totaled US$ 701.7 million, a reduction of 3.1% compared to the US$ 723.9 million reported for the twelve months ending December 31, 2019. During the fourth quarter of 2020, income reached US$ 179.1 million, an increase of 3.6% compared to the US$ 172.8 million reported during the fourth quarter of 2019. 326 10) FINANCIAL REPORTS The specialty plant nutrition line of business continues to be an important segment within our diverse portfolio and we believe that the growth in demand in this market was approximately 5% in 2020 and we hope to see the same growth in demand in 2021. Our sales volumes in 2020 were more or less the same as the previous year, decreasing by 0.5%. Prices in the fourth quarter of 2020 increased more than 4% in comparison to the third quarter of the same year. As an integrated potassium chloride and potassium nitrate producer, the higher prices for potassium chloride that we are seeing in the market should not have a significant impact on our production cost, and at the same time, our consolidated distribution network could enable us to reduce part of the impact of the higher transportation costs that we are seeing in the market. In consequence, although we believe that we are the lowest-cost producer in this market, we believe that our competitive market position should be stronger in 2021. The gross margin of the SPN segment represents approximately 34% of the consolidated gross margin of SQM for the twelve months that ended on December 31, 2020. Iodine and its derivatives Income from the sale of iodine and its derivatives during the twelve months ending on December 31, 2020 were US$ 334.7 million, a decrease of 9.8% compared with the US$ 371.0 million generated during the twelve months ending on December 31, 2019. Sales revenue from iodine and its derivatives for the fourth quarter of 2020 was US$ 71.9 million, showing a decrease of 23.2% in comparison with the US$ 93.6 million reached during the fourth quarter of 2019. The iodine market was affected by the COVID-19 pandemic during 2020 and as a result the total market demand decreased by approximately 9% last year. We believe that we will see a significant recovery during 2021 as the impact of the pandemic dissipates, primarily led by the X ray contrast media, LCD and the pharmaceutical markets, and we hope to increase our market share during the year. We have announced plans to increase our capacity in this business line to ensure that we have adequate capacity to meet the future demand. During the last quarter of 2020, our sales volumes were still affected by a lower consumption throughout the iodine supply chain. The demand has shown a positive trend during the first months of 2021 and we anticipate that our sales volumes during the first quarter may be higher than those reported for the fourth quarter of 2020. The average prices in the iodine and derivatives business line were stable on a quarterly basis throughout the year. The gross margin of the iodine and its derivatives segment represents approximately 34% of the consolidated gross margin of SQM for the twelve months that ended on December 31, 2020. Potassium Chloride and Potassium Sulfate (MOP & SOP) Revenue from potassium chloride and potassium sulfate for the twelve-month period ending December 31, 2020 totaled US$ 209.3 million, a decrease of 1.3% from the same period in 2019, when revenue was US$ 212.2 million. Revenue from potassium chloride and potassium sulfate increased by 32.9% in the fourth quarter of 2020, reaching US$ 66.3 million, in comparison to US$ 49.9 million registered during the fourth quarter of 2019. We believe that the potassium chloride market exceeded 67 metric tonnes in 2020, an increase of approximately 3 million metric tonnes in comparison to 2019. The average potassium chloride prices during the fourth quarter were around US$ 244/metric tonne, with no changes over the third quarter. During the first months of 2021, we have seen 327 10) FINANCIAL REPORTS higher prices, which leads us to believe that we will see higher prices during the rest of the year, given the expected growth in demand in 2021. Our sales volumes for potassium chloride and potassium sulfate for the twelve months ending on December 31, 2020 totaled approximately 730,000 metric tonnes, exceeding our expectations. We believe that our sales volumes in 2021 will be similar to the sales volumes reported for 2020. The gross margin of the potassium chloride and potassium sulfate segment represented approximately 5% of the consolidated gross margin of SQM for the twelve months that ended on December 31, 2020. Industrial Chemicals Sales revenue for industrial chemicals for the twelve months ending on December 31, 2020 reached US$ 160.6 million, a 69.3% increase over the US$ 94.9 million registered for the same period in 2019. Revenue for the fourth quarter of 2020 totaled US$ 53.1 million, with an increase of 13.0% over the revenue numbers for the fourth quarter of 2019, which reached US$ 47.0 million. Revenue from industrial chemical products for the twelve months ending on December 31, 2020 increased significantly over the revenue reported for the same period the previous year. This was the result of the anticipated sales volumes of solar salts, which reached 160,000 metric tons. We believe that in 2021, our sales volumes related to solar salts will reach approximately 200,000 metric tonnes in addition to the sales volumes associated with the traditional uses of this business line. The gross margin of the industrial chemicals business represents approximately 9% of the consolidated gross margin of SQM for the twelve months that ended on December 31, 2020. Other Commodity Fertilizers and Other Revenue Sales revenue for other commodity fertilizers and other revenue reached US$ 27.5 million for the twelve months ending on December 31, 2020, a number below the US$ 36.0 million registered for the same period in 2019. Financial Reporting Cost of sales The cost of sales, excluding total expenses for depreciation and amortization, reached US$ 1,130.4 million for the twelve months ending on December 31, 2020, a decrease of 4.4% in comparison to the US$ 1,182.3 million for the same period in 2019. Administrative expenses Administrative expenses totaled US$ 107.0 million (5.9% of revenue) for the twelve months ending on December 31, 2020, in comparison to the US$ 117.2 million (6.0% of revenue) registered for the twelve months ending on December 31, 2019. Finance costs, net 328 10) FINANCIAL REPORTS The net finance costs for the twelve months ending on December 31, 2020 were US$ 68.5 million in comparison to the US$ 50.6 million registered for the twelve months ending on December 31, 2019. Income Tax Expenses Income tax expenses reached US$ 70.2 million for the twelve months ending on December 31, 2020, which represents an effective tax rate of 29.4%, in comparison to an income tax expense of US$ 110.0 million during the twelve months ending on December 31, 2019. The Chilean corporate tax rate was 27.0% for the 2020 and 2019 period. Others The adjusted EBITDA(3) for the twelve months ending on December 31, 2020 was US$ 579.8 million, less than the US$ 644.2 million registered for the twelve months ending on December 31, 2019. The adjusted EBITDA margin was 31.9% for the twelve months ending on December 31, 2020, compared to the adjusted EBITDA of 33.1% for same period in 2019. The adjusted EBITDA margin for the fourth quarter of 2020 was approximately 28.4%. Notes: 1. A significant portion of the cost of sales for SQM corresponds to costs associated with shared production processes (mining, leaching, etc.), which are distributed between different final products. To estimate the gross margin per business line for both periods covered by this report, the Company used similar criteria to assign the shared costs between the different business areas. This distribution of the gross margin must be used only as reference as a general approximation of the margins per business line. 2. Adjusted EBITDA = EBITDA - Other revenue - Other profit (loss) - Proportion of profit from associates and joint ventures accounted for using the equity method + Other expenses by function + Net profit due to impairment in the reversion (loss) of financial assets - Financial revenue - Currency differences. EBITDA = Net income + Depreciation and amortization expenses + Finance expenses + Income taxes. Adjusted EBITDA margin = Adjusted EBITDA/Revenue. We have included the adjusted EBITDA to provide investors with a complementary measure to our operating performance. We believe that the adjusted EBITDA is an important complementary measure to our operating performance because it eliminates elements that have less influence on our operating performance and therefore highlights the trends in our main business, which would otherwise not be evident if we solely relied on the IFRS financial measures. As an analytical tool, the adjusted EBITDA has significant limitations. For example, the adjusted EBITDA does not reflect (a) our cash expenses or future requirements for capital expenses or contractual commitments; (b) cash changes or requirements for our working capital needs; (c) significant interest expenses, or cash requirements needed to pay interest or capital payment of our debt; and (d) payment of taxes or distributions to our main office to make payments on tax that is attributable to us and represents a reduction in the cash available to us. Even if we consider that the elements excluded in the calculation of non-IFRS measures are less relevant to evaluating our performance, some of these elements may continue to appear and in consequence, may reduce our available cash. 329 10) FINANCIAL REPORTS Revenue as per geographical distribution Latin America and the Caribbean 9% Europe 21% Asia and Others 38% Chile 8% North America 24% 330 2. Financial Ratios Liquidity December 31, 2020 December 31, 2019 Current liquidity Times 5.40 Acid Test Ratio Times 3.10 3.45 2.19 Leverage Debt ratio Short-term debt proportion Long-term debt proportion December 31, 2020 December 31, 2019 122.8 119.5 17.9 82.1 30.5 69.5 % % % Activity Total assets December 31, 2020 December 31, 2019 MUS$ 4,818 4,684 Inventory turnover Inventory permanence % % 1.22 295 1.41 256 10) FINANCIAL REPORTS Current assets Current liabilities (Current Assets - Inventories) Current Liabilities Current liabilities Total equity Current liabilities Total Debt Current Liabilities Total debt LTM Cost of sales Inventories 360 days Inventory turnover Profitability December 31, 2020 December 31, 2019 Earnings (loss) per share Times 0.64 Results of equity Return on assets % % 7.8 9.8 1.07 13.1 12.8 LTM net profit (loss) Subscribed shares LTM net profit (loss) Equity (Gross Earnings - Admin. Expenses) LTM Assets (1) (1) Assets = Total Assets - (Cash and cash equivalents + Financial assets + Investments in related companies) 331 10) FINANCIAL REPORTS 2.1 Analysis of Financial Ratios Liquidity: • Current Liquidity Ratio: This increase in the ratio can be explained as the result of a decrease in the Current Assets (CA) (-112.9 million, 4.2%), and a greater decrease in both the amount and the proportion in the Current Liabilities (CL) (-300.9 million), resulting in a higher ratio. The main variation in assets was seen in the increase of 110 million in Inventories, the decrease of 79 million in Cash and Cash Equivalents and the decrease in Other Current Financial Assets of 157 million, more precisely 140 million of the time deposits greater than 90 days and 17 million of the hedging instruments covered by these. The greatest change in liabilities was seen in Other Current Financial Liabilities, which decreased by 222 million, an amount explained primarily by the payment of a US$ 250 million bond in April 2020, which as of December 2019 was in the account and the increase of almost 20 million of the hedging liabilities that cover debt; and the decrease of 77 million in Other Current Liabilities, explained in large part by the decrease of 66 million in Other Current Non-Financial Liabilities. • Acid-Test Ratio: As mentioned in the previous ratio, there was an increase of 110 million in Current inventories. If we take this amount out of the equation, we can see that the CA decreased by 223 million (- 13.1%), which is still lower in both the amount and proportion than the drop suffered by the CL, which leads this ratio to increase. Leverage: • Leverage ratio: As seen, this ratio increased. While the CL decreased as mentioned above, the Non-Current Liabilities (NCL) increased by 407 million (23.0%), making Total Liabilities increase by 106.2 million (4.2%), and Equity increase by 28 million (1.3%), which means a direct increase in the ratio. The increase in NCL is primarily explained by the increase of 411 million in Other Non-current Financial Liabilities, as a result of the inclusion of the new bond of US$ 400 million, which was issued this year and will reach maturity in 2050. • Debt proportion: Given the aforementioned movements in the liability accounts, by decreasing the CL and increasing the NCL, we can conclude that there is a direct effect meaning a decrease in the short-term debt proportion and an increase in the long-term proportion. Activity: • Inventory Turnover and Permanence: A decrease in the inventory turnover can be seen, due to the fact that inventory increased by 110 million, close to 11.2%, while the LTM cost of sales decreased by 49.3 million, a proportion close to 3.6%, primarily due to a decrease in sales for the year. Either of the recently mentioned movements on its own causes the ratio to decrease, which means that when both effects are combined, it is evident that the ratio will decrease, Due to this decrease, there is also an increase in the permanence of inventory at 39 days, as both ratios are inversely proportional. Return: • Earnings (loss) per share: With the same number of shares, as there is a decrease of 112.2 million (40.0%) in profit obtained in 2020, when compared to profit obtained in 2019, there is a decrease in this ratio. For further details, see income statement. • ROE: The decrease in this ratio was due to the decrease in LTM net profit (loss) in the amount and proportion mentioned above, whereas equity increased in a smaller proportion, as mentioned below (28 million, 1.3%). 332 10) FINANCIAL REPORTS • ROA: The decrease in this ratio was affected by both the decrease of 67.0 million (around 15.1%) in the dividend and the increase in assets that affect this ratio, which increased by 351.5 million (approximately 10.1%). 3. Cash Flow Statement Analysis The constitution of the main components of the flow of cash and cash equivalents as of December 31, 2020 and 2019 is as follows: Flow Statement of Cash and Cash Equivalents Net cash flows provided by operating activities Net cash flows used in investing activities Net cash flows provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalent at beginning of period Cash and cash equivalent at end of period 4. Market Risk Analysis December 31, 2020 December 31, 2019 MUS$ MUS$ 182,234 (167,091) (94,132) (439) 588,530 509,102 426,971 (485,471) 105,896 (14,932) 556,066 588,530 Interest rate: As of December 31, 2020, the Company’s current and non-current financial liabilities that accrue interest are US$ 1,922.9 million. These primarily include the following types of financing: i. Unsecured debentures that accrue current and non-current interest (considering only capital): a US dollar bond of US$ 300 million with a fixed interest rate of 3.625%; a US dollar bond of US$ 250 million with a fixed interest rate of 4.375%; a US dollar bond of US$ 450 million with a fixed interest rate of 4.25%; a US dollar bond of US$ 400 million with a fixed interest rate of 4.25%; a UF bond for the equivalent of US$ 134.0 million with a fixed dollar rate, through a Cross Currency Swap, of 6.24%; a UF bond for the equivalent of US$ 58.7 million with a fixed dollar rate, through a Cross Currency Swap, of 4.47%; a UF bond for the equivalent of US$ 134.2 million with a fixed dollar rate, through a Cross Currency Swap, of 5.11%; a UF bond for the equivalent of US$ 106.9 million with a fixed dollar rate, through a Cross Currency Swap, of 5.45%. ii. A US dollar credit for US$ 70 million at a variable rate of LIBOR6M+1.1%. As of December 31, 2020, the Company registers US$ 69.0 million as other current financial liabilities and US$ 1,899.5 million as other non-current financial liabilities. 333 10) FINANCIAL REPORTS Exchange rate: The primary economic environment of SQM is United States dollars. However, given the internationalization of the Company, it has operations in different countries that generate an exposure to exchange rate variations in different currencies to the US dollar. Therefore, SQM maintains hedge contracts to mitigate the exposure generated by its main mismatches (net assets of liabilities) in currencies other than the US dollar against the exchange rate variation, updating these contracts weekly depending on the amount of assets and liabilities necessary to be covered in currencies other than US dollar. To ensure the difference between its assets and liabilities, as of December 31, 2020, the Company maintains the following derivative instruments (as absolute value of the sum of its notional values): US$ 61.25 million in Chilean peso/US dollar derivative instruments, US$ 55.8 million in Euro/US dollar derivative instruments, US$ 27.11 million in South African rand/US dollar derivative instruments, US$ 58.0 million in Chinese renminbi/US dollar derivative instruments and US$ 9.14 million in other currencies. In addition, the Company maintained US$ 181.38 million in derivative instruments to cover their term deposit investments in Chilean pesos. To cover its expected net cash flows in Chilean pesos associated with the fertilizer trading business in Chile, as of December 31, 2020, the Company did not maintain Chilean peso/US dollar derivative instruments. To cover its expected net cash flows in Euros, as of December 31, 2020, the Company did not maintain Euro/US dollar derivative instruments. Commodities prices: The main commodities consumed by the Company are petroleum in all of its forms. The Company currently has no hedge contracts that cover international price variations, but it does have long-term contracts for energy supply. As presented in the Company’s Annual Report, the markets where the Company operates are unpredictable, they are exposed to significant variations in supply and demand and their prices are highly volatile. In addition, the supply of certain fertilizers or chemical products, including certain products that the Company commercializes, varies primarily based on production from the most important producers and their respective business strategies. Due to this, the Company cannot predict with certainty the movements of demand, the competitor responses, or the fluctuations in final prices of products. The aforementioned can generate significant impacts on the sales volumes of its products, on the Company’s financial situation and on the price of its shares. The report for the Consolidated Financial Statements as of December 31, 2020 provides a detailed analysis of the risks associated with the Company’s business. 334 10) FINANCIAL REPORTS 10) B) SUMMARY FINANCIAL STATEMENTS The summary consolidated or individual financial statements of all companies reported as required by the CMF (ex)SVS General Rule No. 346, Section I, No. 2.1, Letter a. 4.2 are provided below, the complete financial statements of such companies are available to the public in our offices and at the offices of the CMF (ex)SVS. 335 SQM Potasio S.A. and Subsidiaries Summary Consolidated Classified Statements of Financial Position 10) FINANCIAL REPORTS Assets Currents assets Cash and cash equivalents Trade receivables due from related parties, current Current inventories Other current assets Total current assets Non-current assets Property, plant and equipment Other non-current assets Total non-current assets Total assets Liabilities and Equity Current liabilities Other current financial liabilities Trade payables due to related parties, current Other current liabilities Total current liabilities Non-current liabilities Deferred tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Equity Equity attributable to owners of the Parent Non-controlling interest Total equity Total liabilities and equity As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 154,643 191,623 84,010 351,069 636,963 245,229 375,613 1,358,842 1,016,487 293,425 1,309,912 2,668,754 104,929 785,237 887,737 227,105 1,114,842 1,900,079 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 1,835 1,086,514 205,366 1,293,715 191,736 33,708 225,444 1,519,159 946,557 203,038 1,149,595 2,668,754 3,532 509,616 169,456 682,604 191,056 14,619 205,675 888,279 853,456 158,344 1,011,800 1,900,079 336 SQM Potasio S.A. and Subsidiaries Summary Consolidated Statements of Income Consolidated Statements of Income Revenue Cost of sales Gross profit Profit from operating activities Profit before taxes Income tax expense Profit for the year 10) FINANCIAL REPORTS For the period from January to December of the year 2020 ThUS$ 1,290,815 (1,185,360) 105,455 75,224 63,372 (29,479) 33,893 29,791 4,102 33,893 2019 ThUS$ 780,312 (556,296) 224,016 214,856 208,797 (54,906) 153,891 125,975 27,916 153,891 Profit attributable to Owners of the Parent Profit (loss) attributable to Non-controlling interests Profit for the year Summary Consolidated Statements of Comprehensive Income Summary Consolidated Statements of Comprehensive Income Profit for the year Changes in other comprehensive income Total comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of the parent Comprehensive income attributable to non-controlling interest For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 33,893 163,953 197,846 142,193 55,653 197,846 153,891 (721) 153,170 125,394 27,776 153,170 337 10) FINANCIAL REPORTS SQM Potasio S.A. and Subsidiaries Summary Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ Net cash generated from operating activities 349,989 259,551 Net cash generated used in investing activities (213,920) (150,299) Net cash generated used in financing activities (63,869) (112,300) Net decrease in cash and cash equivalents before the effect of changes in the exchange rate 72,200 (3,048) Effects of exchange rate fluctuations on cash held Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period (1,567) 70,633 84,010 154,643 (1,210) (4,258) 88,268 84,010 338 SQM Potasio S.A. y Subsidiarias Summary Consolidated Statements of Changes in Equity 10) FINANCIAL REPORTS Statements of Changes in Equity Share capital Foreign currency translation reserves Reserve for (losses) gains from of defined benefit plans Other miscellaneous reserves Total Other reserves Retained earnings Equity attributable to owners of the Parent Non- controlling interests Total equity ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Equity as of January 1, 2020 257,010 (3,923) (1,145) 11,289 Net profit Other comprehensive income Comprehensive income Dividends Increase (decrease) in equity Equity as of December 31, 2020 - - - - - 257,010 - 112,699 112,699 - 112,699 108,776 - (69) (69) - (69) (1,214) - (228) (228) - (228) 11,061 6,221 - 112,402 112,402 - 112,402 118,623 590,225 29,791 - 29,791 (49,092) (19,301) 570,924 853,456 29,791 112,402 142,193 (49,092) 93,101 946,557 158,344 1,011,800 4,102 51,551 55,653 (10,959) 44,694 33,893 163,953 197,846 (60,051) 137,795 203,038 1,149,595 Statements of Changes in Equity Share capital Foreign currency translation reserves Reserve for (losses) gains from of defined benefit plans Other miscellaneous reserves Total Other reserves Retained earnings Equity attributable to owners of the Parent Non-controlling interests Total equity ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Equity as of January 1, 2019 257,010 (3,983) Net profit Other comprehensive income Comprehensive income Dividends Increase (decrease) in equity Equity as of December 31, 2019 - - - - - - 60 60 - 60 257,010 (3,923) (504) - (641) (641) - (641) (1,145) 339 11,289 - - - - - 11,289 6,802 - (581) (581) - (581) 6,221 562,434 125,975 - 125,975 (98,184) 27,791 590,225 826,246 125,975 (581) 125,394 (98,184) 27,210 853,456 148,944 27,916 (140) 27,776 975,190 153,891 (721) 153,170 (18,376) (116,560) 9,400 36,610 158,344 1,011,800 10) FINANCIAL REPORTS SQM Potasio S.A. and Subsidiaries Detail of related parties and related party transactions As of December 31, 2020, and 2019, the detail of transactions with related parties is as follows: 340 10) FINANCIAL REPORTS SQM Potasio S.A. and Subsidiaries Tax ID No Company Nature Country of origin Transaction 96.592.180-K Ajay SQM Chile Other related parties Chile 96.592.180-K Ajay SQM Chile Other related parties Chile Sale of products Services provided 79.770.780-5 SIT S.A. 79.770.780-5 SIT S.A. Other related parties Chile Current account interest Other related parties Chile Current account interest 79.768.170-9 Soquimich Comercial S.A. Other related parties Chile 79.947.100-0 SQM Industrial S.A. 79.947.100-0 SQM Industrial S.A. 79.947.100-0 SQM Industrial S.A. 79.947.100-0 SQM Industrial S.A. 79.947.100-0 SQM Industrial S.A. 79.947.100-0 SQM Industrial S.A. Associate Associate Associate Associate Associate Associate Chile Chile Chile Chile Chile Chile Sale of products Sale of products Dividends Services provided Current account interest Current account interest Purchase of property, plant and equipment 76.686.311-9 SQM Mag SPA Common controller Chile Purchase of property, plant and equipment 96.592.190-7 SQM Nitratos S.A. 96.592.190-7 SQM Nitratos S.A. 96.592.190-7 SQM Nitratos S.A. 93.007.000-9 SQM S.A. 93.007.000-9 SQM S.A. 93.007.000-9 SQM S.A. Ajay Europe SARL Ajay Europe SARL Ajay North América Soquimich European Holding B.V. Associate Associate Associate Parent Parent Parent Associate Associate Associate Chile Chile Chile Chile Chile Chile France France Sale of products Services provided Current account interest Current account interest Sale of products Services provided Sale of products Dividends United States of America Dividends Other related parties Netherlands Current account interest Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign SQM (Shanghai) Chemicals Co. Other related parties China Sale of products SQM Africa Pty. Ltd. Other related parties South Africa Sale of products SQM Colombia S.A.S. Subsidiary Colombia Sale of products SQM Comercial de México S.A. de C.V. Associate Mexico SQM Ecuador S.A. Other related parties Ecuador SQM Europe N.V. Other related parties Belgium SQM Iberian S.A. Other related parties Spain SQM Internacional S.A. Other related parties Belgium SQM Japan Co. Ltd. Associate Japan Sale of products Sale of products Sale of products Sale of products Sale of products Sale of products SQM North América Corp. Other related parties United States of America Sale of products SQM North América Corp. Other related parties United States of America Current account interest SQM Pavoni & C., SpA Other related parties Italy SQM Vitas Brasil Agroindustria Other related parties Brazil SQM Vitas Perú S.A.C. Other related parties Peru Sale of products Sale of products Sale of products 341 As of December 31, 2020 As of Decembe r 31, 2019 MUS$ MUS$ 142 1 453 - - 1 470 2 9,059 7,790 74,089 83,854 1,429 1,334 702 133 71 9 74 14,392 879 40 886 97 306 - 322 - 1,098 151 24,826 17,559 917 883 23,162 1,197 1,967 - 101,629 - 1,365 - - 2,796 509 - - 26,928 7,210 4,787 23,459 25,502 10,958 15,006 - - - - 322,666 4,575 4,664 156,471 20,560 44,370 485 1,125 407 - 19,981 17,303 1,689 6,941 10) FINANCIAL REPORTS SQM Potasio S.A. and Subsidiaries Trade receivables due from related parties, current: Tax ID No Name Nature Country of origin Currency As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar 2,358 - 7,037 3,607 11,123 - - - 14,154 32,911 3,229 12,355 25 4,420 12,668 70 4,027 41 77,391 37 1,491 4,463 216 2,358 21,341 4,787 3,594 14,668 157,303 3,044 65,335 1,185 41,558 - 16,611 25 - 12,227 65 6,968 - - - - - - 191,623 351,069 Japan Chile United States of America United States of America France Brazil United Arab Emirates Peru Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Nitratos Naturais Do Chile Ltda. Other related parties Brazil SQM Africa Pty Ltd. SQM Colombia SAS Other related parties South Africa Other related parties Colombia SQM Corporation N.V. Associate Curacao SQM Ecuador S.A. SQM Europe N.V. SQM Iberian S.A. SQM Japan 96.592.190-7 SQM Nitratos S.A. Other related parties Ecuador Other related parties Belgium Other related parties Spain Associate Associate Foreign SQM North America Corp. Other related parties 79.768.170-9 Soquimich Comercial S.A. Other related parties Chile Foreign SQM Comercial de México S.A. de C.V. Associate Mexico Ajay North America Ajay Europe SARL Associate Associate SQM Vitas Brasil Agroindustria Joint venture SQM Vitas Fzco SQM Vitas Perú S.A.C SQM Korea LLC Joint venture Joint venture Other related parties Korea SQM (Shanghai) Chemicals Co. Other related parties China SQM Beijing Commercial Co. Ltd. Other related parties China SQM Pavoni & C., SpA Joint venture Italy Foreign SQM Migao (Sichuan) Fertil. (JV) Joint venture Foreign Total Abu Dhabi Fertilizer Industrie Associate China Omán 342 SQM Potasio S.A. and Subsidiaries Trade payables due to related parties, current: Tax ID No Name Nature 10) FINANCIAL REPORTS Country of origin Currency As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ Foreign RS Agro Chemical Trading Corporation A.V.V. Associate Aruba 79.770.780-5 Serv. Integrales de Tránsito y Transf. S.A. Other related parties Chile 79.947.100-0 SQM Industrial S.A. 93.007.000-9 SQM S.A. Associate Matriz Chile Chile Foreign Covalent Lithium Pty Ltd. Joint venture Australia 79.768.170-9 Soquimich Comercial S.A. Other related parties Chile 77.114.779-8 SCM Búfalo Associate Chile Dollar Dollar Dollar Dollar Dollar Dollar Dollar 5,140 17,609 120,092 943,431 241 - 1 5,140 6,044 12,294 485,587 232 319 - Total 1,086,514 509,616 343 SQM Industrial S.A. and Subsidiaries Summary Consolidated Classified Statements of Financial Position 10) FINANCIAL REPORTS Assets Currents assets Cash and cash equivalents Trade receivables due from related parties, current Current inventories Other current assets Total current assets Non-current assets Property, plant and equipment (net) Other non-current assets Total non-current assets Total assets Liabilities and Equity Current liabilities Other current financial liabilities Trade payables due to related parties, current Other current liabilities Total current liabilities Non-current liabilities Deferred tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Equity Equity attributable to owners of the Parent Non-controlling interests Total equity Total liabilities and equity As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 205,344 128,970 707,290 189,414 1,231,018 529,291 111,204 640,495 1,871,513 136,973 54,088 961,378 423,140 1,575,579 517,476 126,395 643,871 2,219,450 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 2,965 662,029 153,765 818,759 41,040 81,357 122,397 941,156 882,067 48,290 930,357 1,871,513 1,692 841,117 191,495 1,034,304 50,170 101,555 151,725 1,186,029 981,261 52,160 1,033,421 2,219,450 344 10) FINANCIAL REPORTS SQM Industrial S.A. and Subsidiaries Summary Consolidated Statements of Income Consolidated Statements of Income Revenue Cost of sales Gross profit Profit from operating activities Profit before taxes Income tax expence Profit for the year Profit attributable to Owners of the Parent Profit attributable to Non-controlling interests Profit for the year For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 1,354,559 (1,095,890) 2,105,365 (1,874,158) 258,669 204,549 195,674 (42,535) 153,139 150,594 2,545 153,139 231,207 150,627 147,687 (40,444) 107,243 105,198 2,045 107,243 Summary Consolidated Statements of Comprehensive Income Summary Consolidated Statements of Comprehensive Income Profit for the year Changes in other comprehensive income Total comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of the parent Comprehensive income attributable to non-controlling interest Total comprehensive income For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 153,139 (97,310) 55,829 50,819 5,010 55,829 107,243 (1,434) 105,809 103,822 1,987 105,809 345 SQM Industrial S.A. and Subsidiaries Summary Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 10) FINANCIAL REPORTS For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ Net cash flows generated from (used in) operating activities 153,716 (33,325) Net cash flows generated from (used in) investing activities Net cash flows generated from (used in) financing activities Net decrease in cash and cash equivalents before the effect of changes in the exchange rate Effects of exchange rate fluctuations on cash held Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period (68,646) (17,188) 67,882 489 68,371 136,973 205,344 (117,435) 142,468 (8,292) 180 (8,112) 145,085 136,973 346 SQM Industrial S.A. and Subsidiaries Summary Consolidated Statements of Changes in Equity 10) FINANCIAL REPORTS Statements of Changes in Equity Share capital Foreign currency translation reserves Reserve for (losses) gains from of defined benefit plans Other miscellaneous reserves Total Other reserves Retained earnings Equity attributable to owners of the Parent Non-controlling interests Total equity Equity as of January 1, 2020 Net profit Other comprehensive income Comprehensive income Dividends Increase in Equity Increase (decrease) in equity Equity as of December 31, 2020 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ 715,066 (12,022) (4,505) 6,390 (10,137) - - - - - - 715,066 - (100,623) (100,623) - - (100,623) (112,645) - 848 848 - - 848 (3,657) - - - - (13) (13) 6,377 - (99,775) (99,775) - (13) (99,788) (109,925) 276,332 150,594 - 150,594 (150,000) - 594 276,926 981,261 150,594 (99,775) 50,819 (150,000) (13) (99,194) 882,067 52,160 2,545 2,465 5,010 (8,880) - (3,870) 48,290 1,033,421 153,139 (97,310) 55,829 (158,880) (13) (103,064) 930,357 Statements of Changes in Equity Share capital Foreign currency translation reserves Reserve for (losses) gains from of defined benefit plans Other miscellaneous reserves Total Other reserves Retained earnings Equity attributable to owners of the Parent Non-controlling interests Total equity Equity as of January 1, 2019 Net profit Other comprehensive income Comprehensive income Dividends Increase (decrease) due to transfers and other changes Increase (decrease) in equity Equity as of December 31, 2019 MUS$ MUS$ MUS$ MUS$ 715,066 (11,950) - - - - - - 715,066 - (72) (72) - - (72) (12,022) (3,201) - (1,304) (1,304) - - (1,304) (4,505) 6,383 - - - - 7 7 6,390 (8,768) - (1,376) (1,376) - 7 (1,368) (10,137) 311,134 105,198 - 105,198 (140,000) - (34,802) 276,332 1,017,432 105,198 (1,376) 103,822 (140,000) 7 (36,171) 981,261 56,109 2,045 (58) 1,987 (5,936) - (3,949) 52,160 MUS$ 1,073,541 107,243 (1,434) 105,809 (145,936) 7 (40,120) 1,033,421 347 10) FINANCIAL REPORTS SQM Industrial S.A. and Subsidiaries Balances and transactions with related parties Detailed identification of the link between the Parent and subsidiary As of December 31, 2020, and 2019, the detail of transactions with related parties is as follows: 348 SQM Industrial S.A. and Subsidiaries 10) FINANCIAL REPORTS Tax ID No. Company Nature Country of origin Transaction As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ Purchase products Sale of fixed assets - - Current account interest 17,720 167,481 1,019 13,537 66 - - - 1 1 290,466 237,617 2,436 3,386 542 - - 13,828 13,619 92 522 2 41 - 609 2 70 26 130 183 1 183 - 21,360 16,034 - - - - - - - 2,486 3,446 573 1,509 83,854 272 9,963 72 774 2 27 886 - - - - - - - - 3,955 29,573 17,197 4,096 1,280 40 2,359 47 3,152 1,929 96.592.190-7 SQM Nitratos S.A. 96.592.190-7 SQM Nitratos S.A. 96.592.190-7 SQM Nitratos S.A. 96.592.190-7 SQM Nitratos S.A. 96.592.190-7 SQM Nitratos S.A. 96.592.190-7 SQM Nitratos S.A. 93.007.000-9 SQM S.A. 93.007.000-9 SQM S.A. 93.007.000-9 SQM S.A. 93.007.000-9 SQM S.A. 93.007.000-9 SQM S.A. 79.626.800-K SQM Salar S.A. 79.626.800-K SQM Salar S.A. 79.626.800-K SQM Salar S.A. 79.626.800-K SQM Salar S.A. 79.626.800-K SQM Salar S.A. Common parent Common parent Common parent Common parent Common parent Common parent Parent Parent Parent Parent Parent Common parent Common parent Common parent Common parent Common parent 76.425.380-9 Exploraciones Mineras Other related parties 96.651.060-9 SQM Potasio S.A. 96.651.060-9 SQM Potasio S.A. 79.768.170-9 Soquimich Comercial S.A. 79.768.170-9 Soquimich Comercial S.A. 79.768.170-9 Soquimich Comercial S.A. 79.768.170-9 Soquimich Comercial S.A. 79.768.170-9 Soquimich Comercial S.A. 79.947.100-0 SQM Industrial S.A. Common parent Common parent Common parent Common parent Common parent Common parent Common parent Other related parties Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Current account interest Sale of product Sale of services Sale of services Current account interest Current account interest Sale of services Sale of fixed assets Purchase products Sale of product Sale of services Current account interest Current account interest Current account interest Current account interest Services received Sale of product Sale of services Current account interest Current account interest Purchase of fixed assets Sale of product Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign SQM Brasil Ltda. Other related parties Brasil Purchase of fixed assets Charlee SQM Thailand Co. Ltd. Associate Thailand Sale of product Coromandel SQM (*) Joint venture SQM Vitas Brasil Agroindustria (1) Joint venture SQM Vitas Perú S.A.C. (1) Joint venture Plantacote NV (*) Terra Tarsa Ukraine LLC (*) Terra Tarsa Don LLC Associate Associate Associate India Brazil Perú Belgium Ukraine Sale of product Sale of product Sale of product Sale of product Sale of product Federation Rusa Sale of product Arpa Speciali S.R.L. (*) Other related parties Italy SQM Eastmed Turkey (*) Associate Pavoni & C., Spa SQM Star Qingdao Corp Nutrition Co., Ltd. Joint venture Joint venture Turkey Italy China Sale of product Sale of product Sale of product Sale of product 349 SQM Industrial S.A. and Subsidiaries 10) FINANCIAL REPORTS Tax ID No. Company Nature Country of origin Transaction As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign SQM Europe N.V. Other related parties Belgium Sale of product SQM International N.V. Other related parties Belgium Sale of product SQM Iberian S.A. Other related parties Spain Sale of product Ajay North America LLC Other related parties United States Sale of product SQM África Pty. Ltd. Other related parties South Africa Sale of product SQM Japan Co. Ltd. Other related parties SQM Investment Corporation N.V. Other related parties Ajay Europe SARL SQMC Holding Corporation L.L.P. Other related parties Associate Abu Dhabi Fertilizer Industries WWL. Associate Japan Netherlands Antilles France United States United Arab Emirates Ajay North America LLC Doktor Tarsa Tarim Sanayi AS (*) Other related parties Associate United States Turkey Sale of product Current account interest Sale of product Current account interest Sale of product Sale of product Sale of product 113,897 106,210 45,614 20,259 18,833 1,263 - - 485 - - - - - - - - - 509 21,348 407 3,749 16,932 14,767 (3) These Companies are subsidiaries of the joint venture SQM Vitas Fzco. (*) The following entities were considered related parties as of December 31, 2019 (see Note 9.4 letter a and Note 10.2): SQI Corporation N.V., SQM Italia SRL, Doktor Tarsa Tarim, SQM Eastmed Turkey, Terra Tarsa Ukraine LLC, Terra Tarsa B.V., Plantacote N.V., Terra Tarsa Don LLC, Doktolab Tarim Arastirma San., Doctochem Tarim Sanayi Ticaret Ltd. STI, Coromandel SQM India Sichuan SQM Migao Chemical Fertilizers Co Ltd. and Arpa Speciali S.R.L. 350 10) FINANCIAL REPORTS SQM Industrial S.A. and Subsidiaries Trade receivables due from related parties, current: Tax ID No. Company Nature Country of origin Currency As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ Foreign Foreign 76.686.311-9 76.425.380-9 96.592.180-K Foreign Foreign 96.511.530-7 Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign Total Arpa Speciali S.R.L Comercial Caiman Int. S.A. SQM Mag SPA Exploraciones Mineras S.A. Ajay SQM Chile S.A. Soquimich SRL Argentina Terra Tarsa Ukraine LLC Soc. Inv P. Calichera S.A. Abu Dhabi Fertilizer Ind Ajay Europe SARL Ajay North América llc Terra Tarsa Don LLC Coromandel SQM India Plantacote N.V. SQM Vitas Brasil Agroindustria SQM Vitas Fzco. SQM Vitas Perú S.A.C Royal Seed Trading Corporation V.V.V. Doktor Tarsa Tarim Sanayi AS SQM Eastmed Turkey Pavoni & C., Spa SQM Europe N.V. SQM Iberian S.A. SQM Africa Ltd. SQM Japan Provision Other related parties Other related parties Other related parties Other related parties Other related parties Subsidiary Associate Jointly controlled entity Other related parties Other related parties Other related parties Other related parties Joint venture Joint venture Joint venture Joint venture Joint venture Other related parties Other related parties Other related parties Joint venture Other related parties Other related parties Other related parties Other related parties Italy Panama Chile Chile Chile Argentina Ukraine Chile United Arab Emirates France United States Federation rusa India Belgium Brazil United Arab Emirates Perú Aruba Turkey Turkey Italy Belgium Spain South Africa Japan Euro Dollar Dollar Dollar Dollar Dollar Ukrainian hryvnia Dollar Dollar Dollar Dollar Russian Ruble Indian rupee Euro Dollar Dollar Dollar Dollar Dollar Euro Euro Dollar Dollar Dollar Dollar Dollar - 805 6 42 - - - 6 379 - 3,141 - - - 11,904 167 20,336 11,275 - - - 47,098 15,331 19,373 153 (1,046) 128,970 134 805 4 40 35 158 7 5 803 3,489 2,318 13 1,792 657 15,049 169 16,507 11,275 110 47 1,028 - - - - (357) 54,088 The receivables for Sichuan SQM Migao Chemical Fertilizers Co Ltda. are presented net of provisions (allowance for bad debts as of December 31, 2020 ThUS$ 1,048 and december 31, 2019 ThUS$ 1,048). 351 SQM Industrial S.A. and Subsidiaries Trade payables due to related parties, current: Tax ID No. Company Nature Country of origin Currency Foreign SQM Investment Co. 96.592.190-7 79.626.800-k SQM Nitratos S.A. SQM Salar S.A. 96.651.060-9 SQM Potasio S.A. Other related parties Other related parties Other related parties Common parent Dutch Antilles Chile Chile Chile Foreign SQMC Holding Corporation L.L.P. Other related parties United States Foreign 93.007.000-9 SQM Star Qingdao Corp Nutrition Co., Ltd. SQM S.A. Joint venture Parent 96.592.180-K Ajay SQM Chile S.A. Foreign Foreign Foreign Foreign Total SQM Europe N.V. SQM International N.V. SQM (Thailand) Limited Ajay Europe SARL Other related parties Other related parties Other related parties Associate Associate China Chile Chile Belgium Belgium Thailand France Dollar Dollar Dollar Peso Dollar Dollar Dollar Dollar Dollar Dollar Dollar Dollar 10) FINANCIAL REPORTS As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 5,563 465,908 52,699 1,370 28,525 - 89,617 9 38 18,185 65 50 5,550 356,516 291,794 571 26,307 243 160,136 - - - - - 662,029 841,117 352 SQM Nitratos S.A. Summary Classified Statements of Financial Position 10) FINANCIAL REPORTS Assets Currents assets Cash and cash equivalents Trade receivables due from related parties, current Current inventories Other current assets Total current assets Non-current assets Property, plant and equipment Other non-current assets Total non-current assets Total assets As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 96 465,908 5,981 3,147 475,132 57,191 6,658 63,849 538,981 285 356,532 11,030 627 368,474 34,049 7,639 41,688 410,162 Liabilities and Equity As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ Current liabilities Trade payables due to related parties, current Other current liabilities Total current liabilities Non-current liabilities Deferred tax liabilities Provisions for employee benefits, non-current Total non-current liabilities Total liabilities Equity Equity attributable to owners of the Parent Total equity Total liabilities and equity 386,422 9,492 395,914 4,118 929 5,047 400,961 138,020 138,020 538,981 274,647 17,888 292,535 2,874 647 3,521 296,056 114,106 114,106 410,162 353 SQM Nitratos S.A. Summary Statements of Income Statements of Income Revenue Cost of sales Gross profit Profit (loss) from operating activities Profit (loss) before taxes Income tax expense Profit for the year 10) FINANCIAL REPORTS For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 188,973 (135,849) 53,124 54,525 59,746 (19,177) 40,569 167,481 (112,896) 54,585 54,271 57,866 (18,336) 39,530 Summary Statements of Comprehensive Income Statements of Comprehensive Income Profit for the year (Losses) gains from measurements of defined benefit plans Total comprehensive income For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 40,569 (81) 40,488 39,530 (90) 39,440 354 10) FINANCIAL REPORTS SQM Nitratos S.A. Summary Statements of Cash Flows Statements of Cash Flows Net cash generated from (used in) operating activities Net cash generated used in investing activities Net cash generated from financing activities Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate Effects of exchange rate fluctuations on cash held Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ (13,775) (35,011) 48,599 (187) (2) (189) 285 96 1,605 (19,661) 18,322 266 5 271 14 285 Note: All cash flows related to the operation of SQM Nitratos are made by SQM S.A. 355 10) FINANCIAL REPORTS SQM Nitratos S.A. Summary Statements of Changes in Equity Statements of Changes in Equity Equity as of January 1, 2020 Net profit Other comprehensive income Comprehensive income Dividends Increase (decrease) in equity Equity as of December 31, 2020 Statements of Changes in Equity Equity as of January 1, 2019 Net profit Other comprehensive income Comprehensive income Dividends Increase (decrease) in equity Equity as of December 31, 2019 Share capital Reserve for (losses) gains from of defined benefit plans Retained earnings Total equity ThUS$ ThUS$ ThUS$ ThUS$ 30,350 - - - - - 30,350 (76) - (81) (81) - (81) (157) 83,832 40,569 - 40,569 (16,574) 23,995 107,827 114,106 40,569 (81) 40,488 (16,574) 23,914 138,020 Share capital Reserve for (losses) gains from of defined benefit plans Retained earnings Total equity ThUS$ ThUS$ ThUS$ ThUS$ 30,350 - - - - - 30,350 14 - (90) (90) - (90) (76) 56,160 39,530 - 39,530 (11,858) 27,672 83,832 86,524 39,530 (90) 39,440 (11,858) 27,582 114,106 356 10) FINANCIAL REPORTS SQM Nitratos S.A. Related party disclosures As of December 31, 2020, and December 31, 2019, the detail of transactions with related parties is as follows: Tax ID No. Company Nature Country of origin Transaction 79.947.100-0 79.947.100-0 79.947.100-0 79.947.100-0 79.947.100-0 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 93.007.000-9 79.770.780-5 SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM Industrial S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. SQM S.A. Common parent Common parent Common parent Common parent Common parent Parent Parent Parent Parent Parent Parent Parent Serv. Integrales de Tránsito y Transferencias S.A. Other related parties Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Chile Sale of products Current account interest Purchase of materials and supplies Purchase fixed asset Miscellaneos services Current account interest Mining concession rental service Payment of value added tax Services received Miscellaneos services Provisional monthly payment Dividends Current account interest 79.626.800-K SQM Salar S.A. Other related parties Chile Current account interest 96.651.060-9 96.651.060-9 76.425.380-9 SQM Potasio S.A. SQM Potasio S.A. Common parent Common parent Exploraciones Mineras S.A. Other related parties Chile Chile Chile Current account interest Camp Service Mining concession As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 188,973 17,720 13,677 8 5,513 12,589 16,087 18,308 7 1,290 20,432 17,190 - - 40 879 13,513 167,481 13,537 12,615 1,019 5,461 9,423 19,999 14,490 8 1,176 14,623 11,859 66 5 146 1,098 - 357 SQM Nitratos S.A. Trade receivables due from related parties, current Tax ID No. Company Nature Country of origin Currency 79.947.100-0 Total SQM Industrial S.A. Common parent Chile Dollar Trade payables due to related parties, current Tax ID No. Company Nature Country of origin Currency 93.007.000-9 96.651.060-9 79.770.780-5 79.626.800-K 76.425.380-9 Total SQM S.A. SQM Potasio S.A. Serv. Integrales de Tránsito y Transferencias S.A. SQM Salar S.A. Exploraciones Mineras S.A. Parent Other related parties Other related parties Other related parties Other related parties Chile Chile Chile Chile Chile Dollar Dollar Dollar Dollar Dollar 10) FINANCIAL REPORTS As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 465,908 465,908 356,532 356,532 As of December 31, 2020 As of December 31, 2019 MUS$ MUS$ 372,268 277 - - 13,877 386,422 273,446 820 16 1 364 274,647 358 Orcoma SPA Summary Classified Statements of Financial Position 10) FINANCIAL REPORTS Assets Current assets Other current non-financial assets Total current assets Non-current assets Intangible assets other than goodwill Deferred tax assets Total non-current assets Total assets Liabilities and Equity Current liabilities Trade payables due to related parties, current Total current liabilities Total liabilities Equity Share capital Retained earnings Total equity Total liabilities and equity As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 3 3 2,357 9 2,366 2,369 - - 2,357 4 2,361 2,361 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 35 35 35 2,358 (24) 2,334 2,369 14 14 14 2,358 (11) 2,347 2,361 359 Orcoma SPA Summary Statements of Income Statements of Income Administrative expenses Profit from operating activities Profit before taxes Income tax benefit Profit net 10) FINANCIAL REPORTS For the period from January to December of the year 2020 2019 ThUS$ ThUS$ (17) (17) (17) 4 (13) - - - - - 360 Orcoma SPA Summary Statements of Changes in Equity 10) FINANCIAL REPORTS Statements of Changes in Equity Share capital Retained earnings Equity attributable to owners of the Parent Total equity Equity as of January 1, 2020 Net profit Comprehensive income Increase (decrease) in equity Equity as of December 31, 2020 MUS$ MUS$ 2,358 - - - 2,358 (11) (13) (13) (13) (24) 2,347 (13) (13) (13) 2,334 2,347 (13) (13) (13) 2,334 Statements of Changes in Equity Share capital Retained earnings Equity attributable to owners of the Parent Total equity Equity as of January 1, 2019 Net profit Comprehensive income Increase (decrease) in equity Equity as of December 31, 2019 MUS$ 2,358 - - - 2,358 (11) - - - (11) 2,347 - - - MUS$ 2,347 - - - 2,347 2,347 Transactions with related parties As of December 31, 2020, and 2019, there were no transactions with related entities. 361 10) FINANCIAL REPORTS As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 6 5,149 5,155 5,155 6 5,149 5,155 5,155 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ - 88 88 88 6 5,061 5,067 5,155 2 62 64 64 6 5,085 5,091 5,155 For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ (24) (24) - (24) (24) (25) (25) - (25) (25) For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ (24) (24) (25 (25) Rs Agro Chemical Trading Corporation A.V.V. Summary Classified Statements of Financial Position Assets Currents assets Cash and cash equivalents Trade receivables due from related parties, current Total current assets Total assets Liabilities and Equity Current liabilities Trade and other payables, current Trade payables due to related parties, current Total current liabilities Total liabilities Equity Share capital Retained earnings Total equity Total liabilities and equity Summary Statements of income Statements of comprehensive Income Other expenses per function Loss from operating activities Finance Costs Loss before taxes Total comprehensive loss Summary Statements of Comprehensive Income Statements of Comprehensive Income Other comprehensive income Total comprehensive income 362 Rs Agro Chemical Trading Corporation A.V.V. Summary Statements of Cash Flows Statements of Cash Flows Net cash generated from operating activities Net cash generated from operating activities Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Summary Statements of Changes in Equity 10) FINANCIAL REPORTS For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ - - 6 6 - - 6 6 Statements of Changes in Equity Share capital Retained earnings Total equity Equity as of January 1, 2020 Net loss Comprehensive loss Decrease in equity Equity as of December 31, 2020 ThUS$ ThUS$ ThUS$ 6 - - - 6 5,085 (24) (24) (24) 5,061 5,091 (24) (24) (24) 5,067 Statements of Changes in Equity Share capital Retained earnings Total equity Equity as of January 1, 2019 Net loss Comprehensive loss Decrease in equity Equity as of December 31, 2019 ThUS$ ThUS$ ThUS$ 6 - - - 6 5,110 (25) (25) (25) 5,085 5,116 (25) (25) (25) 5,091 363 10) FINANCIAL REPORTS Rs Agro Chemical Trading Corporation A.V.V. Transactions with related parties Trade receivables due from related parties, current: Tax ID N° Company Nature Country of origin Currency Foreign SQM Investment Corporation Associate Aruba Dollar Total Trade payables due to related parties, current: Tax ID N° Company Nature Country of origin Currency 93.007.000-9 Foreign Total SQM S.A. Royal Seed Trading Co. Parent Chile Other related parties Aruba Dollar Dollar As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 5,149 5,149 5,149 5,149 As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 79 9 88 53 9 62 364 Orcoma Estudios SPA Summary Classified Statements of Financial Position Assets Currents assets Cash and cash equivalents Other non financial assets, current Total current assets Non-current assets Other non-current financial assets Property, plant and equipment Deferred tax assets Total non-current assets Total assets Liabilities and Equity Current liabilities Trade and other payables, current Trade payables due to related parties, current Total current liabilities Non-current liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Equity Share capital Retained earnings Total equity Total liabilities and equity 10) FINANCIAL REPORTS As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 1 2 3 1,240 3,136 183 4,559 4,562 154 2 156 1,240 3,281 - 4,521 4,677 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 156 253 409 - - 409 4,632 (479) 4,153 4,562 1 27 28 - - 28 4,632 17 4,649 4,677 365 10) FINANCIAL REPORTS For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 1 (678) (677) (2) (679) 183 (496) (496) - - - 1 1 (1) - - For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ (496) (496) - - For the period from January to December of the year 2020 2019 ThUS$ ThUS$ - (145) (8) (35) (105) - (153) (140) 154 1 294 154 Orcoma Estudios SPA Summary Statements of Income Statements of Income Revenue Cost of sales Profit (loss) from operating activities Foreign currency translation differences Profit before taxes Income tax expense Profit for the year Profit for the year Summary Statements of Comprehensive Income Statements of Comprehensive Income Other comprehensive income Total comprehensive income Summary Statements of Cash Flows Statements of Cash Flows Net cash generated (used in) from operating activities Net cash generated used in investing activities Net cash generated from financing activities Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 366 Orcoma Estudios SPA Summary Statements of Changes in Equity 10) FINANCIAL REPORTS Statements of Changes in Equity Share capital Retained earnings Total equity Equity as of January 1, 2020 Net profit Comprehensive income Increase (decrease) in equity Equity as of December 31, 2020 ThUS$ ThUS$ ThUS$ 4,632 - - - 4,632 17 (496) (496) (496) (479) 4,649 (496) (496) (496) 4,153 Statements of Changes in Equity Share capital Retained earnings Total equity Equity as of January 1, 2019 Net profit Comprehensive income Increase (decrease) in equity Equity as of December 31, 2019 ThUS$ ThUS$ ThUS$ 4,632 - - - 4,632 17 - - - 17 4,649 - - - 4,649 367 10) FINANCIAL REPORTS Orcoma Estudios SPA Related party disclosures As of December 31, 2020, and December 31, 2019, there are no transactions with related entities. Relationships between the parent and the entity Orcoma Estudios SPA is controlled by Sociedad Química y Minera de Chile S.A., with 100% ownership. Sociedad Química y Minera de Chile S.A., is registered with the Securities Registry of the Chilean Commission for Financial Markets (CMF) ex Superintendence of Securities and Insurance under No. 0184 of March 18, 1983 and accordingly, is subject to the oversight of such regulating authority, Detailed identification of the link between Orcoma Estudios SPA and subsidiary As of December 31, 2020, and December 31, 2019, the detail of entities that are related parties is as follows: Tax ID N° Company Nature Country of origin Currency 93.007.000-9 Total SQM S.A. Parent Chile Dollar As of December 31, 2020 ThUS$ As of December 31, 2019 ThUS$ 253 253 27 27 368 Ajay SQM Chile Summary Classified Statements of Financial Position Assets Currents assets Cash and cash equivalents Trade receivables due from related parties, current Current inventories Other current assets Total current assets Non-current assets Property, plant and equipment Other non-current assets Total non-current assets Total assets 10) FINANCIAL REPORTS As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 5,360 257 12,680 7,144 25,441 1,204 345 1,549 26,990 77 2,512 9,506 5,685 17,780 1,115 145 1,260 19,040 Liabilities and Equity As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ Current liabilities Trade payables due to related parties, current Other current liabilities Total current liabilities Non-current liabilities Provisions for employee benefits, non-current Total non-current liabilities Total liabilities Equity Equity attributable to owners of the Parent Total equity Total liabilities and equity 7,304 2,260 9,564 713 713 10,277 16,713 16,713 26,990 731 553 1,284 374 374 1,658 17,382 17,382 19,040 369 10) FINANCIAL REPORTS Ajay SQM Chile Summary Statements of Income Statement of Income For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ Revenue Cost of sales Gross profit Profit from operating activities Profit before taxes Income tax expence Profit attributable to Owners of the Parent Profit for the year 38,193 (34,618) 3,575 2,069 2,460 (603) 1,857 1,857 24,882 (21,463) 3,419 2,162 2,098 (588) 1,510 1,510 Summary Statements of Comprehensive Income Statements of Comprehensive Income Profit for the year Total comprehensive income For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 1,857 1,857 1,510 1,510 370 10) FINANCIAL REPORTS Ajay SQM Chile Summary Statements of Cash Flows Statements of Cash Flows Net cash generated from (used in) operating activities Net cash generated from (used in) investing activities Net cash generated from (used in) financing activities Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate Effects of exchange rate fluctuations on cash held Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 7,022 (200) (1,133) 5,689 (406) 5,283 77 5,360 (706) (50) (1,800) (2,556) - (2,556) 2,633 77 371 Ajay SQM Chile Summary Statements of Changes in Equity 10) FINANCIAL REPORTS Statements of Changes in Equity Share capital Retained earnings Total equity Equity as of January 1, 2020 Net profit Comprehensive income Dividends Increase (decrease) in equity Equity as of December 31, 2020 ThUS$ ThUS$ ThUS$ 5,314 - - - - 5,314 12,068 1,857 1,857 (2,526) (669) 11,399 17,382 1,857 1,857 (2,526) (669) 16,713 Statements of Changes in Equity Share capital Retained earnings Total equity Equity as of January 1, 2019 Net profit Comprehensive income Dividends Increase (decrease) in equity Equity as of December 31, 2019 ThUS$ ThUS$ ThUS$ 5,314 - - - - 5,314 12,358 1,510 1,510 (1,800) (290) 12,068 17,672 1,510 1,510 (1,800) (290) 17,382 372 10) FINANCIAL REPORTS Ajay SQM Chile Related party disclosures Detailed identification of the link between Ajay-SQM Chile S.A. and subsidiary As of December 31, 2020 and December 31, 2019, the detail of entities that are related parties is as follows: Tax ID No. Company Nature Country of origin Functional Currency 93.007.000-9 SQM S.A. Parent 79.768.170-9 Soquimich Comercial S.A. Other related parties Foreign Foreign Foreign Total SQM (Shangai) Chemicals Co. Ltd. Other related parties Ajay North America Ajay Europe SARL Other related parties Other related parties Chile Chile China United States France Dollar Dollar Dollar Dollar Euro Trade receivables due from related parties, current: Tax ID No. Company Country of origin Currency Nature 93.007.000-9 SQM S.A. Parent 79.768.170-9 Soquimich Comercial S.A. Other related parties Chile Chile Foreign Total Ajay Europe SARL Other related parties France Peso Dollar Euro Trade payables due to related parties, current: Tax ID No. Company Country of origin Currency Nature 93.007.000 SQM S.A. Parent Chile Foreign SQM (Shangai) Chemicals Co. Ltd. Other related parties Foreign Ajay North America Other related parties China United States of America Foreign Total Ajay Europe SARL Other related parties France Peso Dollar Dollar Euro As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ - 9 248 257 2,237 17 258 2,512 As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 7,072 - 232 - 7,304 591 52 53 35 731 373 SCM Búfalo Summary Classified Statements of Financial Position 10) FINANCIAL REPORTS Assets Currents assets Other current non-financial assets Trade receivables due from related parties, current Total current assets Non-current assets Other non-current non-financial assets Intangible assets other than goodwill Total non-current assets Total assets Liabilities and Equity Current liabilities Trade and other payables, current Trade payables due to related parties, current Current tax liabilities Total current liabilities Non-current liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Equity Share capital Retained earnings Total equity Total liabilities and equity As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 49 1 50 301 22 323 373 - - - - - - - As of December 31, 2020 As of December 31, 2019 ThUS$ ThUS$ 33 316 1 350 - - 350 23 - 23 373 - - - - - - - - - - 374 10) FINANCIAL REPORTS SCM Búfalo Summary Statements of Income Statements of Income Other income Profit from operating activities Foreign currency translation differences Profit before taxes Income tax expense Profit net Summary Statements of Comprehensive Income Statements of Comprehensive Income Other comprehensive income Total comprehensive income For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ 4 4 (3) 1 (1) - - - - - - - For the period from January to December of the year 2020 ThUS$ 2019 ThUS$ - - - - 375 SCM Búfalo Summary Statements of Changes in Equity 10) FINANCIAL REPORTS Statements of Changes in Equity Share capital Retained earnings Total equity Equity as of January 1, 2020 Issuance of shares Net profit Comprehensive income Increase (decrease) in equity Equity as of December 31, 2020 ThUS$ ThUS$ ThUS$ - 23 - 23 23 23 - - - - - - - 23 - 23 23 23 Statements of Changes in Equity Share capital Retained earnings Total equity Equity as of January 1, 2019 Net profit Comprehensive income Increase (decrease) in equity Equity as of December 31, 2019 ThUS$ ThUS$ ThUS$ - - - - - - - - - - - - - - - Transactions with related parties As of December 31, 2020, and 2019, there were no transactions with related entities. Relationships between the parent and the entity SCM Búfalo, is controlled by Sociedad Química y Minera de Chile S.A., with 100% ownership. Sociedad Química y Minera de Chile S,A., is registered with the Securities Registry of the Chilean Commission for Financial Markets (CMF) ex Superintendence of Securities and Insurance under No. 0184 of March 18, 1983 and accordingly, is subject to the oversight of such regulating authority. 376 10) FINANCIAL REPORTS SCM Búfalo Related party disclosures As of December 31, 2020, and December 31, 2019, the detail of transactions with related parties is as follows: Trade receivables due from related parties, current Tax ID No. Company Nature Country of origin Currency 96.651.060-9 Total SQM Potasio S.A. Common parent Chile Dollar Trade payables due to related parties, current Tax ID No. Company Nature Country of origin Currency 93.007.000-9 Total SQM S.A. Parent Chile Dollar As of December 31, 2020 As of December 31, 2019 MUS$ MUS$ 1 1 - - As of December 31, 2020 As of December 31, 2019 MUS$ MUS$ 316 316 - - 377 11) RESPONSIBILITY STATEMENT 11) RESPONSIBILITY STATEMENT The Directors and Chief Executive Officer of SQM S.A. declare that we have exercised our respective functions as administrators and chief executive of the Company in conformity with the practices that are customarily used for such purposes in Chile and, in accordance with these practices, we swear under oath that the information in this 2020 Annual Report is true and that we accept any liability that may arise from this statement. 378 

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