annual report empresas aquachile Report 2012.pdfannual report empresas aquachile chap.01 12 Dear shareholders, AquaChile is a company that was born in the South of Chile and, as it

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annual reportempresas aquachile

annual report empresas aquachile

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annual reportempresas aquachile

1 . EMPRESAS AQUACHILE 08

1.1 From the South of Chile to the world 1 1

1.2 Letter from the Chairman 1 2

1.3 AquaChile at a glance 1 4

1.4 Milestones 2012 1 8

2. OUR COMPANY 2 2

2.1 Profile of AquaChile 25

2.2 Mission, values and principles 26

3. CORPORATE GOVERNANCE 28

3.1 Board of directors 3 1

3.2 Management: Principal executives 34

3.3 Organizational chart 35

4. COMPANY ACTIVITIES 36

4.1 AquaChile: Performance 2012 38

- Salmon business 45

- Tilapia business 45

5. FINANCIAL STATEMENTS 48

- Management discussion and analysis at 31 December 2012 50

- Highlights of the period 50

- Analysis of results 50

- Statement of financial position 54

- Description of flows 55

- Cash flow analysis 56

- Productivity indicators 56

- Risk analysis 56

- Difference between economic and book value of assets 58

- Exchange-rate exposure 59

- Trends 59

EMPRESASAQUACHILE

Annual Report 2012 AquaChile

1 . EMPRESAS AQUACHILE 06

1.1 From the South of Chile to the world 09

1.2 Letter from the Chairman 1 0

1.3 AquaChile at a glance 1 2

1.4 Milestones 2012 1 6

11

/ From the South of Chile, AquaChile supplies the world's most demanding markets with high-value foods, produced from its own salmon, sea trout and tilapia farms.

/ Each day, over 1.5 million people around the world consume and experience the generous abundance of the land and sea through AquaChile's products.

/ AquaChile was born in the South of Chile and, today, has over 400 clients in

50 countries across five continents.

/ AquaChile has over 25 years of experience in the food industry and is present throughout its different stages from genetics through to the food that reaches the tables of the most demanding consumers of different international markets.

/ We appreciate and value our people, our surroundings and our community. With a strong local commitment, we give preference to hiring people who live in the areas where we operate and to using the services these communities offer. We currently provide work for over 5,500 people in Chile, the United States, Costa Rica and Panama.

/ We are committed to the development of an industry that is sustainable in the long term. To this end, we have participated actively in discussions about the sector's new sanitary regulations.

/ At AquaChile, innovation and incorporating new technologies are a key tool for ensuring the company's competitiveness in international markets.

FROM THE SOUTH OF CHILE

TO THE WORLD

empresas aquachile

Chapter 1.1


chap.01

12

Dear shareholders,

AquaChile is a company that was born in the South of Chile and, as it has grown, has kept its strong roots there. It produces value-added foods from the farming of Atlantic and Pacific salmon, sea trout and tilapia. Our production processes have close ties to their surroundings and sustainability is, therefore, a key pillar of our business. We are convinced that this is the surest way to achieve the harmonious development of our company and the industry over time.

In our quest for sustainable salmon farming, we have participated actively in the analysis and regulatory discussion of improved sanitary norms.

We have worked hand-in-hand with the authorities and the main industry players to establish regulations for the prevention and timely management of outbreaks of the illnesses that will always be present in the waters where we farm. During its ISA virus crisis, Chile learned crucial lessons that are reflected in the new legislation.

The most important of these lessons are that the seas used to farm fish have finite capacities and that the country must have measures in place to protect this environment. These must include preventive measures as regards the import of eggs, the vaccination of fish rather than the use of antibiotics, the establishment of compulsory coordinated rest periods for production concessions and the equipment of the National Fishing Service (SERNAPESCA) and the Undersecretariat for Fishing (SUBPESCA) with the legal powers to act in the face of the emergency of an outbreak of disease.

LETTER FROM THE CHAIRMAN

empresas aquachile

Chapter 1.2

13

One of the key points addressed in the discussions of the authorities and the other industry players was the Regulation of Densities which will allow us to prevent outbreaks of infection through dynamic monitoring and control of the sanitary farming load in the Los Lagos and Aysén Regions. These norms stipulate that each neighborhood will have a cap on its production capacity determined on the basis of its sanitary history. Further changes announced by the authorities included flexibility for the rotation of farming centers to prevent use that threatens their sustainability.

This regulation helps to establish the correct incentives, distinguishing between centers that perform well biologically and those that do not and, in this way, enhancing Chile's competitiveness. Thanks to all these efforts, we are achieving a dynamic solution through the implementation of modern regulation that is, indeed, more advanced than that of other producer countries.

To the extent that this new production model works well, we hope that the authorities will open new areas that are suitable for farming so as to guarantee the industry's growth with a sustainable level of output.

In addition, as a company that produces food for the world's most demanding markets, AquaChile understands that consumers attach ever more importance to the conditions in which the production process takes place, its relation to the environment and the social and working conditions of the people who participate in the production chain.

At AquaChile, we have focused on achieving standards that allow us to guarantee our consumers that we do things well and that our products are innocuous and of high quality. In 2012, we obtained certification from important international bodies and became the world's first salmon company to announce an undertaking to obtain certification under the ASC1 standards promoted by the World Wildlife Fund (WWF).

Another milestone for the company is that, three years after we were affected by the ISA virus with the resulting drop in output, we were able to restart operations at our largest processing plant (located in Puerto Montt). When at full capacity, this plant allows us to provide jobs for over 700 people, with priority given to the rehiring of workers with great experience in the sector. In 2012, the global salmon industry has been affected by a drop in the international price for exports of salmon and trout. However, the sustained growth of world demand for healthy proteins leads us to believe that this is only a temporary situation.

Much work certainly remains to be done but we are convinced we are on the right road. In 2012, the most important structural reforms for the industry were put in place and we have responded to the sanitary crisis by innovating and creating solid foundations for the development of our operations with an improved control to produce food based on salmon farming.

1 Aquaculture Stewardship Council: an independent non-profit organization founded in 2010 by the WWF and the Dutch Sustainable Trade Initiative (IDH) to administer the global standards of aquaculture responsibility developed through the Aquaculture Dialogues coordinated by the WWF.

víctor hugo puchi acuñaChairman of the Board


14

KEY FIGURES

thus$ 2012 2011 current assets 436,107 437,132 non-current assets 395,719 341,546total assets 831,826 778,678 current liabilities 176,554 130,969 non-current liabilities 258,739 196,612total liabilities 435,293 327,581equity 387,654 429,713 non-controlling interests 8,879 21,384total liabilities and equity 831,826 778,678

thus$ 2012 2011 total income 409,541 501,151 ebit pre fair value adj.(1) -20,687 76,081 ebitda pre fair value adj.(2) -4,287 95,355 earnings -43,156 54,876

thus$ 2012 2011 financial debt 260,816 196,656 cash 12,922 113,897 financial leverage(3) 1.07 0.47

AQUACHILEAT A GLANCE

empresas aquachile

Chapter 1.3

1 EBIT Pre FV Adj (henceforward EBIT Revenues from ordinary activities less cost of sales (in other words, gross earnings pre fair value), less administrative expenses, less distribution costs. All these figures are obtained directly from the company's Income and Cash Flow Statements.2 EBITDA Pre FV Adj. (henceforward EBITDA): Revenues from ordinary activities less cost of sales (in other words, gross earnings pre fair value), less administrative expenses, less distribution costs, plus adjustment for depreciation and amortization expenses. All these figures are obtained directly from the company's Income and Cash Flow Statements. 3 (Other current financial liabilities plus other non-current financial liabilities less cash and cash equivalents) / EBITDA.

Source: AquaChile

chap.01

15

OWNERSHIP STRUCTURE

AQUACHILE SHARE PRICE (CLP) vs IPSA (POINTS)

CONSOLIDATED SALES 2012. TOTAL: US$410 MILLION

ipsa

ene feb mar abr may jun jul ago sep oct nov dic

450

400

350

300

250

200

4.900

4.700

4.500

4.300

4.100

3.900

3.700

3.500

aquachile ipsa

fig. 01

fig. 02

fig. 03

Source: AquaChile

Source: AquaChile

33,03% familia fischer

33,03% familia puchi

33,95% otros

29,18% aquachile

4,77% afp

Source: AquaChile

12% alimento

17% salmón del atlántico

31% trucha

17% salmón del pacífico

15% tilapia

8% otros


16

CONSOLIDATED EBITDA, 2006-2012 (US$ MILLION)

2006

2007

2008

2009

2010

2 0 1 1

2 0 1 2

136

49

-16

-40

58

95

-4

fig. 05

CONSOLIDATED EARNINGS, 2006-2012 (US$ MILLION)

2006

2007

2008

2009

2010

2 0 1 1

2 0 1 2

84

15

-75

-142

58

55

-43

fig. 06

CONSOLIDATED SALES, 2006-2012 (US$ MILLION)

2006

2007

2008

2009

2010

2 0 1 1

2 0 1 2*

501

484

553

440

388

501

410

(*) No incluye Alitec Pargua S.A.

fig. 04

(*) Includes Alitec Pargua S.A. consolidated proportionally (1)

1 See reasoned analysis of Audited Financial Statement as of 31.12.2012

Source: AquaChile

Source: AquaChile

chap.01

Source: AquaChile

17

CONSOLIDATED WORKFORCE (N° EMPLOYEES)

2007

2008

2009

2010

2 0 1 1

2 0 1 2

6.547

6.483

4.659

4.525

4.813

5.592

fig. 08

CONSOLIDATED INVESTMENT (US$ MILLION)

2006

2007

2008

2009

2010

2 0 1 1

2 0 1 2

30

51

24

6

9

42

76

fig. 07

Source: AquaChile

Source: AquaChile

In 2012 AquaChile reopened its Puerto Montt

processing plant that had been closed for 3 years.

19

RECOGNITIONSPrize for Business Track Record to Víctor Hugo Puchi Acuña >During the Aqua Sur trade fair, the chairman of AquaChile was unanimously awarded the 2012 Business Track Record Prize for his contribution to the Chilean salmon industry, his leadership and vision and his efforts and work to achieve international recognition for the industry.

Innovation Award for Verlasso® >At the 10th International Seafood Summit, organized by the SeaWeb NGO in Hong Kong, Verlasso® received international recognition as one of the year's most creative and innovative aquaculture solutions.

AquaChile recognized as one of Chile's ten most transparent companies >AquaChile was ranked as one of the ten companies with the best policies on transparency, respect for the environment and active engagement with its employees and the community in the 2012 Corporate Transparency Ranking prepared by Inteligencia de Negocios with the support of Chile Transparente, KMPG and Universidad del Desarrollo.

AquaChile recognized as one of the most respected new companies >According to the study, Most Respected Companies 2012, published by Adimark GfK (July 2012), AquaChile is one of the ten new companies that are emerging with success.

MILESTONES2012

empresas aquachile

Chapter 1.4

/

/

/

/

annual report empresas aquachile annual report empresas aquachile

20

PARTICIPATION IN PUBLIC-PRIVATE WORK ON REGULATORY ISSUESAquaChile has worked closely with the authorities and the sector's business associations in discussion of regulatory matters including the Regulation of Densities and Law N° 20.583 which modifies the General Fishing and Aquaculture Law as regards Sanitary Norms and Zoning for Aquaculture Concessions. The company also participated in debates about new norms to prevent and control disease with a high impact on the industry such as sea lice, SRS e ISA and regulation of nurseries (also called stocking centers).

BRINGING SALMON CLOSER TO CHILEANS In 2012, as part of its strategy of increasing the access that Chilean consumers have to high-quality export salmon, AquaChile had a mobile store at the International Aquaculture Fair (Aqua Sur). In addition to this innovative initiative, it opened a shop in Puerto Montt in 2011, expected to be followed soon by other shops in Coyhaique and Santiago.

CERTIFICATIONS IN 2012AquaChile received GLOBALG.A.P and SQF 2000 certification in 2012 and is also working to obtain BAP (Best Aquaculture Practices) and IFS (International Food Standard) certification. In order to strengthen its social, labor, environmental and anti-corruption commitments, it also adhered to the UN Global Compact.

RESTART OF OPERATIONS AT PUERTO MONTT PROCESSING PLANTIn July 2012, AquaChile reopened this plant which had been closed for three years due to lower output in the wake of the ISA crisis. With an annual production capacity of 50,000 tonnes, the plant will focus on producing value-added food, particularly Atlantic salmon. Priority has been given to rehiring workers it employed before the sanitary crisis.

UNDERTAKING WITH THE WWF TO OBTAIN ASC2 CERTIFICATION AquaChile has undertaken to obtain certification under the environmental and social standards promoted by this NGO through the Dialogues in Salmon Farming. It is the world's first salmon company to enter into this undertaking.

ASC CERTIFICATION FOR TILAPIAThe company's three tilapia production centers in Costa Rica obtained ASC certification in December 2012. This certification, promoted by the WWF, indicates that the organization has successfully implemented a program of continuous improvement which ensures that it produces tilapia in a way that is environmentally and socially sustainable. This, in turn, also ensures that value is created throughout the chain through this standard's three guiding principles of credibility, effectiveness and added value.

FISH FEED PLANT IN COSTA RICAGrupo ACI, a subsidiary of AquaChile, and Biomar inaugurated their first plant for the production of concentrated feed for aquaculture in that country. The plant - the most modern of its type in Central America - is designed to efficiently and reliably supply aquaculture producers in Central and South America and, particularly, Costa Rica, Brazil, Colombia, Ecuador, Honduras, Mexico and Panama. It represented an investment of US$15 million.

START OF OPERATION OF LENCA EXPERIMENTAL CENTERIn March 2012, operations began at the Lenca Experimental Center of AquaInnovo S.A. Covering an area of 2,500 m2, the Center is equipped with the highest-standard technology and is unique in Latin America. It was created to carry out research in the field of aquaculture and provide bioassay services under controlled environmental conditions (temperature, salinity and photoperiod) and has high biosecurity standards. In 2012, it carried out experiments related to the challenges of Caligus rogercresseyi (sea lice) and Piscirickettsia salmonis (SRS) and also evaluated diets for salmon.

START-UP OF SALMONES CHAICAS S.A.In 2012, the Salmones Chaicas recirculation hatchery started operations. This technologically advanced facility -which includes an investment of approximately US$ 25 million- will produce 120 million disease-free eggs and 4 million Atlantic salmon smolts annually. Chaicas will allow AquaChile to manage its stock of fish for breeding Atlantic salmon securely from a sanitary point of view since its production systems are closed, access and production areas are zoned and production units are sectorized. In addition, Salmones Chaicas, with AquaInnovo playing an advisory role, has an advanced genetic program based on 120 families of Atlantic salmon.

chap.01

2 Aquaculture Stewardship Council: an independent non-profit organization founded in 2010 by the WWF and the Dutch Sustainable Trade Initiative (IDH) to administer the global standards of aquaculture responsibility developed through the Aquaculture Dialogues coordinated by the WWF.

OURCOMPANY


2. OUR COMPANY 20

2.1 Profile of AquaChile 23

2.2 Mission, values and principles 24

The company is active throughout the production chain

of the industry, from fish genetics through to the

sales and marketing of its products; reaching

more than 400 customers in over 50 countries, and

giving employment to more than 5,500 workers in the

countries where it operates.

2525

Empresas AquaChile S.A. is a Chilean company that produces food and proteins with an emphasis on the production and marketing of salmon, sea trout and tilapia. It comprises a group of companies with strategic synergies that farm and market Atlantic and Pacific salmon, sea trout and tilapia for human consumption, maintaining vertical control and adding value throughout the production chain from genetics through to the marketing of products.

AquaChile is Chile's largest salmon company, the world's principal producer of Pacific salmon and sea trout and the most important supplier of fresh tilapia to the United States.

Through its subsidiaries, AquaChile is active in genetic research for the aquaculture industry and produces salmon and sea trout eggs as well as feed for the salmon and tilapia industries.

The company has operations in Chile, Costa Rica and Panama as well as commercial offices in the United States.

It participates in all the different stages of the industry's production chain from fish genetics through to the sales of its products and directly serves more than 400 clients in over 50 countries and provides more than 5,500 jobs in the countries in which it is present.

In 2012, the company reported consolidated sales for US$409.5 million.

PROFILE OFAQUACHILE

our company

Chapter 2.1


26

chap.02

- To supply the world with a healthy protein produced from the efficient, sustainable and responsible farming of salmon, sea trout and tilapia.

- To act with respect for people, work and the environment.

- To feel passion for the work we do.- To be creative and show initiative in our daily tasks- To act preventively and safely.- To accept new challenges and be open to change- To behave austerely.

- To add value at each stage of the process, taking into account the safety and health of our employees and care for the environment, and to provide each internal and external client with the best product and the best service at a convenient price.

- To guarantee through all stages of the process, safety, quality and competitiveness in the production and marketing of salmon, sea trout and tilapia.

- To achieve international recognition for the quality and consistency of our products and services which should be reflected in greater preference from clients and greater sustainability of the business.

- To constantly improve the way we do things, taking into account product quality and service efficiency, innovating technologically and minimizing workplace risks and environmental impacts.

- To foster the professional and personal development of all the people who form part of the value chain, contributing to improve their skills and consolidating their commitment to the welfare of the community and conservation of the environment.

- To promote partnerships and integration with other companies.

- To produce high-quality, healthy and safe food.- To be proactive and respectful as regards the

environment. - To develop a safe and healthy work environment. - To benefit communities and suppliers in the places

where the company has its operations.

MISSION, VALUES AND PRINCIPLES

our company

Chapter 2.2

mission

corporate values

objetivesprinciples of corporate social responsibility

CORPORATEGOVERNANCE


3. CORPORATE GOVERNANCE 26

3.1 Board of directors 29

3.2 Management: Principal executives 32

3.3 Organizational chart 33

3131

BOARD OF DIRECTORS

AquaChile's Board of Directors has seven members elected by the Shareholders' Meeting. Under the company's bylaws, they sit for a period of three years.

Their principal function, which is regulated by Chile's Law 18.046 on public companies, is that of the company's administration. In addition, the Board represents the company judicially and extra-judicially in all the acts required for it to fulfill its purpose and, to this end, have all the powers of administration and decision that the law or the company's bylaws establish as corresponding to the Shareholders' Meeting.

The Board meets monthly to evaluate and guide the company's economic, environmental and social development. Directors receive a set fee for attendance at board meetings and are not entitled to variable remuneration depending on the company's achievement of economic, social or environmental objectives. The chairman and other directors do not hold executive posts in the company.

CORPORATEGOVERNANCE

corporate governance

Chapter 3.1


32

- Chairman of the Board- Puchi holds an undergraduate degree in economics

and business administration from the Universidad Católica de Chile and an MBA from the University of Chicago. After completing his studies, he worked in the finance area of companies that included Iansa, Grupo BHC and Quiñenco. He is a director of Centrovet and Empresas Hidronor and has business activities in the real estate, tourism and cattle farming sectors in the Los Lagos and Aysén Regions.

- Director- Fischer is a veterinary physician from the

Universidad Austral de Chile. He was one of the pioneers of the salmon industry and, in 1985, founded Salmones Pacífico Sur S.A, a company that initially focused on the ongrowing stage in seawater and sales of the product. He has investments in the tourism, agricultural, cattle farming and real estate sectors and is also a director of the Dreams hotel and casino chain with operations throughout Chile.

- Director- Puchi holds a technical university degree in fishing

from the Universidad Técnica del Estado. He began his professional career in the Aysén Region, working first for the Agricultural Inspection Service (SAG) and, then, for the National Fishing Service (SERNAPESCA), a post that allowed him to specialize and participate in the project for the introduction of Pacific salmon in Chile. He currently has cattle farming business in the Los Lagos and Aysén Regions.

- Director- Fischer is a pilot with Transporte Línea Aérea and was

a founding partner of Salmones Pacífico Sur S.A., established in 1985. He currently has investments in sectors that include transport, tourism, real estate, agricultural and cattle farming. He is also executive president of the Dreams S.A. hotel and casino chain and of the Zona Franca de Punta Arenas.

- Director- Pérez holds an undergraduate degree in civil

industrial engineering from the Universidad de Chile and a master's degree in economics from the University of Chicago. He is chairman of the Board of the Universidad San Sebastián, vice-chairman of the Board of Clínica Indisa and a director of Entel and Inversiones Angelini Ltda. He previously served as CEO of Celulosa Arauco, Soprole S.A. and Watt´s Alimentos S.A.

- Director- Solari holds an undergraduate degree in civil industrial

engineering from the Universidad Católica de Chile and an MBA from Sloan School of Management, MIT. He is executive director of Family Office Megeve Investments and a director of Haldeman Mining Company and Parque del Recuerdo as well as vice-chairman of Aptus Chile, a non-profit educational organization. From 2004 to 2009, he was chairman of the Aguas Nuevas S.A. water company.

- Director- Lamana holds an undergraduate degree in economics

and business administration from the Universidad de Chile and is a company consultant, a professor at the Universidad Adolfo Ibáñez and director of its Retail Center. She is also a director of Empresas Flores and Empresas Artel and the owner of Gelatería Biancolatte. She previously held a number of posts, including senior vice-president customer management, at Unilever Chile. One of her previous posts was that of senior vice-president customer management at Unilever Chile.

claudio fischer llop

chap.03

The Board has monthly meetings where it assesses and

directs the company in economic, environmental and

social matters.


34

MANAGEMENT: PRINCIPAL EXECUTIVESAs of 31 December 2012, the principal managers and executives of Empresas AquaChile S.A. and its subsidiaries were:

- Chief Executive Officer- Business Administration Universidad Católica de Chile MBA J.L. Kellogg Graduate School of Management

- Chief Operations Officer- Agronomist Universidad Católica de Chile

- Director of Institutional Affairs - Civil Engineer Universidad de Chile

- Chief Financial Officer- Business Administration Universidad Católica de Chile

- Chief Commercial Officer- Aquaculture Engineer Universidad Andrés Bello

- Technical Director- Aquaculture Engineer Universidad Andrés Bello MBA, Loyola College Maryland, USA

- Chief Business Development Officer - Agronomist Universidad Católica de Chile MBA, Instituto Directivo de Empresas de Madrid

- Human Resources- Business Administration - Accountant Universidad de Santiago - Universidad Austral de Chile

- Sea Water and Operations Manager- Agronomist Universidad Austral de Chile

- Processing Plants Manager - Civil Engineer Universidad Católica de Chile

- Fresh Water Manager - Marine Technician Universidad Católica de Chile

- Health - Veterinary Physician Universidad Austral de Chile

- Fresh Water Manager, Aysén Region- Mechanical Engineer Instituto Nacional de Capacitación

- Health and Safety- Health and Safety Engineer Instituto Nacional de Capacitación Masters in Environmental Management and Zoning Universidad de Santiago de Chile

- Fresh Water Manager, Trout - Veterinary Physician Universidad Austral de Chile, Masters in Veterinary Science MBA, Universidad Adolfo Ibáñez

ADMINISTRATION OF SUBSIDIARIES

- General Manager, Grupo ACI S.A.- Engineer in Industrial Production Instituto Tecnológico de Costa Rica

- General Manager, AquaChile Inc.- Business Administration Universidad de Santiago

- General Manager, AquaInnovo S.A.- Aquaculture Engineer Universidad de los Lagos Masters in Environmental Studies, Universidad de Santiago

chap.03

35

ORGANIZATIONAL CHART

juan miguel urdangarínGerente Agua Dulce Salar

francisco serraGerente Técnico

roberto berndtGerente Agua Mar y Operaciones

juan carlos puchiGerente Agua Dulce XI Región

juan carlos lópezGerente Agua Dulce Truchas

alfonso márquez de la plataGerente General

josé luis vialGerente de Administración y Finanzas

agustín ugaldeGerente Operacional

franco adamGerente Comercial

felipe sandovalGerente de Asuntos Institucionales

anton felmerGerente de Desarrollo y Nuevos Negocios

ignacio sandovalGerente Plantas de Proceso

alejandra cidRRHH

rodger mirandaGerente GeneralAqualnnovo

gastón dupréGerente GeneralAquaChile Inc.

víctor manuel jiménezGerente GeneralGrupo ACI

ulises jaraSalud

jorge manuel riquelmePrevención de Riesgos

COMPANYACTIVITIES


4. COMPANY ACTIVITIES 34

4.1 AquaChile: Performance 2012 36

- Salmon business 43

- Tilapia business 43


38

company activities

PERFORMANCE2012

Chapter 4.1

chap.04

Empresas AquaChile produces food from the farming of aquaculture species such as Atlantic and Pacific salmon, sea trout and tilapia. It has operations in Chile, Costa Rica, Panama and the United States and sells and markets its products throughout the world.

Empresas AquaChile comprises a group of companies with strategic synergies that farm, produce and market food. It provides jobs for over 5,500 people in Chile, the United States, Costa Rica and Panama.

In 2006, when it acquired 50% of Alitec Pargua, the company became a player in the fish feed industry and, through its alliance with BioMar, went on to open a modern fish feed plant in Costa Rica in 2012.

In 2012, AquaChile was Chile's leading exporter of salmon and sea trout with a market share of 10.4% measured in terms of net volume. AquaChile currently has over 400 clients in 50 countries across five continents and markets its products under well-known brands:

Source: AquaChile

39

SALMON AND TROUT EXPORTS, 2012

company thus$ net % market % market tons share share (value) (volume)empresas aquachile (1) 286,492 51,027 9.9 10.4mainstream (2) 279,999 46,604 9.5 9.5multiexport (3) 210,024 26,993 7.3 5.5marine harvest (4) 187,659 30,448 6.5 6.2los fiordos 159,097 31,200 5.5 6.4acuinova 153,002 32,101 5.3 6.6blumar 149,755 24,190 5.2 5.0camanchaca 132,369 19,122 4.6 3.9antártica 129,330 18,251 4.5 3.7invertec 119,055 18,950 4.1 3.9trusal 118,721 17,724 4.1 3.6australis 108,113 18,143 3.7 3.7tornagaleones 99,025 20,335 3.4 4.2other 766,856 133,382 26.5 27.3total 2,894,497 488,469 100.0 100.0

fig. 9

1 Includes Empresas AquaChile S.A., Aguas Claras S.A. and Salmones Chiloé S.A.2 Includes Mainstream Chile S.A. and Cultivos Marinos Chiloé S.A.3 Includes Salmones Multiexport and Multiexport Foods4 Includes Marine Harvest Chile S.A. and Delifish Ltda.

Source: Infotrade

for AquaChile Salmon, Sea Trout and Tilapia, 2012 (net tonnes)

Principal markets

chile

2,094

argentina

867

germany

127

spain127

brazil1,012

mexico

1,505

lithuania268

canada

274

venezuela132

ukraine

157

costa rica

1,230

u.s.a.6,563

u.s.a.6,709

canada

146

tilapia salmon / sea trout

china3,268

taiwan305

vietnam1,117

russia

6,870

thailand2,044

malasia176

japan16,577


42

1 / genética, reproducción e incubación

2 / eclosión y alevinaje7 /comercialización

6 / producto final

4 / engorda y cosecha5 / proceso

3 / smoltificación

alim

enta

ció

nVALUE CHAIN

SALMON AND TROUT

chap.04

Source: AquaChile

43

1 / genética

2 / reproducción

3 / alevinaje

4 / preengorda

5 / cosecha

6 / proceso

7 / producto final

8 /comercialización

alimenta

ción

VALUE CHAIN

TILAPIA

Source: AquaChile


44

4545

SALMON BUSINESSGenetics >From the beginning of its operations, AquaChile has implemented genetic development programs through the selection of breeding fish in a bid to improve the productivity and quality of its Atlantic and Pacific salmon, sea trout and tilapia. Since 2007, these activities have been undertaken by AquaInnovo, a company owned by AquaChile in partnership with the Universidad de Chile.

Fresh water production >- Eggs: AquaChile is one of Chile's largest producers of eggs and has the

capacity to supply all the companies in the group as well as to sell eggs to third parties.

- Smolts: It has the capacity and sufficient flexibility to supply all the juveniles and smolts required by the group's companies and to provide production services for third parties.

Sea water production >AquaChile holds sea water concessions located in the Los Lagos and Aysén Regions and is present in 29 neighborhoods (50% of the total).

Feed production >AquaChile and BioMar, one of the world's leading producers of high-yield feed for the aquaculture industry, jointly control the Alitec Pargua fish feed plant.

Processing plants >AquaChile has five modern processing plants in Chile, located close to Puerto Montt and Calbuco and on the Island of Chiloé.

Marketing >AquaChile's most important markets are Japan and the United States where it has its own distribution company, AquaChile Inc. In addition, it exports to Europe, Asia, the Middle East and other Latin American companies. It has over 400 geographically diversified clients in over 50 countries across five continents.

TILAPIA BUSINESSThrough Grupo ACI S.A., a company headquartered in Costa Rica, AquaChile has been a player in the tilapia industry since 2005. The focus of Grupo ACI's commercial strategy is to supply fresh tilapia to large supermarket chains, distributors and restaurant chains in the United States.

Genetics and reproduction > Grupo ACI has a genetic improvement program managed by AquaInnovo.

Juveniles, pre-fattening and fattening >All the tilapia production process takes place in a farming area of over 360 hectares in Cañas, Costa Rica.

Processing plant > Grupo ACI's Terrapez processing plant is located in Cañas and has a capacity of 21,000 tonnes WFE. It receives the live harvest recently taken from the farm tanks and, as a result, obtains highly value added products.

Marketing > Grupo ACI sends its fresh products to Miami for distribution to clients under the Rain Forest brand. The company has a consolidated position as one of the leading exporters to this product to the United States.

AcuaPanamá >Through its subsidiary, the company has three unique tilapia farming concessions on Lake Bayano, with a total area of 516 hectares, where operations began in 2011.

it has a unique and non-replicable base of concessions with presence in 50% of neighborhoods. it has important potential for growth in the tilapia business.through aquainnovo, it has a proven and successful track record in genetic development. it is self-sufficient in atlantic and pacific salmon, sea trout eggs and smolts. it has its own processing plants with the capacity to absorb the growth of its output.its concessions are spread out across the los lagos region (37%) and the aysén region (63%) product diversification is provided by the company's farming of three different species of salmon in chile (atlantic salmon, pacific salmon and sea trout) and tilapia in costa rica and panama.it is integrated throughout the entire salmon, trout and tilapia production chains.

aquachile is a company that has great growth potential because:

FINANCIALSTATEMENTS


5. FINANCIAL STATEMENTS 46

- Management discussion and analysis at 31 December 2012 48

- Highlights of the period 48

- Analysis of results 48

- Statement of financial position 5 2

- Description of flows 5 3

- Cash flow analysis 54

- Productivity indicators 54

- Risk analysis 54

- Difference between economic and book value of assets 56

- Exchange-rate exposure 5 7

- Trends 5 7


50

chap.05

Management Discussion and Analysis of the Financial Statements as of 31 December 2012

1. HIGHLIGHTS OF THE PERIODEmpresas AquaChile S.A. and its subsidiaries farm and process salmon, sea trout and tilapia which they sell to different markets. Through its subsidiaries, Empresas AquaChile undertakes the following activities: (i) genetic research for the aquaculture industry, (ii) production of salmon and sea trout eggs and smolts, and (iii) production of fish feed for the salmon industry.

As of 31 December 2012, Empresas AquaChile showed a loss of US$43.2 million as compared to a gain of US$54.9 million in the same period in 2011. The drop reflected principally lower export prices as a result of increased international supply of salmon as well as recognition of a loss due to a net effect of -US$23.9 million for fair value measurement of biomass as compared to a gain of US$4.9 million on this account in 2011. In view of the low prices faced by Chile's salmon export industry in 2012, Empresas AquaChile's financial statements at 31 December 2012 also include a reduction of US$4.6 million in the realizable value of stock of end products and a provision of US$15.8 million for a lower realizable value at harvest of the biomass currently under production whose projected costs have been compared with projected market prices, all of which affected results for the period.

The company's management considered it appropriate to make this provision for the lower realizable value of the biomass currently under production, projecting its costs through to harvest and comparing them with a price projection carried out at the beginning of 2013.

The consensus view among industry analysts is that demand will remain firm, particularly in traditional markets and emerging markets which have developed recently, showing important potential. Similarly, a reduction in supply growth will permit a recovery of salmon export prices and an improvement in margins.

During the early months of this year, international export prices for salmon and trout have shown a recovery and this trend should persist given a moderation of the Chilean industry's stocking rate, the lag that prices for Chilean salmon still show with respect to those of other producer countries and expectations that growth of salmon supply in 2013 will show a significant drop on 2012, coming more closely into line with demand growth, and that salmon prices will narrow their gap with respect to the prices of other animal proteins.

It is important to note that Chile's salmon farming industry has recently been successfully recovering the levels of production of Atlantic salmon seen before the ISA virus crisis. However, new regulation has meant increased restrictions on stocking due to the introduction of compulsory fallowing periods and these will increase further when new density regulation is implemented. This will mean, on the one hand, a reduction in Chile's potential production capacity but, on the other hand, an increase in the industry's sanitary sustainability.

The company closely monitors the evolution of the markets in which it is present and prevailing sanitary conditions, constantly analyzing whether it is necessary or convenient to adjust its production plan and mix of species.

At 31 December 2012, the consolidated sales revenues of Empresas AquaChile reached US$409.5 million. This represented a drop of 18% on the same period in 2011 that was explained principally by: i) the effect on its results of the proportional consolidation of its Alitec Pargua S.A. subsidiary which, under IFRS, implied the incorporation as from 2012 of only 50% of its accounts and registers, ii) the drop

seen in the export prices of the species farmed, and iii) the planned decision to decelerate sales sales of Pacific salmon pending higher returns.

At the operational level, EBITDA pre fair value adjustment(1) (before fair value adjustment of biomass) reached -US$4.3 million as compared to US$95.4 million in the same period in 2011, due principally to lower margins on all the species farmed as a result of lower export prices in the context of increased international supply.

Lower revenues in the salmon and sea trout businesses reflected a drop in the average sale price of the three species and a reduction in volume of sales of Pacific salmon. In a bid to achieve higher returns on Pacific salmon, which is mostly sold frozen, the company has decided to reduce speed of sales in the 2012-2013 season, pending a price recovery. In 2012, input and harvesting costs also increased in all three species. As a result, operating income (EBIT pre fair value adjustment(2)) in the salmon segment reached -US$19.3 million, down from US$73.2 million in the same period in 2011.

Revenues in the tilapia business increased in 2012, reflecting principally higher sales volume. However, sales costs also increased reflecting: i) higher production costs in Panama due to the start-up of the business and ii) a temporary postponement of harvests at the beginning of the year with the resulting negative impact on conversion factor and processing costs. This implied that operating income (EBIT pre fair value adjustment) reached -US$1.4 million, down from US$2.9 million in the same period in 2011.

As of 31 December 2012, the company's financial debt reached US$260.8 million, up from US$196.7 million at 31 December 2011. This increase mainly reflected the use of US$60 million of the Tranche B line of credit for development of the company's production plan and new debt for US$6.8 million taken on by its Grupo ACI subsidiary to refinance its liabilities, improving their terms, as well as to finance construction in conjunction with SPF of a plant for production of flavorings for pets and, in conjunction with Biomar, a fish feed plant.

The cash and cash equivalents account amounted to US$12.9 million at 31 December 2012 while net financial debt (financial debt less cash and cash equivalents) reached US$247.9 million, up from net financial debt of US$165.1 million at 31 December 2011.

2. ANALYSIS OF RESULTSTable N°1 shows the main components of the Consolidated Income Statements of Empresas AquaChile S.A..

Empresas AquaChile S.A. is Chile's leading producer of salmon and sea trout as well as the leading tilapia producer of Costa Rica and Panama. It is a vertically integrated company from genetic development of fish feed production through to the marketing of its output or, in other words, from the production of eggs through to the marketing and distribution of the fish. This structure facilitates control of strategic resources, particularly at the freshwater stage, and also permits the creation of greater value in each of the stages of salmon production.

1 EBITDA pre FV adj. (henceforward EBITDA): Revenues from ordinary activities less sales costs (in other words, gross earnings pre fair value adjustment), less administrative costs, less distribution costs, plus adjustment for depreciation and amortization. All these figures are obtained directly from the company's Income and Cash Flow Statements. 2 EBIT pre FV adj. (henceforward EBIT): Revenues from ordinary activities less sales costs (in other words, gross earnings pre fair value adjustment), less administrative costs, less distribution costs. All these figures are obtained directly from the company's Income and Cash Flow Statements.

51

As of 31 December 2012, AquaChile's sales were down by 18% on the same period in 2011(3) while its operating costs showed an increase of 1%. As a result, operating income pre fair value adjustment (EBIT pre FV adj.*) at 31 December 2012 reached -US$20.7 million as compared to US$76.1 million in the same period in 2011.

Consolidated EBITDA pre fair value adjustment at 31 December 2012 was -US$4.3 million, down from US$95.4 million in the same period in 2011, with the drop explained principally by lower salmon and sea trout export prices and, to a lesser extent, by higher input and harvesting costs for Atlantic salmon, trout and Pacific salmon and a higher sales costs for tilapia due to a temporary harvesting delay at the beginning of the year and the higher cost of the start-up of production in Panama.

(*): In order to measure financial performance under IFRS, AquaChile uses the EBIT pre fair value adjustment parameter (before fair value adjustments to fish biomass). Fair value adjustments of the fish biomass have their origin in the IFRS norm on fair value valuation of biomass. Changes in the price and composition of the biomass during the period may have an impact on its value. AquaChile reports its EBIT pre fair value adjustment in order to reflect the performance of its operations during the period.

It is important to note that the fish biomass under production which has reached marketable weight is valued at fair value in accordance with IFRS and, for this purpose, AquaChile uses a market price obtained from the company's most recent sales in the previous month and/or conservatively from market prices suitable for application to future sales. Moreover, in these estimates, AquaChile considers the most basic product obtained from processing plants or, in other words, gutted head-on (HON) in the case of Atlantic salmon and headed and gutted (HG) in the case of trout and Pacific or coho salmon, without taking into account the prices of a mix of products with greater value added.

figures in us$ million 4q12 4q11 ∆qoq 2012 2011 ∆yoysales 56,101 165,740 -66% 409,541 501,151 -18%operational cost (1) -67,443 -126,364 -47% -388,094 -384,854 1%operational margin -11,342 39,376 -129% 21,447 116,298 -82%other cost and operating expenses (2) -6,415 -6,421 0% -25,734 -20,944 23%ebitda pre fv adj. -17,757 32,955 -154% -4,287 95,355 -104%depreciation & amortization -4,066 -4,824 -16% -16,401 -19,273 -15%ebit pre fv adj. -21,823 28,131 -178% -20,687 76,081 -127%net revenues from biological assets (3) -3,774 18,278 - -44,292 4,893 -ebit post fv adj. -25,597 46,409 -155% -64,980 80,974 -180%financial expenses -2,243 -1,047 114% -8,488 -13,972 -39%financial income 1,568 333 371% 2,548 1,632 56%other non-operating items (4) 2,756 -243 - 2,916 450 548%income taxes 6,091 -8,313 - 24,848 -14,209 -net income -17,424 37,137 - -43,156 54,876 -

It is also important to note that the species of fish farmed and marketed by the company include Pacific salmon which has a marked seasonal behavior as a result of which farm stocking usually takes place between November and March and harvesting between October and February when the fish reach commercially optimum weight. However, towards the end of December or in the last quarter of the year, they usually reach an average weight of more than 2.5 kg WFE at which it is the company's policy to classify them for fair value adjustment, implying an impact on its results due simply to the natural growth of the biomass.

This implies that stocks of fish under production are valued at market price or that of recent sales and that, when sold in subsequent periods, reflect the revalued sales cost with the consequent impact on results.

Due to the net effect of the fair value adjustment of biomass, the company showed a loss of US$23.9 million at 31 December 2012, down from a gain of US$4.9 million in the same period in 2011, due to the low prices faced by the Chilean industry during the current year. (See Note 10 on Biological Assets in the Consolidated Financial Statements).

The biomass under production that has not reached marketable weight is valued at its historic accounting cost. Nonetheless, given the low prices faced by Chile's salmon export industry, a provision of US$15.8 million was included at 31 December 2012 for the lower realizable value at harvest of the stock currently under production and not fair value adjusted. Its projected costs have been compared with market prices as projected at the beginning of 2013.

As of 31 December 2012, the company also recognized a provision of US$4.6 million for lower value as a result of the application of net realizable value to end products.

Other Costs and Operating Expenses showed an increase of 23% over the same period in the previous year. Administrative Expenses did not show a significant change over the previous year while Distribution Costs were up by 80%, reflecting the company's increased marketing activities.

3 This drop was explained principally by the proportional consolidation of the Alitec Pargua S.A. subsidiary (see Note 2. Bases of Consolidation of the Financial Statements) due to which only 50% of its accounts and registers were included.

1 “Sales costs" less “Adjustment for depreciation and amortization”.2 “Distribution costs” plus “Administrative expenses”.3 “Fair value biological assets harvested and sold” plus “Fair value biological assets of the period". (See Note 10 of Financial Statements, Biological Assets.)4 “Other revenues, by function” plus “Other expenses, by function” plus “Exchange-rate differences” plus "Result from realignment units”.

Source: AquaChile

table n°1


52

chap.05In 2012, the salmon and trout businesses together accounted for 65% of total revenues from the sale of end products to third parties.

As of 31 December 2012, most of the company's businesses - with the exception of tilapia - showed a drop in sales value. This was particularly the case of Pacific salmon and fish feed where the reductions reached 37% and 51%, respectively, for the reasons indicated above.

Table N°3 shows variations in consolidated sales, indicating price and volume effects for each business unit or segment.

table n°3 Analysis of variations in consolidated sales (price and volume effect) US$ million volumen precio

ventas2011

501

410

9 24-15

-33-9

-31

-48(1) -1

-23 12

ventas2012

salm

ón

del

atl

ánti

co

tru

cha

salm

ón

del

pac

ífic

o

tila

pia

alim

ento

otr

os

ing

res

os

1 Effect on revenues of proportional consolidation of Alitec Pargua S.A.

Source: AquaChile

2.2. ANALYSIS OF SEGMENTSIn the Atlantic salmon business, revenues dropped by 8% (US$6.5 million) as compared to the same period in 2011, reflecting a 20% drop in the sales price that was partially offset by a 14% increase in sales volume (2,017 tonnes WFE). EBIT pre FV adj. was -US$11.5 million, due principally to lower sales prices. During the period,

Non-operating income showed a loss of US$3.0 million, down from a loss of US$11.9 million in the previous year, with the difference explained principally by lower financial expenses due to the reduction in the company's financial debt.

Income taxes showed a positive balance of US$24.8 million which compared favorably to a loss of US$14.2 million in the same period of the previous year. This was explained mainly by the company's loss during the period and a change in the rate of corporate income tax from 17% to 20% which implied recognition in the results of a larger gain for deferred taxes.

In 2012, the company showed a loss of US$43.2 million, down from a gain of US$54.9 million in the same period in 2011.

2.1. ANALYSIS OF SALESAquaChile is characterized by the diversification of its products and markets. Accumulated ordinary revenues to 31 December 2012 reached US$409.5 million, representing a drop of 18% on accumulated ordinary revenues in the same period in 2011. This reduction was explained principally by a drop of 51% in sales of fish feed (due to the effect of the proportional 50% consolidation of the Alitec Pargua S.A. subsidiary) and of 17% in the sales value of salmon and sea trout due to lower export prices which, in the case of Pacific salmon, were accentuated by a planned reduction in speed of sales pending expectations of higher returns in the coming months.

Table N°2 compares the period accumulated to 31 December 2012 with the same period in 2011, showing an increase in the relative contribution of Atlantic salmon, sea trout and tilapia to the company's sales mix and a drop in the relative share of Pacific salmon and fish feed. This is explained by: - In order to achieve higher returns on Pacific salmon, which is mostly sold

frozen, the company decided to plan a reduction in its speed of sales during the 2012-2013 season in order to capture greater returns as the price increases.

- Due to the application of IFRS, part of the company's sales was reduced for accounting purposes. At the end of 2012, an increase in the number of directors of the Alitec Pargua S.A. subsidiary, from five to six, meant that AquaChile - as a shareholder with a 50% stake - ceased to have a majority, sharing control with the other shareholders as regards decision making. Under IFRS, this called for proportional consolidation and the inclusion of only 50% of this company's sales. This alone implied a drop in sales as a result of the application of accounting criteria.

2011 2012 2011 2012

salmón del atlánticotruchasalmón del pacíficotilapiaalimentootros

77137108

489834

7012868624834

1527219

% %MM US$ 501 MM US$ 410

207

17311615128

table n°2

Source: AquaChile

Consolidated sales by business area

Management Discussion and Analysis of the Financial Statements at 31 December 2012

53

there was, in addition, an increase in input costs due to a temporary increase in mortality caused by high summer temperatures as well as an increase in harvesting costs. EBIT pre FV adj./kg WFE reached -US$0.71 (as compared to US$1.03 at the same date in the previous year). In 2012, EBIT/kg WFE for this species was affected by the harmoniously farmed Verlasso® salmon project, implemented by AquaChile in association with the DuPont® multinational, with a diet that reduces use of fish oil and replaces it with a yeast with a high Omega 3 content patented by DuPont®. This makes it possible to reduce use of pelagic fish by 75% as compared to "traditional" feeding, whilst maintaining the same level of Omega 3, and to ensure the sustainability of our salmon since, internationally, fishing catches are remaining constant or declining while aquaculture output is increasing. The development of the project's market-test stage during 2012 implied higher production, branding and marketing costs in introducing this new category of product, with the resulting effect on the segment's average weighted EBIT/kg WFE.

In the sea trout business, revenues dropped by 6% (US$8.7 million) as compared to the same period in 2011, reflecting a 24% drop in sales price which was partially offset by a 23% increase in sales volume (5,883 tonnes WFE). EBIT pre FV adj. was

-US$16.9 million, due principally to the drop in sales price. During the period, there was, in addition, an increase in input costs due to higher mortality in some farming centers that were affected by SRS as well as an increase in harvesting costs. EBIT pre FV adj./kg WFE reached -US$0.54 (as compared to US$1.18 at the same date in the previous year).

In the pacific salmon business, revenues dropped by 37% (US$40.0 million) as compared to the same period in 2011, due to an 8% drop in sales price and a 32% reduction in volume of sales (8,055 tonnes WFE). The latter was the result of a planned reduction in speed of sales for the 2012-2013 season in order to capture the expected increase in prices to the benefit of margins. EBIT pre FV adj. dropped to US$9.1 million, down by 68% on the same period in 2011, reflecting the drop in sales price and volume as well as higher harvesting costs. EBIT pre FV adj./kg WFE reached US$0.52 (as compared to US$1.13 at the same date in the previous year). In the tilapia business, revenues rose by 31% (US$14.6 million) as compared to the same period in 2011, driven by a 24% increase in sales volume (4,102 tonnes WFE) and of 6% in the average price of the sales mix. EBIT pre FV adj. was -US$1.4 million,

4Q12 4Q11 ∆ QOQ 2012 2011 ∆ YOYatlantic salmon sales volume tonnes wfe 5,292 5,434 -3% 16,267 14,251 14% sales thus$ 21,555 25,594 -16% 70,464 76,944 -8% average price us$ / kg wfe 4.07 4.71 -14% 4.33 5.40 -20% ebit thus$ -4,859 3,684 - -11,512 14,619 - ebit / kg wfe us$ / kg wfe -0.92 0.68 - -0.71 1.03 -sea trout sales volume tonnes wfe 7,916 6,754 17% 31,249 25,366 23% sales thus$ 26,583 36,356 -27% 127,863 136,549 -6% average price us$ / kg wfe 3.36 5.38 -38% 4.09 5.38 -24% ebit thus$ -13,392 8,102 - -16,932 29,816 - ebit / kg wfe us$ / kg wfe -1.69 1.20 - -0.54 1.18 -pacific salmon sales volume tonnes wfe 2,685 13,943 -81% 17,418 25,473 -32% sales thus$ 8,215 60,049 -86% 67,506 107,525 -37% average price us$ / kg wfe 3.06 4.31 -29% 3.88 4.22 -8% ebit thus$ -1,593 16,229 - 9,117 28,755 - ebit / kg wfe us$ / kg wfe -0.59 1.16 - 0.52 1.13 -54%tilapia sales volume tonnes wfe 5,007 3,697 35% 21,342 17,240 24% sales thus$ 14,214 9,778 45% 62,172 47,548 31% average price us$ / kg wfe 2.84 2.64 7% 2.91 2.76 6% ebit thus$ -1,979 115 - -1,360 2,892 - ebit / kg wfe us$ / kg wfe -0.40 0.03 - -0.06 0.17 -total sales volume tonnes wfe 20,900 29,829 -30% 86,276 82,329 5%sales thus$ 70,567 131,778 -46% 328,006 368,565 -11%average price us$ / kg wfe 3.38 4.42 -24% 3.80 4.48 -15%ebit thus$ -21,823 28,131 - -20,687 76,081 -ebit / kg wfe us$ / kg wfe -1.04 0.94 - -0.24 0.92 -

Source: AquaChile

table n°4 Analysis of sales volume, sales value and margin by segment


54

chap.05reflecting an increase in sales cost due to: i) higher production costs in Panama as a result of the start-up of the business and ii) a temporary delay in harvesting at the start of the year with the resulting negative impact on the conversion factor and processing costs. EBIT pre FV adj./kg WFE reached -US$0.06 (as compared to US$0.7 at the same date in the previous year).

3. STATEMENT OF FINANCIAL POSITION

table n°5 Summary of statement of financial position

figures in thus$ 2012 2011current assets 436,107 437,132non-current assets 395,719 341,546total assets 831,826 778,678current liabilities 176,554 130,969non-current liabilities 258,739 196,612total liabilities 435,293 327,581equity 387,654 429,713minority interests 8,879 21,384total liabilities and equity 831,826 778,678

Source: AquaChile

The principal variations in the Consolidated Statement of Financial Position as of 31 December 2012 as compared to 31 December 2011 are summarized below:

As indicated above, the company's financial statements for 2012 consider the proportional consolidation (PC) of Alitec Pargua S.A. in line with IFRS(4). This reflects the equalizing of the number of directors which, at the consolidated level, implies a 50% reduction in all accounting items, affecting the variations in each with respect to the same date in the previous year.

Total assets show an increase of US$53.1 million, up by 7% on 31 December 2011 (+US$83.2 million or 12% if the PC effect is excluded). This is explained by an increase of US$54.2 million in Non-Current Assets (+US$62.2 million if the PC effect is excluded), which was offset by a drop of US$1.0 million in Current Assets (+US$21.0 million if the PC effect is excluded).

The slight drop in Current Assets is explained principally by a reduction of US$100.9 million in Cash and Cash Equivalents, which was totally offset by an increase of US$103.3 million in Biological Assets and Inventories due to the increase in the fish biomass under production and inventories as a result of increased productive activity under the company's production plan.

The increase in Non-Current Assets is explained principally by: i) an increase of US$33.9 million in Property, Plant and Equipment due to the higher level of investment required by the company's growth plan, ii) an increase of US$3.5 million in goodwill followed by the acquisition of the remaining 40% of the Procesadora Hueñocoihue SpA. processing plant and 7% of Salmones Chiloé S.A., and iii) an

increase of US$22.6 million in Deferred Tax Assets as a result of: a) an increase from 17% to 20% in the rate of corporate income tax, b) the tax effect of the increase in indirect manufacturing costs, and c) the tax effect of the loss recognized in the period as a result of fair value adjustment of the biomass subject to revaluation, the application of the deterioration test to the biomass under production not subject to fair value adjustment and the lower net realizable value of the end product.

Total Assets represent an increase of US$107.7 million, which is 33% higher than the level as of 31 December 2011, explained by an increase in Current Assets of US$45.6 million and an increase in Non-Current Assets of US$62.1 million.

Total liabilities show an increase of US$107.7 million, up by 33% on 31 December 2011, due to an increase of US$45.6 million in Current Liabilities and of US$62.1 million in Non-Current Liabilities.

The increase in Current Liabilities is explained principally by an increase of US$43.2 million in Trade and Other Accounts Payable and of US$8.2 million in Accounts Payable to Related Entities.

The increase in Non-Current Liabilities is explained principally by an increase of US$67.1 million in Other Non-Current Financial Liabilities due to use of the Tranche B line of credit available for development of the company's production plan and new debt taken on by Grupo ACI to refinance its liabilities in order to improve the terms of its borrowing and finance new investments.

The company's financial liabilities include covenants calculated with respect to the Consolidated Financial Statements of Empresas AquaChile S.A. at 31 December 2011 and 31 March, 30 June, 30 September and 31 December of subsequent years. These refer to the maintenance of a maximum level of net financial leverage, a minimum level of coverage of net financial expenses and a maximum ratio of net financial debt to EBITDA.

Nonetheless, in view of the low prices faced by the Chilean salmon industry, the company has an agreement with its creditor banks to suspend measurement of those covenants that include EBITDA in their calculation until December 2013 inclusive.

table n°6 Financial covenants

covenants 2011(2) 2012 2013 2014 2015 2016 - 2018financial leverage(1) 1.25x 1.25x 1.20x 1.10x 1.0x 1.0x1 (Total current liabilities plus total non-current liabilities less cash and cash equivalents)/(Total equity).2 Measured at 31 December 2011.

Source: AquaChile

As of 31 December 2012, Empresas AquaChile S.A. and the debtor companies have complied fully with the obligations established and maintained all significant aspects of the declarations and undertakings established in the Liability Reprogramming Contract.

The Total Equity of Empresas AquaChile S.A. shows a reduction of US$54.6 million over the same period in the previous year. This is explained principally by the loss recorded in 2012 and by the effect of a drop in non-controlling interests as a result of: i) the acquisition of 7% of Salmones Chiloé, ii) the acquisition of 40% of

4 IFRS 11 “Joint Arrangements”: Issued in May 2011 to replace IAS 31 “Interests in Joint Ventures” and SIC 13 “Jointly Controlled Entities". Provides a more realistic reflection of joint ventures focusing on the rights and obligations that arise, rather than their legal form. The modifications include elimination of the concept of jointly controlled assets and the possibility of proportional consolidation of jointly controlled entities. Its early adoption is permitted in conjunction with IFRS 10, IFRS 12 and modifications to IAS 27 and 28.


55

In the case of the company's borrowing level, this shows a drop in the proportion of Non-Current Liabilities due to the increase in the Trade and Other Accounts Payable item of Current Liabilities.

In the case of indicators of activity, there is an increase of US$20.6 million in investments as compared to the same period of the previous year.

4. CASH FLOW ANALYSIS

table n°8 Net cash flow

figures in thus$ 2012 2011net cash flows from (used in) operating activities -74,002 8,724net cash flows from (used in) investment activities -76,472 -61,319net cash flows from (used in) financing activities 50,146 137,422net increase (decrease) of cash and cash equivalents -100,975 85,481cash and cash equivalents at start of period 113,897 28,416cash and cash equivalents at end of period 12,922 113,897

Source: AquaChile

Procesadora Hueñocoihue SpA., and iii) the proportional consolidation applied to the Alitec Pargua S.A. subsidiary as explained above.

The main financial indicators of the consolidated balance sheet are set out below: The acid-test ratio reflects a drop in the company's liquidity at 31 December 2012 as compared to the same period in 2011, explained by the drop in Cash and Cash Equivalents due to higher investment in both fixed assets and working capital.

2012 2011liquidity indices current liquidity (current assets / current liabilities) (times) 2.5 3.3acid ratio (available funds / current liabilities) (times) 0.7 1.7debt indices debt ratio (current liabilities + non-current liabilities / net equity) (times) 1.10 0.83short-term debt ratio (current liabilities / net equity) (times) 0.45 0.29long-term debt ratio (non-current liabilities / net equity) (times) 0.65 0.54short-term debt portion (current liabilities / current liabilities + non-current liabilities) % 40.6 34.9long-term debt portion (non-current liabilities / current liabilities + non-current liabilities) % 59.4 65.1financial expense hedge (times) -7.0 5.9(raii) / financial expenses activity indices total assets thus$ 831,826 778,678investments thus$ 76,092 55,505disposals thus$ 61 789inventory turnover (annualized cost to sale / (inventory + average biological assets)) (times) 1.4 2.0permanence of inventories (average inventory / cost to sale *360) (days) 263 180

Source: AquaChile

table n°7 Financial indicators of the statement of financial position

The behavior of the main components of Consolidated Cash Flow as of 31 December 2012 compared to 31 December 2011 was as follows:

As of 31 December 2012, the company showed a negative total net cash flow for the period of US$100.9 million as compared to a positive US$85.5 million for the same period in the previous year.

Operating activities accounted for a negative flow of US$74.0 million as of 31 December 2012, down from a positive US$8.7 million for the same period in 2011.

Investment activities implied an outlay of U$76.5 million to December 2012 as compared to US$61.3 million in the same period of the previous year.

To December 2012, financing activities generated a positive flow of US$50.1 million related principally to the use of US$60 million of Tranche B and new debt taken on by Grupo ACI to refinance its liabilities in order to improve the terms of its borrowing and finance, in conjunction with SPF, construction of a plant for production of flavorings for pets and, in conjunction with Biomar, a fish feed plant. In 2011, the flow reached US$137.4 million and had its origin in the raising of a net US$374.3 million on the stock market through the company's initial public offer (IPO).


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5. PROFIT ANALYSISAs of 31 December 2012, the company showed an accumulated loss of US$43.2 million, representing a drop from a profit of US$54.9 million in the same period in 2011. This reflected principally lower export prices as a result of increased international supply of salmon and recognition of a loss due to the net effect of fair value adjustment of biomass that, at US$23.9 million, was larger than in the same period in 2011. In addition, in view of the low prices faced by Chile's salmon export industry, the company's financial statements as of 31 December 2012 include a reduction of US$4.6 million in the realizable value of stock of end products and a provision of US$15.8 million for a lower realizable value at harvest of the biomass currently under production whose projected costs have been compared with a projection of market prices carried out at the beginning of the present year.

For the past four years, the company has not distributed dividends. At present, its financial statements show accumulated losses.

The principal profitability indicators are shown in the table below:

table n°9

Profitability indicators

2012 2011profitability of equity % -10.3 22.7(net profit / average equity)profitability of assets % -5.2 7.9(net profit / average total assets)earnings per share us$ / share -0.037 0.047net profit / number of subscribed and paid-in shares)return on dividends % n.a n.a.dividends per share / market price

6. PRODUCTION INDICATORSThe company's salmon and sea trout harvest (in tonnes WFE)/center harvested or being harvested ratio at 31 December 2012 was 2,175 tonnes WFE.

As of 31 December 2012, stocking densities of licenses for the seawater ongrowing stage were as follows: i) Atlantic salmon: 5.1 kg/m3, ii) Pacific salmon: 11.1 kg/m3, and iii) sea trout: 5.0 kg/m3.

The survival rates observed in closed groups as of 31 December 2012 were: i) Atlantic salmon: 86%, ii) Pacific salmon: 93%, and iii) trout: 80%.

table n°10 Production indicators

4q12 2012 2011productive indicators salmon and sea trout harvest tonnes wfe 32,735 84,810 67,260 harvested fish farms or fish # 21.0 39.0 37.0 farms that are being harvested salmon and sea trout harvest / tonnes wfe 1,559 2,175 1,818 harvested fish farms or fish farms that are being harvested used fish farms(1) # 47 47 25 salmon and sea trout harvest / tonnes wfe 696 1,804 2,690 used fish farms(1)

farming density(2) atlantic salmon kg / m3 5.10 5.10 2.80 pacific salmon kg / m3 11.10 11.10 9.60 sea trout kg / m3 5.00 5.00 5.10survival closed group(3)

atlantic salmon % 91 86 88 pacific salmon % 91 93 90 sea trout % 81 80 81

1 4Q12 and 2012 correspond to farms in use at the end of the period of analysis; 2011 corresponds to farms at the start of the period of analysis. 2 Density of licenses for the ongrowing in seawater stage. 3 Survival rate of closed groups of fish (farming centers) during the period.

Source: AquaChile

7. RISK ANALYSISThe company, its assets and the aquaculture industry in which it operates are exposed to a number of risks and contingencies that could have a negative effect on the company's solvency, its market position or its financial situation and must be considered when taking an investment decision. The most important risks and contingencies are described below, although there may exist other risks and contingencies that could also negatively affect the company's business and operating results.

7.1. ENVIRONMENTAL RISKSNotwithstanding the geographic diversification of the production facilities of Empresas AquaChile and its subsidiaries in Chile, the salmon industry is exposed to natural risks such as variations in sea temperature, climatic phenomena, seismic events, algal bloom(5), the existence of natural predators and other factors that can affect the places where its production facilities are located. All these factors can affect the growth of Empresas AquaChile and its subsidiaries, have a negative impact on its quality and even increase mortality rates which would lead to a drop in production and, therefore, the company's sales and results. 7.2. PHYTOSANITARY RISKSDiseases, parasites and pollutants are a recurring problem in the aquaculture industry, which can result in reduced product quality, increases in mortality and reductions in production.

Although Empresas AquaChile and its subsidiaries have invested significant resources in research, genetic improvement studies, massive vaccination programs, systems of administration of independent zones, fish health monitoring, low density cage-use policies and sanitary barriers that help to control or reduce

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these risks, the appearance of new diseases or pests that affect the production of salmon, trout and/or tilapia cannot be ruled out.

7.3. PRODUCT QUALITY RISKS AND TRACEABILITYThe products that the company farms, produces and markets are for human consumption and there is a risk of contamination due to negligence during production or improper management during the process of distribution and/or delivery to the end consumer on the part of clients, consumers or third parties. To safeguard against this, AquaChile has developed exhaustive quality classification controls and food safety controls and is constantly monitored internally and externally by the sector authorities.

In order to control food innocuity, the company provides complete fish traceability and, before harvesting, the authorities ensure that fish are analyzed to rule out any trace residues. Processing plants are also subject to sample checks in order to safeguard innocuity of the process and inputs. In this way, both the authorities and clients can be sure of the innocuity of AquaChile's products.

Because they are farmed in an open environment like the sea, fish are exposed to contracting diseases that can have an impact on their health. In order to control these impacts, AquaChile has a health department comprising veterinary physicians responsible for establishing a prevention policy and monitoring sanitary aspects of the fish population and, if a disease is detected, defining the proper treatment for combating it. Not to do this would constitute a risk for the fish population and a risk for the company's results.

7.4. RISKS OF VARIATIONS IN INPUT PRICESInputs of fish meal and fish oil represent some of the most important costs involved in salmon production. Sources of fish feed have diversified, now including new vegetable alternatives, and the company has invested in two feed plants of its own to supply part of its input requirements. AquaChile and its subsidiaries can, however, be affected by variations in prices due to circumstances beyond their control since the feed industry is concentrated in the hands of a few international producers and there is not a deep market for futures or other derivatives for the purchase of a number of the inputs that make up the diet of salmon, sea trout and tilapia.

7.5. INTERNATIONAL PRICE TRENDSSupply of salmon and sea trout is determined by the production strategies of each of the industry players and it is, therefore, complex to project and estimate products' equilibrium price. In addition, demand for farmed salmon has shown strong growth in recent years and a difference between supply and demand for salmon products could, therefore, occur, leading to price volatility. However, a dynamic process of consolidation in the salmon industry at both the international and local level suggests more balanced future growth. Moreover, diversification into other species such as tilapia and the company's geographic diversification will permit minimization of this effect and complement the portfolio that it offers to the market.

7.6. ECONOMIC CHANGES IN MARKET COUNTRIESAt present, the company exports principally to the United States, the European Union and Japan and it is not possible to rule out stagnation, crises or economic

depressions in these countries, with the consequent drop in demand, which could have negative effects on the company's business and operating results.

7.7. CONCENTRATION OF FINANCIAL LIABILITIESOn 24 June 2011, the company signed a Liability Reprogramming Contract with its financial creditors. As well as the renegotiation with all its financial creditors of maturities, interest rates, the required financial indicators and the collateral provided, this included a series of undertakings as to what the company may or may not do and established different mechanisms and quorums for approval by the creditors of any exception to these undertakings. Under the Contract, the company's financial creditors may require the forfeiture of the agreed deadlines and advance payment of the total debt and interest on non-payment of any of the installments of capital and interest at the agreed date or if the company fails to comply with any of the undertakings established and maintains this non-compliance for more than 90 days.

7.8. EXCHANGE-RATE RISKThe performance of AquaChile, as a global company, can be affected by fluctuations in exchange rates since part of its costs (labor and services such as land transport, etc.) are indexed to the Chilean peso while its sales are denominated in foreign currencies such as the US dollar, euro and yen. In addition, since the company reports its results in US dollars, changes in the value of the latter against the other currencies in which the company operates can negatively affect its financial results.

7.9. CHANGES IN ENVIRONMENTAL LEGISLATION AND OTHERSCare for the environment is core to the company's business policy. However, contamination of natural resources as a result of the externalities of production processes is a matter of increasing concern and awareness among consumers, intermediate groups and the relevant authorities who demand care for the environment on the part of production systems and a prior guarantee of the protection of natural resources in the long term. This has led to the introduction of more rigorous norms and procedures which seek to ensure environmental sustainability and can mean important increases in production costs and/or restrictions on the company's productive activities.

7.10. CHANGES IN AQUACULTURE LEGISLATION AND CONCESSIONSThe company has in place processes and constant monitoring to ensure good management of its farming sites as well as a technical department and legal advice for the good use and management of its aquaculture licenses. However, it could face sanctions and, where envisaged by the applicable legislation, even the cancellation of some of its aquaculture licenses by the authorities in the case of their improper management and/or failure to comply with norms relating to sustainability and the good joint operation of the system or inactivity of licenses without justified cause or authorization from the authorities.

7.11. RISKS TO ASSETSFixed assets such as installations and buildings and civil liability risks are covered by insurance policies on commonly-applied market terms and conditions. However, given the lack of effective insurance options, the high costs currently prevailing in the market for insuring living assets or biomass and disputes with insurers as regards response to such losses, the company's biomass is not currently insured against the risks of disease and theft or natural risks such as storms, tidal waves, tsunamis, earthquakes, volcanic eruptions, currents, floods, avalanches and/or landslides, submarine currents or algal blooms. As a result, any significant damage

5 Natural phenomena also known as Harmful Algal Bloom (HAB) that occur in aquatic ecosystems and are caused by phytoplankton that, in environmental conditions favorable to their development, multiply explosively and concentrate, causing alterations in marine life and fish mortality.


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or loss in these assets can have an adverse effect on the company's business and financial situation. However, the company's geographic diversification on land and of its farms in the sea enables it to at least diversify, if not eliminate, the risk of such events.

7.12. SUBSIDIARIES AND AFFILIATED COMPANIESEmpresas AquaChile S.A. is the parent and holding company of a number of companies through which it develops a significant part of its business and depends significantly on their operating results and financial situation. Any significant deterioration in the business and results of its subsidiaries and affiliated companies can, therefore, have an adverse effect on its own business and operating results.

8. DIFFERENCE BETWEEN ECONOMIC AND BOOK VALUE OF ASSETSAs of 31 December 2012, there were no significant differences between the economic and book values of the company's main assets. For investments in related companies acquired prior to January 2003, the proportional equity value is used and, for more recent investments, fair value as defined under the norms established in Circular Nº 1.697 of Chile's Superintendency of Securities and Insurance (SVS) and Technical Bulletin Nº 72 of Chile's Association of Accountants (Colegio de Contadores de Chile A.G.).

Salmon and sea trout biological assets such as broodfish, juveniles, smolts and small fish at the fattening stage are measured at fair value less estimated costs at point of sale, except when fair value cannot be reliably measured in accordance with IAS 41 under which the search for an active market for these assets must first be considered.

Since there is not an active market for stocks of living fish at these stages of development, they have been valued at their accumulated cost as of the end of the period.

Salmon and sea trout biological assets under production and of greater weight are measured at fair value less estimated transformation and sale costs.

The direct and indirect costs incurred during the production process form part of the value of the biological asset through their activation. The accumulation of these costs at the end of each period is compared with the reasonable value of the biological asset.

Changes in the fair value of these biological assets are reflected in the income statement for the period.

Biological assets whose projected harvest date is within 12 months are classified as current assets.

Fair value is estimated on the basis of market prices for harvested fish and adjusted for differences in the distribution of caliber and quality or ranges of normal harvest weights. This price is adjusted for harvest costs, costs of transport to destination and processing costs in order to obtain the value and condition of the fish in the water. In this way, the evaluation takes into account the stage of life cycle of the fish, current weight and expected distribution by caliber at harvesting. This estimate of fair value is incorporated into the company's income statement.

chap.05A summary of valuation criteria is shown below:

stage asset valuationfreshwater Broodfish Accumulated direct and indirect costs at different stages.freshwater Eggs Accumulated direct and indirect costs at different stages.freshwater Smolts and Accumulated direct and indirect costs at juveniles different stages.seawater Fish in Fair value according to: seawater - Atlantic salmon as from 4.0 kg WFE - Pacific salmon as from 2.5 kg WFE - Sea trout as from 2.5 kg WFE. For lower weights, accumulated cost at the

end of the period is used. However, in the case of adverse situations that could affect the salmon market, the company carries out a deterioration test of biomass under production projected to harvest and the net accumulated effect is presented in its results.

Tilapia biological assets in reproduction and tilapia at growth stageTilapia for reproduction are initially recorded at cost and, at each date of statements of financial position, at its accumulated cost considering losses for deterioration.

Tilapia at the growth stage are recorded at cost since, by their nature, market-determined prices or values are not available in Costa Rica and alternative estimates of reasonable value are not considered reliable. Cost includes all inputs, indirect costs and labor during the growth stage of tilapia.

For tilapia, the method applied is as follows:

stage asset valuationfreshwater Tilapia Accumulated direct and indirect costs at different stages.

9. EXCHANGE-RATE EXPOSUREAssets and Liabilities in local currency are shown in Note 29 of the complete Audited Financial Statement of the company.

10. TRENDSIt is not AquaChile's policy to forecast its results or variables that may significantly affect them. The consensus view among industry analysts is that the growth of per capita incomes and a shift in eating habits towards healthier foods suggest that, assuming maintenance of economic growth in developing countries, the outlook for demand for seafood products is good and, specifically, for healthy proteins and foods. In addition, demand for fresh filleted tilapia has continued to increase, maintaining its current price levels.



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annual report empresas aquachile Report 2012.pdfannual report empresas aquachile chap.01 12 Dear shareholders, AquaChile is a company that was born in the South of Chile and, as it

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