CONTENTS 01. INTRODUCTION 3 Message from the Chairman of the Board 4 Letter from Chief Executive Officer 6

02. OUR COMPANY 8 Business Strategy 9 Our History 11 Our Fleet 14 Destinations 20 Our People 25 Company Information 27

03. CORPORATE GOVERNANCE 28 Board of Directors 29 Senior Management 34 Corporate Governance Practices 41 Ownership Structure and Principal Shareholders 46 Financial Policy 49

04. OPERATIONS 52 International Passenger Operations 53 TAM 56 LAN 58 LAN Perú 60 LAN Ecuador 62 LAN Argentina 64 LAN Colombia 66 Customer Loyalty Programs 68 Cargo Operations 70

05. 2012 RESULTS 72 Industry Overview 73 Financial Results 75 Awards and Recognitions 79 Stock Market Information 81 Additional Information 85 Material News 86 Risk Factors 98

06. SUSTAINABILITY 100 LAN 101 TAM 105

07. FINANCIAL STATEMENTS 111 Financial Statements 111 Subsidiaries and Affiliated Companies 277 INTRODUCTION LATAM AIRLINES GROUP S.A.

María Estibaliz LAN Argentina

Paola Russo TAM Perú MEMORIA ANUAL 2012 Introduction 4 on June22whenweannouncedthebirthofLATAM dedication, theresultofwhichfinallymaterialized represented overtwoyearsofhardworkand Latin America’s airlineindustry. Themergerprocess to consolidationbutalsotookanhistoricstepin only fulfilledalong-sought-afterdreamon ourroad LAN andTAM, theregion’s principalairlines,wenot In 2012,byimplementingtheassociationbetween Dear Shareholders, OF THEBOARD MESSAGE FROMTHECHAIRMAN INTRODUCTION / hope tocontributeSouth America’s commercial through a service of excellence with which we This allows us topromote the region internationally of theworldsuchasSantiago, SãoPaulo andLima. connections between South America and the rest in additiontoakeyposition inthemainhubsfor byfartheregion’sas wellBrazil, largestmarket, Perú,in ,Argentina, EcuadorandColombia a diversifiedpresence,withdomesticoperations At theregionallevel,LATAM AirlinesGrouphastoday rest oftheworld. destinations intheregionaswelltoandfrom and connectivity, offeringmoreflightsand way, wehavegrownsignificantlyincapacity cargo to144destinations in 27countries. In this destinations across22countriesandtransporting 300 aircraft andanunrivallednetworkserving135 and coverage, withacombinedfleetcomprisingover airline that is a leader in the region in terms of size course, motivationsinceitwillallowustobuildan This achievementisasourceofbothprideand, Airlines Group. take thisopportunity toexpressoursincerest thanks of differentmarkets and their people. I would like to the advantagesthisimpliesin termsofknowledge only multinationalbutalso multicultural, withall making LATAM AirlinesGroupacompanythatisnot by over53,000peopleofdifferent nationalities, association ofLANandTAM involvesateamformed an importantorganizationalchallengesincethe and lessonstobelearned.Inparticular, weface easy and,onthecontrary, entailmanychallenges we arealsoawarethatmergerprocessesnot Just asweforeseegreatopportunitiesforgrowth, around 30%ofthegroup’s consolidatedrevenues. represents passengers eachyearand,atpresent, domestic marketwhichmovesaround77million include thedevelopmentpotentialofBrazil’s moreover,year oftheintegration. Thisdoesnot, million andUS$700ayearasfromthefourth will generate synergiesworthbetweenUS$600 of allouroperations. We estimatethatthisalliance the sameservicequalitythathasbeenhallmark travel optionsforourclientsatattractive prices with providingmore be morecompetitiveandefficient, The integration ofLANandTAM willenableusto region. integration andto expand ourculture beyond the MEMORIA ANUAL 2012 Introduction 5 of flightsandbetterconnectionswithintheregion clients willbenefitthroughanincreasednumber Airlines Groupfamily. Ourpassengersandcargo effort will create greater prosperity for all the LATAM reflected inourresults. We arecertainthatallthis we invested much time and resources and this is particular, was an important transition year in which passion andgiventhebestofourselves.2012,in In order to reach this stage, we have worked with largest andmostimportantairlines. making LATAM AirlinesGrouponeoftheworld’s ten consolidation ofthisuniqueandhistoricproject spirit ofcollaboration andtobeprotagonistsofthe I would,therefore,inviteyoutokeepalivethis We knowwestillhavealongroadaheadofusand implementation ofourmergerprocess. crucialforthesuccessful This was,withoutdoubt, commitment theyhaveshownoverthesetwoyears. to all our employees for the dedication, effort and coverage andknow-howinordertoconsolidateour on all our strengths and attributes as regards size, this integration process.Together, wewillnowbuild of serviceandthesearedecisiveforthesuccess business visionbutalsothesamevaluesandculture airlines. Both companies shared not only a similar collaboration betweenLANandTAM asindependent draw particularattentiontothelonghistoryof Before finishingtheseremarks,Iwouldliketo in greaterprofitabilityforourshareholders. among otherbenefitsofthemerger, willbereflected terms ofsynergiesandincreasedflowpassengers, and jobsforouremployees.And,finally, thegainsin operations will also mean new career opportunities and withtherestofworld.Thegrowthour Chairman oftheBoard Mauricio Amaro airline industry. to competeinthebigleaguesofinternational position asaglobaloperator thatiswellprepared

MEMORIA ANUAL 2012 Introduction 6 market capitalization. America andoneoftheworld’s firstintermsof and resultedinthelargestairlinegroupLatin largest businessinitiatives–wascrownedasuccess in theAmericas.Themerger–oneofcontinent’s represented amilestoneinthehistoryofaviation the creationofLATAM AirlinesGroupin2012 In ayearmarkedbychallengesforairlinesworldwide, Dear Shareholders, EXECUTIVE OFFICER LETTER FROMCHIEF INTRODUCTION / levels ofmoremature marketsliketheUnited States factor intheyearto73.6%.Though stillbelowthe which significantlyincreased ouraverage load reduce excesscapacityin the domesticmarket, wewereabletosuccessfully underscore. First, thereare two pointsIwouldliketo In Brazil, us toimproveouron-timeperformance. have moreseats,whichreducesourcostsandallows with new Airbus aircraft that are more efficient and wecontinuedtoreplace ourcurrentfleet Colombia, which willbringsignificantgainsgoingforward.In largest domestic markets, Colombia and Brazil, We also advanced important changes in our two continent toEuropeandtheUnitedStates. adjust itineraries toimproveconnectionsfromour of destinations,andalsoworkedcontinuously to LAN andTAM flights,whichincreasedour offering made availabletoourpassengersthejointsaleof initially projected for the integration process. We capture theimportantsynergiesandopportunities Important steps were taken that allowed us to our operations inasingleterminal wewillbe America totherestofworld. Byconcentrating LATAM Airlines Group, effectively connecting South Guarulhos InternationalAirport intoamajorhubfor One ofourmostimportantobjectives istotransform millions ofpassengers. growing needsandimprovingservicefortheir adjustinginfrastructure toaircarriers’ market, initiative forstimulatingtheregion’s aviation Themoverepresentsanimportant contract. management sincemid-2012throughaconcession Airport inSãoPaulo, hasbeenunderprivate Brazil’s GuarulhosInternational largestairport, the country. Miami, whichisBrazilian’s mainportofentryinto new destinationsintheUnitedStatesbasedoutof market48 we willbeginofferingintheBrazilian following approvalbytheregulatoryagencies, two largestairlinesintheirrespectivecountries, between TAM and , among the Second, with the signing of code-sharing agreements 30% oftheLATAM AirlinesGroup’s revenue. which accounts for approximately domestic market, the rightpathtorecoveringprofitabilityinBrazil’s and Europe, this load factor shows that we are on MEMORIA ANUAL 2012 Introduction 7 and the constant renewal of our fleet, we have and the constant renewal of our fleet, improvements in the connectivity of our network and cargocustomers.Inadditiontocontinuous excellence intheserviceweprovidetopassengers More thanever, wemaintainour commitment to especiallyforlong-haulroutes. the currentfleet, evaluating opportunitiestoimproveourproductin for passengers.Additionally, weareconstantly efficiency andprovidingasuperiortravel experience state-of-the-art aircraft tooperate with greater has significantordersofBoeing787andAirbusA350 consume less fuel. Along theselines, the company efficiency byusinglatestgeneration which aircraft, to ourpassengers,whilealsoincreasingflight objective is tooffergreater comfort andwell-being already oneoftheyoungestinworld,butour medium term.TheLATAM AirlinesGroupfleetis We arealsorenewingourfleetovertheshortand conveniences inourlounges. better connectiontimesandmorecomfort international, shorter distances between gates, able to offer our passengers, both domestic and shared similarvaluesandacultureofexcellence was createdfromtwocompaniesthathavealways spirit acrossourcorporation. LATAM AirlinesGroup why weareinvestingincreatingasharedteam with distinct backgrounds and cultures, which is together 53,000peoplefromvariouscountriesand are dedicatingtoouremployees.Ourgroupbrings Lastly, I would like to highlight the importance we customer needs. in anorganizationthatisincreasinglyresponsiveto convinced thatinthelongtermtheywillbereflected challenges intheirimplementation,butweremain our passengers.Thesechangeswerenotfreeof allow ustobettermanagetheinteractions with invested insystemsandtechnologythatwill CEO Enrique CuetoP. markthehistoryofglobalaviation. without adoubt, grandeur. AndtheLATAM AirlinesGroupmergerwill, challenges thatareinherenttoanyenterpriseofthis Over thenextfewyears we willovercomemajor importance inanyintegration process. in customerservice,whichisofinestimable

OUR COMPANY LATAM AIRLINES GROUP S.A.

Taciana Castro TAM Brazil

Gabriela Estrella LAN Ecuador ANNUAL REPORT 2012 Our Company 9 the region offers more flights to more destinations unrivalled connectivityandnootherairlinegroupin Through itsregionalpresence,theCompanyoffers connectivity, diversityandefficiency. this reason,ithasbaseditsstrategy onthepillarsof of theworld’s mostimportantairlinegroups.For today, aftertheirintegration, ispositionedasone the yearscarriedmillionsofpassengersandthat, business thatissustainableovertime,has the airlinesitbringstogether-LANandTAM -a For LATAM AirlinesGroup,successconsistsinmaking BUSINESS STRATEGY OUR COMPANY / their inhabitants. model, makingairtravel evermoreaccessibleto and social development and, thanks to its low-cost markets, contributingtothe countries’economic and Colombia and is the leader in most of these Perú,Ecuador subsidiaries inChile,Brazil, Argentina, LATAM AirlinesGrouphasbuiltasolidnetworkof part ofitsrevenuesfromcargooperations. group ofpassengerairlines,itderivesanimportant althougha markets -andbusinessdiversityinthat, company withapresenceintheregion’s main This includesbothgeographic diversity-asaregional Both companieshaveadiversifiedbusinessmodel. and cargoclients. to provideaserviceofexcellencebothpassengers clients moretravel optionsandconstantlystriving offering the restofworldwithSouthAmerica, of SouthAmericawiththerestworldand São Paulo) thatenableittoimprovetheconnection at strategic pointsintheregion(,Limaand extensive networkofdestinationsandhubslocated on a daily basis on the global stage, with an than LATAM AirlinesGroup. In addition,it competes passengers abetter service. in areduction inCO2emissionsand offering it tocutfuelconsumptionby around15%,resulting some cases,theefficiencyof its aircraft hasallowed its fleetisreflectedinsavings onoperating costs. In The greatinvestment that theCompany hasmadein orders forthenewAirbusA350-200. Boeing 777-200Fcargoplaneaswellitspurchase planes suchastheBoeing787Dreamlinerand Group standsoutforitsuseoflatest-generation orders foraroundafurther187,LATAM Airlines of morethan320aircraft inserviceandpurchase has beenkeyforitssuccess.Withamodernfleet time, environmentally friendly and their efficiency for its operations to be profitable and, atthe same Another pillarofLATAM Airlines Group’s strategy is passenger businessfortheother83.4%. business accountsfor14.6%ofrevenuesandits itscargo which itcouldbeaffected.Atpresent, and stabilityinrelationtotheexternalfactorsby routes andflightstodemandprovidingsolidity adjustingits optimizing utilizationofitsaircraft, integration ofitscargoandpassengerbusinesses, in theinternationalairlineindustry, achievingthe competitiveandprofitable of themostefficient, model hasalsobeenkeyinitsconsolidationasone The diversification ofthe Company’s business Business andgeographic diversification ANNUAL REPORT 2012 Our Company 10 providing greaterbenefitstotheregion. cost efficienciestoallowitcontinuegrowingand in the global market and generating synergies and to the new company, giving it an important position financially solidcompanies, bringing thebestof each The integration ofLANandTAM hasunitedtwo ANNUAL REPORT 2012 Our Company 11 pilots. TAM-Taxi AéreoMaríliacreatedbyfivecharterflight 1961 Start ofLANservicestoMiami. 1958 Start ofLANservicestoLima. 1956 Aires. First LANinternationalflight:Santiago-Buenos 1946 Comandante ArturoMerinoBenítez. Línea AereaNacionaldeChile(LAN)foundedby 1929 OUR HISTORY OUR COMPANY / north andcenterofthecountry. Aéreas, anotherregionalairline operating in Acquisition byTAM ofVOTEC-Brasil Central Linhas 1986 LAN becomesajointstockcompany. 1985 throughCORFO Limitada, Constitution ofLineaAereaNacional-Chile 1983 Mato GrossoandSãoPaulo. Launch ofTAM cities,especially servicesinBrazilian 1976 Capitan RolimAdolfoAmaro. Foundation ofTAM-Transportes AéreosRegionaisby 1975 LAN beginsflightstoEurope. 1970

the ANNUAL REPORT 2012 Our Company 12 LAN listsontheNewYork StockExchange,becoming 1997 Mercosur; startofSãoPaulo-Asunción flights. Paraguayan governmentandcreationofTAM Acquisition byTAM ofLapsaairlinefromthe 1996 other shareholders. of a98.7%stakebyitscurrentcontrollersand Privatization ofLANcompletedwiththeacquisition 1994 frequent flyerprogram. Launch byTAM ofTAM Fidelidade,Brazil’s first 1993 Meridonais. Brasil Central renamedTAM-Transportes Aéreos 1990 Scandinavian AirlinesSystem(SAS). government sellsa51%staketolocalinvestorsand Start ofprivatizationLAN:theChilean 1989 LAN joinsthe 2000 de sharing agreementwithAirFrance toParis Charles Start ofTAM servicestoEuropethroughacode 1999 Perú. LAN’s expansionbegins:startofoperations ofLAN 1999 from SãoPaulo toMiami. Arrival offirstA330; TAMinternational flight 1998 important market. the firstLatinAmericanairlinetotrade ADRsonthis

Gaulle. one world® alliance. 2004 operations ofLANEcuador. LAN continuesitsexpansionplan:startof 2003 LAN AlliancewithQantasandLufthansaCargo. 2002 Academy inSãoPaulo. Creation ofTAM Technology CenterandService 2001 cargo terminal. LAN AlliancewithIberiaandinauguration ofMiami 2001 Frankfurt. Agency (ANAC)tostartflights toMadridand authorization fromBrazil’s NationalCivilAviation Start ofTAM flights toMilanandCórdoba; 2007 purchase ordersfor32Boeing787Dreamliners. markets; capitalincreaseofUS$320million; Implementation oflow-costmodelindomestic 2007 Zurich andGeneva. London and,throughagreementwithAirFrance, to listsonthe NYSE/Startofflightsto TAM S.A. 2006 Launch ofnewLANPremiumBusinessClass. 2006 flights toNew York andBuenosAires. listsontheBOVESPATAM stockmarket;startof S.A. 2005 of operations ofLANArgentina. Further stepinLAN’s regionalexpansionplan:start 2005 Start ofTAM flightstoSantiago. 2004 Launch ofnewcorporate imageasLANAirlinesS.A.

ANNUAL REPORT 2012 Our Company 13 business combinationofthetwoairlines. LAN andTAM signbindingagreementsrelated tothe 2011 TAM officiallyjoinsStarAlliance. 2010 Acquisition ofColombia’s Airesairline. 2010 Pantanal LinhasAéreas. Launch ofMultiplusFidelidade;acquisition 2009 passenger operations inEcuador. Start ofcargooperations inColombiaanddomestic 2009 TAM receivesitsfirstBoeing777-300ER. 2008 aircraft fromtheAirbusA320family. Completion ofrenewalLAN’s short-haulfleetwith 2008 business combination LATAM AirlinesGroupisbornasaresultofthe 2012

betweenLANandTAM. ANNUAL REPORT 2012 Our Company 14 allows theCompanytoserveitsdomesticand great flexibilityaffordedbytheir range andpower exclusively aircraft fromtheAirbusA320family. The For short-hauloperations, theCompanyusesalmost passenger andcargoclients. the connectivityoftheirnetworkstobenefit under theirrespectivebrands butwithafocuson 2012, LAN’s andTAM’s planes continuedtooperate of the most modern in the industry. As of December whose average ageof6.7yearspositionsitasone LATAM AirlinesGroupoperates afleetof327aircraft OUR FLEET OUR COMPANY / the withdrawal fromserviceofAirbusA318s,the domestic andregionalmarkets. Inthissamecontext, densest routesefficientlyand thegrowthofboth greater passengercapacitywill allowittoservethe of largermodelssuchasA320s andA321swhose of itsshort-haulfleetenvisages theincorporation LATAM AirlinesGroup’s strategic planfortherenewal replaced byAirbusA320planes. will gradually betaken outofserviceandmostly (in November2010).Overthemediumterm,they as aresultofitsacquisitionColombia’s Aires which areoperating leases were received by LAN 700s andtenDashplanesremaininservice,allof Only inthecaseofLANColombiadosixBoeing737- of thetwoairlines. element in the process of integrating the businesses of LAN’s andTAM’s short-haul fleetsisanimportant family. Itisimportanttonotethatthehomogeneity LATAM AirlinesGroupafleetof212planesfromthis incorporated and15weretakenoutofservice,giving In 2012,22newaircraft fromthisfamilywere regional routeswithinSouthAmericaefficiently. of passengers, improvethecommercial mix on Boeing 767s,inordertooptimize thedistribution started toreconfigurethe cabins ofsomeits model inoperation. During2012,theCompanyalso - and, as of December 2012, had 41 planes of this established forthemodernBoeing 787Dreamliners configuration -complying withthesamestandards Boeing 767-300s,allequippedforthenewlong-haul In 2012, the Company also incorporated nine new by reducingtheCO2emissionsofflights. making apositivecontributiontotheenvironment competitive advantageintermsofcostsaswell in fuelconsumption,representinganimportant Boeing 787isbetween12%and15%moreefficient planes. Consideredthenew“ecological aircraft”, the the worldtotakedeliveryoftheselatest-generation the firstairlineinAmericasandonlyfourth LATAMeight years.Asaresult, AirlinesGroupbecame planes ofthismodelwhichwillarriveoverthenext Boeing 787-8Dreamlinersoutofatotalorderfor32 of 2012wastheincorporation ofthefirstthree In thecaseoflong-haulplanes,onemilestones checked priortotheirreturn. of theDash8-Q400s,whicharecurrentlybeing will becompletedin2013,aswellthewithdrawal smallest model in the Company’s A320 family fleet, ANNUAL REPORT 2012 Our Company 15 of theirtypeintheindustry. 777Fs. Thelatterarethemostmoderncargoplanes comprised twelveBoeing767Fsandfour As ofDecember2012,theCompany’s cargofleet similar inbothLANandTAM. configured to service standards that are product, cabin reevaluationsoastoofferahomogenous four in2013and2014,ithaslaunchedaprocess of currently haseightandexpectstoreceiveafurther In the case of Boeing 777s, of which the Company through to2018. investment ofapproximatelyUS$13,000million be deliveredin2016.Theplanrepresentsatotal Airbus A350s,thefirstofwhichareexpectedto envisages orders for 187 planes, including the new The futurefleetplanofLATAM AirlinesGroup prefers foritsultra-long-haul routes. Airbus A330andA340planes,thelatterofwhichit experience. TheCompany’s fleetalsoincludes27 used and provide passengers with a better travel the short-haulroutesforwhichtheseaircraft are revenues andtheaimistoreach over40%by2016. theyaccountfor18%ofitstotal to 2016.Atpresent, services tothirdpartiesby20% eachyearthrough external clients.Itsgoalistoincreaserevenuesfrom The unitiscurrentlyworkingtoexpanditsservices registration.Brazilian 767s, Fokker 100sandATRs (ATR-42 andATR-72) with planes (A318/A319A320A321A330),Boeing measures. TAM MROisauthorizedtoattendAirbus propellers andundercarriagescorrective such as the installation and remodeling of engines, the provisionofaircraft maintenance services Brazil’s NationalCivilAviationAgency(ANAC) for -by Repair and Overhaul business unit of TAM S.A. the certificationof TAM MRO-theMaintenance, In this field, one of the milestones of 2012 was MAITENANCE ANNUAL REPORT 2012 Our Company 16 A321-200 A320-200 A319-100 A318-100 A320 FAMILY Maximun weightattake-off: Cruising Speed: Seats: Width: Length: Maximun weight attake-off: Cruising Speed: Seats: Width: Length: Maximun weightattake-off: Cruising Speed: Seats: Width: Length: Maximun weightattake-off: Cruising Speed: Seats: Width: Length: 220 126 168 -174 144 34.1mts 34.1 mts 34.1 mts 34.1 mts 31.8mts 44.51 mts 37.6 mts 33.8 mts 850 km/h 850 km/h 850 km/h 850 km/h 63,000kg 70,000kg 89,000 kg 77,000 kg ANNUAL REPORT 2012 Our Company 17 A340-500 A340-300 A340 FAMILY A330-200 Maximun weightattake-off: Cruising Speed: Seats: Width: Length: Maximun weightattake-off: Cruising Speed: Seats: Width: Length: Maximun weightattake-off: Cruising Speed: Seats: Width: Length: 223 267 260 60.3mts 60.3 mts 63.45 mts 58.8 mts 63.7 mts 67.9 mts 870 km/h 907 km/h 896 km/h 230,000 kg 372,000 kg 275,000 kg ANNUAL REPORT 2012 Our Company 18 BOEING 787-8 BOEING 777-300 BOEING 767-300 -700 Maximun weightattake-off: Cruising Speed: Seats: Width: Length: Maximun weightattake-off: Cruising Speed: Seats: Width: Length: Maximun weightattake-off: Cruising Speed: Seats: Width: Length: Maximun weightattake-off: Cruising Speed: Seats: Width: Length: 148 221 -238205 247 362 35.7 mts 47.6 mts 60.0 mts 64.8 mts 39.5 mts 54.2 mts 56.69 mts 73.9 mts 828 km/h 869 km/h 913 km/h 896 km/h 227,930kg 70,000 kg 184,611 kg 347,800 k g ANNUAL REPORT 2012 Our Company 19 DASH 8-Q400 DASH 8-200 BOEING 777-200F BOEING 767-300F Maximun weightattake-off: Cruising Speed: Cargo Volume: Width: Length: Maximun weightattake-off: Cruising Speed: Seats: Width: Length: Maximun weightattake-off: Cruising Speed: Seats: Width: Length: Maximun weightattake-off: Cruising Speed: Cargo Volume: Width: Length: 78 37 47.6 mts 28.4 mts 25.89 mts 64.8 mts 54.2 mts 32.81 mts 22.25 mts 63.7 mts 438.1 m3 652.7 m3 869 km/h 667 km/h 500 km/h 896 km/h 186,880kg 29,260 kg 16,470 kg 347,450 kg ANNUAL REPORT 2012 Our Company 20 LATAM NETWORK DESTINATIONS OUR COMPANY / ANNUAL REPORT 2012 Our Company 21 Passenger andCargo(Chile) PASSENGER ANDCARGO Passenger andCargo(Perú) ANNUAL REPORT 2012 Our Company 22 Passenger andCargo(Brazil) Passenger andCargo(Ecuador) ANNUAL REPORT 2012 Our Company 23 Passenger andCargo(Argentina) Passenger andCargo(Colombia) ANNUAL REPORT 2012 Our Company 24 Passenger andCargo(International) Only CargoandCodeshare ANNUAL REPORT 2012 Our Company 25 For bothairlines,thedevelopmentoftheirpeople interchange. of LANandTAM, theirgrowthandcross-cultural important challengesimplicitintheintegration Group’s employeeswhoaretheprotagonistsof 2012 hasbeenthemostsignificantyearforall people. thanks totheeffortandcommitmentofallour fulfillment ofagreatdreamandhasbeenpossible The formationofLATAM AirlinesGroupisthe OUR PEOPLE OUR COMPANY / International Business, Finance,Planning, Auditing end-2012, theareasofHuman Resources,Cargo, have madeintheirorganizational structures. As of some policiesandthemodifications bothcompanies in thejointworkithasundertaken tohomologate objectives of LATAM Airlines Group. This is reflected focused human team is one ofthetransversal A high-performance,committedandcustomer- training. the workforce,receivedatotalof1,567,604hours equivalent to 64%of with apermanentcontract, its people,35,478LATAM Airlines Groupemployees In 2012,inlinewithitsfocusonthedevelopmentof the 20countrieswhereithasitsownpersonnel. 53,599 employeesof57differentnationalitiesacross As ofDecember2012,LATAM AirlinesGrouphad the countriesservedbyGroup. boosts economicdevelopmentandemploymentin opportunities foremployeesand,atthesametime, their growthplanforthefuturealsomeansnew is, therefore,fundamentalforensuringthat creating thenew ModelofCompetenciesfor LATAM members oftheorganization wereidentified, To thisend,thecompetenciesrequiredforall cohesion ofLAN’s and TAM’s workteams. their equivalence.Thisiskey for theformationand companies’ executivepostsinordertoensure Work hasalsotakenplacetoredesignboth another country. many ofthemhadtheopportunitytomove employees changedjobswithinthegroupwhile across the Group, 7,810 process implied that, and ITwereworkinginanintegrated way. This ANNUAL REPORT 2012 Our Company 26 Staffing levels step increatingtheidentityofnewCompany. beanimportant Group whichwill,withoutdoubt, design a single model of Culture for LATAM Airlines weareworkingto is onlyjustbeginning.Atpresent, who are vital for the constructionof this story which rich inlessonsandopportunitiesforallourpeople The challengeofcreatingthisholdingairlinesis to beaddressedbytheCompany. excellence, this helpsto identify the training needs skills thatarekeyforachievingaperformanceof of methodsandtechniquestostrengthenthose Airlines Group.Throughthedevelopmentofaseries LATAM employeesbycountry ANNUAL REPORT 2012 Our Company 27 LAN -SantiagoStockExchange TICKER SYMBOL Fax: (56)(2)26774505 Tel: (56)(2)26774500 Santiago, Chile Arturo MerinoBenítezAirport MAINTENANCE CENTER Fax: (56)(2)25658764 Tel: (56)(2)25652525 Las Condes,Santiago,Chile Avenida PresidenteRiesco5711,19thFloor CORPORATE HEADQUARTERS Chilean Tax N°(RUT):89.862.200-2 LATAM AIRLINESGROUP COMPANY INFORMATION OUR COMPANY / Tel: General (800)990-1135 Paul,St. MN55164-0504 P.O. Box64504 JPMorgan ChaseBank,N.A. DEPOSITARY BANKADRs Fax: (56)(2)23939315 Tel: (56)(2)23939003 E-mail: [email protected] Santiago, Chile Huérfanos 770,22ndFloor Depósito Central deValores SHAREHOLDER ENQUIRIES E-mail: [email protected] Tel: (56)(2)25658785 Las Condes,Santiago,Chile Avenida PresidenteRiesco5711,20thFloor LATAM AirlinesGroupS.A. Investor Relations FINANCIAL INFORMATION LATM11 -SaoPaulo S.E. LFL -NewYork StockExchange

Custody Department Bandera 140,Santiago Banco SantanderChile CUSTODIAN BANKADRs E-mail: [email protected] Tel: GlobalInvestDirect(800)428-4237 Tel: FromoutsideUS(651)453-2128 www.tam.com.br www.lan.com www.latamairlinesgroup.net Airlines: Complete informationaboutLATAM WEBSITES Tel: (56)(2)29400000 Santiago, Chile Avenida AndrésBello2711,5thFloor PricewaterhouseCoopers EXTERNAL AUDITORS E-mail: [email protected] Fax.: (55)(11)2797 3413 Tel.: (55)(11)27973411 ADR/BDR Attention: UnidadeDedicadaProduto CEP: 03084-010 Tatuapé –SãoPaulo/SP Rua Ururaí, 111–PrédioIIPisoTérreo Itaú Corretora deValores S.A. CUSTODIAN/DEPOSITARY BANKBDRs Fax: (56)(2)23203560 Tel: (56)(2)23203320

CORPORATE GOVERNANCE LATAM AIRLINES GROUP S.A.

Pedro Esposti TAM Brazil

Nora Sánchez LAN Colombia ANNUAL REPORT 2012 Corporate Governance 29 BOARD OFDIRECTORS CORPORATE GOVERNANCE/ Committees ofLATAM Airlines Group. Finance, Brand, Product andFrequentFlyerProgram Mr. Amaro is a member of the Strategy, Leadership, TAM AviaçãoExecutivaeTaxi AéreoS.A. and the CouncilsofAdministration ofMultiplusS.A. andchairs Empreendimentos eParticipações S.A. from April 2007. He is also executive director of TAM since 2004,servingasitsvice-chairman of TAM S.A. has beenamemberoftheCouncilAdministration He and TAM Aviação Executiva S.A. Linhas Aéreas S.A. Group andwasalsoaprofessionalpilotwithTAM 3 August2012.HehashelddifferentpositionsinTAM June 2012 andchairman of its board of directors since has beenadirectorofLATAM AirlinesGroupsince28 Mr. MauricioRolimAmaro,abusinessadministrator, MAURICIO ROLIMAMARO Committees ofLATAM Airlines Group. Brand, Productand FrequentFlyerProgram Mrs. AmaroisamemberoftheStrategy, Leadership, Executiva eTaxi AéreoS.A. andTAM Aviação of Administration of Multiplus S.A. andformspartoftheCouncils e Participações S.A. is alsoexecutivedirectorofTAM Empreendimentos chairing itsBoardofDirectorssinceApril2007.She member oftheCouncilAdministration ofTAM S.A., Linhas Aéreasand,sinceSeptember2003hasbeena 2012. ShehasservedasdirectorofmarketingatTAM a directorofLATAM AirlinesGroupsince28June business administration andmarketing,hasbeen Mrs. MaríaClaudiaAmaro,whoholdsadegreein MARÍA CLAUDIA AMARO ANNUAL REPORT 2012 Corporate Governance 30 Flyer Program Committees ofLATAM AirlinesGroup. and of the Leadership, Brand, Product and Frequent Mr. EblenisamemberoftheDirectors’Committee andTJCChileS.A. S.A. InversionesSantaBlanca Comercial LosLagosLtda., Group sinceJune1994.Hehasservedaschairmanof administrator, hasbeenadirectorofLATAM Airlines Mr. RamónEblenKadisaneconomistandbusiness RAMÓN EBLENKADIS shareholder andvice-chairmanofAzulAzul. andis themain andTitaniumS.A. SodimacS.A. S.A., Falabellathe boardsofSACIFalabellaRetail S.A., and AgrícolaAncali.Inaddition,heisamemberof Megavisión, Club Hípico de Santiago, Sotraser S.A. owner ofAxxion)andaschairmanAxxionS.A., chairman ofBethia(aninvestmentcompanyand and agricultural sectors.Hecurrentlyservesasvice- 2010. Hehasgreatexperienceintheretail,transport joined theboardofLATAM AirlinesGroupinMay Mr. CarlosHellerSolari,anagricultural engineer, CARLOS HELLERSOLARI ANNUAL REPORT 2012 Corporate Governance 31 Airlines Group. and FrequentFlyerProgram CommitteesofLATAM Mr. CuetoisamemberoftheFinance,Brand, Product other companiesincludingConsorcioMadereroS.A. Healsopreviouslyserved asdirectorof Michilla S.A. andMinera of theboardsForestal CopihueS.A. position hehasheldsince1990,andisamember a vice-president ofInversionesCostaVerde S.A., Group since1994.Hecurrentlyservesasexecutive administrator, hasbeenadirectorofLATAM Airlines Mr. aneconomistandbusiness JuanJoséCuetoPlaza, JUAN JOSÉCUETOPLAZA Andina S.A. andAESGenerS.A. Andina S.A. of othercompaniesthatincludeEmbotelladora The North Face. He previously served on the boards Lauren, BrooksBrothers,GAP, BananaRepublicand represents inChilebrands thatincludePolo Ralph the companywhich been adirectorofKomaxS.A., 2010 and2001,respectively. Since2010,hehasalso since and SociedadQuímicayMinera deChileS.A. firm since1993andadirectorof Walmart .A. law 2012. He has been a partner in the Claro y Cía. the boardofLATAM AirlinesGroupinSeptember Mr. alawyer, JoséMaríaEyzaguirreBaeza, joined JOSÉ MARÍAEYZAGUIRREBAEZA ANNUAL REPORT 2012 Corporate Governance 32 and LeadershipCommitteesof LATAM AirlinesGroup. Finance Committeeandisamember oftheStrategy Mr. JofréchairstheDirectors’Committeeand group. president andasCEOofdifferentcompaniesinthe worked forGrupoSantanderinChileasgroupvice- at Spain’s Grupo Santander. From 1989 to 2004, he and 2005, he was insurance director for the Americas Between2004 Inmobiliaria Parque delSenderoS.A. and InmobiliariaTitaniumS.A. ConstrumartS.A., S.A., ViñaSanPedro Tarapacá D&S Endesa ChileS.A., S.A., funds. From2005to2009,Mr. Jofréwasadirectorof of theinvestmentcouncilSantanderrealestate president oftheFundaciónSaberMásandamember aswell (Codelco) andadirectorAirLifeChileS.A. board oftheNationalCopperCorporation ofChile Airlines GroupinMay2010.Heischairmanofthe business administrator, joinedtheboardofLATAM Mr. Gerardo aneconomistand JofréMiranda, GERARDO JOFRÉMIRANDA Committee ofLATAM Airlines Group. Mr. deBourguignonisamemberoftheDirectors’ University ofChile. as well as an economics lecturer at the Catholic Intergénesis Administradora deFondos deInversión inChileanddirectorof vice-president ofCitibankS.A. company. BeforefoundingAssetChile,heservedas vice-chairman of the board of Chile’s La Polar retail the Chilean subsidiary of Germany’s K+S group and bank. HeiscurrentlyalsoadirectorofSalLobos, investment executive director of the Asset Chile S.A. Mr. de Bourguignon is a co-founding partner and board of LATAM Airlines Group inSeptember 2012. MBA fromHarvardUniversity. Hewaselectedtothe degree fromtheCatholicUniversityofChileandan Mr. GeorgesdeBourguignonholdsaneconomic GEORGES DEBOURGUIGNONARNDT ANNUAL REPORT 2012 Corporate Governance 33 Committees ofLATAM AirlinesGroup. Mr. Luzón is a member of the Strategy and Finance Inditex-Zara. companies thatincludetheglobaltextilecompany has alsoservedontheadministrative councilsof and GrupoBancarioBBV. Duringhiscareer, Mr. Luzón councilor and director general of both Banco Vizcaya Grupo BancarioArgentariaandwasappointedas Hewaspreviouslychairmanandcouncilorof S.A. was alsointernationalvice-presidentofUniversia America atBancoSantanderand,duringthisperiod, Luzón servedasexecutivevice-presidentforLatin Business School(Madrid).From1999to2012,Mr. in ShanghaiandchairmanoftheCouncilICADE China EuropeInternationalBusinessSchool(CEIBS) Development Bank(IDB),avisitingleaderatthe 2012. HeiscurrentlyanadvisortotheInter-American to theboardofLATAM AirlinesGroupinSeptember Mr. Franciscowas elected Luzón López, an economist, FRANCISCO LUZÓN LÓPEZ ANNUAL REPORT 2012 Corporate Governance 34 SENIOR MANAGEMENT CORPORATE GOVERNANCE/ Chile. an organizationthatpromotesentrepreneurshipin Association (SOFOFA) andtheEndeavorfoundation, of theboardsChileanManufacturers’ Transport Association(IATA). He isalsoamember the is anactivememberofthegoverningboards management of passenger and cargo airlines. He knowledge of both the commercial and operational experience intheairlineindustry, Mr. Cuetohaswide of Fast Air, aChileancargoairline.With30years’ From 1983to1993,heservedasgeneral manager of LATAM AirlinesGroup,aposthehasheldsince1994. Mr. isthechiefexecutiveofficer EnriqueCuetoPlaza one

world® allianceandtheInternationalAir ENRIQUE CUETO current position. at LANAirlines,aposthehelduntiltakinguphis he becamechiefexecutiveofficerforpassengers and ofLANAirlinesbetween19951997.In1999, was alsoadirectorofLadecobetween1994and1997 to 1998,aspresidentofLANCargoGroup.Mr. Cueto served as general manager of Fast Air and, from 1995 for sales and marketing. Between 1993 and 1995, he service manager, salesdirectorandvice-president Between 1985and1993,heheldpoststhatincluded his careerintheairlineindustry1985atFast Air. of LAN,aposthehasheldsince2005.Mr. Cuetobegan Mr. isthechiefexecutiveofficer IgnacioCuetoPlaza IGNACIO CUETO ANNUAL REPORT 2012 Corporate Governance 35 more than20years. addition tohavingworkedinthefinancialsectorfor has extensiveexperienceintheairlineindustry been presidentofTAM LinhasAéreas.Mr. Bologna SinceFebruarye Taxi 2012,hehasalso Aéreo S.A. was appointedaspresidentofTAM Aviação Executiva president of TAM Linhas Aéreas and, in March 2009, investor relations.From2004to2007,heservedas for financeandadministration anddirectorof Bologna joinedTAM inMarch2001asvice-president of TAM, aposthehas held sinceApril2010.Mr. Mr. MarcoAntonioBolognaischiefexecutiveofficer MARCO BOLOGNA Harvard University. is acivilengineerandholdsanExecutiveMBAfrom in theUnitedStates,basedMiami.Mr. Valdivieso 1991 and1994,heservedasFast Air’s vice-president 1995 to 1997, as general manager of Fast Air. Between executive officerforcargoatLANAirlinesand,from for passengers.From1997to2005,heservedaschief 2006, hehadservedasLAN’s chiefexecutiveofficer 2012 followingtheintegration ofLANandTAM. Since passenger business in Spanish-speaking countries in LATAM AirlinesGroup’s seniorvice-presidentfor Mr. ArmandoValdivieso Monteswasappointedas ARMANDO VALDIVIESO ANNUAL REPORT 2012 Corporate Governance 36 services atFast Air. and commercial director of MAS Air and manager for Hewaspreviously directorgeneral development. 1998 to2002,asitsvice-presidentforplanningand LAN Cargo’s vice-presidentforproductionand,from Program. Between2002and2005,Mr. Uretaservedas of StanfordUniversity’s ExecutiveSpecialization the CatholicUniversityofChileandisagraduate since 2005. He holdsan engineering degree from executive officerforcargo, aposthehasheld Mr. CristiánUretaisLATAM AirlinesGroup’s chief CRISTIÁN URETA engineering andanMBAfromHarvardUniversity. undergraduate degree ineconomicsandindustrial for its office in . Mr. Scokin holds an a partnerinthefirmand,2003,locationmanager PerúIn2000,hebecame Chile, Brazil, and Argentina. projects intheUnitedStates,Kingdom, Company where,for11years,heworkedondifferent a successfulcareerasconsultantatMcKinsey& operations. BeforejoiningLAN,Mr. Scokindeveloped was responsibleforthisnewsubsidiary’s startof chief executiveofficerofLANArgentinawherehe international passengerbusiness.Hewaspreviously Mr. Damian Scokin is chief executive officer for DAMIAN SCOKIN ANNUAL REPORT 2012 Corporate Governance 37 Adolfo IbáñezUniversity. the Catholic University of Chile and an MBA from the degree ineconomicsandagrarian economyfrom is anagricultural engineerwhoholdsamaster’s subsidiary ofChiquitaBrands Inc.Mr. delaFuente a and financemanageratChiquitaFrupacLtda., Airlines inApril1995afterservingasadministration officer of LATAM Airlines Group. He joined LAN Mr. AlejandrodelaFuenteGoicisthechieffinancial ALEJANDRO DELAFUENTE in Lausanne,Switzerland. He isacivilengineerandholdsanMBAfromtheIMD aleadingChileannon-metallicminingcompany. S.A., various postsatSociedadQuímicayMinera deChile Airlines. Beforejoiningthecompany, Mr. Alvoheld planning and deputy chief financial officer atLAN managerofdevelopmentandfinancial Argentina, as director of administration and finance at LAN served 2001 and,beforetaking up hispresentpost, August 2008. He joined LAN Airlines in November and research,aposttowhichhewasappointedin Group’s vice-presidentforplanning,management Mr. Roberto Alvo Milosawlewitsch is LATAM Airlines ROBERTO ALVO ANNUAL REPORT 2012 Corporate Governance 38 America andmanageroftraining andrecruitment. executive development for customer service in Latin human resourcemanageratLeverChile,of 2003, heheldvariouspostsatUnilever, including D&S, aChileanretailcompany. Between1997and 2005, heservedasmanagerforhumanresourcesat the GabrielaMistral University. Between2003and August 2005.Heholdsapsychologydegreefrom Group’s vice-presidentforhumanresourcessince Mr. Emilio del Real Sota has been LATAM Airlines EMILIO DELREAL ANNUAL REPORT 2012 Corporate Governance 39 2012 did notpaycompensationstomainexecutives. a furtherUS$6.8millioninincentives.Thecompany director) totalremunerations ofUS$15.8million,plus CEOand (including thelevelsofvice-president, In 2012, the Company paid its main executives ANNUAL REPORT 2012 Corporate Governance 40 2. 1. which hasthefollowinggeneral characteristics: December 2011agreedanewCompensationPlan The Extraordinary Shareholders’Meetingof21 91 werenotsubscribedandpaid. were allocatedtothisCompensationPlanofwhich Meeting of5April2007,atotal2,209,091shares the decisionofExtraordinary Shareholders’ and itssubsidiariesexpired.Inaccordancewith Compensation PlanforemployeesoftheCompany and payingthestockoptionsavailableundera On 31March2012,theperiodforsubscribing COMPENSATION PLAN 5. 4. 3. the options,onceaccrued,willexpireon21 The periodinwhichemployeesmayexercise total optionsallocatedtotheemployee. partially, thismaynotbeforlessthan10%ofthe the momentofsubscribingthem.Ifexercised subscribe and pay the respective options at totally orpartiallyinwhichcasetheymust indicated above,employeesmayexercisethem Once the options have accrued in the stages the Company. 2016, subjecttotheemployeeremainingwith on 21 December 2015, and 3) 40% on 21 June occasions: (1) 30% on 21 December 2014, (2) 30% will accrueinstagesonthefollowingthree The optionsassigned to eachemployee Plan. A total of 4,800,000 shares were allocated to the they aresubscribed andpaid. atthesamedateonwhich in theOfficialGazette exchange rate fortheObservedDollarpublished The optionswillbepaidinChilean pesosatthe the dateofsubscribingandpaying theoptions. Labor, betweenthedateof settingthepriceand published monthlybytheUS Departmentof the variationinConsumerPriceIndex(CPI), expressed inUSdollarswillbeadjustedfor thisprice the dateatwhichpricewasset, options areexercised,willbeU$23.19.Asfrom to theCompensationPlan,ifrespective The pricetobepaidforeachshareallocated December 2016. ANNUAL REPORT 2012 Corporate Governance 41 Depositary Receipts(BDRs). intheformofBrazilian (BM&FBOVESPA S.A.) Brazil’s Stock,CommodityandFutures Exchange as AmericanDepositaryReceipts(ADRs)andon as wellontheNewYork StockExchange(NYSE) Stock ExchangeandtheValparaíso StockExchange on theSantiagoStockExchange,Chile’s Electronic regulator, underInscriptionN°306.Itssharestrade de Valores ySeguros(SVS),Chile’s stockmarket stock companyregistered with theSuperintendencia LATAM (“LATAM”) AirlinesGroupS.A. isalistedjoint PRACTICES CORPORATE GOVERNANCE CORPORATE GOVERNANCE/ TAM’s CodeofEthics. principles establishedinLAN’s CodeofConductand commercial activitiesareunderpinnedbytheethical its ownvalues.LATAM Airlines Group’s decisions and are totallyalignedwiththeregulationinforceand to ensure that its internal self-regulation processes Airlines Grouparesubjecttoconstantreviewinorder The corporate governance practices ofLATAM apply toBDRs. (CVM), thecountry’s stock marketregulator, asthey andtheComissãodeValoresof Brazil Mobiliários and thelawsregulationofFederal Republic Exchange Commission(SEC)astheyapplytoADRs United Statesandthatcountry’s Securitiesand is subjecttothelegislationandregulationof as othernormsissuedbytheSVS.Inaddition,it including the latter’s associated norms, as well Law (Nº18.045)anditsCorporations Law(Nº18.046), practices areregulatedbyChile’s SecuritiesMarket LATAM AirlinesGroup’s corporate governance these bodiesaresetoutbelow. between LANandTAM. Theprincipalfunctionsof Program Subcommittees createdafterthemerger Brand andFrequentFlyer Leadership andProduct, United States),togetherwiththeStrategy, Finance, required undertheSarbanes-OxleyActof also fulfillsthefunctionsofAuditCommittee Directors andtheDirectors’Committee(which Group’s corporate governance are its Board of The mainbodiesresponsibleforLATAM Airlines and 1.36%asBDRs. 6.16% oftheCompanywasheldinformADRs companies andindividuals.Asof31December2012, corresponded todifferentinstitutionalinvestors, together held a 25.91% stake while the remainder As of end-2012, these companies Aeronáutica SpA. Costa Verde andCostaVerde AeronáuticaLtda. InversionesNueva Costa Verde AeronáuticaS.A., is controlledbytheCuetogroup,represented total of1,660registeredshareholders.TheCompany As of31December2012,LATAM AirlinesGrouphada STRUCTURE ANNUAL REPORT 2012 Corporate Governance 42 and itsfunctionspowersareestablishedbythe The Directors’Committeeusuallymeetsmonthly Meeting. be approvedbyvoteattheOrdinaryShareholders’ Company’s affairssorequire.Directors’feesmust meetings andextraordinary meetingswheneverthe LATAM AirlinesGroup’s Boardholdsordinarymonthly Meeting whichtookplaceon4September2012. was electedbytheExtraordinary Shareholders’ at leastonedirector. ThepresentBoardofDirectors a shareholderwithmorethan10%stakecanelect number ofcandidates.Thisarrangement ensuresthat to supportonecandidateordividethemamongany one votepershareandcanuseallhisorhervotes number of votes they receive. Each shareholder has statutes, directors are elected according to the total every twoyearsand,underLATAM AirlinesGroup’s governance. All the Board seats come up for election thereby playingafundamentalroleinitscorporate and definingtheCompany’s strategic vision, members andisthebodyresponsibleforanalyzing LATAM AirlinesGroup’s BoardofDirectorshasnine BOARD OFDIRECTORSLATAM AIRLINESGROUP Law (Nº18,046)andtheother applicableregulation. established inArticle50bisof Chile’s Corporations The Directors’andAuditCommittee hasthefunctions States andthecorresponding SECnorms. required undertheSarbanes-OxleyActofUnited Corporations Lawand thoseoftheAuditCommittee fulfills both the functions required under Chile’s Board membersformaDirectors’Committee,which less than10%oftheseshares.Threethenine shareholders whoindividually control orpossess and atleast12.5%ofthevotingsharesareheldby de fomento(aninflation-indexedcurrencyunit) market capitalization of at least 1,500,000 unidades and aDirectors’Committeewhentheyhave must appointatleastoneindependentdirector Under Chileanlaw, listedjointstockcompanies DIRECTOR’S COMMITTEEOFLATAM AIRLINESGROUP applicable legislationandregulation. • • • These include: Audit Committee, were independent directors as Directors’ Committee, whoalso actaspartofthe As of31December2012,all themembersof Act. an AuditCommitteeunderRule 10AoftheExchange LATAM AirlinesGroup’s Directors’Committee actsas the Directors’CommitteeandAuditCommittee, Giventhesimilarity ofthefunctions Exchange Act. requirements establishedunderRule10Aofthe Board members,thatfulfillstheindependence an AuditCommittee, comprising atleastthree Under USregulation,itisnecessarytohave in LawNº18,046. the latternoranyof the othertypes of tiesspecified senior managementorafamilyrelationshipwith its controller or in the group of which it forms part, size withoronthecompany, theothercompanies or commercialdependenceofasignificantnature have ties,interestsoreconomic,professional,credit ingeneral, independent whenheorshedoesnot, controlling shareholders.Adirectorisconsidered the relationshipbetweendirectorsandacompany’s subsequent modifications underLawNº19,705on are setoutinChile’s Corporations Lawandits The requirementsfordirectors’independence • • related complaints; to examineinternalcontrolreportsandany auditors andriskrating agenciestobeused; to puttheBoardproposalsasexternal for approvalbyshareholders; about these reports prior to their presentation to shareholdersandforexpressinganopinion LATAM AirlinesGroup’s administrators provide sheets andotherfinancialstatementsthat Group’s externalauditors,general balance to examinethereportsofLATAM Airlines senior management. to examinethepayscaleofCompany’s related-party transactions; to examineandreportonallmattersregarding ANNUAL REPORT 2012 Corporate Governance 43 2. 1. during 2012aresetoutbelow. the mattersexaminedbyDirectors’Committee In accordancewithArticle50bisofLawNº18,046, director. Ramón Eblen Kadis is not considered an independent purposes ofChile’s Corporations Law(Nº18,046), Jofré Miranda (chairmanoftheCommittee).For the Georges deBourguignonArndtandJuanGerardo date, its members were Messrs. Ramón Eblen Kadis, Atthat defined underRule10AoftheExchangeAct. 6. 5. 4. 3. Ordinary SessionN°12227/3/12: Ordinary SessionN°1216/3/12: Extraordinary SessionN°1314/2/12: Ordinary SessionN°12031/1/12: Extraordinary SessionN°1411/5/12: Ordinary SessionN°12324/4/12: - ApprovaloffeesPWC - Closeof2011auditplanand2012 risk rating agenciesfor 2012 - Proposalforexternalauditorsandprivate - AnnualreportontheCommittee’s activities - Analysisofanaspectthe“safety” issue Company anditssubsidiaries - Compensationplansforemployeesofthe - Progressof2011auditplan - Progressof2011auditplan - Related-partytransaction December 2011 - ReviewofFinancialStatementsat31 - Lettersaboutfeesfromexternalauditors December 2011 - ReviewofFinancialStatementsat31 chairman - Installationand electionofCommittee - Formalities ofmeeting’s convening

8. 7. 12. 11. 10. 9. Ordinary SessionN°12526/6/12: Ordinary SessionN°12429/5/12: Ordinary SessionN°12830/10/12: Ordinary SessionN°12725/09/12 Extraordinary SessionN°1510/08/12: Ordinary SessionN°1263/8/12: - ApprovaloffeesPWC with TAM - Progressonintegration ofauditfunction methodological aspects - LAN2012auditplan,progressand - ApprovaloffeesPWC - Presentationoncreditrisk - PresentationbyRevenueAccounting 2012 - ReviewofFinancialStatementsat31March transaction bysubsidiary - Informationaboutrelated-party - SOX2012project - Employeecompensationplan transactions bysubsidiaries: - Informationaboutrelated-party chairman - InstallationandelectionofCommittee - ApprovaloffeesPWC 2012 - ReviewofFinancialStatementsat30June - TAM Corporate Audit Multiplus S.A. and between TAM LinhasAéreasS.A. ii. Advanceticketpurchaseoperation Riesco 5537,LasCondes,Santiago,Chile; Presidente i. SaleofpropertyatAvda.

ANNUAL REPORT 2012 Corporate Governance 44 S.A. (previously LAN Airlines S.A.) and TEP Chile (previously LAN Airlines S.A.) S.A. of 25January2012betweenLATAM AirlinesGroup In accordancewiththeshareholders’ agreement LATAM AIRLINESGROUP SUBCOMMITTEES OFTHEBOARDDIRECTORS 14. 13. the CEOofLATAM andotherkeystaff, succession and levelsofremunerations andobjectivesfor philosophy of corporate remunerations, structures of LATAM”) and those who report to this person, the president ofLATAM AirlinesGroup(henceforth,“CEO structure, appointmentof the executivevice- that includegroupculture,high-level organizational The LeadershipSubcommitteewillfocusonareas functional areasandhigh-levelstrategy reviews. plans, thebudgetsofmainbusinessunitsand strategy, currentstrategic affairsand three-year The Strategy Subcommittee willfocusoncorporate director electedbyTEPChileS.A. Group andatleastoneoftheirmembers must bea will comprisetwoormoredirectorsofLATAM Airlines eachsubcommittee said shareholders’agreement, Flyer Program Subcommittee.Inaccordancewiththe Subcommittee, and(iv)Brand, ProductandFrequent (ii) LeadershipSubcommittee,(iii)Finance areas ofresponsibility:(i)Strategy Subcommittee, Board about the issues entailed intheir respective review, discussandmakerecommendations tothe established thefollowingfoursubcommitteesto theOrdinaryBoardSession of3August2012 S.A., Ordinary SessionN°12921/12/12: Extraordinary SessionN°1612/11/12: - Letterfromexternalauditors - Progressof2012auditplan minutes - Coordinationofmatterscoveredinprevious - Otherbusiness - ApprovaloffeesPWC September 2012 - ReviewofFinancialStatementsat30 - Otherbusiness - Progressof2012auditplan

performance. characteristics and regular auditing of the brand’s strategy oftheFrequentFlyerProgram anditskey services for each of the principal business units, the units, theprincipalcharacteristics ofproductsand corporate brands andthoseoftheprincipalbusiness strategies andbrand constructioninitiativesfor Program Subcommitteewillfocusonbrand Finally, theBrand, Product and FrequentFlyer the qualityandreliability of financialinformation. compliance policies, taxoptimizationstrategy and policies andstrategy, capitalstructure, control of The FinanceSubcommitteewillfocusonfinancial evaluation oftheperformanceCEOLATAM. or contingencyplanfortheCEOofLATAM and ending on31December 2012. consolidated financial statements for theyear These transactions are summarized in the audited third partyundermarketconditions. Company asthosewhichcould beobtainedfroma and othertermsareatleastasfavorable forthe transaction isrelated totheCompanyandprice exceptwhenthe a significanteconomicinterest, controlled bythesepersonsorinwhichtheyhave shareholder orBoardmemberwithanyentity out transactions with orforthebenefitofany LATAM Airlines Group’s policy is not to carry transport andbooking services. cargo including therentalandexchangeofaircraft, provided toorreceivedfromrelatedcompanies, business, differenttypesofserviceshavebeen shareholders. InthenormalcourseofCompany’s entities owned or controlled by some of its majority transactions withitssubsidiaries,including LATAM AirlinesGrouphascarriedoutdifferent subsidiaries. company. Thisappliestolistedcompaniesandtheir are differentfromthoseapplyingtoanon-listed authorization anddisclosurerequirementsthat in marketconditionsandcomplywithcertain operations witharelatedpartymusttakeplace Under Chile’s Corporations Law, a listed company’s RELATED-PARTY TRANSACTIONS ANNUAL REPORT 2012 Corporate Governance 45 committed totransparency andcompliancewiththe In linewiththeabove,LATAM AirlinesGroupis LATAM AirlinesGroup’s goodcorporate governance. management whoareprimarilyresponsiblefor the Board,Directors’Committeeandsenior by LATAM AirlinesGroup’s BoardofDirectors,itis of ethics and adherence to regulation established responsibility forcompliancewiththehighstandards and stakeholders. Although all our employees share the resultofinteraction ofdifferentindividuals LATAM Airlines Group’s good corporate governance is PRINCIPLES OFGOODCORPORATE GOVERNANCE the saidArticle147. carried out without the requirements envisaged in in thisgeneral habitualoperations policymaybe Seguros on that same date. The operations indicated material newstotheSuperintendenciadeValores y in itsSessionof29December2009andreportedas policy whichwasapprovedbyitsBoardofDirectors Airlines Grouphasageneral habitualoperations Article 147ofLawNo.18,046onCorporations, LATAM Finally, forthepurposesofletterb)lastpoint 1. corporate governance. Theseincludeprincipally: has alsotakenanumberofmeasurestoensuredue Committee, LATAM Airlines Group’s management Company’s Boardof DirectorsanditsDirectors’ Notwithstanding theresponsibilitiesof GOVERNANCE PILLARS OFLATAM AIRLINESGROUP’S CORPORATE purpose byitsBoardofDirectors. ethical andregulatorystandardsestablishedforthis LATAM AirlinesGroup. and compliancewithregulation required by to the highest standards of ethics, transparency which seektoensurethatallemployeesadhere LAN’s CodeofConductandTAM’s CodeofEthics • eticatam.com.br) which provide andTAMethicspoint.com) (www. Ethics Lines of LAN (www.lan. 3. 2. 4. since LawNº20,382onCorporate Governance Information. ThisisrequiredbytheSVSand, Manual forManagementofMarket-Sensitive interest. with regulationandavoidanceofconflicts disclosure of financial information, compliance This fostershonestandethicalconductinthe Code ofEthicsforSeniorFinancialExecutives. different countriesinwhichitoperates. Airlines Group’s businessandactivitiesinthe laws andregulationapplicabletoLATAM Committee, supervisescompliancewiththe of theBoardDirectorsanditsDirectors’ coordination withandunderthesupervision Vice-Presidency of LATAM Airlines Group, in which forms part of the Legal Compliance Area, Compliance Program underwhichLATAM’s executives. information bytheCompany’s employeesand mechanisms fortheprotectionofconfidential of market-sensitiveinformationand shares, mechanismsforcontinuousdisclosure from thepurchaseandsaleofCompany’s operations, periodsofvoluntaryabstinence and regulatesthecriteria for disclosureof however, seekstogofurtherthanthesenorms market legislation.LATAM AirlinesGroup, came intoforce,alsobyChileansecurities reprisal. or investigatedwithoutanyriskof these willbeproperlyprocessed any concernsintheknowledgethat channel throughwhichtoreport employees withadirectandprivate ANNUAL REPORT 2012 Corporate Governance 46 SHAREHOLDERS OWNERSHIP STRUCTUREANDPRINCIPAL CORPORATE GOVERNANCE/ ANNUAL REPORT 2012 Corporate Governance 47 2011 2012 PRINCIPAL CONTROLLINGGROUPS ANNUAL REPORT 2012 Corporate Governance 48 during thepastthreeyears. The tablebelowshowsthedividendpersharepaid Financial Reporting Standards(IFRS). International reported inaccordancewiththe 2012 thisamountcorrespondedtothenetprofit a stake in the controller’s net equity while. In the annualearningsattributabletoholdersof for thepaymentofdividendscorrespondedto Distributable profitsin2010,2011and2012 respective year. represent 50% of the distributable profits of the The dividendscorrespondingto2010and2011 and circumstancesthatmayariseduringtheyear. minimum leveldependingontheparticularevents the distributionofdividendsabovethisobligatory however,regulation inforce.Thisdoesnot, preclude 30% ofprofitscalculatedinaccordancewiththe dividends requiredbylawor, inotherwords, The Company’s policy is to pay the minimum DIVIDENDS ANNUAL REPORT 2012 Corporate Governance 49 regulated bytheFinancialPolicy. periodically toreviewandapprovemattersnot vice-president andcompanydirectors,meets The FinanceCommittee,formedbytheexecutive funds toensurethecontinuityofitsoperations. business and,inthisway, maintainastableflowof to externalconditionsfortheoperation ofits Policy enablestheCompanytorespondeffectively for managingtheCompany’s FinancialPolicy. This The Directorate ofCorporate Financesisresponsible FINANCIAL POLICY CORPORATE GOVERNANCE/ • • • • LATAM AirlinesGroup’s FinancialPolicy seeksto: response tocontingencies. of creditwithlocalandoverseasbanksfor its growth.Maintainanadequateleveloflines adequate for the needs of the operation and operation. Preserveandmaintaincashlevels Ensure aminimumlevelofliquidityforthe rates, the priceoffuelandinterestrates. of marketriskssuchasvariations inexchange Reduce theimpactonCompany’s netmargin investment policy. level ofriskandliquidityconsistent withthe financial investments which guarantee a Achieve areturnoncashsurplusesthrough objective ofminimizingfinancingcosts. growth ofoperations andtakeintoaccountthe profile thatarereasonablyproportionatetothe Maintain anoptimumborrowingleveland not used.Duringtheyear, itcontinuedtofinance financial institutionswhich, as of end-year, it had of US$208 million with local and international addition, itmaintainedlines ofcreditforatotal protection againstpotential externalshocks.In appropriate levelofliquidity forproviding In 2012,LATAM Airlines Groupmaintained an LIQUIDITY ANDINVESTMENTPOLICY Activities andManagementofFinancialRisk. Financing related toLiquidityandInvestment, guidelines andrestrictionsformanagingoperations The Company’s Financial Policy establishes • • with ratings agencies,etc. the financial ratios establishedinundertakings covenants, lowliquidityandadeterioration of situations suchasfailuretocomplywith long-term financial situation so as to anticipate Maintain visibilityoftheCompany’s projected operations withcounterparties. diversification ofandcapsoninvestments Reduce counterpartyriskthrough ANNUAL REPORT 2012 Corporate Governance 50 maturity. between theusefullifeofitsassetsanddebt centralize financingactivitiesandensureabalance The Company’s Financing Policy is designed to FINANCING POLICY counterparties andinstruments. It also seeks to reduce risk through diversification of liquidity. to maintaininganadequatelevelofsecurityand return adjustedforexchange-rate risk,subject centralize investmentdecisionssoastooptimize The aimoftheCompany’s InvestmentPolicy isto own resources. million inadvancesonaircraft financedoutofits in cashandeasilyconvertiblesecuritiesUS$641 LATAM AirlinesGroupheldatotalofUS$1,120million it willreceiveinthefuture.Asof31December2012, delivery paymentsfortheBoeingandAirbusplanes out ofitsownresourcesanimportantpartpre- exchange-rate risk.Inordertohedge completely fuel-price risk, (ii) interest-rate risk, and (iii)local means thatitisexposedtomarket riskssuchas:(i) The natureofLATAM AirlinesGroup’s operations MARKET RISKPOLICY importers inordertofinanceworkingcapitalneeds. 7% ofitstotaldebtintheformloanstoexporters/ of short-termfinancing,theCompanyholdsaround the vastmajorityofcases,are12years.Incase in financing structuresvaryfrom12to16yearsbut, of its own resources. Maturities under the different and theremainderthroughcommercialloansorout or bonds guaranteed by export promotion agencies finances between80%and85%throughbankloans Normally,long-term financialdebt. theCompany combination ofitsownresourcesandstructured programs, whicharegenerally financed usinga investments correspond to fleet acquisition The vastmajorityofLATAM AirlinesGroup’s extent onworldoilsupplyanddemand,decisions Variations infuelpricesdependtoanimportant (i) Fuel-pricerisk: at leastA-issuedbyaninternationalrating agency. Counterparties musthaveariskrating equivalentto or LFC contract signed with the one chosen. Company must have a line approved and an ISDA In ordertooperate withcounterparties,the underlying assets. different derivativestofixorcapincreasesinthe or partiallyagainsttheserisks,theCompanyuses improvement in thelong-termoutlookleading to to theinternationaleconomic situation,withan Variations in interest rates bear a strong relation (ii) Interest-rate riskofcashflow: options andswaptions. swaps, collars,three-waycollars(longvolatility),call As instrumentsforfuelhedging,itpermitstheuseof hedging period. price offuel.Inaddition,itlimitsthemaximum in costs and the market outlook as reflected inthe depending onitscapacitytopassthesechanges minimum and maximum range of fuel to be hedged The Company’s FuelHedgingPolicy restrictsthe advantage ofgreaterliquidity. havethe compared totheUSGulfCoastJet54index, They showastrongcorrelationwithJetFueland, Brent (BRENT)crudeanddistilledHeatingOil(HO). hedges inWest Texas Intermediate(WTI)crude, of liquidityandLATAM AirlinesGroup,therefore, the futuresmarketforthisindexhasalowlevel this underlying asset - the US Gulf Coast Jet 54 - but 54. Thereisaninternationalreferenceindexfor The Company buys aircraft fuel known as Jet Fuel not ofclimatic phenomena andgeopolitical factors. and thelevel of stocksas well astheoccurrence or Exporting Countries(OPEC),worldrefiningcapacity taken bytheOrganizationofPetroleum ANNUAL REPORT 2012 Corporate Governance 51 options andforward-startswaps. Rate HedgingPolicy areswaps,reversecall The instrumentsthatmaybeusedunderitsInterest- interest-rate swapsandcalloptions. interest rates, LATAM Airlines Groups has acquired In ordertoreducetheriskrelatedanincreasein principally toitslong-termfloating-rate liabilities. to variationsinmarketinterestrates isrelated in marketinterestrates. TheCompany’s exposure flows onfinancialinstrumentsduetofluctuations borrowing isequivalenttotheriskoffuturecash investments. The interest-rate riskassociatedwith which issubjecttoafloatinginterest rate andtoits change impliesariskrelatedtotheCompany’s debt will behave and, therefore, how interest rates may Uncertainty astohowthemarketandgovernments similarly, raise themattimesofeconomicexpansion). credit more accessible and to increase output (and, in ordertoboostdomesticdemandbymaking also tend to reducetheir benchmark interest rates In periodsofeconomiccontraction, governments the outlookpromptingadropduetomarketeffects. an increaseinlong-termrates andadeterioration in The tariffsofLATAM AirlinesGroup’s cargoand reais. and approximately33%inBrazilian Company’s total costs is denominated in US dollars in local currency. around 41% of the As a result, Remunerations, onthe otherhand,aredenominated and aircraft components andaccessories. costs, airportcharges,aircraft rentals,insurance in USdollars.Thisisthecase,particularly, offuel denominated inUSdollarsortheequivalent reais.Alargepartofitscostsarealso in Brazilian denominated in US dollars and approximately 27% Approximately 54%oftheCompany’s revenuesis reais. equivalent totheUSdollarorinBrazilian It sellsmostofits services inUSdollars, in prices for itsclassifiedfinancialandearningsstatements. parent companytosetthepricesofitsservicesand The USdollaristhefunctionalcurrencyusedby (iii) Localexchange-rate risk: the Chilean peso and the Brazilian real. the ChileanpesoandBrazilian Out ofthesecurrencies,itsgreatestexposureisto peso andtheAustralian andNewZealanddollars. euro, sterling,thePeruvian nuevo sol,theColombian peso, theParaguayan guaraní, theMexicanpeso, the Chilean peso, the Argentine peso, the Uruguayan currencies including,principally, real, theBrazilian the Companyisexposedtofluctuationsindifferent both tariffsandsales are inUSdollars. As aresult, without anyformofindexationand,inEcuador, pricesareinlocalcurrency Argentina andColombia, Chile, are indexedtotheUSdollarwhile,inBrazil, exists. InPerú, salesareinlocal currencybutprices dollars while, in its domestic businesses, a mix international passengerbusinessesaresetinUS currency usedbytheparentcompany. depreciation ofcurrenciesagainstthefunctional to protectitagainstthepossibleappreciationor The Company’s policy allows it to acquire derivatives exchange-rate riskbyacquiringcurrencyforwards. LATAM AirlinesGrouphaspartiallyhedgedagainst OPERATIONS LATAM AIRLINES GROUP S.A.

Karina Sarmiento TAM Perú

Helios Cedeño LAN Ecuador ANNUAL REPORT 2012 Operations 53 OPERATIONS INTERNATIONAL PASSENGER OPERATIONS / Europe. to increasesof1%intheUnited Statesand5%in by 10%,aheadoftheworld average, ascompared world. In2012,passengertraffic intheregiongrew people within the region and with the rest of the accessible experience,facilitating theconnectionof airlines istomakeairtravel aneversimplerandmore of connections.Theundertakingthisnewgroup region’s largestairlinegroup intermsofitsnetwork and TAM’s businesses represents the birth of the services withintheregion.Theintegration ofLAN’s South Americawiththerestofworldand operations includeboth long-haulflightsconnecting LATAM AirlinesGroup’s internationalpassenger more alternativesthroughasingle network. capture connectivity synergies and offerclients sharing on several internationalroutes in order to of their flights as wellas the introduction of code the implementationofasystem ofcrossedsales homogenization of the two companies’ tariffs and integration ofthisarea ofthebusinesscalledfor operate inparallel undertheirexistingbrands. The LATAM AirlinesGroup,although theycontinueto half oftheyear, placedunderthemanagementof operations were unified and,as from thesecond the secondhalfof2012,theirinternational Following the two companies’ integration, during ANNUAL REPORT 2012 Operations 54 Colombia inaugurated theBogotá-Miamiroutewith LAN Inthiscontext, its servicestoNorthAmerica. LATAM AirlinesGroupgaveprioritytothegrowthof In viewofEurope’s weakeconomicsituationin2012, IAG with22%andAirFrance-KLM with21%. Europe, accounting for 13% of total capacity after third largestoperator betweenSouthAmericaand in termsofcapacity, theairlineispositionedas Paris,are Madrid,Frankfurt, LondonandMilanand, permitted byitsnetwork.Thedestinationsserved number offlightsthroughthedifferentconnections Airlines Groupcannowservefivecities,withalarger routes operated byLANandTAM meansthatLATAM In thecaseofEurope,complementaritybetween and Delta Airlines with 14% and13%, respectively. Airlines with 33% and followed by United Airlines accounting for24%oftotalcapacity, afterAmerican between SouthAmericaandtheUnitedStates, in termsofcapacityforthetransport ofpassengers and SanFrancisco -andisthesecondlargestoperator destinations - Miami, Orlando, New York, Los Angeles LATAM AirlinesGroup.Intheformer, itservesfive important marketsand,therefore,strategic for the United States and Europe are the two most In the case of long-haul passenger operations, added from Lima to Cancún and La Habana. added fromLimatoCancúnand LaHabana. four tosevenperweekwhile moreflightswerealso flights fromLimatoMexico Cityincreasedfrom In the case of Mexico and the Caribbean, hub in Lima. rest ofourdestinationsinNorth Americathroughour American Airlines,andtostrengthen servicestothe the UnitedStatesthroughhubofourassociate, increases seektoboostMiamiastheportofentry Francisco route,from threetofourperweek.These and 13perweek,respectively, and,ontheLima-San Lima-Miami and Lima-Los Angeles routes to 11,17 LAN Perú increaseditsflightsontheLima-New York, total ofmorethan20newflights.Inthiscontext, America andtheCaribbean,offeringpassengersa flights perweekfromSantiagoandLimatoNorth gradually addedone,twoanduptothree August, Boeing 767s,alsoincreasingcapacity, and,asfrom to Miami, TAM began to use Airbus A330s, instead of ManausandRíodeJaneiro Belo Horizonte,Brasilia, increasing theircapacity. Similarly, foritsroutesfrom route withaBoeing777-300,therebysignificantly A330 onitstwoflightsdailytheSão Paulo-Miami Airbus A320.Inaddition,TAM replacedthe Airbus a dailyflightthroughouttheweekoperated byan also increasedasaresultoftheconnectionthese the twocities.CapacityonLima-SãoPaulo route passengers athirddailynon-stopflightbetween flights ontheSantiago-Montevideoroute,offering routes tothreeperday. LANalsoaddedmore São Paulo-Santiago and São Paulo- daily inbothcases,andincreaseditsflightsonthe and RíodeJaneiro-Santiagoroutes,withoneflight TAM alsobegantoflytheRíodeJaneiro-Montevideo with oneflightperdayusinganAirbusA320,while include Bogotá-SãoPablo, served byLANColombia routes openedbyLATAM AirlinesGroupin2012 of 24%and10%,respectively. Thenewregional competitors areAvianca-Taca withshares andGOL, 46% oftotalcapacity. itsmain Inthismarket, representing regional serviceswithinSouthAmerica, LATAM AirlinesGroupistheleadingoperator of However, in compliance with a requirement of theoneworldallianceand TAM ofStarAlliance. As ofDecember2012,LANcontinued tobeamember TAM havesigned withotherairlineoperators. alliances andcommercialagreements thatLANand destinations aroundtheworldunderstrategic directly, itsclientshaveaccesstosome159 destinations thatLATAM AirlinesGroupserves In additiontothenumerousinternational important costsavingsinthecomingyears. of theseservicesandisexpectedtogenerate will meanimportantimprovementsintheprovision However, forboththeairlineanditspassengers,it the change,implementedinSeptember2012. to SABRE.Somedifficultieswereexperiencedduring control of departures, LAN switched these processes which includes the booking system, inventories and In abidtoimproveitspassengerservicesystem(PSS), by 7.0%,givingaloadfactorof82.0%. traffic grewby7.2%in2012whilecapacityincreased international operations, consolidatedpassenger regional routes.ConsideringbothLAN’s andTAM’s international long-haulroutesand8.0million passengers in2012ofwhom5.4millionflew passenger operations transported 13.4 million statistics, LATAM AirlinesGroup’s international In all,consideringcomparable jointLANandTAM A320, therebyboostingthesetwocentersasahub. two citieswithanAirbusA330insteadof ANNUAL REPORT 2012 Operations 55 region. therebyboostingconnectivityinthe and Colombia, bring more tourists from these countries to Ecuador the UnitedStatesandCanadaand,atsametime, to offermorealternativesfortraveling toandwithin bilateral agreementswithAmericanAirlinesinorder Similarly, LANEcuadorandColombiasigned and diversifyoptionsforflightstoNorthAmerica. with AmericanAirlines,allowingittoincrease In 2012,TAM enteredintoacodesharingagreement will jointhealliancein2014. Colombia and TAM, withitssubsidiaryinParaguay, announced on7March2013.ThisimpliesthatLAN Airlines Group’s globalpassengeralliancewas Competition, thechoiceofoneworldasLATAM imposed byChile’s Tribunal fortheDefenseofFree ANNUAL REPORT 2012 Operations 56 TAM OPERATIONS / continent. gateway toEurope,coveringfive destinationstothis improved, andthusempower thiscountryasa coordination between the group’s airlines has been Thisiswhythe and therestofSouthAmerica. toEurope,America superior networkfromBrazil Internationally, LATAM AirlinesGrouphasbuilta low, offeringgreatpotentialforgrowth. flights in2012,thepenetration ofairtravel isquite Although77.4millionpeople tookdomestic market. inhabitants, makingittheregion’s largestpassenger accounts foralmosthalfofSouthAmerica’s With a population of around 200 million, Brazil adjusted bythemainoperators. of capacity. Attheend of 2011, this began tobe characterized inrecentyearsbythestronggrowth offers for the development of air travel, it has been market Despite the opportunities the Brazilian of 34.4%,15.0%and6.5%,respectively. AzulandAviancaBrasil, withmarketshares are GOL, 43.7% marketshareoftraffic. Itsmaincompetitors passengers and,asoftheendyear, hada A320 family. In2012,itcarried33.5milliondomestic using amodernfleetof109aircraft fromtheAirbus TAMIn Brazil, serves45domestic destinations, ANNUAL REPORT 2012 Operations 57 All these measures put TAM on a better footing line withthoseofLAN. such asthebaggageallowancewerebroughtinto more anticipation.Inaddition,differentpolicies order tobeabledefinetheofferofaflightwith included achangeintheduration ofabookingin Other commercialinitiativesimplementedin2012 segmentation bytypeofpassenger. regulation ofeachoneinordertoachievebetter of tariffs,thisimpliedacompleteredesignthe tariff structure in 2012. Based on a larger number Along thesesamelines,TAM alsodeveloped anew and anaverage 77.8%inthesecondhalfofyear. factor whichrose from 68.8%in2011to73.6%2012 reflected inasharpincreasetheCompany’s load through betterpassenger segmentation. This was to increaseunitrevenuesondomesticoperations contracted by7.4%.TAM’s restructuringprocessseeks the industry’s totalcapacity, measuredinASKs, domestic market by around 1.1% in 2012while TAMIn thiscontext, reduceditscapacityinthe the growthpotentialofferedbythismarket. solid foundationsfromwhichtotakeadvantageof sustainable andpermanentovertimeestablish in Brazil’s domesticmarketinordertomakethem structural changesalready beginningtobeseen In thefuture,TAM willcontinuetoreinforcethe costs thataredenominatedinUSdollars. results duetothehighpercentageofCompany’s the depreciation of the real had a negative impact on deceleration economy. oftheBrazilian Inaddition, its domesticoperation in2012,affectedbythe to addressthecomplexcontextthatexistedfor ANNUAL REPORT 2012 Operations 58 LAN OPERATIONS / measured inRPKs,roseby 13.3% whilecapacity, on 2011.Domesticpassenger traffic withinChile, In 2012,LANcarried6.3million passengers,upby18% reaching a 77.2% market share at the end of the year. and maintainitspositionas theleadingoperator, favorable contextto continue improvingitsservice of thecountry. TheCompanytookadvantageofthis years agoandbyminingdevelopmentinthenorth low-cost modelthatLANintroducedinChileafew travel. Demandhasbeen furtherstimulatedbythe reflected in strong and solid demand for domestic air rate ofeconomicgrowth andthisdynamismwas In 2012, Chile experienced the region’s second highest part ofChile of 23%in2012thenumber of flightstothernorth increase of 15% in passenger traffic, and an increase part ofChile,accumulating anaverage annual development ofthemining industry inthenorth years, empowered principally by the enhanced experimented by this country in the last five This isthecontinuationofsolidexpansion on thepreviousyear. operations of80.1%,down by1.8percentagepoints an average load factor on domestic passenger measured inASKs,increasedby15.9%,giving ANNUAL REPORT 2012 Operations 59 gateway tothiscontinentfromSouthAmerica. being the Europe, United States and Oceania, network, withflightstotherestofSouthAmerica, From Chile,LANoperates abroadinternational northern Chile. has focuseditsoperations intheminingregionsof (SINAMI) together with Servicios Aéreos Río Baker, it Formed bytheUnionofIndustrialAssemblyWorkers the Sinamiairline,entereddomesticmarket. 19.6% and3.2%,respectively. In2012,anewplayer, and PrincipalAirlineswhichhaveamarketshareof The maincompetitorsofLANinChileareSkyAirline improve thecapacity with morecapacity, tooptimizetheoperations and the 126-seat A318s andtheir replacement by planes for 2013envisagesthewithdrawal fromservice of with the highest levels of technology. The fleet plan family, withbetween126and174seats,designed has amodernfleetof22aircraft fromtheAirbusA320 For its domestic operations in Chile, theCompany tourism. as oneofsouthernChile’s mostattractive areasfor inhabitants while,atthesametime,promotingit is seekingtoenhanceconnectivityfortheIsland’s destination. Throughthisnewservice,theCompany and is the first airline to fly to this in , per weekfromSantiagotoCastrowithastopover Island ofChiloéintoitsnetwork,offeringfourflights as EasterIsland.InOctober2012,itincorporated the integrating the north and south of the country as well LAN serves16domesticdestinationsinChile, ANNUAL REPORT 2012 Operations 60 LAN PERÚ OPERATIONS / slightly below thatof its competitors, the Company Although the increase in LANPerú’s capacity was airlines. drivenbothbyLANPerúmeasured inASK, andother in an8%annualincreasethe industry’s capacity economic growthandthiswas,inturn,reflected 2012 whenPerú experiencedtheregion’s fastest passengers transported. Thistrendpersistedin of expansionintermsthenumberdomestic four years,registeringtheregion’s highestrate growing atanannualrate ofover18%inpast this country’s domestic airlineindustryhasbeen Thanks tothedynamismofPeruvian economy, flights perweek,therebyoffering themostcomplete inaugurated theTarapoto-Iquitos route,withtwo fleet of14AirbusA319s.In 2012,theCompany operating upto110flightsperdaywithamodern LAN Perú currently serves 14 domestic destinations, for theindustryinternationally. by threepercentagepointsandabovetheaverage year. Thisgaveitanaverage loadfactorof81.0%,up million passengers,upby14.2%ontheprevious share of62.2%ondomesticroutesandcarried4.5 itclosedthe yearwithamarket in RPKs.Asaresult, saw an18%increaseinpassengertraffic, measured was moresuccessfulinstimulatingdemandand ANNUAL REPORT 2012 Operations 61 used inthisarea. enable LANPerú tooptimizethetimeandresources will the mostmodernofitstypeinLatinAmerica, the training ofPeruvian pilotsandcrew. ThisCenter, latest-generation installationsandequipmentfor simulators of Boeingaircraft andAirbus A320s and Training with Center(CIT)intheJorgeChávezairport, In October, it went on to inaugurate the Technical an areaof10,500m2plus3,000forsupportoffices. Airbus planesoftheA320familyortwoBoeing767sin the capacitytoprovidemaintenanceservicesforsix with its newPremiumMaintenance base in Lima, important milestones in2012.InApril, it inaugurated In termsofitsinfrastructure, LANPerú achievedtwo States andEurope. United connections totherestofSouthAmerica, operations ofLATAM AirlinesGroup, with important hub for the regional and international In thesametime,Limahasbeenpositionedasan market sharesof10.5%,10.9%and12.6%,respectively. Airlines, StarperúandAvianca-Taca whichhave domestic routes, its main competitors are Peruvian coverage, connectivityandnationalintegration. On ANNUAL REPORT 2012 Operations 62 LAN ECUADOR OPERATIONS / partners. For its domesticoperations, theCompany with the group’s entire network and our airline more connectivityisofferedthrough theconnection main operator withthe32%ofmarketshare.Also States andEurope,hasbeen recognizedasthe has operations United to rest of South America, LANEcuador Regarding theinternational market, launch oftwoflightsdailyontheQuito-Mantaroute. incorporated itssixth domesticdestination,withthe Islands intheGalápagos.InMarch2013,it Guayaquil routetotheSanCristóbalandBaltra Guayaquil-Cuenca routesaswelltheQuito/ through theQuito-Guayaquil,Quito-Cuencaand LAN Ecuadorservessixdomestic destinations them, thankstotheintroduction ofinnovative some oftheirfaresunchanged and,even,lower airline marketsinceoperators wereabletokeep had helpedtoboostthedevelopment ofEcuador’s which covered 40% ofthecost offuelpurchases, by theendingoffuelsubsidies. Thesesubsidies, In 2012,Ecuador’s airlineindustrywasaffected routes. of flightsontheQuito-GuayaquilandQuito-Cuenca growth in2012includedanincreasethenumber passenger cabin of their category. The Company’s aircraft havethelargest andmostcomfortable uses amodernfleetoffiveAirbusA320s.These ANNUAL REPORT 2012 Operations 63 2.5 percentagepointson2011. 13.3%, givinganaverage loadfactorof78.1%,upby rose by16.9%in2012whileitscapacityincreased LAN Ecuador’s passengertraffic ondomesticroutes used Quito-Guayaquilroute,by7percentagepoints. by 5percentagepointsand,onthemostheavily increased itsmarketshareofalltheroutesitserves year. ItisalsoimportanttonotethattheCompany 1.2 million passengers, up by 20.0% on the previous operates, of44.8%.In2012,theCompanycarried share of31.8%and,consideringonlytheroutesit As ofDecember2012,ithadachievedamarket as animportantplayerinthedomesticmarket. Ecuador hasprogressivelyconsolidatedaposition in terms of safety, reliability and service, LAN efforts toprovidethebestproductpassengers the internationalpriceofoil.Thankstoitsconstant surcharge, separate fromfares,whichvarieswith structures. LAN Ecuador had tointroduce a fuel costs, allthecountry’s airlinesmodifiedtheirfare measure andfinancetheresultingincreasein In ordertomitigatetheimpactofthisgovernment domestic operations in2009. implemented byLANEcuadorafterthestartofits models forstimulatingdemandsuchasthat passenger contactcenters. million, andtheinauguration ofitsnewofficesand inwhich itinvestedUS$4.7 International Airport, implementation ofitsfacilitiesatthenewQuito important investmentsin2012.Theyincludedthe the country, LANEcuadormadeanumberof In ademonstration ofitscommitmentto respectively. subsidiary, withmarketsharesof44.7%and22.7%, are TAME andAvianca-Taca throughitsAerogal On domesticroutes,LANEcuador’s maincompetitors ANNUAL REPORT 2012 Operations 64 LAN ARGENTINA OPERATIONS / at weekendsinordertoprovide anefficientservice up tofiveflightsonweekdays anduptonineperday also increasedthenumberof flightsonthisrouteto which particularlyaffectedthis destination.InJuly, it eruption ofChile’s PuyehueVolcano in June2011, after aninterruptionofnine monthsfollowingthe on theBuenosAires-SanCarlosdeBarilocheroute In 2012,itcompletelyreestablisheditsdirectservice capital withthecountry’s othermaincities. connectingthe serves 14destinationsinArgentina, important operators of domesticflights.Itcurrently has positioneditselfasoneofthecountry’s most Since itslaunchsevenyearsago,LANArgentina with marketsharesof66.5%and 1.5%,respectively. with Aerolíneas Argentinas and Andes Lineas Aereas, 74.0%. On domestic routes, LAN Argentina competes increased by21.1%,givingan average loadfactorof passenger traffic grewby18.2%whilecapacity up by21%onthepreviousyear. Consolidated During theyear, itcarried2.3millionpassengers, 2012, hada32.0%shareofthedomesticmarket. passengers onalltheroutesitservesand,atend- The companywasrewardedwiththepreferenceof this touristcenter. for thehighwinter-holidaydemandexperiencedby ANNUAL REPORT 2012 Operations 65 the LATAM AirlinesGroup’s networkandcodeshare the UnitedStates,achievingasolidcoverage through operates flights to other South American cities and LANArgentina Regarding theinternational market, are notflights. between anairportandnearbycitiestowhichthere stage ofthe“busproject”totransport passengers value proposition,LANArgentinalaunchedthefirst In 2012,aspartofitspermanentquestto enhance its in thecityofTucumán. two newcommercialofficesinBuenosAiresandone destinations withinthecountry, andalsoopened throughout the country, including different the CompanylaunchedLANTOURSprogram discounts on the purchase of tickets. In addition, association withlocalbanks,offeringattractive the Companymountedanumberofcampaignsin airline marketthroughmorecompetitivetariffs, In abidtostimulategrowthofthedomestic of thistype. efficient andecologicintheindustryforoperations of tenAirbusA320s,considered the most modern, For itsdomesticflights,the Companyhasafleet agreements withourairlinepartners. ANNUAL REPORT 2012 Operations 66 LAN COLOMBIA OPERATIONS / Colombia changeditsroute totheUnitedStates Regarding internationaloperations, in2012LAN with marketsharesof61.4%and 8.5%,respectively. competitors areAvianca-Taca andCopa Colombia, is the country’s second largest airline. Its main destinations inColombiaand,termsofcoverage, average load factor of 73.3%. The Company serves 20 while itscapacityincreasedby13.4%,givingan Its consolidated passenger traffic grew by 12.5% course of theyear, carried 3.2 millionpassengers. that reached19.6%inDecember2012and,overthe Company achievedashareofthedomesticmarket the In itsfirstyearofoperations asLANColombia, financial situationandlowservice standardscalled local Airesairline(attheendof 2010).Itsdeteriorated LAN Colombiaistheresultof theacquisitionof and improvingthepassenger’s experience. Paulo, increasing the capacity between those cities will initiallystartflyingonroutestoMiamiandSao configured withthenewonboarddesignofLAN, improve itsservice.Thesenewwide-bodyaircraft, aircraft to its international operations, in order to LAN Colombiawillincorporate newBoeing767-300 specially withAmericanAirlines.Alsoduring2013 better connections with our partner airlines, from Fort LauderdaletoMiami,aiminggenerate ANNUAL REPORT 2012 Operations 67 by bettersegmentationofpassengers.Italso reductions ofaround35%inbasefaresaccompanied in otherdomesticmarketstheregion,with low-cost modelsuccessfullyimplementedbyLAN focusing onstimulatingdemand,replicatingthe In 2012,theCompanydefinedacommercialstrategy expected tobetakenoutofservice. returned. In2013,alltheBoeing737-700sarealso from servicefourDash8-Q400swhichshouldbe 700s andtenDash8-200s,havingalreadywithdrawn comprisingfiveAirbusA320s,sixBoeing737- aircraft, operating itsdomesticflightswithafleetof21 costs. As of December 2012, LAN Colombia was which willtake some years and generate associated replace them,mainly, withAirbusA320s,aprocess 737-700s andBombardierDashsoutofservice fleet in2012ordertogradually takeAires’s Boeing profitability, the Company began the renewal of its Among othermeasuresdesignedtorestoreits of brand. and culminatedattheendof2011withchange standards. Thisprocesswasachievedinrecordtime line withLAN’s safety, punctualityandefficiency for afar-reachingrestructuringplantobringitinto in asinglecorporate system. the MXIsysteminordertohomologateoperation Finally, inmaintenance,LANColombiaimplemented Occidente inconjunctionwiththeVisabrand. co-branding ofLANPASS with theBancodeBogotáy penetration oftheindirect saleschannelandthe travel agenciesinorder toincreasetheCompany’s included a redefinition of the commissions paid to Other commercialinitiativesimplementedin2012 Corporate loyaltyprogram. transport withinColombiaandlaunchedtheLAN contracts withthemaincompaniesusingair its penetration ofthe corporate segment by signing to increaserecognitionoftheLANbrand, increased implemented anewmarketingstrategy designed ANNUAL REPORT 2012 Operations 68 were able to accumulate and redeem kilometers and as fromJune2012,membersofthetwoprograms independent customerloyaltyprograms although, As ofDecember2012,LANandTAM continued tohave PROGRAMS CUSTOMER LOYALTY OPERATIONS / With peoplewho flyconstantlyinmind, TAM created have anagreementwithit. vast networkofcompaniesaround theworldwhich well aswhenshoppingwithor usingtheservices of a program suchasAlaskaAirlinesandAeroméxico as in theoneworldallianceorothersaffiliatedto every time they fly with LAN, TAM or any of the airlines Members oftheprogram earnLANPASS kilometers members. expansion in2012,endingtheyearwithover620,000 Thislast country led theprogram’sand Colombia. Perú,Chile, Argentina, Ecuador, theUnitedStates 2012, the program had 7.4 million members across of otherproductsandservices.AsDecember that can be exchanged for tickets or a wide range privileges through the accumulation of kilometers of itscustomerswithnumerousbenefitsand LAN in1984torewardthepreferenceandloyalty LANPASS is the frequent flyer program createdby network. points, respectively, throughoutthetwoairlines’ ANNUAL REPORT 2012 Operations 69 retailers, supermarkets,carrentalsandmagazines. companies includinghotels,financialinstitutions, million members anda network of 230partner As ofDecember2012,thisprogram hadover10.5 with a72.9%stake. LATAM AirlinesGroupistheprincipalshareholder trades ontheSãoPaulo stockmarketandinwhich points. Multiplusisajointstockcompanythat accumulation andredemptionofTAM Fidelidade a coalitionofloyalty programs, to administer the In January2012,TAM wentontocreateMultiplus, network. as welltoparticipateintheMultiplusFidelidade TAM’s destinationsandthoseofassociatedairlines loyalty programs. Thesecanthenberedeemedinall which theyaccumulatepointsinawidevarietyof Members oftheprogram haveasingleaccountin services for its passengers and reward them. the TAM Fidelidade program in 1993 to enhance ANNUAL REPORT 2012 Operations 70 CARGO OPERATIONS OPERATIONS / at boththedomestic andinternationallevels. capacity andawiderange ofproductsandservices in 27 countries, modern infrastructure, increased in theregionandworld with 144destinations in termsofaccesstothebroadest networkofroutes ThisgeneratedBrazil. importantbenefitsfor clients operator groupinLatinAmericaand,particular, of LATAM AirlinesGroup asthelargestaircargo This positionedthecargocompaniesthatformpart complementary capacitiesandnetworksofroutes. operational agreements, bringingtogetherhighly their subsidiariesbegantodevelopcommercialand 2012, thecargooperations ofthetwocompaniesand Following theassociationofLANandTAM inJune the businessas asinglelargenetwork. filling ofthisnewcapacityand beabletoadminister hubs wasalsoimprovedin order tooptimizethe cargo operations. Connectivityinthemaincargo processes andbestpractices intothegroup’s new permitted theincorporation ofLANCargo’s systems, administered byLANCargoand itssubsidiaries.This of space, the bellies of TAM’s aircraft began to be In addition, through agreementsforthepurchase or bynegotiatingnewagreementswithsuppliers. house officesandfunctionsthat TAM hadoutsourced structures were unified either bybringing back in- business during2012.Commercialandoperational efficiency gainswereachievedintheinternational In theframework of theassociation,important ANNUAL REPORT 2012 Operations 71 tariffs. in particular, exerting downward pressure on Brazil, transferred partoftheircapacitytotheregionand, but alsobecauseEuropeanandAsiancargoairlines increased notonlyonthepartoflocaloperators Competition inLatinAmerica’s cargomarketsalso the economyshowedanimportantdeceleration. especially, theregion’s Brazil, where largestmarket, mainly byadropinimportsintoLatinAmericaand, crisis in the Eurozone. Weaker demand was explained macroeconomic conditionsand,inparticular, the by acontraction ofmarketsinresponsetoadverse In 2012,thecargobusiness was, however, affected brand underwhichallitscapacityismarketed. boosted bythestrongpositionofTAM Cargo all thesefields,thegroup’s operations werefurther routes tenderedbythecountry’s postalservice.In charter business and special businesses such as the where demand is heaviest as well as access to the for 15years-providegreatcapacityontheroutes freighters ofABSA-LANCargo’s subsidiaryinBrazil coverage ofalargenumberdestinations,whilethe extensive networkofpassengerplanes,permitting were generated through the incorporation of TAM’s importantsynergies market, In thedomesticBrazilian and theirrespective subsidiariesin2011. to comparable figuresfortheoperations of TAM, LAN down by1.1percentagepoints, inallcasesrelative showed a0.1%drop,giving loadfactorof58.7%, its subsidiariesfellby2.4% in 2012whilecapacity Overall, thecargotraffic ofLATAM Airlines Groupand capacity butonlyconsume50%morefuel. on theBoeing767-300Fsinthattheyhavetwicetheir These modernaircraft representanimprovement helped toincreasetheefficiencyofbusiness. operations inLatin America andEuropebutalso 777-200F freightersin2012notonlystrengthened Inaddition,theincorporation oftwonewBoeing which remainedstrongthroughouttheyear. perishable productssuchasflowers,fruitandfish, region totheUnitedStatesandEurope,principally performance oftheexportsothercountriesin withthesolid the weaknessofimportsintoBrazil markets. In 2012, this allowed it to partly offset business is itspresence in theregion’s different One of the strengths of LATAM Airlines Group’s cargo 2012 RESULTS LATAM AIRLINES GROUP S.A.

Juliana Bentz TAM Brazil

Tatiana Simon LAN Perú ANNUAL REPORT 2012 2012 Results 73 past, theairlineindustryreportedveryweakresults past, undersimilarconditionsinthe History showsthat, China. of the world’s largest economies and, in particular, well as the euro zone debt crisis and the deceleration dollar, whichraised thecostsofmanyairlines,as depreciation ofanumbercurrenciesagainstthe averaged aroundUS$109.5/barrel(WTI),andthe factors thatincludedthehighpriceoffuel,which complex in2012.Thisreflectedacombinationof Conditions fortheworld’s airlineindustrywere INDUSTRY OVERVIEW 2012 RESULTS / larger companiesonlydidsowith governmenthelp. small airlineswereunabletosurvive andsomeother placed tohandlethedifficult contextwhilemany economies and greater efficiency, that were best It waslargeoperators, withtheadvantagesofscale mergers. commercial agreementsand,even,cross-border emphasis onthedevelopmentofalliances, rather thanconfrontation, withanevengreater there wasalsoacleartrendtowardscooperation, have proventobekeyfactorsforsuccess.In2012, In thisprocess,consolidationandcapacitydiscipline difficult conditions. greater resourceswithwhichtoaddressthecurrent has, inotherwords,reinventeditselfandnowhas economy wasexperiencing4%growth.Theindustry price offuelwasjustUS$45/barrelandtheworld and cash flow that weresimilarto 2006when the In 2012,however, airlinesachievedlevelsofearnings and, even,losses. the Middle East. the MiddleEast. achieve growthinthecargo market werethosein part oftheirtotalrevenues. The onlyoperators to whom thecargobusinessrepresents animportant principally operators intheAsia-Pacific regionfor Thisaffected and apreferenceforseatransport. the result of a decrease in international trade of traffic andasimilar dropinyields.Thiswas thecargomarketsawa2%contractionBy contrast, increased theirmarketshare. marked riseinthetraffic oflow-costairlineswhich in EuropeandtheAsia-Pacific region,therewasa while, followedby Latin America, the MiddleEast, 3% increaseinyields.Theseadvanceswereledby which roseby5.3%onthepreviousyear-anda impacted in2012bystrongpassengertraffic - industry’s globalperformancewaspositively the Despite theweakmacroeconomiccontext, capacity seeninthiscountry’s domesticmarket. embarked on a sharp reduction in the excess wheretheprincipaloperatorsof theyearinBrazil was thecapacity discipline seeninthesecond half spread tootherregions.Particularly noteworthy almost exclusivelytoNorthAmericanairlines, Capacity discipline,previouslyapractice confined ANNUAL REPORT 2012 2012 Results 74 growth. in theseregionsandtheirprospectsforeconomic years duetothelowpenetration ofairtransport This trend is expected to persist in the coming East. markets ofAsia-Pacific, LatinAmericaandtheMiddle industry’s growthhasbeendrivenbytheemerging inrecentyears,the It isimportanttonotethat, 7%-8%. required torecovertheindustry’s costofcapitalis 1.0% in2012and1.3%2013whereasthemargin envisages adropinnetmarginfrom1.4%2011to to US$8.8billionin2011).Thischange,nonetheless, in JunetoUS$6.7billionDecember(ascompared airlines’ globalearningsin2012fromUS$3.0billion Transport Association(IATA) increaseditsestimateof first ninemonthsoftheyear, theInternationalAir In view of the industry’s performance over the ANNUAL REPORT 2012 2012 Results 75 published on 27 September 2012. As a result, thenet published on27September2012.Asaresult, from 17% to 20% as part of a tax reform officially due toariseinChile’s corporate incometaxrate In addition,taxpaymentsrosebyUS$70.4million the consolidationofTAM asfrom22June2012. 2011. ThisincludedalossofUS$45.2milliondueto for 2012,downby96.6%fromUS$320.2millionin Company reportednetearningsofUS$11.0million TAM’s businesseswhichoccurred inJune2012.The affected principallybytheintegration ofLAN’s and In 2012,theresultsofLATAM AirlinesGroupwere FINANCIAL RESULTS 2012 RESULTS / meaningful comparison. the completeyearsof2011and 2012,provideamore below, which consolidateLAN’s andTAM’s resultsfor The pro-formafinancial statements presented 9.4% to5.2%. on 2011,whiletheoperating margindroppedfrom earnings reachedUS$331.2million,downby38.6% LAN’s andTAM’s businessesisexcluded,operating the previousyear. Iftheimpactofintegration of equivalent toadropof6.2percentagepointson on 2011,whileitsoperating margin,at3.2%,was earnings reachedUS$316.9million,downby41.3% LATAM AirlinesGroup’s accountingoperating the integration withTAM. million ofwhichUS$3,709.0correspondedto Operating costsincreasedby85.9%toUS$9,625.5 million corresponded to the integration with TAM. by 73.9%onthepreviousyear, ofwhichUS$3,695.8 Operating revenuesreachedUS$9,942.3million,up margin droppedto0.1%in2012,downfrom5.6%. ANNUAL REPORT 2012 2012 Results 76 a 6.2%dropincargorevenuesandalso This reflecteda1.0%increaseinpassengerrevenues, compared to2011andreachedUS$13,271.1million. In 2012,pro-formarevenuesdroppedby0.3%as US$13,182.2 million in 2012, up by 7.2% on the pro- The Company’s pro-formaoperating costsreached in themarketforimportsinto LatinAmerica. weakness ofglobalcargomarkets andweakdemand in tonnes, dropped by 1.0% in 2012, reflecting the load factorwhichreached58.7%.Traffic, measured in theyieldandof1.1percentagepoints revenues per ATK wasdriven by a decrease of 3.9% In thecaseofcargooperations, a5.7%dropinunit than theincreaseof7.8%intraffic measuredinRPKs. the increase in capacity measured in ASKs was less load factor rose from 75.9% to 78.2% since, at 4.6%, Airlines Group’s otherdomesticmarkets.In2012,the offset byincreasesinrevenuesperASKLATAM third oftheCompany’s revenuesandwaspartly US dollarin2012,whichaffectedapproximatelya realagainstthe 16.7% devaluationoftheBrazilian yields. Thisreflectedtheimportantimpactof per ASKweredownby3.5%duetoa6.3%dropin In thecaseofpassengeroperations, unitrevenues other revenues. margin of0.2% inthepreviousyear. in 2012ascomparedtoapositive netpro-forma This implies a negative net pro-forma margin of 3.7% to anetpro-formaprofitof US$29.8 millionin2011. forma lossofUS$491.8million in2012ascompared Finally, LATAM Airlines Group showed a net pro- that wererelatedtothemergerprocess. well asonetimecostsofUS$47millionduring2012 to theintegration of LAN’s andTAM’s businesses as approximately US$72 million in synergies related It shouldbenotedthattheseearningsinclude the pro-formaresultsfor2011. million incomparisontoUS$1,010.9under LATAM AirlinesGroupin 2012reachedUS$88.9 thepro-formaoperating earningsof As aresult, expenditure onfuel. which wasregisteredasareductioninthatyear’s of fuel taxes (PIS/COFINS) for US$323 million in 2011 addition, TAM receivedacreditagainstpayments In price offueloncehedgingistakenintoaccount. rise in gallons consumed and a 9.7% increase in the costs. This12.6%increasewastheresultofa2.7% an itemthataccountedfor36.3%oftotaloperating US$535.5 millionincreaseinexpenditureonfuels, forma resultsfor2011.Theywereaffectedbya ANNUAL REPORT 2012 2012 Results 77 Revenue BreakdownbyCountry2012 Revenue BreakdownbyCountry2011 ANNUAL REPORT 2012 2012 Results 78 ANNUAL REPORT 2012 2012 Results 79 Group in2012 Principal recognitionsreceivedbyLATAM Airlines AWARDS ANDRECOGNITIONS 2012 RESULTS / • • • LAN 2012 AIRLINE WINEAWARDS BUSINESS TRAVELLER’S CELLARSINTHESKY “Best onlineairlinesite” 1st place BEST OFTHEWEBAWARDS: LASTMILELEADER “Best SouthAmericanAirline”. 2nd place WORLD AIRLINEAWARDS (SKYTRAX) Roederer) Best SparklingWine(ChampagneLouis 1st place

• • • • • “Best BusinessClassinLatinAmerica” 1st place BUSINESS TRAVELLER Committed toClimateChangeManagement Ranking ofCompaniesinChileMost 5th place CAPITAL MAGAZINEANDFUNDACIÓNCHILE courses most supportedprofessional-technicaltraining Recognition ofnineChileancompaniesthat 2012 DUOCUCHUMANCAPITAL PRIZE “Company withBestReputationinChile” 1st place MERCO “Most RespectedCompany” 1st place MOST RESPECTEDCOMPANIES LA SEGUNDA-ADIMARK:RANKINGOFCHILE’S

ANNUAL REPORT 2012 2012 Results 80 • • • TAM 2012 • • 5th most innovativeairlineintheworld. AIRLINETRENDS.COM In industryand19thinoverall ranking 1st place DINHEIRO /BRANDANALYTICS) BRAZIL’S MOSTVALUABLE BRANDS(ISTOÉ “Human ResourceManagement”. 1st place THE BESTOFDINHEIRO(ISTOÉDINHEIRO) Admired inLatinAmerica”. “Airline” CompaniesMost and“Brazilian 1st and5thplaces,respectively COMPANIES INBRAZIL CARTA CAPITAL MAGAZINE:MOSTADMIRED Airline StaffServiceinSouthAmerica”. “Best AirlineinSouthAmerica” and “Best 1st place WORLD AIRLINEAWARDS (SKYTRAX)

• • • • MAGAZINE) TRUSTED BRANDSPRIZE(SELECCIONES “Best LogisticsCompany(TAM Cargo)” 1st place (CONSUMIDOR MODERNOMAGAZINE) PRIZE FOREXCELLENCEINCUSTOMERSERVICE “Most ImprovedFirstClassCellar”. 1st place “Best FirstClassRedClosCanon2008” 1st place TRAVELLER CELLARS INTHESKYREVISTA BUSINESS programs intheAmericas” “Best redemptionofcustomerloyalty 1st place(TAM Fidelidade) FREDDIE AWARDS, INSIDEFLYER MAGAZINE “Airline” 1st place

ANNUAL REPORT 2012 2012 Results 81 3.0%. whichshowedanannualgainof share priceindex, Airlines Group’s shares performed below Chile’s IPSA capitalization ofUS$11,218million.In2012,LATAM 31 December2012,theCompanyhadamarket a lossof7.7%whileLAN’s ADRgained1.4%.Asof In 2012,LATAM AirlinesGroup’s sharepriceshowed STOCK MARKETACTIVITY STOCK MARKETINFORMATION 2012 RESULTS / ANNUAL REPORT 2012 2012 Results 82 ANNUAL REPORT 2012 2012 Results 83 ( US D ) ( US D ) ANNUAL REPORT 2012 2012 Results 84 ( BRL ) ( BRL ) ANNUAL REPORT 2012 2012 Results 85 (in-flight entertainment), Goodrich (reversers) and and LufthansaTechnik (MROcomponents),Thales Services Ltd.(engines),SICMA(seats),AirFrance Royce plc,General Electric Commercial Aviation & Whitney, IAEInternationalAeroEnginesAG,Rolls- accessories, sparesandcomponentssuchasPratt consist mainlyofcompaniesthatproduceaircraft Boeing aircraft manufacturers. Its othersuppliers of LATAM AirlinesGroupweretheAirbusand In 2012,asinpreviousyears,themainsuppliers SUPPLIERS ADDITIONAL INFORMATION 2012 RESULTS / premiums andbettercoverage. liability insurance, whichhelpsinobtaininglower for the joint negotiation of the terms of hull and with BritishAirways,AerLingus andothercompanies Since 2006,theCompanyhasalsohadanagreement subsidiaries andreinsuredontheLondonmarket. is takenoutjointlybyLATAM AirlinesGroupandits baggage, merchandise and airports. This coverage parts andthird-partyliabilityforpassengers,cargo, engines,spare commercial aviationsuchasaircraft, type ofinsurance covers alltherisksinherentto categories: aviation,hullandliabilityinsurance. This carries insurance that canbedividedintothreemain that involve potential risks, LATAM Airlines Group Taking intoaccountallthoseareasofitsoperations INSURANCE and Exxon. including RepsolYPF, Copec,Shell,Terpel, Chevron the Companyhasanumberoffuelsuppliers Messier BugattiandGoodrich(brakes). Inaddition, in thesecountries. differentiate andmarkettheir productsandservices destination oftheiroperations inordertobeable in whichtheyoperate oraretheoriginand/or corresponding bodies in thedifferent countries of trademarks. These aredulyregisteredwiththe The Companyanditssubsidiariesuseanumber TRADEMARKS ANDPATENTS crews. including executives,staffingeneral andflight accident insurance on behalfofallitspersonnel liability, etc.Inaddition,theCompanyholdslifeand corporatemotor vehicles,airandseatransport, civil all-risk coverage) aswelltraditional coverage of transport of securities, window breakage and other computerequipment, policies (includingfire,theft, assets. Theseareprotectedthroughmulti-risk assets, particularly its physical goods and financial all thoserisksthatcouldaffecttheCompany’s Insurance ofthistypeprovidescoverage against GENERAL INSURANCE ANNUAL REPORT 2012 2012 Results 86 Securities Registration #306: DISCLOSURE regardingLATAM AirlinesGroupS.A., authorization, Iherebymakethefollowingmaterial Market Law, andinGeneral Rule#30,underdue subparagraph of Article 10 of the Securities As providedinArticle9andthesecond GROUP S.A. AND/OR NATIONAL MARKETS/ PLACEMENT OFSECURITIESONINTERNATIONAL 20/12/2012 -19:15 MATERIAL NEWS 2012 RESULTS / 3. 2. 1. resolved: At ameetingheldtoday, theBoardunanimously begin on December 21, 2012by publication of Meeting on September 4, 2012. The period will 21, 2011,asmodifiedbytheSpecialShareholders the SpecialShareholders Meeting onDecember on accountofthecapitalincreaseapprovedby subscribe 7,436,816 cash shares in the Company To beginthepreemptiveoptionperiodto Exchange, Securities Exchange,according to Book Auctionsystemofthe SantiagoStock 11,000 pershareusingtheOrder of CH$ Company onDecember21, 2012ataprice To placeatotalof2,951,390sharesinthe preemptive optionperiod. shareholders being preemptivelyofferedtotheCompany’s To settheplacementprice fortheshares made inthenewspaperLaTercera. 29) oftheCompaniesRegulations,whichwillbe the Notice ordered in Article 26 (formerly Article

at H [•] CH$ per LATAM AIRLINES share during the • • • • • the Meeting: The followingindividualswereelectedDirectorsat of Directors,whowillholdofficefortwoyears. shareholders electedthemembersofLATAM’s Board 2012,LATAM’s (LATAM)Group S.A. heldSeptember 4, Shareholders Meeting(Meeting)ofLATAM Airlines of 1989,pleasebeadvisedthatatanExtraordinary Law 18045andinGeneral Rule#30oftheCommission As providedinArticles9and10ofSecuritiesMarket GROUP S.A. CHANGES INMANAGEMENT/ 04/09/2012 -17:42 Ramón EblenKadis; Maria ClaudiaAmaro; Mauricio RolimAmaro; Juan JoséCuetoPlaza; José MaríaEyzaguirreBaeza; December 14,2012. the parameters oftheshareoffersubmittedon

LATAM AIRLINES ANNUAL REPORT 2012 2012 Results 87 Company’s Board of Directors. He willcontinueon Company’s BoardofDirectors. He resignation fromhispositionofChairmanthe Today, Mr. Jorge Awad Mehech submitted his Securities Registration #306: (formerly called LAN AirlinesS.A.), Airlines Group S.A. DISCLOSE thefollowingmaterialevents of LATAM General Rule #30, under due authorization, I hereby of Article 10 of the Securities Market Law and in As provided in Article 9, in the second subparagraph CHANGES INMANAGEMENT/ 03/08/2012 -18:34 article 50-bisofCompaniesLaw18046. were electedasindependentdirectors,accordingto The Directors named in numbers 7, 8 and 9 above • • • • September 4,2012todiscussthe followingmatters: on Extraordinary ShareholdersMeetingat10:30a.m. of LATAMresolvedtoconvenean AirlinesGroupS.A. At athemeetingheldtoday, theBoardofDirectors Securities Registration #306: (formerly called LAN AirlinesS.A.), Airlines Group S.A. DISCLOSE thefollowingmaterialeventsofLATAM General Rule #30, under due authorization, I hereby of Article 10 of the Securities Market Law and in As provided in Article 9, in the second subparagraph AIRLINES GROUPS.A. NOTICES, AGREEMENTSANDPROPOSALS/ EXTRAORDINARY SHAREHOLDER’SMEETING, 03/08/2012 -18:28 of LATAM AirlinesGroupS.A. Mr. MauricioRolimAmaroasChairmanoftheBoard as director. Board then unanimously appointed The Georges deBourguignonArndt. Juan Gerardo JofréMiranda; y Francisco LuzónLópez; Carlos HellerSolari;

LAN AIRLINESS.A. LATAM 3. 2. 1. 6. 5. 4. of theLawNo.18,046regardingChilean “Remaining Shares”)pursuanttosection25 shareholders ofLATAM(the AirlinesGroupS.A. tobeofferedpreferably tothe Holdco IIS.A., and exchanged forsharesofSisterHoldcoS.A. held onDecember21,2011andthatnotwere Extraordinary General MeetingofShareholders value) issuedaspertheauthorizationfrom shares (all ordinary and withoutnominal fromthetotalof142,555,882 Airlines GroupS.A., ordinary andwithoutnominalvalue)ofLATAM Approve thattheremaining7,436,816shares(all Election ofmemberstheBoardDirectors. Revoke BoardofDirectors. items abovelisted. Adopt anyotherresolutions tocarryoutthe Option CompensationPlan. the creationandimplementationofStock price and applicable terms and conditions for and fixingofthesubscriptionplacement of theCompanydetermination,setting Plan”); ortodelegateintheBoard of Directors 21, 2011(the“StockOptionCompensation Meeting of Shareholders held on December asapprovedbytheExtraordinary GeneralAct, No. 18,046 regarding the Chilean Corporation plan pursuanttoSection24oftheLaw used tocreateandimplementastockoption ordinary andwithoutnominalvalue)tobe placement priceofthe4,800,000shares(all setanddeterminethesubscription Fix, of theRemainingShares. conditions forthesubscriptionandplacement of theCompanytodeterminepriceand ortodelegateintheBoard ofDirectors S.A., without nominalvalue)ofLATAM AirlinesGroup namely, forthe7,436,816shares(allordinaryand placement priceoftheRemainingShares, setanddeterminethesubscription Fix, markets. shares tobeofferedandplacedinthesecurities Corporation Act; and that any unsubscribed ANNUAL REPORT 2012 2012 Results 88 2. 1. Securities Registration #306: (formerly called LAN AirlinesS.A.), Airlines Group S.A. DISCLOSE thefollowingmaterialeventsofLATAM General Rule #30, under due authorization, I hereby of Article 10 of the Securities Market Law and in As provided in Article 9, in the second subparagraph OTHERS / 28/06/2012 -9:19 4. 3. the conditionsforplacementofsuchshares. The Boardwasgranted thepowertodetermine pursuant to Article 24 of the Companies Law. plan foremployeesofLATAM anditssubsidiaries Merger exchange,anemployeecompensation with anyremainderofsharesnotusedinthe combined par value) to create and implement, 4,800,000 additionalshares(allcommon,withno Said Meetingalsoapprovedtheissuanceof Merger (allcommonshares,withnoparvalue). to implementtherespectiveexchangein issuance of142,555,882shareswasauthorized Among the matters discussed at the Meeting, the be thecompanysurvivingMerger. or indirectly. LAN(nowcalled“LATAM”) would Holdco IIheldthesharesinTAM eitherdirectly company. aBrazilian (“TAM”), Sisterand S.A. for, andpriorto,themergerofLANTAM companies hadbeenincorporated especially (“HoldcoII”)(the“Merger”). Thesetwolatter S.A. (“Sister”) and HoldcoII and SisterHoldcoS.A. (“LAN”) matters, the merger of LAN Airlines S.A. 21, 2011(the“Meeting”)approved,amongother A SpecialShareholdersMeetingheldDecember 24 oftheCompanies Law, but rather beallocated of LATAM anditssubsidiariespursuanttoArticle implement acompensationplan foremployees the ShareRemaindernotbeused tocreateand a motiontothecompany’s shareholdersthat On today’s date, the Board resolved to submit (“Share Remainder”). exchanged forsharesinSisterandHoldcoII (all common,withnoparvalue)thatwerenot authorized sharesinLATAM aftertheMerger there was aremainder of 7,421,021 the market, offer did notcover all shares in TAM existing on Since thelevelofacceptanceexchange LAN AIRLINESS.A.

5. 6. 29,723,889 sharesinTAM thatwereaccepted 17,550 shares were unilaterally reversed, of the offer anddepositaryofitsBDRprogram--that retained byLATAM toimplementtheexchange (“Itau Corretora”)--the securities intermediary y FuturosnotifiedItauCorretora de Valores S.A. BolsadeValoresBM&FBOVESPA Mercadorias S.A. Please notethatbyletterdatedJune26,2012, which willbedulydisclosed. corresponding SpecialShareholdersMeeting, purposes, theBoardshallalsoconvene Forand placedonthegeneral market. these and thatanyunsubscribedbalancebeoffered according toArticle25oftheCompaniesLaw, to apreemptiveoffertheLATAM shareholders shares, withnoparvalue). total 7,436,816sharesinLATAM (allcommon concludes, the Share Remainder placeable will indicated intheprecedingparagraph offer onJune27,2012.Andaftertheadjustment TAM shareholdersthat accepted theexchange the correspondingADRsandBDRsofLATAM to paragraph didnotaffectthetimelydeliveryof The situationdescribedinthepreceding their respectiveBDRs). contracts for those 15,795 shares in and Brazil result intherevocationofforeignexchange this situationassoonpossible(whichwill is takingactionwithItauCorretora tocorrect of ItauCorretora intheformofBDRs.LATAM (17,550 x 0.90). Said shares are in possession shares inLATAM inexcesstoItauCorretora TAM, whichmeantthatLATAM delivered15,795 waseffectively29,706,339shares in in Brazil Therefore, theresultofexchangeoffer the stockexchangedidnotopportunelyidentify. this company, becauseofduplicateordersthat by subscriptionofthesamenumbersharesin were contributed by Itau Corretora to Holdco II were inthecustodyofthatstockexchangeand bytheendofexchangeofferthat (“Brazil”) for exchangeintheFederal RepublicofBrazil

ANNUAL REPORT 2012 2012 Results 89 LAN AIRLINESS.A. DIVISION, MERGERORCREATION OFCOMPANIES / 22/06/2012 -9:04 meeting ofthecompany. will be renewed at the next regular shareholders In lightoftheforegoing,entireboarddirectors 1. Securities Registration #306: (formerly called LAN AirlinesS.A.), Airlines Group S.A. DISCLOSE the following material event of LATAM General Rule #30, under due authorization, I hereby of Article 10 of the Securities Market Law and in As provided in Article 9, in the second subparagraph CHANGES INMANAGEMENT/ 28/06/2012 -9:14 1. Registry No.306: (“LAN”),Securities regarding LANAirlines S.A. I herebyreportthefollowingESSENTIALFACT de Carácter General N°30),beingdulyempowered, Valores), andinGeneral RegulationNo.30,(Norma 2, oftheSecurities Market Law (Ley de Mercado de As establishedinArticle9and10,paragraph By meansofEssentialFact datedDecember Amaro intheirsteadasdirectorsofthecompany. Mauricio RolimAmaroandMs.MariaCláudia vacancies, the Board resolved to appoint Mr. from theirdirectorships.Inviewofthose Cox DonosoandMr. DarioCalderonGonzalez Directors learnedoftheresignationMr. Jose On today’s date,thecompany’s Boardof and HoldcoIIwouldbeabsorbed byLAN(the Shares –ADSsofTAM), bothSisterHoldco those representedbyAmericanDepositary an exchangeofferfortheTAM shares(including If Holdco II successfully completed (“TAM”). S.A. proposed combinationbetweenLANandTAM specially incorporated forpurposesofthe (“Holdco II”), two companies and Holdco II S.A. (“SisterHoldco”) of LANwithSisterHoldcoS.A. meetings wereheldandapprovedthemerger 21, 2011,itwasreportedthatshareholders

LAN AIRLINESS.A. 2. 4. 3. Holdco IIshares,andultimately, forLANshares held bythecontrollingshareholdersofTAM, for represented byTAM ADSs)otherthanthose for alloutstandingTAM shares(includingthose (“USA”) anexchangeoffer(the“ExchangeOffer”) andintheUnitedStatesofAmerica (“Brazil”) had initiatedintheFederal RepublicofBrazil 2012, itwasreportedthatHoldcoIIandLAN By meansofEssentialFact datedMay10, pursuant totheexchangeoffer. would hold the TAM shares and ADSs acquired controlling shareholdersofTAM, andHoldcoII would holdtheTAM sharescontributedbythe entity. PriortotheMergers,SisterHoldco “Mergers”), withLANcontinuingasthesurviving Mercadorias e Futuros wasscheduledforJune -BolsadeValores,auction inBM&FBOVESPA S.A. for 10calendardays,anda new dateforthe term oftheExchangeOffer wasextended of thiswaiver, law, accordingto Brazilian the an EssentialFact onthatsamedate.Asaresult condition, whichwasinformedbymeansof On June12,2012,LANwaivedthesqueeze-out in Brazil. would nolongerbearegisteredpubliccompany the delisting condition, as a result of which TAM by the controllingshareholders of TAM; and (ii) tendered in the Exchange Offer or contributed mandatorily redeemalloftheTAM shares not as aresultofwhichTAM wouldbeable to were established(i)thesqueeze-outcondition, to certainotherconditions. In particular, there conditions ofacceptanceforitssuccessand The ExchangeOfferwassubject to minimum – intheUSA. andAmericanDepositaryReceipts-ADRs Brazil, DepositaryReceipts-BDRsin form ofBrazilian due totheeffectivenessofMergers),in (the latterbeingthelegalsuccessor of HoldcoII • company inBrazil. deregistration ofTAM asapublic Offer shallhaveagreedwiththe participating intheExchange than 2/3ofthetotalTAM shares more delisting conditiontobemet, law,According toBrazilian forthe ANNUAL REPORT 2012 2012 Results 90 6. 5. of theotherconditionstocompletion Based on the foregoing and the satisfaction circulation. of TAM represent95.9%ofTAM sharesin contributed by the controlling shareholders in theExchangeOffertogetherwiththose information purposes,theTAM sharestendered satisfying thedelistingcondition.For of TAM thereby asapubliccompanyinBrazil, Exchange Offeragreedwiththederegistration 99.9% oftheTAM sharesthatparticipatedinthe Prior totheexpiration oftheExchangeOffer, SaoPaulo(10:00 a.m., time). SantiagoandNewYork22, 2012at9:00a.m., time 7. shares ofLANforeachonesuchshares: are exchangedforLANshares,attherate of0.9 outstanding Sister Holdco and Holdco II shares evidencing the Mergers, pursuant to which the Holdco and Holdco II have executed the deed transaction, on this same date LAN, Sister Also, andfollowingthestepsprovidedin Paulo time). Santiago andNewYork Sao time(10:00a.m., Mercadorias eFuturostoday, at9:00a.m., -BolsadeValores,in BM&FBOVESPA S.A. the ExchangeOffer, theauctiontookplace ANNUAL REPORT 2012 2012 Results 91 de Carácter General N°30),dulyempowered, Ihereby Valores), andinGeneral RegulationNo.30,(Norma of theSecuritiesMarketLaw(LeydeMercado As establishedinArticle9and10,part2, OTHERS / 12/06/2012 -8:28 9. 8. 2. 1. (“LAN”),SecuritiesRegistry No.306: Airlines S.A. report thefollowingESSENTIALFACT regardingLAN incorporated forpurposes of theproposed (“HoldcoII”),twocompaniesspecially II S.A. (“SisterHoldco”) andHoldco Sister HoldcoS.A. meetings that approved the merger of LAN with 21, 2011,itwasreportedthattheshareholders By meansofEssentialFact datedDecember 2011, becomeeffective. referred tointheMaterialFact datedJanuary 19, andTAM anditssubsidiaries LAN, HoldcoIS.A., the shareholdersagreementswithrespectto Airlines”, “LANGroup” and/or“LAN”;and(ii) “LATAM AirlinesGroup”, “LATAM Group”, “LAN under thetrade names“LATAM Airlines”, that itmayalsocontinuetodobusiness “LATAM notwithstanding AirlinesGroupS.A.”, Finally, on this date (i) LAN changes its name to BDRs ofLANonJune27,2012. Exchange Offer of the corresponding ADRs and the shareholdersofTAM thatacceptedthe Offer willoccurwiththedeliveryabroadto June 22,2012,andsettlementoftheExchange executed intheLAN’s shareholdersregistryon The shareexchangeprocessisautomatically By means of Essential Fact dated May 10, 2012, acquired pursuanttotheexchange offer. Holdco II will hold the shares and ADSs of TAM by thecontrollingshareholders ofTAM, and Holdco will hold the shares of TAM contributed entity oftheMerger. PriortotheMerger, Sister “Merger”), with LAN continuing as the surviving Holdco and Holdco II will be merged into LAN (the Depositary Shares–ADSsofTAM), bothSister TAM (includingthoserepresentedbyAmerican completes anexchangeofferforthesharesof hadoccurred.IfHoldco IIsuccessfully (“TAM”), combination betweenLANandTAM S.A. LAN AIRLINESS.A.

3. 6. 5. 4. The Exchange Offer was subject to minimum the USA. and AmericanDepositaryReceipts-ADRs–in DepositaryReceipts-BDRsinBrazil, Brazilian the effectivenessofMerger),inform latter aslegalsuccessorofHoldcoIIdueto II shares, and ultimately, forLANshares(the shareholders ofTAM, inexchangeforHoldco ADSs) otherthanthoseheldbythecontrolling shares (including those representedbyTAM “Exchange Offer”)foralltheoutstandingTAM States ofAmerica(“USA”) anexchangeoffer(the Federativa andintheUnited (“Brazil”) deBrazil II”) andLANhadcommencedintheRepública (“Holdco it wasreportedthatHoldcoIIS.A. originally scheduledfortoday inBM&FBOVESPA Exchange Offerdocuments,the auctionthatwas other completionconditionssetforthinthe Therefore, subjecttothesatisfactionof calendar days. of the Exchange Offer will be extended for 10 laws,theperiod in accordancewithBrazilian squeeze-out condition. As a result of this waiver, the companytowaive,andLANhaswaived, the boardofdirectorsLANhasauthorized association between LAN and TAM, on this date In ordertoproceedwiththeproposed shareholders ofTAM. Exchange Offerorcontributedbythecontrolling TAM sharesnotofferedforacceptancein the TAM cannot mandatorily redeem all of the out condition.Unlessthisconditionissatisfied, acceptances requiredtosatisfythesqueeze- in circulation,amountwhichislessthanthe which correspondto94.4%oftheTAM shares (including those representedbyTAM ADSs), of TAM, accountfor147,836,864TAM shares shares heldbythecontrollingshareholders the acceptancesreceived,togetherwith Prior totheexpiration oftheExchangeOffer, certain otherconditions. conditions ofacceptanceforitssuccessand ANNUAL REPORT 2012 2012 Results 92 1. (“LAN”),SecuritiesRegistry Nº306: Airlines S.A. report thefollowingESSENTIALFACT regardingLAN Carácter General N°30),dulyempowered,Ihereby Valores), and in General Regulation 30, (la Norma de of theSecuritiesMarketLaw(LeydeMercado As establishedinArticle9and10,part2, OTHERS / 10/05/2012 -5:31 2. the ChileanAntitrustCourt(Tribunal deDefensa other jurisdictions, including the resolution of and havingobtainedfurtherauthorizations in andintheUSA, authorizations obtainedinBrazil mentioned, in view of the registrations and In additiontotheinformationpreviously Receipts –ADRsintheUSA. – and BDRs American – Depositary in Brazil DepositaryReceipts II), intheformofBrazilian with LANbeingthelegalsuccessorofHoldco LAN shares(asHoldcoIIwillmergeintoLAN, initially for HoldcoIIshares and ultimately for (“TAM”) the offertoexchangesharesofTAM S.A. the United States of America (“USA”) to carry out Federative and in (“Brazil”) Republic of Brazil required registrations andauthorizationsinthe (“HoldcoII”)andLAN obtainedthe II S.A. and 9,2012,inwhichweinformedthatHoldco 7 We refertotheEssentialFacts datedMay 22, 2012. New York time(10:00am,SaoPaulo time),ofJune has beenpostponeduntil9:00am,Santiagoand -BolsadeValores, MercadoriaseFuturos S.A. time (10:00am,SaoPaulo time)onJune 12,2012. Mercadorias eFuturos,at9:00 am,NewYork BolsadeValores, – held onBM&FBOVESPA S.A. 11,2012andtheauctionwillbe time) onJune until 5:00 pm, New York time (6:00 pm, Theexchange offer shallremainopen the USA. for TAM and shares in simultaneously in Brazil and LANhavecommencedtheexchangeoffer thisdate Holdco II 2012, on 955 dated April 17, LAN sharesinyourSuperintendencyunderN° 2012, andtheregistration fortheissuanceof Chile (Excelentísima Corte Suprema) on April 5, 2011, whichwasupheldbytheSupremeCourtof 21, de laLibreCompetencia)datedSeptember LANAIRLINESS.A.

report thefollowingESSENTIALFACT regardingLAN Carácter General N°30),dulyempowered, Ihereby Valores), andinGeneral Regulation30,(laNormade of theSecuritiesMarketLaw(LeydeMercado As establishedinArticle9and10,part2, OTHERS / 09/05/2012 -17:11 3. 2. 1. (“LAN”),SecuritiesRegistry Nº306: Airlines S.A. uhrte,rsetvl, www.cvm.gov. br and www.sec.gov. authorities, respectively, and websites US of securities the Brazilian www.tam.com.br, and www.latamairlines.com, www.lan.com, andintheInternet websites offer canbefoundinthecorporate Internet The documentsrelatedtotheexchange ADSs acquired in theExchangeOffer. TAM andHoldco IIwillholdTAM sharesandTAM contributed bythecontrolling shareholdersof the Mergers,SisterHoldcowill holdTAM shares the survivingcompanyofeach Merger. Priorto and intoLAN(the“Mergers”) andLANwillbe of SisterHoldco and HoldcoIIwillmerge with Executed Contracts (the “ExchangeOffer”),each represented byTAM ADSs)contemplated by the exchange offerforTAM shares(includingthose Holdco IIsuccessfullycompletesthefirst-step the proposedcombinationofLANandTAM. If incorporated specifically forthepurposesof (“HoldcoII”),twocompanies and HoldcoIIS.A. (“SisterHoldco”) companies SisterHoldcoS.A. were held authorizing the merger of LAN with the 2011, shareholders’meetings On December 21, LAN andTAM. conditions for theproposed merger between thereto) containing the definitive terms and Contracts”, includingsubsequentamendments (the“Executed ExchangeOfferAgreement (b) and ImplementationAgreement, to as(a) written intheEnglishlanguage,referred and JoãoFrancisco Amarosignedcontracts Rolim Amaro,NoemyAlmeidaOliveira Amaro, Messrs MariaCláudiaOliveira Amaro,Maurício and Empreendimentos eParticipações S.A., TAM (“TAM”), TAM S.A. del CantábricoS.A., InversionesMineras Aeronáutica S.A., 18,2011,LAN,CostaVerde On January LAN AIRLINESS.A.

ANNUAL REPORT 2012 2012 Results 93 3. Executed Contracts: In accordance with the steps set forth in the • • • • • • the effectivenessofForm F-4to a requestwiththeSECtoaccelerate On May 7, 2012,HoldcoIIandLANfiled and www.sec.gov. www.tam. com.br, www.latamairlines.com, www.lan.com, websites The Form F-4 can be found in the TAM will bemailedtoUSshareholdersof Exchange OfferandMergerswhich forth thetermsandconditionsof exchange/prospectus whichsets The Form F-4containsanofferto of TAM. ADRs)toUSshareholders Receipts – American Depositary (in the formof LAN shares to be issued in the Mergers issued in the Exchange Offer and the and saleoftheHoldco II sharestobe Merger inordertoregistertheoffer F-4”) regarding the Exchange Offer and (“Form 333-177984) (Registration No. Registration StatementonForm F-4 Securities Actof1933referredtoasthe registration statementundertheUS “SEC”),the Exchange Commission (the securities authority, the Securities and United StatesofAmerica(“USA”) Holdco IIandLANfiledwiththe of Brazil (“Brazil”) providedtheir (“Brazil”) of Brazil exchange oftheFederative Republic securities authoritiesandthe stock Fact datedMay 7, 2012,onthatdatethe As previously informed by Essential Offer intheUSA. and LAN to commence the Exchange effective, whichwillpermitHoldcoII 2012, theSECdeclaredForm F-4 NewYorkAt 10:00a.m., time,onMay 9, 2012. 9, NewYork10:00 a.m., time,onMay Carácter General N°30),dulyempowered, Ihereby Valores), andinGeneral Regulation30,(laNormade of theSecuritiesMarketLaw(LeydeMercado As establishedinArticle9and10,part2, OTHERS / 07/05/2012 -17:57 2. 1. (“LAN”),SecuritiesRegistry Nº306: Airlines S.A. report thefollowingESSENTIALFACT regardingLAN ADSs acquired in theexchangeoffer. TAM andHoldcoIIwillhold TAM sharesand TAM contributed bythecontrolling shareholdersof the Mergers,SisterHoldcowill holdTAM shares the survivingcompanyofeach Merger. Priorto and intoLAN(the“Mergers”) andLANwillbe of SisterHoldco and HoldcoII willmerge with contemplated bytheExecutedContracts, each (including thoserepresentedbyTAM ADSs) the first-stepexchangeofferfor TAM shares and TAM. IfHoldcoIIsuccessfullycompletes purposes oftheproposedcombinationLAN companies incorporated specificallyforthe (“HoldcoII”),two Holdco”) andHoldcoIIS.A. (“Sister with thecompaniesSisterHoldcoS.A. were heldauthorizingthemergerofLAN 2011, shareholders’meetings On December 21, LAN andTAM. conditions fortheproposedcombinationof thereto) containing the definitive terms and Contracts”, includingsubsequentamendments (the“Executed ExchangeOfferAgreement (b) and ImplementationAgreement, to as(a) written intheEnglishlanguage,referred and JoãoFrancisco Amarosignedcontracts Rolim Amaro,NoemyAlmeidaOliveira Amaro, Messrs. Maria Cláudia Oliveira Amaro,Maurício and Empreendimentos eParticipações S.A., TAM (“TAM”), TAM S.A. del CantábricoS.A., InversionesMineras Aeronáutica S.A., 18,2011,LAN,CostaVerde On January LAN AIRLINESS.A. in theUSA. and willbelaunchedsimultaneously days followingtheregistration date within10 must belaunchedinBrazil to theapplicableregulationsinBrazil, TheExchangeOffer,Brazil. according registration of the Exchange Offer in authorization forthecorresponding

ANNUAL REPORT 2012 2012 Results 94 • • 3. • • • Furthermore, Holdco II, LAN, andBanco Itaú BBA defined inthefollowingparagraphs). (as completion oftheExchangeOfferinBrazil commence onthebusinessdayfollowing symbol “LATM11”. Trading of the BDRs would BDR program, whichwasassignedtheticker for thecorrespondingregistration oftheLAN 2012,theCVMgranted authorization On May 7, custodian. and designatesBancoItaúChileastheshare paragraph, regulatestheissuanceof BDRs of theregistration mentionedinthepreceding subjecttoreceipt Escrituração deBDRs, which, de Prestação de Serviços de Emissão e Contrato Portuguese languagereferredtoas Itaú Corretora signedacontract writtenin the 27,2012,LANand Furthermore, onFebruary Receipts (“BDRs”) program. Depositary Brazilian LAN, also known as a de DepósitoAçõesOrdináriasEmissão by Programa de Certificados the registration of a Mercadorias eFuturos (the “BM&FBOVESPA”), for de Valores, BM&FBOVESPA S.A.—Bolsa and theComissão deValores “CVM”) Mobiliários (the in the Federative towit, Republic of Brazil, exchange authorities and stock exchange organization, madearequesttothe Corretora”), initscapacityasadepositary (“Itaú LAN andItaúCorretora deValores S.A. Executed Contracts: In accordance with the steps set forth in the fe nBai ilb elce nte Edital willbe reflectedinthe Offer inBrazil The termsandconditions of theExchange BM&FBOVESPA (the“ExchangeOfferinBrazil”). registration ofTAM asacompanylistedonthe in theformofBDRs,andcancellation legal successor of Holdco IIaftertheMergers) and ultimatelyforLANshares(aswillbethe TAM initiallyforHoldco IIshares sharesinBrazil the registration of the offer for the exchange of made arequesttoCVMandBM&FBOVESPA for thelatteractingthroughItaúCorretora, S.A., • • in detail. please findAppendix1thatdescribesthisdividend In compliancewithCircular#660of1986,enclosed entitled tothisdividend. on thefifthbusinessdaypriortothatdatewillbe 17, 2012.Allshareholderswhoare equal toUS$0.05414pershare,payablestartingMay US$18,461,735.07 willbeeffectivelydistributed, and paidpreviouslybyLAN.Consequently, amount toUS$141,635,532.96andweredisclosed imputed towardthisdividend,which,combined, The twointerimdividends#44and#45willbe equal toUS$160,098,330.74. distribution of 50% of the 2011 fiscal year profits, its meetingheldApril24,2012,consistingofthe of thefinaldividendproposedbyBoardat April 26, 2012, LAN’s shareholders approved payment (LAN)held Shareholders MeetingofLanAirlinesS.A. of 1989,pleasebeadvisedthatataRegular Law 18045andinGeneral Rule#30oftheCommission As providedinArticles9and10ofSecuritiesMarket DIVIDENDS) / DISTRIBUTION OFPROFITS(PAYMENT OF 26/04/2012 -18:16 days. mustcommencewithinthefollowing10 Brazil, which, accordingtoapplicableregulationsin registration oftheExchangeOfferinBrazil granted authorizationforthecorresponding 7,2012,theCVMandBM&FBOVESPA On May com and www.cvm.gov.br. www.latamairlines. www.tam.com.br, lan.com, The Editalcanbefoundinthewebsites www. (the “Edital”). regardingTAM Corporativa daBM&FBOVESPA e ConsequenteSaídadoNível2deGovernança Cancelamento deRegistroCompanhiaAberta de OfertaPública dePermuta deAçõespara LAN AIRLINESS.A.

ANNUAL REPORT 2012 2012 Results 95 • • • • • the Meeting: The followingindividualswereelectedDirectorsat hold officefortwoyears. the membersofLAN’s BoardofDirectors,whowill (LAN) heldApril26, 2012, LAN’s shareholders elected Shareholders Meeting(Meeting)ofLanAirlinesS.A. of 1989, please be advised that at a Regular Law 18045andinGeneral Rule#30oftheCommission As provided in Articles 9 and 10 ofSecurities Market DIVIDENDS) / DISTRIBUTION OFPROFITS(PAYMENT OF 26/04/2012 -18:15 26, 2012todiscussthefollowing matters: onApril a RegularShareholdersMeeting at10:30a.m. resolved toconvene (hereinafterthe“Company”) S.A. March 27,2012,theBoardofDirectors ofLanAirlines please beadvisedthatata Regular Meetingheld Law andinGeneral Rule#30,underdueauthorization, As providedinArticles 9 and 10 ofSecurities Market AGREEMENTS ANDPROPOSALS/ ORDINARY SHAREHOLDERSMEETING,NOTICES, 27/03/2012 -18:25 article 50-bisofCompaniesLaw18,046. were electedasindependentdirectors,accordingto The Directorsnamedinnumbers6,7,8and9above • • • • Jorge Salvatierra Pacheco Juan Gerardo JofréMiranda; y Bernardo Fontaine Talavera; Jorge AlbertoAwadMehech; Ramón EblenKadis; Carlos HellerSolari; Darío CalderónGonzález; José CoxDonoso; Juan JoséCuetoPlaza; LAN AIRLINESS.A.

LAN AIRLINESS.A.

4. 3. 2. 1. N° 306: (“LAN”), Securities Register EVENT of Lan Airlines S.A. 2012, pleasebeadvisedofthe followingMATERIAL the boardofDirectorsmeeting heldonJanuary31st, Commission, underdueauthority andaccordinglyto General RuleNo.30of theSecuritiesandInsurance of article10SecuritiesMarketLaw18045and Pursuant toarticle9andthesecondsubparagraph OTHERS / 31/01/2012 -18:04 9. 8. 7. 6. 5. December 31,2012; Board ofDirectorsforthefiscalyearending the compensationtobepaidCompany’s the electionofCompany’s BoardofDirectors; 2012, mustbeimputedtowardthatsum; per share,paidinSeptember2011andJanuary interim dividendsofUS$0.116677andUS$0.24988 on accountofthe2011fiscalyearprofits.The approval ofthepaymentafinaldividend fiscal yearendingDecember31,2011; and financialstatements oftheCompanyfor balancesheet approval oftheannualreport, the Company. purview ofaRegularShareholdersMeeting other mattersofcorporate interestwithinthe Company willmakepublications;and designation of the newspaper in which the Commission; Circular 1816oftheSecuritiesandInsurance and sendingtheinformationindicatedin information onthecostofprocessing,printing of CompaniesLaw18,046; the reportsonmattersindicatedinTitleXVI and risk rating agencies for the Company; and the appointmentofexternalauditingfirm year endingDecember31,2012; Audit Committee and its budget for the fiscal the compensationtobepaidCompany’s LAN AIRLINESS.A.

ANNUAL REPORT 2012 2012 Results 96 Airlines S.A. accordingtoIFRS. Airlines S.A. through thedeliveryoffinancialinformationonLAN and themarket in general adequately informed years; and(iii)keepingourshareholders,investors inrecent as hasbeenthepractice ofLANAirlinesS.A. investors and analysts, information to the market, complying withthedeadlinefordeliveryoffinancial respective FECUwithintheapplicabledeadlines;(ii) information inadvanceofthedelivery providing themtruthful,sufficientandtimely and themarketingeneral forthepurposeof(i) financial informationtoitsshareholders,investors willprovidethis Please notethatLANAirlinesS.A. 2011. quarter endingDecember31st, performance foryear2011aswellthefourth includes a qualitative explanation of the operating consolidated balancesheetofthecompanyandalso financial information on theincome statement and informationcorrespondstosummary herewith. This ofthefinancialinformationenclosed material event, haveapprovedpublication,asa LAN AirlinesS.A. the AuditCommitteeandBoardofDirectors corresponding FECUwithinthepertinentdeadline, thisdate,notwithstandingtheforwardingof On 1. (“LAN”),SecuritiesRegistration #306: S.A. DISCLOSE thefollowingmaterialeventofLANAirlines Board MeetingheldJanuary12,2012,Ihereby Rule #30,underdueauthorizationgranted atthe of Article10SecuritiesMarketLawandinGeneral As providedinArticle9,thesecondsubparagraph OTHERS / 12/01/2012 -19:29 Securities andInsurance Commission. within thedeadlinesstipulatedinrulesof which willbedeliveredforthepurposesofyear2011 or modify the corresponding FECU according to IFRS, Finally, thisfinancialinformationdoesnotsupersede cargo operations (internationally and in Brazil) passenger networks,agrowth inthecoverage of equal proportionsfroman alignment ofthe million. Overall, thosesynergieswillcomein annually synergiesforapproximately US$400 once themergerisperfected, itshouldcreate (“TAM”), upon themergerofLANandTAM S.A. As reportedtoinvestorsandthemarketatlarge LAN AIRLINESS.A.

2. 5. 4. 3. amount. million annuallywouldbereducedbythat The previouslyannouncedfigureofUS$400 would be no more than US$10 million annually. synergies giventhosemitigativemeasures were later informed that the impact on minor of certainconditions,investorsandthemarket merger ofbothcompaniessubjecttofulfillment on September21,2001,whichapprovedthe Because of the decision by the Antitrust Court the endofthirdyear. first yearaftertheprocessisclosedandallby of thesynergiesshouldbeachievedduring and costreductions.Approximatelyone-third synergies will be created and segmented. This It describeshowtheaforesaid potential which wassentsimultaneous tothisdisclosure. Information ofInterest LAN isattached, LAN accordingtotheManual onHandling A pressreleaseandinvestor releasesentby 40% fromcost-savingssynergies. increase in cargo income, and the remaining an increaseinpassengerincome,20%from merger ofLANandTAM wouldalsocomefrom in thisnewestimationofthesynergiesfrom It ispredictedthat40%ofthepotentialsynergies complete. attained duringthefirstyearaftermergeris new estimationofsynergiesareexpectedtobe million toUS$200ofthetotalthis identified incertainareas.FromUS$170 benefits oftransferring thebestpractices merger betweenLANandTAM. Itincludes the generating opportunitiesresultingfromthe of combinedcostsavingsandincome– is areflectionoftherevisionandadjustment the mergeriscomplete.Thisnewestimation depreciation and taxes, by the fourth year after by US$600milliontoUS$700million,before LATAM (“LATAM”), AirlinesGroupS.A. overtime the operating incomeofthenewcompany, LAN andTAM havebeenestimatedtoincrease synergies afterconsummationofthemerger Bain &Company, consultants,thecombined weeks togetherwithMcKinsey&Companyand According toevaluationsmadeinthelast10 ANNUAL REPORT 2012 2012 Results 97 are anessentialpartofthesame. and cautionscontainedinthatrelease,which information isprovidedsubjecttothelegends ANNUAL REPORT 2012 2012 Results 98 our businesscouldbenegativelyimpactedifany relations inmanycountrieswhichweoperate and We depend on strategic alliances and commercial negatively affectourbusinessandoperating results. success dependsonkeyregulatoryissuesthatcan could haveanadverseimpactonourbusiness.Its Adverse economicconditionsinthesecountries economic situation in the countries where we operate. Our performancedependssignificantlyonthe AIRLINE INDUSTRY RISKS RELATED TOOUROPERATIONS ANDTHE RISK FACTORS 2012 RESULTS / affect ourbusinesses. We relyonmaintaining a supply andcostofjetfuel,which couldnegatively Our operations aresubjecttofluctuationsinthe sale. be affected by events impacting their production or considerable partofour cargorevenueswhichcould A relativelylimitedrange ofproductsaccountsfora attacks. or raise costs,suchas epidemics,warsorterrorist result ofexogenouseventsthataffecttravel habits downturn in thecommercial aviation industry as a Our businessescouldbenegativelyaffectedbya to implementourgrowthstrategy successfully. and commonshareswouldsufferifwewereunable Our businessesandthemarketvalueofourADRs and slotsotheroperating permits. obtain and maintain routes, suitable airport access results could be negatively affected if we ceased to were terminated.Ourbusinessesandoperating of thesestrategic alliancesorcommercialrelations and newequipmenttheir phase-incouldhave We areincorporating anumberoftechnologies conditions, ourbusinesscould suffer. aircraft intoourfleetatacceptablepricesand If, infuture,weareunabletoincorporate leased negative impactonourcompetitiveposition. competitors couldreceiveexternalsupportwitha adversely affectourlevelofoperations. Someofour The intensecompetitionintheairlineindustrycan have asignificantimpactonourbusinesses. by accidentsaffectingoneormoreaircraft could affect ouroperations. Lossesandliabilitiescaused beyond ourcontrolsuchasweatherconditionsthat We arefrequentlyaffectedbycertainfactors the publichasanegativeperceptionofouraircraft. aircraft arenotavailablefromthesecompaniesorif if we do not receive if opportune delivery of aircraft, ourbusinessisatrisk these companies.Asaresult, We flyAirbusandBoeingaircraft anddependon vulnerable todelays. increase ourrevenuesandthismakesusparticularly high dailyrate ofaircraft utilizationin orderto ANNUAL REPORT 2012 2012 Results 99 operating costs,coulddirectlyaffectourearnings. labor costs, which represent a significant part of our and negativelyaffectourbusiness.Increasesin from employeescouldcauseoperational difficulties agreements withourunionizedemployees.Pressure unable toreachsatisfactorycollectivebargaining be negativeconsequencesforourbusinessifweare subject to non-competition restrictions. There can and performanceofkeypersonnel,whoarenot Our financialsuccessdependsontheavailability adverse effectonourbusiness. could disrupt our operations andhave a significant in aircontrolsystemsorothertechnicalfailures situation andtheresultsofouroperations. Problems in itscoverage could negatively affect our financial Higher insurance costsand/orsignificantreductions leasing liabilitiesascomparedtoourequity. affected byourhighborrowinglevelandaircraft requirements. Our businesscouldbenegatively unable tocoverourimportantfuturefinancing Our businesscouldbeadverselyaffectedifwewere standards. a negativeimpactonourserviceandoperating company. receive lessinformationthan fromacomparable US to ourinvestorsasUSissuersand youmay, therefore, We arenotobliged to discloseasmuchinformation could adverselyaffectourrevenues andprofitability. the currencies of other countries where we operate Fluctuations inthevalueofChileanpesoand price ofourcommonsharesandADRs. operating resultsand causeadropinthemarket economy, negativelyimpactourbusinessand emerging marketscouldadverselyaffecttheChilean Events inLatinAmericancountriesandother MARKETS RISKS INHERENTTOCHILEANDOTHEREMERGING could adverselyaffectourbusinessandreputation. comply withtheapplicableenvironmentregulation and retainingemployees.Afailureonourpartto We may experience difficulties in finding, training preferential rights. in certaincircumstances, be unable to exercise their who investinourshares.HoldersofADRscould, taxes couldnegativelyaffectnon-residentsinChile Chile’s foreigninvestmentcontrolsandwithholding and exchange-rate fluctuations. Future changes in could be adversely affected by currency devaluations illiquidity andpricevolatility. HoldersofourADRs placed onthemarketandcouldexperiencefurther number of our ADRs and common shares have been differ fromthoseofourothershareholders.Alimited Our controllingshareholdersmayhaveintereststhat ADRs RISKS RELATED TOOURCOMMONSHARESAND SUSTAINABILITY LATAM AIRLINES GROUP S.A.

Tereza Alcantara TAM Brasil

Alfredo Perilla LAN Ecuador ANNUAL REPORT 2012 Sustainability 101 • OPERATIONAL EXCELLENCE to sustainabledevelopment. represent theconcretewayinwhichwecontribute we consideritapriority to addressandwhich comprising eightsphereswhich,asacompany, since 2011,hadinplaceasustainabilitystrategy Fordevelopment. thisreason,theCompanyhas, impact onsociety, theenvironmentandeconomic At LAN, we areawareofour role asanagentwith an LAN SUSTAINABILITY / • • ETHICS ANDGOVERNANCE • • three B-787s is the fruit of our efforts to increase Boeing 787 Dreamliners: financial approach. integrated riskmanagementareawitha Risk Management impact onclients. interruption of ouroperations orsignificant and passengercheck-insystemwithoutany Host: principles (relating tohumanrightsandlabor, in our strategies and operations to its ten demonstration ofour commitment toadhering we havesignedtheUNGlobal Compactina Global Compact: and reportcomplaintsanonymously. that allowsourcollaborators tomakeenquiries Ethics point: our fleet. the efficiencyandenvironmentalfriendlinessof We changedLAN’s booking,inventory We haveimplementedaplatform : We havecreatedaspecial As LATAM AirlinesGroup, The arrival of our first ANNUAL REPORT 2012 Sustainability 102 • • ENVIRONMENT • • • OUR PEOPLE • • SAFETY • • • management systemdesignedspeciallyforthe Assessment (IEnvA) Program, an environmental We aremembersoftheIATA Environmental Certification Association(AENOR). was certifiedbytheSpanishNormalizationand The carbonfootprintofoursubsidiaryinPerú CO2/100 RTK. transported. In 2012,we emitted 72.09 kg of gradually reducedCO2emissionsperunit By managingfueluseonourflights,wehave Roadmap ChileBioRenovablesinitiative. commercial flightusingbiofuelandsupportthe Biofuel: an investmentofUS$31.13million. a totalof21,006employeesin2012,representing Academy provided1,022,140hoursoftraining to 1,022,140 hoursoftraining: of whom42.8%arewomenand57.2%men. Employees: Aires, GuayaquilandSantiago. reforested greenareasinthecitiesofBuenos 193 corporate volunteers environmental andanti-corruptionpractices). Operational SafetyAudit(IOSA)certification. IOSA: (APF) Program. Assistance toPassengers and theirFamilies 1,489 employeesarevolunteerswiththe calculate theimpactofmovementcargo. www.lancargo.com withwhichitispossibleto CO2 calculator: airline industry. LANanditssubsidiaries haveIATA We carriedoutSouthAmerica’s first LAN has a total of 23,721 employees We postedaCO2calculatoron : In2012,193volunteers Our Corporate ANNUAL REPORT 2012 Sustainability 103 • COMMUNITY • • • SUPPLIERS • • • • fly forthefirsttime,thankstoConociendo installations andhundredsofthemwereableto had theopportunitytovisitCompany’s 4,331 childrenvisitLAN: tourism. and 107volunteerstopromotesustainable encouraging 693youngpeople South America, restoring touristattractions in12places program experiencedstronggrowthin2012, Cuido midestino(Ilookaftermydestination) Cuido miDestinoprogram in12places: sustainability issues. draw up a supplier policy that incorporates Sustainable suppliers: and suppliersofgeneral goodsandservices. suppliers ofinputsandfuel,in-flight suppliers into four groups: aircraft suppliers, Four groupsofsuppliers: we havedomesticoperations. EcuadorandPerú,Chile, Colombia, thecountries procurement wenttosuppliersinArgentina, 81.2% ofexpenditureonglobalcorporate aircraft. to passengersorcrewseriousdamagean an accident that has resulted inserious injury Zero accidents: marked thelaunch inChileoftheoption of of 1,000,000LANPASS kilometersto threeNGOs Donation ofLANPASS kilometers: to Frankfurt foritstourofEurope. of Chile’s NationalYouth SymphonyOrchestra (Great Moments)exhibitionandtheinstruments York toSantiago fortheGrandes Momentos Guggenheim collectionfromVenice andNew to MexicoCity, 83worksofartfromthe transported nine elephants from Namibia Works of art and animals: LAN (GettingtoknowLAN)programs. Since1991,noflighthassuffered In 2012,weworkedto In2012,4,331children In 2012, LAN Cargo We classifyour The donation The ANNUAL REPORT 2012 Sustainability 104 • • • • SOUTH AMERICAINTHERESTOFWORLD CARGO CLIENTSANDPASSENGERS: WEPROMOTE passengers abouttheirrightsandobligations. in ColombiaandArgentinatoinformour Customer rights: snacks andtheInmagazine. sustainable tourism through videos, images on Sustainable tourism: tickets wereobtainedwithLANPASS kilometers. LANPASS had7.4millionmembersand572,637 freight aswell64.9millionpassengers. and togethertransported 1.2milliontonnesof LAN and TAM unified their cargo operations COANIQUEM,TECHO). Solidaria, America that havean alliance withLAN (América transfer charge,toNGOsthroughoutLatin donating LANPASS kilometers,withouta Campaigns wereimplemented In-flight promotionof ANNUAL REPORT 2012 Sustainability 105 • of contactfrombookingtoboarding. in ordertomakethisapparentclientsatallpoints We demonstrate ourcommitmenttosustainability CLIENTS TAM SUSTAINABILITY / • and preparedaneducationalcampaignfor other employeesinvolvedinwastecollection network. We alsotrained ourcabincrewsand apply wasteseparation toourentiredomestic Airport which wesaw as anopportunity to introduced by Infraero at São Paulo’s Congonhas to complywithnewdisposalprocedures This initiativeispartoftheadjustmentrequired waste andtheotherforrecyclablewaste. have twocompartments,onefororganic planes withspeciallyadaptedtrolleysthat waste separation whereweequippedour projects, particularlyintheareaofin-flight achieved greatprogressinoursustainability In-Flight Waste Separation: also strengtheningourtieswith them. of theNGOswithwhichwehave allianceswhilst greater visibility to the campaigns and activities volunteer activities. In this way, we help to give diversity,the environment, socialinclusionand such assustainabletourism,conservationof the conceptofsustainability, addressingissues sustainability practices as well as to promote in socialnetworkstoinformclientsaboutour Media: 85% ofin-flightwasteisrecyclable. passengers. Tests showed thatapproximately We useourin-flightmediaandpresence In2012,we

ANNUAL REPORT 2012 Sustainability 106 • • within andoutsidetheCompany. to adoptsustainablepractices intheiractivitiesboth and motivationalactivitiesencourage ourteams issues relatedtosustainabilitythrougheducational We seektoincreaseouremployees’awarenessof EMPLOYEES • • VOLUNTEER ACTIVITIES We promotediversitythrough: issues, gender, ageandsexualorientation. of people with disabilities, ethnic-racial integration and equity takes account diversity andnon-discriminationseeking Diversity: 4,060 cabinstaff. in 2011,which,twoyears,hasalreadytrained The resultwastheFOCCOprogram, launched program onsustainabilityespeciallyforthem. with clients,wedecidedtocreateatraining Education: social responsibilityperformance. as thetransport servicescompanywiththebest Awards: We haveinplace twovolunteerprograms inclusion. Over600youngpeopleaged of employability, guaranteeing social training and,bycreatingconditions people fortheirprofessionallife,providing Apprentice program istoprepareyoung program: Jovem Aprendiz(Young Apprentice) people hadreceivedthistraining. posts intheCompany. By2012,atotalof 319 people withdisabilitiessotheycanfillwork program: Asas daInclusão(WingsofInclusion) are currentlyparticipatingintheprogram. professional careerswithourCompany, between 14and24,whoarestartingtheir We receivedtheISTOÉDinheiroAward Ourinternalpolicyofvaluing In viewofourcrews’closerelations ThekeyobjectiveoftheYoung Through thisprogram, wetrain

ANNUAL REPORT 2012 Sustainability 107 activities. At TAM, wehaveaplaninplace to reduce environmental impactofourpresentandfuture wemustunderstandandstudythe environment, In order to avoid or minimize damage to the ENVIRONMENT clothing andtoys. specific activitiessuchascampaignstocollect In additiontothesetwoprograms, wealsoundertake • • • • of wasteandtoprotectbiodiversity. emissions ofgreenhousegasesandthegeneration Biofuel: and ouroperational practices. issue, researchforthedevelopmentofbiofuels greenhouse gasesthrougheducationaboutthe charged withreducing our emissionsof Climate Change: to youngpeoplefromdeprivedcommunities. entrepreneurship givenbyvolunteeremployees Junior Achievement: children andyoungpeople. groups that meet to fulfill the dreams of these employees participate in thisprogram through or seriouslyillchildrencometrue.Our Make aWish: institutions: developed inconjunctionwithinternational and executivesfromTAM andothercompanies with 18peopleonboardincluding technicians airspace for45minutes, Ocean inBrazilian International Airportandflew overtheAtlantic took offfromRíodeJaneiro’s Tom Jobim Airbus A320 withacapacity for 174 passengers, an theaircraft, In thisexperimentalproject, in thehistoryofBrazil’s airlineindustry. in Latin America and represented a milestone biodiesel. Thiswasthefirstflightofitstype an oilseed plant also used to produce aircraft usingbiofuel madefromjatropha, out anexperimentalflightinacommercial On22November2010,wecarried We makethedreamsofterminally We haveaworkinggroup We promoteclasseson

ANNUAL REPORT 2012 Sustainability 108 • • WASTE SEPARATION, RECYCLING ANDDISPOSAL • • • Environmental permits: poses thehighestriskofenvironmentalimpact. 100% ofbasesweremanagingthewastethat hangars, cargoterminalsandairports).By2012, TAM’s differentactivities(offices, maintenance the differenttypesofwastegenerated byall and wemonitororganizedisposalof Waste Management: recycling olduniforms. conjunction withaspecializedcompany, weare recycle wastewiththepotentialforreuse.In Recycling ofUniform: non-recyclable, etc.)atstrategic places. for eachtypeofwaste(paper, plastic,metal, Waste Separation: its flightsbybetween65%and80%. the Company to reduce the carbonemissions of of viewtheenvironmentsinceitwillallow will representanenormousgainfromthepoint based kerosenewiththenewbiokerosene.This The long-termgoalistoreplaceup20%ofoil- aircraftcreation ofaBrazilian biofuelplatform. wehavetakenthefirststeptowards the project, in fiveyears’time.Throughthisinnovative biofuels areexpectedtobereadyforproduction on differentlinesofresearchandthefirstaircraft is already working Brazil involved in the project. the Companybuthasyettobe published. prepared inconjunctionwith differentareasof Emissions Report: process andawaitingtheresults. another 25basesareengagedinthesame were exemptedfromrequiringapermitwhile In 2012, six bases completed the process and processes forobtainingenvironmentalpermits. has adopted a proactive stance, investing in complying with legal requirements, TAM law.is establishedby Ratherthan merely permit orisexemptedfromrequiringa which anactivity obtains anenvironmental EThe fifthGHGReportwas We installedgroupsofbins This isrequiredbylaw TAM isworkingto Theprocessthrough

ANNUAL REPORT 2012 Sustainability 109 • close relationswiththecommunity. tourism and the environment and strive to establish We undertakeactivitiesrelatedtosustainable COMMUNITY • • • fund, wealsodonatesurplusitemsfrom Donations: organizations. up by 82% on the previous year, by a total of 110 year. In2013,over200projectswerepresented, in the selection process has increased year by ThenumberofNGOsregistering environment. environmental impactsandconservationofthe promotion oflocalculture,themitigation through improvementsinhospitality, the an emphasisonprojectsthatfostertourism and NGOsthatpromotetheseissues,with organizations such as associations, foundations we investresources in non-profitsocial Eachyear,protection oftheenvironment. development ofsustainabletourismand investment hasastrategic focusonthe Social Investmentfund: Sustainability Report. We dothisthroughtheannualpublicationofa Company’s environmentalandsocialactivities. that oureconomicresultsarerelatedtothe on theireconomicinterests,demonstrating our sustainabilitypractices haveabearing Investors: clauses, workshopsforcritical suppliersand contracts, theinclusionofsustainability Aéreas. Thisincludesevaluation oftheir the more than 4,000suppliers of TAM Linhas drawing upamapof stage ofthisproject, In 2012,wewentontolaunchasecond practices bysuppliers since2007. for theimplementationofsustainable Suppliers: benefited fromthesedonations. campaigns. In2012,over240,000people our operations and those collectedthrough We havehadaprojectinplace We seek to explain to investors that In addition to our social investment Our privatesocial

ANNUAL REPORT 2012 Sustainability 110 half of2013. We expecttocompletethisprojectduringthefirst h dsg o LTMs utiaiiy policy. sustainability LATAM’s of design the sustainability auditsandtraining aswell

CONSOLIDATED FINANCIAL STATEMENTS LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

DECEMBER 31, 2012

CONTENTS > Consolidated Statement of Financial Position > Consolidated Statement of Income by Function > Consolidated Statement of Comprehensive Income > Consolidated Statement of Changes in Equity > Consolidated Statement of Cash Flows - Direct Method > Notes to the Consolidated Financial Statements

CLP - CHILEAN PESO ARS - ARGENTINE PESO US$ - UNITED STATES DOLLAR THUS$ - THOUSANDS OF UNITED STATES DOLLARS COP - COLOMBIAN PESO BRL/R$ - BRAZILIAN REAL THR$ - THOUSANDS OF BRAZILIAN REAL

NOTES

NOTE 1. General information 13 NOTE 2. Summary of significant accounting policies 19 2.1. Preparation 19 2.2. Consolidation 24 2.3. Foreign currency transactions 25 2.4. Property, plant and equipment 25 2.5. Intangible assets other than goodwill 26 2.6. Goodwill 26 2.7. Borrowing costs 26 2.8. Losses for impairment of non-financial assets 26 2.9. Financial assets 27 2.10. Derivative financial instruments and hedging activities 28 2.11. Inventories 29 2.12. Trade and other accounts receivable 29 2.13. Cash and cash equivalents 29 2.14. Capital 29 2.15. Trade and other accounts payables 29 2.16. Interest-bearing loans 29 2.17. Deferred taxes 29 2.18. Employee benefits 30 2.19. Provisions 30 2.20. Revenue recognition 30 2.21. Leases 31 2.22. Non-current assets (or disposal groups) classified as held for sale 31 2.23. Maintenance 31 2.24. Environmental costs 31 NOTE 3. Financial risk management 32 3.1. Financial risk factors 32 3.2. Capital risk management 43 3.3. Estimates of fair value 44 NOTE 4. Accounting estimates and judgments 48 NOTE 5. Segmental information 49 NOTE 6 . Cash and cash equivalents 51 NOTE 7. Financial instruments 53 7.1. Financial instruments by category 53 7.2. Financial instruments by currency 55 NOTE 8. Trade, other accounts receivable and non-current accounts receivable 56 NOTE 9. Accounts receivable from/payable to related entities 60 NOTE 10. Inventories 62 NOTE 11. Tax assets 63 NOTE 12. Other financial assets 64 NOTE 13. Other non-financial assets 66 NOTE 14. Non current assets (or disposal groups) classified as held for sale 67 NOTE 15. Investments in subsidiaries 68 NOTE 16. Equity accounted investments 71 NOTE 17. Intangible assets other than goodwill 75 NOTE 18. Goodwill and bussines combination 77 18.1. Goodwill 77 18.2. Business Combination 78 NOTE 19. Property, plant and equipment 84 NOTE 20. Taxes and deferred tax 94 NOTE 21. Other financial liabilities 99 NOTE 22. Trade and other accounts payables 111 NOTE 23. Other provisions 113 NOTE 24. Tax liabilities 116 NOTEE 25. Other non-financial liabilities 117 NOTE 26. Employee benefits 118 NOTE 27. Accounts payable non-current 119 NOTE 28. Equity 120 NOTE 29. Revenue 126 NOTE 30. Costs and expenses by nature 127 NOTE 31. Gains (losses) on the sale of non-current assets not classified as held for sale 129 NOTE 32. Other income, by function 130 NOTE 33. Foreign currency and exchange rate differences 131 NOTE 34. Earnings per share 134 NOTE 35. Contingencies 139 NOTE 36. Commitments 149 NOTE 37. Transactions with related parties 155 NOTE 38. Share-based payments 158 NOTE 39. The environment 161 NOTE 40. Events subsequent to the date of the financial statements 162 SUBSIDIARIES AND AFFILIATED COMPANIES 167 ANNUAL REPORT 2012 Financial Statements 116 (OR DISPOSALGROUPS)CLASSIFIEDASHELDFORSALE TOTAL CURRENTASSETSOTHERTHANNON-CURRENT ASSETS Tax assets Inventories Accounts receivablefromrelatedentities Trade andotheraccountsreceivable Other non-financialassets Other financialassets Cash andcashequivalents CURRENT ASSETS Assets TOTAL ASSETS TOTAL NON-CURRENTASSETS Deferred taxassets Current taxassets,longtermportion Property, plantandequipment Goodwill Intangible assetsotherthangoodwill Equity accountedinvestments Accounts receivable Other non-financialassets Other financialassets NON-CURRENT ASSETS TOTAL CURRENTASSETS FOR SALEORASHELDDISTRIBUTIONTOOWNERS NON-CURRENT ASSETS(ORDISPOSALGROUPS)CLASSIFIEDASHELD OR ASHELDFORDISTRIBUTIONTOOWNERS The accompanyingNotes1to 40formanintegral part oftheseconsolidatedfinancialstatements. LATAM ANDSUBSIDIARIES AIRLINESGROUPS.A CONSOLIDATED STATEMENT OFFINANCIALPOSITION Note 7 -12 7 -12 7 -8 7 -9 7 -8 6 -7 20 11 19 18 17 16 13 14 11 10 13 20,593,267 17,245,653 11,797,889 December 3,347,614 3,008,657 1,848,593 3,299,959 1,426,330 31, 2012 ThUS$ 144,629 243,905 220,529 181,283 169,824 636,543 650,263 As of 73,516 50,612 74,095 47,655 15,187 3,757

December 7,648,659 1,343,351 6,305,308 5,927,982 1,338,690 31, 2011 ThUS$ 163,777 531,355 227,803 374,407 As of 60,148 42,958 64,923 15,205 21,833 98,789 72,787 32,711 7,491 4,661 991 838

ANNUAL REPORT 2012 Financial Statements 117 The accompanying Notes 1to40form anintegral partofthese consolidated financialstatements. LATAM ANDSUBSIDIARIES AIRLINESGROUPS.A CONSOLIDATED STATEMENT OFFINANCIALPOSITION TOTAL LIABILITIESAND EQUITY TOTAL EQUITY Non-controlling interest Parent’s ownershipinterest Other reserves Treasury Shares Retained earnings Share capital EQUITY TOTAL LIABILITIES TOTAL NON-CURRENTLIABILITIES Other non-financialliabilities Employee benefits Deferred taxliabilities Other provisions Accounts payable Other financialliabilities NON-CURRENT LIABILITIES TOTAL CURRENTLIABILITIES Other non-financialliabilities Tax liabilities Other provisions Accounts payabletorelatedentities Trade andotheraccountspayables Other financialliabilities LIABILITIES Liabilities andEquity Note Note 7 -22 7 -21 7 -27 7 -21 7 -9 25 24 23 28 28 28 28 25 26 20 23 20,593,267 15,424,451 December December 5,168,816 5,142,083 2,535,100 1,106,168 1,501,018 5,780,289 1,942,530 1,652,955 2,047,330 9,644,162 7,698,857 31, 2012 31, 2012 ThUS$ ThUS$ 115,481 101,321 558,049 536,334 731.235 As of As of 26,733 21,719 18,366 (203) 274

December December 7,648,659 1,457,372 1,445,324 1,116,798 6,191,287 2.322.079 1.057.637 3,869,208 3,109,136 (145,381) 31, 2011 31, 2011 473,907 ThUS$ ThUS$ 369,625 354,930 645.086 582.257 As of As of 12,048 13,132 22,385 29.369 7.363 367 - -

ANNUAL REPORT 2012 Financial Statements 118 The accompanyingNotes1to 40formanintegral part oftheseconsolidatedfinancialstatements. LATAM ANDSUBSIDIARIES AIRLINESGROUPS.A CONSOLIDATED STATEMENT OFINCOMEBYFUNCTION Result ofindexationunits Other gains/(losses) Other expenses Administrative expenses Distribution costs Other income GROSS MARGIN Cost ofsales Revenue EARNINGS PERSHARE NET INCOMEFORTHEPERIOD Income attributabletonon-controllinginterest Income attributabletoownersoftheparent Net incomefortheperiod INCOME TAX EXPENSE INCOME BEFORETAXES Foreign exchangegains/(losses) Equity accountedearnings Financial costs Financial income GAINS (LOSSES) FROMOPERATING ACTIVITIES Diluted earningspershare(US$) Basic earningspershare(US$) Note 29 34 34 33 16 30 32 20 (7,642,643) 2,079,546 9,722,189 (102,212) (294,598) (311,753) (869,504) (803,619) For thePeriods ended ThUS$ 126,602 276.076 (38,750) 220,156 0.02657 0.02657 2012 24,390 13,434 10,956 24,390 66,685 77,489 (22) December31, 972 (4,078,598) 1,506,842 5,585,440 (139,077) (214,411) (405,716) (479,829) (61,789) ThUS$ 320,571 382,360 506.651 (33,039) 132,804 0.94260 0.94335 320,197 320,571 2011 14,453 (256) 374 131 458 ANNUAL REPORT 2012 Financial Statements 119 The accompanyingNotes1to40formanintegral partoftheseconsolidatedfinancialstatements. LATAM ANDSUBSIDIARIES AIRLINESGROUPS.A CONSOLIDATED STATEMENT OFCOMPREHENSIVE INCOME TOTAL COMPREHENSIVEINCOME Other componentsofothercomprehensiveincome,beforetaxes Other comprehensiveincome,beforetaxes,cashflowhedges Cashflowhedges Other comprehensiveincome,beforetaxes,currencytranslation differences Gains (losses)oncurrencytranslation, beforetax Currency translation differences Components ofothercomprehensiveincome,beforetaxes NET INCOME TOTAL COMPREHENSIVEINCOME Comprehensive incomeattributabletonon-controllinginterest Comprehensive incomeattributabletoownersoftheparent Comprehensive incomeattributableto: Other comprehensiveincome Amount ofincometaxesrelatedtocomponentsothercomprehensive Incometaxrelatedtocashflowhedgesinothercomprehensiveincome in othercomprehensiveincome Incometaxrelatedtocurrencytranslation differences INCOME TAX RELATING TOOTHERCOMPREHENSIVEINCOME Gains (losses)oncashflowhedgesbeforetax Note 20 20 21 33 For thePeriods ended ThUS$ 2012 35,215 35,215 (5,357) (2,623) (2,734) (2,510) (2,510) 24,390 18,692 27,673 10,825 16,182 18,692 7,542 December31, 278,047 278,047 (42,524) (51,232) (40,368) (40,368) (10,864) (10,864) 320,571 277,631 ThUS$ 2011 8,708 6,862 1,846 416 ANNUAL REPORT 2012 Financial Statements 120 statements. consolidated financial integral partofthese Notes 1to40forman The accompanying SUBSIDIARIES AND GROUP S.A LATAM AIRLINES EQUITY CHANGES IN STATEMENT OF CONSOLIDATED

Attributable to owners of the parent

Changes in other reserves

Currency Cash flow Parent’s Note Share Treasury Other sundry translation hedging Retained ownership Non controlling Total equity Capital shares reserve reserve reserve earnings interest interest

ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Equity as of January 1, 2012 473,907 - 8,492 (13,317) (140,556) 1.116,798 1,445,324 12,048 1,457,372 Total increase (decrease) in equity Comprehensive income Gain (losses) 28 - - - - - 10,956 10,956 13,434 24,390 Other comprehensive income - - - 16,891 (174) - 16,717 (5,892) 10,825 TOTAL COMPREHENSIVE INCOME - - - 16,891 (174) 10,956 27,673 7,542 35,215

Transactions with shareholders Equity issuance 28-38 1,030,621 - 2,665,692 - - - 3,696,313 - 3,696,313 Dividends 28 - - - - - (21,749) (21,749) - (21,749) Increase (decrease) through 28 - (203) - - - - (203) - (203) transactions with treasury shares Increase (decrease) through transfers and other changes, equity 28-38 (3,510) - (1,928) - - 163 (5,275) 7,143 1,868 TOTAL TRANSACTIONS WITH 1,027,111 (203) 2,663,764 - - (21,586) 3,669,086 7,143 3,676,229 SHAREHOLDERS

CLOSING BALANCE AS OF CURRENT YEAR ENDING BALANCES 1,501,018 (203) 2,672,256 3,574 (140,730) 1,106,168 5,142,083 26,733 5,168,816 DECEMBER 31, 2012 ANNUAL REPORT 2012 Financial Statements 121 financial statements. these consolidated an integral partof Notes 1to40form The accompanying SUBSIDIARIES AND GROUP S.A LATAM AIRLINES EQUITY CHANGES IN STATEMENT OF CONSOLIDATED

Attributable to owners of the parent

Changes in other reserves

Currency Cash flow Parent’s Note Share capital Other sundry translation hedging Retained ownership Non controlling Total equity reserves reserve reserve earnings interest interest

ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Equity as of January 1, 2011 453,444 5,463 (4,257) (107,050) 949,214 1,296,814 3,246 1,300,060

Total increase (decrease) in equity

Comprehensive income

Gain (losses) 28 - - - - 320,197 320,197 374 320,571

Other comprehensive income - - (9,060) (33.506) - (42,566) 42 (42,524)

TOTAL COMPREHENSIVE INCOME - - (9,060) (33,506) 320,197 277,631 416 278,047

Transactions with shareholders

Equity issuance 28-38 23,135 - - - - 23,135 - 23,135

Dividends 28 - - - - (151,981) (151,981) - (151,981) Increase (decrease) through transfers 28-38 (2,672) 3,029 - - (632) (275) 8,386 8,111 and other changes, equity TOTAL TRANSACTIONS WITH SHAREHOLDERS 20,463 3,029 - - (152,613) (129,121) 8,386 (120,735)

PRIOR YEAR ENDING BALANCES 473,907 8,492 (13,317) (140,556) 1,116,798 1,445,324 12,048 1,457,372 DECEMBER 31, 2011 ANNUAL REPORT 2012 Financial Statements 122 statements. financial these consolidated an integral partof Notes 1to40form The accompanying SUBSIDIARIES AND GROUP S.A LATAM AIRLINES METHOD DIRECT – CASH FLOWS STATEMENT OF CONSOLIDATED Amounts raised from long-term loans Payments toacquireorredeemthesharesofentity Amounts raised fromissuanceofshares Cash flowsfrom(usedin)financingactivities NET CASHFLOW USEDININVESTINGACTIVITIES Other cashinflows(outflows) Dividends received Payment fromotherlong-termassets Purchases ofintangibleassets Amounts raised fromsaleofintangibleassets Purchases ofproperty, plantandequipment Amounts raised fromsaleofproperty, plantandequipment Other paymentstoacquireequityordebtinstrumentsofotherentities Other cashreceiptsfromsalesofequityordebtinstrumentsotherentities Cash flowsusedforacquisitionofsubsidiaries Cash flowsarisingfromthelossofcontrolsubsidiariesorotherentities Cash flowsusedininvestingactivities NET CASHFLOWS FROMOPERATING ACTIVITIES Other cashinflows(outflows) Income taxesrefunded(paid) Interest received Other paymentsforoperating activities Payments toandonbehalfofemployees Payments tosuppliersforgoodsandservices PAYMENTS FOR OPERATING ACTIVITIES Other cashreceiptsfromoperating activities Proceeds fromsalesofgoodsandservices Cash collectionfromoperating activities CASH FLOWS FROMOPERATING ACTIVITIES CASH ANDEQUIVALENTS AT ENDOFPERIOD CASH ANDEQUIVALENTS AT BEGINNINGOFPERIOD Net increase(decrease)incashand equivalents Effects ofvariationintheexchangerate oncashandequivalents before effectofexchangesrate change Net increase(decrease)incashandequivalents NET CASHFLOWS FROM(USEDIN)FINANCINGACTIVITIES Other cashinflows(outflows) Interest paid Dividends paid Payments offinanceleaseliabilities Loans repayments Amounts raised from short-term loans Note 6 6 (1,926,416) (1,938,769) (7,153,865) (2,389,364) 10,258,473 1,203,812 1,005,196 2,185,663 (231,079) (227,607) (124,827) (292,931) (539,332) For thePeriods ended ThUS$ 650,263 (50,433) (52,986) (19,325) (59,166) 374,407 275,856 282,592 152,000 386,379 2012 (3,018) (6,736) (3,223) 57,763 83,512 27,143 38,035 73,429 (203) 351 December31, - - - (1,241,105) (1,367,025) (4,286,394) 5,966,464 (256,645) (256,540) (121,338) (192,133) (883,402) (883,297) 374,407 767,674 (59,990) (27,615) (84.000) 631,052 216,891 146,849 334,500 969,252 ThUS$ (3,541) (7.499) 23,153 93,787 47,337 52,012 2011 6,189 9,201 9.762 (105) (72) 545 626 89 - - ANNUAL REPORT 2012 Financial Statements 123 Stock Exchange;itisalsoquotedintheUnitedStates Chilean ElectronicStockExchangeandtheSantiago the StockBrokers-Exchange(Valparaíso), the under No.306,whosesharesarequotedinChileon Superintendency of Securities and Insurance (SVS), a publiccompanyregisteredwiththeChilean is LATAM (the“Company”) AirlinesGroupS.A. NOTE 1. AS OFDECEMBER31,2012 LATAM ANDSUBSIDIARIES AIRLINESGROUPS.A NOTES TOTHECONSOLIDATED FINANCIALSTATEMENTS a non-binding Memorandum of Understanding signed Empreendimentos eParticipações (“TEP”) and TAM (“TAM”), “Cueto Subsidiaries”), TAM S.A. (thelattertwo, Mineras delCantábricoS.A. andInversiones Costa Verde Aeronáutica S.A. an EssentialMatter, thatat thisdatetheCompany Superintendency ofSecuritiesandInsurance, as On August13,2010,theCompanyreportedto andColombia. business inMexico,Brazil Company hassubsidiariesoperating inthefreight its subsidiariesindifferentcountries.Inaddition,the These businessesareperformeddirectlyorthrough Europe and Oceania. international routes in America, and in a developed series Brazil of regional and Ecuadorand Chile, Peru,Colombia, Argentina, transportation, both in the domestic markets of Its principalbusinessispassengerandcargoair DepositaryReceipts(“BDRs”). of Brazilian – StockExchange,MercadoriaseFuturos,intheform Receipts (“ADRs”) BM&FBOVESPA andinBrazil S.A. in NewYork intheformofAmericanDepositary of AmericaontheNewYork StockExchange(“NYSE”) GENERALINFORMATION the Company and TAM, establishing 14mitigation approvedthemergerbetween Competition (“TDLC”) On September 21, 2011, theCourt of Defense ofFree TAM. proposed partnershipbetween theCompanyand containing thefinaltermsandconditionsof Exchange OfferAgreement(“Contracts Signed”) called (a)ImplementationAgreementand(b) of TEP, signedbindingcontracts writteninEnglish Amaro (“Amaro Family”), astheonlyshareholders Noemy AlmeidaOlivera AmaroandJoaoFrancisco Maria CláudiaOliveira Amaro,MaurícioRolim On January18,2011thepartiesofMOUandMrs. this agencyonMarch1,2011. Aviation Agency(“ANAC”), whichwasapprovedby structure ofthetransaction Civil totheBrazilian operating subsidiariesofTAM hadpresentedthe 20, 2010,theCompanyandTAM announced thatthe current operating licensesandbrands. On October would continueoperating independentlywiththeir withover50,000employees.Bothairlines aircraft, in 23countries,operating withafleetofover300 passengers andcargotomorethan115destinations airline groups, providing transport services for affiliation would be within the world’s 10 largest LATAM (“LATAM”). AirlinesGroupS.A. Theproposed jointly underoneparentcompany, tobenamed with theirintentionofcarryingoutoperations (“MOU”) inwhichthecompaniesagreedtoproceed ANNUAL REPORT 2012 Financial Statements 124 value ofwhich: by issuing147,355,882commonshareswithoutpar (c) contracts. the transactions contemplatedinthesubscribed (b) Company andTAM; for thepurposeofassociationbetween Companies”), twocompaniesspeciallyconstituted companies(the“Absorbed andHoldcoIIS.A. S.A. (a) approved, amongothers,thefollowingmatters: on November11,2011,inwhichtheirshareholders cited aspecialmeetingofshareholders,carriedout On December 21, 2011, the Board of the Company rejecting theappealfiledbybothcompanies. the SupremeCourtconfirmedTDLC resolution to certainmitigationmeasures.OnApril5,2012, TAM filedanappealtotheSupremeCourtobjecting measures. OnOctober3,2011,theCompanyand successful andhavingreceived 95.9%ofthetotal with theconditionsfordeclaring theexchangeoffer the exchangeofferofTAM shares.Havingcomplied On May10,2012,theCompany andHoldcoIIinitiated extraordinary shareholders’meeting. to compliancewiththeconditionsestablishedin The effectivenessoftheseagreementswassubject as providedinArticle24oftheCorporations Law. for employeesoftheCompanyanditsSubsidiaries, shares, whichwouldgotowardscompensationplans (ii) merger, shallhavenoeffect;and holds intheacquiredcompaniesattimeof than theCompany’s. ThesharesthattheCompany Companies, andthatbelongstoshareholdersother fully subscribedandpaidforeachoftheAbsorbed new shares of the Company for each share that is as aresultoftheproposedmerger, atarate of0.9 exchanged forsharesoftheAbsorbedCompanies 142,555,882 shares,whichwouldbeintendedto (i) US$1,417,639,617.60throughtheissuanceof TheincreaseincapitalbyUS$1,465,372,970.09 US$47,733,352.49throughtheissuanceof4,800,000 The mergeroftheCompanywithSisterHoldco The change of Company name and the rest of conditions applicable tothelatter. Regulations, and determinetheterms and paragraph of Article 28 of the Corporations Corporations Law, inaccordancewith thesecond to thecompensationinterms ofArticle 24 ofthe Shareholders meetingdated December 21,2011 4,800,000 sharesdefinedunder theExtraordinary with thebroadestpowersplacementpriceof authority to determine, fix andagree freely and (d) approved, amongothers,thefollowingmatters: out onAugust3,2012inwhichtheirshareholders cited aspecialmeetingofshareholders,carried On September 4, 2012 the Board of the Company Corporate Regulations. with the second paragraph of Article 28 of the placement priceofthesharesinaccordance and agreefreelywithbroadestpowersthe of theCompanyauthoritytodetermine,fix remaining shares anddelegation to the Board terms oftheissueandplacementreferred agree andproceedwiththebroadestpowers, (c) market ingeneral. balance wouldbeofferedandplacedonthe Corporations Lawandthattheunsubscribed to LATAM shareholdersunderArticle25ofthe would be defined to be offered preferably SA, shares oftheSisterHoldcoSAandII 2011, andthatwerenottobeexchangedfor Shareholders’ MeetingheldonDecember21, under theauthorizationofExtraordinary shares, out of the total 142,555,882 shares issued (b) the newBoardofCompany. (a) instrument datedJuly10,2012. effective. Theexecution deed wasrectifiedby name to“LATAM became AirlinesGroupS.A.” that same date the change of the Company’s effected accordingtothatdescribedabove.On were exchangedforsharesoftheCompany, as which theshares of theAbsorbedCompanies granted the execution deed of Merger, through the CompanyandAbsorbedCompanies shares ofTAM incirculation,onJune22,2012, Authorization of theBoard of the Company to Total revocation of the Board and election of Approvalthattheremaining7,436,816LATAM Delegation totheBoardofCompany ANNUAL REPORT 2012 Financial Statements 125 the issuanceofBDRs. Mobiliários (“CVM”)ofthatcountry, asitpertainsto andtheComissãodeValoresRepublic ofBrazil with respecttotheissuanceofADRs,andFederal and ExchangeCommission(“SEC”)ofthatcountry, of the United States of America and the U.S. Securities regulations oftheSVSandlaws the Corporations Lawanditsregulations,the are setinaccordancewithSecuritiesMarketLaw Corporate Governancepractices ofthe Company Américo Vespucio SurNo.901,communeofRenca. The CompanyislocatedinSantiago,Chile,atAvenida available inNote40onSubsequentEvents. The Information on the result of this placement is Insurance byEssentialMatteronthesamedate. reported totheSuperintendencyofSecuritiesand fix thepriceofplacementthem,allwhichwas preferred optionofthosesharesandproceededto fromDecember21,2012,attheperiodof to start, December 20,2012,theBoardofDirectorsagreed Securities and Insurance, onDecember 11, 2012. On (b) above was approved by the Superintendency of The placementofthesharesreferredtoinparagraph As of December 31, 2012, the Company had a total on itsadministration. Market Law, given thatthereisadecisiveinfluence letter b)ofArticle97and 99oftheSecurities Company inaccordancewith theprovisionsof and thereforeisthecontrollingshareholderof owns 25.92%ofthesharesissuedbyCompany, CostaVerde Spa Aeronáutica Limitada, Aeronáutica., and itsSubsidiaries,InversionesNuevaCostaVerde Group, which through Costa Verde Aeronáutica S.A., The majorityshareholderoftheCompanyisCueto regulations oftheSEC. of theUnitedStatesAmericaandrespective Committee requiredbytheSarbanesOxleyLaw the Corporations Law andthefunctionsofAudit Committee whichfulfillsboththeroleforeseenin board members,threeformpartofitsDirectors’ sessions asthecorporate needsdemand.Ofthenine in regularmonthlysessionsandextraordinary ordinary shareholders’meeting.TheBoardmeets members whoareelectedeverytwoyearsbythe The BoardoftheCompanyiscomposednine financial statementsareasfollows: The subsidiariesincludedintheseconsolidated Crew, 4,527inControlsCrew, and4,858inSales. Maintenance, 18,138inOperations, 10,164inCabin over 8,980administrative employees,6,932in this yearwithatotalof 53,599 employees, spread andSubsidiaries.Ended Combination withTAM S.A. in thesecondsemesterof2012,causedbyBusiness in thefirstsemesterof2012and53,167employees The Companyhadanaverage of22,214employees the formofBDRs. was intheformofADRsandapproximately1.36% approximately 6.16%oftheCompany’s sharecapital of 1,660 registered shareholders. At that date ANNUAL REPORT 2012 Financial Statements 126 31, 2012 December a) Asof

Results for the Participation Rate As of Statement of financial position period ending December 31, 2012 As of December 31, 2012 December 31, 2012 Direct Indirect Total Tax No. Company Country Functional ownership ownership ownership Assets Liabilities Equity NET Income of origin Currency interest interest interest % % % ThUS$ ThUS$ ThUS$ ThUS$

Lantours Division de Servicios 96.518.860-6 Chile US$ 99.9900 0.0100 100.0000 2,678 2,153 525 1.300 Terrestres S.A.and subsidiaries (****) 96.763.900-1 Inmobiliaria Aeronáutica S.A. Chile US$ 99.0100 0.9900 100.0000 57,227 23,029 34,198 17,719 96.969.680-0 Lan Pax Group S.A. and subsidiaries (*) Chile US$ 99.8361 0.1639 100.0000 522,408 637,851 (112,395) (77,269) Foreign Lan Perú S.A. Peru US$ 49.0000 21.0000 70.0000 159,361 150,319 9,042 2.513 Lan Chile Investments Limited Cayman Foreign US$ 99.9900 0.0100 100.0000 4,419 5,247 (828) (10) and subsidiaries (*) Islands

93.383.000-4 Lan Cargo S.A. Chile US$ 99.8939 0.0041 99.8980 727,091 371.,663 355,428 (50,693)

Foreign Connecta Corporation U.S.A US$ 0.0000 100.0000 100.0000 234 2,041 (1,807) 70 Prime Airport Services Inc. Foreign U.S.A US$. 0.0000 100.0000 100.0000 24,678 29,484 (4,806) 1,174 and subsidiaries (*) 96.951.280-7 Transporte Aéreo S.A. Chile US$. 0.0000 100.0000 100.0000 357,725 114,302 243,423 11,144 96.634.020-7 Ediciones América S.A. Chile CLP 0.0000 100.0000 100.0000 - 612 (612) - Foreign Aircraft International Leasing Limited U.S.A US$. 0.0000 100.0000 100.0000 - 2,799 (2,799) (5) 96.631.520-2 Fast Air Almacenes de Carga S.A. Chile CLP 0.0000 100.0000 100.0000 9,708 1,553 8,155 2,067 96.631.410-9 Ladeco Cargo S.A. Chile CLP 0.0000 100.0000 100.0000 416 11 405 3 Foreign Laser Cargo S.R.L. Argentina ARS 0.0000 100.0000 100.0000 70 228 (158) (42) Lan Cargo Overseas Limited Foreign Bahamas US$. 0.0000 100.0000 100.0000 364,482 397,611 (37,368) (6,375) and subsidiaries (*) 96.969.690-8 Lan Cargo Inversiones S.A. and subsidiaries (*) Chile CLP 0.0000 100.0000 100.0000 57,154 64,905 (8,692) (4,458) 96.575.810-0 Inversiones Lan S.A. and subsidiaries (*) Chile CLP 99.7100 0.0000 99.7100 16,181 9,714 6,466 (112) Foreign TAM S.A. and subsidiaries (*) (**) (***) Brazil BRL 63.0901 36.9099 100.0000 8,292,729 7,517,696 753.903 (45,163)

(*) The Equity reported corresponds to Equity attributable to owners of the parent, does not include Non-controlling interest. (**) The indirect participation percentage over TAM S.A. and Subsidiaries comes from Holdco I S.A., entity for which LATAM Airlines Group S.A. holds a 99.9983% participation. (***) LATAM Airlines Group S.A. owns 226 voting shares of Holdco I S.A., equivalent to 19.42% of total voting shares of that company. (****) On November 22, 2012, by public deed in the Notary of Santiago of Mr. Patricio Rabiy Benavente, Lantours División Servicios Terrestres II S.A. was incorporated, which corresponds 99.99% to Lantours División Servicios Terrestres S.A. and 0.01% to Inversiones Lan S.A., entity without movement. ANNUAL REPORT 2012 Financial Statements 127 31, 2011 December b) Asof

As of Results for the December Statement of financial position period ended 31, 2011 As of December 31, 2011 December 31, 2011

Direct Indirect Total Tax No. Company Country Functional ownership ownership ownership Assets Liabilities Equity NET Income of origin Currency interest interest interest

% % % ThUS$ ThUS$ ThUS$ ThUS$

Lantours Division de 96.518.860-6 Chile US$ 99.9900 0.0100 100.0000 2,534 1,749 785 860 Servicios Terrestres S.A. 96.763.900-1 Inmobiliaria Aeronáutica S.A. Chile US$ 99.0100 0.9900 100.0000 65,580 34,101 31,479 3,484 Lan Pax Group S.A. and 96.969.680-0 Chile US$ 99.8361 0.1639 100.0000 464,789 502,284 (4,935) (28,163) Subsidiaries (*) Foreign Lan Perú S.A. Peru US$ 49.0000 21.0000 70.0000 139,888 128,979 10,909 920 Lan Chile Investments Limited Cayman Foreign US$ 99.9900 0.0100 100.0000 4,420 5,238 (818) 1,820 and Subsidiaries (*) Islands 93.383.000-4 Lan Cargo S.A. Chile US$ 99.8939 0.0041 99.8980 765,829 343,799 422,030 57,140 Foreign Connecta Corporation U.S.A US$ 0.0000 100.0000 100.0000 346 2,223 (1,877) (109) Prime Airport Services Inc. Foreign U.S.A US$. 0.0000 100.0000 100.0000 9,965 15,945 (5,980) (735) and Subsidiary (*) 96.951.280-7 Transporte Aéreo S.A. Chile US$. 0.0000 100.0000 100.0000 348,943 116,663 232,280 26,146 96.634.020-7 Ediciones Ladeco América S.A. Chile CLP 0.0000 100.0000 100.0000 - 566 (566) - Aircraft International Foreign U.S.A US$. 0.0000 100.0000 100.0000 - 2,794 (2,794) (8) Leasing Limited 96.631.520-2 Fast Air Almacenes de Carga S.A. Chile CLP 0.0000 100.0000 100.0000 24,692 11,372 13,320 1,998 96.631.410-9 Ladeco Cargo S.A. Chile CLP 0.0000 100.0000 100.0000 380 8 372 1 Foreign Laser Cargo S.R.L. Argentina ARS 0.0000 100.0000 100.0000 82 216 (134) (18) Lan Cargo Overseas Limited Foreign Bahamas US$. 0.0000 100.0000 100.0000 162,002 189,614 (30,990) 9,037 and Subsidiaries (*) Lan Cargo Inversiones S.A. 96.969.690-8 Chile CLP 0.0000 100.0000 100.0000 67,194 69,671 (2,477) 3,070 and Subsidiary (*) Inversiones Lan S.A. and 96.575.810-0 Chile CLP 99.7100 0.0000 99.7100 14,299 7,821 6,478 (347) Subsidiaries (*)

(*) The Equity reported corresponds to Equity attributable to owners of the parent, does not include non-controlling interest. ANNUAL REPORT 2012 Financial Statements 128 Airlines Group S.A. asofJune22,2012 dateonwhich Airlines GroupS.A. andSubsidiariesbecamepartofLATAM- TAM S.A. wasacquiredinFebruary 2011(SeeNote18.2). S.A, direct subsidiary of Lan Pax Group - AEROASIS S.A., (1) 1, 2011andDecember31,2012,aredetailedbelow: Changes inthescope of consolidationbetweenJanuary the consolidation. All theentitiescontrolledhavebeenincludedin are contributors. funds inwhichtheparentcompanyandsubsidiaries Purpose Entities(“SIC12”)andprivateinvestment Accounting Information:Consolidation-Special Interpretations Committee of the International them accordingtostandardsissuedbytheStanding Company has major risks and benefits associated to destined to the aircraft advance financing, as the the aircraft financingandChercánLeasingLimited, destinedto purpose entities,denominated:JOL, Additionally, hasproceededtoconsolidatespecial income statement. reflected inOthergain(loss)theConsolidated a profit ofapproximately ThUS$44,325,which is at March2011wasThUS$9,061,thesalegenerated was ThUS$53,386,thebookvalueofinvestment sales valueofBlueExpressINTLLtdaandsubsidiary The and its subsidiary Blue Express S.A. INTL Ltda. respect to100%ofthesharecapitalBlueExpress as buyers,enteredintoapurchaseagreementin company, subsidiaries oftheBethiaS.A. Betmin SpA, and ServiciosdeTransporte LimitadaandInversiones subsidiaries ofLATAMassellers, AirlineGroupS.A., andInversiones LanS.A., April 6,2011LanCargoS.A. andSubsidiaries,dated - BlueExpressINTLLtda. (2) (seeNote18.2). andHoldcoIIS.A. Holdco S.A. merger wasmaterializedwiththecompaniesSister Disposalofcompanies Incorporation oracquisitionofcompanies

ANNUAL REPORT 2012 Financial Statements 129 The preparation oftheconsolidatedfinancialstate nancial instruments. modified bythevaluationatfairvalueofcertainfi prepared underthehistoric-costcriterion,although The consolidatedfinancial statements have been Board (IASB)andIFRICinterpretations. issued bytheInternationalAccountingStandards International Financial Reporting Standards (IFRS) 31, 2012andhavebeenpreparedinaccordancewith are for the period ended December lines Group S.A. The consolidatedfinancialstatementsofLATAM Air 2.1. dated financialstatements. policies adoptedinthepreparation oftheseconsoli The followingdescribestheprincipalaccounting ING POLICIES NOTE previous year. dated financialstatementscorrespondingtothe been someminorreclassificationstotheconsoli In ordertofacilitatecomparison,therehave cial statements. estimates are significant to the consolidated finan complexity ortheareaswhereassumptionsand areas thatimplyagreaterdegreeofjudgmentor Company’s accounting policies. Note4showsthe management touseitsjudgmentinapplyingthe certain criticalaccountingestimates.Italsorequires ments in accordance with IFRS requires the use of PREPARATION 2. SUMMARYOFSIGNIFICANTACCOUNT

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ANNUAL REPORT 2012 Financial Statements 130 The adoptionofthestandards,amendmentsandinterpretationsdescribed rate forsalesoperations. Earlyadoptionis permitted. it requiresapplytothetemporary differencesarisingfromthese,thetax tion thatinvestmentpropertyvaluedatfairvalue,aremadebysale,so fair valuecontainedinIAS40.Theamendmentincorporates thepresump Combination ifaftertheBusiness Combination theacquirerapplies The exceptionalsoappliestoinvestmentpropertyacquiredinaBusiness measured usingthefairvaluecontainedinIAS40“InvestmentProperty”. tion tothegeneral principlesofIAS12forinvestmentpropertiesthatare issuedinDecember2010,providesanexcep Income taxThisamendment, Amendment toIAS12: information forthefirstyearofimplementationisnotrequired. for transactions involvingtransfers offinancialassets.Comparative Disclosures IssuedinOctober2010,increasesthedisclosurerequirements Amendment toIFRS7:FinancialInstruments: Standards andamendments January 1,2012: (a) Accountingpronouncementswithimplementationeffectivefrom amendment toIAS28. is permittedinconjunctionwith IFRS10,11and12the consolidation wereremoved andincludedinIFRS10.Earlyadoption statements, astheaspects related tothedefinitionofcontroland is restrictedbeginningwith thischangeonlyforseparate financial Issued in May 2011, replaces IAS 27 (2008). The scope of this standard IAS 27:Separate financial statements. periods. Earlyadoptionispermitted. evaluating if they potentially will bereclassified to results infuture items ofOtherComprehensiveIncomeareclassified and grouped Issued inJune2011.Themainchangethisamendmentrequires that Amendment toIAS1:Presentationoffinancialstatements Standards andamendments January 1,2013andfollowing: (b) Accounting pronouncements with applications effective as of financial statements. above have not had a significant impact onthe Company’s consolidated - -

Annual periodsbeginningon Annual periodsbeginningon Mandatory application: Mandatory application: 07/01/2011 01/01/2013 07/01/2012 01/01/2012 or after or after ANNUAL REPORT 2012 Financial Statements 131 IFRS 11:Jointarrangements 11, IFRS12andamendmentstoIAS2728. nancial statements.EarlyadoptionispermittedinconjunctionwithIFRS nition of control, and the principles for the preparation of consolidated fi Financial Statements”.Setsclarificationsandnewparameters forthedefi ties” andorientationoncontrolconsolidationinIAS27“Consolidated Issued in May 2011, replaces SIC 12 “Consolidation of special purpose enti IFRS 10:Consolidatedfinancialstatements offset intheStatementofFinancialPosition. Earlyadoptionispermitted. quantitative informationoverthefinancialinstrumentsrecognizedthat convergence betweenIFRSandUSGAAP. Theserevelationsarefocusedon compensation offinancialassetsandliabilities,withtheaimincreasing Issued inDecember2011.Requiresimprovementofcurrentdisclosuresover Amendment IFRS7:FinancialInstruments:Disclosures Standards andamendments and amendmentstoIAS2728. associates. Earlyadoptionispermittedinconjunctionwith IFRS10,11 ble forentitiesthatholdinvestmentsinsubsidiaries,joint ventures,and er they are classified as subsidiaries, associates or joint ventures. Applica in thefinancialstatementsrelatedtoinvestmentsother entities,wheth Issued inMay2011,bringstogetheronestandardallrequired disclosures IFRS 12:Disclosuresofinterestsinotherentities IAS 27and28. tion ispermittedinconjunctionwithIFRS10,12andamendmentsto of proportional consolidation of entities under joint control. Early adop elimination oftheconceptjointlycontrolledassetsandpossibility ments rather than their legal form. Within its modifications include the rangements by focusingonrightsandobligations arising from theagree “Jointly controlledentities”.Providesamorerealisticreflectionofjointar Issued inMay2011,replacesIAS31“InterestsJointVentures” andSIC13 ------Annual periodsbeginningon Mandatory application: 01/01/2013 01/01/2013 01/01/2013 01/01/2013 or after ANNUAL REPORT 2012 Financial Statements 132 is permitted. insolvencyorbankruptcy.as wellinthecaseofdefault, Earlyadoption gally bindinguponbothcounterpartiesinthenormalcourseofbusiness, Italsoindicatesthatitmustbele date andnotdependonafutureevent. cally, thattherighttocompensationshouldbeavailableatreporting cial assetsandliabilitiesintheStatementofFinancialPosition. Specifi Issued inDecember2011.Clarifiestherequirementsforoff-settingfinan Amendment toIAS32:Financialinstruments:Presentation sures forallemployeebenefits. termination benefits.Additionally, itincludesmodificationstodisclo the recognitionandmeasurementofcostsfordefinedbenefitplans Issued inJune2011,replacesIAS19(1998).Thisrevisedstandardchanges IAS 19Revised:Employeebenefits incorporates newconceptsandexplanationsformeasurement. and the fairvalueofassetsandliabilitiesdisclosuresrequiredon it, Issued inMay2011,bringstogetheronestandardthewaytomeasure IFRS 13:Fair valuemeasurement Standards andamendments and classificationoffinancialliabilities.Earlyadoptionispermitted. Later thisstandardwasamendedinNovember2010toincludetreatment of financialassets. Issued inDecember2009,amendingtheclassificationandmeasurement IFRS 9:Financialinstruments

- - - - Annual periodsbeginningon Mandatory application: 01/01/2013 01/01/2013 01/01/2015 01/01/2014 or after ANNUAL REPORT 2012 Financial Statements 133 the comparative information presented in this period, if the evaluation of adopting therule.Therefore,itmaybenecessarytomakemodifications indicating thatitisnecessarytoapplythefirstdayofannualperiodin Issued inJune2012.Clarifiesthetransitional provisionsforIFRS10, Joint Arrangements and IFRS 12: Disclosure of interests in other entities. Amendments toIFRS10:ConsolidatedFinancialStatements,11: requirements applicabletoannualfinancialstatements. of segment assets and liabilities in interim periods, confirming the same IAS 34InterimFinancialReporting-Clarifiesthedisclosurerequirements tax distributionsandrelatedtransaction costs. IAS 32:Financialinstrument:Presentation-Clarifiesthetreatmentincome inventory, asitmeetsthedefinitionofProperty, plantandequipment. equipment willbeclassifiedasProperty, plantandequipment rather than IAS 16:Propertyplantandequipment-Clarifiesthatthepartsservice Position column. comparative informationwhenanentityhasa3rdStatementofFinancial IAS 1: Presentation of financial statements – Clarifies requirements for Improvements issuedinMay2012 of theabovestandards. the year of their first application. The Company has not earlyadoptedany significant impactontheCompany’s consolidated financialstatementsin amendments andinterpretations describedabovewouldnothavehada The Company’s management believesthattheadoptionofstandards, disclosure requirementsoninvestmentfirmsinIFRS12and IAS27. and separate financial statements.Theamendmentalsointroducesnew or lossaccordingtoIFRS9“FinancialInstruments”inthe consolidated measure the investment of these subsidiaries at fair value through profit pertaining toinvestmententities.Thisamendmentrequires anentityto entity and introduce an exception to consolidate certain subsidiaries October 2012.Themodificationsincludethedefinition ofaninvestment Statements andIFRS12:Disclosureofinterestsinotherentities-issued IAS 27:Separate FinancialStatementsandIFRS10:Consolidated with IAS27/SIC12. the controloverinvestments differs fromthatrecognizedinaccordance

01/01/2013 01/01/2014 ANNUAL REPORT 2012 Financial Statements 134 liabilities assumedinaBusinessCombinationare assets acquiredandtheliabilitiescontingent assumed ontheexchangedate.Theidentifiable instruments issuedandtheliabilitiesincurredor is thefairvalueofassetsdelivered,equity purchase ofsubsidiaries.Thecostacquisition The Companyusestheacquisitionmethodfor flows areincorporated fromthedateofacquisition. date theyceasetobesocontrolled.Theresultsand and theyareexcludedfromtheconsolidationon the dateonwhichcontrolispassedtoCompany considered. Thesubsidiariesareconsolidatedfrom date oftheconsolidatedfinancialstatementsare that arecurrentlyexercisableorconvertibleatthe the existenceandeffectofpotentialvotingrights whether theCompanycontrolsanotherentity, more thanhalfofthevotingrights.Inevaluating which are generally accompanied by a holding of power tocontrolthefinancialandoperating policies, purpose entities)overwhichtheCompanyhas Subsidiaries arealltheentities(includingspecial- (a) Subsidiaries 2.2. policies ofthesubsidiariesare modified. policies adoptedbytheCompany, theaccounting necessary inordertoensureuniformitywiththe of animpairmentlosstheassettransferred. When eliminated unlessthetransaction providesevidence entities are eliminated. Unrealized losses are also gains ontransactions betweentheCompany’s Inter-companytransactions, balancesandunrealized income statementwhentheyareincurred. Combination arerecognizedintheconsolidated income (Note2.6).Thetransaction costsinaBusiness is recordeddirectlyintheconsolidatedstatementof net assetsoftheacquiredsubsidiary, thedifference Goodwill. If the cost is less than the fair value of the in thenetidentifiableassetsacquiredisshownas cost over the fair value of the Company’s holding controlling interests.Theexcessoftheacquisition acquisition, regardless of the extent of the non- initially valuedattheirfairvalueonthedateof CONSOLIDATION the consolidatedincomestatementinOthergains resulting fromthelossofcontrolisrecognizedin equity related to thesubsidiary. Anygainorloss the non-controllingandothercomponentsof derecognizes assetsandliabilitiesofthesubsidiary, of participationisnotretained,theCompany When asubsidiaryissoldandpercentage (c) Salesofsubsidiaries without aneffectonincome. not relatedtolossofcontrol,asequitytransactions transactions with non-controlling interests, when The Companyappliesthepolicyofconsidering (b) Transactions withnon-controllinginterests are showninreserves. movements in reserves of investees or associates in results,anditsparticipation inpostacquisition acquisition ofitsinvesteesorassociatesisshown and Subsidiariesinthelosses or gainsafterthe The participationofLATAM AirlinesGroupS.A. recognized attheircost. booked usingtheequitymethodandareinitially of thevotingrights.Investmentsinassociatesare usually arisesfromholdingbetween20%and50% significant influencebuthavenocontrol.This LATAM andSubsidiaries have AirlinesGroupS.A. Investees or associates are all entities over which (d) Investeesorassociates accounted usingtheequitymethod. retained valued at fair value are subsequently are reclassifiedtoprofitorloss.Thepercentage related liabilities,whichcancausetheseamounts Company haddisposeddirectlyfromtheassetsand comprehensive incomeareaccountedasifthe theamountspreviouslyrecognizedinOther lost, recognized at fair value on the date that control is subsidiary, anddoesnotrepresentcontrol,thisis retain anownershipofparticipationinthesold If LATAMandSubsidiaries AirlinesGroupS.A. (losses). ANNUAL REPORT 2012 Financial Statements 135 of theconsolidatedfinancialstatementsLATAM States dollarwhichisalsothepresentationcurrency currency ofLATAMistheUnited AirlinesGroupS.A. operates (thefunctionalcurrency).The the maineconomicenvironmentinwhichentity and Subsidiariesarevaluedusingthecurrencyof each oftheentitiesLATAM AirlinesGroupS.A. The itemsincludedinthefinancialstatementsof (a) Presentationandfunctionalcurrencie 2.3. are shownintheconsolidatedstatementofincome. Gains orlossesfordilutionininvesteesassociates associate. or madepaymentsonbehalfoftheinvestee additional lossesunlessithasincurredobligations andSubsidiarieswillnotshowthe Airlines GroupS.A. any othernonguaranteed accountreceivable,LATAM including is equal to or more than its holding in it, Subsidiaries inthelossesofaninvesteeorassociate participation ofLATAMand AirlinesGroupS.A. Whenthe the bookvalueofinvestment. Post-acquisition movement isadjustedagainst statement of financial positionpresented are (i) translated tothepresentationcurrencyasfollows: currency otherthanthepresentation currencyare inflationary economy)that haveafunctional entities (noneofwhichhasthecurrencyahyper- The results and financial position of all the Group consolidated statementofincome. denominated inforeigncurrencyareshownthe exchange rates of the monetary assets and liabilities transactions andfrom thetranslation attheclosing and lossesresultingfromtheliquidationofthese on thetransaction dates.Foreign currencygains the functionalcurrencyusingexchangerates Foreign currencytransactions aretranslated to (b) Transactions andbalances andSubsidiaries. Airlines GroupS.A. (c) Groupentities Assets andliabilitiesofeach consolidated FOREIGN CURRENCYTRANSACTIONS s dollar. whose functionalcurrencyisdifferenttotheU.S. in thecountrywheresubsidiaryislocated, The exchangerates usedcorrespondtothosefixed income. as a separate component in Other comprehensive (iii) rates prevailingonthetransaction dates, statement accountaretranslated attheexchange (ii) consolidated statementoffinancialpositiondate; translated attheclosingexchangerate onthe improvements, extensions,etc.)areincluded in Subsequent costs(replacement ofcomponents, aircraft. under Constructioninprogress untilreceiptofthe manufacturers arecapitalized bytheCompany The amountsofadvancepaymentstoaircraft and anyimpairmentloss. at historiccostlessthecorrespondingdepreciation equipment aremeasured,initiallyandsubsequently, impairment loss.TherestoftheProperty, plantand is recognizedatcostlessanyaccumulated The landofLATAM andSubsidiaries Airlines Group S.A. 2.4. translated attheclosingexchangerate. as assetsandliabilitiesoftheforeignentityare from the acquisition of a foreign entity are treated Adjustments totheGoodwillandfairvaluearising as partofthelossorgainonsale. are shownintheconsolidatedstatementofincome the investmentissold,theseexchangedifferences investments, are recordedwithinnetequity. When currency instrumentsdesignatedashedgesforthese to thatoftheparent),andloansotherforeign entities (orlocalwithafunctionalcurrencydifferent from thetranslation ofanetinvestmentinforeign In theconsolidation,exchangedifferencesarising Alltheresultantexchangedifferencesareshown PROPERTY, PLANANDEQUIPMENT The revenuesandexpensesofeachincome ANNUAL REPORT 2012 Financial Statements 136 Losses andgainsonthesaleofProperty, plantand (Note 2.8). is reducedimmediatelytoitsrecoverable amount its than value its estimated recoverable amount, When thecarryingamountofanassetishigher reviewed, andadjustedifnecessary, onceperyear. The residualvalueandusefullifeofassetsare on thebasisofcyclesandhoursflown. certain technicalcomponentswhicharedepreciated estimated technicalusefullives;exceptinthecaseof calculated usingthestraight-line methodovertheir Depreciation ofProperty, plantandequipmentis are incurred. are chargedtotheresultsofyearinwhichthey The rest of the repairs and maintenance replacement. replaced iswrittenoffinthebooksattimeof determined reliably. The value of the component to theCompanyandcostofelementcanbe of Property, plantandequipmentaregoingtoflow economic benefitsassociatedwiththeelements asset onlywhenitisprobablethatthefuture the valueofinitialassetorshownasaseparate specific software. Thesecostsareamortized over acquiring them and preparing them for usingthe capitalized onthebasisof the costsincurredin Licenses forcomputersoftware acquiredare Computer software a specifiedperiod. within and departureofaircraft ataspecificairport, authorization tocarryoutanoperation ofarrival The airportslotscorrespondtoanadministrative tests annually. indefinite usefullifeandaresubjecttoimpairment Brands andairport Slots areintangibleassetsof Brands andairportSlots 2.5. INTANGIBLE ASSETSOTHERTHANGOODWILL consolidated statementofincome. obtained withthebookvalueandareincludedin equipment arecalculatedbycomparingtheproceeds as assetsareamortizedovertheirestimateduseful Development costsofcomputersoftwareshown directly associated. who developthecomputersoftwareandothercosts direct costsincludetheexpensesofpersonnel they havemetallthecriteriaforcapitalization.The as intangibleAssetsothersthanGoodwillwhen software controlledbytheCompany, areshown production ofuniqueandidentifiablecomputer when incurred.Certaincostsdirectlyrelatedtothe qualify for capitalization, are shown as an expense maintenance ofcomputersoftwarewhichdonot Expenses relatedtothedevelopmentor their estimatedusefullives. value is greater than the recoverable amount. The value isgreaterthantherecoverable amount. An impairmentlossisrecorded whenthebook book valueoftheassetsmay notberecoverable. event or changein circumstances indicates that the are subjectedtoimpairment testswheneverany impairment losses.Assetssubject toamortization amortization andaresubjecttoannualtestingfor life, anddevelopingITprojects, are notsubjectto Intangible assets that have an indefinite useful ASSETS 2.8.LOSSES FORIMPAIRMENT OFNON-FINANCIAL to incomeandexpenses. for itsintendeduse.Otherinterestcostsarecharged necessary forcompletingandpreparingtheasset any qualifiedassetarecapitalizedoverthetime Interest costsincurredfortheconstructionof 2.7.BORROWING COSTS goodwill relatedtotheentitysold. the saleofanentityincludebookamount tested forimpairmentannually. Gainsandlosseson to acquisition of subsidiaries is notamortized but associate ontheacquisitiondate.Goodwillrelated in thenetidentifiable assetsofthesubsidiary or over the fair value of the Company’s participation Goodwill representstheexcessofacquisitioncost 2.6. GOODWILL lives. ANNUAL REPORT 2012 Financial Statements 137 which havebeendesignatedatfairvaluethrough are financialinstrumentsheldfortrading andthose Financial assetsatfairvaluethroughprofitandloss loss (a) Financialassetsatfairvaluethroughprofitand occurs onthedateoftransaction. instruments atthetimeofinitialrecognition,which determines theclassificationofitsfinancial financial instrumentswereacquired.Management classification depends on the purpose for which the receivables and financial assets held to maturity. The fair value through profit and loss, loans and in thefollowingcategories:financialassetsat The Companyclassifiesitsfinancialinstruments 2.9. FINANCIALASSETS reviewed ifthereareindicatorsofreverselosses. goodwill thathavesufferedanimpairmentlossare identifiable (CGUs).Non-financialassetsotherthan the lowestlevelforwhichcashflowsareseparately theassetsaregroupedat evaluating theimpairment, fair valuelesscoststosellanditsinuse.In recoverable amountofanassetisthehigherits (c)Financialassets heldtomaturity position (Note2.12). receivable intheconsolidated statementoffinancial receivables areincludedintrade andotheraccounts are classifiedasnon-current assets.Loansand consolidated statementoffinancialposition,which maturity over12monthsfromthedateof classified incurrentassetsexceptforthosewith Theseitemsare not traded onanactive market. instruments withfixedordeterminablepayments Loans andreceivablesarenon-derivativefinancial (b) Loansandreceivables assets, designatedoninitialrecognition. equivalents, heldfortrading, andotherfinancial Assets in this category are classified as Cash and cash for trading unlesstheyaredesignatedashedges. fair value.Derivativesarealsoclassifiedasacquired when theseassetsaremanagedandmeasuredusing for the purpose of being sold in the near future or asset isclassifiedinthiscategoryifacquiredmainly profit or loss in their initial classification. A financial recognized onthetrade date–theonwhich Regular purchasesandsalesoffinancialassetsare as othercurrentfinancialassets. statement offinancialposition,whichareclassified to orlessthan12monthsfromtheconsolidated current assets,exceptforthosematurityequal instruments heldtomaturityareincludedinnon- is reclassified asavailable for sale.These financial assets heldtotheirmaturity, thewholecategory sell anot-insignificantamountofthefinancial to hold until their maturity. Should the Company management hasthepositiveintentionandcapacity payments andfixedmaturitiesthattheCompany’s financial instrumentswithfixedordeterminable Financial assetsheldtomaturityarenon-derivative HEDGING ACTIVITIES 2.10. DERIVATIVE FINANCIAL INSTRUMENTS AND original effectiveinterestrate. the estimatedfuturecashflows, discountedatthe book valueoftheassetsandpresent of theprovisionisdifferencebetween theamount if thereisanyevidenceofimpairment, loss. For thecaseoffinancialassetsheldtomaturity, financial assetsmayhavesufferedanimpairment objective evidence that a financial asset or group of financial position,theCompanyassessesifthereis At thedateofeachconsolidatedstatement cost usingtheeffectiveinterestrate. to maturityinvestmentsarecarriedatamortized cost usingtheeffectiveinterestrate method.Held receivables aresubsequentlycarriedatamortized loss aresubsequentlycarriedatfairvalue.Loansand The financial assets at fair value through profit or ownership. transferred substantiallyallrisksandrewardsof expired orhavebeentransferred andtheGrouphas to receivecashflowsfromtheinvestmentshave Financial assetsarederecognizedwhentherights costs areexpensedintheincomestatement. initially recognizedatfairvalue,andtransaction assets carriedatfairvaluethroughprofitorlossare carried atfairvaluethroughprofitorloss.Financial plus transaction costsforallfinancialassetsnot Investments areinitiallyrecognizedatfairvalue the Groupcommitstopurchase or selltheasset. ANNUAL REPORT 2012 Financial Statements 138 the beginningandonanongoingbasis,astowhether bothat Company alsodocumentsitsassessment, carrying outvarioushedgingtransactions. The objectives formanagingriskandthestrategy for instrument andthehedgeditem,aswellits transaction, therelationshipbetweenhedging The Companydocuments,attheinceptionofeach accounting. (c) transaction (cash-flowhedge),or recognized liabilityoranexpectedhighly-probable (b) value hedge); (a) certain derivativesas: nature of theitemhedged. The Companydesignates designated asahedginginstrumentandifso,the gain dependsonwhetherthederivativehasbeen The methodforbookingtheresultantlossor later they continue to bevaluedattheir fair value. the datederivativecontracts aresignedand Derivatives arebookedinitiallyatfairvalueon (b) hedged thatisattributableto theriskbeinghedged. any changeinthefairvalue of theassetorliability consolidated statementofincome, togetherwith that qualifyasfairvaluehedgesareshowninthe Changes inthefairvalueofdesignatedderivatives (a) assets orliabilities. booked as hedges areclassifiedasOtherfinancial hedged is less than 12 months.Derivatives not asset orliabilityiftheremainingtermofitem is over12months, and as an other current financial liability if the remaining maturity of the item hedged booked asanothernon-currentfinancialassetor The totalfairvalueofthehedgingderivativesis value orcashflowsoftheitemsbeinghedged. highly effectiveinoffsettingthechangesfair the derivativesusedinhedgingtransactions are Hedgeofanidentifiedriskassociatedwitha Cashflowhedges Fair valuehedges Hedge of thefair value of recognized assets (fair Derivatives thatdonotqualifyforhedge accrue interest. costs atthesametimeassociateddebts income arereclassifiedtoresultswithinfinancial recognized inthestatementofOthercomprehensive In caseofvariableinterest-rate hedges,theamounts hedged itemaffectsprofitorloss. reclassified to profit or lossin theperiods when the gains (losses).Amountsaccumulatedinequityare the consolidatedstatementofincomeunderOther the ineffectiveportionisrecognizedimmediatelyin comprehensive income.Thelossorgainrelatingto flow hedgesisshowninthestatementofother derivatives thataredesignatedandqualifyascash The effective portion of changes in the fair value of 2.11. INVENTORIES statement ofincomein“Othergains (losses)”. as ahedgeareshownimmediately intheconsolidated in fair value of any derivative instrument that is not booked Certain derivativesarenotbookedasahedge.Thechanges (c) income as“Othergains(losses)”. immediately totheconsolidatedstatementof statement ofothercomprehensiveincomeistaken going tooccur, thegainorlossaccumulatedin expected thatthehedgedtransaction isnolonger hedged transaction is finallyrecognized.Whenitis the consolidated statement of income when the other comprehensiveincomeandisreclassifiedto until thatmomentremainsinthestatementof in thestatementofothercomprehensiveincome accounted forashedges,anygainorlossaccumulated when theydonotmeettherequirementstobe When hedginginstrumentsmatureoraresold from theuseofpoints,arerecognizedasincome. reclassified toincomeasdeferredrevenueresulting in thestatementofOthercomprehensiveincomeare For foreigncurrencyhedges,theamountsrecognized is used. sales totheextentthatfuelsubjecthedge reclassified toresultsunderthelineitemCostof statement ofOthercomprehensiveincomeare For fuelpricehedges,theamountsshownin Derivatives notbookedasahedge

ANNUAL REPORT 2012 Financial Statements 139 been impaired.Theamountoftheprovisionis considered indicatorsthatthereceivablehas and thedefaultordelayinmakingpaymentsare is entering bankruptcy or financial reorganization the partofdebtor, theprobabilitythatdebtor The existenceofsignificantfinancialdifficultieson accounts receivable. amounts dueaccordingtotheoriginaltermsof that theCompanywillnotbeabletorecoverall receivable ismadewhenthereobjectiveevidence An allowance for impairment loss of trade accounts method, lesstheallowanceforimpairmentlosses. in accordancewiththeeffectiveinterestrate their fairvalueandlateratamortizedcost Trade accountsreceivableareshowninitiallyat 2.12. TRADEANDOTHERACCOUNTSRECEIVABLE sale. business, lessestimatedcostsnecessarytomakethe estimated sellingpriceinthenormalcourseof cost method(WAC). Thenetrealizablevalueisthe is determinedonthebasisofweightedaverage lower ofcostandtheirnetrealizablevalue.The Inventories, detailedinNote10,areshownatthe 2.14. CAPITAL other short-termandhighlyliquidinvestments. balances, timedepositsinfinancialinstitutions,and Cash and cash equivalents include cash and bank 2.13. CASHANDEQUIVALENTS receivable. is chargedtotheallowanceaccountforaccounts sales. Whenanaccountreceivableiswrittenoff, it the consolidatedstatementofincomeinCost amount oftheallowanceandlossisshownin rate. Thebookvalueoftheassetisreducedby flows, discountedattheoriginaleffectiveinterest and thepresentvalueofestimatedfuturecash difference betweenthebookvalueofassets

Financial liabilitiesareshowninitiallyattheirfair 2.16. INTEREST-BEARINGLOANS method oftheeffectiveinterestrate. at amortizedcostandarevaluedaccordingtothe initially recognizedatfairvalueandsubsequently Trade payablesandotheraccounts payable are 2.15. TRADEANDOTHERACCOUNTSPAYABLES equity asadeductionfromtheproceedsreceived. issuance ofnewsharesoroptionsareshowninnet Incremental costs directly attributable to the The commonsharesareclassifiedasnetequity. probable that therewillbesufficient future Deferred taxassetsarerecognised whenitis deferred taxliabilitydischarged. the relateddeferred tax asset is realized orthe statements close,andareexpectedtoapplywhen substantially enactedattheconsolidatedfinancial the taxrates (andlaws) thathavebeenenactedor not booked.Thedeferredtaxisdeterminedusing accounting resultorthetaxgainloss,theyare the timeoftransaction doesnotaffectthe different fromaBusinessCombinationthatat recognition ofaliabilityoranassetintransaction the temporary differences arise from the initial and liabilities and their book values. However, if differences arisingbetweenthetaxbasesofassets Deferred taxesarecalculatedonthetemporary 2.17. DEFERREDTAXES payment datesofthenominalprincipal. non-current liabilitiesaccordingtothecontractual Financial liabilities are classified in current and method. accordingtotheeffectiveinterestrate of thedebt, consolidated statement of income during the term costs) andtherepaymentvalue,isshownin obtained (netofthenecessaryarrangement amortized cost;anydifferencebetweentheproceeds Later, thesefinancialliabilitiesarevaluedattheir value, netofthecostsincurredintransaction. ANNUAL REPORT 2012 Financial Statements 140 statements in accordance with IFRS 2: Share based of sharesareshownintheconsolidatedfinancial granting ofoptionsforthesubscriptionandpayment The compensationplansimplementedbythe (b) vacations onanaccrualbasis. The Companyrecognizestheexpenseforpersonnel (a) 2.18. EMPLOYEE BENEFITS investments inassociatesisimmaterial. Deferred taxontemporary differencesarisingon differences will not reverse in the foreseeable future. the Companyanditisprobablethattemporary reverse thetemporary differencesiscontrolledby subsidiaries, provided thattheopportunity to temporary differencesarisingoninvestmentsin The Companydoesnotrecorddeferredtaxon temporary differences. tax earningswithwhichtocompensatethe portion ofmonthly remuneration and theprovision eventually granted consist of agivennumber or individual contributiontothe results.Theincentives its personnelforcompliance withobjectivesand The Companyhasanannual incentivesplanfor (d) Incentives when theyoccur. gains orlossesareshowninresultsfortheperiod reference tomarketinterest-rate curves. Actuarial calculations. Thediscountrates aredeterminedby wage increasesdeterminedonthebasisofactuarial of futurepermanence,mortalityrates andfuture andtakinginto accountestimates accrued cost, applying themethodofactuarialvalue Provisions aremadefortheseobligationsby (c) options andthedateonwhichthesebecomevested. straight-line basisbetweenthedateofgranting such options granted asachargetoremuneration ona payments, showingtheeffectoffairvalue Personnel vacations Share-based compensation Post-employment andotherlong-termbenefits

Provisions areshownatthepresentvalueof (iii) necessary tosettleanobligation,and (ii) obligation asaresultofpastevents. (i) Provisions arerecognisedwhen: 2.19. PROVISIONS distribution. is madeonthebasisofamountestimatedfor make purchaseswithanassociated creditcard.The services ofentitiesregistered withtheprogram or program holdersmakecertainflights,usethe delivery ofkilometersorpoints flywheneverthe whose objectiveiscustomer loyaltythroughthe The Companycurrentlyhasafrequent flyerprogram, (ii) provided. of passengersandcargooncetheservicehasbeen The Companyshowsrevenuefromthetransportation (i) (a) refunds, rebatesanddiscounts. Company’s business.Revenuesareshownnetof rendering servicesintheordinarycourseof received ortobeonsalesofgoodsand Revenues includethefairvalueofproceeds 2.20. REVENUERECONGNITION related totheliabilityinquestion. time valueofmoney, aswellthespecificrisks the date of the consolidated financial statements, present valuereflectscurrentmarketevaluationson The pre-taxdiscountrate usedfordeterminingthe the obligationusingCompany’s bestestimates. disbursements expectedtobenecessaryforsettling TheCompanyhasapresentlegalorimplicit Passenger andcargotransport Rendering ofservices Frequent flyerprogram The amounthasbeenreliablyestimated. It isprobablethatpaymentgoingtobe ANNUAL REPORT 2012 Financial Statements 141 the paymentisestablished. Dividend income is booked when the right to receive (c) interest rate method. Interest income is booked using the effective (b) when thesehavebeenprovided. The Companyrecordsrevenuesforotherservices (iii) 13: Customerloyaltyprograms. pending useatthatdate,inaccordancewithIFRIC established forthekilometersorpointsaccumulated according totheestimateofvaluation liabilities forthisconcept(deferredincome), The consolidated financial statements include flight ticketsorotherservicesofassociatedentities. kilometers orpointsearnedcanbeexchangedfor is depreciated over itsusefullifeandisincluded in each year. The asset acquired under a financial lease interest ontheremainingbalance oftheliabilityfor period sothatitproducesaconstant periodicrate of consolidated statementofincome overthelease of interestinthefinancial cost ischargedtothe included inOtherfinancialliabilities.Theelement leasing obligations,netoffinancialcharges,are Thecorresponding outstanding amountofthedebt. so astoobtainaconstantinterestrate overthe liability componentandthefinancialexpenses Every lease payment is separated between the minimum leasepayments. value oftheasset leased and the present value ofthe leases areinitiallyrecordedattheloweroffair therefore classified asfinancialleases. Financial and benefitsderivingfromtheownership;theyare equipment inwhichithassubstantiallyalltherisk The CompanyleasescertainProperty, plantand (a) WhentheCompanyislessee–financiallease 2.21. LEASES Dividendincome Interestincome Other revenues Non-current assets (or disposal groups) classified as CLASSIFIED ASHELDFORSALE 2.22. NON-CURRENTASSETSORDISPOSALGROUPS basis overthetermoflease. consolidated statementofincomeonastraight-line received fromthelessor)arechargedin respect tooperating leases(netofanyincentive are classified as operating leases. Payments with of therisksandbenefitsderivingfromownership, Leases, inwhichthelessorretainsanimportantpart (b) WhentheCompanyislessee–operating lease Property, plantandequipment. are chargedtoresultswhenincurred. Disbursements relatedtoenvironmentalprotection 2.24. ENVIRONMENTAL COSTS to resultsasincurred. engines, aswellminormaintenance,arecharged The unscheduledmaintenanceofaircraft and cycles andflighthours. grounds, accordingtoitsuseexpressedintermsof The depreciationrate isdeterminedontechnical and depreciateduntilthenextmaintenance. of theaircraft’s fuselageandenginesarecapitalized The costsincurredforscheduledmajormaintenance 2.23. MAITENANCE book valueandthefairlesscoststosell. assets heldforsaleareshownatthelesseroftheir ANNUAL REPORT 2012 Financial Statements 142 underlying assets.. derivative instruments tofixorlimitrisesinthe hedge alloftheserisks,theCompanyoperates with exchange-rate risk.Inordertofullyorpartially (i) fuel-pricerisk,(ii)interest-rate risk,and(iii)local exposed tomarketriskssuchas: Due tothenatureofitsoperations, theCompanyis (a) Marketrisk derivatives tohedgepartoftheserisks. effects onthenetmargin.TheCompanyuses markets andtriestominimizethepotentialadverse program is focused on uncertainty in the financial liquidity risk.TheCompany’s globalriskmanagement financial risks: (a) market risk,(b) credit risk, and(c) The Company’s activitiesareexposedtodifferent 3.1. NOTE 3. use oftheU.S. GulfCoastJet54index. and thereforehaveadvantagesincomparisontothe correlation withJetFuelandarehighlyliquidassets and distillateHeatingOil(“HO”),whichhaveahigh crude crude,Brent(“BRENT”) Intermediate (“WTI”) the CompanyhedgesitsexposureusingWest Texas for thisassethasalowliquidityindexandasresult is USGulfCoastJet54.However, thefuturesmarket which international marketforthisunderlyingasset, Fuel grade 54.There isabenchmarkpriceinthe The Companypurchasesanaircraft fuelcalledJet maintained, andweathergeopoliticalfactors. (“OPEC”), global refining capacity, stock levels by OrganizationofPetroleum ExportingCountries global supplyanddemandforoil,decisionstaken Fluctuations infuelpriceslargelydependonthe i. Fuel-price risk: FINANCIAL RISKFACTORS FINANCIALRISKMANAGEMENT The following tables show the notional value of the million (positive). December 31,2011,thismarketvaluewasUS$30.6 positions amountedtoUS$9.9million(negative).At At December 31, 2012, the market value of its fuel reason. recognized gainsofUS$39.9millionforthesame hedging. Duringthesameperiod2011,Company recognized lossesofUS$1.8milliononfuel During the financial year 2012, the Company contracted forthedifferentperiods: purchase positionstogetherwiththederivatives ANNUAL REPORT 2012 Financial Statements 143 (**) Weighted average betweencollarsandoptionswhenactivated.CorrespondtoequivalentinWTI. (*) Thevolumeshowninthetableconsidersallhedginginstruments(swapsandoptions)BrentWTI. (**) Weighted average betweencollarsandoptions,whenactivated. (*) Thevolumeshowninthetableconsidersallhedginginstruments(swapsandoptions)WTI. consumption value) of thehedge(ofexpected Aproximate percentage TOTAL (T (US$ perbarrel)(**) Contracted futureprice Volume (thousandsofbarrelsWTI) 31, 2012(*) Positions asofDecember Approximate percentageofhedge(ofexpectedconsumptionvalue) TOTAL (T Contracted futureprice(US$perbarrel)(**) Volume (thousandsofbarrelsWTI) Positions asofDecember31,2011(*) variation inthefuelpricehas animpactonthe are bookedascashflowhedge contracts, soa hedge positionshavenoimpact onincome(they in theexposuretomarket value,thecurrent represent changesincashflows, butavariation Due tothefactthatcurrent positionsdonot in price. in ordertobecompetitivetheeventofadrop therefore istomaintainahedge-freepercentage against theriskofariseinprice.Thepolicy as these are acquired to protect the Company also negativelyaffectscontracted positions through areductionincosts.However, thisdrop A dropinfuelpricepositivelyaffectstheCompany Sensitivity analysis h h US$) US$) 501,696 Q113 4,824 61% 104 70,200 Q213 117 600 7% 62,475 Q313 119 525 6% of December, 2011. benchmark price at December, 2012 andthe end curve oftheWTIandBRENT crudefutures parallel movementofUS$5perbarrelinthe The calculationsweremadeconsideringa the secondquarterof2014. beingthelastbusinessdayof hedge contract, defined untiltheendoflastcurrentfuel effect on equity. The term of the projection was to reasonablechangesinthefuelpriceandtheir analysis ofthefinancialinstrumentsaccording The followingtableshowsthesensitivity Company’s netequity). Maturities 62,475 Q413 119 525 6% 171,000 Q112 1,800 50% 95 52,500 Q114 100 525 6% 104,328 Q212 1,134 33% 92 Maturities

Q214 6,975 1% 63,756 93 75 Q312 19% 693 92

756,918 337,311 Total 7,074 Total 19% 3,627 107 34% 93 ANNUAL REPORT 2012 Financial Statements 144 Benchmark price credit moreaccessible andincreasingproduction rates to stimulate aggregate demand by making economic recession,itisusual toreduceinterest consider governmentintervention inperiodsof a declinethroughmarketeffects. However, ifwe moves long-termrates upwardwhileadropcauses improvement in long-term economic prospects heavily onthestateofglobaleconomy. An The fluctuationininterest rates depends ii. increased fuelcosts. an impactofapproximatelyUS$90.4million (the monthlydailyaverage) wouldhavemeant 5 dollarsintheWTIandBRENTbenchmarkprice the sameperiod.For the2012,averticalriseby million in the cost of total fuel consumption for meant a impact of approximately US$ 91.0 price (themonthlydailyaverage), wouldhave fall by5dollarsintheWTIandBRENTbenchmark which considersahedge-freeportion,vertical Given thefuelhedgestructureduring2012, inefectiveness withintheincomestatement. periods presentedtheCompanyhasnotrecorded to fuel hedging instruments of TAM. During the the Companydidnotapplyhedgeaccounting of fuelhedgingTAM society. UntilJune30,2012, presented toapplyhedgeaccountinginrespect company meetstherequiredcriteriaofIAS39, Beginning withthethirdquarterof2012 consumed. and collarstopartiallyhedgethefuelvolumes hedge instrumentslikeswaps,calloptions sharp pricefall.TheCompanythereforeuses compared toitscompetitorsintheeventofa rises toensureitisnotleftatadisadvantage The Companyseekstoreducetheriskoffuelprice (US$ perbarril) Cashflowinterest-rate risk: +5 -5 December 31,2012 (millions ofUS$) effect onequity Positions asof +12.6 -11.3 of December Positions as effect on (millions 31, 2011 of US$) equity +16.5 -13.8 in libor3months -100 +100 interest rates. related tolong-term obligations withvariable changes in market interest rates is mainly TheCompany’s exposuretorisksof market. due tothefluctuationininterest rates onthe of futurecashflowsthefinancialinstruments Cash flowinterest rate riskequatestothe and itsinvestments. to theCompany’s debtat floating interest rates interest rates willchange,createsariskrelated and thus how and governments will react, Thepresentuncertaintyabouthowthemarket periods ofeconomicexpansion). (in thesamewayinterest rates areraised in based oncurrentmarketconditions. changes areconsideredreasonablypossible hedged against interest-rate variations. These changes infinancialobligationsthatarenot The followingtableshowsthesensitivityof (“TJLP”). Brazil Certificate (“ILC”), andtheInterestRate Term of InterbankDeposit days and360days,Brazilian Bank OfferRate(“LIBOR”)of30days,90180 in oneportiontothevariationsofLondonInter interest rate. ThereforetheCompanyisexposed a 62%ofthedebtisfixedtofluctuationsin rate swapandcalloptioncontracts. Currently interest rates, theCompanyhassignedinterest- In ordertoreducetheriskofaneventualrisein (decrease) Increase basispoints basispoints (millions ofUS$) effect onPre-Tax of December Positions as earnings 31, 2012 +33.69 +33.69 (millions ofUS$) effect onPre-Tax of December Positions as earnings 31, 2011 +3.06 -3.06 ANNUAL REPORT 2012 Financial Statements 145 currency withoutanykindof indexation. Inthecase Chile, ArgentinaandColombia thetariffsareinlocal but the prices are indexed to the US dollar. In Brazil, domestic marketsassalesinPeru areinlocalcurrency business tariffsinUSdollars. Thereisamixinthe The Companymaintainsitscargoandpassenger expenses aredenominatedinlocalcurrencies. aircraft components and accessories.Remuneration aeronautic charges, aircraft leases,insurance and equivalents totheUSdollar, particularlyfuelcosts, part of its expenses are denominated in US dollars or real.Alarge equivalent totheUSdollarandBrazilian sells mostofitsservicesinUSdollars,prices and effectsonitsoperating income.TheCompany composition ofitsstatementfinancialposition US dollarintermsofsettingpricesforitsservices,the The functionalcurrencyusedbytheCompanyis conditions. Thecalculationsweremadeincreasing reasonably possiblebasedoncurrentmarket cash-flow hedges).Thesechangesareconsidered Company’s equity (because they are booked as hedging interestrates, causinganeffectonthe in thevaluationofcurrentfinancialinstruments Changes inmarketconditionsproduceachange iii. consolidated incomestatement. not recorded amounts for effectiveness in the during theperiodspresented,Companyhas In accordancewiththerequarementsofIAS39, change ineachperiod. futures curvesarenotnecessarilymetandwill by themarketbecauselevelsindicated sensitivity analysisandrelatetothoseprovided There arelimitationsinthemethodusedefor month Liborfuturescurve. (decreasing) vertically 100 basis points of the three- -100 +100 future curvein libor 3months Foreign exchangerate risk: (decrease) Increase basispoints basispoints (millions ofUS$) 31, 2012effect of December Positions as on equity +33.6 -35.5 31, 2011effect of December Positions as on equity (millions of US$)) +40.7 -43.2 protect thepossibleappreciationordepreciation The Companymayenterintoderivativecontracts to using forwardexchangecontracts. currency riskthroughhedgingselectedbalances The Companymanagesitsexposuretoforeign real. chilean pesoandbrazilian currencies, the largest exposure is presented by Australian dollarand New Zealanddollar. Of these PeruvianEuro, Esterlinglibra, sol,Colombianpeso, Uruguayan peso,Paraguayan guaraní, Mexicanpeso, real,Chileanpeso,Argentine mainly: Brazilian exposed tofluctuationsinthedifferentcurrencies, and sales are in US dollar. The Company is therefore of thedomesticbusinessinEcuador, bothtariffs currency derivativearepresentedbelow: The notionalvalueandmarketofforeign meet therequirement. currency equivalenttotheamountofdeposit a collar contract was made with a notional foreign foreign currencydepositsarenotallowedinBrazil, deposit wasrequiredasaguaranteed collateral. As of 2010andinthesecondquarter of 2011,adollar in thefirstquarterof2009,second In ordertorestructurederivativecontracts inBrazil, Company. of currencies against the functional currency of the Market Value (MUS$) Notional Value (MUS$) derivative Foreign currency Position atDecember 31, 2012 +30.00 +0.00 ANNUAL REPORT 2012 Financial Statements 146 Market Value(MUS$) Value(MUS$) Notional multiplus derivative Foreign currency months later. income after being exchanged, on average, six of thepointsareexpectedtoberecognizedin of collectionpoints.Thehighlyprobablesale the derivativescoincidewithprobabledate for eachmaturitydate.Theexpiration dateof and marketvalueofderivativesexchangerate The followingtablepresentsthenotionalamount rate collars. contract decrease exposure,MultiplusS.A. variations intheexchangerate R$/US$.To real, thesaleofthesepointsareassignedto dollars. AsfunctionalcurrencyistheBrazilian aredenominated inUS subsidiary MultiplusS.A. The pricesoffrequentflyerpointsinthe exchange rate R$/US$: performance toappreciateordepreciate10% following tableshowsthevariationoffinancial real, theresultsofCompanyvary. The account receivables of US dollars to Brazilian convert financialliabilities,assetsand According thestructureofCompanyto (depreciation) R$/US$ Apprececiation +10% -10% +283.00 2013 -14.68 Position atDecember 31, 2012maturity Effect atDecember 31, 2012MUS$ +18.00 2014 -0.55 +404.19 -404.21 +301.00 Total -15.23

Sensitivity exchangerate MultiplusS.A. position and Income statement of TAM S.A. and position andIncome statement ofTAM S.A. by convertingtheStatementoffinancial fluctuations inOther comprehensive income Company presentseffectsbytheexchangerate real,the and SubsidiariesistheBrazilian DuetothefunctionalcurrencyofTAM S.A. which arerecognizedimmediatelyasequity. exchange rate inthetime value ofderivatives, 28.2, mainly as theeffect of gains or lossesfrom have variedapproximatelyMUS$21.8/ thefinancialresultswould are heldconstant, 10% againsttheUSdollarandallothervariables realappreciatesordepreciatesby If theBrazilian or depreciate10%exchangerate R$/US$: income recognized in Total equity to appreciate table showsthechangeinOthercomprehensive in Othercomprehensiveincome.Thefollowing conversion toU.S. dollaralsoproduceseffects realwhose andSubsidiariesinBrazilian TAM S.A. Business Combinationisrecognizedasanassetof and Subsidiaries.Thegoodwillgenerated inthe financial statementofLATAM AirlinesGroupS.A. presentation currencyoftheconsolidated the U.S. dollar, being these last currency the Subsidiaries fromtheirfunctionalcurrencyto Apprececiation (depreciation) R$/US$ +10% -10% Effect atDecember MMUS$ 31, 2012 +401.12 -328.19

ANNUAL REPORT 2012 Financial Statements 147 transactions andthecontracting of derivative in otherkindsofinstruments,exchange-rate with banksandfinancialinstitutions,investments operative andfinancialactivities,includingdeposits The Companyisexposedtocreditriskdueits financial assets,notliabilities). a loss in market value of a financial instrument (only leadingto an obligationdueorfinancialinstrument, financial agreementorinstrumentfailstodischarge Credit riskoccurswhenthecounterpartytoa (b) Creditrisk results oftheCompany(Note21). of cash flow hedge and is recognized in the financial The timevalue corresponds to theineffective portion while thehedgetransaction isrecordedinincome. shown inequityandlatertransferred toincome, the percentageofcashflowcovered,initially intrinsic valueandtimevalue.Theis of hedginginstruments are segregated between The profit or losscaused by changes in the fair value Statements Effects ofexchangerate derivativesintheFinancial institutions, private investment funds, short-term Board, mainlyintimedeposits withdifferentfinancial according tocreditlimitsapproved bytheCompany’s assets necessaryfortheoperation areinvested Cash surpluses that remain after the financing of i. monitored regularly. maximum limitsforinvestmentswhichare Agencies. Additionallythecompanyhasestablished least investmentgrade bymajorRiskAssessment counterparty tothefinancialactivitiesremainat financial activities,theCompanyrequiresthat As awaytomitigatecreditriskrelated operational withtravel activitiesinBrazil agents). are monitored permanently (mainly in case of to abridgetheexposureoftheirdebtorswhich activities, theCompanyhasestablishedcreditlimits To reducethecreditriskassociatedwithoperational instruments oroptions. Financialactivities chooses themostrestrictiveparameter ofthe According tothesethreeparameters, theCompany limits accordingtotheCompany’s levelofliquidity. equity sizeofthecounterparty, and(iii)investment based on (i) their credit rating,investment, (ii) the standing ofeachcounterpartyandthelevels international). TheCompanyevaluatesthecredit different bankinginstitutions(bothlocaland the Company, investmentsarediversifiedamong that theriskassumedisknownandmanagedby In ordertoreducecounterpartyriskandensure equivalents andOthercurrentfinancialassets. These investments are booked as Cash and cash sovereign bondswithshortremainingmaturities. mutual funds,andeasily-liquidatedcorporate and fluctuates between1and45days. The exposureconsistsofthetermgranted, which issuing institutions. they are fully guaranteed by 100% by the airlines. Inthecaseofcredit-cardadministrators, are excludedfromoperating withIATA’s member they an agencyorairlinedoesnotpaytheirdebt, between airlinesandtravel agentsandcargo.When objectives istoregulatethefinancialtransactions scheduled commercialtraffic andoneofitsmain most oftheairlinesthatrepresentover90% international (“IATA”) organization comprising by InternationalAirTransport Association, card administrators. Thefirstthreearegoverned travel agencies,cargoagents,airlinesandcredit- The Companyhasfourlargesales“clusters”: ii. this exposure. The Companyhasnoguarantees tomitigate for operations witheachcounterparty. previous threeandbasedonthis,establisheslimits airlines andtravel andcargoagencies. Inthecase the roleofcollectorsand distributors between and banks(creditcards).These institutionsfulfill Systems (“CASS”),IATA ClearingHouse(“ICH”) Sales Processing(“BSP”),Cargo AccountSettlement related totheindustry, such asIATA, Business credit risk is to participate in global entities One ofthetoolsCompanyusesforreducing Operational activities

ANNUAL REPORT 2012 Financial Statements 148 through first-classfinancial entities. is investedinhighly-liquidshort-term instruments obligations. Thiscashand equivalentsposition investments maynotexceed the average termofits The Company’s policy is that the average term of its term of investments with those of its obligations. equivalents anditsfinancialassets,matchingthe The Companythereforemanagesitscashand funds tomeetitspaymentobligations. to market-riskhedges,theCompanyrequiresliquid plusthefinancing needsrelated renewal ofitsfleet, needs relatedtotheacquisitionofnewaircraft and the operation, and its investmentandfinancing Because ofthecyclicalnaturebusiness, has nofundstomeetitsobligations. Liquidity riskrepresentsthethatCompany (c) Liquidityrisk with travel agents).The bad-debtrate intheprincipal of operational activitiesofTAM LinhasAéreasS.A. which aremonitoredpermanently(mainlyincase limits toabridgetheexposureoftheirdebtors activities, theCompanyhasestablishedcredit To reduce thecreditriskassociatedwithoperational demands aregreater. or airlinesnotmembersofIATA, theinternal complementary to the external one, i.e. for agencies Theinternalclassificationsystemis local market. markets basedontrade reports availableonthe are also used for particular evaluations or specific Company isprovidedbyIATA. Internalsystems The externalcreditevaluationsystemusedbythe Credit qualityoffinancialassets directly byTAM LinhasAéreasS.A. agents fordomestictransportation isdone inBrazil relatedwithtravel agentsandcargo Aéreas S.A. entities. CurrentlythesalesinvoicingofTAM Linhas of guarantees hasbeenachievedthroughthese them. Areductionintermandimplementation between airlinesfortheservicesprovided of the Clearing House, it acts as an offsetting entity is insignificant. countries wheretheCompanyhasapresence

aircraft purchasecontracts. other bankborrowings,derivativecontracts and financial leases,operating leases,maturitiesof The Companyhasfutureobligationsrelated to ANNUAL REPORT 2012 Financial Statements 149

Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2012

More than More than Debtor Debtor Up to 90 More than one More than Class of Liability Debtor Creditor Tax No. Creditor Creditor country Currency 90 days to three to Total Amortization Effective rate Nominal value Nominal rate Tax No. country days to three years five years one year five years

ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Loans to 89.862.200-2 LATAM Airlines Group S.A. Chile 97.004.000-5 BANCO DE CHILE Chile US$ 30,331 - - - - 30,331 Semiannual 2.17% 30,000 2.17% exporters LATAM Airlines Group S.A. Chile 97.006.000-6 BCI Chile US$ 35,102 - - - - 35,102 Semiannual 1.70% 35,000 1.70% LATAM Airlines Group S.A. Chile 76.645.030-K ITAU Chile US$ 75,205 - - - - 75,205 Quarterly 1.32% 75,000 1.32% LATAM Airlines Group S.A. Chile 97.032.000-8 BBVA Chile US$ 102,770 - - - - 102,770 Annual 1.83% 102.000 1.79% Bank loans 89.862.200-2 LATAM Airlines Group S.A. Chile 97.036.000-K SANTANDER Chile US$ 181 195 214,373 - - 214,749 - 2.57% 214,373 2.57% LATAM Airlines Group S.A. Chile 97.030.000-7 ESTADO Chile US$ - 45,430 - - - 45,430 Semiannual 1.76% 44,848 1.74% Guaranteed 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E ING U.S.A US$ 4,025 12,070 32,208 32,203 44,336 124,842 Quarterly 5.69% 102,649 5.01% obligations CREDIT LATAM Airlines Group S.A. Chile 0-E France US$ 12,945 34,730 36,019 6,757 - 90,451 Quarterly 3.42% 87,448 3.37% AGRICOLE LATAM Airlines Group S.A. Chile 0-E PEFCO U.S.A US$ 4,209 12,695 24,726 15,597 19,493 76,720 Quarterly 4.96% 66,148 4.41% LATAM Airlines Group S.A. Chile 0-E BNP PARIBAS U.S.A US$ 17,740 53,435 144,037 146,463 152,574 514,249 Quarterly 4.15% 451,090 3.67% LATAM Airlines Group S.A. Chile 0-E WELLS FARGO U.S.A US$ 48,067 144,221 383,034 380,772 1.207,825 2,163,919 Quarterly 2.57% 1.959,463 1.76% LATAM Airlines Group S.A. Chile 0-E CITIBANK U.S.A US$ 11,508 34,628 93,287 94,699 217,034 451.,156 Quarterly 2.71% 409,908 2.10% LATAM Airlines Group S.A. Chile 97.036.000-K SANTANDER Chile US$ 5,405 16,281 44,085 45,085 119,771 230,627 Quarterly 1.39% 220,449 0.85% LATAM Airlines Group S.A. Chile 0-E BTMU U.S.A US$ 2,876 8,680 23,567 24,190 77,456 136,769 Quarterly 1.73% 128,222 1.13% LATAM Airlines Group S.A. Chile 0-E APPLE BANK U.S.A US$ 1,410 4,262 11,576 11,898 38,593 67,739 Quarterly 1.71% 63,480 1.11% BANK OF LATAM Airlines Group S.A. Chile 0-E AMERICA U.S.A US$ 3,714 11,194 30,188 30,703 111,059 186,858 Quarterly 1.97% 172,789 1.26% MERRIL LYNCH DEVELOPMENT LATAM Airlines Group S.A. Chile 0-E U.S.A US$ 2,309 6,958 18,759 19,079 68,662 115,767 Quarterly 1.98% 107,072 1.27% BANK OF JAPAN LATAM Airlines Group S.A. Chile 0-E DEUTSCHE BANK U.S.A US$ 5,777 17,413 46,958 47,790 109,099 227,037 Quarterly 3.35% 190,000 3.35% Financial 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E ING U.S.A US$ 7,260 17,848 38,443 26,596 1,865 92,012 Quarterly 3.71% 85,491 3.42% leases CREDIT LATAM Airlines Group S.A. Chile 0-E France US$ 4,992 15,145 31,093 31,375 26,226 108,831 Quarterly 1.32% 103,684 1.29% AGRICOLE LATAM Airlines Group S.A. Chile 0-E CITIBANK U.S.A US$ 2,009 6,028 16,075 16,075 16,075 56,262 Quarterly 6.38% 46,086 5.65% LATAM Airlines Group S.A. Chile 0-E S.CHARTERED U.S.A US$ 1,849 5,676 - - - 7,525 Quarterly 1.31% 7,462 1.31% LATAM Airlines Group S.A. Chile 0-E PEFCO U.S.A US$ 15,604 46,825 124,870 122,783 51,501 361,583 Quarterly 5.29% 314,261 4.70% Other loans 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E BOEING U.S.A US$ 596 2,248 146,189 - - 149,033 - 1.86% 146,189 1.86% LATAM Airlines Group S.A. Chile - OTROS - US$ 3,539 10,733 29,473 15,214 - 58,959 Quarterly 2.08% 58,960 2.08% Hedging 89.862.200-2 LATAM Airlines Group S.A. Chile - OTROS - US$ 10,393 31,344 68,360 30,509 5.,678 146,284 - - 141,624 - derivatives Non-Hedging 89.862.200-2 LATAM Airlines Group S.A. Chile - OTROS - US$ 1,235 3,557 5,926 - - 10,718 - - 10,300 - derivatives

TOTAL 411,051 541,596 1,563,246 1,097,788 2,267,247 5,880,928 5,373,996 ANNUAL REPORT 2012 Financial Statements 150

Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2012

More More than More than Debtor Creditor Creditor Up to 90 than one More than Nominal Class of Liability Debtor Tax No. Debtor Creditor Currency 90 days to three to Total Amortization Effective rate Nominal rate country Tax No. country days to three five years value one year five years years

ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

02.012.862/0001-60 TAM S.A. and Subsidiaries Brazil 0-E CREDIT AGRICOLE France US$ 1,093 64,533 - - - 65,626 Quarterly 2.81% 50,322 2.81% Bank loans TAM S.A. and Subsidiaries Brazil 0-E CITIBANK Brazil US$ 26,520 5,945 - - - 32,465 At Expiration 4.03% 29,986 4.03%

TAM S.A. and Subsidiaries Brazil 0-E BANCO DO BRASIL S.A Brazil US$ 45,946 118,821 - - - 164,767 At Expiration 5.35% 151,980 5.35% TAM S.A. and Subsidiaries Brazil 0-E BANCO IBM S.A Brazil BRL 356 - - - - 356 Semiannual 10.72% 92 10.72%

TAM S.A. and Subsidiaries Brazil 0-E BANCO ITAU BBA Brazil US$ 52,628 129,638 - - - 182,266 At Expiration 5.65% 163,391 5.65%

TAM S.A. and Subsidiaries Brazil 0-E BANCO SAFRA Brazil BRL/US$ 18,893 15,391 861 - - 35,145 Monthly/ At Expiration 7.69% / 4.01% 32,446 7.69% / 4.01% TAM S.A. and Subsidiaries Brazil 0-E BANCO UNIBANCO Brazil BRL 72 29 - - - 101 Monthly 8.94% 88 8.94%

TAM S.A. and Subsidiaries Brazil 0-E BANCO BRADESCO Brazil BRL - 28,563 - - - 28,563 At Expiration 3.34% 27,484 3.34% TAM S.A. and Subsidiaries Brasil 0-E NCM - NEDERLANDSCHE CREDIETVERZEKERING MAATSCHAPPIJ Holland US$ 231 495 1,320 1,320 2,695 6,061 Monthly 0.96% 4,608 0.95% Brazil Obligation with 02.012.862/0001-60 TAM S.A. and Subsidiaries 0-E THE BANK OF NEW YORK U.S.A. US$ 27,009 87,902 191,720 480,708 1,028,161 1,815,500 At Expiration 8.60% 1,100,000 8.41% the public TAM S.A. and Subsidiaries Brazil 0-E BANCO DO BRASIL S.A Brazil BRL 42,222 271,490 - - - 313,712 Semiannual 8.96% 244,678 8.56%

02.012.862/0001-60 TAM S.A. and Subsidiaries Brazil 0-E AFS INVESTMENT IX LLC U.S.A. US$ 3,482 7,728 20,609 20,609 29,196 81,624 Monthly N/A 65,127 N/A Financial leases TAM S.A. and Subsidiaries Brazil 0-E AIR CANADA U.S.A. US$ 3,521 9,350 - - - 12,871 Monthly N/A 12,750 N/A AIRBUS FINANCIAL TAM S.A. and Subsidiaries 0-E U.S.A. US$ 3,689 10,105 28,056 28,642 23,687 94,179 Monthly 2.25% 87,033 2.25% Brazil SERVICES

TAM S.A. and Subsidiaries Brazil 0-E AWAS U.S.A. US$ 5,957 14,958 9,418 - - 30,333 Monthly N/A 17,617 N/A TAM S.A. and Subsidiaries Brazil 0-E BNP PARIBAS U.S.A. US$ 775 1,919 5,445 5,983 11,867 25,989 Quarterly 1.50% 24,326 1.50%

TAM S.A. and Subsidiaries Brazil 0-E BNP PARIBAS France US$ 2,938 8,487 19,824 19,476 45,939 96,664 Quarterly 3.84% 87,986 3.84%

TAM S.A. and Subsidiaries Brazil 0-E CITIBANK N.A England US$ 13,119 44,695 90,296 87,083 241,694 476,887 Quarterly 3.69% 451,284 3.69% TAM S.A. and Subsidiaries Brazil 0-E CREDIT AGRICOLE - CIB U.S.A. US$ 5,392 14,164 70,758 11,728 20,603 122,645 Quarterly 2.29% 114,810 2.29%

TAM S.A. and Subsidiaries Brazil 0-E CREDIT AGRICOLE - CIB France US$ 20,355 50,931 132,830 124,825 184,734 513,675 Quarterly/Semiannual 2.01% / 0.82% 494,721 2.01% / 0.37%

TAM S.A. and Subsidiaries Brazil 0-E DVB BANK SE Germay US$ 3,482 10,103 25,845 - - 39,430 Quarterly 2.89% 37,500 2.89% TAM S.A. and Subsidiaries Brazil 0-E DVB BANK SE U.S.A. US$ 509 1,456 2,918 768 - 5,651 Monthly 2.25% 5,402 2.25%

TAM S.A. and Subsidiaries Brazil 0-E GENERAL ELECTRIC CAPITAL CORPORATION U.S.A. US$ 10,898 20,745 51,339 - - 82,982 Monthly 2.59% 81,086 2.59% TAM S.A. and Subsidiaries Brazil 0-E HSBC France US$ 1,601 4,427 12,000 12,302 43,975 74,305 Quarterly 1.70% 69,458 0.85%

TAM S.A. and Subsidiaries Brazil 0-E KFW IPEX-BANK Germay US$ 4,568 12,801 35,134 25,246 27,784 105,533 Monthly/Quarterly 2.11% / 2.21% 97,770 2.11% / 2.21%

TAM S.A. and Subsidiaries Brazil 0-E NATIXIS France US$ 12,126 26,169 73,710 78,388 178,957 369,350 Quarterly/Semiannual 2.62% / 3.32% 316,425 2.62% / 3.32% TAM S.A. and Subsidiaries Brazil 0-E PK AIRFINANCE US, INC. U.S.A. US$ 3,618 9,773 27,406 38,907 48,681 128,385 Monthly 1.96% 117,092 1.96%

TAM S.A. and Subsidiaries Brazil 0-E WACAPOU LEASING S.A. Luxembourg US$ 1,340 1,835 4,332 3,569 15,599 26,675 Quarterly 2.42% 23,647 2.42%

TAM S.A. and Subsidiaries Brazil 0-E WELLS FARGO BANK NORTHWEST N.A. U.S.A. US$ 1,836 5,379 3,205 - - 10,420 Monthly 1.98% 10,271 1.98% TAM S.A. and Subsidiaries Brazil 0-E SOCIÉTÉ GÉNÉRALE MILAN BRANCH Italy US$ 14,786 39,102 100,197 99,264 157,422 410,771 Quarterly 1.95% 380,025 1.95% TAM S.A. and Subsidiaries Brazil 0-E THE TORONTO-DOMINION BANK U.S.A. US$ 661 1,654 4,481 4,589 8,956 20,341 Quarterly 0.88% 19,431 0.08% TAM S.A. and Subsidiaries Brazil 0-E BANCO DE LAGE LANDEN BRASIL S.A Brazil BRL 493 1,458 1,891 - - 3,842 Monthly 7.51% 2,025 7.51% TAM S.A.and Subsidiaries Brazil 0-E BANCO IBM S.A Brazil BRL 604 1,882 136 - - 2,622 Monthly 10.58% 2,255 10.58% CISLATINA TAM S.A. and Subsidiaries 0-E Brazil ARRENDAMENTO MERCANTIL S.A Brazil BRL 41 13 - - - 54 Monthly 5.31% 53 5.31% TAM S.A. and Subsidiaries Brazil 0-E HP FINANCIAL SERVICE Brazil BRL 177 529 93 - - 799 Monthly 9.08% 747 9.08%

TAM S.A. and Subsidiaries Brazil 0-E SOCIETE AIR FRANCE France EUR 629 108 1,203 - - 1,940 Monthly 6.82% 1,572 6.82%

TAM S.A. and Subsidiaries Brazil 0-E SOCIETE GENERALE LEASING S.A Brazil BRL 2,766 - - - - 2,766 Monthly 0.00% 2,520 0.00%

COMPANHIA Other loans 02.012.862/0001-60 TAM S.A. and Subsidiaries Brazil 0-E BRASILEIRA DE

Brazil MEIOS DE PAGAMENTO Brazil BRL 31,882 9,143 - - - 41,025 Monthly 2.20% 41,025 2.20%

Hedging derivatives 02.012.862/0001-60 TAM S.A. and Subsidiaries Brazil 0-E OTROS Brazil US$ 4,008 9,353 1,963 - - 15,324 - 0.00% 15,324 0.00%

Non-Hedging derivatives 02.012.862/0001-60 TAM S.A. and Subsidiaries Brasil 0-E OTROS Brazil US$ 3,603 6,903 4,529 - - 15,035 - 0.00% 15,035 0.00% Total 373,826 1,047,977 921,519 1,043,407 2,069,950 5,456,679 4,399,392 ANNUAL REPORT 2012 Financial Statements 151

Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2012

More More than More than Debtor Creditor Creditor Up to 90 than one More than Nominal Nominal Class of Liability Debtor Tax No. Debtor Creditor Currency 90 days to three to Total Amortization Effective rate country Tax No. country days to three five years value rate one year five years years

ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Trade and other LATAM Airlines Group S.A. Others - Others - US$ 555,290 82,.049 - - - 637,339 - - 637,339 - accounts payables and Subsidiaries CLP 5,761 - - - - 5,761 - - 5,761 - payable BRL 432,693 31,.190 - - - 463,883 - - 463,883 - BRL 29,758 8,860 - - - 38,618 - - 38,618 - BRL 5,389 14,480 - - - 19,869 Monthly 6.60% 19,668 6.60% other 198,968 - - - - 198,968 - - 198,968 - currencies

Accounts payable, LATAM Airlines Group S.A. non-current - and Subsidiaries Others - Others - US$ - - 18,000 - - 18,000 - - 18,000 - US$ - - 15,994 - - 15,994 Quarterly 2.06% 15,541 2.06% BRL - - 3,594 - - 3,594 - - 3,594 - BRL - - 39,251 44,872 142,914 227,037 Monthly 6.60% 207,089 6.60% Accounts payable - LATAM Airlines Group S.A. Others 78.591.370-1 Bethia S.A. y Filiales Chile CLP 14 - - - - 14 - - - - to related parties Others 96.847.880-K Lufthansa Lan Technical currents Training S.A. Chile US$ 237 - - - - 237 - - - - Others 0-E Made in Everywhere Rep. Com.Distr.Ltda Brazil BRL 23 - - - - 23 - - - - Subtotal of page 1,228,133 136,579 76,839 44,872 142,914 1,629,337 1,608,461 Total consolidated 2,013,010 1,726,152 2,561,604 2,186,067 4,480,111 12,966,944 1,1.38,1.849 ANNUAL REPORT 2012 Financial Statements 152

Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2011

More More than More than Debtor Creditor Creditor Up to 90 than one More than Nominal Nominal Class of Liability Debtor Tax No. Debtor Creditor Currency 90 days to three to Total Amortization Effective rate country Tax No. country days to three five years value rate one year five years years

ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

89.862.200-2 LATAM Airlines Group S.A. Chile 97.004.000-5 BANCO DE CHILE Chile US$ 292 30,291 - - Loans to exporters - 30,583 Semiannual 1.91% 30,000 1.91% LATAM Airlines Group S.A. Chile 97.006.000-6 BCI Chile US$ 50,187 - - - - 50,187 Quarterly 1.51% 50,000 1.51% LATAM Airlines Group S.A. Chile 97.036.000-K SANTANDER Chile US$ - 12,704 - - - 12,704 Semiannual 2.35% 12,500 2.35% LATAM Airlines Group S.A. Chile 97.032.000-8 BBVA Chile US$ - 61,297 - - - 61,297 Annual 2.21% 60,000 2.13% 89.862.200-2 LATAM Airlines Group S.A. Chile 97.036.000-K SANTANDER Chile US$ 1,145 2,314 203,779 - Bank loans - 207,238 - 2.55% 202,899 2.55% LATAM Airlines Group S.A. Chile 97.030.000-7 ESTADO Chile US$ - 876 45,532 - - 46,408 Semiannual 1.82% 44,848 1.81%

Guaranteed 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E ING U.S.A US$ 4,025 12,076 32,192 32,213 60,438 140,944 Quarterly 5.69% 113,193 5.01% obligations LATAM Airlines Group S.A. Chile 0-E CREDIT AGRICOLE France US$ 21,249 61,560 67,744 33,826 7,228 191,607 Quarterly 4.05% 182,041 4.05% LATAM Airlines Group S.A. Chile 0-E PEFCO U.S.A US$ 15,633 46,900 125,060 106,833 124,408 418,834 Quarterly 5.18% 354,360 4.61% LATAM Airlines Group S.A. Chile 0-E BNP PARIBAS U.S.A US$ 19,616 59,263 159,420 161,548 252,865 652,712 Quarterly 4.27% 557,517 3.81% LATAM Airlines Group S.A. Chile 0-E WELLS FARGO U.S.A US$ 5,615 16,828 44,837 44,749 113,352 225,381 Quarterly 3.64% 188,942 3.53% LATAM Airlines Group S.A. Chile 0-E CITIBANK U.S.A US$ 13,585 41,065 110,232 111,306 290,463 566,651 Quarterly 2.94% 497,707 2.61% LATAM Airlines Group S.A. Chile 97.036.000-K SANTANDER Chile US$ 5,436 16,577 44,721 45,461 143,675 255,870 Quarterly 1.14% 239,882 1.01% LATAM Airlines Group S.A. Chile 0-E JP MORGAN U.S.A US$ 4,692 14,329 38,755 39,580 143,763 241,119 Quarterly 1.09% 226,295 0.94% LATAM Airlines Group S.A. Chile 0-E BTMU U.S.A US$ 2,227 6,817 18,434 18,807 69,085 115,370 Quarterly 1.41% 105,863 1.26% LATAM Airlines Group S.A. Chile 0-E APPLE BANK U.S.A US$ 757 2,330 6,322 6,469 23,952 39,830 Quarterly 1.37% 36,541 1.22%

89.862.200-2 LATAM Airlines Group S.A. Chile 0-E ING U.S.A US$ 7,332 43,281 39,703 Financial leases 21,559 9,324 121,199 Quarterly 3.94% 110,576 3.73% LATAM Airlines Group S.A. Chile 0-E CREDIT AGRICOLE France US$ 2,311 7,020 20,099 20,901 35,093 85,424 Quarterly 1.46% 79,428 1.46% LATAM Airlines Group S.A. Chile 0-E CITIBANK U.S.A US$ 1,809 6,140 19,663 - - 27,612 Quarterly 1.85% 26,426 1.82% LATAM Airlines Group S.A. Chile 0-E S.CHARTERED U.S.A US$ 1,773 5,435 7,538 - - 14,746 Quarterly 1.56% 14,481 1.56% LATAM Airlines Group S.A. Chile 0-E PEFCO U.S.A US$ 4,204 12,617 33,636 33,629 14,736 98,822 Quarterly 5.22% 85,948 4.68%

Other loans 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E BOEING U.S.A US$ - 5,884 271,307 - - 277,191 - 1.87% 269,965 1.87% LATAM Airlines Group S.A. Chile - OTHERS - US$ - - 31,081 31,006 - 62,087 Quarterly 2.43% 58,960 2.43%

Hedging derivatives 89.862.200-2 LATAM Airlines Group S.A. Chile - OTHERS - US$ 10,191 28,940 70,303 41,382 8,620 159,436 - - 154,410 - Non-hedging 89.862.200-2 LATAM Airlines Group S.A. Chile - OTHERS derivatives - US$ 1,357 3,896 8,998 1,586 - 15,837 - - 15,380 -

Trade and other LATAM Airlines Group S.A. Others - OTHERS - US$ 411,908 25,920 - - - 437,828 - - - 437,828 - accounts payables and Subsidiaries CLP 15,408 - - - - 15,408 - - 15,408 - OTHER 78,245 - - - 78,245 CURRENCIES - - - 78,245 -

LATAM Airlines Group S.A. Accounts payable, - Others - OTHERS - and Subsidiaries US$ - - 36,000 - - 36,000 - - 36,000 -

Lufthansa Lan Technical Accounts payable Others 96.847.880-K Chile US$ 147 - - - - 147 LATAM Airlines Group S.A. Training S.A. - - 147 - to related parties - and Subsidiaries Austral Sociedad currents Others 96.921.070-3 Chile CLP 2 - - Concesionaria S.A. - - 2 - - 2 - Others 78.591.370-1 Bethia S.A. y Filiales Chile CLP 116 - - - - 116 - - 116 - Inversora Aeronáutica Others Foreing Argentine US$ 102 - - Argentina - - 102 - - 102 -

Total 679,364 502,638 1,438,934 768,999 1,297,002 4,686,937 4,286,010 ANNUAL REPORT 2012 Financial Statements 153 optimum capitalstructureandreduceitscosts. a returnforitsshareholders,and(iii)tomaintainan order tocontinueasanon-goingbusiness,(ii)seek management ofcapital,are(i)tosafeguarditin The Company’s objectives,withrespecttothe 3.2. changes infuelpricesandinterestrates. maturity andfuelpurchasecontracts andrates, and Theincreasewasdueat stand-by lettersofcredit. in guarantees forCashandcashequivalent 2012, theCompanyhadprovidedUS$189.9million AttheendofDecember31, stand-by lettersofcredit. million inderivativemarginguarantees, forcashand At the end of 2011, the Company provided US$ 117.2 the derivatives. produced bychangesinthemarketvaluationof institution inordertoregulatethemutualexposure Company hasmarginfacilitieswitheachfinancial contracts withdifferentfinancialinstitutions.The rate hedging strategies involving derivatives The Companyhasfuel,interestrate andexchange of consolidation with TAM S.A. andSubsidiaries, of consolidation withTAM S.A. for beingconsideredinvestment grade). Asaresult rating ofhigherthanBBB-(theminimumrequired of between70%and80% an internationalcredit 2007, hasconsistedofmaintaining aleverage ratio The Company’s strategy, which has not changed since market valueofderivatives. amount ofnetequitywithouttheimpact plus marketablesecurities).Adjustedcapitalisthe (measured asthesumofcashandequivalents payments ofthelast12months,lesstotalcash total financialdebtplus8timestheoperating lease Netadjusteddebtis equity andnetadjusteddebt. as netadjusteddebtdividedbythesumof in linewithindustrypractice. Thisindexiscalculated The Company monitors the adjusted leverage ratio, reduce debt. to shareholders,issuenewsharesorsellassets dividends payabletoshareholders,returncapital the Company may adjust the amount of the In ordertomaintainoradjustthecapitalstructure, CAPITAL RISKMANAGEMENT

Adjusted leverage EQUITY TOTAL ADJUSTEDDEBTAND ADJUSTED EQUITY Cash flowhedgingreserve Net Equity TOTAL NETADJUSTEDDEBT Cash andmarketablesecurities Less: lease paymentx8 Last twelvemonthsOperating Total financialloans December 31,2011,wereasfollows: The leverage ratios asofDecember31,2012,and August 2010). (issued pursuanttothemergerannouncementin had arating ofBBBwithanegativeperspective grade rating). Priortothemerger, theCompany with stableperspective(whichisnotaninvestment a newlong-termrating fortheCompanyofBB+ the rating agencyFitchhasissuedonJune22,2012 See informationrelatedtofinancialcovenantsinNote36(a). December 17,312,649 12,029,836 (1,120,335) 5,282,813 3,390,664 9,759,507 5,142,083 31, 2012 ThUS$ 140,730 As of 69.5% December 6,295,229 1,585,880 4,709,349 1,393,576 3,788,272 1,445,324 31, 2011 (472,499) ThUS$ 140,556 As of 74.8%

ANNUAL REPORT 2012 Financial Statements 154 quoted pricesinactivemarketsforidenticalassetsor hierarchy consists of 3 levels (I) fair value based on This level ofinformationusedintheassessment. measurement using a hierarchy that reflects the The Companyhasclassifiedthefairvalue • • • • • • value. Theseinclude: financial instrumentsthat shouldberecorded atfair At December31,2012,theCompanymaintained 3.3 of themarketatperiodend. value offuturecashflowsusing forwardpricecurves similar instrumentsand/orestimatingthepresent used bytheCompanyarequotedmarketpricesof market information.Valuation techniquesgenerally valuation techniques that maximize use of available markets (derivative contracts) is determined using The fairvalueoffinancialassetsnottraded inactive of theperiodusingcurrentpricebuyer. trading, isbasedonquoted marketpricesattheclose active markets,suchasinvestmentsacquiredfor The fairvalue of financial instruments traded in are notbasedonobservablemarketdata. value based on inputs for the asset or liability that indirectly (thatis,derivedfromprices)and(III)fair asset orliability, eitherdirectly(thatis,asprices)or included withinlevel1thatareobservableforthe methods basedoninputsotherthanquotedprices liabilities, (II)fairvaluecalculatedthroughvaluation ESTIMATES OFFAIR VALUE Financial letters Private investmentfundsand Currency derivativecontracts, Fuel derivativecontracts, Interest rate derivativecontracts, Bank certificateofdeposit-CBD equivalent), Investments inshort-termMutualFunds(cash

ANNUAL REPORT 2012 Financial Statements 155 OTHER FINANCIALLIABILITIES,NONCURRENT OTHER FINANCIALLIABILITIES,CURRENT LIABILITIES OTHER FINANCIALASSETS,NONCURRENT OTHER FINANCIALASSETS,CURRENT CASH ANDEQUIVALENTS ASSETS As ofDecember31,2012 Interest rate derivatives notrecognizedasahedge Fair valueofforeigncurrencyderivatives Fair valueoffuelderivatives Fair valueofinterestrate derivatives Interest rate derivatives notrecognizedasahedge Fair valueofforeigncurrencyderivatives Fair valueoffuelderivatives Fair valueofinterestrate derivatives Fair valueofforeigncurrencyderivatives Fair valueoffuelderivatives Other investments Domestic andforeignbonds Financial letter Certificate ofdepositCDB Private investmentfunds Fair valueoffuelderivatives Fair valueofinterestrate derivatives Short-term mutualfunds the assessment: 2012 dependingonthelevelofinformationusedin financial instrumentsatfairvalueDecember31, The followingtableshowstheclassificationof Ar December Fair value 31, 2012 ThUS$ 311,675 311,675 104,547 116,555 317,598 474,176 13,360 10,502 41,736 70,075 73,611 77,316 5,515 1,963 4,530 4,477 1,023 1,118 4,098 799 748 95 6 Fair valuemeasurementsusingvaluesconsideredas Level I ThUS$ 311,675 311,675 317,598 319,145 799 748 ------Level II ThUS$ 104,547 116,555 155,031 73,611 77,316 13,360 10,502 41,736 70,075 5,515 4,477 1,963 4,530 1,023 1,118 4,098 95 6 - - - - - Level III ThUS$ ------ANNUAL REPORT 2012 Financial Statements 156 As ofDecember31,2011 OTHER FINANCIALLIABILITIES,NONCURRENT OTHER FINANCIALLIABILITIES,CURRENT LIABILITIES OTHER FINANCIALASSETS,CURRENT CASH ANDEQUIVALENTS ASSETS Interest rate derivativesnotrecognizedasahedge Fair valueofinterestrate derivatives Interest rate derivativesnotrecognizedasahedge Fair valueofforeigncurrencyderivatives Fair valueofinterestrate derivatives Private investmentfunds Fair valueofforeigncurrencyderivatives Fair valueoffuelderivatives Fair valueofinterestrate derivatives Short-term mutualfunds Fair value ThUS$ 156,334 156,334 120,304 130,163 60,733 30,615 92,052 39,132 44,923 9,859 4,907 631 884 73 Fair valuemeasurementsusingvaluesconsideredas 156,334 156,334 Level I ThUS$ 60,733 60,733 ------120,304 Level II 130,163 ThUS$ 30,615 39,132 31,319 44,923 9,859 4,907 631 884 73 - - - Level III ThUS$ ------ANNUAL REPORT 2012 Financial Statements 157 instruments asshowninthetablebelow: of fairvalues,theCompanyhasvaluedthese value. Inordertomeetthedisclosurerequirements financial instrumentswhicharenotrecordedatfair Additionally, atDecember31,2012,theCompanyhas values. fairvalueapproximates theircarrying current, bank balances,depositsandaccountspayable,non- their short-termnature.Inthecaseofcashonhand, are assumedtoapproximatetheirfairvalues,due The book values of accounts receivable and payable Accounts receivablefromrelatedentities Trade andotheraccountsreceivablecurrent Other financialassets Cash andcashequivalents Accounts payable,non-current Other financialliabilities,noncurrent Accounts payabletorelatedentities Trade andotheraccountspayables Other financialliabilities,current Accounts receivable Other financialassets,noncurrent Other financialassets Domestic andforeignbonds Time deposits Overnight Bank balance Cash onhand Book value 7,582,302 1,652,955 1,977,255 1,426,330 338,588 731,235 162,367 162,367 119,713 147,373 ThUS$ 50,612 72,977 15,187 64,667 6,835 274 As ofDecember - according tomarketpricesatperiodend. financial assets,thevaluationwasperformed similar financialinstruments.InthecaseofOther cash flowsatthecurrentmarket interest rate for estimated bydiscountingthefuturecontractual The fair value of Other financial liabilities is 31, 2012 7,806,643 1,652,955 2,090,726 1,426,330 Fair value 338,588 731,235 162,367 162,367 119,713 147,373 ThUS$ 50,612 72,977 15,187 64,667 6,835 274 - Book value 2,978,973 218,073 354,930 645,086 537,334 531,355 135,751 150,427 ThUS$ 21,833 98,392 37,359 46,028 17,013 4,605 7,491 367 838 As ofDecember 31, 2011 3,072,076 Fair value 218,073 354,930 645,086 593,585 531,355 138,642 150,427 ThUS$ 21,833 98,392 40,250 46,028 17,013 7,491 4,605 367 838 ANNUAL REPORT 2012 Financial Statements 158 loyalty programs whichhavenotyetbeenused. kilometers orpointscreditedtoholdersofthe of theperiod,correspondingtovaluation (e) (d) assets. (c) intangible assets. (b) certain assets. (a) and commitments;theserelateprincipallyto: some oftheassets,liabilities,revenues,expenses The Companyhasusedestimatestovalueandbook JUDGMENTS NOTE 4. the squeeze-outdescribedin Note18.2),entitling not acceptexchangeandwhich weresubjectof of TAM (except those shareholders of TAM who did all of the outstanding common and preferred shares LATAM issuedtheirordinarysharesinexchangefor financial statements.Theabove onthebasisthat purposes and therefore has consolidated their andSubsidiariesforaccounting control overTAM S.A. in determiningthatLATAMhas AirlinesGroupS.A. Additionally, themanagementhasappliedjudgment prospectively. which casetheeffectswouldbeaccountedfor modification oftheestimatesinfuture, In anycase,itispossiblethateventswillrequire information availableonthemattersanalyzed. These estimatesaremadeonthebasisofbest (g) determination oftheirvalues. (f) Theneedforprovisionsandwhererequired,the Thecriteriaemployedinthevaluationofcertain Thecalculationofdeferredincomeattheend Therecoverability ofdeferredtaxassets. Theevaluationofpossibleimpairmentlossesfor Airticketssoldthatarenotactuallyused. Theusefullivesandresidualvaluesoffixed ACCOUNTINGESTIMATES AND of theairlinesrequireaffirmativevoteboth all significantactionsrequiredfortheoperation beneficial to TAM butdetrimentalto LATAM. Further, incentive toexercisetheirrightsinamannerthatis shareholders anddirectorsofTAM willhaveno TAM controllingshareholders,ensuringthatthe LATAM andallofitsshareholders,includingthe This exchange aligns the economic interests of all therisksincidentaltooperations ofTAM. also, consequently, exposingittosubstantially that willbegenerated bytheLATAM Group and LATAM tosubstantiallyalloftheeconomicbenefits LATAM ofTAM’s operations isappropriate. accounting standardsandthatconsolidationby requirements establishedbytheapplicable substance ofthesearrangements satisfiesthe law,Brazilian LATAM believesthattheeconomic currently may be held by foreign investors under there arerestrictionsonvotingintereststhat LATAM board, determine compensation. Although the LATAM Groupexecutives and, together with the Further, theLATAM CEO willevaluateperformanceof LATAM Group and who will report to the LATAM board. who willbeinchargeoftheoverall operation ofthe under theTAM CEOandgloballybytheLATAM CEO, critical airlineactivitieswillbemanagedinBrazil operated asasinglecompany. Withinthis,most operations withTAM, andbothentitieswillbe In addition,LATAM isinprocessofintegrating LATAM andtheTAM controllingshareholders. ANNUAL REPORT 2012 Financial Statements 159 (a) For theperiodsended held separately andwhichisevaluatedregularly of anentityonwhichfinancialinformationis An operating segmentisdefinedasacomponent areas andprincipalcustomers. reporting aboutproductsandservices,geographical by segmentsinthefinancialstatements,plus standard setsrulesforthereportingofinformation established inIFRS8“Operating segments”.This The Companyreportsinformation by segmentsas NOTE 5. assets ofsegment Purchase ofnon-monetary Investments inassociates Assets ofsegment Expenses forincometax in theincomeofassociates Participation oftheentity SEGMENT PROFIT amortization Depreciation and EXPENSE TOTAL NETINTEREST Interest expense Interest income Other operating income activities Income fromordinary SEGMENTAL INFORMATION 19,978,154 9,733,950 (243.443) (294,447) (101,019) (784,038) ThUS$ (51,190) 211,955 2012 51,004 Air transport At 1,619 December 31, 972 - 1,394,640 7,648,659 5,585,440 (124,624) (396.475) (139,077) ThUS$ 320,197 (61,789) 132,804 14,453 2011 991 458 ThUS$ 637,195 400,860 At December31, 2012 62,146 26,334 (1,193) 26,485 2,138 8,201 (849) (151) Multiplus - - customer loyaltyprogram (“Multiplus”). operating segments:theairtransportation andthe The Company has determined that it has two evaluation ofresults. with respecttotheassignmentofresourcesand by theseniormanagementinmakingdecisions ThUS$ 2011 ------(412,621) ThUS$ (22,082) At December31, 2012 Eliminations ------ThUS$ 2011 ------20,593,267 2,448,530 9,722,189 (217,109) ThUS$ (102,212) (784,887) (294,598) 2012 220,156 At December31, 10,956 77,489 3,757 Consolidated 972 1,394,640 7,648,659 5,585,440 (124,624) ThUS$ (396,475) (139,077) 320,197 (61,789) 132,804 2011 14,453 991 458 ANNUAL REPORT 2012 Financial Statements 160 cargo. Assetsarecomposedprimarilyofaircraft and based onthepointofsalepassengerticketor The Companyallocatesrevenuesbygeographic area The Company’s revenuesbygeographic areaareasfollows: with TAM S.A. and Subsidiaries. with TAM S.A. incorporates theeffects ofBusinessCombinations For theperiodendedatDecember31,2012income represent morethan10%ofsales. The Companyhasnocustomersthatindividually a geographic area. the differentcountries,soitisnotpossibletoassign whichare used throughout aeronautical equipment, OTHER OPERATING INCOME INCOME FROMORDINARYACTIVITIES Asia Pacífic andrestofLatinAmerica Chile Ecuador Brazil Colombia Europe USA Argentina Perú 9,722,189 3,334,249 1,268,573 1,525,009 ThUS$ 366,664 738,803 890,167 620,263 712,190 266,271 220,156 2012 For theperiodendedat December 31, 5,585,440 1,135,904 1,312,376 ThUS$ 258,300 367,642 523,749 616,625 557,549 584,424 228,871 132,804 2011 ANNUAL REPORT 2012 Financial Statements 161 equivalents, incorporates the effects of Business The balanceatDecember31,2012Cashandcash NOTE 6. December 31,2011: following currenciesatDecember31,2012,and Cash and cash equivalents are denominated in the andSubsidiaries. Combinations withTAM S.A. TOTAL CASHANDEQUIVALENTS TOTAL CASHEQUIVALENTS Mutual funds Time deposits TOTAL CASH Overnight Cash onhand Cash TOTAL Other currencies Strong bolivar(**) US Dollar Euro Colombian peso Chilean peso(*) real Brazilian Argentine peso(*) Currency CASHANDEQUIVALENTS December 31, 2012 650,263 230,776 149,723 ThUS$ 63,565 51,346 15,502 28,758 40,212 70,381 As of December 374,407 31, 2011 158,313 148,274 ThUS$ 21,589 20,020 As of 6,239 5,688 7,668 6,616 ThUS$ 51,346(ThUS$23,914atDecember 31,2011). inUSdollarsis At December31,2012,therestricted amount, restrictions forfreelyremittingthese fundsoutsideVenezuela. availability ofbolivarsinVenezuela, theCompanyhascertain Management Commission(“CADIVI”). Despitehavingfree all remittancesabroadshouldbeapprovedbytheCurrency (**) In Venezuela, effective 2003, the authorities decreed that outstanding contracts atDecember31,2012. for theinvestmentsinArgentinepesos,Companyhasno For currencyderivativecontracts, forconversionintodollars 2011), forconversionintodollarsofinvestmentsinpesos. at December31,2012(ThUS$110,339 (*) The Company has no currency derivative contracts (forward) December 31, 2012 273,921 650,263 376,342 119,713 147,373 311,675 ThUS$ 64,667 As of 6,835 December 374,407 306,761 156,334 150,427 31, 2011 ThUS$ 67,646 46,028 17,013 As of 4,605 ANNUAL REPORT 2012 Financial Statements 162 and 31December2011aredetailedasfollow. Other inflows(outflows)ofcashat31December2012 transactions thatmustbedisclosed. The Companyhasnosignificant non-cash Opening balanceCashandcashequivalentsacquiredcompanies TOTAL OTHERINFLOW (OUTFLOWS) OPERATION FLOW Bank commissions,taxespaidandother Commodities fuelderivatives Guarantees TOTAL OTHERINFLOWS (OUTFLOWS) FINANCINGFLOW Other TOTAL OTHERINFLOWS (OUTFLOWS) INVESTMENTFLOW Settlement ofderivativecontracts Credit cardloanmanager Aircraft Financingadvances Other Certificate ofbankdeposits Amount paidbySqueezeOutTAMS(*) S.A Hedging marginguarantees Fuel hedge (231,079) (242,804) (167,589) (50,433) ThUS$ (13,728) (42,274) (20,479) (13,974) (50,827) (69,254) 263,986 2012 For theperiodended 27,143 12,057 14,237 76,280 December 31, - ThUS$ 146,849 (40,519) 163,754 (7,499) 2011 (7,686) (9,219) (8,995) (7,987) (1,609) 51,611 1,122 (577) 545 - - - ANNUAL REPORT 2012 Financial Statements 163 As ofDecember31,2012 7.1 NOTE 7. loans andreceivablescorrespondstoguarantees given. (*) Thevaluepresentedatfairthroughprofitandlossoninitialrecognition, correspondstoprivateinvestmentfunds;and TOTAL Accounts payable,noncurrent Other financialliabilities,noncurrent entities, current Accounts payabletorelated payable, current Trade andothersaccounts Other liabilities,current Liabilities TOTAL Accounts receivable,noncurrent Other financialassets,noncurrent(*) related entities,current Accounts receivablefrom receivable, current Trade andothersaccounts Other financialassets,current(*) Cash andcashequivalents Assets FINANCIAL INSTRUMENTSBYCATEGORY FINANCIALINSTRUMENTS receivables Loans and 2,065,554 1,426,330 338,588 162,367 ThUS$ 50,612 72,470 15,187 derivatives 11,944,021 liabilities financial 7,582,302 1,652,955 1,977,255 Hedge ThUS$ ThUS$ 731,235 Other 5,222 1,118 4,104 274 - - - - derivatives Held for trading Hedge ThUS$ ThUS$ 176,638 111,040 74,866 74,359 65,598 507 ------through profit as fairvalue designation and loss Held for trading 707,388 311,675 395,713 ThUS$ ThUS$ Initial 9,992 5,515 4,477 ------12,130,651 2,853,030 1,426,330 7,698,857 1,652,955 2,047,330 636,543 650,263 ThUS$ ThUS$ 731,235 Total Total 50,612 74,095 15,187 274 ANNUAL REPORT 2012 Financial Statements 164 At December31,2011 receivables correspondstoguarantees given. designated asatfairvaluethroughprofitandlossoninitialrecognition correspondstoprivateinvestmentfunds;andloansand (*) Thevaluepresentedinheldtomaturitycorrespondsmainlydomestic andforeignbondsotherinvestments;in TOTAL Accounts payable,noncurrent non current Other financialliabilities, related entities,current Accounts payableto payable, current Trade andotheraccounts Other liabilities,current Liabilities TOTAL non current Accounts receivable, non current(*) Other financialassets, related entities,current Accounts receivableto receivable, current Trade andothersaccounts assets, current(*) Other financial Cash andcashequivalents Assets maturity Held for ThUS$ 37,867 37,359 508 - - - - receivables Loans to 877,474 531,354 218,073 ThUS$ 98,392 21,325 7,491 838 derivatives liabilities 4,516,690 financial 2,978,973 Hedge ThUS$ ThUS$ 354,930 645,086 537,334 Other 31,319 31,319 367 - - - - - derivatives Held for trading 156,334 Hedge 156,334 ThUS$ ThUS$ 160,320 120,304 40,016 ------as fairvalue designation profit and through Held for trading ThUS$ ThUS$ 60,733 Initial 60,733 14,766 loss 9,859 4,907 ------1,163,727 4,691,776 3,109,136 531,355 227,803 374,407 354,930 645,086 582,257 ThUS$ ThUS$ 21,833 Total Total 7,491 838 367 ANNUAL REPORT 2012 Financial Statements 165 a) Assets 7.2 FINANCIALINSTRUMENTSBYCURRENCY TOTAL ASSETS US Dollar Chilean peso real Brazilian Accounts receivablefromrelatedentities,current Other currencies US Dollar Chilean peso real Brazilian Accounts receivable,non-current Other currencies Strong bolívar US Dollar Euro Colombian peso Chilean peso real Brazilian Argentine peso Trade andotheraccountsreceivable,current Other currencies Strong bolívar US Dollar Euro Colombian peso Chilean peso real Brazilian Argentine peso Other financialassets(currentandnoncurrent) Other currencies Strong bolívar US Dollar Euro Colombian peso Chilean peso real Brazilian Argentine peso Cash andcashequivalents OTHER CURRENCIES STRONG BOLÍVAR US DOLLAR EURO COLOMBIAN PESO CHILEAN PESO BRAZILIAN REAL ARGENTINE PESO December 1,264,183 2,853,030 1,426,330 31, 2012 164,892 937,544 197,858 103,561 545,426 710,638 230,776 149,723 650,263 530,380 132,869 561,746 142,254 ThUS$ 54,706 90,614 39,672 As of 63,565 51,346 15,502 28,758 40,212 70,381 14,565 15,187 34,123 50,612 90,154 67,287 33,049 10,925 9,564 6,677 2,759 8,086 7,825 2,828 131 611 248 601 648 11 December 1,163,727 31, 2011 748,280 220,911 ThUS$ 249,636 158,313 148,274 374,407 348,921 531,355 241,008 As of 20,851 22,841 14,245 46,426 45,149 45,024 21,589 20,020 14,174 34,583 63,818 35,467 24,879 3,066 6,239 5,688 7,668 6,616 7,422 7,491 1,247 8,266 4,175 125 809 838 378 291 588 29 60 9 5 - - risk management in thetablewithinNote3Financial Liabilities informationisdetailed b) Liabilities ANNUAL REPORT 2012 Financial Statements 166 The fairvalueoftrade andotheraccountsreceivable andSubsidiaries. Combinations withTAM S.A. receivables, incorporates theeffectsofBusiness accounts receivables and non-current accounts The balanceatDecember31,2012ofTrade, other AND NON-CURRENTACCOUNTSRECEIVABLE NOTE 8. not requiringaprovision. (*) Value ofthissegmentcorrespondsprimarilyto Accountsreceivablethatwereevaluatedintheirabilitytorecover, therefore period isasfollows: The maturity of these accounts at theend of each does notdiffersignificantlyfromthebookvalue. TOTAL Accounts receivablethatwereevaluatedintheirabilitytorecover Judicial, pre-judicialcollectionandprotesteddocuments More than180daysoverdue(*) Expired from91to180days Expired from1to90days Day TRADEANDOTHERACCOUNTSRECEIVABLE, CURRENT LESS: NON-CURRENTPORTION–ACCOUNTSRECEIVABLE TOTAL NETTRADEANDACCOUNTSRECEIVABLE LESS: ALLOWANCE FORIMPAIRMENT LOSS TOTAL TRADEANDOTHERACCOUNTSRECEIVABLE Other accountsreceivable Trade accountsreceivable TRADE,OTHERACCOUNTSRECEIVABLE December December 1,369,465 1,226,120 1,476,942 1,552,445 1,426,330 1,369,465 31, 2012 31, 2012 ThUS$ ThUS$ (50,612) (75,503) 182,980 As of As of 45,947 29,556 23,977 10,705 33,160 December December 31, 2011 31, 2012 ThUS$ ThUS$ 474,852 428,706 531,355 538,846 559,371 (20,525) 474,852 As of As of 10,549 24,082 (7,491) 84,519 9,976 975 564 ANNUAL REPORT 2012 Financial Statements 167 other accountsreceivableareasfollows: The amountsofindividuallyimpairedTrade and of eachperiodisasfollows: The receivablepastduebutnotimpairedattheend December 31,2011,areasfollows: accounts receivablesatDecember31,2012and receivables, non-currentaccountsreceivableand Currency balancesthatmakeuptheTrade Debtors underpre-judicialcollectionprocessandportfoliosensitization Judicial, pre-judicialcollectionandprotesteddocuments TOTAL More than180daysoverdue Expired from91to180days Expired from1to90days TOTAL Other currency Strong bolivar US Dollar Euro Colombian peso Chilean Peso Real Brazilian Argentine Peso CURRENCY TOTAL December December December 1,476,942 31, 2012 31, 2012 31, 2012 564,503 142,433 568,423 ThUS$ ThUS$ ThUS$ As of As of As of 67,842 23,977 10,705 33,160 90,402 67,287 33,049 75,503 45,947 29,556 2,759 8,086 December December December 31, 2011 31, 2011 31, 2011 538,846 348,930 ThUS$ ThUS$ ThUS$ As of As of As of 25,621 14,234 34,583 71,240 35,467 24,879 24,082 20,525 10,549 1,247 8,266 9,976 975 564 ANNUAL REPORT 2012 Financial Statements 168 follows: between January1,2011andDecember31,2012isas of Trade The movement in the allowance for impairment loss for thosethatareconsideredrealactiveguarantees. in morethan180daysareprovisioned100%,except thosedue estimate oftheprovisionisbydocument, the thesituationisdifferent, Specifically for TAM S.A. specific marketsignals. the portfolio,specificactsofdamage(default)and evidence ofimpairmentlossesarethematurity criteria usedtodeterminethatthereisobjective evidence of impairment of trade receivables. The The Companyrecordsallowanceswhenthereis control. method rather thandirectwrite-off, toensure allowance. TheCompanyonly usestheallowance exhausted, theassetsarewritten offagainstthe Once pre-judicialandjudicial collectioneffortsare Between 6and12months Over 1year Judicial andpre-judicialcollectionassets Maturity CLOSING BALANCEASOFDECEMBER31,2012 Conversion differenceaffiliates Addition forbusinesscombination (Increase) decreaseinallowance Write-offs As ofJanuary1.2012 CLOSING BALANCEASOFDECEMBER31,2011 (Increase) decreaseinallowance Write-offs As ofJanuary1,2011 accounts andOtherreceivables Impairment (75,503) (20,525) (54,511) (20,525) (22,077) ThUS$ (2,857) (2,508) 3,312 4,060 100% 100% (922) 50% ANNUAL REPORT 2012 Financial Statements 169 indicated above. each oneofthecategoriesaccountsreceivable presentation oftheinformationisfairvalue The maximum credit-risk exposure at the date of whetheroverdueorfallingdue. the account, classification isjustified,anallowancemadefor classify accountstopre-judicialrecovery. Ifsuchre- risk, determiningwhetheritisappropriatetore- to classifythemaccordingtheexistenceof and thepolicyistoanalyzecasebyinorder Historic andcurrentre-negotiationsarenotrelevant through IATA. Existing guarantees, if appropriate, are made no materiallysignificantdirectguarantees exist. risk andthesearevaluedwhentheysettled; There are no relevant guarantees covering credit Other accountsreceivable Trade accountsreceivable exposure 1,.369,465 ThUS$ Gross 182,980 December exposure Impaired 31, 2012 ThUS$ Gross (75,503) As of - net ofrisk Exposure trations 1,293,962 concen ThUS$ 182,980 - exposure ThUS$ Gross 474,852 84,519 December exposure Impaired 31, 2011 ThUS$ Gross (20,525) As of

- net ofrisk Exposure trations concen ThUS$ 454,327 84,519 - ANNUAL REPORT 2012 Financial Statements 170 Foreign Foreign Foreign 96.812.280-0 87.752.000-5 78.591.370-1 96.810.370-9 Tax No. TOTAL CURRENTASSETS Granja Marina yFiliales Bethia S.A. Verde yCPA. Ltda. Inversiones Costa Argentina Inversora Aeronautica Serviços deFidelização Companhia Brasileira de e Taxi AéreoS.A. TAM AviaçãoExecutiva y Filiales San AlbertoS.A. Tornagaleones S.A. (a) AccountsReceivable 2011, respectively, areasfollows: entities asofDecember31,2012and The Accountsreceivablefromandpayabletorelated PAYABLE TORELATED ENTITIES NOTE 9. ThUS$ 14,217. Lo Echevers”.Thevalueof the saleamountsto the landcalled“LotNo.12of parcellationproject as purchaser, enteredintoanagreementtopurchase (SubsidiaryofBethiaS.A.) as sellerandSotraser S.A. On December28,2012,InmobiliariaAeronáuticaS.A. Related party ACCOUNTSRECEIVABLE FROM/ parties Others related parties Others related parties Others related parties Others related parties Others related parties Others related shareholder Controlling Relationship Argentina of origin Country Brazil Brazil Chile Chile Chile Chile December 31, 2012 15,187 14,534 ThUS$ As of 597 11 14 30 1 -

December 31, 2011 ThUS$ As of 838 758 29 32 19 - - - Currency US$ BRL BRL US$ CLP CLP CLP Transaction 30 to45days 30 to45days 30 to45days 30 to45days 30 to45days 30 to45days 30 to45days deadlines transaction Nature of Monetary Monetary Monetary Monetary Monetary Monetary Monetary ANNUAL REPORT 2012 Financial Statements 171 Foreign Foreign 78.591.370-1 96.921.070-3 96.847.880-K Tax No. LIABILITIES TOTAL CURRENT Repr. Com. Distr. Ltda. Made InEverywhere yFiliales Bethia S.A. Concesionaria S.A. Austral Sociedad Technical Training S.A. Lufthansa Lan interested andduly-informedparties. carried out on free-trade conditions between Transactions betweenrelatedpartieshavebeen (b) Accountspayable Argentina Inversora Aeronaútica Related party parties Other related parties Other related Associate Associate parties Other related Relationship Argentina of origin Country Brazil Chile Chile Chile December 31, 2012 ThUS$ As of 237 274 23 14 - - December 31, 2011 ThUS$ As of 116 147 367 102 2 - Currency US$ US$ BRL CLP CLP Transaction 30 to45days 30 to45days 30 to45days 30 to45days 30 to45days deadlines transaction Nature of Monetary Monetary Monetary Monetary Monetary ANNUAL REPORT 2012 Financial Statements 172 part ofCostSales. flight consumptionandmaintenance,whichforms mainly due toin- 2011) withintheincome statement, ThUS$ 127,989(ThUS$41,213asofDecember31, As ofDecember31,2012,theCompanyrecorded values. amounts donotexceedtherespectivenetrealizable (ThUS$ 1,685asofDecember31,2011).Theresulting as ofDecember31,2012amountstoThUS$1,174 netofprovisionforobsolescencethat average cost, the Companyandthirdparties,whicharevaluedat in in-flightandmaintenanceservicesprovidedto materials thatwillbeusedmainlyinconsumption The itemsincludedinthisheadingaresparepartsand andSubsidiaries. with TAM S.A. incorporates theeffectsofBusinessCombinations The balanceatDecember31,2012ofInventories, 31, 2011respectively, aredetailedbelow: The InventoriesatDecember31,2012and NOTE 10. SUPPLIERS TOTAL PRODUCTION Non-technical stock Technical stock INVENTORIES December 31, 2012 ThUS$ 181,283 150,130 As of 31,153 December 31, 2011 ThUS$ As of 72,787 14,951 57,836 ANNUAL REPORT 2012 Financial Statements 173 The compositionofTax assetsisasfollows: NOTE 11. with TAM S.A. andSubsidiaries. with TAM S.A. incorporates theeffectsofBusinessCombinations The balances at December 31, 2012 of Tax assets, TOTAL NON-CURRENT Sales tax NON-CURRENT TOTAL CURRENT Others Tax income Sales tax CURRENT TAX ASSETS December 31, 2012 ThUS$ 220,529 100,263 110,609 As of 73,516 73,516 9,657 December 31, 2011 ThUS$ As of 42,958 98,789 68,755 42,958 24,727 5,307 ANNUAL REPORT 2012 Financial Statements 174 Combinations with TAM S.A. andSubsidiaries. Combinations withTAM S.A. assets, incorporates theeffectsofBusiness The balanceatDecember31,2012ofOtherfinancial follows: The compositionofOtherfinancialassetsisas NOTE 12. TOTAL NON-CURRENT (b) Hedgingasset (a) Otherfinancialassets NON-CURRENT TOTAL CURRENT (b) Hedgingasset (a) Otherfinancialassets CURRENT OTHERFINANCIALASSETS December 31, 2012 ThUS$ 636,543 632,439 As of 74,095 72,977 1,118 4,104 December 31, 2011 227,803 196,484 ThUS$ As of 21,833 31,319 21,833 - December 31,2011,respectively, areasfollows: Other financialassetsasofDecember31,2012and (a) Otherfinancialassets TOTAL OTHERFINANCIALASSETS TOTAL NON-CURRENT Other investments Other guarantees given Deposits inguarantee (loan) Deposits inguarantee (aircraft) NON-CURRENT TOTAL CURRENT Domestic andforeignbonds Other investments Other guarantees given Certificate ofdepositCBD Deposits inguarantee (aircraft) Financial letters of derivatives Guarantees formargins Private investmentfunds CURRENT December 31, 2012 ThUS$ As of 705,416 632,439 121,889 317,598 72,977 29,344 37,247 77,316 33,012 73,611 5,879 7,466 507 748 799 December 31, 2011 218,317 196,484 ThUS$ 21,833 15,498 37,359 11,657 79,171 60,733 As of 5,827 7,564 508 - - - - ANNUAL REPORT 2012 Financial Statements 175 December 31,2011,areasfollows: Hedging assets as of December 31, 2012 and (b) Hedgingassets period arepresentedinNote21. maintained bytheCompanyatendofeach The types of derivative hedging contracts of forwardexchangeandcollarscontracts. Foreign currencyderivativesincludethefairvalue TOTAL HEDGINGASSET TOTAL NON-CURRENT price derivatives Fair valueoffuel currency derivatives Fair valueofforeign NON-CURRENT TOTAL CURRENT price derivatives Fair valueoffuel currency derivatives Fair valueofforeign rate derivatives Fair valueofinterest CURRENT December 31, 2012 ThUS$ As of 5,222 1,118 4,104 1,023 4,098 95 6 - December 31, 2011 ThUS$ 31,319 31,319 30,615 As of 631 73 - - - ANNUAL REPORT 2012 Financial Statements 176 follows: The compositionofOthernon-financialassetsisas NOTE 13. December 31,2011areasfollows: Advance paymentsasofDecember31,2012 (a) Advancepayments TOTAL NON-CURRENT b) Otherassets a) Advancepayments NON-CURRENT TOTAL CURRENT b) Otherassets a) Advancepayments CURRENT TOTAL ADVANCE PAYMENTS TOTAL NON-CURRENT Others Aircraft leases NON-CURRENT TOTAL CURRENT Others handling services Handling andground Aircraft leases Aircraft insurance andothers CURRENT OTHERNON-FINANCIALASSETS December December 31, 2012 31, 2012 ThUS$ 243,905 169,824 ThUS$ 204,198 123,995 As of As of 85,536 39,707 45,829 39,707 45,829 18,975 20,732 14,325 18,703 12,643 158 December December 31, 2011 31, 2011 ThUS$ ThUS$ As of 32,711 15,205 42,741 11,189 31,552 31,552 11,189 11,189 13,196 As of 4,016 1,159 7,461 2,941 7,954 - 31, 2011areasfollows: Other assetsasofDecember31,2012,and (b) Otherassets TOTAL OTHERASSETS TOTAL NON-CURRENT Others Contributions toSITA Judicial deposits Aircraft maintenancereserve NON-CURRENT TOTAL CURRENT Others Contributions toSITA Aircraft maintenancereserve CURRENT December 31, 2012 328,193 204,198 123,995 ThUS$ 149,084 123,299 As of 54,336 304 474 696 - December 31, 2011 ThUS$ As of 5,175 4,016 1,159 4,016 318 841 - - - - ANNUAL REPORT 2012 Financial Statements 177 as follows: as ofDecember31,2012,and2011are Non-current assetsanddisposalgroupsheldforsale GROUPS) CLASSIFIEDASHELDFORSALE NOTE 14. result ofsalesenginesBoeing 737-200fleet. third quarter of 2012retirements weremade, as a Américo Vespucio. Otherwise,duringthesecond and quarter thelandlocatedinAvenidaCircunvalación Avenida Presidente Riesco, and during the fourth quarter the Boeing767-200and the landlocated in classified as held for sale. Were soldduring the third to Non-current assets or groups of assets for disposal N° 1401 from the item Property, plant and equipment located inAvenidaCircunvalaciónAméricoVespucio Avenida PresidenteRiescoN°5537andtheland thelandlocatedin 767-200, twoA318-100aircraft, During theyear2012,atransfer ofanaircraft Boing andSubsidiaries. with TAM S.A. incorporates theeffectsofBusinessCombinations assets ordisposal groups classified asheldforsale, The balanceatDecember31,2012ofNon-current TOTAL Scrapped aircraft Engines Inventories onconsignment Rotables Aircraft NON-CURRENTASSETS(ORDISPOSAL December 31, 2012 ThUS$ As of 47,655 44,878 1,184 365 542 686 December 31, 2011 ThUS$ As of 4,661 2,204 1,537 365 527 28 December 31,2012. The Companyhasnodiscontinuedoperations asof (ThUS$ 15,504atDecember31,2011). as ofDecember31,2012amountedtoThUS$23,413 Item balances are shown net of provision, which ANNUAL REPORT 2012 Financial Statements 178 Combinations with TAM S.A. and Subsidiaries.. Combinations with TAM S.A. 31, 2012incorporates theeffectsofBusiness The summarizedfinancialinformation atDecember consolidated: and privateinvestmentfundsthathavebeen of subsidiarycompanies,special-purposeentities with respectto the sumoffinancialstatements The followingisasummaryoffinancialinformation and privateinvestmentfunds. consolidation also includes special-purpose entities LATAM andSubsidiaries.The AirlinesGroupS.A. consolidated withinthefinancialstatementsof the companiesdefinedassubsidiarieshavebeen recognized asinvestmentsinsubsidiaries.All The Companyhasinvestmentsincompanies NOTE 15. TOTAL Non-Current Current As ofDecember31,2011 TOTAL Non-Current Current As ofDecember31,2012 TOTAL NETINCOME Total expenses Total operating revenues December 31, For theperiodended INVESTMENTS INSUBSIDIARIES (6,586,805) 10,088,103 6,494,944 7,634,339 2,453,764 1,992,502 Assets Assets ThUS$ ThUS$ 1,498,840 (91,861) ThUS$ 2012 493,662 (2,577,685) Liabilities Liabilities 9,136,432 2,619,157 5,389,364 3,747,068 1,535,531 ThUS$ ThUS$ ThUS$ 41,472 2011 917,171 618,360 ANNUAL REPORT 2012 Financial Statements 179 TAM S.A. (*) TAM S.A. Regional, AIRESS.A. Aerovías deIntegración Nacionales delEcuadorS.A. Aerolane LíneasAéreas Transporte AéreoS.A. Lan ArgentinaS.A. Lan CargoS.A. Lan Perú S.A. subsidiary Name ofsignificant subsidiaries. Summary financialinformationofsignificant Name ofsignificantsubsidiary 2012 Significant subsidiaries detailed as of December 31, (*) Corresponds to consolidated information of TAM S.A. andSubsidiaries. (*) Correspondstoconsolidatedinformation ofTAM S.A. TAM S.A. TAM S.A. Regional, AIRESS.A. Aerovías deIntegración Nacionales delEcuadorS.A. Aerolane LíneasAéreas Transporte AéreoS.A. Lan ArgentinaS.A. Lan CargoS.A. Lan Perú S.A. Total Assets 8,292,729 ThUS$ 165,032 357,725 165,961 727,091 159,361 74,204 Statement offinancialpositionasDecember31,2012 2,026,549 Current 249,174 144,463 172,856 133,448 Assets ThUS$ 58,457 40,531 incorporation Country of Non-current Argentina Colombia Ecuador Brazil 6,266,180 Chile Chile Peru Assets ThUS$ 106,575 108,551 554,235 33,673 21,498 25,913 Functional currency 7,517,696 Liabilities 114,302 141,454 371,663 150,319 COP US$ US$ US$ US$ ARS BRL ThUS$ 58,398 71,284 Total % Ownership 3,039,500 Liabilities 139,653 169,501 149,263 Current 69.97858 99.89804 94.99055 99.89803 99.99938 98.21089 71.94990 ThUS$ 46,434 68,068 26,731 Non-current Liabilities 4,478,196 202,162 ThUS$ 11,964 87,571 3,216 1,801 1,056 Nature andscopeofsignificant restrictions ontransferring Without significantrestrictions Without significantrestrictions Without significantrestrictions Without significantrestrictions Without significantrestrictions Without significantrestrictions Without significantrestrictions funds to controller to funds ended December31,2012 1,.047,106 Revenue 3,645,409 Results fortheperiod ThUS$ 283,870 305,177 373,157 538,328 292,066 (45,163) (75,522) (14,077) (50,693) Income ThUS$ 11,144 Net 9,152 2,513 ANNUAL REPORT 2012 Financial Statements 180 Regional, AIRESS.A. Aerovías deIntegración Nacionales delEcuadorS.A. Aerolane LíneasAéreas Transporte AéreoS.A. Lan ArgentinaS.A. Lan CargoS.A. Lan Perú S.A. subsidiary Name ofsignificant subsidiaries. Summary financialinformationofsignificant Name ofsignificantsubsidiary 2011. Significant subsidiaries detailed as of December 31, significant subsidiaries Summary financialinformationof Regional, AIRESS.A. Aerovías deIntegración Nacionales delEcuadorS.A. Aerolane LíneasAéreas Transporte AéreoS.A. Lan ArgentinaS.A. Lan CargoS.A. Lan Perú S.A. Total Assets 134,983 136,579 765,829 139,888 348,943 ThUS$ 71,598 Statement offinancialpositionasDecember31,2011 Current 124,485 237,627 108,561 188,937 Assets ThUS$ 76,936 42,369

Non-current incorporation Assets ThUS$ 576,892 111,316 Country of 58,047 29,229 28,018 15,403 Argentina Colombia Ecuador Chile Chile Peru Liabilities ThUS$ 116,663 114,037 343,799 128,979 80,271 61,102 Functional Total currency COP US$ US$ US$ US$ ARS Liabilities Current ThUS$ 128,025 112,555 122,450 70,112 58,726 26,332 Ownership 99.89804 94.99055 99.89803 69.97858 98.21089 71.94990 %

Non-current Liabilities ThUS$ 221,349 10,159 90,331 2,376 1,482 954 Nature andscopeofsignificant restrictions ontransferring Without significantrestrictions Without significantrestrictions Without significantrestrictions Without significantrestrictions Without significantrestrictions Without significantrestrictions ended December31,2011 funds to controller to funds Revenue Results fortheperiod ThUS$ 282,493 278,039 370,697 438,137 258,298 916,861 Income (25,860) ThUS$ Net (1,972) 26,146 57,140 2,303 920 ANNUAL REPORT 2012 Financial Statements 181 corresponding to thestatementsoffinancial the sumoffinancialstatementsinvestees, The followingsummarizedfinancialinformationis (a) RelatedCompanies andSubsidiaries.. Combinations withTAM S.A. The balance at December 31, 2012 of Equity accounted investments, incorporates the effects of Business the equitymethodisasfollows: The compositionofinvestmentsaccountedforusing NOTE 16. 2011. ending asofDecember31,2012and 2011, andthestatementsofincomeforperiods position asofDecember31,2012and EQUITY ACCOUNTEDINVESTMENTS (b) JointVentures (a) Relatedcompanies TOTAL Non-current Current As ofDecember31,2011 TOTAL Non-current Current As ofDecember31,2012 EQUITY ACCOUNTEDINVESTMENTS December 31, 2012 Assets Assets ThUS$ ThUS$ ThUS$ As of 3,757 2,138 1,619 2,918 3,612 2,649 3,193 269 419 December Liabilities Liabilities 31, 2011 ThUS$ ThUS$ ThUS$ As of 1,530 1,421 991 991 836 115 721 109 - ANNUAL REPORT 2012 Financial Statements 182 investments inassociatesduringtheyear2012. Lan Technical The Company made no Training S.A. andLufthansa Austral SociedadConcesionariaS.A. shown itsholdingsinthefollowingcompanies: As aninvestmentinassociates,theCompanyhas on theabilitytotransfer funds. These companiesdonothavesignificantrestrictions Company SUM OFNETINCOME Total expenses Total operating revenues Training S.A. Lan Technical Lufthansa Concesionaria S.A. Austral Sociedad incorporation Country of Chile Chile Functional currency CLP CLP December 31, 2012 Percentage ofownership As of 50.00 20.00 % December 31, 2011 As of 50.00 20.00 % December 31, 2012 ThUS$ As of ThUS$ 2012 (2,759) 3,704 Cost osinvestment For theperiodended 702 661 945 December 31 December 31, 2011 ThUS$ As of ThUS$ 2011 (1,902) 2,896 702 661 994 ANNUAL REPORT 2012 Financial Statements 183 investments in associates on a monthly basisin The Companyrecordsthegainorlossonits January 1,2011andDecember31,2012isasfollows: The movementofinvestmentsinassociatesbetween equity method. in associateswhicharenotaccountedforusingthe equity method. The Company has no investments the consolidatedstatementofincome,using CLOSING BALANCEASOFDECEMBER31,2012 TOTAL CHANGESININVESTMENTSASSOCIATED ENTITIES Dividends received Other increases,investmentsinassociatedentities Participation inprofits Opening balanceasofJanuary1,2012 CLOSING BALANCEASOFDECEMBER31,2011 TOTAL CHANGESININVESTMENTSASSOCIATED ENTITIES Dividends received Other reductions,investmentsinassociatedentities Participation inprofits Opening balanceasofJanuary1,2011 in reservesofMultiplus S.A. participation in changesinreserves are recognized of thecompany arerecognizedinincome and the Theparticipationinearnings recognized atcost. initially the equitymethodproportional investment, company sharesandparticipation isaccountedby owns 50% of investment returns. Multiplus S.A. doesnotallowunilateral decisionsthataffect S.A., The shareholdingparticipationinPrismahFidelidade the conversionofloyaltyprogram points. points programs orother waysofpossiblechanges, technical andtechnologicalconsulting,through limited to: thecustomer relationship management, companies. Theiractivitiesincludebutarenot relationships and sales incentive programs for programs relatedto loyaltyprograms/customer provision ofvariousservices,thedevelopment isthe The purposeofPrismahFidelidadeS.A. (“Prismah”). Prismah FidelidadeS.A. April 2,2012,whosecorporate namewaschangedto (“CBSF”).Thecompanywas incorporated on S.A. Companhia Brasileira de Servicos de Fidelização AIMIA Newco UK LLP (“Aimia”) jointly control the and a subsidiary of TAM S.A. Multiplus S.A., (b) JointVenture ThUS$ 1,619 (352) (79) (25) 628 685 295 991 991 398 502 593 ANNUAL REPORT 2012 Financial Statements 184 December 31,2012,hasthefollowingitems:: asof The companyPrismahFidelidadeS.A. (**) Extraordinary General Assembly (*) General AssemblyAct Beginning balanceatDecember31,2011 Movement investmentalDecember31,2012 ENDING BALANCEAT DECEMBER31,2012 Result ofequityequivalence Capital increase-AGE(**)09/18/2012 Capital aware-AAGConstituent(*) Expense intheperiod Year Revenues Current liabilities Non-current assets Current assets Result oftheheritageequity Loss fortheyear Investment value Liquid equity Participation % “Ordinary sharesownedbyMultiplusS.A.” Number ofordinaryshares Social capitalatDecember31,2012ThUS$

December 31, 2012 ThUS$ As of (2,320) (1,078) (2,156) 13,144,000 2,356 2,275 4,356 2,137 6,432 6,572,000 164 6,432 50

6,572,000 6,571,500 Amount shares of 500 - - ThUS$ (1,078) 2,138 3,215 1 - ANNUAL REPORT 2012 Financial Statements 185 The detailsofintangibleassetsareasfollows: GOODWILL NOTE 17. Subsidiaries. and effects ofBusinessCombinationswithTAM S.A. assets otherthangoodwill,incorporates the The balanceatDecember31,2012ofIntangible Computer software ASSETS (GROSS) INTANGIBLE CLASSES OF TOTAL Other assets Trademarks Airport slots Developing software Computer software ASSETS (NET) INTANGIBLE CLASSES OF TOTAL Other assets Trademarks Airport slots software Developing computer INTANGIBLE ASSETSOTHERTHAN December December 1,928,501 1,848,593 1,561,130 1,561,130 31, 2012 31, 2012 ThUS$ ThUS$ 223,586 144,244 As of As of 82,373 60,040 82,373 60,040 1,372 806 December December 31, 2011 31, 2011 113,689 ThUS$ ThUS$ 64,923 As of As of 39,395 25,124 39,395 73,486 808 404 - - - - ANNUAL REPORT 2012 Financial Statements 186 2012 isasfollows: goodwill betweenJanuary1,2011andDecember31, The movement in Intangible assets other than expenses. Theaccumulatedamortization ofcomputer consolidated statementofincome inadministrative The amortizationoftheperiod isshowninthe between 3and7years. which theCompanyhasestablishedusefullivesof primarily oflicensingandcomputersoftware,for Intangible assets with defined useful lives consist withinaperiodoftime. inaspecificairport, aircraft, authorization forthearrivalanddepartureof The airportslotscorrespond to anadministrative Transfer software business combinations Acquisitions through of January1,2012 Opening balanceas DECEMBER 31,2011 CLOSING BALANCEASOF Amortization Withdrawals Additions Withdrawals Additions of January1,2011 Opening balanceas DECEMBER 31,2012 CLOSING BALANCEASOF Amortization difference Subsidiaries conversion software Net Computer 144,244 (30,978) ThUS$ 25,124 (1,637) (9,670) 55,618 78,106 18,768 25,124 26,074 8,904 (757) (184) Developing software (51,392) ThUS$ 60,040 39,395 20,286 28,238 43,633 39,395 19,109 166 - - - - Airport slots 1,561,130 1,552,016 to ThUS$566(ThUS$404asofDecember31,2011). intangible assets as of December 31, 2012 amounts accumulated amortizationofotheridentifiable 79,342 (ThUS$ 48,362 as of December 31, 2011). The programs asofDecember 31,2012amountstoThUS$ ThUS$ 9,114 ------Trademarks ThUS$ 82,373 81,892 481 ------assets Net ThUS$ Other (162) (162) 806 563 404 404 566 (2) 3 - - - - 1,848,593 1,740,815 ThUS$ (31,140) Total 64,923 (1,639) (9,832) 62,401 64,923 29,190 45,749 9,007 4,226 (184) ANNUAL REPORT 2012 Financial Statements 187 determined assumingthatyields,occupation to whichgoodwillhasbeenassigned The valueinuseofthosecashgenerating units least onceperyear. impairment wasidentified.Thetestingisdoneat impairment testbasedonthevalueinuseandno At December 31, 2012, the Company performed an (ThUS$ 163,777atDecember31,2011) December 31, 2012 amounted to ThUS$ 3,008,657 the subsidiary at the acquisition date. Goodwill at of theCompanyinidentifiablenetassets acquisition overthefairvalueofparticipation The goodwillrepresentstheexcessofcost 18.1 COMBINATION NOTE 18.GOODWILLANDBUSINESS acquisition ofthe combinedcompanies.. civil andtaxcontingency. Themaximumtimethatthestandardgives(IFRS3)tomakechanges isoneyearfromthedateof thesechangesaremainlyrelateto:fairvalueoffinancial instruments,fairvalueofthefleetandrecognitionlabor,In TAM S.A. (*) Theamendmentsrelatetoinitial recognitionofchangesintheFair valuedetermined atthetimeofBusinessCombination. Opening balanceasofJanuary1,2011 CLOSING BALANCEASOFDECEMBER31,2012 exchange rate differences Increase (decrease)dueto Amendment initialrecognition(*) Additions bybusinesscombinations Opening balanceasofJanuary1,2012 CLOSING BALANCEASOFDECEMBER31,2011 exchange rate differences Increase (decrease)dueto Initial recognitionmodification(*) Additions bybusinesscombinations GOODWILL 2,835,067 2,118,057 TAM S.A. 700,458 ThUS$ 16,552 ------Integración Aerovías de AIRES S.A. Regional. 102,648 ThUS$ 93,429 94,224 93,429 9.219 (820) 25 time valueofmoneyandrisksrelatedtothosecash discounted atarate whichtakesintoaccountthe the unitsoperate. Thedeterminedcashflowsare term economicprojectionsinthemarketswhich based onagrowthfactorconsistentwiththelong- and extrapolate thefinalvalueoftheseperiods for theinitialperiodsbasedoninternalbudgets obtainable levels.TheCompanyprojectscashflows factors andfleetcapacityaremaintainedatcurrent December 31,2012,isasfollows: The movementofGoodwillfromJanuary1,2011to account inestimationoftheunits’futurecashflows. generating unitswhichhavenotbeentakeninto - - - AEROASIS S.A. ThUS$ 7,266 6,613 6,613 6,736 (123) 653 - - - - societies ThUS$ Other 63,676 63,735 63,770 63,735 (59) (35) - - - - 3,008,657 2,118,057 163,777 ThUS$ 700,458 163,777 157,994 Total 26,365 6,736 (133) (820) ANNUAL REPORT 2012 Financial Statements 188 Business CombinationconsigningtotheCompanyas Under IFRS3thisoperation hasbeenregisteredasa exchange offer. 27, 2012,thatis,TAM shareholderswhoaccepted the abroadonJune to theshareholdersofHoldcoIIS.A. and ADRs(“American DepositaryReceipts”)fromLAN DepositaryReceipts”) respective BDRs(“Brazilian andthe shares toshareholdersofSisterHoldcoS.A. occurred withthedeliveryofrespectiveLAN andHoldcoIIS.A.. Sister HoldcoS.A. shares inonerelatedof0.9LAN´sforeach forLAN´s andHoldco IIS.A. of SisterHoldcoS.A. 2012. These scriptures recorded the share exchange same time, anditwasrectified bydeeddated July10, execution ofmergerissuedbysuchcompaniesatthe whichwasreflected inthedeedof and TAM S.A. purpose oftheassociationbetweenCompany twocompaniesspeciallyconstitutedforthe II S.A., andHoldco withSisterHoldcoS.A. Airlines GroupS.A.), (todayLATAMcompleted betweenLANAirlinesS.A. Dated June22,2012themergerwassuccessfully andSubsidiaries (a) TAM S.A. 18.2 writing MaterializationStatement issuedMerger Materialization Statementon MergerbyAbsorption and theCompanygranted adeedofrectification HoldcoIIS.A. Diez Morello,SisterHoldco S.A., On July10,2012,inSantiago´s Notary ofEduardo toLATAMbecameeffective. S.A. AirlinesGroup LAN andTAM, and(ii)therenamingofLANAirlines concluded theprocessofBusinessCombination As a consequence of the end of that process: (i) requirement forthesuccessofexchangeoffer. the condition for the cancellation of registration, whichfulfilled being apubliccompanyinBrazil, TAM shares thataccepted that TAM would stop exchange previouslyreferenced was 99.9%ofthe The shareexchangeoffermaterializedwiththe over thecombinedentity. relating oftheformershareholdersLANandTAM is basedontheeconomicrightsandrelativevote one whoissuingthesharesincombination,this purchaser ofTAM. BesidesthefactthatLATAM isthe BUSINESS COMBINATION ht exchange That Company. investors wasdue to discount15,795sharesofthe of ShareholderssothatBancoItaúonbehalf of TAM. This should be reflected in the Register 29,706,339 sharesofTAM, insteadof29,723,889shares amountedto result oftheExchangeOfferinBrazil not timelyidentifiedassuch.Becauseofthis,the which correspondedtoduplicateordersthatwere forsharesofLAN accepted forexchangeinBrazil to invalidatetheinclusionof17,550sharesTAM parties in the same Notary which the purpose was by AbsorptiondatedJune22,2012thesame TAM wasasfollows: At December31,2012theownershipstructureof Real. 339 millionBrazilian remaining 4.1%throughthedisbursementbyTAM of TAM, theaforementionedconditionwasmet onthe represented 95.9% of the total outstanding shares of committed bythecontrollingshareholdersofTAM, received intheexchangeoffer, plustheshares by controllingshareholdersofTAM. SinceTAM shares not exchangedintheexchangeofferorcontributed compulsory could rescue all TAM shares that were granted legislation,underwhicha bytheBrazilian On July27,2012,TAM madeuseoftheSqueeze-Out Essential Matter. which, datedJuly19,2012,TAM wasinformed bya cancellation ofitsregistration asapubliccompany (“CVM”), byDeedNo.330/2012informedTAM ofthe On July18,2012,theComissãodeValores Mobiliários ANNUAL REPORT 2012 Financial Statements 189 TAM S.A. Holdco IS.A. flight networkofLATAM and TAM. may earn and redeem miles/points in the complete frequent flyerprograms LANPASS and TAM Fidelidade reduced connectiontimes.Additionally, membersof connectivity, improvedroutes andfrequencies, and airlines LATAM andTAM willhaveare,the increased Among the benefits that passengers of both transporting cargoto 169 destinationsin27countries. around 150destinationsin22countriesand The combinedcompanywilloffertoitspassengers connectivity toitspassengers. for developmentintermsofnetworkingand are complementarycreatingasignificantpotential Additionally, the business models of both companies airline intheregiontermsofcoverage andfleet. This BusinessCombinationhascreatedtheleading airline. Brazilian and 88.1%oninternationalroutesoperated forthe and amarketshare(2011)Domestic41.2%inBrazil salesof7,300millionUnitedStatesdollars aircraft, operation, over30thousandemployees,afleetof160 TAM with35yearsof isaleadingairlineinBrazil TOTAL PN (non-voting): ON (voting): Shares TOTAL Series B(economic) Series A(voting): Shares 55,413,784 0 (owned bythecontrolling shareholders ofTAM) 938(80.58%) 55,413,784 (100%) TEP Chile S.A. TEP ChileS.A. Holdco IS.A. 0 938 Subsidiaries areasfollows: and financial positionatJune22,2012of TAM S.A. The assetsandliabilitiesofthestatement this purposeisoneyear. The maximumperiodthatthestandardprovidesfor and certainitemsofProperty, plantandequipment. value calculationsare:Intangibles,Contingencies assets andliabilitiesthatarestillsubjecttofair being atthisdate,provisionalincharacter. Themain Combination at December 31, 2012 is not complete, determination ofadjustmentsBusiness purposes was June 22, 2012, the definition and Considering theacquisitiondateforaccounting 94,718,931 55,413,847 55,413,621(100.00%) 226(19.42%) LATAM AirlinesGroupS.A. LATAM AirlinesGroupS.A 0 94,718,931(100%) 150,132,715 55,413,784 94,718,931 55,414,785 55,413,621 Total Total 1,164 ANNUAL REPORT 2012 Financial Statements 190 The Goodwillrecognizedon the acquisitionofTAM shall besubjecttoimpairment testannually. and its useful lives are classified as indefinite, which measured atfairvaluethedateofcombination The airportslots(landingandtake-offs)havebeen NET ASSETS TOTAL LIABILITIES Other non-financialliabilities Deferred taxliabilities Other provisions Accounts payabletorelatedentities Accounts payable Other financialliabilities Other non-financialliabilities Tax liabilities Other provisions Accounts payabletorelatedentities Trade andotheraccountspayables Other financialliabilities TOTAL ASSETS Deferred taxassets Current taxassets,non-current Property, plantandequipment Intangible assetsotherthangoodwill Accounts receivable Other non-financialassets Other financialassets classified asheldforsale Non-current assets(ordisposalgroups) Tax assets Inventories Accounts receivablefromrelatedentities Trade andotheraccountsreceivable Other non-financialassets Other financialassets Cash andcashequivalents Expressed inThUS$ Goodwill ofThUS$2,818,515has beenrecognized. of financialpositionLATAM AirlinesGroupS.A., Business Combination. Therefore, inthestatement that are expected to be achieved through the and liabilities. This value expresses the synergies the transaction that cannot be attributed to assets and Subsidiaries reflects the excess value of S.A 27,380 Book Value 7,913,684 1,027,949 4,651,274 7,335,125 3,717,019 1,048,847 282,690 325,171 174,718 743,586 263,986 253,476 578,559 189,101 454,289 969,575 731,394 13,682 66,493 70,123 94,483 52,835 63,239 14,236 8,865 4,266 25 45 62

8,834,131 1,740,815 1,022,010 4,233,592 7,848,898 3,748,677 1,054,225 FairValue 305,706 151,949 743,586 263,986 181,953 985,233 27,380 204,062 619,840 434,921 970,299 642,863 13,682 66,493 69,823 94,483 65,185 14,236 8,865 4,266 25 45 62 ANNUAL REPORT 2012 Financial Statements 191 in thefollowingtable: The determinationofthepurchasepriceisexplained The income contribution of TAM S.A. andSubsidiaries The incomecontributionofTAM S.A. December 31,2012. at fairvalueofacquiredassets andliabilitiesat this is valued In regards to non-controlling interest, statement whentheywereincurred. ThUS$50,647, and are recorded in the Income to maketheBusinessCombinationamounts The costs incurred by LATAM Airline Group S.A. shown inOtherreserves. purchase price,amountingtoThUS$2,665,692is 951,409. Thedifferencebetweenthisvalueandthe equivalenttoThUS$ andHoldcoIIS.A., Holdco S.A. determined bythesocialcapitalamountofSister The capitalincreaseoriginatedinthemerger, is Exchange rate asofJune22503.89 (*) Value oftheshareatJune22$13,489 Less: Purchase price Goodwill determination: GOODWILL Noncontrolling interest liabilities acquired Fair valueofassetsand Number ofshares LAN Exchange 135,119,066 (a) ThUS$ (21,504) 985,233 Share price a fairvalue at June22 exchange 26.76973 (*)

June 22 rate at US$ (b)

2,818,515 3,782,244 ThUS$ 963,729 Purchase price (a) times(b) 3,617,101 ThUS$ December 31,2012,beingThUS$(45,163). consolidated financialstatementsofthegroup,at was ThUS$ 3,645,409, the net result considered in the

Squeeze OutAt rate atJune22 July exchange ThUS$ 165,143 Total purchaseprice ThUS$ 3,782,244

ANNUAL REPORT 2012 Financial Statements 192 largest operator withintheColombiandomestic in 1980,atthedateofacquisitionitwassecond founded Aerovías deIntegración Regional,AIRESS.A., The purchasepricewasThUS$12,000. owned theaforementionedpercentageofAIRESS.A. which andSAIPAN HoldingS.A., AKEMI HoldingsS.A. 100% ofthesharesPanamanian corporations This acquisition was made through the purchase of S.A. company AerovíasdeIntegración Regional,AIRES of the Company, acquired 98.942% of the Colombian asubsidiary On November26,2010LANPax GroupS.A., (b) AerovíasdeIntegración Regional,AIRESS.A. Non-current assets Currents assets Summary statementoffinancialpositionatacquisitionsdate: GOODWILL Purchase price Controlling interest Goodwill determination: Controlling Interest TOTAL ASSETS ThUS$ 94,224 12,000 82,224 ThUS$ (82,224) 58,967 31,652 27,315 Subsidiaries asGoodwillofThUS$94,224. statement offinancialpositiontheCompanyand The BusinessCombinationisrecognizedinthe America. and cargo)throughanincreaseincoverage inLatin business of LATAM (passengers Airlines Group S.A. Additionally, betterperformanceisexpectedbythe of thebusinessmodelLATAM AirlinesGroupS.A. intheColombianmarketandefficiency of AIRESS.A. Synergies areexpectedbetweenthecombination Colombia aswell3internationaldestinations. regular service to 27 domestic destinations within offered market with a market share of 22%. AIRES S.A. TOTAL LIABILITIES Equity Non-current liabilities Current liabilities ThUS$ (86,553) 125,193 58,967 20,327 ANNUAL REPORT 2012 Financial Statements 193 AEROASIS S.A. isacorporation incorporated under AEROASIS S.A. ThepurchasepricewasThUS$3,541. AEROASIS S.A. of the Company acquired 100% of Colombian society subsidiary Dated February 15,2011,LANPax GroupS.A. (c) AEROASISS.A. Subsidiaries asgoodwillofThUS$6,736. statement offinancialpositiontheCompanyand The Business Combination is recognized in the Deed No.1,206datedMay2,2006. the lawsofRepublicColombiathroughPublic TOTAL ASSETS Non-current assets Currents assets Summary statementoffinancialpositionatacquisitiondate: GOODWILL Purchase price Controlling interest Goodwill determination Controlling interst ThUS$ 6,736 3,541 3,195 ThUS$ (3,195) 4,812 3,010 1,802 TOTAL LIABILITIES Equity Non -CurrentLiabilities Current Liabilities ThUS$ (3,195) 4,812 8,007 - ANNUAL REPORT 2012 Financial Statements 194 equipment isasfollows: The compositionbycategoryofProperty, plantand NOTE 19. Combinations with TAM S.A.and Subsidiaries. Combinations withTAM S.A.and incorporates theeffectsofBusiness and equipment, The balanceatDecember31,2012ofProperty, plant TOTAL and equipment Other property, plants Leasehold improvements Motor vehicles and accessories Fixed installations equipment Information technology Machinery Plant andequipment Buildings Land Construction inprogress Other Own aircraft Other Financial leasingaircraft PROPERTY, PLANTANDEQUIPMENT 15,710,654 December 5,657,286 5,812,401 6,979,986 7,946,519 1,153,003 31, 2012 ThUS$ 155,115 171,568 966,533 245,939 As of 87,004 70,706 81,251 76,956 65,307 Gross BookValue December 7,690,607 1,087,563 4,921,907 5,335,840 31, 2011 772,.887 ThUS$ 832,772 413,933 101,123 As of 59,885 94,485 45,161 64,936 89,678 35,673 3,376 December Acumulated depreciation (3,912,765) (1,835,736) (1,875,827) (1,278,738) (1,640,530) 31, 2012 ThUS$ (131,105) (361,792) As of (40,091) (65,276) (48,451) (38,908) (41,799) (70,869) - - (1,762,625) (1,123,871) (1,211,814) December 31, 2011 (308,805) (338,774) ThUS$ (29,969) (62,986) (26,943) (29,838) (67,087) (87,943) (23,185) As of (1,998) - - December 11,797,889 1,153,003 3,821,550 3,936,574 5,701,248 6,305,989 31, 2012 ThUS$ 115,024 604,741 175,070 As of 21,728 22,255 42,343 40,463 35,157 65,307 Net BookValue December 5,927,982 3,798,036 4,124,026 1,087,563 31, 2011 ThUS$ 464,082 493,998 325,990 As of 29,916 31,499 18,218 35,098 22,591 77,938 35,673 1,378 ANNUAL REPORT 2012 Financial Statements 195 below: to December31,2012isshown equipment fromJanuary1,2011 categories ofProperty, plantand The movementinthedifferent

(a) As of December 31, 2011

Other Plant and Information Fixed Motor Leasehold property, Property, Construction Land Buildings equipment technology installations vehicles improvements plant and Plant and in progress net net equipment & accessories net net equipment equipment net net net net

ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Opening balance as 715,603 35,538 80,121 3,663,136 18,599 27,003 1,290 44,120 363,020 4,948,430 of January 1, 2011 Additions 29,898 - 1,111 1,028,568 11,885 6,663 543 6,555 19,072 1,104,295 Acquisitions through ------16 16 business combination Disposals - - (2,681) (109,936) (8) - (6) - (537) (113,168) Transfers (to) from non-current assets (127) - - (112) (1,195) (588) (1) - (115) (2,138) and disposal group Retirements (150) - (4) (4,817) (85) (23) (17) - (332) (5,428) Depreciation expense - - (3,302) (265,062) (6,354) (3,602) (215) (19,938) (30,608) (329,081) Conversion difference (852) - (95) (771) (63) (54) 18 - (95) (1,912) subsidiaries Other increases 343,191 135 2,788 (169,021) (188) 5,699 25 762 143,577 326,968 (decreases) CHANGES, TOTAL 371,960 135 (2,183) 478,849 3,992 8,095 347 (12,621) 130,978 979,552 CLOSING BALANCE AS OF 1,087,563 35,673 77,938 4,141,985 22,591 35,098 1,637 31,499 493,998 5,927,982 DECEMBER 31, 2011 ANNUAL REPORT 2012 Financial Statements 196 below: to December31,2012isshown equipment fromJanuary1,2011 categories ofProperty, plantand The movementinthedifferent

(b) As of December 31, 2012

Other Plant and Information Fixed Motor Leasehold property, Property, Construction Land Buildings equipment technology installations vehicles improvements plant and Plant and in progress net net equipment & accessories net net equipment equipment net net net net ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Opening balance as 1,087,563 35,673 77,938 4,141,985 22,,591 35,098 1,637 31,499 493,998 5,927,982 of January 1, 2012 Additions 34,885 - 8,805 2,783,869 11 7,836 458 4,668 154,000 3,006,147 Acquisitions through 553,781 46,373 87,338 464,415 16,990 1,697 4,099 - 3,058,899 4,233,592 business combination Disposals (27) (5,116) (4,821) (73,654) (15) - (28) - (5) (83,666) Transfers (to) from non-current assets (2,256) (11,895) - (49,910) - - - - - (64,061) and disposal groups Retirements (281) - (1,100) (127,519) (951) (262) (62) (82) (18,799) (149,056) Depreciation expense - - (3,311) (324,189) (14,982) (6,526) (1,316) (16,432) (255,366) (622,122) Conversion difference 1,,844 272 (2,370) 2,206 3,967 532 (100) - 16,287 22,638 subsidiaries Other increases (522,506) - 12,591 (458,524) 1,237 3,968 34 2,075 487,560 (473,565) (decreases) CHANGES, TOTAL 65,440 29,634 97,132 2,216,694 17,872 7,245 3,085 (9,771) 3,442,576 5,869,907 CLOSING BALANCE AS OF 1,153,003 605,307 175,070 6,358,679 40,463 42,343 4,722 21,728 3,936,574 11,797,889 DECEMBER 31, 2012 ANNUAL REPORT 2012 Financial Statements 197 and equipment: Aircraft includedintheCompany´sProperty, plant (c) Compositionofthefleet Operating leases: Airbus Airbus Airbus Airbus Airbus A320 Airbus Airbus Boeing 787 Boeing 777 Boeing 777 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Aircraft TOTAL FLEET TOTAL Bombardier Bombardier Boeing Airbus Airbus A330 Airbus A321 Airbus A320 Airbus A319 Boeing 777 Boeing 767 Boeing 767 Aircraft TOTAL A340 A340 A330 A321 A319 A318 A340 737 Freighter Freighter Dhc8-400 Dhc8-200 Model Model 300ER 200ER 300ER 300ER 300F 300F 800 700 300 200 500 300 200 200 200 100 100 300 200 200 100 December December 31, 2012 31, 2012 204 As of As of 327 123 30 18 76 39 10 65 18 3 2 8 8 3 2 2 8 5 - 4 6 3 2 1 2 4 8 December December 31, 2011 31, 2011 101 150 As of As of 21 33 24 10 49 10 10 1 8 4 ------4 9 1 9 2 4 - - - ANNUAL REPORT 2012 Financial Statements 198 stated policy, areclassifiedasfinanceleasesbecausethepresentvalueofpaymentsrepresentsmosteconomic Additionally, forthesameBusinessCombination,5aircraft wereaddedunderoperating leasecontracts, whichaccordingtothe Its residualvaluesareestimatedaccordingtomarketvalueattheendofsuchcontracts. under modalityoffinancialleasing,whicharedepreciatedaccordingtotheduration oftheircontracts, between12and18years. andSubsidiaries65aircraft were incorporatedAs aresultoftheBusinessCombinationwithTAMremarketingclause(**) S.A. (*) Exceptforcertaintechnicalcomponents,whicharedepreciatedonthebasisofcyclesandflighthours. plant andequipment: (d) MethodusedforthedepreciationofProperty, its participationinthepermanent establishments Duringthe first quarter theCompanysold aircraft. passengers and twocargo) and three Boeing 787-800 six Boeing 777-300 aircraft767-300 aircraft, (four nineBoeing A319-100, sevenAirbusA320-200 aircraft, guarantees wereaddedforthreeaircraft Airbus In theperiodendedDecember31,2012direct guarantee:: i. plant andequipment: (e) AdditionalinformationregardingProperty, and administrative expensesintheconsolidatedstatementofincome. 622,122 (ThUS$329,081fortheperiodendedDecember31,2011).DepreciationchargesyeararerecognizedinCostofsales The depreciationchargedtoincomeintheperiod,whichisincludedconsolidatedstatementofincome,amountsThUS$ (**) Aircraft withremarketingclausearethosethatrequiredtosellattheendofcontract. the property. Theusefullifeassignedis6years,accordingtotheduration ofthecontracts Other property, plantandequipment Leasehold improvements Motor vehicle Fixed installationsandaccessories Information technologyequipment Plant andequipment Buildings Property, plantandequipmentpledgedas Straight linewithoutresidualvalue Straight linewithoutresidualvalue Straight linewithoutresidualvalue (*) 36% inthelong-haulfleet. of 20%intheshort-haulfleetand Straight linewithresidualvalue Straight linewithoutresidualvalue Method the long-haul fleet. (*) the long-haulfleet. short-haul fleetand36%in value of20%inthe Straight linewithresidual Straight linewithoutresidualvalue B767-300F. the sale,oftwoaircraft A340-300andoneaircraft were eliminatedforthreeaircraft A318-100dueto during thesecondsemesterof2012guaranties passenger aircrafts and onefreighter).Additionally, A319-100 andsevenaircraft Boeing767-300(six guarantees associated withtwoaircraft Airbus Leasing LLC. AssuchtheCompanyeliminateddirect Pochard LeasingLLC, GarzaLeasingLLC andCaiquen Quetro LeasingLLC, CodornizLeasingLimited, minimum 10 10 20 3 5 5 5 Useful life maximum 20 10 10 10 20 50 5 ANNUAL REPORT 2012 Financial Statements 199 pledged asguarantee: Description ofProperty, plantandequipment Combinations with TAM S.A. andSubsidiaries. Combinations withTAM S.A. incorporates theeffectsofBusiness and equipment, The balanceatDecember31,2012ofProperty, plant 2011). ThUS$ 3,777,715(ThUS$504,355asofDecember31, guarantees as of December 31, 2012 amounts to 31, 2011).Thebookvalueofassetswithindirect to ThUS$2,888,753(ThUS$316,859atDecember whose totaldebtatDecember31,2012amounted to assets recorded in Property, plant and equipment Additionally, thereareindirectguarantees related carrying valueofthegoodsprovidedasguarantees. nominal value.Bookvaluecorrespondstothe The amounts of existing debt are presented at TOTAL DIRECTGUARANTEE JP Morgan Credit Agricole BNP Paribas Banco SantanderS.A. Wilmington Trust Company Creditor ofguarantee Aircraft andengines Aircraft andengines Aircraft andengines Aircraft andengines Aircraft andengines committed Assets Airbus A318 Airbus A320 Airbus A319 Boeing 787 Boeing 767 Fleet B Airbus A340 Airbus A320 Airbus A319 Airbus A320 Airbus A319 oeing 777 4,017,678 1,296,704 Existing 121,172 626,317 858,221 280,698 261,139 360,100 ThUS$ 81,698 19,531 68,096 44,002 Debt December 31,2012 As of 5,149,667 1,640,071 150,026 782,609 111,458 937,074 324,159 105,349 156,355 107,625 333,105 501,836 ThUS$ Value Book 2,502,338 1,032,921 Existing ThUS$ 187,705 411,043 284,265 301,327 Debt 89,287 13,750 54,491 34,530 93,019 December - 31,2011 As of 3,441,252 1,305,915 215,978 163,746 114,376 350,387 404,723 239,530 504,827 117,106 ThUS$ Value 24,664 Book - ANNUAL REPORT 2012 Financial Statements 200 signed anew commitment to thismanufacturer for 2011 and2016.Later, inDecember2010the Company aircraft oftheA320 family with deliveries between for thepurchaseof30 commitment withAirbusS.A.S. In December2009,theCompanysignedapurchase (*) Accordingtothemanufacturer’s pricelist. future purchasesareasfollows: Fully depreciatedassetsandcommitmentsfor ii. As ofDecember31,2012,and as aresultofdifferent respectively. December 2011,for3,5and2B767-300aircraft The BoeingCompanyduringFebruary, Mayand Otherwise purchasecontracts weresignedwith purchase optionsfor4A320NEOaircraft. Additionally,price list. the Company has active is ThUS$6,400,000,accordingtothemanufacturer’s between 2013and2018.Theapproximateamount 78 Airbusaircraft ofthe A320familytobedelivered there remain contracts signed with Airbus S.A.S., 2012, andasaresultofdifferentaircraft purchase With regardstotheabove,asofDecember31, between 2017and2018. aircraft oftheA320NEOfamilywithdeliveries June 2011,acontract wassignedfor20additional deliveries between 2012 and 2016. Additionally, in the acquisitionof50aircraft ofthesamefamilywith acquisition ofaircraft (*) Commitments forthe plantandequipmentstillinuse depreciated property, Gross bookvalueoffully Commitments andothers 24,500,000 December 31, 2012 ThUS$ 188,214 As of 14,500,000 December December 31, 2011 ThUS$ As of 43,626 and during2013theCompanyplanstoselllast7. first 5aircraft weresold.During2012soldanother3 no significant impact onresults.During 2011 the 2011 and2013.Itisestimatedthatthissalewillhave involves thesaleof15AirbusA318modelbetween Thisplanalso strategic planforthelong-termfleet. The acquisitionoftheseaircraft ispartofthe options for15787Dreamlineraircraft. Additionally, theCompanyhasvalidpurchase the manufacturer’s isThUS$5,000,000. pricelist, accordingto 2017. Theapproximateamount, withdeliverydatesbetween2013and aircraft, 767-300 aircraft during2013and23787Dreamliner Boeing Company, remaintoreceiveatotalof4 aircraft purchase contracts signed with The In December2008, anewcommitmentpurchase and 5AirbusNEOA350. has validpurchaseoptionsfor 10A320familyaircraft dates startingfrom2015.Additionally, theCompany 2018, and27Airbusaircraft A350familywithdelivery , with deliveries between 2013 and remaintoreceive71aircraft with AirbusS.A.S., the different aircraft purchase agreements signed With theabove,atDecember31,2012,asaresultof 2016 and2018. 22 familyaircraft A320 NEOwithdeliveriesbetween family withdeliveriesbetween2016and2017,plus the acquisition of 10 additional aircraft of the A320 commitment was signed to this manufacturer for exercised topurchase5A350.InOctober2011,anew 2014 and2015onthesamedateoptionwas of 20A320familyaircraft withdeliveriesbetween for the acquisition commitment with Airbus S.A.S. In July 2010, signed for a 22 A350purchase aircraft. 2010 and2014,alsosignedapurchasecommitment and 4aircraft A330-200,withdeliveriesbetween acquisition of20additionalA320familyaircraft in January2008signedanewcommitmentforthe deliveries between2007and2010.Subsequently, A320 familyaircraft with and6A330-200aircraft, forthe acquisitionof31 signed withAirbusS.A.S. In November2006,apurchasecommitment was commitments areincorporated: and Subsidiaries the following with TAM S.A. Additionally, asaresultoftheBusinessCombination ANNUAL REPORT 2012 Financial Statements 201 Property, plantandequipment. iii. 13,100,000, according to the manufacturers price list. andSubsidiariesisThUS$ Combination withTAM S.A. contracts incorporated for the effect of the Business The approximateamountofindividual purchase options for2B777aircraft. Additionally, theCompanyhasvalid purchase Boeing Company, remaintoreceive4B777aircraft. the variouspurchasecontracts signedwithThe With the above, at December 31, 2012, due to another 2B777aircraft withdeliveriesin2014. 2011 anagreementwassignedforthepurchaseof 2 B777 aircraft with deliveries in 2013, and in February agreement wassignedwithTheBoeingCompanyfor interest Costs ofcapitalized interest costs of capitalized capitalization Average rate of Capitalized interestcostswithrespectto % T h US$ For theperiodsended 2012 45,069 December 31, 2.60 33,342 2011 3.51 ANNUAL REPORT 2012 Financial Statements 202 Garza LeasingLLC Forderum HoldingB.V. (GECAS) FLYAFI 3S.R.L. FLYAFI 2S.R.L. FLYAFI 1S.R.L. Eagle LeasingLLC Codorniz LeasingLimited Cernicalo LeasingLLC Caiquen LeasingLLC Bluebird LeasingLLC AWMS I(AWAS) Air Canada Agonandra StatutoryTrust Agonandra StatutoryTrust Lessor TOTAL Wells Fargo BankNorthNationalAssociation(ILFC) Wacapou LeasingS.A TMF InterleaseAviationIIIB.V. TMF InterleaseAviationIIIB.V. TMF InterleaseAviationIIIB.V. TMF InterleaseAviationIIIB.V. TMF InterleaseAviationIIB.V. TMF InterleaseAviationIIB.V. TMF InterleaseAviationB.V. TMF InterleaseAviationB.V. SL AlcyoneLTD (Showa) SG Infraestructure Italia S.R.L. Seagull LeasingLLC Quetro LeasingLLC Pochard LeasingLLC Petrel LeasingLLC NBB SãoPaulo LeaseCO.Limited(BBAM) NBB RiodeJaneiroLeaseCOandBrasilia LeaseLLC (BBAM) Linnet LeasingLimited Juliana LeasingLimited Intraelo BETA Corpotation(KFW) General ElectricCapitalCorporation follows: The detailofthemainfinancialleasesisas iV. Financialleases Boeing 767 Boeing 767 Boeing 767 Airbus A340 Airbus A320 Airbus A319 Aircraft Airbus A330 Airbus A320 Airbus A330 Airbus A321 Airbus A320 Airbus A319 Airbus A320 Airbus A319 Airbus A330 Airbus A320 Airbus A320 Boeing 777 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Airbus A321 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A330 Boeing 767 Airbus A320 Boeing 777 Boeing 777 Boeing 777 Boeing 767 Airbus A319 Boeing 767 Model 300ER 300ER 300ER 300ER 300ER 300ER 300ER 300ER 300ER 300F 300F 300F 300F 300 500 200 100 200 200 200 200 200 100 200 100 200 200 200 200 200 200 200 200 200 200 100 December 31,2012 As of 102 10 12 12 1 2 3 2 2 4 1 1 7 3 2 5 1 1 1 3 2 1 1 1 4 2 1 6 1 2 1 1 1 1 2 2 - December 31,2011 As of 11 2 1 1 4 1 2 ------ANNUAL REPORT 2012 Financial Statements 203 Quetro LeasingLLC, theCompanyincreased its Garza LeasingLLC, Pochard LeasingLLC and Caiquen Leasing LLC, Codorniz Leasing Limited, its participation in the permanent establishments During the first quarter of 2012,due to the sale of as ofDecember31,2011). had onehundredandtwoaircraft (elevenaircraft AsofDecember31,2012theCompany equipment. are classifiedasOtherproperty, plantand Fixed assetsacquiredunderfinancialleases certificates attheirowncost. on theaircraft andupdatetheairworthiness coverage performmaintenance fortheaircraft, to contract andmaintainactivetheinsurance Additionally, the lessee will have the obligation monthly paymentsofobligations. and 18yeartermssemi-annual,quarterly lessee ofaircrafts establishduration between12 Leasing contracts wheretheCompanyactsas TOTAL Over fiveyears Between oneandfiveyears No laterthanoneyear As ofDecember31,2011 TOTAL Over fiveyears Between oneandfiveyears No laterthanoneyear As ofDecember31,2012 (ThUS$ 464,082asofDecember31,2011). of December31,2012amountstoThUS$3,863,193 The bookvalueofassetsunderfinancialleasesas more AirbusA320-200wereaddedinthisway. leasing, andduringthethirdquarterof2012two aircraft capitalleaseswereaddedasfinancial As aresultoftheBusinessCombination81 and equipment. category to the category Other property plant were reclassifiedfromthePlantandequipment and twoA319-100.Therefore,theseaircraft 300 (onefreighterandsixpassengeraircrafts) number ofaircraft onleasebysevenBoeing767- are asfollows: The minimumpayments under financialleases Gross Value Gross Value 3,345,891 1,135,262 1,687,596 ThUS$ ThUS$ 344,886 207,365 523,033 59,152 78,369 (309,690) (186,145) Interest Interest (28,357) ThUS$ ThUS$ (18,657) (57,455) (66,090) (2,078) (7,622) 3,036,201 1,077,807 1,501,451 Present Present ThUS$ ThUS$ 316,529 188,708 456,943 Value Value 57,074 70,747 ANNUAL REPORT 2012 Financial Statements 204 The balancesofdeferredtaxesareasfollows: income taxesrelatingtothesametaxauthority. is alegalrighttooffsetassetsandliabilitiesfor Deferred taxassetsandliabilitiesareoffsetifthere NOTE 20.TAXES ANDDEFERREDTAXES reverse inthelongterm. composed principallyoftemporary differencesto The balanceofdeferredtaxassetsandliabilitiesare and Subsidiaries. with TAM S.A. incorporates theeffects of Business Combinations The balanceatDecember31,2012ofdeferredtaxes, Revaluation offinancialinstruments Provissions Amortizacion Leased assets Depreciation Concept TOTAL Others Intangibles Revaluation property, plantandequipment Tax losses December 31, 2012 ThUS$ 144,629 105,652 As of 16,266 15,148 3,047 5,178 (662) - - - Assets December 31, 2011 ThUS$ As of 60,148 35,300 14,255 1,142 9,998 (547) - - - - December (328,608) (247,743) 31, 2012 558,049 (12,092) (45,579) (30,110) ThUS$ 498,674 105,554 548,618 69,335 As of Liabilities December 31, 2011 ThUS$ 369,625 (83,297) (28,788) 338,741 As of (6,695) 47,757 36,667 65,240 - - ANNUAL REPORT 2012 Financial Statements 205 are asfollows: December 31,2012 January 1,2011to and liabilitiesfrom Deferred taxassets Movements of

(a) From January 1 to December 31, 2011

Recognized Beginning Recognized in in other Incorporation Sale of Ending balance Balance asset consolidated comprehensive by business Reclassifications Others Investments asset (liability) (Liability) income income combination ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

- - Depreciation (290,669) (48,614) - - (5) (339,288)

Leased assets (59,848) (5,392) - - - - - (65,240)

Amortization (17,320) (8,903) - 3,811 - - - (22,412)

Provisions (14,889) (22,482) - - - - (388) (37,759)

Post employment benefit obligations 1,604 (1,604) ------

Revaluation of financial instruments 21,926 - 6,862 - - - - 28,788

Tax losses 13,229 112,013 - - (6,645) - - 118,597

Others 72,039 (63,460) 1,846 - - (2,521) (67) 7,837

TOTAL (273,928) (38,442) 8,708 3,811 (6,645) (2,521) (460) (309,477)

(b) From January 1 to December 31, 2012

Opening Recognized balance Recognized in in other Incorporation by Exchange Effect from Ending assets/ consolidated comprehensive business rate change in Others balance liabilities income income combination variation tax rate asset (liability) ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

(370) Depreciation (339,288) (86,740) - (63,106) (59,776) - (549,280)

Leased assets (65,240) (28,801) - - - (11,513) - (105,554)

Amortization (22,412) (6,580) - (18,614) (110) (6,471) - (54,187)

Provisions (37,759) (8,823) - 317,083 1,861 (8,353) - 264,009

Revaluation of financial instruments 28,788 (5,348) (2,623) 9,335 56 5,080 - 35,288

Tax losses 118,597 110,930 - 188,910 1,110 14,713 - 434,260

Revaluation propety, plant and equipment - - - 45,313 266 - - 45,579

Intangibles - - - (495,762) (2,912) - - (498,674)

Others 7,837 10,422 (2,734) 14,440 86 701 (15,613) 15,139

TOTAL (309,477) (14,940) (5,357) (2,401) (13) (65,619) (15,613) (413,420) ANNUAL REPORT 2012 Financial Statements 206 December 31,2011,respectively, areasfollows: taxes fortheperiodsendedatDecember31,2012and Expense (income)fordeferredandcurrentincome benefits. December 31,2011)tooffsetagainstfutureyearstax compared toalossofThUS$5,265(ThUS$103at of ThUS$1,439(ThUS$35atDecember31,2011) The Companyhasnotrecognizeddeferredtaxassets relevant taxbenefitthroughfuturetaxableprofits. recognized totheextentthatitislikelyprovide Deferred taxassetsonlosscarry-forwards,are Deferred taxassetsnotrecognized: TOTAL Tax losses Temporary differences INCOME TAX EXPENSE TOTAL DEFERREDTAX EXPENSE,NET Reduction (increase)invalueofdeferredtaxassetsduringtheevacuation itsusefulness. Deferred expense(income)fortaxesrelatedtothecreationandreversaloftemporary differences TOTAL CURRENTTAX EXPENSE,NET Other currenttaxexpense(income) Adjustment topreviousyear’s currenttax Current taxexpense Expense forcurrentincometax Expense fordeferredincometaxes December 31, 2012 ThUS$ As of 1,439 1,439 - December 31, 2011 ThUS$ As of 2,187 2,152 35 For theperiodsended ThUS$ 102,212 (13,886) 2012 80,559 21,653 79,155 35,527 1,404 December 31 12 ThUS$ 2011 61,789 38,442 23,347 (1,609) 40,051 19,470 3,877 - ANNUAL REPORT 2012 Financial Statements 207 effective rate: Reconciliation of tax expense using the legal rate to the tax expense using the Composition ofincometaxexpense(income): Reconciliation oflegaltaxrate toeffectivetaxrate: Tax effectsofrates inotherjurisdictions Tax effectoflegalrate change Tax expenseusingthelegalrate INCOME TAX EXPENSE DEFERRED TAX EXPENSE,NET, TOTAL Chile Deferred taxexpense,net, foreign Deferred taxexpense,net, TOTAL CURRENTTAX EXPENSE,NET Chile Current taxexpense,net, foreign Current taxexpense,net, Effect oftaxrate ondisallowableexpenses Effect oftaxrates inother jurisdictions TAX EXPENSEUSINGTHEEFFECTIVERATE TOTAL ADJUNSTMENTSTOTAX EXPENSEUSINGTHELEGALRATE Other increases(decreases) Tax effectofdisallowableexpenses Tax effectofnon-taxableoperating revenues Effect oftaxrate onnon-taxableoperating revenues Effect oftaxrates for legalrate change Legal taxrate TOTAL EFFECTIVETAX RATE TOTAL ADJUSTMENTSTOTHELEGALTAX RATE Efecto entasaimpositivadegastosno deducibles ThUS$ ThUS$ (54,980) (10,138) (10,686) 102,212 135,539 102,212 For theperiodended For theperiodended 2012 2012 80,559 21,653 79,579 (7,029) 31,791 27,437 70,441 22,633 (584) December 31, December 31, (14,621) ThUS$ ThUS$ (20,876) (11,094) (10,571) 2011 2011 38,442 23,347 61,789 59,318 18,861 61,789 76,410 4,486 5,087 1,916 41 For theperiodended 2012 90.31 70.31 (0.52) (6.21) (9.44) 24.24 62.24 20.00 % December 31, (3.82) 16.18 (2.89) (2.77) 20.00 2011 0.01 1.33 0.50 % ANNUAL REPORT 2012 Financial Statements 208 Deferred taxesrelatedtoitemschargednetequity: the closingfinancialstatementsbeginningasof the taxyear2013is20%.Therefore,forpurposesof The aboveimplies,thattherate ofincometaxfor 2013 taxyear. which mustbedeclaredandpaidbeginning in the contains, theFirstCategoryTax Ratewasmodified the majortaxreformsthatamendingLaw Legislation and FinanceEducationReform”. Among published intheOfficialJournalthat“Improves Tax On September27,2012,theLawN°20,630was Deferred taxeffectsofthecomponentsothercomprehensiveincome: TOTAL DEFERREDTAXES RELATED TOITEMSCHARGEDNETEQUITY Aggregate deferredtaxationrelatedtoitemschargednetequity Aggregate deferredtaxationofcomponentsothercomprehensiveincome Translation adjustment Cash-flow hedges Translation adjustment Cash-flow hedges ThUS$ 70,441. 20%, whichmeantahigherrecordedtaxexpenseby expense consideringtheincreasedrate of17%to Thereby, atDecember31,2012theCompanyhadtax determination ofdeferredtaxrate of20%. determining theprovisionforincometaxesand September 30,2012,thisshouldbeconsideredin Amount before Amount before (18,692) ThUS$ ThUS$ Taxes Taxes 10,864 40,368 2,510 expense (income) expense (income) Income tax Income tax December December 31, 2011 31, 2012 ThUS$ ThUS$ As of As of (8,708) (1,846) (6,862) 5,357 2,734 2,623 ThUS$ For theperiodended (5,614) 2012 (5,357) (257) December 31, Amount Amount (15,958) ThUS$ ThUS$ Taxes Taxes after after 33,506 5,133 ThUS$ 9,018 2011 8,353 8,708 (355) ANNUAL REPORT 2012 Financial Statements 209 The balanceatDecember31,2012ofOtherfinancial follows: The compositionofOtherfinancialliabilitiesisas NOTE 21. Combinations with TAM S.A. andSubsidiaries. Combinations withTAM S.A. liabilities, incorporates theeffectsofBusiness TOTAL NON-CURRENT (c) Hedge derivatives (b) Derivatives notrecognizedasahedge (a) Interest bearingloans NON-CURRENT TOTAL CURRENT (c) Hedge derivatives (b) Derivatives notrecognizedasahedge (a) Interest bearingloans CURRENT OTHER FINANCIALLIABILITIES December 2,047,330 7,698,857 1,977,255 7,582,302 31, 2012 ThUS$ 111,040 As of 65,598 4,477 5,515 December 3,109,136 2,978,973 31, 2011 582,257 537,334 120,304 ThUS$ As of 40,016 4,907 9,859 ANNUAL REPORT 2012 Financial Statements 210 instruments: Obligations withcreditinstitutionsanddebt (a) Interestbearingloans are asfollows: loans atDecember31,2012and December31,2011, Currency balancesthatmake theinterestbearing the loan. effective rate changes oneachdateofrepricing the caseofloanswithvariableinterestrates, the rate doesnotvarythroughout the loan,whilein effective interestrate forloanswithafixedinterest the effectiveinterestrate method.UnderIFRS,the All interest-bearingliabilitiesarerecordedusing INSTITUTIONS TOTAL OBLIGATIONS WITHFINANCIAL TOTAL NON-CURRENT Other loans Financial leases Obligation withthepublic SUBTOTAL BANKLOANS Guaranteed obligations Bank loans NON-CURRENT TOTAL CURRENT Other loans Financial leases Obligation withthepublic SUBTOTAL BANKLOANS Guaranteed obligations Bank loans Loans toexporters CURRENT December 1,174,030 9,559,557 7,582,302 3,652,238 1,977,255 2,615,924 1,123,840 3,432,919 31, 2012 273,682 411,313 519,762 242,955 190,300 219,319 471,896 ThUS$ As of 57,647 December 3,516,307 2,978,973 2,406,780 2,159,055 31, 2011 TOTAL US Dollar Euro real Brazilian CURRENCY ThUS$ 463,982 537,334 310,217 153,386 326,411 245,782 247,725 As of 70,747 2,605 379 - - December 9,559,557 31, 2012 9,231,378 ThUS$ 326,394 As of 1,785 3,516,307 3,516,307 December 31, 2011 ThUS$ As of - - ANNUAL REPORT 2012 Financial Statements 211

Interest-bearing loans due in install results due at December 31, 2012 at nominal value

More than More than More than Total Total Class of Liability Debtor Debtor Creditor Creditor Creditor Creditor Currency Up to 90 days one to three to More than nominal Amortization Efective accounting Nominal tax No. country Tax No. country 90 days to one three years five years five years value rate value rate year ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ % ThUS$ %

Loans to exporters 89.862.200-2 LATAM Airlines Group S.A. Chile 97.004.000-5 BANCO DE CHILE Chile US$ 30,000 - - - - 30,000 Semiannual 2.17% 30,253 2.17% LATAM Airlines Group S.A. Chile 97.006.000-6 BCI Chile US$ 35,000 - - - - 35,000 Semiannual 1.70% 35,056 1.70% LATAM Airlines Group S.A. Chile 76.645.030-K ITAU Chile US$ 75,000 - - - - 75,000 Quarterly 1.32% 75,084 1.32% LATAM Airlines Group S.A. Chile 97.032.000-8 BBVA Chile US$ 102,000 - - - - 102,000 Annual 1.79% 102,562 1.79%

Bank loans 89.862.200-2 LATAM Airlines Group S.A. Chile 97.036.000-K SANTANDER Chile US$ - - 214,373 - - 214,373 - 2.57% 214,586 2.57% LATAM Airlines Group S.A. Chile 97.030.000-7 ESTADO Chile US$ - 44.848 - - - 44,848 Semiannual 1.74% 44,972 1.74%

Guaranteed obligations 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E ING U.S.A. US$ 2,732 8,374 23,951 26,478 41,114 102,649 Quarterly 5.01% 101,461 5.01% LATAM Airlines Group S.A. Chile 0-E CREDIT AGRICOLE France US$ 12,203 33,402 35,129 6,714 - 87,448 Quarterly 3.37% 87,719 3.37% LATAM Airlines Group S.A. Chile 0-E PEFCO U.S.A. US$ 3,474 10,696 20,753 13,014 18,211 66,148 Quarterly 4.41% 65,494 4.41% LATAM Airlines Group S.A. Chile 0-E BNP PARIBAS U.S.A. US$ 13,578 41,635 118,769 130,877 146,231 451,090 Quarterly 3.67% 444,700 3.67% LATAM Airlines Group S.A. Chile 0-E WELLS FARGO U.S.A. US$ 39,546 119,458 324,890 334,407 1,141,162 1,959,463 Quarterly 1.76% 1,872,616 1.76% LATAM Airlines Group S.A. Chile 0-E CITIBANK U.S.A. US$ 9,311 28,406 79,112 84,369 208,710 409,908 Quarterly 2.10% 399,854 2.10% LATAM Airlines Group S.A. Chile 97.036.000-K SANTANDER Chile US$ 4,931 14,919 40,930 42,645 117,024 220,449 Quarterly 0.85% 214,434 0.85% LATAM Airlines Group S.A. Chile 0-E BTMU U.S.A.. US$ 2,514 7,638 21,116 22,221 74,733 128,222 Quarterly 1.13% 123,920 1.13% LATAM Airlines Group S.A. Chile 0-E APPLE BANK U.S.A. US$ 1,231 3,748 10,359 10,919 37,223 63,480 Quarterly 1.11% 61,411 1.11% BANK OF AMERICA LATAM Airlines Group S.A. Chile 0-E U.S.A. US$ 3,159 9,602 26,388 27,586 106,054 172,789 Quarterly 1.26% 165,394 1.26% MERRIL LYNCH DEVELOPMENT LATAM Airlines Group S.A. Chile 0-E U.S.A. US$ 1,962 5,974 16,404 17,153 65,579 107,072 Quarterly 1.27% 102,662 1.27% BANK OF JAPAN LATAM Airlines Group S.A. Chile 0-E DEUTSCHE BANK U.S.A. US$ 4,151 12,813 36,339 39,791 96,906 190,000 Quarterly 3.35% 190,813 3.35% SWAP Aviones LATAM Airlines Group S.A. Chile - - US$ 815 2,316 5,158 3,549 1,916 13,754 - - 13,754 - llegados

Financial leases 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E ING U.S.A. US$ 6,510 16,075 35,499 25,563 1,844 85,491 Quarterly 3.42% 85,670 3.42% LATAM Airlines Group S.A. Chile 0-E CREDIT AGRICOLE France US$ 4,646 14,192 29,145 30,216 25,485 103,684 Quarterly 1.29% 103,869 1.29% LATAM Airlines Group S.A. Chile 0-E CITIBANK U.S.A. US$ 1,.358 4,164 12,014 13,461 15,089 46,086 Quarterly 5.65% 45,480 5.65% LATAM Airlines Group S.A. Chile 0-E S.CHARTERED U.S.A. US$ 1,825 5,637 - - - 7,462 Quarterly 1.31% 7,466 1.31% LATAM Airlines Group S.A. Chile 0-E PEFCO U.S.A. US$ 11,899 36,603 104,071 112,116 49,572 314,261 Quarterly 4.70% 311,418 4.70%

Other loans 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E BOEING U.S.A. US$ - - 146,189 - - 146,189 - 1.86% 148,582 1.86% LATAM Airlines Group S.A. Chile - OTHERS - US$ 3,524 10,706 29,472 15,258 - 58,960 Quarterly 2.08% 58,340 2.08%

TOTAL 371,369 431,206 1,330,061 956,337 2,146,853 5,235,826 5,107,570 ANNUAL REPORT 2012 Financial Statements 212 Interest-bearing loans due in install rents due at December 31, 2012, at nominal value

More than More than Class of Debtor Creditor Creditor Creditor Up to 90 days one to More than More than Total Efective Total Nominal Liability tax No. Debtor country Tax No. Creditor country Currency 90 days to one three three to five years nominal Amortization rate accounting rate year years five years value value ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ % ThUS$ %

Bank loans 02.012.862/0001-60 TAM S.A. and Subsidiaries Brazil 0-E CREDIT AGRICOLE France US$ - 50,322 - - - 50,322 Quarterly 2.81% 64,480 2.81%

TAM S.A. and Subsidiaries Brazil 0-E CITIBANK Brazil US$ 24,363 5,623 - - - 29,986 At Expiration 4.03% 30,419 4.03%

TAM S.A. and Subsidiaries Brazil 0-E BANCO DO BRASIL S.A. Brazil US$ 42,106 109,874 - - - 151,980 At Expiration 5.35% 152,517 5.35%

TAM S.A. and Subsidiaries Brazil 0-E BANCO IBM S.A. Brazil BRL 92 - - - - 92 Semiannual 10.72% 336 10.72%

TAM S.A. and Subsidiaries Brazil 0-E BANCO ITAU BBA Brazil US$ 45,539 117,852 - - - 163,391 At Expiration 5.65% 166,916 5.65%

Monathly/ At TAM S.A. and Subsidiaries Brazil 0-E BANCO SAFRA Brazil BRL/US$ 17,306 14,356 784 - - 32,446 7.69% / 4.01% 32,596 7.69% / 4.01% Expiration

TAM S.A. and Subsidiaries Brazil 0-E BANCO UNIBANCO Brazil BRL 61 27 - - - 88 Monathly 8.94% 78 8.94%

TAM S.A. and Subsidiaries Brazil 0-E BANCO BRADESCO Brazil BRL - 27,484 - - - 27,484 At Expiration 3.34% 27,506 3.34% NEDERLANDSCHE TAM S.A. and Subsidiaries Brazil 0-E Holland US$ 96 297 861 971 2,383 4,608 Monathly 0.96% 4,674 0.95% CREDIETVERZEKERING MAATSCHAPPIJ

Obligations with 02.012.862/0001-60 TAM S.A. and Subsidiaries Brazil 0-E THE BANK OF NEW YORK U.S.A US$ - - - 300,000 800,000 1,100,000 At Expiration 8.60% 1,146,251 8.41% the public

TAM S.A. and Subsidiaries Brazil 0-E BANCO DO BRASIL S.A. Brazil BRL 24,468 220,210 - - - 244,678 Semiannual 8.96% 251,271 8.56%

Financial leases 02.012.862/0001-60 TAM S.A. and Subsidiaries Brazil 0-E AFS INVESTMENT IX LLC U.S.A US$ 1,666 5,140 14,816 16,580 26,925 65,127 Monathly N/A 66,032 N/A TAM S.A. and Subsidiaries Brazil 0-E AIR CANADA U.S.A US$ 3,400 9,350 - - - 12,750 Monathly N/A 12,871 N/A

TAM S.A. and Subsidiaries Brazil 0-E AIRBUS FINANCIAL SERVICES U.S.A US$ 2,862 8,819 25,357 27,070 22,925 87,033 Monathly 2,25% 87,409 2.25%

TAM S.A. and Subsidiaries Brazil 0-E AWAS U.S.A US$ 2,991 8,975 5,651 - - 17,617 Monathly N/A 18,588 N/A

TAM S.A. and Subsidiaries Brazil 0-E BNP PARIBAS U.S.A US$ 544 1,699 4,939 5,609 11,535 24,326 Quarterly 1.50% 24,479 1.50%

TAM S.A. and Subsidiaries Brazil 0-E BNP PARIBAS France US$ 2,372 7,237 17,064 17,384 43,929 87,986 Quarterly 3.84% 88,109 3.84%

TAM S.A. and Subsidiaries Brazil 0-E CITIBANK England US$ 11,862 41,043 82,593 81,129 234,657 451,284 Quarterly 3.69% 451.201 3.69%

TAM S.A. and Subsidiaries Brazil 0-E CREDIT AGRICOLE-CIB U.S.A US$ 4,182 12,683 67,629 10,627 19,689 114,810 Quarterly 2.29% 115,493 2.29%

Quarterly/ TAM S.A. and Subsidiaries Brazil 0-E CREDIT AGRICOLE -CIB France US$ 15,945 47,894 126,930 121,391 182,561 494,721 2.01% / 0.82% 497,986 2.01% / 0.37% Semiannual

TAM S.A. and Subsidiaries Brazil 0-E DVB BANK SE Germany US$ 3,125 9,375 25,000 - - 37,500 Quarterly 2.89% 37,570 2.89%

TAM S.A. and Subsidiaries Brazil 0-E DVB BANK SE U.S.A US$ 456 1,369 2.,821 756 - 5,402 Monathly 2.25% 5,420 2.25% GENERAL ELECTRIC CAPITAL TAM S.A. and Subsidiaries Brazil 0-E U.S.A US$ 9,140 19,967 51,979 - - 81,086 Monathly 2.59% 81,379 2.59% CORPORATION

TAM S.A. and Subsidiaries Brazil 0-E HSBC France US$ 1,275 3,887 10,713 11,249 42,334 69,458 Quarterly 1.70% 69,596 0.85%

Monathly/ TAM S.A. and Subsidiaries Brazil 0-E KFW IPEX-BANK Germany US$ 3,709 11,343 32,226 23,604 26,888 97,770 2.11% / 2.21% 98,111 2.11% / 2.21% Quarterly

Quarterly/ TAM S.A. and Subsidiaries Brazil 0-E NATIXIS France US$ 5,972 20,421 59,579 66,989 163,464 316,425 2.62% / 3.32% 319,002 2.62% / 3.32% Semiannual

TAM S.A. and Subsidiaries Brazil 0-E PK AIRFINANCE US, INC. U.S.A US$ 2,609 8,080 23,530 36,373 46,500 117,092 Monathly 1.96% 117,520 1.96%

TAM S.A. and Subsidiaries Brazil 0-E WACAPOU LEASING S.A. Luxembourg US$ 493 1,417 3.369 2,847 15,521 23,647 Quarterly 2.42% 23,844 2.42%

TAM S.A. and Subsidiaries Brazil 0-E WELLS FARGO BANK NORTHWEST N.A. E.E.U.U. US$ 1,769 5,308 3,194 - - 10,271 Monathly 1.98% 10,300 1.98%

TAM S.A. and Subsidiaries Brazil 0-E SOCIÉTÉ GÉNÉRALE MILAN BRANCH Italy US$ 11,355 34,574 90,164 91,964 151,968 380,025 Quarterly 1.95% 381,847 1.95%

TAM S.A. and Subsidiaries Brazil 0-E THE TORONTO-DOMINION BANK U.S.A US$ 504 1,532 4,207 4,390 8,798 19,431 Quarterly 0.88% 19,545 0.08%

TAM S.A. and Subsidiaries Brazil 0-E BANCO DE LAGE LANDEN BRASIL S.A Brazil BRL 252 758 1.015 - - 2,025 Monathly 7.51% 1,344 7.51%

TAM S.A. and Subsidiaries Brazil 0-E BANCO IBM S.A Brazil BRL 543 1,631 81 - - 2,255 Monathly 10.58% 2,192 10.58% CISLATINA ARRENDAMENTO TAM S.A. and Subsidiaries Brazil 0-E Brazil BRL 40 13 - - - 53 Monathly 5.31% 50 5.31% MERCANTIL S.A

TAM S.A. and Subsidiaries Brazil 0-E HP FINANCIAL SERVICE Brazil BRL 189 484 74 - - 747 Monathly 9.08% 711 9.08%

TAM S.A. and Subsidiaries Brazil 0-E SOCIETE AIR FRANCE France EUR 61 191 1.320 - - 1,572 Monathly 6.82% 1,785 6.82%

TAM S.A. and Subsidiaries Brazil 0-E SOCIETE GENERALE LEASING S.A Brazil BRL 2,520 - - - - 2,520 Monathly 0.00% 1,534 0.00%

TAM S.A. and Subsidiaries Brazil

COMPANHIA BRASILEIRA DE Other loans 02.012.862/0001-60 TAM S.A. and Subsidiaries Brazil 0-E Brazil BRL 31,882 9,143 - - - 41,025 Monathly 2.20% 41,025 2.20% MEIOS DE PAGAMENTO

TOTAL 275,749 818,378 655,896 818,933 1,800,077 4,369,033 4,451,987

TOTAL CONSOLIDATED 647,118 1,249,584 1,985,957 1,775,270 3,946,930 9,604,859 9,559,557 ANNUAL REPORT 2012 Financial Statements 213

Interest-bearing loans due in installments to December 31, 2012, at accounting values

More than More than Debtor Debtor Creditor Creditor Up to 90 days one to More than More than Total Efective Total Nominal Class of Liability tax No. Debtor country Tax No. Creditor country Currency 90 days to one three three to five years accounting Amortization rate nominal rate year years five years value value ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Loans to exporters 89.862.200-2 LATAM Airlines Group S.A. Chile 97.004.000-5 BANCO DE CHILE Chile US$ 30,253 - - - - 30,253 semiannual 2.17% 30,000 2.17% LATAM Airlines Group S.A. Chile 97.006.000-6 BCI Chile US$ 35,056 - - - - 35,056 semiannual 1.70% 35,000 1.70% LATAM Airlines Group S.A. Chile 76.645.030-K ITAU Chile US$ 75,084 - - - - 75,084 Quarterly 1.32% 75,000 1.32% LATAM Airlines Group S.A. Chile 97.032.000-8 BBVA Chile US$ 102,562 - - - - 102,562 Annual 1.83% 102,000 1.79%

Bank loans 89.862.200-2 LATAM Airlines Group S.A. Chile 97.036.000-K SANTANDER Chile US$ 214 - 214,372 - - 214.586 - 2.57% 214.373 2.57% LATAM Airlines Group S.A. Chile 97.030.000-7 ESTADO Chile US$ - 44,988 (16) - - 44.972 semiannual 1.76% 44.848 1.74%

Guaranteed obligations 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E ING U.S.A US$ 3,590 8,374 22,767 25,947 40,783 101.461 Quarterly 5.69% 102,649 5.01%

LATAM Airlines Group S.A. Chile 0-E CREDIT AGRICOLE France US$ 12,475 33,402 35,128 6,714 - 87,719 Quarterly 3.42% 87,448 3.37% LATAM Airlines Group S.A. Chile 0-E PEFCO U.S.A US$ 3,829 10,696 20,126 12,764 18,079 65,494 Quarterly 4.96% 66,148 4.41% LATAM Airlines Group S.A. Chile 0-E BNP PARIBAS U.S.A US$ 15,428 41,635 113,648 128,765 145,224 444,700 Quarterly 4.15% 451,090 3.67% LATAM Airlines Group S.A. Chile 0-E WELLS FARGO U.S.A US$ 45,109 119,458 284,423 313,700 1,109,926 1,872,616 Quarterly 2.57% 1,959,463 1.76% LATAM Airlines Group S.A. Chile 0-E CITIBANK U.S.A US$ 10,711 28,406 73,422 81,588 205,727 399,854 Quarterly 2.71% 409,908 2.10% LATAM Airlines Group S.A. Chile 97.036.000-K SANTANDER Chile US$ 5,308 14,919 37,797 41,117 115,293 214,434 Quarterly 1.39% 220,449 0.85% LATAM Airlines Group S.A. Chile 0-E BTMU U.S.A US$ 2,746 7,638 19,070 21,177 73,289 123,920 Quarterly 1.73% 128,222 1.13% LATAM Airlines Group S.A. Chile 0-E APPLE BANK U.S.A US$ 1,418 3,748 9,347 10,401 36,497 61,411 Quarterly 1.71% 63,480 1.11% LATAM Airlines Group S.A. Chile 0-E BANK OF AMERICA MERRIL LYNCH U.S.A US$ 3,566 9,602 23,088 25,860 103,278 165,394 Quarterly 1.97% 172,789 1.26% LATAM Airlines Group S.A. Chile 0-E DEVELOPMENT BANK OF JAPAN U.S.A US$ 2,373 5,974 14,360 16,085 63,870 102,662 Quarterly 1.98% 107,072 1.27% LATAM Airlines Group S.A. Chile 0-E DEUTSCHE BANK U.S.A US$ 4,964 12,813 36,339 39,791 96,906 190,813 Quarterly 3.35% 190,000 3.35% LATAM Airlines Group S.A. Chile - SWAP Aviones llegados - US$ 815 2,316 5,158 3,549 1,916 13,754 - - 13,754 -

Financial leases 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E ING U.S.A US$ 7,167 16,076 35,155 25,431 1,841 85,670 Quarterly 3.71% 85,491 3.42% LATAM Airlines Group S.A. Chile 0-E CREDIT AGRICOLE France US$ 4,831 14,191 29,145 30,216 25,486 103,869 Quarterly 1.32% 103,684 1.29% LATAM Airlines Group S.A. Chile 0-E CITIBANK U.S.A US$ 1,603 4,164 11,481 13,237 14,995 45,480 Quarterly 6.38% 46,086 5.65% LATAM Airlines Group S.A. Chile 0-E S.CHARTERED U.S.A US$ 1,828 5,638 - - - 7,466 Quarterly 1.31% 7,462 1.31% LATAM Airlines Group S.A. Chile 0-E PEFCO U.S.A US$ 13,960 36,603 100,514 110,981 49,360 311,418 Quarterly 5.29% 314,261 4.70%

Other loans 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E BOEING U.S.A US$ 563 1,829 146,190 - - 148,582 - 1.86% 146,189 1.86% LATAM Airlines Group S.A. Chile - OTHERS U.S.A US$ 3,524 10,706 29,472 14,638 - 58,340 Quarterly 2.08% 58,960 2.08%

TOTAL 388,977 433,176 1,260,986 921,961 2,102,470 5,107,570 5,235,826 ANNUAL REPORT 2012 Financial Statements 214 Interest-bearing loans due in installments to December 31, 2012, at accounting value

More than More than More than Class of Debtor Debtor Creditor Debtor Up to 90 days one to three to More than Total Efective Total Nominal Liability Tax Nº Debtor country Tax Nº Creditor country Currency 90 to one three five five accounting Amortization rate nominal rate days year year year year value value ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Bank loans 02.012.862/0001-60 TAM S.A. and Subsidiaries Brazil 0-E CREDIT AGRICOLE France US$ 733 63,747 - - - 64,480 Quarterly 2.81% 50,322 2.81% TAM S.A. and Subsidiaries Brazil 0-E CITIBANK Brazil US$ 24,735 5,684 - - - 30,419 At Expiration 4.03% 29,986 4.03% TAM S.A. and Subsidiaries Brazil 0-E BANCO DO BRASIL S.A. Brazil US$ 41,444 111,073 - - - 152,517 At Expiration 5.35% 151,980 5.35% TAM S.A. and Subsidiaries Brazil 0-E BANCO IBM S.A. Brazil BRL 336 - - - - 336 Semiannual 10.72% 92 10.72% TAM S.A. and Subsidiaries Brazil 0-E BANCO ITAU BBA Brazil US$ 47,205 119,711 - - - 166,916 At Expiration 5.65% 163,391 5.65% Monthly/ At TAM S.A. and Subsidiaries Brazil 0-E BANCO SAFRA Brazil BRL/US$ 17,288 14,560 748 - - 32,596 7.69% / 4.01% 32,446 7.69% / 4.01% Expiration TAM S.A. and Subsidiaries Brazil 0-E BANCO UNIBANCO Brazil BRL 50 28 - - - 78 Monthly 8.94% 88 8.94% TAM S.A. and Subsidiaries Brazil 0-E BANCO BRADESCO Brazil BRL - 27,506 - - - 27,506 At Expiration 3.34% 27,484 3.34%

NEDERLANDSCHE TAM S.A. and Subsidiaries Brazil 0-E Holland US$ 162 298 861 971 2,382 4,674 Monthly 0.96% 4,608 0.95% CREDIETVERZEKERING MAATSCHAPPIJ

Obligations with the public 02.012.862/0001-60 TAM S.A. and Subsidiaries Brazil 0-E THE BANK OF NEW YORK U.S.A. US$ 12,759 9,652 6,720 306,771 810,349 1,146,251 At Expiration 8.60% 1,100,000 8.41%

TAM S.A. and Subsidiaries Brazil 0-E BANCO DO BRASIL S.A. Brazil BRL 31,061 220,210 - - - 251,271 Semiannual 8.96% 244,678 8.56%

Financial leases 02.012.862/0001-60 TAM S.A. and Subsidiaries Brazil 0-E AFS INVESTMENT IX LLC U.S.A. US$ 2,571 5,140 14,816 16,580 26,925 66,032 Monthly N/A 65,127 N/A TAM S.A. and Subsidiaries Brazil 0-E AIR CANADA U.S.A. US$ 3,521 9,350 - - - 12,871 Monthly N/A 12,750 N/A TAM S.A. and Subsidiaries Brazil 0-E AIRBUS FINANCIAL SERVICES U.S.A. US$ 3,238 8,819 25,357 27,070 22,925 87,409 Monthly 2.25% 87,033 2.25%

TAM S.A. and Subsidiaries Brazil 0-E AWAS U.S.A. US$ 3,962 8,975 5,651 - - 18,588 Monthly N/A 17,617 N/A TAM S.A. and Subsidiaries Brazil 0-E BNP PARIBAS U.S.A. US$ 697 1,699 4,939 5,609 11,535 24,479 Quarterly 1.50% 24,326 1.50% TAM S.A. and Subsidiaries Brazil 0-E BNP PARIBAS France US$ 2,495 7,237 17,064 17,384 43,929 88,109 Quarterly 3.84% 87,986 3.84% TAM S.A. and Subsidiaries Brazil 0-E CITIBANK England US$ 11,779 41,043 82,593 81,129 234,657 451,201 Quarterly 3.69% 451,284 3.69% TAM S.A. and Subsidiaries Brazil 0-E CREDIT AGRICOLE-CIB U.S.A. US$ 4,865 12,683 67,629 10,627 19,689 115,493 Quarterly 2.29% 114,810 2.29% Quarterly/ TAM S.A. and Subsidiaries Brazil 0-E CREDIT AGRICOLE -CIB France US$ 19,209 47,894 126,929 121,392 182,562 497,986 2.01% / 0.82% 494,721 2.01% / 0.37% Semiannual TAM S.A. and Subsidiaries Brazil 0-E DVB BANK SE Germany US$ 3,195 9,375 25,000 - - 37,570 Quarterly 2.89% 37,500 2.89% TAM S.A. and Subsidiaries Brazil 0-E DVB BANK SE U.S.A. US$ 474 1,369 2,821 756 - 5,420 Monthly 2.25% 5,402 2.25% GENERAL ELECTRIC CAPITAL TAM S.A. and Subsidiaries Brazil 0-E U.S.A. US$ 10,536 19,967 50,876 - - 81,379 Monthly 2.59% 81,086 2.59% CORPORATION

TAM S.A. and Subsidiaries Brazil 0-E HSBC France US$ 1,413 3,887 10,713 11,249 42,334 69,596 Quarterly 1.70% 69,458 0.85% Monthly/ TAM S.A. and Subsidiaries Brazil 0-E KFW IPEX-BANK Alemania US$ 4,049 11,343 32,226 23,605 26,888 98,111 2.11% / 2.21% 97,770 2.11% / 2.21% Quarterly Quarterly/ TAM S.A. and Subsidiaries Brazil 0-E NATIXIS France US$ 8,549 20,421 59,579 66,989 163,464 319,002 2.62% / 3.32% 316,425 2.62% / 3.32% Semiannual TAM S.A. and Subsidiaries Brazil 0-E PK AIRFINANCE US, INC. U.S.A. US$ 3,037 8,080 23,530 36,373 46,500 117,520 Monthly 1.96% 117,092 1.96% TAM S.A. and Subsidiaries Brazil 0-E WACAPOU LEASING S.A. Luxemburg US$ 1,192 1,417 3,370 2,847 15,018 23,844 Quarterly 2.42% 23,647 2.42%

TAM S.A. and Subsidiaries Brazil 0-E WELLS FARGO BANK NORTHWEST N.A. U.S.A. US$ 1,798 5,308 3,194 - - 10,300 Monthly 1.98% 10,271 1.98%

TAM S.A. and Subsidiaries Brazil 0-E SOCIÉTÉ GÉNÉRALE MILAN BRANCH Italy US$ 13,177 34,574 90,164 91,964 151,968 381,847 Quarterly 1.95% 380,025 1.95%

TAM S.A. and Subsidiaries Brazil 0-E THE TORONTO-DOMINION BANK U.S.A. US$ 618 1,533 4,206 4,390 8,798 19,545 Quarterly 0.88% 19,431 0.08%

TAM S.A. and Subsidiaries Brazil 0-E BANCO DE LAGE LANDEN BRASIL S.A Brazil BRL 103 302 939 - - 1,344 Monthly 7.51% 2,025 7.51% TAM S.A. and Subsidiaries Brazil 0-E BANCO IBM S.A Brazil BRL 505 1,585 102 - - 2,192 Monthly 10.58% 2,255 10.58% CISLATINA ARRENDAMENTO TAM S.A. and Subsidiaries Brazil 0-E Brazil BRL MERCANTIL S.A

37 13 - - - 50 Monthly 5.31% 53 5.31%

TAM S.A. and Subsidiaries Brazil 0-E HP FINANCIAL SERVICE Brazil BRL 158 472 81 - - 711 Monthly 9.08% 747 9.08%

TAM S.A. and Subsidiaries Brazil 0-E SOCIETE AIR FRANCE France EUR 602 35 1,148 - - 1,785 Monthly 6.82% 1,572 6.82%

TAM S.A. and Subsidiaries Brazil 0-E SOCIETE GENERALE LEASING S.A Brazil BRL 1,534 - - - - 1,534 Monthly 0.00% 2,520 0.00%

COMPANHIA BRASILEIRA DE Others loans 02.012.862/0001-60 TAM S.A. and Subsidiaries Brazil 0-E Brazil BRL 31,882 9,143 - - - 41,025 Monthly 2.20% 41,025 2.20% MEIOS DE PAGAMENTO

TOTAL 310,969 844,133 661,256 825,706 1,809,923 4,451,987 4,369,033

TOTAL CONSOLIDATED 699,946 1,277,309 1,922,242 1,747,667 3,912,393 9,559,557 9,604,859 ANNUAL REPORT 2012 Financial Statements 215

Interest-bearing loans installments due at December 31, 2011, at nominal value

More than More than More than Total Total Class of Liability Debtor Debtor Creditor Creditor Creditor Creditor Currency Up to 90 days one to three to More than nominal Amortization Efective accounting Nominal tax No country Tax No country 90 days to one three years five years five years value rate value rate year ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Loans to exporters 89.862.200-2 LATAM Airlines Group S.A. Chile 97.036.000-k SANTANDER Chile US$ - 12,500 - - - 12,500 Semiannual 2.35% 12,615 2.35% LATAM Airlines Group S.A. Chile 97.004.000-5 BANCO DE CHILE Chile US$ - 30,000 - - - 30,000 Semiannual 1.91% 30,224 1.91%

LATAM Airlines Group S.A. Chile 97.006.000-6 BCI Chile US$ 50,000 - - - - 50,000 Quarterly 1.51% 50,065 1.51% LATAM Airlines Group S.A. Chile 97.032.000-8 BBVA Chile US$ - 60,000 - - - 60,000 Annual 2.21% 60,482 2.13%

Bank loans 89.862.200-2 LATAM Airlines Group S.A. Chile 97.030.000-7 ESTADO Chile US$ - - 44,848 - - 44,848 Semiannual 1.82% 44,975 1.81% LATAM Airlines Group S.A. Chile 97.036.000-k SANTANDER Chile US$ - - 202,899 - - 202,899 - 2.55% 203,129 2.55%

Guaranteed obligation 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E ING U.S.A US$ 2,584 7,961 22,779 25,172 54,697 113,193 Quarterly 5.69% 111,605 5.01%

LATAM Airlines Group S.A. Chile 0-E CREDIT AGRICOLE France US$ 19,373 57,624 64,797 33,089 7,158 182,041 Quarterly 4.05% 182,876 4.05%

LATAM Airlines Group S.A. Chile 0-E PEFCO U.S.A US$ 11,515 35,377 100,266 90,741 116,461 354,360 Quarterly 5.18% 350,084 4.61%

LATAM Airlines Group S.A. Chile 0-E BNP PARIBAS U.S.A US$ 14,230 43,705 124,762 137,393 237,427 557,517 Quarterly 4.27% 548,525 3.81%

LATAM Airlines Group S.A. Chile 0-E WELLS FARGO U.S.A US$ 3,946 12,031 33,640 35,999 103,326 188,942 Quarterly 3.64% 184,969 3.53%

LATAM Airlines Group S.A. Chile 0-E CITIBANK U.S.A US$ 10,285 31,428 88,005 94,388 273,601 497,707 Quarterly 2.94% 484,801 2.61%

LATAM Airlines Group S.A. Chile 97.036.000-K SANTANDER Chile US$ 4,822 14,611 40,108 41,767 138,574 239,882 Quarterly 1.14% 232,676 1.01%

LATAM Airlines Group S.A. Chile 0-E JP MORGAN U.S.A US$ 4,151 12,635 34,726 36,288 138,495 226,295 Quarterly 1.09% 217,978 0.94%

LATAM Airlines Group S.A. Chile 0-E BTMU U.S.A US$ 1,886 5,742 15,876 16,702 65,657 105,863 Quarterly 1.41% 102,065 1.26%

LATAM Airlines Group S.A. Chile 0-E APPLE BANK U.S.A US$ 643 1,957 5,440 5,740 22,761 36,541 Quarterly 1.37% 35,254 1.22% LATAM Airlines Group S.A. Chile - SWAP Aviones llegados - US$ 969 2,770 8,887 3,792 2,021 18,439 - - 18,439 -

Financial leases 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E ING U.S.A US$ 7,258 21,816 59,161 13,340 9,001 110,576 Quarterly 3.94% 110,707 3.73%

LATAM Airlines Group S.A. Chile 0-E CREDIT AGRICOLE France US$ 3,136 9,534 25,518 41,240 - 79,428 Quarterly 1.46% 79,552 1.46%

LATAM Airlines Group S.A. Chile 0-E CITIBANK U.S.A US$ 2,357 4,842 19,227 - - 26,426 Quarterly 1.85% 26,467 1.82%

LATAM Airlines Group S.A. Chile 0-E S.CHARTERED U.S.A US$ 1,716 5,303 7,462 - - 14,481 Quarterly 1.56% 14,488 1.56%

LATAM Airlines Group S.A. Chile 0-E PEFCO U.S.A US$ 3,181 9,826 27,939 30,653 14,349 85,948 Quarterly 5.22% 85,315 4.68%

Other loans 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E BOEING U.S.A US$ - - 269,965 - - 269,965 - 1.87% 272,569 1.87%

LATAM Airlines Group S.A. Chile - OTROS - US$ - - - 58,960 - 58,960 Quarterly 2.43% 56,447 2.43%

TOTAL 142,052 379,662 1,196,305 665,264 1,183,528 3,566,811 3,516,307 ANNUAL REPORT 2012 Financial Statements 216

Interest-bearing loans due in installments at December 31, 2011, at accounting Values

More than More than More than Total Total Class of Liability Debtor Debtor Debtor Creditor Creditor Creditor Currency Up to 90 days one to three to More than aacounting Amortization Efective nominal Nominal tax No. country Tax No. country 90 days to one three five years five years value rate value rate year years ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Loans to export 89.862.200-2 LATAM Airlines Group S.A. Chile 97.036.000-K SANTANDER Chile US$ 115 12,500 - - - 12,615 Semiannual 2.35% 12,500 2.35% LATAM Airlines Group S.A. Chile 97.004.000-5 BANCO DE CHILE Chile US$ 224 30,000 - - - 30,224 Semiannual 1.91% 30,000 1.91%

LATAM Airlines Group S.A. Chile 97.006.000-6 BCI Chile US$ 50,065 - - - - 50,065 Quarterly 1.51% 50,000 1.51% LATAM Airlines Group S.A. Chile 97.032.000-8 BBVA Chile US$ 482 60,000 - - - 60,482 Annual 2.21% 60,000 2.13%

Bank loans 89.862.200-2 LATAM Airlines Group S.A. Chile 97.030.000-7 ESTADO Chile US$ 149 - 44,826 - - 44,975 Semiannual 1.82% 44,848 1.81% LATAM Airlines Group S.A. Chile 97.036.000-K SANTANDER Chile US$ 230 - 202,899 - - 203,129 - 2.55% 202,899 2.55%

Guaranteed obligations 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E ING U.S.A US$ 3,498 7,961 21,490 24,538 54,118 111,605 Quarterly 5.69% 113,193 5.01%

LATAM Airlines Group S.A. Chile 0-E CREDIT AGRICOLE France US$ 20,209 57,624 64,796 33,089 7,158 182,876 Quarterly 4.05% 182,041 4.05%

LATAM Airlines Group S.A. Chile 0-E PEFCO U.S.A US$ 13,616 35,377 96,396 89,083 115,612 350,084 Quarterly 5.18% 354,360 4.61%

LATAM Airlines Group S.A. Chile 0-E BNP PARIBAS U.S.A US$ 16,712 43,705 118,390 134,443 235,275 548,525 Quarterly 4.27% 557,517 3.81%

LATAM Airlines Group S.A. Chile 0-E WELLS FARGO U.S.A US$ 4,567 12,031 31,412 34,896 102,063 184,969 Quarterly 3.64% 188,942 3.53%

LATAM Airlines Group S.A. Chile 0-E CITIBANK U.S.A US$ 12,140 31,427 81,172 90,922 269,140 484,801 Quarterly 2.94% 497,707 2.61%

LATAM Airlines Group S.A. Chile 97.036.000-K SANTANDER Chile US$ 5,269 14,611 36,649 40,011 136,136 232,676 Quarterly 1.14% 239,882 1.01%

LATAM Airlines Group S.A. Chile 0-E JP MORGAN U.S.A US$ 4,476 12,635 31,060 34,373 135,434 217,978 Quarterly 1.09% 226,295 0.94%

LATAM Airlines Group S.A. Chile 0-E BTMU U.S.A US$ 2,161 5,741 14,167 15,803 64,193 102,065 Quarterly 1.41% 105,863 1.26%

LATAM Airlines Group S.A. Chile 0-E APPLE BANK U.S.A US$ 761 1,957 4,852 5,430 22,254 35,254 Quarterly 1.37% 36,541 1.22%

LATAM Airlines Group S.A. Chile - SWAP Aviones llegados - US$ 969 2,770 8,887 3,792 2,021 18,439 Quarterly - 18,439 -

Financial leases 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E ING U.S.A US$ 8,158 21,816 58,568 13,194 8,971 110,707 Quarterly 3.94% 110,576 3.73%

LATAM Airlines Group S.A. Chile 0-E CREDIT AGRICOLE France US$ 3,260 9,534 25,518 41,240 - 79,552 Quarterly 1.46% 79,428 1.46%

LATAM Airlines Group S.A. Chile 0-E CITIBANK U.S.A US$ 2,411 4,842 19,214 - - 26,467 Quarterly 1.85% 26,426 1.82%

LATAM Airlines Group S.A. Chile 0-E S.CHARTERED U.S.A US$ 1,723 5,303 7,462 - - 14,488 Quarterly 1.56% 14,481 1.56%

LATAM Airlines Group S.A. Chile 0-E PEFCO U.S.A US$ 3,874 9,826 26,985 30,325 14,305 85,315 Quarterly 5.22% 85,948 4.68%

Other loans 89.862.200-2 LATAM Airlines Group S.A. Chile 0-E BOEING U.S.A US$ 2,605 - 269,964 - - 272,569 - 1.87% 269,965 1.87%

LATAM Airlines Group S.A. Chile - OTROS - US$ - - - 56,447 - 56,447 Quarterly 2.43% 58,960 2.43%

TOTAL 157,674 379,660 1,164,707 647,586 1,166,680 3,516,307 3,566,811 ANNUAL REPORT 2012 Financial Statements 217 financial leases) than bankloans,obligationswiththepublicand Summary ofotherfinancialnon-currentloans(other follows: 31, 2012andDecember2011,respectively, isas Derivatives not recognized as a hedge as of December (b) Derivativesnotrecognizedasahedge. TOTAL NON-CURRENTS c) Hedgederivatives(seenote21 b) Derivativenotrecognizedasahedge(seenote21 a) Otherinterestbearingloans(seenote21 NON-CURRENT TOTAL CURRENTS c) Hedgederivatives(seenote21 b) Derivativenotrecognizedasahedge(seenote21 a) Otherinterestbearingloans(seenote21 CURRENT TOTAL OTHERFINANCIALLIABILITIES TOTAL NON-CURRENT Interest rate derivative notrecognizedasahedge NON-CURRENT TOTAL CURRENT Interest rate derivative notrecognizedasahedge CURRENT December December 31, 2012 31, 2012 ThUS$ 127,722 306,855 111,040 190,300 ThUS$ As of As of 65,598 57,647 9,992 5,515 4,477 5,515 4,477 4,477 5,515 December December 31, 2011 31, 2011 ThUS$ ThUS$ 456,574 120,304 326,411 14,766 As of As of 47,528 40,016 9,859 4,907 9,859 4,907 9,859 4,907 2,605 ANNUAL REPORT 2012 Financial Statements 218 December 31,2011areasfollows: Hedge derivatives as ofDecember31, 2012 and (c) Hedgederivatives exchange and collars contract. exchange andcollarscontract. The foreigncurrencyderivativesareforward TOTAL NON-CURRENT Fair valueofforeigncurrencyderivatives Fair valueoffuelderivatives Fair valueofinterestrate derivatives NON-CURRENT TOTAL CURRENT Fair valueofforeigncurrencyderivatives Fair valueoffuelderivatives Fair valueinterestrate derivatives Accrued Interestfromthelastdateofinterestrate swap CURRENT TOTAL HEDGINGLIABILITIES December 31, 2012 176,638 111,040 104,547 ThUS$ As of 65,598 10,502 37,076 13,360 4,660 1,963 4,530 December 31, 2011 160,320 120,304 ThUS$ 120,304 As of 40,016 34,105 5,027 884 - - - ANNUAL REPORT 2012 Financial Statements 219 recorded ascashflowhedges. rate forlong-termloansincurredintheacquisitionofaircraft tobeproducedfromthefuturecontract date.Thesecontracts are (1) Coversthesignificantvariationsincashflowsassociatedwithmarketriskimplicitchanges3-monthLIBORinterest instruments arepresentedbelow: of derivative,thecontracts heldashedging The fairvaluesofassets/(liabilities),bytype Hedging operation (7) CoversTAM’s revenuesrecordedinanothercurrency. ensuring investmentindollars. (6) CoversinvestmentsdenominatedinChileanpesostochangesthe USDollar-ChileanPeso exchange rate, withtheaimof purchases. (5) Coversthesignificantvariationsincashflowsassociatedwithmarket riskimplicitinthechangespriceoffuturefuel purchases. (4) Coverssignificantvariationsincashflowsassociatedwithmarketriskimplicitthechangespriceoffuturefuel cash flowhedges. LIBOR interestrates forlong-termloansincurredintheacquisitionofaircraft andbankloans.Thesecontracts arerecordedas (3) Coversthesignificantvariationsincashflowsassociatedwithmarketriskimplicitincreases3,6and12months interest rate Thesecontracts forlong-termloansincurredintheacquisitionofaircraft. arerecordedascashflowhedges. (2) Coversthesignificantvariationsincashflowsassociatedwithmarketriskimplicitchanges3-monthLIBOR Currency collars(7) Currency forward(6) Fuel swap(5) Fuel collars(4) Interest rate swaps(3) Interest rate options(2) Forward startingswaps(FSS)(1) December (146,283) 31, 2012 (15,228) ThUS$ As of (9,000) (911) 6 - - December (139,733) 31, 2011 (19,703) ThUS$ 11,599 19,016 As of (253) 73 - ANNUAL REPORT 2012 Financial Statements 220 to theinitialvalueofsuchassets. the derivativesrecognizedinequitywastransferred noportionoftheresult of anon-financialasset, Since noneofthecoverage resultedintherecognition statement ofincome,forcurrencycollars. ineffectiveness recognizedintheconsolidated During theperiodspresented,therehasbeenhedge probable transaction thathavenotbeenrealized. occurred hedgingoperations offuturehighly During theperiodspresented,therehavenot of theinvestment. months), whilethecashflowsoccuratmaturity throughout thelifeofinvestment(upto3 on investmentswillimpactresultscontinuously loans, whicharevalidfor12years.Thehedges hedges willimpactresultsoverthelifeofrelated where asinthecaseofinterestrate hedging,the consolidated statementoffinancialpositiondate, impact resultsoverthenext18monthsfrom hedges, thecashflowssubjecttosaidhedgeswill maintains cashflowhedges.Inthecaseoffuel During theperiodspresented,Companyonly income areasfollows: during theperiodandtransferred fromnetequityto The amountsrecognizedincomprehensiveincome Debit (credit)transferred fromnetequitytoincomeduringtheyear Debit (credit)recognizedincomprehensiveincomeduringtheyear December 31, 2012 ThUS$ (26,470) As of (2,510) December 31, 2011 (40,368) ThUS$ As of 62 ANNUAL REPORT 2012 Financial Statements 221 Subsidiaries. and of BusinessCombinationswithTAM S.A. other accountspayables,incorporates theeffects The balanceatDecember31,2012ofTrade and payables isasfollows: The compositionofTrade andotheraccounts PAYABLES NOTE 22. as follows: The detailsofTrade andotheraccounts payablesare Note 23. Seedetailin (*)Includesagreemententitled“PleaAgreement”withtheDepartment ofJusticetheUnitedStatesAmerica. 31, 2012andDecember2011areasfollows: (a) TOTAL TRADEANDOTHERACCOUNTSPAYABLES (b) Accrued liabilitiesatthereportingdate (a) Trade andotheraccountspayables CURRENT TOTAL Other accountspayabe(*) Leasing obligations Trade creditors Trade and otheraccounts payable as of December TRADE ANDOTHERACCOUNTS 1,652,955 1,364,237 December 1,364,237 288,718 1,036,436 December ThUS$ 31, 2012 ThUS$ 296,983 31, 2012 30,818 As of As of December ThUS$ 645,086 113,605 531,481 December 31, 2011 ThUS$ 531,481 102,099 410,533 31, 2011 As of 18,849 As of ANNUAL REPORT 2012 Financial Statements 222 (*) Profitsandbonds participation(Note26letterb) December 31,2011,areasfollows: (b) Note 23. Seedetailin (**) Includesagreemententitled“PleaAgreement”withtheDepartmentofJusticeUnitedStatesAmerica. REFIS isintendedtoallowthesettlementoftaxdebtsthroughaspecialmechanismpayandrefinance.. (*) FiscalRecoveryProgram (REFIS),establishedinLawNo.11.941/09 andProvisionalMeasureNo.449/2009. inBrazil Other personnelexpenses Boarding Fee Aircraft fuel TOTAL TRADEANDOTHERACCOUNTSPAYABLES Others Distrubution sistem Communications Aviation insurance Maintenance Crew DepartmentofJustice(**) U.S.A. Tax recoveryprogram (*) Leases, maintenanceandITservices Services onboard Aircraft andenginesleasing Ground services Handling andgroundhandling Marketing Professional servicesandadvisory Fleet (jol) Suppliers' technicalpurchases Landing andotheraviationfees TOTAL ACCRUEDLIABILITIES Others accruedliabilities Aircraft andenginemaintenance Accounts payabletopersonnel(*) Accrued personnelexpenses The liabilitiesaccruedatDecember31,2012and 1,364,237 December December ThUS$ 121,464 134,357 203,690 360,618 31, 2012 288,718 31, 2012 ThUS$ 174,147 26,674 30,818 38,436 49,738 51,360 52,903 59,181 64,981 68,785 16,233 18,387 19,668 24,433 21,893 22,053 70,625 As of As of 1,389 5,038 7,465 8,619 December December ThUS$ 531,481 134,088 31, 2011 113,605 31, 2011 ThUS$ 11,753 11,252 18,387 13,419 12,929 18,849 34,743 22,183 29,870 36,387 41,900 32,833 80,253 18,002 11,178 38,391 46,034 As of As of 3,137 5,881 6,274 9,780 7,563 - -

ANNUAL REPORT 2012 Financial Statements 223 2012 andDecember31,2011isasfollows: The detail of Other provisions as of December 31, NOTE 23. with TAM S.A. andSubsidiaries. with TAM S.A. incorporates theeffects of Business Combinations The balanceatDecember31,2012ofOtherprovisions, (3) ReferencedvalueinNote35Contingencies. market. (2) ProvisionmadeforproceedingsbroughtbytheEuropeanCommission forpossiblebreachesoffreecompetitioninthefreight that thecurrentbalanceasofDecember31,2012willbeappliedduring thenext12months. and others. The charge for the provision is shown in the consolidated statement of income in Administrative expenses. It is expected (1) TheamountrepresentsaprovisionforcertainlegalclaimsmadeagainsttheCompanybyformeremployees,regulatoryagencies PROVISION LEGALCLAIMS(1) TOTAL OTHERPROVISIONS,CURRENT PROVISION LEGALCLAIMS(1) CURRENT TOTAL OTHERPROVISIONS,NON-CURRENT PROVISION FOREUROPEANCOMMISIONINVESTIGATION (2) TOTAL OTHERPROVISIONS(3) NON-CURRENT Other Tax contingencies Labor contingencies Civil contingencies Tax contingencies Labor contingencies Civil contingencies OTHER PROVISIONS December 31, 2012 558,053 536,334 ThUS$ 326,048 125,119 As of 21,719 14,776 10,865 68,236 6,066 6,772 171 December 31, 2011 ThUS$ As of 29,748 22,385 10,675 7,363 5,981 3,700 1,005 1,024 6,772 331 260 ANNUAL REPORT 2012 Financial Statements 224 and December31,2012isasfollows: The movement of provisions between January 1, 2011 Matter report dated December 27, 2007. The U.S.A. Matter reportdatedDecember 27,2007.TheU.S.A. investigation wasdisclosed throughaEssential authorities.Thestart of the European andU.S.A. Thiswasajointinvestigationbythe cargo market. regarding possibleunfaircompetition ontheair aspartofaglobalinvestigationbegunin2006 S.A., more than25cargoairlines,includingLanCargo Competition oftheEuropeanCommissionagainst investigation broughtbytheDirectorate General for (a) European CommissionProvision: Brazilian Government. tribunal confirmsthefirstdecision,suchdepositwillbeconvertedin adefinitivepaymentinfavorofthe if thefinaldecisionisfavorable tothecompany, thedepositalreadymadeisgoingtocomeback TAM. Ontheotherhand,if Finally,first decision),thecompanyneededtododepositjudicialinguarantee tosuspend theenforceabilityofsuchtaxcredit. publicized in an unfavorable way, revoking the provisional remedy relief. As the legal suit isstill in progress (TAM appealed from this collect thetaxwhiletherewasnotajudicialdecisioninthisregard.However, thedecisiontakenbyajudgeinfirstinstancewas FA Initiallyitwascoveredbytheeffectsofaprovisionalremedy, inalegalsuit. thecompanywasnotobligatedto meaningthat, ThecompanyisdiscussingovertheTribunalthe enforceabilityoftaxcredit. theconstitutionality oftherequirementmadeby (**) Thedepositjudicialinguarantee, regardingtheFundoAeroviário(FA), intheamount ofMUSD$115,wasdoneinordertosuspend (*) Ismainlyrelatedtothereversaloftaxcontingencies. Opening balanceasofJanuary1,2011 Opening balanceasofJanuary1,2012 CLOSING BALANCEASOFDECEMBER31,2011 Exchange difference Reversal ofunusedprovision(*) Provision used Increase inprovisions CLOSING BALANCEASOFDECEMBER31,2012 Exchange difference Subsidiaries conversiondifference Additions duetobusinesscombination Reversal ofunusedprovision Provision used(**) Increase inprovisions This provisionwasestablishedbecauseofthe under which it imposed fines totaling €799,445,000 had issued its decision on this case (the “decision”), reported thattheGeneral DirectionofCompetition (b) 2009. in a Essential Matter report notice on January 21, Department ofJustice,asdisclosed with theU.S.A. (“ABSA”)Brasileiras S.A. signedaPleaAgreement anditssubsidiary, Aerolíneas when LanCargoS.A. portion oftheglobalinvestigationconcluded AEssentialMatterreportdated November9,2010, Legal claims (115,123) ThUS$ 547,188 (11,518) 634,076 19,073 (3,592) 12,085 21,957 19,073 3,724 5,596 (449) 141 291 Investigation Commission European ThUS$ 10,675 10,865 10,916 10,675 (241) 190 ------(115,123) 558,053 (11,518) 634,076 ThUS$ 29,748 (3,592) 12,085 32,873 29,748 Total 5,596 3,724 (100) (449) 481 ANNUAL REPORT 2012 Financial Statements 225 10,865 (ThUS$10,675atDecember31,2011) 31, 2012,theprovisionreachedamountofThUS$ Court ofJusticetheEuropeanUnion.AtDecember appealed the decision before the and Lan Cargo S.A. (d) the investigation. because LATAMcooperated during AirlineGroupS.A. decision, astherewasasignificantreductioninfine This is a minor fine in comparison tothe original financial statementsofLATAM AirlineGroupS.A.. for saidinfractions, whichwasprovisionedinthe (eight milliontwohundredtwentythousandEuros) have been fined inthe amount of€ 8,220,000 S.A., (c) Singapore Airlines. and Pacific, JapanAirlines, Airways,S.A.S. Cathay Air France, KLM,BritishAirways,Cargolux, AirCanada, andLanCargoS.A., Airline GroupS.A. against eleven(11)airlines,amongwhichareLATAM European Unionregulationsonfreecompetition and forty-fivethousandEuros)forinfringementof (seven hundredandninetyninemillionfour Jointly, LATAM and LanCargo Airline GroupS.A. On January24,2011,LATAM AirlineGroupS.A. ANNUAL REPORT 2012 Financial Statements 226 with TAM S.A. andSubsidiaries. with TAM S.A. incorporates theeffects of Business Combinations The balancesatDecember31,2012ofTax liabilities, The compositionofTax liabilitiesisasfollow: NOTE 24. TOTAL CURRENT Others Income tax Retentions Sales tax CURRENT TAX LIABILITIES ThUS$ December 31, 2012 115,481 As of 14,512 47,122 45,413 8,434 ThUS$ December 31, 2011 As of 29,369 13,138 1,284 9,750 5,197 ANNUAL REPORT 2012 Financial Statements 227 2012 andDecember31,2011areasfollows: Other non-financialliabilitiesasofDecember31, NOTE 25. with TAM S.A. andSubsidiaries. with TAM S.A. incorporates theeffects of Business Combinations financial liabilitiescurrentandnon-current, The balanceatDecember31,2012ofOthernon- TOTAL OTHERNON-FINANCIALLIABILITIES TOTAL NONCURRENT OTHERNON-FINANCIAL, Other sundryliabilities Deferred revenues Non-current TOTAL OTHERNON-FINANCIALLIABILITIES, CURRENT Other sundryliabilities Sale leaseback Dividends payable Deferred revenues Current OTHER NON-FINANCIALLIABILITIES December 2,043,851 1,942,530 1,909,896 31, 2012 101,321 101,259 ThUS$ As of 20,744 7,867 4,023 62 December 1,057,637 1,057,637 31, 2011 969,873 ThUS$ As of 85,318 2,446 - - - - ANNUAL REPORT 2012 Financial Statements 228 payments andotherobligationsbetweenJanuary1, (a) ThemovementinPension andtermination andSubsidiaries. Combinations withTAM S.A. benefits, incorporates theeffectsofBusiness The balanceatDecember31,2012ofEmployee follows: 2012 andDecember31,2011,respectively, areas Liability foremployeebenefitsasofDecember31, NOTE 26. 2011 andDecember31,2012isasfollows: BENEFITS TOTAL LIABILITYFOREMPLOYEE Other obligations Termination payments Pension payments CLOSING BALANCEASOFDECEMBER31,2012 Benefits paid Increase (decrease)currentserviceprovision Opening balanceasofJanuary1,2012 CLOSING BALANCEASOFDECEMBER31,2011 Benefits paid Increase (decrease)currentserviceprovision Opening balanceasofJanuary1,2011 EMPLOYEE BENEFITS December 31, 2012 ThUS$ 18,366 As of 12,594 5,532 240 December 31, 2011 ThUS$ ThUS$ 18,366 13,132 (2,007) 13,132 As of 10,556 13,132 5,274 5,482 9,657 2,296 (40) 280 Subsidiaries. and of Business Combinations with TAM S.A. personnel expenses,incorporates theeffects For the period ended at December31, 2012 the objectives. to anannualincentivesplanforachievement of The participationinprofitsandbonusescorresponds (*) Accountspayablestothepersonnel(Note22letterb) respectively, isdetailedbelow: December 31,2012and2011 (b) Theliabilityforshort-termbenefitsasof (c) Employmentexpensesaredetailedbelow: Profit-sharing andbonuses(*) TOTAL Other personnelexpenses Termination benefits Short-term employeebenefits Salaries andwages December 1,907,873 1,296,101 31, 2012 For theperiodsended ThUS$ 181,084 397,824 ThUS$ As of 70,625 32,864 2012 December 31, December 1,012, 31, 2011 ThUS$ 144,219 764,396 ThUS$ As of 38,391 2011 18,207 85,681 503 ANNUAL REPORT 2012 Financial Statements 229 (**) Agreemententitled“PleaAgreement”withtheDepartmentofJusticeUnitedStatesAmerica;itsshort-termpartisin intended toallowthesettlementoftaxdebtsthroughaspecialmechanismpayandrefinance. (*) FiscalRecoveryProgram (REFIS),establishedinLawNo.11.941/09andProvisional MeasureNo.449/2009.REFISis inBrazil 2012 andDecember31,2011areasfollows:: Non-current accountspayableasofDecember31, NOTE 27. Combinations with TAM S.A. andSubsidiaries. Combinations withTAM S.A. incorporates theeffectsofBusiness The balanceatDecember31,2012ofaccountspayablenon-current, Trade andotherpayable.See detailsinNote23. TOTAL ACCOUNTSPAYABLE, NON-CURRENT Other sundryliabilities Provision forvacationsandbonuses Aircraft andenginemaintenance Other accountspayable(**) Tax recoveryprogram (*) Fleet financing(JOL) ACCOUNTS PAYABLE, NON-CURRENT December 31, 2012 731,235 335,834 207,089 140,769 ThUS$ As of 21,594 15,995 9,954 December 31, 2011 354,930 271,965 ThUS$ As of 38,540 36,000 7,982 443 - ANNUAL REPORT 2012 Financial Statements 230 circumstances, as wellthetransfer oftheshares, loss,replacementandothersimilar disablement, stock certificates andtheirissuance,exchange, series of shares and no privileges. The form of its 31, 2011),noparvalue.Therearespecial divided into340,326,431sharesasofDecember common stock of a same series (ThUS$ 473,907, amounts toThUS$1,501,018dividedinto479,098,052 The capitaloftheCompanyatDecember31,2012 composed inthefollowingform: The CapitaloftheCompanyismanagedand solid financialposition. the returnforitsshareholdersandmaintaininga out itsmediumandlong-termobjectives,optimizing ensure access to thefinancialmarketsforcarrying appropriate levelofcapitalizationthatenablesitto The Company’s objective is to maintain an (a) Capital NOTE 28. not beused for thepurposeofcreating and 7,436,816 sharesthatwerenot usedintheexchange, of shareholderstheCompany thattheremaining 2012, theBoardagreedtosubmit totheapproval As reportedbyEssentialMatter datedJune28, andHoldcoIIS.A. the SisterHoldcoS.A. 135,119,066 weresubjectedtoexchangeforsharesof of December 2012, 343,978,986 are fully paid and of theCompanyanditssubsidiaries.Atend allocated tocompensationplansforemployees and4,800,000shareswillbe and HoldcoIIS.A.; to themergerwithcompaniesSisterHoldcoS.A. Of thisincrease,142,555,882shares,wasallocated 21, 2011by147,355,882ordinarysharesnoparvalue. Extraodinary Shareholders’ MeetingofDecember according tothecapitalincreaseapprovedat authorized is488,355,791sharesnoparvalue, As of December 31, 2012,the total number of shares (b) Subscribedandpaidshares and itsregulations. is governedbytheprovisionsofCorporations Law EQUITY 7,436,816 shareswereintendedtobeoffered to discuss,amongothermatters,thatthereferred agreed to callExtraordinary Shareholders Meeting Matter datedAugust3,2012,tothisdate,theBoard According totheinformationthroughEssential the Corporation Law. LATAM accordingtoarticle25of AirlinesGroupS.A., preferably intended to be offered to shareholders of in Article24oftheCorporations Law, butinstead of theCompanyanditssubsidiaries,asprovided implementing acompensationplanforemployees 7,000 sharespaidonDecember 30,2011and 340,326,431 shareshavebeen fullypaid(includes At December31,2011,ofthetotal sharessubscribed, 40 onSubsequentEvents. on theresultofthisplacementisavailableinNote placed ofwhich2,979,077werepaid.TheInformation 2012, 2,988,885ofthesaid7,436,816shareshadbeen Essential Matteronthesamedate.AtDecember31, the SuperintendencyofSecuritiesandInsurance by the priceofplacingthem,whichwasreportedto preferred optionofthoseshares,proceededtofix from December 21, 2012, the period of to start, December 20,2012,theBoardofDirectorsagreed and Insurance, dated December11,2012.On was approvedbytheSuperintendencyofSecurities There-destinationandplacementofthoseshares in general. balance, wouldbeoffered and placed on themarket of the Corporations Law and that the unsubscribed between theLATAM shareholdersunderArticle25 wereintendedtobeoffered preferably II S.A., andHoldco for shares of theSisterHoldcoS.A. December 21,2011,andwerenottobeexchanged of theExtraordinary ShareholdersMeetingdated 142,555,882 sharesissuedundertheauthorization approval oftheremaining7,436,816sharestotal September 4,2012,agreed,amongothermatters,the Extraordinary Shareholders Meeting held on on themarketingeneral. Theaforementioned the balancenotsubscribed,wasofferedandplaced preferentially to shareholders of the Company and ANNUAL REPORT 2012 Financial Statements 231 between January1,2011andDecember31,2012 authorized and fully paid shares described above The followingtableshowsthemovementof under optioncontracts. 2012), leaving673,569sharesreservedforissuance registered intheRegisterofShareholdersJanuary The movementofstockoptionsoversharesrelatedtothecapital increasein2007isdetailedNote38. costs forissuanceandplacementofsharesbyThUS$(3,510)atDecember 31,2012andThUS$(2,672)toDecember2011. (*) Amountsreportedrepresentonlythosearisingfromthepaymentof the outstandingshares,doesnotconsidercapitalization Paid sharesasofJanuary1,2011 Movement fullypaidshares(*) Authorized sharesasofDecember31,2012 Increase capitaloptionclosingyear2007optionsovercanceledshares Authorized sharesasofJanuary1,2012 Authorized sharesasofDecember31,2011 Compensation plansforemployees andHoldcolS.A. Issued sharesmergercompaniessisterHolcoS.A. Increase CapitalasofDecember21,2011 Authorized sharesasofJanuary1,2011 Movement ofauthorizedshares Paid sharesasofDecember31,2012(*) andHoldcoIIS.A. with companiessisterHoldcoS.A. Placement oftheremainingpreferredsharesissuedformerger andHoldco IIS.A. Exchange ofsharesformergerCompaniesSisterHoldcoS.A. Exercise stockoptionsincreasecapital2007 Paid sharesasofDecember31,2011 Exercise stockoptionsincreasecapital2007 Paid sharesasofJanuary1,2012 479,098,052 340,326,431 488,355,882 shares 142,555,882 341,000,000 135,119,066 340,326,431 338,790,909 488,355,791 488,355,882 N° of shares 2,979,077 1,535,522 4,800,000 N° of 673,478 (91) Amount 1,507,200 476,579 ThUS$ 951,409 476,579 453,444 68,986 10,226 23,135 ANNUAL REPORT 2012 Financial Statements 232 January 1,2010andDecember31,2012isasfollows: The movementofOthersundryreservesbetween (d) Othersundryreserves 203. foranamountofThUS$ the righttoretirement, 7,401 shares,fromtheshareholderswhoexercised subscribed andpaid,theCompanyhasacquired At December31,2012,ofthetotalnumbershares (c) Treasury stock month ofSeptember2012,accordingtotheminutesExtraordinary MeetingofShareholdersheldonSeptember4,2012. (2) Thecostsofissuanceandplacementsharesrecognizedinreserves duringthefirsthalfof2012werecapitalized Shareholders MeetingheldonDecember21,2011. (1) Capitalizationshareissuanceandplacementcostscausedbythecapital increasecarriedoutin2007,assetExtraordinary CLOSING BALANCEASOFDECEMBER31,2011 Legal reserves Capitalization shareissuanceandplacementcost(1) Transactions withnon-controllinginterest Deferred tax Stock optionplans Opening balanceasofJanuary1,2011 CLOSING BALANCEASOFDECEMBER31,2012 Legal reserves shareexchange Higher valueforTAM S.A. Capitalization shareissuanceandplacementcost(2) Cost ofissuanceandplacementshares(2) Transactions withnon-controllinginterest Deferred tax Stock optionplan Opening balanceasofJanuary1,2012 Stock option ThUS$ plans (1,299) 5,574 7,130 2,084 5,401 7,130 (257) (355) ------2,666,682 2,665,692 reserves ThUS$ Other (3,510) (1,604) (1,801) 1,362 1,232 3,510 2,672 1,362 429 62 - - - - 2,672,256 2,665,692 ThUS$ Total (3,510) (1,604) (1,299) (1,801) 8,492 1,232 3,510 8,492 2,672 2,084 5,463 (257) (355) 429 ANNUAL REPORT 2012 Financial Statements 233 only becapitalized. 1979, inCircularNo.1,529.Therevaluationwasoptionalandcouldbetakenonlyonce,thereserveisnotdistributablecan (2) CorrespondstothetechnicalrevaluationoffixedassetsauthorizedbySuperintendenceSecuritiesandInsurance in exchange sharesofLATAMatJune22,2012. AirlinesGroupS.A. (undertheExchangeOffer),asstipulatedinDeclaration ofPosting ofMergerbyAbsorptionandthefairvaluethese II S.A. andHoldco acquired(undersubscriptions)bySisterHoldcoS.A. (1) CorrespondstothedifferenceinsharesvalueofTAM S.A. December 31,2012isasfollows: comprehensive incomebetweenJanuary1,2011and The movementof Reserves with effect in other income. (e) Reserveswitheffectinothercomprehensive ThUS$ (983)atDecember31,2012. by InvestmentinthecapitalincreasecarriedoutbyLíneaAéreaCarguera deColombiaS.A. by theparticipationofLanCargoS.A. byThUS$(621)atDecember31,2012(ThUS$(1,801)2011)andthelossgenerated Integración Regional,AIRESS.A. inthecapitalincreaseforAerovíasde (3) Correspondstothelossgenerated bytheparticipationofLanPax GroupS.A., TOTAL Others Transactions withnon-controllinginterest(3) Reserve fortheadjustmenttovalueoffixedassets(2) shareexchange(1) Higher valueforTAM S.A. CLOSING BALANCE ASOFDECEMBER 31,2012 Conversion difference subsidiaries Deferred tax Derivatives valuationgains(losses) Opening balanceasofJanuary1,2012 CLOSING BALANCEASOFDECEMBER31,2011 Conversion differencesubsidiaries Deferred tax Derivatives valuationgains(losses) Opening balanceasofJanuary1,2011 following: The balanceofOtherreservescomprisesthe payments” explainedinNote38. These reservesarerelatedtothe“Share-based (d.1) (d.2) Reservesforstockoptionplans Otherreserves translation Currency reserve (13,317) ThUS$ (13,317) (10,915) (2,727) (4,257) 19,618 3,574 1,855 - - December 2,666,682 2,665,692 31, 2012 ThUS$ As of (3,405) (140,730) (140,556) (140,556) (107,050) 1,775 2,620 Cash flow (40,368) hedging reserve ThUS$ (5,177) 5,003 6,862 - - December 31, 2011 (137,156) (153,873) (153,873) (111,307) ThUS$ (10,915) (40,368) As of (1,801) ThUS$ (7,904) 19,618 1,362 2,620 Total 5,003 8,717 543 - ANNUAL REPORT 2012 Financial Statements 234 (f) Retainedearnings January 1,2010andDecember31,2012isasfollows: The movementofRetainedearningsbetween CLOSING BALANCEASOFDECEMBER31,2012 Dividends Other decreases Result fortheperiod Opening balanceasofJanuary1,2012 CLOSING BALANCEASOFDECEMBER31,2011 Dividends Other decreases Result fortheperiod Opening balanceasofJanuary1,2011 corresponding resultsrecognized. these reservesshouldbeadjustedandthe cash flowhedges.Whenthesecontracts expire, derivative contracts thathavebeendefinedas at the end of each period of theoutstanding These originatefromthefairvaluevaluation (e.2) non-controlling interests. loss ofcontrol,thesereservesaretransferred to the saleordisposal.Ifdoesnotinvolve statement ofincomeaspartthelossorgainon these reserves are shown in the consolidated is soldordisposedandlossofcontroloccurs, investments. When the investment (all or part) foreign currencydesignatedashedgesforsuch parent), andfromloansotherinstrumentsin a functionalcurrencydifferenttothatofthe in foreignentities(orChileaninvestmentwith arising fromthetranslation ofanyinvestment These originate from exchange differences (e.1) Currency translation reserve Cash flowhedgingreserve 1,106,168 1,116,798 1,116,798 (151,981) ThUS$ (21,749) 320,197 949,214 10,956 (632) 163 ANNUAL REPORT 2012 Financial Statements 235 (g) Dividendspershare category Othernon-financialliabilities,current. 30% ofthevalueCompany. Thisamountisinthe a minimummandatorydividendcorrespondingto At December 31, 2012,dividends are provisioned for the year. circumstances that may occurduring the courseof of thisobligatoryminimum,basedontheeventsand the Companyfromdistributingdividendsinexcess current regulations. This policy does not preclude by law, i.e.30%ofthenetincomeaccording to distributed will beequal to theminimum required The Company’s dividend policy is that dividends Dividend pershare(US$) the dividendisdistributed Number ofsharesamongwhich Amount ofthedividend(ThUS$) Date ofdividend Description As ofDecember31,2011 Dividend pershare(US$) Number ofsharesamongwhichthedividendisdistributed Amount ofthedividend(ThUS$) Date ofdividend Description As ofDecember31,2012 dividend, 2010 339,310,509 04-29-2011 0.03061 Final 10,386 dividend, 2011 Final 340,999,909 04-26-2012 0.05414 18,462 dividend, 2011 339,358,209 08-30-2011 Interim 0.16677 56,595 dividend, 2012 Mandatory minimum 479,098,052 12-31-2012 0.00686 3,287 dividend, 2011 340,164,105 12-20-2011 Interim 0.24988 85,000 ANNUAL REPORT 2012 Financial Statements 236 Combinations with TAM S.A. andSubsidiaries. Combinations withTAM S.A. Revenue, incorporates theeffectsofBusiness For theperiodendedatDecember31,2012 The detailofrevenuesisasfollows: NOTE 29. TOTAL Cargo Passengers REVENUE 9,722,189 1,743,525 7,978,664 For theperiodsended ThUS$ 2012 December 31, 5,585,440 1,576,530 4,008,910 ThUS$ 2011 ANNUAL REPORT 2012 Financial Statements 237 expenses aredetailedbelow: The mainoperating costsandadministrative (a) Costsandoperating expenses NOTE 30. Liability foremployeebenefits (SeeNote26). The costsforpersonnelexpenses aredisclosedin (c) Personnel expensesl (*) IncludesthedepreciationofProperty, plantandequipmentthemaintenancecostofaircraft heldunderoperating leases. Depreciation andamortizationaredetailedbelow: (b) Depreciationandamortization TOTAL Passenger services Aircraft maintenance Aircraft rentals Other operating expenses Comissions Aircraft fuel Other rentalsandlandingfees TOTAL Amortization Depreciation (*) COSTS ANDEXPENSESBYNATURE 6,934,759 3,434,569 1,052,594 1,288,151 For theperiodsended For theperiodsended ThUS$ ThUS$ 784,887 753,747 239,848 297,618 313,038 308,941 31,140 2012 2012 December 31, December 31, 3,769,576 1,750,052 ThUS$ ThUS$ 396,475 386,644 136,049 182,358 174,197 646,051 209,255 671,614 2011 2011 9,831 ANNUAL REPORT 2012 Financial Statements 238 statement ofincomebyfunction. and financingcostspresentedintheconsolidated costs, administrative expenses,otherexpenses equivalent tothesumofcostsales,distribution plus theEmployeeexpensesdisclosedinNote26,are Costs andexpensesbynaturepresentedinthisnote The detailoffinancialcostsisasfollows: (d) Financialcosts Subsidiaries. and effects ofBusinessCombinationswithTAM S.A. Cost andexpensesbynature,incorporates the For theperiodendedatDecember31,2012 TOTAL Other financialinstruments Financial leases Bank loaninterest For theperiodsended ThUS$ 294,598 213,332 34,373 46,893 2012 December 31, ThUS$ 139,077 109,168 2011 17,644 12,265 ANNUAL REPORT 2012 Financial Statements 239 and 2011areasfollows: classified asheldforsaleofDecember31,2012 The gains(losses)onsalesofnon-currentassetsnot FOR SALE CURRENT ASSETSNOTCLASSIFIEDASHELD NOTE 31. TOTAL Property, plantandequipment GAINS (LOSSES) ONTHESALEOFNON- For theperiodsended ThUS$ (2,836) (2,836) 2012 December 31, ThUS$ 2011 (172) (172) ANNUAL REPORT 2012 Financial Statements 240 of Business Combinations with TAM S.A. and of BusinessCombinationswithTAM S.A. Other income,byfunction,incorporates theeffects For theperiodendedatDecember31,2012of Other incomebyfunctionisasfollows: NOTE 32. Subsidiaries. TOTAL Other miscellaneousincome Tours Customs andwarehousing Logistics andcourier Aircraft leasing Duty free OTHER INCOME,BYFUNCTION For theperiodsended ThUS$ 220,156 24,537 28,863 17,463 75,067 74,226 2012 December 31, - ThUS$ 132,804 2011 24,677 10,958 12,701 16,874 23,642 43,952 ANNUAL REPORT 2012 Financial Statements 241 purposes. to theDecember2011amounts,forcomparative It wasalsonecessarytoapplytheabovedefinition LATAM andSubsidiaries. AirlinesGroupS.A. foreign currency of each of the entities that make mentioned inthisnotecorrespondtothesumof Considering theabove,balancesbycurrency currencies aredefinedasforeigncurrency. which an entity operates in each state and all other currency oftheprimaryeconomicenvironmentin The functionalcurrencyisdefinedprimarilyasthe andSubsidiaries. Combinations withTAM S.A. real,thelatterduetoBusiness peso andBrazilian such as the Chilean peso, Argentine peso, Colombian functional currencyisdifferenttotheUSdollar, is the US dollar, also it has subsidiaries whose S.A. The functionalcurrencyofLATAM AirlinesGroup RATE DIFFERENCES NOTE 33. items incurrentandnon-currentassetsisasfollows:: The foreign currency detail ofbalancesmonetary (a) Foreign currency FOREIGN CURRENCYANDEXCHANGE Othercurrency Strongbolivar U.S. dollar Euro Colombianpeso Chileanpeso real Brazilian Argentinepeso OTHER FINANCIALASSETS Othercurrency Strongbolivar U.S. dollar Euro Colombianpeso Chileanpeso real Brazilian Argentinepeso CASH ANDEQUIVALENTS Current assets December 31, 2012 337,223 ThUS$ 30,936 As of 18,020 63,565 51,346 94,035 15,502 40,091 68,705 7,443 2,147 2,167 3,308 601 550 671 8 - December 31, 2011 216,747 148,148 ThUS$ As of 17,214 14,948 21,589 14,647 12,956 1,127 6,239 5,688 6,616 325 291 499 864 18 5 1 ANNUAL REPORT 2012 Financial Statements 242 Euro Colombian peso Chilean peso real Brazilian Argentine peso TAX ASSETS U.S. dollar Chilean peso RELATED ENTITIES ACCOUNTS RECEIVABLE FROM Other currency Strong bolivar U.S. dollar Euro Colombian peso Chilean peso real Brazilian Argentine peso TRADE ANDOTHERACCOUNTSRECEIVABLE Current assets Other currency Strong bolivar U.S. Dollar Euro Colombian peso Chilean peso real Brazilian Argentine peso TOTAL ASSETS Other currency Strong bolivar U.S. dollar December 31, 2012 ThUS$ 503,601 950,878 166,758 130,736 178,916 280,462 210,706 As of 14,565 64,553 90,154 67,287 33,313 55,057 87,415 49,541 81,886 17,754 24,764 10,753 14,565 2,759 3,153 9,441 6,895 1,649 4,618 3,740 351 924 - December 31, 2011 ThUS$ 160,882 441,205 As of 225,946 45,524 14,174 28,150 61,839 35,467 40,698 22,841 32,913 14,767 29,156 51,685 23,199 19,960 14,651 1,247 3,289 8,266 8,450 8,475 1,792 838 522 124 809 29 - - ANNUAL REPORT 2012 Financial Statements 243 Other currency DEFERRED TAX ASSETS Other currency U.S. dollar Argentine peso TAX ASSETS,LONG TERMPORTION Other currency U.S. dollar Chilean peso ACCOUNTS RECEIVABLE Other currency U.S. dollar Euro Colombian peso Chilean peso real Brazilian Argentine peso OTHER FINANCIALASSETS Non-current assets Other currency U.S. dollar Euro Colombian peso Chilean peso real Brazilian Argentine peso TOTAL ASSETS December 31, 2012 ThUS$ As of 14,812 31,329 72,449 22,105 15,895 29,996 20,896 22,063 4,203 9,564 3,482 7,817 3,505 7,817 9,662 3,505 4,203 5,000 524 524 248 98 49 41 8 1 December 31, 2011 ThUS$ As of 29,821 17,951 17,952 17,951 7,482 4,388 7,422 2,166 1,939 2,166 7,511 1,939 140 113 140 53 89 60 1 ------ANNUAL REPORT 2012 Financial Statements 244 follows: items incurrentliabilitiesandnon-currentisas The foreign currency detail ofbalancesmonetary ACCOUNTS PAYABLE TORELATED ENTITIES Other currency Strong bolivar U.S. dollar Euro Colombian peso Chilean peso real Brazilian Argentine peso TRADE ANDOTHERACCOUNTSPAYABLES Euro U.S. dollar OTHER FINANCIALLIABILITIESCURRENT Current liabilities Other currency U.S. dollar Euro Colombian peso Chilean peso real Brazilian Argentine peso TAX LIABILITIES U.S. dollar Chilean peso December 31, 2012 ThUS$ 825,391 241,473 As of 240,871 413,468 208,858 12,840 21,398 38,540 29,268 72,643 38,506 3,261 3,019 2,925 2,125 2,710 602 985 325 200 Up to90days 14 14 - December 31, 2011 ThUS$ As of 292,133 14,968 86,792 44,115 10,921 26,594 74,576 32,898 7,520 1,192 3,238 1,724 1,269 593 468 305 249 118 367 - - - - December 31, 2012 ThUS$ 589,105 As of 589,070 19,850 11,938 6,157 1,695 91 daysto1year 35 52 8 ------December 31, 2011 ThUS$ As of 12,272 10,062 1,012 1,431 678 334 697 51 22 9 ------ANNUAL REPORT 2012 Financial Statements 245 Other currency U.S. dollar Euro Chilean peso real Brazilian Argentine peso TOTAL NON-CURRENTLIABILITIES Other currency Euro Chilean peso real Brazillian Argentine peso Other provisions Other currency U.S. dollar Chilean peso ACCOUNTS PAYABLE Euro U.S. dollar OTHER FINANCIALLIABILITIES Non-current liabilities Other currency Strong bolivar U.S. dollar Euro Colombian peso Chilean peso real Brazilian Argentine peso TOTAL LIABILITIES Other currency Strong bolivar U.S. dollar Colombian peso Chilean peso real Brazilian OTHER NON-FINANCIALLIABILITIES Current liabilities December 31, 2012 ThUS$ More than1to3years 953,230 623,828 313,215 622,680 926,311 303,631 As of December 12,013 10,865 16,187 8,286 1.148 5,112 8,322 3,814 1,298 1,128,653 31, 2012 ThUS$ 808 664 808 664 As of 414,821 494,110 36 48,935 75,796 41,529 23,523 44,056 42,403 32,550 1,211 3,082 3,921 368 120 Up to90days 98 December 31, 2011 ThUS$ As of December 19,351 10,675 10,675 11,821 6,578 6,549 7,530 31, 2011 ThUS$ 351,904 981 466 651 466 651 981 As of 51,884 78,046 34,622 15,273 35,392 16,135 87,988 80,349 11,389 42,729 29 1,508 ------239 114 4 - December 31, 2012 More than3to5years ThUS$ 859,664 859,526 As of 859,526 859,526 December 31, 2012 ThUS$ 608,971 As of 595,227 138 138 138 11,938 1,730 ------91 daysto1year 18 10 16 58 6 ------December 31, 2011 ThUS$ As of December 31, 2011 ThUS$ As of 76 76 76 76 ------17,111 11,101 3,827 3,231 4,662 578 361 235 697 51 22 - - - - - More than5years December 1,811,660 1,811,660 31, 2012 1,811,660 1,811,660 ThUS$ As of ------December 31, 2011 ThUS$ As of 10 10 10 10 ------ANNUAL REPORT 2012 Financial Statements 246 Other currency Strong bolivar U.S. dollar Euro Colombian peso Chilean peso real Brazilian Argentine peso TOTAL LIABILITIES Other currency Strong bolivar U.S. dollar Euro Colombian peso Chilean peso real Brazilian Argentine peso TOTAL ASSETS General summaryofforeigncurrency: Other currency Strong bolivar U.S. dollar Euro Colombian peso Chilean peso real Brazilian Argentine peso NET POSITION December (4,385,476) 5,362,178 1,023,327 31, 2012 4,686,834 (211,079) ThUS$ (25,131) As of 208,912 301,358 220,368 124,174 419,991 55,057 95,232 53,046 81,935 51,136 39,086 10,691 57,748 56,146 32,550 96,194 42,355 24,187 7,419 3,921 December 31, 2011 ThUS$ 388,452 471,026 (48,209) (51,958) (11,407) As of 233,457 137,646 (7,994) 40,811 22,841 33,053 14,767 31,322 53,624 41,151 21,311 17,958 25,227 89,020 85,011 22,761 42,729 95,811 35,666 15,924 1,530 ANNUAL REPORT 2012 Financial Statements 247 Brazilian real Brazilian Argentine peso Uruguayan peso Peruvian Sol New Zealanddollar Mexican peso Boliviano Australian dollar Strong bolivar Euro Colombian peso Chilean peso of ThUS$66,685andaloss256,respectively. ended December 31, 2012 and 2011, generated a gain sured atfairvaluethrough profit orlossfor theyear exceptforfinancialinstrumentsmea statement, Exchange differences recognized in the income (b) Exchangedifferences with TAM S.A. andSubsidiaries. with TAM S.A. incorporates theeffects ofBusinessCombinations Foreign currencyandexchangerate differences, For theperiod ended atDecember 31,2012 of the U.S. dollar, onthedatesindicated: The following showsthe current exchange rates for spectively. a gainofThUS$18,692andloss10,864,re year endedDecember31,2012and2011,represented serves forcurrencytranslation differencesforthe Exchange differencesrecognizedinequityasre December 31, 2012 1,760.00 As of 479.96 19.05 12.99 2.55 1.22 6.86 0.96 4.30 0.76 2.04 4.91 - - - December 31, 2011 1,936.00 As of 519.20 19.80 13.96 2.69 1.28 6.86 0.98 4.30 0.77 1.87 4.30 ANNUAL REPORT 2012 Financial Statements 248 NOTE 34. Weighted average number average sharesstockoptions Adjustment dilutedweighted of shares,basic Weighted average number Basic earningspershare(US$) of shares,basic Weighted average number DILUTED EARNINGSPERSHARE(US$) of shares,diluted equity holders(ThUS$) controlling company’s Earnings attributableto Diluted earnings equity holders(ThUS$) controlling company’s Earnings attributableto Basic earnings EARNINGS PERSHARE 412,267.624 412,267,624 412,267,624 0.02657 2012 2012 0.02657 10,956 10,956 For theperiodsended For theperiodsended - December31, December 31, 339,424,598 339,695,978 339,424,598 2011 2011 0.94335 320,197 0.94260 271,380 320,197 ANNUAL REPORT 2012 Financial Statements 249 (i) LawsuitsfiledbyLATAMandSubsidiaries AirlinesGroupS.A. Lawsuits NOTE 35. Investments LLC Atlantic Aviation (AAI) Investments LLC Atlantic Aviation (AAI) Mas deCargaS.A. Aerotransportes Company CONTINGENCIES of NewYork. York County State ofNew Court ofthe Supreme of NewYork. York County State ofNew Court ofthe Supreme justice. administrative of fiscaland Federal Court Court 07-6022920 Case No. 602286-09 31698/11- 17-01-8 incorporated underthelawsof iary LATAM AirlinesGroupS.A., LLC. ("AAI"), anindirectsubsid Atlantic AviationInvestments the parties on September 29, 2006. the partiesonSeptember29,2006. Understanding signedbetween tions undertheMemorandum of to guarantee and other obliga and (b)forbreachofitsobligation mentioned inthepreviousnote for non-paymentofthefourloans Volo (a)asalteregosofVariglog (Cayman) IILPandLogisticsLLC son GlobalOpportunitiesPartners nities Partners IILP, MatlinPatter Matlin Patterson GlobalOpportu lin Patterson Global Advisers LLC, (“AAI”) suedonJuly24,2009Mat Atlantic AviationInvestmentsLLC. Aéreas S.A. the original debtor, VRG Linhas the loansineventofsale establish the acceleration of New York law. Thesecontracts credit agreements governed by of fourdocumentedloansin ("Variglog") for non-payment S.A. August 29th, 2007 Varig Logistics the StateofDelaware,suedin ance infavorofVAT. refusaltorestorebal thority's Nullity trialagainstthetaxau Origin ------principal, interestandcostsin that Variglog shouldpaythe zerland, theconvictionstated In implementation stage in Swit cants (damages). actually payablebytheappli for determinationoftheamount turned backtothelowercourt Thecausewas by theHighCourt. which wasultimatelydismissed fendants appealedthisdecision court ruledfavorably. Thede (abbreviated trial)whichthe AAI fileda “summary judgment” covery. declared thestateofjudicialre to recognizethejudgmentthat andhasasked Switzerland Brazil process ofjudicialrecoveryin land withAAI.Variglog isinthe go of Variglog funds in Switzer favor ofAAI.Itkeepstheembar Presentation ofevidence. Stage oftrial ------commited Amounts costs and and costs damages interest, interest ThUS$ 17,100 17,100 4,900 plus plus ANNUAL REPORT 2012 Financial Statements 250 AIRES S.A. Regional, Integración Aerovías de Group S.A. LATAM Airlines y Lan CargoS.A. Brasileiras S.A. Aerolinhas Company Defense, Brazil Economic Council for Administrative de Bogotá. del Circuito Tercero Civil Juzgado (Países Bajos). Ceveil Recht Zaken Afdeling Juridische and Directie (Inglaterra) División Chancery Justice Court of In theHigh Court Case No. - - - the Netherlands. parties, basedinEnglandand court proceedings as third havebeensuedin Group S.A, andLATAMCargo S.A. Airlines especially fuelsurcharge.Lan airline competitionfreighters, for possible violations of as a resultof the investigation services inprivateprosecutions airlines byusersoffreight Lawsuits filedagainstEuropean surcharge freighters, especiallyfuel violations ofairlinecompetition Investigation forpossible their destination. airline passengerssafeuntil breaking theobligationtokeep community lifewereaffected, and herfamily, professionaland hearing capacityinherrightear happened because she lost contractual liability forwhat Mrs. Milena Paez, alleged The demander,the aircraft. system andpressurizationof 1, failure occurred in the start procedure oftheengineNo. 2, to start the engine starting after startoftheengineNo. and airport inBucaramanga, aircraft HK-4491wasinthe On December10,2008,the Origin process. Case isinevidencediscovery not yetissuedafinaldecision. Investigation pending.CADEhas million pesosCOP. ($1,000,000). the costsguarantee callfora not prosper. Also ordered to pay statingthatitdid requirement, the preliminaryobjection demand remedied and resolved 2012), theCourtconsidered 2012 (reportedbystateAugust27, demand. ByorderonAugust23, filed a memorial rectifying the On July 31, 2012 the demander Stage oftrial mined Undeter Indetermined minimum wage. legal monthly (*) SMMLV: Current 2,800 SMMLV ). equivalent to 1,500 million, tional COP tes anaddi that genera 2008, anitem December dated from terests liqui (*), plusthein 3,550 SMMLV valent to million (equi i.e. COP1,900 ThUS$ 1,768, proximately claim ofap with amain demanded was Aires S.A. commited Amounts ThUS$ ------ANNUAL REPORT 2012 Financial Statements 251 LATAM Airlines (ii) Trials receivedbyLATAMandsubsidiries AIRLAINSGROUPS.A. Ecuador S.A. Nacionales del Líneas Aéreas Aerolane Ecuador S.A. Nacionales del Líneas Aéreas Aerolane Ecuador S.A. Nacionales del Líneas Aéreas Aerolane Lan CargoS.A. y Group S.A. LATAM Airlines Lan CargoS.A. y Group S.A. Company Canadá. Bureau Competition and Canada commission European services. revenue Internal de Guayaquil. Tribunal Fiscal Guayaquil Court 2nd District Court 6319-4064-05 Case No. 2012-0082 2010-0114 17502- 09504- - - overpayment oftaxes. Revenue ServicesGuayaquil,for Regional DirectoroftheInternal Judicial proceedingsagainstthe Added Tax (VAT) 2006. Order DeterminingtheValue charge freighters, especiallyfuelsur lations ofairlinecompetition Investigation forpossiblevio peal cannotbepredicted. Theoutcomeofthisap Group S.A. Lan CargoSAandLATAM Airlines This penaltyisbeingappealedby in theamountofThUS$$10,865. Group SA the imposition of a fine andLATAM Lan CargoS.A. Airlines European Commissionnotified ate General forCompetition of the On November 9, 2010, the Director ing afuelsurchargeandfreight. especiallytheallegedfix market, petition intheEuropeanaircargo for possibleviolationsoffreecom airlines, includingLanCargoS.A., a caseagainsttwenty-fivecargo and LATAMof AirlinesGroupS.A. mission notifiedLanCargoS.A. petition oftheEuropeanCom the Directorate General forCom charge. OnDecember26,2007, freighters, especially fuelsur lations ofairline competition Investigation forpossiblevio in 2012. come Tax, etc.Processinitiated sions withoutWithholdingofIn branch expenses,ARCcommis CEDT requesting certification of come Tax, whichhaveunknown Determination Actfor2006In Origin ------Court. Protection fortheConstitutional of IRS. Extraordinary Action National Courtacceptsappeal Tax Litigation Division of the Sentence pending Investigation pending filed onJanuary24,2011. was answered.Theappeal of the European Commission On April14,2008,thenotification Sentence pending. Stage oftrial commited Amounts 4,210 plus Undeter interest ThUS$ mined 10,865 8,971 4,565 - ANNUAL REPORT 2012 Financial Statements 252 Aéreas S.A. Tam Linhas Ecuador S.A. Nacionales del Líneas Aéreas Aerolane Group S.A. LATAM Airlines Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Company vice ofBrazil). Revenue Ser (Internal Brazil Revenues of of Federal Secretary Third Region) (Court ofthe da 3aRegião gional Federal Tribunal Re Region). the Second the (Courtof da 2Região gional Federal Tribunal Re vice ofBrazil). Revenue Ser (Internal Brazil Revenues of of Federal Secretary Pichincha. Civil Court20 of Santiago Civil Court Tenth Court - - - - 10314.720023 10314.720023 16643.000087 (AI 2008.03.00. 374-2012 LA 2007.61.05. 2001.51.01. Case No. 014317-3 012530-0 004494-2) / 2011-15 /2009-36 - business continuity. affectedtheirprestigeand S.A. caused byLATAM AirlinesGroup They claimthatthedamage which weredismissedforgood. of fraud againstthemin2008, complaints filedforthecrime have caused due to the criminal basedonthedamagethey S.A. ited suesLATAM AirlinesGroup The companyJara Jara andLim tribution onnetprofit("CSL"). quirement topaythesocialcon Notice ofViolationthere admission. customs regimeoftemporary for noncompliancewithspecial eliminate possiblesanctions Requirements presentedto pany toraise theAirFund. relationship obligatingtheCom to declarethatthereisnolegal Ordinary judicialactionbrought ports ofcertainaircraft. the Excise Tax (“IPI”) over the im Import taxcollection(“II”)and Notice ofViolationtorequest counter agentofcreditcard. Passenger demandformisuseby Origin - - - - - First instance. company. the wewactionbroughtby rently awaitingthedecisionof the interestofcompany. Cur ministrative instance adverseto Decisions offirstandsecondad in thepresentcase. mentation ofthesamedecision Currently awaitingtheimple to theinterestsofCompany. with thiscaseruledfavorably The mainprocessassociated pletion ofthesurvey. Aeroviário (FA). Pending thecom move the charge by the Fundo Protection granted tore pany. untary appealfiledbytheCom the letter of appeal and the vol waiting forthejudgmenton of BRL$700millions.Currently by determiningtheexclusion Decision infavoratfirstinstance date. Waiting for conciliation hearing Stage oftrial ------commited Amounts 123,204 376,827 ThUS$ 35,447 50,205 11,935 5,500 ANNUAL REPORT 2012 Financial Statements 253 Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Pantanal Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Company Secretaria da vice ofBrazil). Revenue Ser (Internal Brazil Revenues of of Federal Secretary vice ofBrazil). Revenue Ser (Internal Brazil Revenues of of Federal Secretary vice ofBrazil). Revenue Ser (Internal Brazil Revenues of of Federal Secretary District. of theThird Regional Court vice ofBrazil). Revenue Ser (Internal Brazil Revenues of of Federal Secretary Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da of SaoPaulo) of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Court ------10831.012344 16643.000085 10314.720181 10880.725950 1997.0002503-9 3.130.043-1 3.123.785-0 Case No. /2005-55 /2009-47 /2011-75 /2011-05 admission. customs regimeoftemporary penalties forbreachofspecial Execution filedtocollecttax contributions PISandCOFINS. Compensation claimsofsocial ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode international cargo. ing fromthelossofunidentified butions of PIS and COFINS aris mand payment and social contri Infraction IIpresentedtode use ofthebrand TAM. royalties expensedetailandthe income taxandCSLderivedfrom Order compoundtodemandthe imports ofaircraft components. tions PISandCOFINSaffecting of II,IPIandsocialcontribu Order torequirethecollection Origin ------tence. second instance.Favorable sen Waiting forthedecisionof ment presentedbytheCompany. ment intheeventofdisagree Currently awaitingforthejudg the appeal filed by the Company. Currently expecting ruling on pany. on theappealfiledbyCom Currently expectingtheruling of appealbytheCompany. Currently awaiting the decision the firstadministrative level. Partially favorable decisionat Company. ruling ontheappealfiledby company. Currentlyexpecting vorable totheinterestsof First instancedecisionunfa administrative instance. Pending the decision of the first Stage oftrial - - - - - commited Amounts ThUS$ 10,531 10,951 12,619 15,687 23,792 25,789 32,586 ANNUAL REPORT 2012 Financial Statements 254 Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Company vice ofBrazil). Revenue Ser (Internal Brazil Revenues of of Federal Secretary Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da Third Region). (Court ofthe da 3aRegião gional Federal Tribunal Re Sao Paulo. the Stateof Finance of Secretary of Sao Paulo. the Stateof Finance of Secretary of vice ofBrazil). Revenue Ser (Internal Brazil Revenues of of Federal Secretary Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da Court - - - - - 022504-6 2006.03.00. /2001-56 11610.001360 3.120.355-3 3.120.346-2 3.117.001-8 3.099.486-0 Case No. 0045794 of PIS. of socialsecuritycontributions Application forreimbursement ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode quarter of1997. social contributioninthethird to demandpaymentofCOFINS Notice of infraction registered ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode and August1998. the monthsofFebruary, March Penalty forcingIRPJcollectionin of aircraft. ing paymentofICMSonimports Notice ofinfringementdemand of aircraft ing paymentofICMSonimports Notice ofinfringementdemand Origin ------stances. Currentlyexpectingfis and secondadministrative in Unfavorable ruling in the first the appeal filed by the Company. Currently expecting ruling on ment filedbytheCompany Expected therulingonimpeach the appeal filed by the Company. Currently awaitingarulingon Pending firstinstanceruling. filed bythecompany. Pending decisionontheappeal filed bytheCompany. Pending decisionontheappeal cal executionruling. Stage oftrial - - - commited Amounts ThUS$ 10,531 7,941 7,970 8,066 8,375 8,712 8,864 ANNUAL REPORT 2012 Financial Statements 255 Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Company Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da enue Service. Internal Rev Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da of SaoPaulo). Government Paulo (State Estado deSão Governo do Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da Court - - - - - 4.002.475-1 3.099.563-2 3.123.000-3 3.120.286-0 2002.61.19. Case No. 001123-1 990.172 port ofaircraft. ment ofICMSthataffectstheim Fiscal Executiontodemandpay ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode ery ofIPIonimportsaircraft. Injunction filedtopreventrecov ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode Origin ------the endofmaintrial. Trial suspended.Itnowexpects the endofmaintrial. Trial suspended.Itnowexpects ment filedbytheCompany. Expected therulingonimpeach the appeal filed by the Company. Currently awaitingarulingon the appeal filed by the Company. Currently awaitingarulingon the endofmaintrial. Trial suspended.Itnowexpects Stage oftrial - commited Amounts ThUS$ 6,184 6,360 6,427 6,950 6,956 7,234 ANNUAL REPORT 2012 Financial Statements 256 Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Company Service). nal Revenue Federal (Inter da Receita Secretaria Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da of Paraiba). of theState tary ofFinance Paraíba (Secre do Estadoda da Fazenda Secretaria Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da Court ------93300008.09. 3.146.575-4 3.154.701-1 3.123.770-8 3.019.886-0 Case No. 00000883 /2009-13 /2009-31 676.339 10880- ticular operations. mand paymentofICMSinpar Order ofinfringementtode ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode mand paymentofIRPJ. Order ofinfringementtode ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode Origin ------the appeal filed by the Company. Currently awaitingarulingon the endofmaintrial. Trial suspended.Itnowexpects ment filedbytheCompany. Expected therulingonimpeach the endofmaintrial. Trial suspended.Itnowexpects ment filedbytheCompany. Expected therulingonimpeach the appeal filed by the Company. Currently awaitingarulingon Stage oftrial - - commited Amounts ThUS$ 5,264 5,309 5,480 5,604 5,626 5,693 ANNUAL REPORT 2012 Financial Statements 257 Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Company Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da Brazil). Internos de de Impuestos eral (Servicio Receita Fed Secretaria da de Goias). del Estado de Hacienda (Secretaria tado deGoiás Fazenda doEs Secretaria da Sao Paulo). of theState tary ofFinance Paulo (Secre Estado deSão Fazenda do Secretaria da tute –INSS. Security Insti National Social Court ------16643.000088 3032722060291 3.129.987-8 3.117.801-7 3.146.651-5 2006.03.00. Case No. 080569-5 /2009-81 ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode portation benefit. amounts paidbywayoftrans cancel thecollectionofINSSon Regular judicialactionfiledto ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode ing theimportationofaircraft. mand paymentofICMSgovern Order ofinfringementtode mand paymentofIRPJandCSLL. Order ofinfringementtode ticular operations. mand paymentofICMSinpar Order ofinfringementtode Origin ------the endofmaintrial. Trial suspended.Itnowexpects filed bythecompany. Pending decisionontheappeal appeal riledbythecompany. Currently awaitingarulinonthe the endofmaitrial. Trial suspended.Itnowexpects the appeal filed by the Company. Currently awaitingarulingon the appeal filed by the Company. Currently awaitingarulingon Stage oftrial

commited Amounts ThUS$ 4,537 4,816 4,850 5,309 5,174 5,202 ANNUAL REPORT 2012 Financial Statements 258 The Companyhasnotdisclosedtheindividual probabilityofsuccessforeachcontingency inordertonotnegativelyaffectitsoutcome. disclosed inNote23. LATAM hasmade provisions, which at the endofthesefinancial statements,reached thesumofThUS$558,053whichis Airlines GroupS.A., In ordertodealwithanyfinancialobligationsarisingfromlegalproceedings outstandingatDecember31,2012,whethercivil,laborortax, Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Aéreas S.A. Tam Linhas Company Brasilia. Court Labour Sao Paulo. Labour Justice / BA. tion Salvador Labor Jurisdic Salvador / BA - Labour Justice rulhos. of LaborGua - Jurisdiction Guarulhos /SP Labour Justice of Porto Alegre. Labour Court / SC. of Navegantes of theDistrict 1st CivilCourt Court - - (precautionary) 033.03.013110-6 033.03.014870- 01683.2009. Case No. 015.10.003 65.2011.5. 78.2011.5. 47.2010.5. 79.2010.5. (ordinary). 0000033- 0000728- 0000504- 001680- 02.0030 05.0021 02.0313 04.0014 able court. lishment of protectionenforce agreeing in advance the estab land freighttransport otherthan unfounded trade representative ful terminationofcontract and sequence oftheallegedwrong and economicdamageincon ing compensationformoral representative ofTAM demand Action filedbyaformersales maintenance employees. compensationforall of hazard Brasilia/DF demanding payment Action bytheUnionAerovias for allemployees. pay quires paymentofhazard vias de São Paulo/SP that re Action bytheUnionStateAero SSA base. bonus forallemployeesofthe which requirespaymentofrisk Union ofAviationworkers, Class actionbytheNational bonus forallworkersofthebase. which requirespaymentofrisk tion Workers ofGuarulhos/SP Class actionbytheUnionofAvia ployees. bond riskformaintenanceem which requirespaymentofthe Aviation Workers ofPorto Alegre Class actionbytheUnionof Origin ------the expertreport. evaluation ofourobjectionto We arecurrentlyawaitingthe peal. Awaiting theoutcomeofap Process in the last instance. tion. Procedure according to comple Awaiting sentencing. Process inthefirstinstance. peal onbothparts. awaiting thejudgmentofap Process in the second instance, judgment ofappeal. waiting Process in the last instance, Stage oftrial - - - Approximate Approximate commited Approximate Approximate Approximate Amounts Estimated Estimated Estimated Estimated Estimated ThUS$ value / value / value / value / value / 15,645 13,010 53,020 4,717 5,046 4,637 ANNUAL REPORT 2012 Financial Statements 259 assets. terms ofshareholdercompositionanddisposal in management anditssubsidiaryLanCargoS.A. restrictions havebeenestablishedtotheCompany´s guarantee oftheUnitedStatesExport–ImportBank, whichcarrythe of Boeing767Fand777Faircraft, forthefinancing by itssubsidiaryLanCargoS.A. Additionally, withrespecttovariousloanssigned and disposalofassets. Company’s managementintermsofitsownership same contracts, restrictionsarealsoinplaceonthe consolidated basis.Moreover, andrelatedtothese some oftheCompany’s financialindicatorsona States Export–ImportBank,limitshavebeenseton whichcarrytheguarantee787 aircraft, oftheUnited Company forthefinancingofBoeing767,777and With respect to various loans signed by the (a) Loancovenants NOTE 36. in current financial liabilities. On February 14, 2013, related to this issuance of debentures are classified to IFRSaccountingstandards, financialliabilities Asamblea General deDebenturistaandaccording requestedawaiverto the TAM Linheas Aéreas S.A. breach ofthislimitattheend ofDecember2012, Anticipating a possible declaration of Aéreas S.A.. established financiallimitindicatorsto TAM Linhas original amountofThR$600,000in2009,has with the issuance of debentures (CVM 476) by inconnection The subsidiaryTAM LinhasAéreasS.A., Company isincompliancewiththeseindicators. on aconsolidatedbasis.AtDecember31,2012,the limits tosomefinancialindicatorsoftheCompany Company, forthecurrentperiodlocalbankshaveset In relationtocreditagreementsenteredintobythe legal successorincaseofmerger. ownership structureoftheirguarantors andtheir United States, restrictions have been placedon the are guaranteed bytheExport-ImportBankof for itsBoeing767,767F, 777,777Fand787,which In connectionwiththefinancingofspareengines COMMITMENTS and non-currentinthenextfinancialstatements. shall beclassifiedwithincurrentfinancialliabilities thisobligation requested waiverandasaresult, the AsambleaGeneral deDebenturistagranted the ANNUAL REPORT 2012 Financial Statements 260 Details ofthemainoperating leasesareasfollows: (b) Commitmentsunderoperating leasesaslessee GECAS SverigeAircraft LeasingWorldwide AB(*) Eden IrishAircrLeasingMSN1459(AERCAP) (*) Delaware Trust Company, NationalAssociation(CRAFT) Continuity AirFinanceIVB.V (BOC)(*) CIT AerospaceInternational(*) CIT AerospaceInternational(*) CIT AerospaceInternational Celestial AviationTrading 35Ltd.(GECAS) BOC AviationPte.Ltd. Baker &SpiceAviationLimited(*) AWAS 5234Trust AWAS 5178Limited AWAS 5125Trust AWAS 4839Trust AWAS (SWEDENTWO)AB(*) Avolon AerospaceAOE6Limited Avolon AerospaceAOE20Limited Avolon AerospaceAOE19Limited Aviación Tritón(*) A.I.E. (*) Aviación RealA.I.E (*) Aviación RealA.I.E (*) Aviación Centaurus,A.I.E. (Santander)(*) Aviacion Centaurus,A.I.E ALC A3191703,LLC (*) (AVMAX) Aircraft SolutionsLuxVS.ÀR.L. Aircraft 76B-28206Inc.(ILFC) Aircraft 76B-27615Inc.(ILFC) Aircraft 76B-27613Inc.(ILFC) Aircraft 76B-27597Inc.(ILFC) Aircraft 76B-26329Inc.(ILFC) Aircraft 76B-26327Inc.(ILFC) Aircraft 76B-26261Inc.(ILFC) Airbus FinancialServices Air Canada(Sublessor) ACS Aircraft FinanceBermudaLtd.-Aircastle(WFBN) Lessor Bombardier Dhc8-200 Bombardier Dhc8-200 Airbus A340 Airbus A340 Airbus A320 Airbus A320 Airbus A319 Airbus A320 Airbus A319 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A319 Airbus A320 Airbus A319 Airbus A321 Airbus A319 Airbus A319 Boeing 767 Boeing 767 Boeing 737 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Aircraft December 31, 2012 As of 10 1 2 1 1 1 9 1 4 3 1 1 1 2 1 1 1 1 2 1 1 1 3 1 1 1 3 1 1 1 1 1 1 - - December 31, 2011 As of 9 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ------ANNUAL REPORT 2012 Financial Statements 261 TAM S.A. and Subsidiaries.Therentalsareshown inresultsfortheperiodwhich theyareincurred. TAM S.A. (*) Thecompositionofthefleetas operating leasesatDecember31,2012,incorporates theeffectsofBusinessCombinationswith GECAS SverigeAircraft LeasingWorldwide AB(*) International LeaseFinanceCorporation (*) International LeaseFinanceCorporation International LeaseFinanceCorporation GFL Aircraft LeasingNetherlandsB.V. (GECAS)(*) MASL Sweden(2)AB(MACQUARIE) (*) MASL Sweden(1)AB(MACQUARIE) (*) KN Operating Limited(NAC) JB 30249,Inc.-AWAS JB 30244,Inc.-AWAS MASL Sweden(7)AB(MACQUARIE) (*) RBS AerospaceLimited(*) Pembroke B737-7006LeasingLimited Orix AviationSystemsLimited MSN 32415,LLC -AWAS MCAP EuropeLimited-Mitsubishi(WTC) MASL Sweden(8)AB(MACQUARIE) (*) Volito AviationAugust2007AB(*) Sunflower Aircraft LeasingLimited-AerCap SKY HICHVLEASINGCOMPANY LIMITED(*) Volito AviationNovember2006AB(*) Volito November2006AB(*) Volito Brasilien AB(*) Wells Fargo BankNorthNationalAssociation(ACG)(*) Association (BAKER&SPICE)(*) Wells Fargo BankNorthNational Wells Fargo BankNorthNationalAssociation(ACG)(*) Wells Fargo BankNorthNationalAssociation(BOC)(*) Wells Fargo BankNorthNationalAssociation(BOC)(*) Wells Fargo(AVOLON) BankNorthwestN.A (*) Association (BOC)(*) Wells Fargo BankNorthwestNational Association (ACG)(*) Wells Fargo BankNorthwestNational Zipdell Limited(BBAM)(*) Wilmington Trust Company(ILFC)(*) (GECAS) Wells Fargo N.A. BankNorthwest, (GECAS) Wells Fargo N.A. BankNorthwest, TOTAL Lessor Bombardier Dhc8-400 Airbus A330 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A319 Airbus A320 Airbus A319 Airbus A320 Airbus A320 Airbus A319 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A319 Airbus A320 Airbus A320 Boeing 737 Boeing 737 Boeing 767 Boeing 737 Boeing 737 Boeing 737 Boeing 737 Boeing 777 Boeing 767 Aircraft December 31, 2012 As of 123 2 1 1 4 1 1 2 1 1 1 1 6 2 3 1 2 2 2 1 1 2 1 2 3 4 2 2 1 2 4 1 1 - - - December 31, 2011 As of 49 1 2 4 1 1 2 2 1 1 2 2 4 ------ANNUAL REPORT 2012 Financial Statements 262 the following: The minimumleasepaymentschargedtoincomeare are thefollowing: The minimumfutureleasepaymentsnotyetpayable In September2011,theCompany signedacontract lease term. 200 aircraft wasreturnedduetoterminationofthe other hand,inSeptember2011 aBombardierDhc8- A320-200 aircraft for a periodofeightyears.Onthe September 2011,theCompanyreceivedanAirbus for aperiodofeightyears,whileinAugustand the CompanyaddedtwoAirbusA320-200aircrafts months whichwasreturnedinMay2011.InJuly2011 years andoneAirbusA319-100foraperiodoffour five years,oneAirbusA320-200foraperiodofseven aBoeing767-300Fwithcontractaircraft, termof In January2011theCompanyaddedtofleetthree respectively. 767-300F forperiodsofsevenandsixmonths, November andDecember2010addedtwoBoeing latter finallyreturnedinMay2011.Additionally, in A 320-200aircraft foraperiodofeightmonths,the In December2010,theCompanyaddedoneAirbus TOTAL Over fiveyears Between oneandfiveyears No laterthanoneyear TOTAL Minimum operating leasepayments assets. Regarding rental payments, these are cover associatedrisksandthe amountsofthese should alsocontract insurance foreachaircraft to cost thatmustbeassumedby thelessee.Thelessee the marginsagreedinleasing agreements,a manufacturer’s technical instructionsandwithin of theaircraft should bedoneaccordingtothe Company anditssubsidiariesstatethatmaintenance The operating lease agreementssignedbythe given theendofleasecontract. 300 aircraft andtwo Airbus A320-200werereturned periods of6and8years.Inaddition,twoBoeing767- added leased two for Airbus A320-200 aircraft, During thethirdquarterof2012,itCompany Airbus A320-200aircraft leasedforaperiodof8years. During thesecondquarterof2012,addedthree during thesecondquarterof2012. 700. Thereturnofthesethreeaircraft wascompleted to establishtheearly departure ofthreeBoeing 737- December 1,469,030 31, 2012 For theperiodsended ThUS$ ThUS$ 235,658 852,659 380,713 310,496 310,496 As of 2012 December 31, December 31, 2011 ThUS$ 705,362 ThUS$ 443,256 169,842 168,369 168,369 As of 92,264 2011 ANNUAL REPORT 2012 Financial Statements 263 follows: letters ofcreditrelatedtooperating leasingas At December31,2012theCompanyhasexisting and lessee. accounts receivableorpayablebetweenthelessor unrestricted andmaynotbenettedagainstother TAF Venus TAF Mercury Orix AviationSystemLimited International LeaseFinanceCorp GE CapitalAviationServicesLimited Air Canada Creditor Guarantee Volito November2006Ab SMBC Aviation RBS AerospaceLimited Masl Sweden GE CapitalAviationServicesLimited Bank (Asia)Ltd. DVB GroupMerchant Cit AerospaceInternational BOC Aviation(USA)Corporation Baker &SpiceAviationLimited National Association Wells Fargo BankNorthwest, CIT AerospaceInternational GE Capital Aviation Services Limited Trading 16Limited Celestial Aviation Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. LATAM AirlinesGroupS.A. LATAM AirlinesGroupS.A. LATAM AirlinesGroupS.A. LATAM AirlinesGroupS.A. LATAM AirlinesGroupS.A. LATAM AirlinesGroupS.A. Lan CargoS.A. LATAM AirlinesGroupS.A. Lan CargoS.A. LATAM AirlinesGroupS.A. Debtor Three letterofcredit Three letterofcredit Five letterofcredit Six letterofcredit Twelve letterofcredit Two letterofcredit Seven letterofcredit Four letterofcredit Four letterofcredit One letterofcredit Two letterofcredit One letterofcredit One letterofcredit Two letterofcredit Eight letterofcredit Five letterofcredit Six letterofcredit Two letterofcredit One letterofcredit Type 168,727 ThUS$ 12,143 26,382 30,428 15,222 17,052 Value 1,311 7,425 6,163 8,380 6,386 8,365 2,530 3,240 4,000 4,000 6,520 3,880 3,500 1,800 September 17,2013 February 24,2013 May 31,2013 October 4,2013 May 23,2013 April 13,2013 January 10,2013 February 3,2013 April 23,2013 June 30,2013 May 13,2013 December 11,2013 December 11,2013 May 5,2013 February 26,2013 November 16,2013 January 10,2013 April 25,2013 February 13,2013 Release date ANNUAL REPORT 2012 Financial Statements 264 2ª Vara CíveldaComarcadeBauru/SP Comarca deSãoPaulo Execuções FiscaisEstaduaisda União Federal Federal deCampoGrande/MS 6ª Vara deExecuçõesFiscais Vara DeExecuçõesFiscaisSantaCataria do EstadodeSãoPaulo 12ª Vara daFazenda Pública 3ª Vara daFazenda Pública deSãoPaulo 6ª Vara daFazenda Pública deSãoPaulo/SP 12ª Vara CíveldaComarcadeNatal/RN GE CapitalAviationServicesLimited PK AirfinanceUS,INC. Metropolitan DadeCounty Washington InternationalInsurance Dirección SeccionaldeAduanasBogotá Comisión Europea Deutsche BankA.G. Creditor Guarantee Dirección General deAviaciónCivilChile The RoyalBankofScotlandplc insurance policiesasfollows: certificatesofdepositsandwarranty letters ofcredit, At December31,2012theCompanyhasexisting (c) Othercommitments Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. Tam LinhasAéreasS.A. LATAM AirlinesGroupS.A. LATAM AirlinesGroupS.A. de ColombiaS.A. Línea AéreaCarguera LATAM AirlinesGroupS.A. LATAM AirlinesGroupS.A. LATAM AirlinesGroupS.A. LATAM AirlinesGroupS.A. Debtor Two letterofcredit Three letterofcredit One insurance policies guarantee One insurance policies guarantee One insurance policies guarantee Two insurance policiesguarantee One insurance policiesguarantee One insurance policiesguarantee One insurance policiesguarantee One insurance policiesguarantee One insurance policiesguarantee Three letterofcredit Three letterofcredit Five letterofcredit Six letterofcredit Three insurance policiesguarantee One letterofcredit Sixty twoticketguarantee Type 183,246 ThUS$ 18,000 30,000 73,142 10,686 16,970 Value 1,000 1,158 2,533 3,780 1,392 1,402 2,474 2,347 4,162 4,800 1,675 2,700 5,025 January 8,2013 January 31,2013 November 14,2014 May 25,2014 July 24,2015 January 4,2014 November 20,2013 January 28,2014 May 28,2014 March 1,2013 May 17,2013 October 8,2013 September 23,2013 May 31,2013 April 5,2013 June 10,2013 February 11,2013 September 1,2013 Release date ANNUAL REPORT 2012 Financial Statements 265 PARTIES WITH RELATED TRANSACTIONS NOTA 37.

a) Transactions with related parties for the period ended December 31, 2012 Explanation of other Tax No. Related party Nature of relationship Country of information about Nature of related Currency Amounts of with related parties oorigin related parties parties transctions transactions

ThUS$

Inversiones Costa 96.810.370-9 Controlling Shareholder Chile Investments Revenue from services provided CLP 11 Verde Ltda. y CPA.

Leases as lessor CLP 411 Lufthansa Lan Technical 96.847.880-K Associate Chile Training center Services received CLP (1,101) Training S.A. Services received US$ (803)

Promotion and women Revenue from services provided CLP 13 65.216.000-K Comunidad Mujer Other related parties Chile empowerment Services received CLP (13) 78.591.370-1 Bethia S.A. y Filiales Other related parties Chile Investments Leases as lessor CLP 741 Other related parties Revenue from services provided CLP 897 Commitments made on CLP 3 behalf of the entity Services received CLP (786) Sale of Property plant and equipment (1) CLP 14,217 79.773.440-3 Transportes San Felipe S.A. Other related parties Chile Transport Services Received CLP (279) Granja Marina 87.752.000-5 Other related parties Chile Pisciculture Revenue from services provied CLP 243 Tornagaleones S.A. 96.812.280-0 San Alberto S.A. y Filiales Other related parties Chile Investments Services Received US$ (29) Inversora Aeronáutica Foreign Other related parties Argentina Investments Leases as lessor US$ (442) Argentina Liabilities settlement on behalf of US$ 11 the entity for the related party Tadef-Transporte Foreign Administração e Other related parties Brazil Transport Services Received US$ (18) Participação Ltda. TAM Aviação Executiva Foreign Other related parties Brazil Transport Revenue from services provied BRL 306 e Taxi Aéreo S.A. Liabilities settlement on behalf of BRL 3 the entity for the related party Made In Everywhere Foreign Other related parties Brazil Transport Services Received BRL (211) Repr. Com. Distr. Ltda. Liabilities settlement on behalf of Foreign Prismah Fidelidade S.A. Other related parties Brazil Marketing BRL 419 the entity for the related party

(1) On December 28, 2012, Inmobiliaria Aeronáutica S.A. as seller and Sotraser S.A. (Subsidiary of Bethia S.A.) as purchaser, entered into an agreement to purchase the land called “Lot No. 12 of the parcellation proyect Lo Echevers.” The value of the sale amounted to ThUS$ 14,217. ANNUAL REPORT 2012 Financial Statements 266

(b) Transactions with related parties for the period ended December 31, 2011 Explanation of other Tax No. Related party Nature of relationship Country of information about Nature of related Currency Amounts of with related parties oorigin related parties parties transctions transactions

ThUS$

Inversiones Costa 96.810.370-9 Controlling Shareholders Chile Investments Leases as lessor CLP 71 Verde Ltda. y CPA. Revenue from services provided CLP 19

Leases as lessor CLP 122 Lufthansa Lan Technical 96.847.880-K Associate Chile Training center Services received CLP (652) Training S.A. Services received US$ (594)

Leases as lessor CLP 546 Revenue from services provided CLP 1,683 78.591.370-1 Bethia S.A. y Filiales (1) Other related parties Chile investments Cession granted debt CLP 4,461 Services received CLP (456) Sale of subsidiaries CLP 53,386

Granja Marina 87.752.000-5 Other related parties Chile Fish farming Revenue from services provided CLP 199 Tornagaleones S.A. Inversiones Mineras 96.625.340-1 Other related parties Chile Investments Other prepayments received US$ (811) del Cantabrico S.A.

Inversora Aeronáutica Leases as lessee US$ (412) Foreign Other related parties Argentina Investments Argentina Other prepayments granted US$ 811

(1) On April 6, 2011, Lan Cargo S.A. and Inversiones Lan S.A., subsidiaries of LATAM Airlines Groups S.A. as sellers and Servicios de Transporte Limitada and Inversiones Betmin SpA., subsidiaries of Bethia S.A., as purchasers, entered into a contract of sale related to 100% of the social equity of companies Blue Express INTL Ltda. y Blue Express S.A. The value of the sale of Blue INTL Ltda. and subsidiary was for ThUS$ 53,386.

The balances of Accounts receivable and accounts payable to related parties are disclosed in Note 9.

As of December 31, 2012 operations with common shareholders of TAM S.A. and Subsidiaries, are considered from the date of Business Combination, which is June 22, 2012. ANNUAL REPORT 2012 Financial Statements 267 Executives andDirectors.. considering thelevelsofVice-Presidents,Chief and whodirectlyaffecttheresultsofbusiness, define theCompany’s policiesandmajorguidelines key management personnel are the executives who The Companyhasdefinedforthesepurposesthat (c) Compensationofkeymanagement TOTAL Share-based payments Short-term benefits Non-monetary benefits Management fees Remuneration ThUS$ 22,666 15,146 2012 1,412 5,060 For theperiodsended 395 653 December 31, ThUS$ 17,641 2011 2,084 5,011 9,696 665 185 ANNUAL REPORT 2012 Financial Statements 268 and paymentofoptions.Thesemodificationswere of theplanwereamendedregardingsubscription During thelastquarterof2009,original terms these becomevested. date ofgranting theoptionsanddateonwhich remuneration on a straight-line basis between the date fairvalueoftheoptionsgranted asachargeto based payments”,bookingtheeffectofgrate financial positioninaccordancewithIFRS2“Share- 2007, areshownintheconsolidatedstatementsof which havebeengranted sincethelastquarterof granting ofoptionstosubscribeandpayforshares, The compensationplansimplementedthroughthe (a) LATAMcompensationplans. AirlinesGroupS.A. NOTE 38. Closing balanceas of December31,2012 Stock optionsexercised Stock optionsannulled Balance asofJanuary1,2012 Closing balanceasofDecember31,2011 Stock optionsexercised Balance asofJanuary1,2011 based paymentagreement Stock optionsunderashare- All optionsexpiredonMarch31,2012. “Black-Scholes-Merton” method. fair valueonthegrant date,determinedusingthe These optionshavebeenvaluedandbookedattheir Percentage 70% 30% SHARE-BASED PAYMENTS From October30,2011 From October29,2010 until March31,2012 until March31,2012 Period Numberofshareoptions (1,535,522) 2,209,091 (673,478) 673,569 673,569 (91) - executive onthosedatesforexercisingtheoptions: which arerelatedtothepermanenceof to theproportionsshowninaccrualschedule, contracts forthesubscriptionofsharesaccording have beenformalizedthroughthesigningofoption The originalgrant andsubsequentamendments established anewtermandexerciseprice. carried out during thefirstquarter of2010and ANNUAL REPORT 2012 Financial Statements 269 972,344 sharesand891,261shares,respectively. options atDecember31,2012,whichamountedto haveoutstandingstock subsidiaries ofTAM S.A., both and Multiplus S.A., TAM Linhas Aereas S.A. (b) Subsidiariescompensationplans options granted. Entry dataforoptionvaluationmodelusedstock into threeequalpartsandemployees mayexercise the optionsgranted totheusualprizesaredivided the plan’sFor Multiplus S.A., termsprovide that of theoptionsissevenyears. remain employees of the company. The agreed term four andfiveyearsrespectively, aslongthey employees can run a third of itsoptions after three, plan’s terms,aredividedinto threeequalpartsand underthe The OptionsofTAM LinhasAéreasS.A., TAM LinhasAéreasS.A. Multiplus S.A. option number Outstanding Date option number Outstanding Date Description Description Weighted average share price US$ 17.3 10-04-2010 12-28-2005 1 1 st st 61,463 Grant Grant Exercise US$ 14.5 price - 11-08-2010 11-30-2006 2 2 nd nd 119,041 Grant Grant 2,245 Expected volatility 33.2% 04-16-2012 12-14-2007 3 3 rd rd 362,272 259,857 Grant Grant 10-04-2010 05-28-2010 363,446 4 4 - th th Grant Grant option Life of 1.9 years and twoyearsrespectively. two equalparts,whichmaybe exercisedafterone second extraordinary granting wasalsodividedinto after threeyearsandhalf after fouryears.The parts, andonlyhalfoftheoptions maybeexercised extraordinary granting wasdividedintotwoequal seven yearsafterthegrant oftheoption.Thefirst of thecompany. Theagreedtermoftheoptionsis respectively, aslongtheykeepbeingemployees one-third oftheirtwo,threeandfour, options 230,000 1 1 st st 403,235 nary Grant nary Grant Extraordi Extraordi 10-04-2010 09-27-2007 Dividends expected - - 50% 2 3 nd nd nary Grant nary Grant - Extraordi Extraordi 10-04-2010 04-01-2010 - - - 3 4 th th - nary Grant nary Grant Extraordi Extraordi 04-16-2012 04-01-2010 Risk-free interest 62,046 0.0348 - - 891,261 972,344 Total Total ANNUAL REPORT 2012 Financial Statements 270 Multiplus S.A. TAM LinhasAéreasS.A. Company rights, inbothcompaniesisasfollows: The state,inrelationtotheacquisitionofshare’s to theoptions. certain preconditionsinordertomaintaintheirright Terminated employees will be required to meet by employeesduringapredeterminedperiod. depends exclusivelyonthedeliveryservices “service condition” inwhichtheexerciseofoptions Both companieshaveanoptionthatcontainsa Number ofshares Accrued options 972,344 - Non accruedoptions Number ofshares 891,261 - ANNUAL REPORT 2012 Financial Statements 271 were asfollow: The main initiatives in 2012 on environmental issues programs currentlyinprocess. environmental benefitsandtocomplementthose programs in their internal processes that generate areas oftheCompany, continuousimprovement is todevelop,inconjunctionwiththevarious One of the functions of the Environmental Division in globalenvironmentalissues. positiontheCompanyasanindustryleader with it, increasingly demanding requirements globally and system andenvironmentalprograms thatmeetthe department istoimplementamanagement the lasttwoyears.Themainobjectiveofthis issues insidetheCompanyonagloballevelover structure has allowed it to manage environmental whose Environmental DivisionofLANAirlinesS.A., In 2010theGroupcompletedcreationof NOTE 39. • • Peru: • • Chile: environmental compliances. issues, particularlyindiagnosticsandupdating used Studies andexternalauditsenvironmental Biofuel with America cooking oil; South within Implementation ofthefirstcommercialflight operations ontheground. US$ 49,000tooffsettheemissionsofour Purchase carboncreditsintheamountof Carbon Footprint inLANPerú S.A. Measurement and external Verification of THE ENVIRONMENT

• USA: • Ecuador: Environmental DivisionwasUS$526,074. During 2012theexpensesincurred by the our cargooperation inMiami. environmental management system project for Starting the implementation of an our operations atthenewairportinQuito. environmental management system project for Starting the implementation of an ANNUAL REPORT 2012 Financial Statements 272 2. SuspensionoftheB787FleetOperation: per US$1. be settled using the exchange rate of 4.30 bolivars duly licensed by theNationalExecutiveBranch, will international passenger, cargoandmailaircarriage as of February 8, 2013 for, among other purposes, the Foreign Currency Administration Commission to applications that had been markedreceived by foreign currency sale transactions corresponding Article 9ofthesameArrangement addedthat was 4.30bolivarsperUS$1. bolivars perUS$1.Untilthatdate,theexchangerate February 9,2013,theexchange rate wassetat6.30 Republic ofVenezuela accordingtowhicheffective oftheBolivarian published intheOfficialGazette On February 8,2013,Exchange Arrangement N°14was 1. DevaluationinVenezuela: OF THEFINANCIALSTATEMENTS NOTE 40. and itssubsidiaries: 3. EmployeeCompensation Plan fortheCompany will resumeoperation. FAA, soitisimpossibletodeterminewhenthatfleet There has not yet been any official decision by the that ledtothesuspensionofBoeing787fleet. Boeing has been working on resolving the problems further notice. to suspenditsBoeing787operations until Aviation Board(“DGAC”),theCompanydecided Therefore, incoordinationwiththeChileanCivil and actionsweretakenregardingthebatterysystem. America tosuspendtheirflightsuntilinspections the Boeing787operators intheUnitedStatesof Federal AviationAdministration (“FAA”) instructed Onthesamedate, systems ofthoseaircraft. because ofrecentoccurrenceswiththebattery Airlines suspendedtheirBoeing787operations On January16,2013,AllNipponAirwaysandJapan EVENTS SUBSEQUENTTOTHEDATE

of theCompaniesLaw. Company anditssubsidiaries,pursuanttoArticle24 to compensationplansforemployeesofthe the issuanceof4,800,000shares,wouldbeallocated US$47,733,352.49 ofthatincrease,correspondingto 147,355,882 common shares with no par value. by US$1,465,372,970.09throughtheissuanceof among othermatters,anincreaseinitscapital 21, 2011,theCompany’s shareholdersapproved, At aSpecialShareholdersMeetingheldDecember in cash, by check, by bank check, by electronic respective sharesatonce,inthe actofsubscription, in which case he must subscribe and pay for the the employeemayexercisethem inwholeorpart, (e) payable inthemannerindicatedletterh)below. be CLP$11,000.Itwillcalculated,adjustedand Compensation Plan,iftheoptionsareexercised,will (d) the company’s employ. and (3)40%onJune21,2016,subjecttoremainingin on December21,2014:(2)30%2015 accrue inpartsonthefollowingthreedates:1)30% (c) shareholders meetings. rights andwillnotbeconsideredinthequorumfor the optioneewillhavenoeconomicorpolitical (b) each employee. which astockoptionagreementwillbesignedwith the Company that will be allocated to each, after number ofoptionsfortheacquisitionsharesin included intheCompensationPlanand the employeesofCompanyanditssubsidiaries Executive Committee, the Board willdetermine (a) plans are: The mainconditionsforthesecompensation Theoptionsallocatedtoeachemployeewill UponarecommendationbytheCompany’s Thepricepayableforeachshareallocatedtothe Oncetheoptionsaccrue,in aforesaidparts, Until the shares in the option are subscribed,

ANNUAL REPORT 2012 Financial Statements 273 exercise oftheoptionsisinforce. may beexercised,alwaysprovidedtheperiodfor the dateoftermination of theemployment contract the LaborCode,onlyoptionsaccruedthrough other thanthereasonscontainedinarticle160of employment contract isterminatedforanyreason (g) Company willbereleasedfromanyobligation. waived anyrightorpowerinrelationthereto.The be understood that the employee has irrevocably Company willbedeemedextinguishedandit in relation to the subscription of cash shares in the accordingly, allrights,powers,promisesoroffers for allpurposes,tohavewaivedtheoptionsand, the optionsinthatperiod,hewillbeunderstood, 2016. Iftheemployeehasnotexercisedorwaived according to letter c) above will expire December 21, exercise theoptionsaftertheyhaveaccrued (f) held bytheEmployee. exercise maybefornolessthan10%ofalloptions representing moneypayableondemand.Partial fund transfer oranyotherinstrumentpaper Date”), converted at the observed dollar exchange the Company’s BoardofDirectorssetsit(the“Pricing Price indicated in letter d) above on the date when for theequivalentinthatcurrency tothePlacement in DollarsoftheUnitedStates ofAmerica(“Dollars”), respective options are exercised, will be expressed (h) periods indicatedabove. permanent disabilityandmayexercisetheminthe retain hisrightstotheoptionsineventofa date oftheemployee’s death.Theemployeeshall exercise them within 180 calendar days after the accrue automaticallyandtheheirsorlegateesmust apply. Inthatcase,alloftheoptionsgranted shall provisions in this letter shall consequently not for theemployeeshouldhedie,andabove the rightsandfulfillobligationsinsubstitution The heirs or legatees of the employee shall exercise 160 oftheLaborCode. is severedforanyofthereasonscontainedinarticle the options, whether or not they have accrued, if he The employeewillalsoforfeittherighttoexercise Thepricepayablefortheseshares,ifthe If theemployeeresignsfromhispositionor The periodduringwhichtheemployeemust the ChiefFinancialOfficerofCompany. at anytimebysendingacertifiedletterofwaiverto the employee may state his waiver of the options transferred inanywaybytheemployee.However, (i) subscription andpaymentoftheshares. onthedateof rate publishedintheOfficialGazette currency, converted at the observed dollar exchange The subscriptionpriceshallbepaidinpesos,local the dateofsubscriptionandpaymentshares. U.S. DepartmentofLabor, fromthePricingDateto Consumer PriceIndex(CPI)publishedmonthlybythe in Dollarswillbeadjustedbythechange Date. AsofthePricingDate,saidpriceexpressed onthePricing rate publishedintheOfficialGazette transaction, i.e.,asfromJune22,2012. of 22monthsafterconsummation oftheconcentration they willparticipate to approval by CADE in the period submitthechoiceofglobalallianceinwhich S.A., andTAM that thepetitioners,namelyLAN AirlinesS.A. said resolution.Oneofthosedefinitiveconditionswas subject tofulfillmentoftheconditionsstipulatedin 2011, which was partially amended on February 8, 2012, by resolution issued December 14, LAN AirlinesS.A. and approvedthemergerofTAMCADE) ofBrazil S.A. (the Administrative Economic DefenseCouncil,or (c) consummation oftheTransaction.” in the period of 24 months as from the date of to thisTransaction, LANandTAM, aremembers, one ofthetwoglobalalliancesinwhichparties Decision requiresthat“LATAM resignfromatleast (b) conditions stipulatedinthatDecision. subjectto fulfillment ofthe Linhas AereasS.A., (nowcalledLATAM andTAM S.A. AirlinesGroupS.A.) the concentration transaction betweenLAN Airlines “Decision”), approved theAntitrustCourt(“TDLC”) (a) following materialevent: Securities andInsurance Commissionofthe On March7,2013,theCompanyinformed 4. DecisiononGlobalAlliance: Theoptionsmaynotbeassigned,lienedor The Conselho Administrativo de Defesa Economica TheConselhoAdministrativo deDefesaEconomica InDecisionN°37datedSeptember21,2011(the ThesixthconditionimposedbytheTDLC’s ANNUAL REPORT 2012 Financial Statements 274 on adatetobedisclosedduring2013. which willtakeeffectinthesecondquarterof2014, membership intheStarAllianceglobalalliance, (f) our passengers. benefits, moreconnectivityandproductsfor with LATAM AirlinesGroup.Italsooffersthebest the company’s interestsandhasthemostsynergies Group, thisglobalallianceistheonebestsuitedto (e) and 13othersarealreadymembers. will joinoneworldinwhichLATAM AirlinesGroup (“LanColombia”) de Integracion Regional-AiresS.A. andAerovias (“TAM”) TAMresult, LinhasAereasS.A. its global alliance for the airlines in its group. As a meeting heldMarch5,2013,tochooseoneworldas LATAM AirlinesGroupresolved,ataregularBoard by eachofTDLC andCADE,theBoardofDirectors of (d) this debenture issueareclassifiedasa current standards, thefinancial liabilities relatingto Holder Assemblyandaccording toIFRSaccounting requested a waiver by the General Debenture S.A. the closeofDecember2012, TAM LinheasAéreas potential declaration of default onthose limits at an originalamountofThR$600,000.Anticipatinga to theissuanceofdebentures(CVM476)in2009for limits onsomeofitsfinancialindicatorsinrelation Our subsidiary, hasset TAM LinhasAéreasS.A., 5. CovenantsofTAM LinhasAéreasS.A.: and toapplicableprocedure. according tothetermsofitsaforesaidresolution willbepresentedinduecoursetoCADE, Group S.A. (i) fourth quarterof2013. (h) Alliance. Thatdatewillalsobeannouncedthisyear. the secondquarterof2014,assoonitleavesStar (g) Finally, thisdecisionbytheBoardofLATAM Airlines TAM’s Boardalsoresolvedto resign fromTAM’s IntheopinionofBoardLATAM Airlines TAM is expected to officially join during In ordertofulfilltheaforesaidconditionsimposed LAN Colombia is expected to join oneworld in the

shareholders decided,amongothermatters,thatthe of DirectorsonAugust3,2012.Atthatmeeting, shareholders meeting convened by its Board On September4,2012,theCompanyheldaspecial shares: 6. Placementofremainderintheexchange financial statements. and non-currentfinancialliabilitiesinthefuture so thisobligationwillbeclassifiedascurrent Debenture HolderAssemblygranted thatwaiver, financial liability. On February 14,2013,theGeneral Multiplus S.A. (BM&FBOVESPA: MPLU3) Multiplus S.A. (“Company”), Significant matter: publishedthefollowing subsidiary ofTAM S.A., On March8,2013thecompany MultiplusS.A., 7. CapitalincreaseofMultiplusS.A. at apriceofCLP$11,921pershare. Exchange, SecuritiesonJanuary23,2013 That balancewasauctionedontheSantiagoStock leaving abalanceof579,626unsubscribedshares. of thatremainderhadbeensubscribedandpaid, period, i.e.,onJanuary19,2013,6,857,190shares same date.Attheendofthatrightfirstrefusal and Insurance Commission byadisclosureonthe share, allofwhichwasinformedtotheSecurities and tosettheplacementpriceatCLP$11,000per period forsuchshareseffectiveDecember21,2012 of Directors agreed to begin the right of first refusal 11, 2012.OnDecember20,2012,theCompany’s Board Securities and Insurance Commissionon December Placement oftheseshareswasapprovedbythe the market. and that any unsubscribed balance be placed on according toarticle25oftheCompaniesLaw, to a preemptive offer among LATAM shareholders beallocated andHoldcoII S.A. Sister HoldcoS.A. 21, 2011thatwerenotexchangedforsharesin the SpecialShareholdersMeetingheldDecember of 142,555,882sharesissuedunderauthorization remainder of7,436,816sharesinLATAM outofatotal

ANNUAL REPORT 2012 Financial Statements 275 primary public distribution of Shares in Brazil on primary publicdistributionofSharesinBrazil and BancoJ.P. andwillcomprise the MorganS.A. (“LeadManager”and“StabilizingAgent”) Pactual S.A. The Offering will be coordinated by BancoBTG Agreement Activities. ANBIMA RegulationandBestPractices Codefor envisaged inCVMInstruction471andthe of theOfferingwillobeysimplifiedprocedure for the preliminary analysis for the registration (“Shares” and“Offering”,respectively). Said request Company, freeandclearofanyencumbrances book-entry shareswithnoparvalue issued bythe primary publicdistributionofregisteredcommon the preliminaryanalysisofregistration ofa Market Entities(“ANBIMA”) witharequestfor Association of CapitalandFinancial Brazilian Today, theCompanypresentedANBIMA– and themarketingeneral that: Instruction 471”),herebyinformsitsshareholders of CVMInstruction471August8,2008(“CVM Commission (“CVM”),asamended,andarticle7 SecuritiesandExchange issued bytheBrazilian Instruction358/02 amended (“Corporation Law”), pursuant toLaw6404ofDecember15,1976,as of the total Shares initially offered (“Over-Allotment augmented byanover-allotment optionofupto15% 400, thenumberofSharesinitially offeredmaybe In accordancewitharticle24 ofCVMInstruction documentation (“PriorityOffering”). total capitalstock,pursuanttotheOffering shares proportional to their share of the Company’s Law, althoughtheywillhaveprioritytosubscribe pre-emptive rightsasperarticle172ofCorporation The Company’s shareholders willnotbeentitledto America orconstitutedinaccordancewithitslaws. whoarenotresidentintheUnitedStatesof Brazil, countries, excepttheUnitedStatesofAmericaand aswellfor investorsinother Securities Act, that areexemptfrompriorregistration aspersaid 144A of the Securities Act of 1933, through operations definedinaccordancewithRule States ofAmerica, investors residentanddomiciledintheUnited placement effortsabroadforqualifiedinstitutional amended (“CVMInstruction400”),includingbest to CVMInstruction400ofDecember29,2003,as pursuant the unorganizedover-the-countermarket,

hundred millionreais),althoughthismayvary estimated atapproximatelyR$800million(eight Allotment OptionandtheAdditionalShares,is The amountoftheOffering,excludingOver- (“Additional Shares”). and atthesamepriceasSharesinitiallyoffered Shares initiallyofferedunderthesameconditions Company, beaugmentedbyupto20%ofthetotal Over-Allotment Option,may, atthecriterionof number ofSharesinitiallyoffered,excludingthe article 14,paragraph 2ofCVMInstruction400,the prejudice totheOver-AllotmentOption,pursuant determined duringtheOffering.Inaddition,without Stabilizing Agent in order to meetanyexcessdemand Option”), tobegranted bytheCompanyto will onlybegin when it hasbeendulyregistered request iscurrentlyunderstudy andtheOffering bookbuilding period.TheOffering’s registration the conditions,procedures, reserveperiodand Offering disclosuredatesand locations;and(iv) prospectus canbeobtained; (iii)theestimated (ii) thelocationsfromwherepreliminary (i) theremainingcharacteristics oftheOffering; a NoticetotheMarketcontaininginformationon: conditions. Induetime,theCompanywillpublish will besubjecttonationalandinternationalmarket announcement ofaShareoffering.TheOffering This communicationshouldnotberegardedasan the Offering. to beheldbeforetheCVMgrants registration of a meeting of the Company’s Board of Directors Law, andthepricepersharewillbeapproved by rights, pursuanttoarticle172,itemIofCorporation the exclusionofexistingshareholders’pre-emptive increase withinthelimitsofauthorizedcapital,with Directors onMarch7,2013.Theeffectivecapital approved byameetingoftheCompany’s Boardof The Offering,anditstermsconditions,were bookbuilding process. demand (by volume and price), collected during the duetothenatureof indications ofinterest, of theSharesonBM&FBOVESPA; and(ii)the based on the following parameters: (i) the price after conclusionofthebookbuildingprocess, The saleprice of theShareswillbedetermined demonstrated duringthecourseofOffering. depending oneffectivedemandfortheShares

ANNUAL REPORT 2012 Financial Statements 276 held March19,2013. 2012 wereapprovedatBoard of Directors Meeting and Subsidiaries as December 31, Airlines Group S.A. The ConsolidatedFinancialStatementsofLATAM abroad, inaccordancewithCVMInstruction400. and of securitiesissuedbytheCompanyinBrazil other consultants in the contextof public offerings the proceduresofitsindependentauditorsand the needtoalignitsguidancedisclosurepolicywith its guidance in item 11 of its Reference Form, given Management opted to discontinue the disclosure of N°01/2013, theCompanyherebydeclaresthatits pursuant toOfficialLetterOfício-Circular/CVM/SEP/ important decisions regarding the Offering. The Companywillkeepthemarketinformedofany with theCVM.

Finally, INFORMATION ABOUT SUBSIDIARIES AND AFFILIATED COMPANIES LATAM AIRLINES GROUP S.A. ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 278 became ajointstockcompanyunderthename thecompany Public NotaryMiguelGaray Figueroa, By publicdeedof20August1985,extendedby 1983. of31December published intheOfficialGazette 11,248 of1983theSantiagoBusinessRegisterand an extract ofwhichwasrecordedatFolio 20,341Nº extended byPublicNotaryEduardoAvelloArellano, company bypublicdeedof30December1983, Incorporation: NOMBRE: LATAMCHILEANTAX Nº89.862.200-2 AIRLINESGROUPS.A., LATAM AirlinesGroupS.A. 4,238 Nº2,921of2012and was publishedinthe Register oftheRealEstateRegistry Officeat Folio the Meeting’s minutes was recorded on theBusiness AnextractS.A.” ofthepublicdeedcorresponding to change thecompany’s nameto“LATAM AirlinesGroup heldon21December2011agreedto Airlines S.A. The Extraordinary Shareholders’ MeetingofLAN September 2004. August 2004.Thechangeofnamecameintoforceon8 of 21 2004 and was published in the Official Gazette Real Estate Registry Office at Folio 25,128 Nº18,764of minutes wasrecordedontheBusinessRegisterof of thepublic deed correspondingtothe Meeting’s company’s Anextract nameto “LAN AirlinesS.A.”. heldon 23 July2004agreed tochange the Chile S.A. The Extraordinary Shareholders’MeetingofLAN continuation ofthestatecompanycreatedin1929. expressly designated by LawN°18.400 as thelegal administrative concessions,thiscompanywas communication concessions,traffic rightsandother As regards aeronautic and radio Airlines Group S.A.). (nowLATAMof LíneaAéreaNacionaldeChileS.A. Established asalimitedliability name cameintoforceon22June2012. of 14 January 2012. The change of Official Gazette Superintendencia deValores ySeguros(SVS). public atourcorporate headquartersandatthe complete financial statements are available to the presented belowhasbeensummarized.Their Note: Inscription N°0306of22January1987. Seguros (SVS),Chile’s stockmarketregulator, under registered withtheSuperintendenciadeValores y applicable tolistedjointstockcompaniesandis LATAM is subject to the regulation Airlines Group S.A. Thefinancialinformationaboutsubsidiaries ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 279 and complementary to regular air transport. and complementarytoregularairtransport. services andotheractivities associated, related regular nationalandinternationalairtransport companies, especiallycompaniesthatprovide Purpose: inMay1997. Brazil Incorporation: andSubsidiaries TAM S.A. % ofconsolidatedassets: Shareholding: Net income: Subscribed andpaid-incapital: To participateasashareholderinother Joint stockcompanyestablishedin ThUS$ (28,166) ThUS$ 404,169 100,00% 3,76% Flávia Directors: Turci Chairman: BOARD OFDIRECTORS: TP Franchising Limited Corsair Participações Ltda. Pantanal LinhasAereasS.A. Transportes AereosdelMercosurS.A. Multiplus S.A. TAM Linhas Aereas S.A. yfiliales TAM LinhasAereasS.A. yParticipación S.A. Sociedades FilialesdeTAM

Maurício RolimAmaro Ignacio CuetoPlaza Enrique CuetoPlaza Noemy AlmeidaOliveira Amaro Maria CláudiaOliveira Amaro

100,00% 100,00% 100,00% 99,99% 94,98% 72,87%

ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 280 TAM S.A. andSubsidiaries TAM S.A. EQUITY TOTAL LIABILITIES Total non-currentliabilities Total currentliabilities LIABILITIES LIABILITIES ANDEQUITY TOTAL ASSETS Total non-currentassets Total currentassets distribution toowners Non-current assets(ordisposalgroups)classifiedasheldforsaleor as heldforsaleordistributiontoowners Total currentassetsotherthannon-current(ordisposalgroups)classified ASSETS Consolidated StatementsofFinancialPosition NET INCOMEFORTHEPERIOD Non-controlling interest Owners oftheparent Net incomefortheperiodattributableto: NET INCOMEFORTHEPERIOD Income taxexpense Income beforetaxes Gross margin Revenues Consolidated StatementsofIncomebyFunction TOTAL LIABILITIESANDEQUITY Total equity Non-controlling interest Parent’s ownershipinterest betweenJune 22th As ofDecember As oftheperiod and December 31th of2012 8.292.729 7.517.696 8.292.729 31, 2012 ThUS$ 2.026.549 2.017.632 4.478.196 3.039.500 6.266.180 3.645.409 8.917 (28.166) (28.166) 775.033 753.907 (45.163) (22.171) 615.475 21.126 (5.995) 16.997 ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 281 Net cashflowfrom(usedin)operating activities Consolidated StatementsofCashFlows–DirectMethod Cash andcashequivalentsatendofperiod Effects ofvariationintheexchangesrate oncashandequivalents NET INCREASE(DECREASE)INCASHANDEQUIVALENTS Net cashflowfrom(usedin)financingactivities Net cashflowfrom(usedin)investmentactivities CLOSING BALANCEASOFCURRENTYEARENDING Other increase(decrease)inequity Dividends Comprehensive incomefortheperiod Equity asofJune22,2012 Consolidated StatementsofChangesinEquity TOTAL COMPREHENSIVEINCOMEFORTHEPERIOD Non-controlling interest Owners oftheparent Comprehensive incomeattributableto: TOTAL COMPREHENSIVEINCOMEFORTHEPERIOD Other comprehensiveincome NET INCOMEFORTHEPERIOD Consolidated StatementsofComprehensiveIncomebyFunction BALANCES DECEMBER31,2012

ownership (169.757) Parent’s interest ThUS$ 753.907 (40.072) 963.736 - controlling interest (19.997) ThUS$ 1.779 21.126 17.847 21.497 Non- between June22th As oftheperiod and December 31th of2012 June 22thand ThUS$ (22.225) (22.225) 31th of2012 (40.072) (28.166) (167.978) December 17.847 (537.981) between As ofthe 775.033 (19.997) (22.225) ThUS$ 985.233 equity 5.941 (63.317) (28.166) 320.716 195.418 MUS$ period Total (6.587) ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 282 public deedof20November1998,recordedatFolio amended on a number of occasions, most recently by Palazuelos. Thecompany’s bylawshavesincebeen extended byPublicNotaryJaimeGarcía established bypublicdeedof3September1958, Cobre Limitada(LadecoLimitada)whichhadbeen the assets and liabilities of the Línea Aérea del by PublicNotarySergioRodríguezGarcés,with company bypublicdeedof22May1970,extended INCORPORATION: and Subsidiaries LAN CargoS.A. August 2004. of 30 2004 and was published in the Official Gazette Real Estate Registry Office at Folio 26,994 Nº20,082of is recordedontheBusinessRegister oftheSantiago Anextractchanged to“LANCargoS.A.” ofthisdeed heldon17August2004,itsnamewas Chile CargoS.A. to theExtraordinary Shareholders’MeetingofLAN Under publicdeedof23August2004corresponding came intoforceon10December2001. of5November,Gazette 2001.Thechangeofname Nº 22,624of2001andwaspublishedintheOfficial Santiago RealEstateRegistryOfficeat Folio 27,746 deed isrecordedontheBusinessRegisterof Anextractchanged to“LANChileCargoS.A.”. ofthis heldonthesamedate,itsnamewas Ladeco S.A. to theExtraordinary Shareholders’Meetingof Under publicdeedof22October2001corresponding of LANChileS.A. asubsidiary incorporation withFast AirCarrierS.A., mergedthrough 1998, underwhichLadecoS.A. of3December and publishedintheOfficialGazette 30,091 Nº24,117oftheSantiagoBusinessRegister

Established asaclosedjointstock account oronbehalfofothers,thefollowing PURPOSE: Directors: Chairman: Board ofdirectors fulfill theaboveobjectives. enter intoallcontracts necessaryandpertinentto future, andmayingeneral performalltheactsand association, whether existing or formed in the shares or rights or interests in any other type of become apartnerinothercompaniesbyacquiring objectives, theCompanymaymakeinvestmentsor within andoutsideChile.Incompliancewiththese and theotheractivitiesgoodsreferredtoabove, and, alltypesofactivitiesrelatedtotourism,hotels other typeofconsultancy, withinandoutsideChile; maintenance, technical or any of ground support, particular, inanyofitsformswhetherconsisting to transport ingeneral andtoairtransport in of alltypesservicesandconsultancyrelated their exploitationonanyaccount;theprovision own account or on behalf of third parties, and either on its parts and aeronautic equipment, renting or any other form spare of use of aircraft, sale, manufacture and/or assembly, maintenance, their formswithinandoutsideChile;thepurchase, hotel andothercomplementaryactivitiesinanyof cargo andmailwithinoutsideChile;tourism, and, inparticular, theairtransport ofpassengers, activities: transport ingeneral inanyof itsforms % ofconsolidatedassets: Shareholding: Net income: Subscribed andpaid-incapital:

To engageinanddevelop,onitsown Juan JoséCuetoPlaza Enrique CuetoPlaza Ignacio CuetoPlaza Ramón EblenKadis José CoxDonoso

ThUS$ 83,225 ThUS$55,356

99,8980% 2,20% ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 283 (Closed jointstockcompany) andsubsidiaries LAN CargoS.A. Connecta Corporation yfilial LAN CargoInversionesS.A. UniónTransitoriaLaser CargoS.R.L. deEmpresas - Consorcio Fast AirAlmacenesdeCargaS.A. Transporte AéreoS.A. LAN CargoOverseasLimitedyfiliales Prime AirportServicesInc.yfilial Fast AirAlmacenesdeCargaS.A. Ladeco CargoS.A. Ediciones LadecoAméricaS.A. Aircraft InternacionalLeasingLimited Laser CargoS.R.L yParticipación Cargo S.A. Sociedades FilialesdeLAN Consolidated StatementsofFinancialPosition TOTAL LEABILITIESANDEQUITY TOTAL EQUITY Non-controlling interest Parent’s ownershipinterest EQUITY TOTAL LIABILITIES Total non-current liabilities Total current liabilities LIABILITIES LIABILITIES ANDEQUITY TOTAL ASSETS Total non-current assets Total current assets distribution toowners Non-current assets(ordisposalgroups)classifiedasheldforsaleor as heldforsaleordistributiontoowners Total currentassetsotherthannon-current(ordisposalgroups)classified ASSETS in subsidiaries Shareholdings LAN Cargo S.A.: 100,00% 100,00% 100,00% 99,99% 99,00% 99,98% 99,89% 99,00% 99,00% 99,98% 99,99% 1.203.551 1.203.551 December ThUS$ 31, 2012 452.037 751.514 447.028 455.291 296.223 716.666 486.885 484.594 As of 5.009 2.318 1.029.672 1.029.672 December ThUS$ 522.143 507.529 518.600 292.417 215.112 528.033 501.639 499.321 31, 2011 3.543 As of 2.291 ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 284 TOTAL COMPREHENSIVEINCOMEFORTHE PERIOD Other comprehensiveincome NET INCOMEFORTHEPERIOD Consolidated StatementsofComprehensiveIncomebyFunction NET INCOMEFORTHEPERIOD Non-controlling interest Owners oftheparent Net incomefortheperiodattributableto: NET INCOMEFORTHEPERIOD Income taxexpense Income beforeincometaxes Gross margin Revenues Consolidated StatementsofIncomebyFunction BALANCES DECEMBER 31,2012 CLOSING BALANCEASOF CURRENTYEARENDING Other increase(decrease)inequity Dividends Comprehensive incomefortheperiod EQUITY ASOFJANUARY 1,2012 PRIOR YEARENDINGBALANCEASOFDECEMBER31,2011 Other increase(decrease)inequity(161) Dividends Comprehensive incomefortheperiod EQUITY ASOFJANUARY 1,2011 Consolidated StatementsofChangesinEquity TOTAL COMPREHENSIVEINCOMEFORTHE PERIOD Non-controlling interest Owners oftheparent Comprehensive incomeattributableto: ownership ThUS$ 447.028 518.600 518.600 456.106 (15.901) (54.308) (32.544) Parent’s interest (1.363) 95.199 ThUS$ 2012 (161) For theperiodsended 1.333.780 (55.356) (55.356) (55.478) (47.360) (7.996) 40.465 December 31, controlling ThUS$ 122 interest Non- 5.009 3.543 3.543 2.752 1.459 (14) 113 692 7 For theperiodsended - ThUS$ (54.301) (54.301) (55.356) (54.308) 2012 1.055 December 31, ThUS$ 2011 7 ThUS$ 452.037 522.143 522.143 458.858 (15.901) (54.301) (32.558) 1.292.997 equity 95.891 Total (14.657) 111.710 ThUS$ 97.053 97.053 (1.162) 96.365 59.930 2011 95.891 95.891 692 (48) 97.053 95.199 96 688 ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 285 Consolidated StatementsofCashFlows–DirectMethod Cash andcashequivalentsatendofperiod Effects ofvariationintheexchangesrate oncashandequivalents NET INCREASEINCASHANDEQUIVALENTS Net cashflowfrom(usedin)financingactivities Net cashflowfrom(usedin)investmentactivities Net cashflowfrom(usedin)operating activities (118.848) For theperiodsended (11.677) 125.990 ThUS$ (4.535) 2012 12.688 December 31, (2) (177.751) 104.682 ThUS$ (1.631) 17.225 71.438 2011 (74) ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 286 laws. internationally, incompliancewithcivilaeronautical passengers, cargoandmail,domestically PURPOSE: company inPeru on14February 1997. INCORPORATION: LAN Perú S.A. (Closed jointstockcompany) LAN Perú S.A. Subscribed andpaid-incapital: Equity andLiabilities Shareholder equity Liabilities Assets Balance Sheet % ofconsolidatedassets: Shareholding: Net income:

To provideairtransport servicesfor

Established asajointstock ThUS$ December 31, 2012 167.121 147.055 167.121 As of 20.066 ThUS$2,683 ThUS$4,341 ThUS$ December 31, 2011 143.212 126.881 143.212 70,00% As of 16.331 0,04% Directors: Chairman: BOARD OFDIRECTORS:

Enrique CuetoPlaza Luis EnriqueGálvezdelaPuente Alejandro GarcíaVargas Jorge HartenCosta Alejandro delaFuenteGoic Ignacio CuetoPlaza Emilio RodríguezLarraín Salinas

ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 287 CLOSING BALANCEASOFDECEMBER31,2012 Years’profit Deferred taxrevaluationofland Dividends Revaluation ofland Deferred taxrevaluationofland Revaluation ofland OPENING BALANCEASOFJANUARY 01,2011 Statements ofChangesinEquity Operating revenues Income Statement Cash andcashequivalentsatendofperiod Net cashflowfrom(usedin)financing activities Net cashflowfrom(usedin)investment activities Net cashflowfrom(usedin)operating activities Consolidated StatementsofCashFlows–DirectMethod OPENING BALANCEASOFJANUARY 01,2012 CLOSING BALANCEASOFDECEMBER31,2011 Years’profit Net income Incometax Non-operating income(loss) Operating profit NET DECREASEINCASHANDEQUIVALENTS equity paid- Changes in in-capital ThUS$ ------4.341 4.341 4.341 4.341 - revaluation Changes in 4.960 surplus ThUS$ 10.392 (2.328) 7.760 4.960 2.330 3.229 (699) - - - Changes in reserve ThUS$ ------legal 868 868 868 868 - Changes in earnings retained ThUS$ 993 (14.150) For theperiodsended (4.380) 1.121.219 2012 6.162 6.162 (6.636) (3.134) 41.982 ThUS$ For theperiodsended - - - ThUS$ (4.380) (1.731) 2012 6.162 2.683 5.169 2.683 4.336 December 31, December 31, 78 - (2.328) Equity total Changes in 2.330 20.066 993 ThUS$ ThUS$ 975.522 2011 ThUS$ (8.586) 16.331 (4.380) (5.377) (3.209) 16.331 13.707 56.132 (1.874) 2011 2.683 7.760 2.182 (699) 685 993 - ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 288 types andacquirerightsin,administer, modifyand the companymayformothercompaniesofall moveable orreal,tangibleintangible;inaddition, PURPOSE: February 1990. of2 Register andpublishedintheOfficialGazette Folio 3,462Nº1,833of1990theSantiagoBusiness by PublicNotaryHumbertoQuezadaM.,recordedat company bypublicdeedof23January1990,extended INCORPORATION: and Subsidiaries Inversiones LANS.A. liquidate existingcompanies. % ofconsolidatedassets: Shareholding: Net income: Subscribed andpaid-incapital:

To invest in all types of property, whether

Establishedasaclosedjointstock ThUS$ (111) ThUS$ 458 99,71% 0,03% Directors: Chairman: BOARD OFDIRECTORS: Andes AirportServicesS.A. Passenger Aircraft LeasingLimited Cargo Aircraft Leasing Limited Aviation Administration ServicesLtd Falcon AviationManagementLtd Hawk AviationManagementLtd Transport AviationLeasingLimited Shareholdingsinsubsidiaries Inversiones LANS.A.:

Ignacio CuetoPlaza Enrique ElsacaHirmas Roberto AlvoMilosawlewitsch Alejandro delaFuenteGoic Enrique CuetoPlaza

100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 98,00%

ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 289 (Closed jointstockcompany) SHAREHOLDINGSINSUBSIDIARIES INVERSIONES LANS.A.: Consolidated StatementsofFinancialPosition Revenues Consolidated StatementsofIncomebyFunction Non-controlling interest Owners oftheparent Net incomefortheperiodattributableto: NET INCOMEFORTHEPERIOD Income taxexpense Income beforeincometaxes Gross margin TOTAL LEABILITIESANDEQUITY TOTAL EQUITY Non-controlling interest Parent’s ownershipinterest EQUITY TOTAL LIABILITIES Total non-currentliabilities Total currentliabilities LIABILITIES LIABILITIES ANDEQUITY TOTAL ASSETS Total non-currentassets Total currentassets distribution toowners Non-current assets(ordisposalgroups)classifiedasheldforsaleor as heldforsaleordistributiontoowners Total currentassetsotherthannon-current(ordisposalgroups)classified ASSETS NET INCOMEFORTHEPERIOD December ThUS$ For theperiodsended ThUS$ 31, 2012 2012 16.181 16.181 10.607 9.714 24.667 As of 6.467 5.574 5.001 6.466 9.158 4.854 (111) (111) (112) (201) 948 556 December 31, 90 1 1 December ThUS$ ThUS$ 31, 2011 2011 9.121 14.299 14.299 (354) 22.546 As of 6.478 7.821 6.476 7.650 5.178 4.230 3.232 (354) (347) (427) 171 573 ( 7) 73 2 ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 290 Equity asofJanuary1,2011 Statement ofChangesinEquily Other comprehensiveincome NET INCOMEFORTHEPERIOD Consolidated StatementsofComprehensiveIncomebyFunction Effects ofvariationintheexchangesrate oncashand equivalents NET INCREASEINCASHANDEQUIVALENTS Net cashflowfrom(usedin)financingactivities Net cashflowfrom(usedin)investmentactivities Net cashflowfrom(usedin)operating activities Consolidated StatementsofCashFlows–DirectMethod Equity asofJanuary1,2012 PRIOR YEARENDINGBALANCEASOFDECEMBER31,2011 Other increase(decrease)inequity Comprehensive incomefortheperiod TOTAL COMPREHENSIVEINCOMEFORTHEPERIOD Non-controlling interest Owners oftheparent Comprehensive incomeattributableto: TOTAL COMPREHENSIVEINCOMEFORTHEPERIOD Cash andcashequivalentsatendofperiod Other increase(decrease)inequity Comprehensive incomefortheperiod BALANCES DECEMBER31,2012 CLOSING BALANCEASOFCURRENTYEARENDING ThUS$ ownership Parent’s interest (538) (47) 6.466 6.476 7.320 6.476 (306) 37 ThUS$ controlling interest Non- (7) (5) For theperiodsended ThUS$ 2 1 8 2 1 4 2012 (111) 152 ended December31, 41 December 31, 41 37 ThUS$ (4.547) 4 2012 4.677 For theperiods 290 226 (2) 96 ThUS$ Total equity 2011 ThUS$ 6.478 6.467 7.328 6.478 ThUS$ (305) (305) (354) (545) (305) (306) (859) 2011 (52) (45) (24) 814 49 41 66 1 - ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 291 and exploitrealestateinanyotherway, whetheron administer estate andrealprojects;torent, over realestate;todevelop,plan,sellandbuild PURPOSE: of14September1995. Official Gazette Santiago BusinessRegisterandpublishedinthe recorded atFolio 21,690N°17,549of1995the by PublicNotaryGonzalodelaCuadraFabres, company bypublicdeedof1August1995,extended INCORPORATION: Inmobiliaria Aeronáutica S.A. its ownaccountoronbehalfofthirdparties. % ofconsolidatedassets: Shareholding: Net income: Subscribed andpaid-incapital:

To acquireandsellrealestaterights

Established asaclosedjointstock ThUS$17,719 ThUS$1,147 100,00% 0,17% Directors: Chairman: BOARD OFDIRECTORS:

Alejandro delaFuenteGoic Armando Valdivieso Montes Enrique CuetoPlaza

ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 292 (Closed jointstockcompany) INMOBILIARIA AERONAUTICA S.A. Statements ofIncomebyFunction TOTAL EQUITY EQUITY Total liabilities Total non-currentliabilities Total currentliabilities LIABILITIES LIABILITIES ANDEQUITY TOTAL ASSETS Total non-currentassets Total currentassets ASSETS Statements ofFinancialPosition NET INCOMEFORTHEPERIOD Statements ofComprehensiveIncomebyFunction NET INCOMEFORTHEPERIOD Income taxexpense Income beforeincometaxes Gross margin Revenues TOTAL LEABILITIESANDEQUITY TOTAL COMPREHENSIVEINCOMEFORTHEPERIOD December ThUS$ 31, 2012 ThUS$ 57.227 34.198 17.226 57.227 41.607 15.620 23.029 2012 5.803 As of (5.795) For theperiodsended 17.719 23.514 24.671 50.256 For theperiodsended ThUS$ 2012 17.719 17.719 December 31, December 31, ThUS$ December 31, 2011 ThUS$ 2011 As of (960) 65.580 31.479 ThUS$ 34.101 32.425 65.580 62.672 3.484 2011 4.444 4.765 8.961 1.676 2.908 3.484 3.484 ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 293 NET INCREASEINCASHANDEQUIVALENTS Statements ofCashFlows–DirectMethod BALANCES DECEMBER31,2012 CLOSING BALANCEASOFCURRENTYEARENDING Dividends Comprehensive incomefortheperiod EQUITY ASOFJANUARY 1,2012 PRIOR YEARENDINGBALANCEASOFDECEMBER31,2011 Dividends Comprehensive incomefortheperiod EQUITY ASOFJANUARY 1,2011 Statements ofChangesinEquity Cash andcashequivalentsatendofperiod Effects ofvariationintheexchangesrate oncashandequivalents Net cashflowfrom(usedin)financingactivities Net cashflowfrom(usedin)investmentactivities Net cashflowfrom(usedin)operating activities Changes in paid-in- ThUS$ capital 1.147 1.147 1.147 1.147 - - - - retainedearnings Changes in For theperiodsended (22.860) (15.000) ThUS$ ThUS$ 33.051 30.332 (2.500) 22.986 17.719 30.332 29.348 2012 3.484 142 127 December 31, 1 1 ThUS$ (1.680) 2011 1.366 332 Changes in net equity (6) 14 18 (15.000) ThUS$ 34.198 31.479 (2.500) 17.719 31.479 30.495 30.495 total ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 294 Santiago BusinessRegisterandpublishedinthe recorded atFolio 39,034N°26,946of2010the by SantiagoPublicNotaryPatricio RabyBenavente, recently underpublicdeedof27July2010,extended have beenamendedonanumberofoccasions,most of2July1987.Thecompany’s bylaws Official Gazette Santiago BusinessRegisterandpublishedinthe recorded atFolio 13,139N°8,495of1987the by SantiagoPublicNotaryRaúlUndurragaLaso, company bypublicdeedof22June1987,extended INCORPORATION: Terrestres andsubsidiary S.A. Lantours DivisiónServicios inputs orfinishedproducts. markets, any typeofgoods whether raw materials, or onbehalfofothers,indomesticinternational produce, marketanddistribute,onitsownaccount export, parties, car rental activities; to import, onitsownaccountorbehalfofthird to exploit, hotel, shipping,airtransport andtourismactivities; or overseas companies or businesses dedicated to PURPOSE: of12August2010. Official Gazette % ofconsolidatedassets: Shareholding: Net income: Subscribed andpaid-incapital: To administerandrepresentlocal exploit,

Established as a closed joint stock ThUS$1,300 ThUS$225 100,00% 0,00% Directors: Chairman: BOARD OFDIRECTORS: Terrestres IIS.A. Lantours DivisiónServicios :Shareholdingsinsubsidiary S.A. Lantours DivisiónServiciosTerrestres

Armando Valdivieso Monte Andrés delValle Eitel Damián ScokinRimolo 99,99%

ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 295 (Closed jointstockcompany) ANDSUBSIDIARY LANTOURS DIVISIONSERVICESTERRESTRESS.A. Statements ofIncomebyFunction TOTAL LEABILITIESANDEQUITY TOTAL EQUITY EQUITY Total liabilities Total non-currentliabilities Total currentliabilities LIABILITIES TOTAL ASSETS Total non-currentassets Total currentassets ASSETS Statements ofFinancialPosition TOTAL COMPREHENSIVEINCOMEFORTHEPERIOD NET INCOMEFORTHEPERIOD Statements ofComprehensiveIncomebyFunction NET INCOMEFORTHEPERIOD Income taxexpense Income beforeincometaxes Gross margin Revenues LIABILITIES ANDEQUITY December ThUS$ For theperiodsended 31, 2012 ThUS$ 2012 For theperiodsended 1.300 1.598 5.600 9.399 As of (298) 2.678 2.678 2.121 2.411 2.153 MUS$ 267 2012 525 1.300 December 31, 1.300 32 December 31, December 31, 2011 ThUS$ ThUS$ As of 2011 1.082 4.575 7.872 2.534 2.534 1.749 1.745 2.283 MUS$ 4 (222) 2011 860 785 251 860 860 ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 296 Cash andcashequivalentsatendofperiod Dividends Comprehensive incomefortheperiod NET INCREASEINCASHANDEQUIVALENTS Net cashflowfrom(usedin)financingactivities Net cashflowfrom(usedin)investmentactivities Net cashflowfrom(usedin)operating activities Statements ofCashFlows–DirectMethod BALANCES DECEMBER31,2012 CLOSING BALANCEASOFCURRENTYEARENDING EQUITY ASOFJANUARY 1,2012 PRIOR YEARENDINGBALANCEASOFDECEMBER31,2011 Dividends Comprehensive incomefortheperiod EQUITY ASOFJANUARY 1,2011 Statements ofChangesinEquity in paid-in- Changes capital ThUS$ 225 225 225 225 - - - - retainedearnings Changes in ThUS$ (1.560) (380) 1.300 860 300 560 560 For theperiodsended 80 ThUS$ 2012 (1.560) 1.604 December 31, (41) 11 3 Changes in net equity ThUS$ ThUS$ total (1.560) 2011 1.300 (380) (380) 785 (69) 444 525 305 860 305 (5) 8 ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 297 the companymayformothercompaniesofall moveable orreal,tangibleintangible;inaddition, Purpose: 2001. of6October and publishedintheOfficial Gazette of the Santiago Business Register on 4 October 2001 recorded at FolioZaldivarMackenna, 25,636 N° 20,794 extended bySantiagoPublicNotaryPatricio company bypublicdeedof27September2001, Incorporation: Subsidiaries and LAN Pax GroupS.A. pursuant orcomplementarytothispurpose. resulting from its purpose and/or linked, related, may alsodevelopandundertakeanyotheractivity of any kind that are conducive to its objectives. It perform acts of any type and enter into contracts on its own account or on behalf of others, and acquire, sellandexploitalltypesofgoods,whether liquidate existingcompanies.Ingeneral, itmay types andacquirerightsin,administer, modifyand % ofconsolidatedassets: Shareholding: Net income: Subscribed andpaid-incapital: To invest in all types of property, whether

Established asaclosedjointstock ThUS$(82,277) ThUS$425 100,00% 0,00% Directors: Chairman: BOARD OFDIRECTORS: and subsidiaries Puerto MonttHolding S.A. Nacionales delEcuador S.A. Aerolane, LíneasAéreas Aeroasis S.A. Saipan HoldingsS.A. Akemi HoldingsS.A. Perdiz LeasingLLC Atlantic AviationInvestmentsLLC (ExSiventasS.A.) Lantours S.A. Inversora Cordillera S.A. andsubsidiaries Inversora Cordillera S.A. Shareholdingsinsubsidiaries LAN Pax GroupS.A.:

Alejandro delaFuenteGoic Enrique ElsacaHirmas Ignacio CuetoPlaza 99,875% 100,00% 100,00% 100,00% 100,00% 71,92% 99,00% 99,00% 95,78%

ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 298 (Closed jointstockcompany) ANDSUBSIDIARIES LAN PAX GROUPS.A. TOTAL LEABILITIESANDEQUITY TOTAL EQUITY Non-controlling interest Parent’s ownershipinterest EQUITY Total liabilities Total non-currentliabilities Total currentliabilities LIABILITIES LIABILITIES ANDEQUITY TOTAL ASSETS Total non-currentassets Total currentassets ASSETS Estado deSituaciónFinanciera ClasificadoConsolidado NET INCOMEFORTHEPERIOD Non-controlling interest Owners oftheparent Net incomefortheperiodattributableto: NET INCOMEFORTHEPERIOD Income taxexpense Income beforeincometaxes Gross margin Revenues Consolidated StatementsofIncomebyFunction (5.008) 1.130.295 (82.277) (114.478) For theperiodsended MUS$ (82.277) (77.269) 128.389 2012 ThUS$ 32.201 (115.443) December (112.395) 522.408 522.408 582.742 293.559 637.851 228.849 31, 2012 (3.048) 55.109 December 31, As of (1.668) (29.290) December ThUS$ (29.290) MUS$ (37.495) (27.622) (46.074) 722.701 464.789 464.789 (41.935) 4.440 502.284 447.140 236.257 228.532 2011 31, 2011 16.784 88.125 55.144 As of ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 299 Consolidated StatementsofChangesinEquity Consolidated StatementsofComprehensiveIncomebyFunction Cash andcashequivalentsatendofperiod Effects ofvariationintheexchangesrate oncashandequivalents NET INCREASEINCASHANDEQUIVALENTS Net cashflowfrom(usedin)financingactivities Net cashflowfrom(usedin)investmentactivities Net cashflowfrom(usedin)operating activities Consolidated StatementsofCashFlows–DirectMethod BALANCES DECEMBER31,2012 CLOSING BALANCEASOFCURRENTYEARENDING Other increase(decrease)inequity Comprehensive incomefortheperiod EQUITY ASOFJANUARY 1,2012 PRIOR YEARENDINGBALANCEASOFDECEMBER31,2011 Other increase(decrease)inequity Comprehensive incomefortheperiod EQUITY ASOFJANUARY 1,2011 TOTAL COMPREHENSIVEINCOMEFORTHEPERIOD Non-controlling interest Owners oftheparent Comprehensive incomeattributableto: TOTAL COMPREHENSIVEINCOMEFORTHEPERIOD Other comprehensiveincome NET INCOMEFORTHEPERIOD ownership (112.395) Parent’s interest (41.935) ThUS$ (33.228) (70.823) (41.935) (1.625) (7.082) 363 controlling 4.440 interest ThUS$ (3.048) (3.175) (2.121) (5.367) (1.752) 9.367 Non- 4.440 For theperiodsended ThUS$ (134.249) (13.328) 2012 116.611 For theperiodsended (76.190) (76.190) 42.335 (82.277) (70.823) ThUS$ 4.310 (6.087) (5.367) 2012 (144) December 31, December 31, Total equity (115.443) (37.495) (37.495) ThUS$ (76.190) (34.980) (10.257) (115.774) ThUS$ (34.980) (34.980) (1.758) (33.228) (29.290) 145.516 ThUS$ (5.690) 2011 (1) 27.244 7.742 (2.498) (1.752) 55.807 2011 ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 300 moveable orreal,tangibleintangible. PURPOSE: Company Registeronthesamedate. Cayman Islandsandrecordedinthe company bypublicdeedof30July1999inthe INCORPORATION: and subsidiaries LAN ChileInvestmentsLimited % ofconsolidatedassets: Shareholding: Net income: Subscribed andpaid-incapital:

To invest in all types of property, whether

Established asalimitedliability ThUS$(10) ThUS$10 100,00% 0,00% Andrea Directors: Chairman: Williams BOARD OFDIRECTORS: Inversiones LaBurgueríaS.A. Shareholdings insubsidiary LAN ChileInvestmentsLimited:

Alejandro delaFuenteGoic Enrique CuetoPlaza 99,90%

ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 301 (Limited liabilitycompany) LAN CHILEINVESTMENTSLIMITEDANDSUBSIDIARIES NET INCOMEFORTHEPERIOD Owners oftheparent EQUITY TOTAL LIABILITIES Total non-currentliabilities Total currentliabilities LIABILITIES LIABILITIES ANDEQUITY TOTAL ASSETS Total non-currentassets Total currentassets ASSETS Consolidated StatementsofFinancialPosition Non-controlling interest Net incomefortheperiodattributableto: NET INCOMEFORTHEPERIOD Income taxexpense Income beforeincometaxes Gross margin Revenues Consolidated StatementsofIncomebyFunction TOTAL LEABILITIESANDEQUITY TOTAL EQUITY Parent’s ownershipinterest (828) December For theperiodsended ThUS$ ThUS$ 31, 2012 2012 4.419 5.236 5.247 As of 4.419 4.419 (828) (10) (10) (10) (10) December 31, 11 - - - - - December 278.039 ThUS$ ThUS$ 31, 2011 1.820 1.578 (818) (818) 37.692 2011 2.467 2.467 As of 5.238 4.420 4.420 3.150 2.088 4.420 647 889 - ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 302 Comprehensive incomefortheperiod EQUITY ASOFJANUARY 1,2011 Consolidated StatementsofChangesinEquity TOTAL COMPREHENSIVEINCOMEFORTHEPERIOD Non-controlling interest Owners oftheparent Comprehensive incomeattributableto: TOTAL COMPREHENSIVEINCOMEFORTHEPERIOD Other comprehensiveincome NET INCOMEFORTHEPERIOD Consolidated StatementsofComprehensiveIncomebyFunction Consolidated StatementsofCashFlows–DirectMethod Cash andcashequivalentsatendofperiod NET INCREASEINCASHANDEQUIVALENTS Net cashflowfrom(usedin)financingactivities Net cashflowfrom(usedin)investmentactivities Net cashflowfrom(usedin)operating activities Comprehensive incomefortheperiod EQUITY ASOFJANUARY 1,2012 PRIOR YEARENDINGBALANCEASOFDECEMBER31,2011 Other increase(decrease)inequity BALANCES DECEMBER31,2012 CLOSING BALANCEASOFCURRENTYEARENDING ownership Parent’s interest ThUS$ (828) (2.634) (818) (4) (818) 1.820 (10) Non- controlling interest ThUS$ (653) For theperiodsended ThUS$ For theperiodsended 2012 647 ThUS$ 6 2012 - - - - December 31, (10) (10) (10) (10) December 31, 1 ------ThUS$ equity ThUS$ Total (818) (27.479) ThUS$ (657) (818) (10) (2.628) (2.660) 2011 6.325 2011 18.494 2.467 (828) 2.467 2.467 1.820 2.467 647 1 - ANNUAL REPORT 2012 Subsidiaries and Affiliated Companies 303 contained inthisAnnualReport. responsibility ontheveracity oftheinformation Airlines Group, we declare under oath our As Directors and Chief Financial Officer of LATAM SWORN STATEMENT Director Juan JoséCuetoPlaza Director Ramón EblenKadis President Mauricio RolimAmaro Director Francisco LuzónLópez Director Gerardo JofréMiranda

Chief FinancialOfficer Alejandro delaFuenteGoic Director Georges DeBourguignonArndt Director José MaríaEyzaguirreBaeza Director Carlos HellerSolari Director María ClaudiaAmaro