Founded in 1872 Annual Report 1 6 200 2 Annual Report 6 200 AAnnual Report and Financial Statements 2006 4 Chairman’s Letter to the Shareholders 6 Board of Directors 8 Management 11 Historical Summary: A Regional Company Going Global 15 Description of the Company and the Industry Sector 19 The CSAV Group in 2006 22 CSAV Services 28 Services of Norasia Container Lines Ltd. 30 Services of Companhia Libra de Navegaçao and Compañía Libra de Navegación (Uruguay) S.A. 32 Other Activities in the Year 44 General Information 48 Material Information 51 CSAV Subsidiary Companies 65 Other Subsidiary and Associate Companies 82 Summary of Ownership of Subsidiaries 86 Investments as Proportion of Total Assets 91 Financial Statements 204 Declaration of Responsibility Annual Report 3 6 200 CChairman’s Letter to the Shareholders Dear Shareholder, I should like to comment on the Company’s business during 2006. CSAV last year produced a loss of US$58,241,000. In my letter to shareholders published in the previous AnnualAnnual Report,Report, II hadhad forecastedforecasted 2006 by saying that “it will be a very bad year from the point of view of thethe freightfreight inin thethe containership business”. I made the same forecast at the shareholders meeting held on April 19, 2006. In the letter mentioned above, I added: “The problem for containerships has already been explained to shareholdersshareholders inin thethe financial statements of September and December 2005. It is very simple: there is anan imbalanceimbalance between supply and demand in this freight market. Capacity has risen and continues toto riserise because practically all shipowners, seeing the good results and tariff increases of thethe yearsyears 2004 and most of 2005, ordered the building of new ships, many of which with largerlarger capacitycapacity than existing ones. Demand, on the other hand, has not risen in the same proportion.” In addition to the fall in containership freight rates, thethe riserise inin thethe oiloil priceprice resultedresulted in an extra cost of US$ 150.000.000. I should also mention the fall in the dollar againstagainst thethe ChileanChilean pesopeso (or(or thethe appreciationappreciation of the peso) which negatively affected expenses incurred in Chile. I should also add the continuous and disproportionate increasesincreases inin thethe tollstolls paidpaid inin the Panama Canal. In early 2006, the year seemed so bad that it waswas possiblepossible thatthat losseslosses couldcould exceedexceed US$ 350,000,000 for the reasons explained above. The Board instructed management to increase the cost reductions beingbeing implementedimplemented globally, which counted with the collaboration of the personnel. The management restructured the shipping business, which translated into the occupation of a larger proportion of available capacity and, in some cases, the suppressionsuppression ofof services that caused the greatest losses. I should insist that the fall in containership freight ratesrates isis duedue toto anan over-supplyover-supply ofof ships and freight capacity and not to declining demand which continued toto bebe firm,firm, butbut lessless than the supply. The firmness in demand is related to the good performance of the globalglobal economy,economy, notably once again the spectacular growth of China, the improvement in the European economy, the revival of Japan, which ended a long periodperiod ofof deflation,deflation, andand thethe growthgrowth ofof thethe AsianAsian economies, particularly Vietnam. 4 Annual Report 6 200 In order to reduce its losses, the Company produced a non-operating income of which the most important items are a profit of US$73,210,000 on the sale of four ships of the joint project with Peter Döhle Schiffahrskontor KG, belonging to associate companies of CSAV, and a profit of US$22,031,000 on the sale of the holding in the associate company Belden Shipholding Pte. Ltd. What do we expect for 2007? Containership freight rates have been firmer in some of the more important traffics. A newsletter from Maersk Broker of March 2007 says that “faith in the shipping business in general also showed a favorable change, with many shipowners showing improved valuations and thus higher share prices”. It added “A better future for line operations is therefore expected”. But the newsletter reminds the reader that the challenges to be expected in future years would not be caused by a weakness on the demand side but by a potential over-supply. The same publication states that the total fleet has continued to grow. The order list of ships being or to be built equate to 45.5% of the current fleet at March this year. With respect to demand, China continues to grow very strongly, although I believe it will be less than last year. Europe has a much lower, but apparently solid, growth rate, while Asia generally also shows satisfactory growth. The problem is the economy of the United States of America, which is showing some deceleration. This is caused by a slow-down in construction, serious problems in institutions related to the mortgage business and a fall in productivity rates. Alan Greenspan, who was president of the Federal Reserve for many years has stated that there is a risk of recession toward the end of this year, quantified as a 30% possibility. I agree with him about the existence of the risk but tend to think that the possibility could be a little higher. Considering this factor and the number of ships that will increase the containership fleet this year, I think that the rise in freight rates could be impacted, which obliges us to act very prudently. Finally, I wish to record the gratitude of the directors and myself to the Company’s personnel who have contributed so well in facing the adverse circumstances that the company has had to face. Ricardo Claro Valdés Chairman Annual Report 5 6 200 BBoard of Directors CHAIRMAN VICE PRESIDENT Ricardo Claro Valdés Felipe Lamarca Claro Lawyer Business Engineer Board Member since April 1986 Board Member since April 2003 TAX ID: 3.158.999-1 TAX ID: 4.779.125-1 DIRECTORS Luis Alvarez Marín Baltazar Sánchez Guzmán Agronomist Business Engineer Board Member since April 1979 Board Member since July 1990 TAX ID: 1.490.523-5 TAX ID: 6.060.760-5 Joaquín Barros Fontaine Christoph Schiess Schmitz General Manager Business Engineer & Bachelor of Commerce Board Member since April 2000 Board Member since April 1996 TAX ID: 5.389.326-0 TAX ID: 6.371.875-0 Juan Andrés Camus Camus Patricio Valdés Pérez Business Engineer General Manager Board Member since April 2004 Board Member since April 1988 TAX ID: 6.370.841-0 TAX ID: 7.443.809-1 Arturo Claro Fernández Agronomist Board Member since April 1987 TAX ID: 4.108.676-9 Jaime Claro Valdés PRESIDENT AD-HONOREM Civil Industrial Engineer José Luis Cerda Urrutia Board Member since April 1997 Civil Engineer TAX ID: 3.180.078-1 TAX ID: 1.661.990-6 Patricio García Domínguez SECRETARY TO THE BOARD General Accountant Alexander Tavra Checura Board Member since April 1988 Navy-Systems Engineer TAX ID: 3.309.849-9 TAX ID: 6.215.367-9 Changes in the Board There were no changes in the board during 2006. Directors’ Committee The Directors’ Committee, as referred to in clause 50 Bis of Law 18,046, comprised during the year Luis Alvarez Marín (chairman), Patricio García Domínguez and Juan Andrés Camus Camus. 6 Annual Report 6 200 Annual Report 7 6 200 MManagement General Manager Deputy General Manager Juan Antonio Alvarez Avendaño Domingo Cruzat Amunátegui Lawyer Civil Industrial Engineer Tax ID: 7.033.770-3 Tax ID: 6.989.304-K Senior Vice President Information Technology Senior Vice President West Coast South America Senior Vice President Shipmanagement Roberto Aguiló Ríos Lines Héctor Arancibia Sánchez Civil Engineer Luis Alvarez Ríos Mechanical Navy Engineer Tax ID: 6.065.462-K Civil Engineer Tax ID: 4.803.268-0 Tax ID: 7.175.692 – 0 Senior Vice President Libra and Libra Uru- Senior Vice President East Coast Lines Senior Vice President Chartering & Bulk guay Lines Gonzalo Baeza Solsona Santiago Bielenberg Vásquez Enrique Arteaga Correa Civil Industrial Engineer Business Engineer Civil Industrial Engineer Tax ID: 6.955.062-2 Tax ID: 5.051.578-8 Tax ID: 9.771.836-9 Senior Vice President Operations & Logistics Senior Vice President Human Resources Regional Manager West Coast South America Fernando Bustamante Feres Guillermo Cobo González Eugenio Cruz Novoa Electronic Engineer Degree in Administration Civil Engineer Tax ID: 6.622.925-4 Tax ID: 4.756.816-1 Tax ID: 7.018.819-8 Executive Director of CSAV Group Asia Senior Vice President 21st Century Project and Senior Vice President Cargo Services Mario Da-Bove Andrade Management Control Rafael Della Maggiora Silva Business Engineer Rodrigo de la Cuadra Infante Civil Industrial Engineer Tax ID: 4.175.284-K Foods Engineer Tax ID: 6.999.711-2 Tax ID: 8.396.078-7 Comptroller Senior Vice President Administration & Finance Senior Vice President Norasia Lines Gabriel Escobar Pablo Rafael Ferrada Moreira Guillermo Ginesta Bascuñán Business Engineer Business Engineer Civil Industrial Engineer Tax ID: 7.583.066-1 Tax ID: 10.302.911-2 Tax ID: 7.011.275-2 Senior Vice President North America Region Senior Vice President Asia Region Senior Vice President Europe Region Andrés Kulka Kuperman Alejandro Pattillo Moreira Arturo Ricke Guzmán Business Engineer Degree in Economics Business Engineer Tax ID: 7.711.411-4 Tax ID: 7.431.351-5 Tax ID: 6.994.493-0 Senior Vice President Car Carrier & Reefer Senior Vice President Marketing and Commercial Senior