Memoria aquachile 2017 ingles completa by aqua

annual report empresas aquachile

2017

annual report empresas aquachile

2017

I ANNUAL REPORT 1.

EMPRESAS AQUACHILE 06

1.1

Company Information

1.2 From

southern Chile to the world

08 11

1.3

Message from the Chairman

1.4

AquaChile at a glance 14

1.5

Milestones in 2017

annual report empresas aquachile s.a.

empresas aquachile chapter 01

COMPANY INFORMATION Chapter 1.1

CORPORATE NAME

- Empresas AquaChile S.A.

CHILEAN ID NUMBER

- 86.247.400-7

LEGAL ENTITY

- Publicly Traded Corporation

REGISTRATION IN THE SECURITIES REGISTRY

- N° 1,069 dated April 12, 2011

LEGAL ADDRESS

- Cardonal, Plot B, Puerto Montt, Los Lagos Region, Chile

ORGANIZATION

- The Company’s legal domicile is in Puerto Montt, but may establish other branches, agencies or offices in Chile and abroad. - Empresas AquaChile S.A. is managed from Puerto Montt.

BUSINESS PURPOSE

- The Company’s business purpose is to import, export, produce, breed, fatten, process, transform, modify and market hydrobiological species in Chile and abroad, particularly salmon.

ARTICLES OF INCORPORATION

The Company was established after the merger of the following two companies:

- A.- “Fischer Hermanos Limitada” constituted by public deed dated July 20, 1979, granted at the Coyhaique Notary of Mr. Patricio Olate Melo, who is domiciled in Coyhaique. Registered by the Coyhaique Property Registrar: on page 38 under number 34 of 1979. “Fischer Hermanos Limitada” moved its domicile to Puerto Montt by public deed dated October 18, 1991, granted at the Puerto Montt Notary of Mr. Heriberto Barrientos Bahamondes. Registered by the Puerto Montt Property Registrar: on the back of page 325 under number 208 of 1991.

ARTICLES OF INCORPORATION

“Fischer Hermanos Limitada” was converted into a limited company called “Salmones Pacífico Sur S.A.” by public deed dated May 29, 1996, granted by the Santiago Notary of Mr. Felix Jara Cadot. Registered by the Puerto Montt Property Registrar: on page 364 under number 228 of 1996. - B.- “AquaChile S.A.” constituted by public deed dated April 26, 1988, granted at the Santiago Notary of Mr. Ricardo San Martín Urrejola. Registered by the Santiago Property Registrar: on page 9196 under number 4888 of 1988. - C.- Merger: Between “Salmones Pacífico Sur S.A. and Inmobiliaria Los Robles S.A.” with the former absorbing the latter, by public deed dated June 30, 1999, granted by the Santiago Notary of Mr. Felix Jara Cadot. Registered by the Puerto Montt Property Registrar: on the back of page 396 under number 264 of 1999. “Salmones Pacífico Sur S.A.” changed its name to EMPRESAS AQUACHILE S.A., by public deed dated December 30, 2004, granted by the Santiago Notary of Mr. Humberto Santelices Narducci.

MAIN OFFICE ADDRESS MANAGEMENT AND ADMINISTRATION

- Cardonal s/n Lote B, Puerto Montt - Telephone: (+56-65) 2433600 - Fax: (+56-65) 2433606 - PO Box 30 D, Puerto Montt - E-mail: contacto@aquachile.com

WEBSITE

- www.aquachile.com

EXTERNAL AUDITORS

- PwC (PricewaterhouseCoopers Consultores Auditores y Compañía Limitada)

TICKER SYMBOL IN CHILE

- AQUACHILE

SHAREHOLDER INFORMATION

DCV Registros S.A. - E-mail: atencionaccionistas@dcv.cl - Address: Huerfanos 770, floor 22, Santiago, Chile. - Telephone: (+56-2) 2393 9003 - Fax: (+56-2) 2393 9101 - Website: www.dcv.cl

INVESTOR RELATIONS

- Contact Name: Matías Arellano Armijo - Telephone: (+56 65) 2433717 - E-mail: investor.relations@aquachile.com - Address: Cardonal, Plot B, Puerto Montt - Website: www.aquachile.com

Note: The Company's 2017 Annual Report has been published in digital format on its web site (www.aquachile.com) for shareholders, investors and the general public.

empresas aquachile

FROM SOUTHERN CHILE TO THE WORLD Chapter 1.2

From southern Chile our Company reaches the world's most demanding markets and supplies them with high-value foods that are produced from our own salmon and trout.

We farm tilapia in Central America, and supply fresh and healthy fish mainly to the North American market.

Our Company began in southern Chile and we now have over 320 customers in 35 countries.

Every day, through our products, approximately two million people across the world consume and experience the abundant bounty of the Chilean seas. Our mission is to produce healthy seafood, now and for future generations, while respecting and valuing the environment and our people.

We currently provide employment to over 4,800 people in Chile, Costa Rica and the USA. We focus on our people, and consequently our corporate values include risk prevention and â&#x20AC;&#x153;safety firstâ&#x20AC;?.

We value and appreciate our people and environment. We are very committed to local communities; accordingly, we give priority to recruiting people who live nearby, and we prefer the services that these communities offer.

We have over 25 years of experience in the food industry and we are involved in all productive stages, from genetics through to our food arriving on the tables of the most demanding consumers in various international markets.

We are committed to keeping our industry sustainable over the long-term. Therefore, we actively participate in discussions regarding regulations that affect the sector.

Innovation and incorporating new technologies are fundamental tools in AquaChile for achieving efficiencies and secure our competitiveness in international markets.

annual report empresas aquachile s.a.

empresas aquachile chapter 01

MESSAGE FROM THE CHAIRMAN Chapter 1.3

Chile has favorable aquaculture conditions, due to its pure waters and sea temperatures that are appropriate for farming. Chile has developed its salmon industry over the past 30 years, which has contributed to social progress and improved connectivity in southern areas. Our salmon has been positioned across the entire world as great tasting healthy food, and now is being consumed on five continents. It has become an Ambassador of Chile in the most demanding food markets across the planet. Global interest in consuming healthy marine proteins enables us to face the future with great optimism. The demand for our products is growing, while the supply is limited and there are many constraints to growth. Salmon has many well-known health benefits, so we are convinced that this sector has high potential. Chile has improved its production processes over the years. Our current sanitary regulations are far more robust than a decade ago and as a result, if for example should an outbreak of the ISA virus occur, we would immediately implement the corresponding action plans to prevent it from spreading. An effective sanitary control practice has been the rotation in the use of farming centers, which allows farming neighborhoods to work and rest at the same time. Another important action is the legal requirement to take independent samples at each productive unit prior to harvest, to ensure that the final product reaches our global consumers with absolutely no residual traces of medicines, as these may have been administered during production. These are examples of some of the improvements that have been recently implemented. Our characteristic strategies will continue as usual: to

continue a constructive dialog with the authorities, to ensure that the public and private sectors continue developing efficient regulations that ensure that the world views our industry as competitive, and particularly as environmentally, economically and socially sustainable. AquaChile benefited from various efficiencies that were introduced during 2017, thus achieving better performance and a stronger financial position. We reviewed various processes, such as feeding procedures, diet selection and genetic improvements, among others. Therefore, these initiatives have enabled us to reduce our production costs. Another milestone of the year was the total acquisition of Salmones Chaicas. This company operates a recirculation hatchery using the latest technology, and focuses on producing high quality breeders, eggs and smolts, in biosecure conditions, and has contributed to long-term business sustainability. Furthermore, AquaInnovo has completed 10 years’ service. This subsidiary is dedicated to genetics and its mission is to create technical solutions that secure and accelerate continual improvements in aquaculture efficiency. AquaInnovo began in 2007 as a biotechnology consortium. Early participants were AquaChile and Universidad de Chile, with support from the Chilean Economic Development Agency (CORFO) through Innova Chile. It has now become a scientific hub, which disseminates science and knowledge from southern Chile to the rest of the world. Our employees and our Company are continually concerned with employment stability. Therefore, AquaChile signed a Labor Relations Cooperation and Strengthening Agreement, within the framework of our commitment to our people, in order to take another step towards strengthening our harmonious and reliable labor relations. This agreement was the result of several conversations with AquaChile’s trade unions and an approach formulated by the National Workers Coordinator for the Salmon and Related Industries, an organization that was formed after the algal bloom, by trade unions from several companies in the sector, in order to protect jobs. We are proud of our southern origins and our involvement in a business that we firmly believe in. Looking to the future, we want to take advantage of our knowledge and our extensive concessions pool to restore productive capacity and ensure that our production model remains sustainable, thus strengthening supply continuity for our customers. We also forecast further consolidation within the industry in Chile, which will strengthen the position of our salmon industry across the world.

víctor hugo puchi acuña Chairman of the Board

annual report empresas aquachile s.a.

empresas aquachile chapter 01

AQUACHILE AT A GLANCE Chapter 1.4

KEY FIGURES

thus$

current assets non-current assets total assets current liabilities non-current liabilities total liabilities equity non-controlling interests total liabilities and equity

thus$

total revenue ebit pre fair value adj. ebitda pre fair value adj. Net income (loss)

thus$

financial costs financial income

thus$

financial debt cash net financial debt / ebitda financial leverage financial expense coverage

14 Source: AquaChile

2017 2016

398,929 364,117 395,961 395,435 794,890 759,552 179,105 174,766 224,260 256,206 403,365 430,972 385,132 323,687 6,393 4,893 794,890 759,552 2017 2016

632,738 107,669 141,942 58,912

618,628 23,487 56,235 6,896

2017 2016

-18,215 1,025

-18,957 664

2017 2016

218,731 274,648 40,772 36,993 1.25 4.23 0.93 1.20 8.26 3.07

OWNERSHIP STRUCTURE

fig. 01

33.03%

PUCHI FAMILY

FISCHER FAMILY

33.95%

OTHERS

Source: AquaChile

PRICE AND VOLUME OF AQUACHILE SHARES TRADED IN 2017

VOLUME (CLP) Share Price (CLP)

fig. 02

SHARE PRICE (CLP) Volume (CLP)

450

8,000,000

400

7,000,000

350

6,000,000

300

5,000,000

250 4,000,000 200 3,000,000

150

2,000,000

100

1,000,000

0 JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Source: Bolsa de Comercio de Santiago

CONSOLIDATED SALES BY SEGMENT FOR 2017

fig. 03

48% ATLANTIC SALMON 11% OTHERS

5% FEED 7% TILAPIA

18% PACIFIC SALMON

11% TROUT

Source: AquaChile 15

annual report empresas aquachile s.a.

CONSOLIDATED SALES (US$ MILLION)

fig. 04

2017

633

2016

619

2015

623

2014

779

2013

738

2012

410

2011

501

2010

388

2009

440

chapter 01

Source: AquaChile

CONSOLIDATED EBITDA (US$ MILLION)

fig. 05

2017

142

2016

2015

-57

2014

2013

-16

2012

-4

2011

2010

2009

-40

Source: AquaChile

CONSOLIDATED NET INCOME (US$ MILLION) 2017

2016

2015

-99

2014

2013

-9

2012

-43

2011

2010

2009

-142

Source: AquaChile

fig. 06

CONSOLIDATED CAPEX

fig. 07

2017

2016

2015

2014

2013

2012

2011

2010

2009

Source: AquaChile

CONSOLIDATED NUMBER OF EMPLOYEES AS OF DECEMBER 31

fig. 08

2017

4,849

2016

4,861

2015

5,290

2014

5,678

2013

5,996

2012

5,592

2011

4,813

2010

4,525

2009

4,659

Source: AquaChile

During 2017, and aiming to align its efforts towards more efficient operations and management, Empresas AquaChile kept working on its Efficiency and Competitiveness Plan, that was launched in year 2016.

empresas aquachile

MILESTONES IN 2017 Chapter 1.5

Greater efficiencies: During 2017 AquaChile continued to implement its Efficiency and Competitiveness Plan, which aims to develop initiatives that improve production efficiency and sustainability, by improving or optimizing productive processes. The results of this plan are already being reflected in our business performance.

AquaChile acquired control of Salmones Chaicas: The Company announced that it had acquired control of Salmones Chaicas in February 2017, from which it was already a shareholder. Salmones Chaicas owns a technologically advanced recirculation hatchery to produce Atlantic salmon eggs and smolts. Its facilities have been designed to maximize biosecurity and reduce its environmental impact, in order to secure long-term sustainability.

annual report empresas aquachile s.a.

chapter 01

AquaInnovo completed 10 yearsâ&#x20AC;&#x2122; service: This genetics subsidiary completed 10 yearsâ&#x20AC;&#x2122; service in 2017. AquaInnovo began in 2007 as a biotechnology consortium. Early participants were AquaChile, the Universidad de Chile, with support from the Chilean Economic Development Agency (CORFO) through Innova Chile. Today the only shareholder is AquaChile. Its mission is to create technical solutions that secure and accelerate continual improvements in productive aquaculture efficiency. It serves Aquachile and a broad portfolio of customers that participate in various segments of the aquaculture industry. AquaInnovo has two business units: Genetic and genomic services used in genetic fish improvement programs; and product research, testing, development trials, validation and registration in ATC Patagonia. AquaChile joined the Salmon Council at the NFI: AquaChile became a member of the Salmon Council at the National Fisheries Institute (NFI) in 2017. The Salmon Council was established in January 2013 to promote salmon in the US market.

OUR COMPANY

Annual Report AquaChile 2017

2.1 Profile

of Aquachile

2.2 Mission, 2.3 Our

vision and values

history

25 26 28

The company participates in every step of the productive cycle, from genetics to the marketing of its own products, that reach over 320 clients in more than 35 country, while offering jobs to more than 4,800 employees in the countries where it operates.

our company

PROFILE OF AQUACHILE Chapter 2.1

Empresas AquaChile S.A. is a Chilean food company dedicated to produce and market salmon, trout and tilapia. Our mission is to produce healthy seafood, now and for future generations, while respecting and valuing the environment and our people. We are a group of companies with strategic synergies that farm and market Atlantic salmon, Pacific salmon, trout and tilapia for human consumption. We maintain vertical control over the entire process and add value throughout the production chain, from genetics through to product marketing. We are one of the largest salmon farming companies in Chile, one of the world's largest producers of trout and Pacific salmon, and a leading supplier of fresh tilapia to the USA. AquaChile operates from Chile and Costa Rica, and has commercial offices in the USA. It employs over 4,800 people and supply its food to over 320 customers in 35 countries. AquaChile uses its vertical integration to develop genetic research for the aquaculture industry, to produce salmon and trout eggs and smolts, and fish feed for the salmon and tilapia industries.

annual report empresas aquachile s.a.

our company chapter 02

MISSION, VISION AND VALUES Chapter 2.2

MISSION

- Produce healthy seafood, now and for future generations, while respecting and valuing the environment and our people.

VISION

- To be internationally recognized for the superior quality of our products, the sustainability of our processes and for respecting our employees.

CORPORATE VALUES

CORPORATE SOCIAL RESPONSIBILIT Y PRINCIPLES

- Behave with respect towards people and the environment.. - Be passionate about our work. - Show initiative and be creative. - Be open to change and to new challenges. - Preserve a safe working environment. - Behave frugally.

- Produce superior quality, healthy and safe food. - Be proactive and respectful to the environment. - Develop a safe and healthy working environment. - Deliver benefits to local communities and suppliers.

OBJECTIVES

- Add value at each stage of the process, while being concerned for the health and safety of our employees and the environment, and provide each internal or external customer with the best product and the best service at an affordable price. - Guarantee safety, quality and competitiveness at each stage in the salmon, trout and tilapia production and marketing processes. - Achieve international recognition for the superior quality and consistency of our products and services, which will result in greater customer loyalty and improved business sustainability. - Seek continual improvement, focusing on product quality, process efficiency, and technological innovation, while minimizing risks to employees and our impact on the environmental. - Encourage everyone involved in the value chain to achieve professional and personal development, help them to improve their skills and strengthen their commitment to the local community and the environment.

Our History 1998-2017

Empresas AquaChile S.A. was established in 1998 from the merger of Salmones Pacífico Sur S.A. (formed in 1979 in Coyhaique), and AquaChile S.A. (formed in 1988 in Santiago). Initially, each company was dedicated to different stages within the salmon farming process. Salmones Pacífico Sur S.A. was focused on the marine farming stage, while AquaChile S.A. was focused on the fresh water stage, producing eggs, fry and smolts . The two companies were entirely complementary, with strong strategic positions within their businesses. They had well developed organizations, an extensive knowledge of the business, and shareholders that were aware of a unique opportunity to jointly achieve more profitable and solid growth. The main achievements since the merger of these two companies have been:

1999-2004 Acquisition Aucar (freshwater farming facility).

The first sea facility in the Aysen Region began to operate.

Acquisition of Cherquenco (freshwater farming facility).

AquaChile Inc. is established in the USA to market the company’s salmon and trout.

2005- 2006 2008- 2009 Acquisition of the remaining 19.09% of Antarfish S.A.

The Company sold its interest in Sudmaris S.A.

Acquisition of 60% of Salmones Chiloe S.A. (Salmosan), 100% of Pesquera Palacios S.A. and 100% of Salmones Australes S.A., 60% of the salmon business owned by Robinson Crusoe S.A. (Salmones Maullín S.A.) and 60% of Grupo ACI S.A., a company based in Costa Rica that produces fresh tilapia.

Grupo ACI merged with El Pelón group, which is an important Costa Rican agribusiness dedicated to producing tilapia and various other businesses. After the merger, Empresas AquaChile kept its 72.86% interest in the resultant company.

Sudmaris Chile S.A. was formed, in order to produce, process and export mussels. Salmones Chiloé, a subsidiary of Empresas AquaChile, has a 50% interest in this company.

Alitec Pargua S.A. is established as a joint venture with a world leader in animal nutrition, to produce fish feed.

2007 Acquisition of the remaining 40% of Salmones Maullín S.A.

Acquisition of further shares in Grupo ACI S.A., achieving a 72.86% interest.

Acquisition of the assets of Pesquera BestSalmon S.A.

Acquisition, in two stages, of 80.85% of Antarfish S.A., the parent company of Aguas Claras S.A., making AquaChile the largest Chilean salmon and trout producer. The Company's name changed to Empresas AquaChile S.A.

AquaInnovo S.A. is formed under an alliance with Universidad de Chile, AquaticHealth Chile and a contribution from the Business Innovation Sub Committee at Innova Chile - CORFO. AquaInnovo is dedicated to genetically improving salmon and other aquaculture species, using the latest technology.

Smolt: the physiological state of a fish when it is capable to move from fresh water to a marine environment.

Administrative integration with its subsidiary Antarfish S.A. Accordingly, management for the entire group was centralized at its headquarters.

2010 Administrative integration with Salmones Chiloe S.A., with management centralized in Puerto Montt. Acquired further shares in Grupo ACI S.A., to increase its interest from 72.86% to 79.95%.

2011 A capital increase approved in December 2010 was cancelled and a new capital increase approved, in order to launch an Initial Public Offering (IPO) of shares.

33.45% of Empresas AquaChile’s shares were placed on the Stock Exchange. Alliance with Biomar to build a tilapia feed plant in Costa Rica.

Alliance with Spécialités Pet Food S.A.S. and Inversiones Industriales Bauprés Ltd. (Diana Group) to builda value-added plant in Guanacaste province, Costa Rica, to take advantage of tilapia waste as a byproduct.

The company opens its first retail store in Puerto Montt, following with its strategy of bringing export quality salmon to the Chilean market.

Alliance between AquaChile and Friosur to jointly market both companies’ products in US and Canadian markets.

AquaChile rejoined SalmonChile, the trade association that gathers most of Chile’s salmon producers.

AquaSea, a pet food flavoring plant in Costa Rica, began its operations.

2012 Grupo ACI and Biomar open a feed plant in Costa Rica for fish and other aquaculture species.

The Lenca Experimental Center of AquaInnovo (now called ATC Patagonia) began to operate

The recirculation hatchery owned by Salmones Chaicas began its operations.

Acquisition of the remaining 7% interest in Salmones Chiloe S.A., which was held by minority interests, and the remaining 40% interest in Procesadora Hueñocoihue Ltda.

2013 Acquisition of the remaining 35.48% interest in Piscicultura Aquasan S.A., which was held by minority interests.

AquaChile joined the Global Salmon Initiative (GSI), which was launched in August 2013.

2014 AquaChile opened retail stores in Santiago and Pucón, in order to continue with its efforts of bringing export quality salmon closer to the Chilean market. These add to the shops in Puerto Montt and Aysen.

The Huenquillahue sea farm achieved certified compliance with ACS (Aquaculture Stewardship Council) standards, becoming the first sea farm in Los Lagos and Aysen Regions, and the first Pacific salmon sea farm to do so in the world.

Merger of Salmones Chiloe S.A. into Aguas Claras S.A. with the latter becoming the legal successor of all the former’s rights and obligations.

2015- 2016 AquaChile participated together with World Wildlife Fund (WWF) in an initiative to protect the blue whale and other large cetaceans in Northern Patagonia. The Company signed a Clean Production Agreement, which encourages monitoring and sighting measures, and adopted production practices that conserve the habitat of blue whales.

The Guafo plant, in Chonchi, began its operations. This facility was leased by AquaChile to absorb production that had previously been undertaken by the Hueñocoihue plant, which was damaged by fire in November 2014.

AquaChile reached an agreement with its eight creditor banks, and signed a long-term refinancing contract, in order to efficiently and effectively manage its business plan.

AquaChile opened a new retail store in Puerto Varas. This adds to the Company’s shops in Puerto Montt, Aysen, Pucon and Santiago.

2017 Acquisition of the remaining interests in Salmones Chaicas.

AquaInnovo, the genetic subsidiary of AquaChile, completed 10 years of service in 2017.

THE COMPANYâ&#x20AC;&#x2122;S BUSINESS

Annual Report AquaChile 2017

3.1 Industrial

sector

3.2 Activities

and Businesses

3.3 Properties

and facilities

3.4 Insurance

3.5 Risk

factors

3.6 Investment 3.7 Financing

plans

Activities

annual report empresas aquachile s.a.

the companyâ&#x20AC;&#x2122;s business chapter 03

INDUSTRIAL SECTOR Chapter 3.1

THE SALMON INDUSTRY Worldwide food consumption continues to increase. This is due to continual population growth, and particularly due to an increase in the consumption patterns in emerging economies. As income levels rise, people are improving the quality of their diet and preferring fig. 09 / fig. 10 / fig. 11 healthier proteins. Prospects are positive over the long-term, with potential for further growth. The main demand drivers are: - - - - -

World population growth. Growth of the middle classes in emerging markets. Improvements in retail infrastructure in emerging countries. Changes in consumption towards healthier foods. General contraction in the supply of marine products. fig. 12 / fig.13

Overexploitation has limited the global availability of wild fish. Therefore, aquaculture has tremendous growth potential to meet the demand for marine products. fig. 14

WORLD POPULATION (BILLION PEOPLE) fig. 09

16.0 14.0 12.0

DEVELOPING REGIONS

10.0 8.0 6.0 4.0 2.0 DEVELOPED REGIONS

0 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 Source: UN World Population Prospects

ANNUAL GROWTH IN GROSS DOMESTIC PRODUCT BY ECONOMY (%)

2015 2016 2017

2018

2019

fig. 10

2020

7 6 5 4 3 2 1 0 -1 -2 ASIA PACIFIC

EUROPE AND CENTRAL ASIA

LATIN AMERICA

SOUTHERN ASIA

WORLD

Source: World Bank

annual report empresas aquachile s.a.

FORECAST FOR FISH CONSUMPTION PER CAPITA (KG PER PERSON PER YEAR)

World

fig. 11

Europe and central asia latin America

China 41

38 chapter 03

33 27 24

2000

2006

18 18

18 17

17 17

2010

2020 E

2030 E

Source: "Fish to 2030: Prospects for Fisheries and Aquaculture”, World Bank-FAO

MIDDLE CLASS POPULATION’S GROWTH (MILLIONS OF PEOPLE)

fig. 12

2000 2010 2020 1800 1600 1400 1200 1000 800 600 400 200 0

BRAZIL Source: Carnegie

RUSSIA

INDIA

CHINA

BRIC´S BRIC

DEMAND FOR ATLANTIC SALMON BY MARKET

100%

fig. 13

EMERGING MARKETS

90% 80% 70% 60% 50% 40% 30% 20% DEVELOPED MARKETS

10% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: ABG Sundal Collier

GLOBAL PRODUCTION OF FARMED AND WILD SALMON AND TROUT (THOUSANDS OF TONS WFE)

fig. 14

4,000 3,500 3,000

FARMED

2,500 2,000 1,500 1,000 500

WILD

19 8 19 2 8 19 3 8 19 4 8 19 5 86 19 8 19 7 88 19 8 19 9 90 19 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 96 19 9 19 7 98 19 9 20 9 0 20 0 20 01 2002 0 20 3 2004 20 05 0 20 6 0 20 7 2008 0 20 9 1 20 0 1 20 1 1 20 2 1 20 3 14 20 1 20 5 16 20 17

Sources: FAO FishStatJ, Revista Aqua, www.ssb.no

annual report empresas aquachile s.a.

chapter 03

CONVERSION FACTORS

fig. 15

TUNA

BEEF

PORK

POULTRY

TILAPIA

1.8

SALMON

1.3

Source: Kontali Analyse AS

Salmon and tilapia are efficient feed converters in comparison to other animal proteins (the Feed Conversion Rate -FCR- is an efficiency indicator that measures how many kilos of feed are required to produce a kilo of live animal). They are more efficient because they are cold blooded animals, and so, they need less energy to maintain their body temperature. Furthermore, AquaChile has been working on various feeding systems and feed ingredients, to further improve these factors. fig. 15 About 68% of salmon meat is usable for human consumption, which is far higher than the proportion for other animal proteins. fig. 16 / fig. 17 / fig. 18 / fig. 19

Chile has favorable conditions for developing aquaculture, especially due to the purity of its waters and its stable sea temperatures. At National level, Salmon farming is a leading industry and represented 6.8% of the value-added exports of the Country in 2017, ranking in second place after copper, and positively increasing from the 6.4% that it represented in 2016. fig. 20

PROPORTIONS OF USABLE PROTEIN

FISH (%)

fig. 16

PORK (%)

52%

68%

EDIBLE

POULTRY (%)

fig. 17

46% EDIBLE

fig. 18

LAMB (%)

fig. 19

41% EDIBLE

Source: Ytrestoyl et. al. (2014), National Beef Association UK (2014), Volden, H and N. I. Nielsen (2011), Energy and 14 metabolizable protein supply, www.journalofanimalscience.org, Skretting (2012) Delivering SUSTAINABLE FEED SOLUTIONS for aquaculture, SINTEF Report (2009) Carbon footprint and energy use of Norwegian seafood products. 37

CHILEAN EXPORTS BY VALUE IN 2017

fig. 20

49.8% COPPER 1.8% GRAPES 3.0% WINE 6.8% SALMON AND TROUT 4.5% CELLULOSE

34.1% OTHERS

Source: Chilean Central Bank

COMPETENCIA The main producers of Atlantic salmon in 2017 continued to be Chile and Norway. Together they represented approximately 77.3% of global production. fig. 21 Historically, the salmon industry has been an atomized sector, formed by many small salmon producers. This has been true in Norway and to a lesser extent in Scotland and Chile. By 1997 there were 117 companies in these three countries, producing roughly 80% of all farmed salmon. 70 of these companies were in Norway. It is expected that the industry will continue to consolidate, as small producers find it difficult to achieve an efficient cost structure. The formation of bigger companies should benefit the industry, as size and integration are more conducive to improve the research and development of new products. Moreover, large companies will be in a better position to compete on equal terms with the main companies in the food and distribution industries. fig. 22

annual report empresas aquachile s.a.

ATLANTIC SALMON PRODUCTION BY COUNTRY (THOUSANDS OF TONS WFE) growth

norway

chile

united kingdom

canada

faroe island

fig. 21

others

3,000 chapter 03

25% 20%

2,500

15%

2,000

10% 1,500 5% 1,000

500

-5%

0 e 17

13 20

-10%

Source: ABG Sundal Collier

INDUSTRY CONSOLIDATION: NUMBER OF ATLANTIC SALMON FARMING COMPANIES BY REGION (LATEST DATA: 2014) canada scotland

fig. 22

chile norway

60 50 40 30 20 10 0 2000

2003

2006

2009

2012

2013

2014

Source: Kontali Analyse

RELATIVE PARTICIPATION Norwegian companies dominated global salmon production during 2017. The top three, ranked by production, were Marine Harvest, Leroy Seafood Group and Cermaq (Mitsubishi). AquaChile is currently the sixth largest global producer, and one of the largest Chilean Salmon exporters, with 9.9% of total exports (measured in net tons).

CHILEAN SALMON AND TROUT EXPORTERS IN 2017 company

thus$

net tons

thus$ (%)

net tons (%)

CERMAQ CHILE

498.429

58.016

10,8%

11,1%

EMPRESAS AQUACHILE S.A.

456.057

51.602

9,9%

9,9% 8,8%

MULTIEXPORT

424.134

46.280

9,2%

AUSTRALIS MAR S.A.

374.826

42.257

8,1%

LOS FIORDOS LTDA.

314.324

38.149

6,8%

7,3%

MARINE HARVEST CHILE S.A.

260.529

31.214

5,6%

6,0%

SALMONES AUSTRAL

219.788

25.164

4,8%

INVERMAR

190.912

19.079

4,1%

3,6%

BLUMAR

174.552

17.191

3,8%

3,3%

VENTISQUEROS

167.051

20.281

3,6%

3,9%

OTHERS

1.534.936

173.811

33,3%

33,2%

TOTAL

4.615.538

523.044

100,0%

Source: Salmon Index and Chilean customs.

MAIN EXPORT MARKETS The Chilean salmon industry exported 523,044 net tons during 2017, of which 71% was Atlantic salmon, 8% was trout, and 21% was Pacific salmon. fig. 24 / fig. 25 / fig. 26

CHILEAN SALMON AND TROUT EXPORT MIX IN 2017 (IN TONS) fig. 24

TROUT

21%

PACIFIC SALMON ATLANTIC SALMON

71%

Source: Infotrade and Chilean Customs

CHILEAN EXPORT MIX BY SPECIES IN 2017 AND 2016 (NET TONS) Species

Atlantic salmon

2017

2016

% change

369,000.3

378,163.3

-2%

Pacific salmon

110,947.6

85,971.6

29%

Trout

43,095.9

48,470.0

-11%

Total

523,043.8

512,604.9

Source: Infotrade and Chilean Customs

annual report empresas aquachile s.a.

PRINCIPAL EXPORT MARKETS FOR CHILEAN SALMON AND TROUT IN 2017-2016

chapter 03

fig. 25

us$ million fob

2017

2016

% change

Usa

1,610

1,341

20%

Japan

977

754

30%

Latin America

836

724

15%

European Union

249

233

Others

944

769

23%

TOTAL

4,616

3,821

21%

net tons

2017

2016

% change

Usa

140,131

135,938

120,628

111,812

Latin America

107,143

106,336

European Union

26,652

33,954

-22%

Japan

Others

128,490

124,565

TOTAL

523,044

512,605

Source: Infotrade and Chilean Customs

CHILEAN SALMON AND TROUT EXPORTS BY MARKET IN 2017 fig. 26

523,044 Net Tons 20% LATIN AMERICA

US$ 4,616 million 27% USA

18% LATIN AMERICA

35% USA

21% JAPAN 5% EUROPEAN UNION

23% JAPAN

25% OTHERS

Source: Infotrade and Chilean Customs

21% OTHERS

5% EUROPEAN UNION

annual report empresas aquachile s.a.

chapter 03

PRICE SITUATION During the first quarter of 2017, Atlantic salmon prices continued showing the upward trend that began in 2016, reaching a maximum of US$ 6.13/lb in March 2017. However, with the pass of the months, and due to the recovery of the supply levels, the prices began go down until they stabilize around an average of US$ 4.73/ lb. By the end of the year the observed price was at US$ 4.80/lb, which is equivalent to a variation of ∆-10.4% with respect to the close of 2016. fig. 27 The international Pacific salmon price rose by ∆+ 5.2% during 2017, from JPY 779/kg to JPY 810/kg (yen per kilo), with a maximum of JPY 920/kg in April. Meanwhile, the international trout price rose by ∆+ 8.0%, from JPY 880/kg in December 2016 to JPY 950/kg in December 2017, with a maximum of JPY 1,120/kg in April. fig. 28

Industry analysts expect that global salmon and trout supply will grow by about 6% in volume during 2018, pushed by an increase in supply from Norway. However, consensus is that demand should continue to strengthen, largely due to growing demand for salmon in emerging markets, to levels that can absorb the growth in supply. THE SALMON FEED INDUSTRY Feed is a significant component of salmon production costs. The Feed Conversion Rate (FCR) indicates how many kilograms of feed a fish must eat in order to gain a kilogram in weight. Efficient biomass management should result in FCR’s of less than 1.3. The fish feed industry in Chile is highly concentrated, and four producers control approximately 90% of total production volumes. The cost of this consumable depends on the cost of its main ingredients, which are fish meal and fish oil. Chile and Peru are the largest global producers of these ingredients, and in consequence there is a relevant local supply. fig. 29 / fig. 30 The salmon industry seeks to optimize the use of natural resources and after years of research, the proportion of fishmeal used in Salmon feed has been reducing considerably. The average percentage of fish meal in the diet has fallen over the last 12 years from about 30% to less than 12%, without losing the characteristics required to produce a superior quality product. fig. 31

jan-06 may-06 sept-06 jan-07 may-07 sept-07 jan-08 may-08 sept-08 jan-09 may-09 sept-09 jan-10 may-10 sept-10 jan-11 may-11 sept-11 jan-12 may-12 sept-12 jan-13 may-13 sept-13 jan-14 may-14 sept-14 jan-15 may-15 sept-15 jan-16 may-16 sept-16 jan-17 may-17 sept-17

dec-06 apr-07 aug-07 dec-07 apr-08 aug-08 dec-08 apr-09 aug-09 dec-09 apr-10 aug-10 dec-10 apr-11 aug-11 dec-11 apr-12 aug-12 dec-12 apr-13 aug-13 dec-13 apr-14 aug-14 dec-14 apr-15 aug-15 dec-15 apr-16 aug-16 dec-16 apr-17 aug-17 dec-17

CHILEAN ATLANTIC SALMON PRICES (USD/LB)

PACIFIC SALMON AND TROUT PRICES (JPY/KG)

TROUT fig. 27

ATLANTIC SALMON (TRIM-D 2-3 FOB MIAMI)

7,00

6,00

5,00

4,00

3,00

2,00

1,00

0,00

Source: Urner Barry

fig. 28

1,200 PACIFIC SALMON

1,000

800

600

400

200

Source: Urner Barry

annual report empresas aquachile s.a.

GLOBAL FISH MEAL PRODUCTION (THOUSANDS OF TONS) fig. 29

perú chile thailand

usa

j a p a n others

7,000 6,000 chapter 03

5,000 4,000 3,000 2,000 1,000 0 2001

2002

2003

2004

2005

2006

2007

2008 2009

2010

2011

2012

2013

2014

2015

2016

Source: The Biomar

GLOBAL FISH OIL PRODUCTION (THOUSANDS OF TONS)

perú chile usa

fig. 30

japan others

1,400 1,200 1,000 800 600 400 200 0 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Source: The Biomar

FISH MEAL AND FISH OIL USED IN SALMON DIETS fishmeal

alternative protein and starch

fig. 31

fish oil

vegetable oil

100 90 80 70 60 50 40 30 20 10 0 2005 46

Source: The Biomar

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

annual report empresas aquachile s.a.

chapter 03

THE TILAPIA INDUSTRY Tilapia is a fish native to tropical Africa. It was first farmed in Kenya in the 1920’s, from where it expanded to Asia and America after World War II. There are currently about 70 kinds of tilapia around the world and around 100 hybrids, which have been grouped into four classes according to their reproductive habits: “Tilapia Smith”, “Sarotherodom”, “Danakilia” and “Oreochromis Niloticus (or Nile Tilapia)”. The latter is the most widely farmed class internationally. This species is farmed in most of the world’s tropical region, where the best conditions can be found for its reproduction and growth. Optimal tilapia development is achieved when water temperatures are above 24°C. Tilapia’s main features that make it attractive for production and marketing are: - - - - - - - - -

Tremendous physical stamina. Accelerated growth. High productivity. Adapts to captivity. Accepts a wide range of feed. Lives in fresh and brackish waters. Tolerates low oxygen concentrations. Can be genetically improved. Excellent quality meat.

GLOBAL PRODUCTION 68% of world production is concentrated in Asia, with China as a leading producer. fig. 32 / fig. 33

The annual production of Nile Tilapia was approximately 4.2 million tons in 2015, which equates to 3.2% of global fishing and fish farming production. Nile Tilapia production achieved a compound annual growth rate of fig. 34 8.6% between 2000 and 2015. Tilapia supply should continue to expand over the coming years, mainly reflecting the importing strength of Latin America, which is strongly influenced by the North American market.

GLOBAL WILD AND FARMED TILAPIA PRODUCTION BY CONTINENT

fig. 32

40% ASIA EX. CHINA 28% CHINA

23% AFRICA

8% AMERICA

Source: FishStat FAO (2015)

GLOBAL WILD AND FARMED TILAPIA PRODUCTION (MILLION TONS)

fig. 33

6,0 5,0 4,0 3,0 2,0 1,0 0,0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: FishStat FAO (2015)

GLOBAL NILE TILAPIA PRODUCTION (THOUSAND TONS)

fig. 34

4,000 3,500

3,490

CAGR: 8.6% 2,813

3,000 2,500 2,000 1,500

1,213

1,280 1,359

1,514

1,716

1,896 11,866

2,065

2,299

3,649

3,902

4,162

3,100

2,484

1,000 500 0 2000 2001

2002 2003 2004 2005 2006 2007 2008 2009 2010

2011

2012

2013

2014

2015

Source: FishStat FAO (2015)

USA > MAIN IMPORT MARKET

USA is the worldâ&#x20AC;&#x2122;s main tilapia importer; with a compound annual growth rate of 8.4% in the per capita consumption of Tilapia between 2001 and 2016, this species is now ranked in fourth place by consumer preference, after prawns, salmon and tuna. MARINE FOOD CONSUMPTION IN THE USA (NET KG) fig. 35

kg. per capita

1.- prawns 2.- salmon 3.- canned tuna 4.- tilapia 5.- pollok 6.- pangasius

1.86 0.99 0.95 0.54 0.44 0.40

Source: National Fisheries Institute (2016)

Fresh tilapia consumed in the USA is mainly sourced from Costa Rica, Colombia and Honduras. However, a large proportion of frozen products are sourced from China and other Asian countries such as Taiwan and Indonesia. New markets are being developed and demand is expanding, as some restaurant chains in the USA are introducing tilapia to their menus and Europeans are also discovering this fish, with the consequent potential for an expansion of the consumer market. COMPETITION The AquaChile subsidiary, Grupo ACI, is one of the largest producers of tilapia in Central America, the largest producer in Costa Rica and one of the main suppliers of fresh tilapia to the USA with a market share of 21%. Grupo ACI harvested 17,351 tons WFE of tilapia in Costa Rica during 2017.

TILAPIA CONSUMPTION PER CAPITA IN THE USA (KG)

fig. 36

CAGR: 8.4% 0.65

0.32 0.16

2001

0.18

2002

0.45

0.39

0.51

0.54

0.55

0.67 0.58

0.65

0.63 0.54

0.24

2004

2003

2005 2006 2007 2008 2009

2010

2011

2012

2013

2014

2015

2016

Source: National Fisheries Institute (2016)

SOURCES OF FRESH TILAPIA IMPORTS FROM THE USA IN 2017 (TONS)

fig. 37

6,867 5,119

4,114 1,670

HONDURAS

COLOMBIA

COSTA RICA*

MEXICO

1,013

ECUADOR

546

BRAZIL

305

OTHERS

Source: Urner Barry, Monthly Acquaculture Insider January 2018 *Grupo ACI is the only tilapia exporter in Costa Rica 51

annual report empresas aquachile s.a.

chapter 03

LEGAL AND REGULATORY FRAMEWORK The Chilean salmon industry is essentially governed by Law 18,892, â&#x20AC;&#x153;General Fisheries and Aquaculture Lawâ&#x20AC;? dated 1989, and its amendments and regulations. In particular by Supreme Decree (DS in Spanish) 319 (Health Regulations) and DS 320 (Environmental Regulations), both issued by the Ministry of Economic Affairs, Development and Tourism. The consolidated Law was legalized in DS 430 issued by the Ministry of Economy, and was published in the Official Journal on January 21, 1992. Legal provisions governing productive activities are also applicable to this sector, in particular those that govern environmental protection. The main amendments to the General Fisheries and Aquaculture Law can be found in Law 20,091 dated 2006, Law 20,434 dated 2010, Law 20,597 dated 2012 and Law 20,657 dated 2013. These regulations expand availability rights for aquaculture concessions, enabling their relocation, merger and division; establish terms for new concessions; rectify concessions that may have expired; establish new grounds for termination; amendments to farming regimes, including the organization of concession groupings, macro-areas, obligatory fallow periods, and maximum cage densities; increased inspection authority for the National Fisheries and Aquaculture Service, together with the corresponding increase in penalties; increased cost of aquaculture licenses; suspend new requests for aquaculture concessions; establish a new regime for preparing environmental, health and certification reports; establish a new legal regime for hatcheries; create the National Aquaculture Commission; amend the principal public organizations in the sector, the Undersecretary for Fisheries (now Undersecretary for Fisheries and Aquaculture) and the National Fisheries Service (now the National Fisheries and Aquaculture Service) thereby creating more legal-institutional authority for national aquaculture; transfer the Aquaculture Concessions Register from the Undersecretary for the Armed Forces to the Undersecretary for Fisheries and Aquaculture. New legislation enacted since 2007 draws on experience acquired during the health crises at that time. It also incorporates stricter measures during the product processing stage, and strengthens the bio-containment and bio-exclusion measures that apply from the harvesting stage through to the packaging stage. The regulations that govern aquaculture are enacted in Supreme

Decrees (DS in Spanish) issued by the Undersecretary for Fisheries and Aquaculture at the Ministry of Economic Affairs, Development and Tourism. These are: Regulations governing limits to Concession Areas or Aquaculture Authorizations (DS 550/1992); National Aquaculture Registry Regulations (DS 499/1994); Aquaculture Concessions Regulations (DS 290/1993); Regulations governing Protection and Control Measures and Eradication of High Risk Diseases that threaten Hydro-biological Species (DS 319/2001-RESA); Environmental Regulations for Aquaculture (DS 320/2001-RAMA); Regulations on Hydro-biological Pests (DS 345/2005); Regulations governing Collection Centers and Slaughtering Centers (DS 49/2006); Regulations governing operating limits by species and area (DS 383/2007); Regulations governing reporting information on Fishing, Aquaculture and Traceability (DS 129/2013); Public Aquaculture Concessions Register Regulations (DS 113/2013). Similarly, aquaculture is directly related to the Regulations governing Maritime Concessions (DS 2/2005 issued by the Undersecretary of the Navy at the National Defense Ministry). Specific procedures and methods for applying sanitary measures are established in general and specific programs described by Resolutions (RE in Spanish) issued by the National Fisheries and Aquaculture Service. Currently these programs are as follows: a.- General Health Programs, referred to in the RESA and used to apply the appropriate operating sanitary measures, in order to secure an adequate state of health for hydro-biological species, and prevent the spread of diseases and pathogens. Therefore, they are particularly important instruments for: i.- Vaccinations (RE 60/2003); ii.- Official Disease Investigations (RE 62/2003); iii.- Data Recording and Laboratory Information (RE 63/2003); iv.Salmonid Egg Disinfection (RE 65/2003); v.- Disease Management (RE 67/2003); vi.- Waste Management (RE 68/2003); vii.- Health Management of Fish Reproduction (RE 70/2003); viii.- Feed Handling (RE 71/2003); ix.- Transport Procedures (RE 2010/2011); x.- Cleaning and Disinfection Procedures for Fish Production (RE 2011/2011); xi.- Mortality Management (RE 1468/2012, as amended by RE 126/2016); xii.- Dealing with Suspected List 1 High Risk Diseases and Unknown Etiology (RE 2101/2014); xiii.- Harvesting Procedures (RE 2009/2014); xiv.- Techniques and Methods to Disinfect Effluents, and the Control and Treatment

annual report empresas aquachile s.a.

of Solid Organic Waste (RE 4866/2014); xv.- Compartments Free of High Risk Diseases (RE 1012/2015); xvi.- Antimicrobial Use in Salmon and other Farmed Fish (RE 8228/2015); xvii.- Monitoring and Control in the Magallanes Region and the Chilean Antarctic (RE 6246/2017). chapter 03

b.- Specific Health Programs: i.- Active Monitoring of High Risk Diseases in Farmed Fish (RE 065/2003); ii.- Monitoring and Control of Infectious Salmon Anemia (RE 1577/2011); iii.- Monitoring and Control of Piscirickettsiosis (RE 3174/2012); iv.- Monitoring and Control of Caligidosis (RE 13/2015, replaces previous Health Programs and compliments RE 1240/2016).

AQUACULTURE CONCESSIONS Aquaculture concessions require two permits or administrative decisions in Chile. The first authorize the aquaculture development, subject to certain technical requirements, and is granted by the Undersecretary for Fisheries and Aquaculture at the Ministry of Economic Affairs, Development and Tourism. The second permits the use of a specific geographical area, or specific parts of state-owned water, for fish farming in accordance with the first authorization, and is granted by the Undersecretary for the Armed Forces at the National Defense Ministry. The use of concessions is restricted to a particular geographical area, as specified in the permit. They must be used to farm specific salmonid species and are subject to production and stocking density limits, as specified in the Environmental and Health Regulations issued by the authority, and must be respected by concession holders. Concessions granted before April 8, 2010 are indefinite, although they are subject to termination clauses. However, concessions granted since that date and those subject to geographical relocation terminate after 25 years, though they are renewable and also subject to termination clauses. Aquaculture concessions can be involved in many transactions and the law authorizes them to be used to guarantee obligations. The General Fisheries and Aquaculture Law (LGPA) did not experience changes during 2017. The Environmental Regulations for Aquaculture were also not changed. The Health Regulations were amended during 2017 by DS 216, published in the Official Journal on August 5, 2017. The authority evaluated the results of a full productive cycle where farming density by grouping was measured, and concluded that adjustments to the procedure for setting farming densities and the procedure for reducing smolt stocking should be introduced in order to achieve the objectives of those measurements. This regulation establishes that the farming density shall be set by semester for all groupings that begin their coordinated fallow period within the same semester. Semesters run from April to September of the same year and October to March of the following year. Concession holders may choose a percentage of smolt stocking reduction and distribute it among its farming centers for the same or a different grouping, provided that they relate to those whose farming density is set in the same semester. This regulation applies to concession groups that begin their coordinated fallow periods in October 2017 and March 2018.

A new General Health Program was issued during 2017, and a Specific one amended: a.- The General Health Program for the Monitoring and Control of the Magallanes Region and Chilean Antarctica under RE 6246 was published in the Official Journal on December 27, 2017. It establishes preventive measures that maintain and improve the health conditions for salmon farming in this region. These preventive measures secure the health condition of smolts entering the region, using smolt sampling and vaccinations. It establishes restrictions over the use of baits derived from salmonid species, and requirements for net use, as it only allows the use of new nets or nets used in the same region that have been cleaned and disinfected in accordance with the procedures issued by Sernapesca, and identifies nets using an individual code which ensures traceability. b.- The Specific Health Program for the Monitoring and Control of Caligidosis was amended under RE 4151 and published in the Official Journal on September 29, 2017. It amended the program established by RE 13/2015, and complemented RE 1240/2016. The definitions relating to the General Annual Diagnosis by Cage were incorporated. This process affects all marine fish farming cages, including estuaries, that contain salmonid species. They must be sampled in order to count the number of Caligus each fish is carrying. Also, the definitions relating to the General Stocking Diagnostic by Cage were incorporated. This is the same sampling and counting process that applies 30 days after smolt stocking. Furthermore, salmonid farms in the Magallanes Region and Chilean Antarctica were designated as strict caligidosis monitoring centers. A central question when operating a farming center is related to the density of fish in cages, which is the fish biomass in a cage at the end of the grow-out phase in the production cycle. Law 20,434 dated 2010 introduced a new production and sanitary model, which includes farming density for salmon concession groupings. This measure was first applied in 2014 in the Tenth and Eleventh Regions. The farming density by species or group of species for salmon concession groupings is set by Resolution issued by the Undersecretary for Fisheries and Aquaculture, using the procedure referred to in Article 86bis of the General Fishing and Aquaculture Law. The Law also indicates that this density will be reviewed at the end of the grow-out phase of the production cycle. It sets the maximum number of fish at the start of the grow-out phase of the production cycle, by considering the useful depth of the cages, the expected mortality rate, and the average weight of fish at harvest. Law 20,434 provides for Salmon Concession Groupings to be established, under Resolutions issued by the Undersecretary for Fisheries and Aquaculture. Sernapesca sets the coordinated fallow periods for these groupings by Resolution. It introduces the method and procedure to establish cage densities for these groupings, including RESA Regulations and indicates that two stages are involved, where the first sets the common farming density for

each grouping in accordance with their classification, and the second sets the maximum number of fish that can be stocked at each center. It classifies the Concession Groupings, which covers the environmental (INFAs), health (losses) and productive aspects (comparison between stocking forecasts and final inventory). It establishes the classification ranges and smolt reduction percentages at centers, such as the score and weighting of the elements that comprise the grouping classifications, their ranges and their corresponding farming densities. DS 74/2016 amended the Health Regulations, by removing the smolt reduction percentage measure at concession groupings, and created the smolt reduction percentage measure at individual concessions. The Undersecretary established health indicators, weighting for the variables and smolt reduction percentages by issuing RE 3375/2016. The Undersecretary then amended RE 3375 by issuing RE 3471/2017. This introduced the formulas and procedures for calculating the loss indicator and the health indicator and for calculating smolt reduction percentages, which support the new method to classify the biosecurity of groupings, in accordance with DS 216. This Regulation was applied to groupings that began their fallow period between October 2017 and March 2018, to determine the alternative and voluntary smolt reduction percentages. Various related Resolutions were issued by the Undersecretary for Fisheries and Aquaculture over the course of 2017, setting farming densities by concession groupings. Law 20,249 has significantly influenced aquaculture during this period, by creating Coastal Marine Environments for Indigenous Peoples. It was published in the Official Journal on May 26, 2009, and its Regulations are contained in DS 134 dated 2009. To date, eight indigenous communities have been granted a marine environment, some of them include sectors where aquaculture is taking place. Apart from its purpose, this Regulation limits the development of marine activities. It hinders current developments and puts obstacles for new ones. No-one involved in aquaculture was consulted while this law was being processed. Furthermore, the authority has incorrectly applied it, in the sense that, as soon as an application of this nature is received, it has suspended the renewal of maritime concessions, which were already granted prior to this law taking effect and are necessary to support aquaculture businesses. A contentious issue on the application applying this law has been the vast surface area requested for such environments. Various sectors have suggested the need to review this Law.

annual report empresas aquachile s.a.

the companyâ&#x20AC;&#x2122;s business chapter 03

ACTIVITIES AND BUSINESSES Chapter 3.2

AquaChile is one of the largest global producers of Pacific salmon and trout. Its salmonid sales reached 80,315 tons WFE during 2017. From this total, 45,979 tons WFE corresponded to Atlantic salmon, 24,098 tons WFE to Pacific salmon and 10,238 tons WFE to trout.

fig. 38 / fig. 39 / fig. 40

AquaChile was one of the main Chilean exporters of salmon and trout in 2017, with a market share of 9.9% of the total net volume exported from the Country. fig. 41 / fig 42

MAIN GLOBAL SALMON AND TROUT PRODUCERS 2016

fig. 38

423

167

MARINE HARVEST

LEROY SEAFOOD GROUP

138

MITSUBISHI/ CERMAQ

128

SALMAR

EMPRESAS AQUACHILE

COOKE AQUACULTURE

GRIEG SEAFOOD

MULTIEXPORT

Source: Salmon World 2017, Kontali Analyse (latest information available for 2016)

COUNTRIES PRODUCING ATLANTIC SALMON IN 2017 (THOUSAND TONS WFE)

COUNTRIES PRODUCING PACIFIC SALMON IN 2017 (THOUSAND TONS WFE)

COUNTRIES PRODUCING TROUT IN 2017 (THOUSAND TONS WFE) fig. 39

2.300

165

156

263

1.208 579

133

513 0

NORWAY

CHILE

OTHERS TOTAL

NORWAY

CHILE

OTHERS TOTAL

NORWAY

CHILE OTHERS TOTAL

Source: Kontali Analyse

CHILEAN ATLANTIC SALMON EXPORTERS IN 2017 (THOUSAND NET TONS)

CHILEAN PACIFIC SALMON EXPORTERS IN 2017 (THOUSAND NET TONS)

CHILEAN TROUT EXPORTERS IN 2017 (THOUSAND NET TONS)

9.5

7.3

5.5

SALMONES CALETA BAY S.A.

AQUACHILE GROUP

13.6

AUSTRALIS MAR S.A

11.6

SALMONES ANTARTICA S.A.

12.4

CERMAQ GROUP

15.6

AQUACHILE GROUP

20.0

SALMONES AYSEN S.A.

30.6

AQUACHILE GROUP

31.2

M. HARVEST GROUP

39.1

MULTIEXPORT GROUP

CERMAQ GROUP

43.0

GRANJA MARINA TORNAGALEONES LT

fig. 40

Source: Infotrade and Chilean Customs

AQUACHILE’S SALMON AND TROUT SALES VOLUMES (NET TONS)

fig. 41

53,863

37,559

26,056

34,712

42,473

58,149

66,564

64,675

60,377

51,602

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

tons

Source: Infotrade, Chilean Customs and Salmon Index

MARKET SHARE BY VOLUME OF THE MAIN CHILEAN PRODUCERS OF SALMON AND TROUT

fig. 42

empresa

2017

Cermaq (1) Empresas AquaChile

2008

2009

2010

2011

2012

2013

2014

2015

2016

6.9%

9.2%

7.9%

9.6%

9.5%

9.1%

9.5%

10.2%

7.3%

11.1%

14.6%

12.9%

11.5%

10.4%

12.2%

11.9%

11.0%

11.8%

9.9%

Marine Harvest (2)

11.1%

6.4%

4.3%

5.3%

6.2%

3.7%

8.3%

8.9%

5.6%

6.0%

Multiexport

6.0%

6.3%

7.1%

5.9%

5.5%

5.9%

5.7%

7.0%

6.5%

8.8%

Los Fiordos

5.8%

7.4%

5.5%

7.8%

6.4%

7.8%

9.1%

5.7%

7.2%

7.3%

3.2%

5.0%

4.4%

4.5%

3.2%

4.2%

3.3%

Blumar Otros

62.5%

67.0%

71.6%

66.3%

66.5%

66.0%

60.5%

64.2%

64.6%

64.7%

Total

100.0%

Source: Infotrade and Chilean Customs 1 Includes Mainstream Chile, Cultivos Marinos Chiloé and Salmones Humboldt. 2 Includes Marine Harvest Chile S.A., Delifish Ltda. and Acuinova Chile.

Since 2005, through its subsidiary Grupo ACI S.A, AquaChile has participated in the tilapia farming and marketing business, focusing on the North American market. This company has become one of the main exporters of this product to the USA with almost a 21% market share during 2017. The most important markets for AquaChile are Japan and the USA. AquaChile has operated its own distribution company since 2002 that serves the US market: AquaChile Inc. AquaChile also exports to Europe, Asia, the Middle East and Latin America.

Main destinations of AquaChile's Sales (Net Tons)

denmark

canada

usa

holland

12.592

101

germany

537

belgium usa

161

5.234

spain

france

998

550 italy

mexico

1.444

costa rica

rep. dominican republic

1.188

19 venezuela

21 colombia

1.019

peru

36 brazil

4.732 chile

2.298 paraguay

argentina

813

japan

16.991

russia

7.029

lithuania

185

ukraine

china

1.124

giorgia

israel

239

the united arab emirates

Taiwan

333

520 hong kong

thailand

1.186 vietnam

282

philippines

Sri Lanka

malaysia

71 singapore

Tilapia (Net Tons) Salmon y Trout (Net Tons)

We have a team of engineers, biologists and veterinarians that are constantly studying and evaluating different alternatives to improve the company's genetic heritage

AquaChile has tremendous growth potential because:

It has over 150 concessions in several neighborhoods in southern Chile, which provides it with a unique and non-replicable concession base. It has significant growth potential in tilapia, given its important market share in the fresh tilapia segment. It has a proven and successful genetic development program through AquaInnovo. This subsidiary specializes in genetic research and development for aquaculture. Its subsidiaries enable it to be self-sufficient in eggs and smolts for Atlantic salmon, Pacific salmon, trout, and juvenile tilapia. It has its own processing plants, with capacity to absorb production growth. Its concessions are geographically diversified across the Los Lagos Region (36%), the Aysen Region (62%) and the Magallanes Region (2%). It has a diversified range of products, by farming three different species of salmonids in Chile (Atlantic salmon, Pacific salmon and trout) and tilapia in Costa Rica. It is an integrated company that adds value to the salmon, trout and tilapia production chain.

FROM EGG TO PLATE SALMON AND TROUT AquaChile’s subsidiaries produce Pacific salmon and Rainbow trout eggs, and supply all AquaChile’s requirements. In fact, they produce surpluses that are sold to third parties. Its requirements for Atlantic salmon eggs are mainly met through Salmones Chaicas S.A., which AquaChile has controlled since February 2017. This company has a long-term supply contract with AquaChile and other contracts with third parties. These eggs come from a long-term research and development process, conducted by the subsidiary AquaInnovo S.A., whose aim is to produce superior quality fish, with improved growth rates, and greater disease resistance. After fertilizing and incubating the eggs, a new process begins, taking between 50 and 80 days depending on the species and the temperature of the eggs. Subsequently the fry are obtained (fish between 0.3 and 6 grams approx.), and after 8 to 10 months these become smolts (the physiological stage where the fish can live and grow in saline water) and their life at sea begins. This stage takes place in freshwater tanks for Atlantic salmon, in lakes for trout, and in lakes, estuaries or freshwater tanks for Pacific salmon.

Once the fish reach their commercial size or weight, they are harvested and transported alive to collection centers, to await processing. Processing plants prepare the various products that AquaChile supplies to the market. Finally, they are marketed world-wide.

SALMON AND TROUT SALES DISTRIBUTION BY COUNTRY IN 2017 (NET VOLUME)

fig. 43

32% japan 2% others 1% vietnam

1% the united arab emirates 1% taiwan 1% germany 1% france

The fish are monitored during this stage using a rigorous surveillance and vaccination program.

2% argentina 2%

spain

2% colombia

After completing the smolt stage, fish are transferred to the growout stage, which takes place at marine farms, where they will remain from 18 to 19 months for Atlantic salmon, and from 10 to 12 months for Pacific salmon and trout.

2% china 2% thailand 3% mexico 4% chile

For the sea stage, AquaChile counts with 153 marine concessions distributed in the Los Lagos, Aysen and Magallanes Regions, in 28 neighborhoods (48% of the total). Furthermore, the Company, in partnership with Biomar (a leading global supplier of high performance fish feed for the aquaculture industry), owns a 50% interest in the feed production plant of Alitec Pargua S.A., which supplies part of AquaChile’s feed requirements.

9% brazil 13% russia 24% usa

Source: AquaChile

annual report empresas aquachile s.a.

chapter 03

TILAPIA Grupo ACI produces its own tilapia eggs, with the support of AquaInnovo who manage a genetic improvement program for this species. In Costa Rica, AquaChileâ&#x20AC;&#x2122;s Tilapia is farmed in land-based ponds that cover a total water surface of 330 hectares. The farming process begins with reproduction, and continues with juveniles, followed by pre-grow-out and finally the grow-out stage. The entire cycle lasts approximately 270 days until the fish reach 950 grams and are ready for harvest. During this period, the fish are fed a balanced soya-based diet, and their health and production performance are constantly monitored. The Company in partnership with Biomar owns equal interests in the feed production plant run by Biomar Aquacorporation Products, which supplies a large proportion of its feed requirements.

Terrapez has a processing capacity of 21,000 tons WFE per year. It produces different products, such as fillet and whole tilapia, plus several by-products for local sale, such as pieces, loins and tripe. Products are sold fresh or frozen, depending on customer requirements. Also, the Company joined a partnership with Grupo Diana to own Aquasea, a pet food flavoring plant in Costa Rica that uses the tilapia waste that is generated during the production process. The Company distributes its products in the USA, Costa Rica, Paraguay and Peru. However, its main sales destination is the USA, where they are distributed under the RainForest brand. In Costa Rica its products are distributed under the St Peter's brand.

When the fish are ready to be harvested, they are transported in trucks with water tanks to the Terrapez processing plant in Canas, Guanacaste, Costa Rica, which receives the live fish recently extracted from the farming ponds.

fig. 44

TILAPIA SALES DISTRIBUTION BY COUNTRY IN 2017

fig. 44

18% costa rica 1% peru 1% paraguay

80%

Source: Grupo ACI/AquaChile

usa

annual report empresas aquachile s.a.

chapter 03

1 / Genetics and reproduction

8 /Clients

SALMON AND TROUT

2 / Hatching and Alevin stage

3 / Smoltification

7 / Final Product Salmon and Trout productive cycle and its traceability

6 / Processing

4 / Sea farming and harvest

5 / Transport and Logistics

1 / Genetics

8 /Clients

2 / Reproduction

TILAPIA 7 / Final Product

3 / Alevin stage

Tilapia productive cycle and its traceability

4 / Grow-out stage

6 / Processing

5 / Harvest

annual report empresas aquachile s.a.

chapter 03

MAIN CONTRACTS In the salmon and fresh tilapia markets is not usual to have long-term contracts, but instead the sales are conducted on the basis of agreements of up to three months, while some industry agents work with consignments. Our sales are usually firm, due to the high quality of our products and the good service provided by our logistics department. For the case of Verlasso, the Company has commercial agreements that are more stable over time, but not necessarily governed by a written contract. fig. 45

MAIN CUSTOMERS The Company has over 320 customers, diversified in 35 countries. During 2017, 43% of the companyâ&#x20AC;&#x2122;s salmon sales were concentrated in 6 customers. Each of them had less than 10% of total sales, with the exception of the main customer who alone accounted for 18% of the total. On the tilapia segment, the Company have a more fragmented customer base, and the largest customer individually accounted for only 13% of the segment sales.

fig. 46

MAIN SUPPLIERS AquaChile has close relationships with its suppliers, and has established long-term relations with some of them. However, the Company still tenders for goods and services for its business, in order to obtain the best conditions available in the market, using a transparent process. The Company has a fragmented supplier base in the salmon and trout segment. Only one supplier achieved a proportion over 10% of the total goods and services purchased during 2017. The supplier base is more concentrated in the tilapia segment, with three suppliers jointly providing over 50% of total purchases.

BRANDS AND DOMAINS The Company has registered brands and pending applications for its trademarks and those of its subsidiaries in the corresponding public records, in accordance with current legislation. These registers also include the respective legal names. The Company has also registered the internet domain names linked to its brands, to safeguard its interests and its intangible assets. Its products are marketed using the following brands:

Source: AquaChile

SALMON CUSTOMER DISTRIBUTION

TILAPIA CUSTOMER DISTRIBUTION

fig. 45

44% others

18% customer 1 7% customer 2 13% customer 1

5% customer 3 5% customer 4

11% customer 2

4% customer 5 4% customer 6 57% others

9% customer 3

12% customer 4 7% customer 5

Source: AquaChile

4% customer 6

SALMON SUPPLIER DISTRIBUTION

TILAPIA SUPPLIER DISTRIBUTION fig. 46

57% others 10% supplier 1

9% supplier 2

34% supplier 1

13% supplier 2

10% supplier 3 8% supplier 4

8% supplier 3 7% supplier 4 5% supplier 5 4% supplier 6

4% supplier 5 3% supplier 6 28% others

Source: Grupo ACI/AquaChile

annual report empresas aquachile s.a.

chapter 03

RESEARCH AND DEVELOPMENT AquaChile has a team of engineers, biologists and veterinarians dedicated to improve the genetic qualities of the salmonid and tilapia species that it farms. The aim is to produce strains that are best suited to the conditions found at the Company’s farming centers, and thereby maximize productivity. The subsidiary AquaInnovo, through a selection methodology, is focused on obtaining genetic improvements for salmon and other aquaculture species. MAIN ASSETS The main assets owned by AquaChile are essential for its business, and are detailed in the financial statements of the company and its subsidiaries. (See Note 8: Trade receivables: Notes 9 and 10: Inventory and Biological Assets: Note 14: Intangible Assets: Note 15: Goodwill: Note 16: Property, Plant and Equipment). The fixed assets classified as constructions, infrastructure works and machinery, mainly include five processing plants with their respective equipment -four in Chile and one in Costa Rica-, the Company’s offices, its freshwater and marine facilities, nets, grow-out cages, protection and safeguarding equipment, ponds, containers, vehicles and vessels. The Company’s intangible assets include water rights and aquaculture concessions. The Company has 122 water rights to a total volume of 66,672.99 liters per second (l/s). Five of these rights are for variable flows, depending on the dry season month, in which case the flow rates were calculated as the geometric mean.

WATER RIGHTS SUMMARY region

fig. 47

number

XIV

Total

122

The Company owns 166 aquaculture concessions, comprising 153 marine, 1 river and 12 lake concessions, covering a total area of 1,670.17 hectares, that comprise 1,588.39 marine hectares, 22.33 fig. 48 river hectares and 59.45 lake hectares. As of December 31, 2017, the company has 37 marine and river aquaculture concessions in use, as well as 4 lake aquaculture fig. 49 concessions.

The Regulatory Framework section describes a summary of the main features of the aquaculture concessions and their regulatory treatment.

AQUACULTURE CONCESSION SUMMARY

region

own sea and river total surface area concessions (ha)

fig. 48

in use as of 12/31/2017

own lake concessions

total surface area (ha)

in use as of 12/31/2017

782.8

25.48

789.84

33.97

XII

15.75

XIV

22.33

154

1,610.72

59.45

Total

GEOGRAPHICAL LOCATION OF THE COMPANY’S MARINE CONCESSIONS

fig. 49

LOS LAGOS REGION

X REGION

INDUSTRY 24 neighborhoods in total

3A 5

AQUACHILE 55 concessions in 12 neighborhoods

3B 6 17B 7 17A

8 9A

10A

9C 15 10B 14

12A

12B 12C

AYSEN REGION XI REGIÓN

18A

AQUACHILE 95 concessions in 16 neighborhoods

34 18B 18C

19C

19A 18B

31A

21A

31B

21B 21C

30A 30B

22A

22B

22C

28A

29 22D

28B

26B

23A 23C

INDUSTRY 34 neighborhoods in total

18D

23B 24 26A 25

MAGELLAN AND CHILEAN ANTARCTIC REGION XII REGIÓN AQUACHILE 3 concessions in 2 neighborhoods

41 42

INDUSTRY 21 neighborhoods in total

44 45 43

48A 47B 48B 47 A

49A 49B 50 B

annual report empresas aquachile s.a.

the company’s business chapter 03

PROPERTIES AND FACILITIES Chapter 3.3

Most of AquaChile’s fresh water and marine farming centers have adjoining properties, where accommodation has been built for operating technicians, staff canteens and store-rooms for minor implements. The Company also has barges at each freshwater (in open water) and marine farming center, to support the aquaculture production process. Harvested fish are sent to the Company’s processing plants, which are located on its own land:

/ / / / /

Cardonal processing plant (Puerto Montt). Produces value-added products from Atlantic salmon. Calbuco processing plant (Calbuco). Produces value-added products from Atlantic salmon, Pacific salmon and trout. Antarfood processing plant (Chonchi). Produces HG (Headed and Gutted) products and value-added products from Atlantic salmon and Pacific salmon. Cailin processing plant (Quellón). Produces HG products from Atlantic salmon and Pacific salmon. Terrapez processing plant (Costa Rica). Produces value-added products from tilapia.

the companyâ&#x20AC;&#x2122;s business

INSURANCE Chapter 3.4

Empresas AquaChile and its subsidiaries have insurance policies to cover the major risks to their physical assets, finished or in process products, offices, processing plants and facilities, and to cover civil liability and other minor risks. Therefore, a significant proportion of these risks are covered by policies with local insurance companies, which in turn negotiate reinsurance for part of their risk portfolio with international reinsurers. The operational business risks are continually evaluated to optimize this coverage, depending on the competitive services available on the market. Coverage includes:

PROPERTY

RISKS COVERED

Biomass

Growing-out biomass mortality, as a result of risks associated with diseases, algal blooms, natural events and water pollution, among others.

Harvested live fish

Damage as a consequence of or directly caused by an external agent during transport by sea, air or land.

Deterioration to property caused by fire, including earthquake. Buildings, facilities, machinery and finished products

Deterioration to property caused by natural risks. Coverage for fire and property damage as a direct result of strikes, looting and riots.

Fresh and frozen fish (salmon and trout)

Loss or damage during sea, air or land transportation.

Life insurance

Accidental or natural death.

Civil Liability Insurance

General insurance covering property damage and injury to third parties.

annual report empresas aquachile s.a.

the companyâ&#x20AC;&#x2122;s business

RISK FACTORS

chapter 03

Chapter 3.5

The Company, its assets and the aquaculture industry in general are exposed to a range of risks that could have a negative effect on the Companyâ&#x20AC;&#x2122;s solvency, its market position or financial situation, and should be considered when making investment decisions. The most important risks are described below, although other risks could affect the Company's business and operating performance. OPERATIONAL BUSINESS RISKS Environmental risks > AquaChile and its subsidiaries have geographically diversified its production facilities in Chile. Nevertheless, the salmon industry is exposed to natural risks, such as variations in sea temperatures, climatological phenomena, seismic movements, harmful algal bloom2, natural predators and other factors that may affect its production facilities. These circumstances can all affect the Companyâ&#x20AC;&#x2122;s growth, negatively impact the quality of its products and even increase mortality rates, which would result in lower production volumes, sales and financial performance. Phytosanitary risks > Diseases, parasites and pollutants are a recurring problem in the aquaculture industry, and may reduce the quality of its products, increase mortality and reduce production. AquaChile and its subsidiaries have invested significant resources in research, genetic improvement studies, mass vaccination programs, independent area management systems, fish health monitoring programs, policies of reducing fish densities in cages, and sanitary barriers that help to control and reduce these risks. However, new diseases or pests may appear that affect salmon, trout and tilapia production.

Natural phenomena also known as harmful algal blooms (HABS). These occur in aquatic ecosystems and are caused by phytoplankton organisms that multiply explosively in the right environmental conditions, to become concentrated, thus causing alterations to marine life and fish mortality. 3

Product quality and traceability risks > The products that AquaChile farms, produces and markets are for human consumption, and a contamination risk arises from negligence during production or inadequate handling during the distribution process or delivery to the final consumer, by customers, consumers or third parties, which could affect the Company’s sales and financial performance. AquaChile has developed exhaustive quality classification and food safety controls, in order to mitigate these risks. These are being constantly monitored internally and also externally by the sectoral authority. The Company has introduced complete fish traceability, to monitor food safety, and the authority requires that fish are analyzed prior to harvest to rule out any trace of residues. The processing plants are also sampled to safeguard raw material and processing safety. Therefore, both the authorities and customers can verify the healthiness of AquaChile’s products. Furthermore, as fish are growing in an open marine environment, they are exposed to diseases that can impact their health. AquaChile has a health department composed of veterinarians, to control these impacts. They have established a preventative policy and monitor the health of the fish population. If any diseases appear, they establish the appropriate treatment to combat them. Failure to do this would expose the fish population to risks and could impact the Company’s financial performance. Raw Material’s price risks> Fishmeal and fish oil are significant components of salmon production costs. Even though AquaChile and its subsidiaries have diversified their sources of fish feed to include new alternatives, and has invested in its own two feed plants to supply a proportion of its requirements, it may still be positively or negatively affected by changes in the prices of these consumables, due to circumstances beyond its control. International price trends> The supply of salmon and trout largely depends on the productive strategies operated by each company in the industry, as well as by unexpected biological or climatic events. Therefore, forecasting and estimating an equilibrium price for its products over the medium and long term is complex. Fortunately, the growth in demand for

farmed salmon has been strong in recent years. Although, imbalances between supply and demand for salmon products can lead to price volatility, which would positively or negatively affect the Company’s financial performance. However, the salmon industry has been subject to dynamic global and local consolidation and regulatory changes, which suggests that estimated future growth should tend to be more balanced. Moreover, diversification by species and target markets mitigates the negative effect of high volatility.

Changes in consumption within target markets > Global trends indicate that sustained increases in the consumption of farmed fish and other seafood products can be expected over the next few years. However, the Company cannot assume that this trend and intensity will continue over time. A change or reversal of this trend could negatively affect the Company’s business and operating performance. Economic changes in target markets > Currently, the Company exports its products to the USA, the European Union and Japan, and is not possible to rule out an economic crisis, depression, stagnation or the emergence of trade barriers. Any of these might lead to a reduction in demand, and if this were to happen, it could negatively affect the Company’s business and operating performance. Nevertheless, increases in income within emerging economies could open up new markets and increase the demand for salmon and the Company’s sales. FINANCIAL RISKS Concentration of financial liabilities > The Company has signed loan contracts with its financial creditors, in which, beside the establishment of repayment terms, interest rates, minimum financial ratios, and guarantees, it is required for the Company to comply with various other obligations. They also contain various mechanisms for the creditors to approve any exceptions to these obligations. Failure to pay any of the installments of capital and interest on the due dates, or failure to comply with the Company’s obligations for more than 90 days, may result in the financial creditors immediately calling in all the capital and interest due on these loans, which could negatively impact the Company’s financial position and performance.

annual report empresas aquachile s.a.

chapter 03

Foreign exchange risk > AquaChile is a global company, so fluctuations in exchange rates can negatively affect the Company’s performance. The Company has some of its costs, such as labor, land transportation services, etc., indexed to the Chilean peso and Costa Rican Colons, while its sales are affected by the relative value of the foreign currencies used by its target markets, such as the US dollar, the Euro and the Yen. The Company’s presentation currency is US dollars, so changes in the strength of the US dollar compared to the remaining currencies used by the Company may negatively affect its financial performance. REGULATORY AND ENVIRONMENTAL RISKS Changes in environmental and other legislation > Caring for the environment is an essential component of the Company’s business policy. However, the pollution of natural resources as a consequence of the externalities of productive processes have resulted in a growing awareness and concern among consumers, intermediary groups and authorities in this field, who require productive systems that care for the environment and guarantee in advance that natural resources will be protected over the long term. These requirements have resulted in rigorous standards and procedures that aim for environmental sustainability, but that could lead to significant increases in production costs or to the introduction of new restrictions to the Company’s productive processes. Changes in aquaculture and concession legislation > The Company has implemented different procedures to correctly manage its fish farms, and consequently it has a technical and legal department that ensures that aquaculture concessions are properly used and managed. However, issues such as failure to comply with changes in aquaculture and concession legislation and

standards, failure to adequately manage aquaculture concessions, failure to comply with relevant sustainability standards and carefully operate the system as a whole, and unjustifiable or unauthorized failure to use concessions, could lead to sanctions or restrictions that could negatively affect the Company’s business and operating performance. These sanctions, could even include the authorities revoking aquaculture concessions. OTHER RISKS Asset risks > Fixed assets such as buildings and facilities, finished products and civil liability risks are covered by insurance policies with terms and conditions that are usual for the market. AquaChile regularly evaluates its insurance cover that partially covers damage to its biological assets caused by diseases, theft and natural risks, such as storms, hurricanes, storm surges, tsunamis, earthquakes, volcanic eruptions, floods, avalanches, landslides, underwater currents and algal blooms. Consequently, significant damage or loss to such assets could still have an adverse effect on the Company’s business and financial position. Nevertheless, the geographical diversity of its facilities on land and farming centers at sea at least diversify the risk of such events, although it will not completely eliminate the risk. Subsidiaries > Empresas AquaChile S.A. is the parent company for several companies. A significant proportion of the Company’s business is performed by these companies and its operating performance and financial position substantially depends on them. Any significant deterioration in the business or performance of its subsidiary companies may have an adverse effect on its own business and operational performance.

the companyâ&#x20AC;&#x2122;s business

INVESTMENT PLANS Chapter 3.6

The Company, in accordance with its bylaws, will carry out all the investments that it needs to fulfill its business objectives. Therefore, Management is authorized to invest in the business, on the basis of expansion plans approved by the Board of Directors and in profitable projects that meet technical and financial criteria. Sources of finance to implement these investment plans are managed in accordance with the Companyâ&#x20AC;&#x2122;s financial plan. Financial resources are obtained from its own business, traditional borrowing, public and private debt instruments and equity contributions, provided the strategic and financial conditions are appropriate and acceptable.

annual report empresas aquachile s.a.

the companyâ&#x20AC;&#x2122;s business chapter 03

FINANCING ACTIVITIES Chapter 3.7

The Company uses credits to finance its exports, in accordance with International Exchange Regulations. These credits are paid using the returns generated by the companyâ&#x20AC;&#x2122;s operations. The Company performs the financing activities that are in line with its business and its main source of financing is through Loans to Exporters (PAE from its name in Spanish). Cash surpluses are invested on the local financial market in short-term fixed income instruments of the best available credit quality.

OWNERSHIP AND SHARES

Annual Report AquaChile 2017

4.1 Ownership 4.2 Shares,

their Characteristicss and rights

86 90

annual report empresas aquachile s.a.

ownership and shares

chapter 04

OWNERSHIP Chapter 4.1

The Company’s subscribed and paid-up share capital is five hundred and fourteen million four hundred and sixty-two thousand nine hundred and fifty US dollars (US$ 514,462,950) as of December 31, 2017, which is divided into one thousand one hundred and fifty-seven million single series shares (1,157,000,000). CONTROL No individual shareholder has a controlling interest in the Company as of December 31, 2017, and there are no shareholder agreements. TWO LARGEST SHAREHOLDERS The Company has two shareholders who can each designate at least one Director, and each holds an interest greater than 10% in the Company.

TABLE A corporate name

fig. 50

number of shares

ownership interest %

Inversiones Patagonia Limitada

382,115,000

33.03%

Holding Salmones Limitada

382,115,000

33.03%

Individuals or legal entities who directly or indirectly hold shares representing 10% or more of the Company’s share capital are as follows: A.1 Individuals or legal entities related to the Puchi Acuña and Aguilera Marin families, comprising Mr. Victor Hugo Puchi Acuña, Chilean ID Number 6.680.823-8, Mr. Mario Puchi Acuña, Chilean ID Number 6.270.533-7; Mr. Juan Carlos Puchi Acuña, Chilean ID Number 7.961.289-8 and Mr. Pablo Aguilera Marin, Chilean ID Number 4.808.232-7. The members of the Puchi Acuña family and Mr. Pablo Aguilera Marin exercise their voting rights as individuals or through investment companies that belong to the same family.

Tax ID

Inversiones Patagonia Limitada Inversiones VHP Ltda. Inversiones Altair Ltda.

ownership interest %

76.070.159-9

33.03%

76.899.680-6

12.44%

76.897.150-1

8.64%

76.901.610-4

8.64%

Inversiones JCP SpA

76.898.370-4

1.38%

Inversiones nueva vhp spa

96.529.050-8

0.54%

Pablo Aguilera Marín

76.349.672-4

0.54%

Valle Chico SpA

76.412.301-8

0.54%

Inversiones Santa Cecilia Ltda.

4.808.232-7

0.23%

Juan Carlos Puchi Acuña

7.961.289-8

0.09%

Inversiones MPA Ltda.

Inversiones Patagonia Limitada, Chilean ID Number 76.070.159-9 is controlled directly or indirectly by Mr. Victor Hugo Puchi Acuña, Chilean ID Number 6.680.823-8, Mr. Mario Puchi Acuña, Chilean ID Number 6.270.533-7; Mr. Juan Carlos Puchi Acuña, Chilean ID Number 7.961.289-8 and Mr. Pablo Aguilera Marin, Chilean ID Number 4.808.232-7. The members of the Puchi Acuña family and Mr. Pablo Aguilera Marin exercise their voting rights as individuals or through investment companies that belong to the same family. Inversiones VHP Limitada, Chilean ID Number 76.899.680-6 is wholly owned by the Puchi Reyes family, comprising the spouse of Mr. Victor Hugo Puchi Acuña, Myriam Cecilia Reyes Abarca, Chilean ID Number 7.162.539-7, and Rodrigo Alejandro Puchi Reyes, Chilean ID Number 9.586.465-1, Paulina Andrea Puchi Reyes, Chilean ID Number 9.587.7532, Veronica Puchi Reyes, Chilean ID Number 15.325.760-4, and Cecilia Puchi Reyes, Chilean ID Number 16.207.367-2, and Inversiones Nueva VHP SpA, Chilean ID Number 76.349.672-4, which is wholly owned by Mr. Victor Hugo Puchi Acuña, Chilean ID Number 6.680.823-8. Inversiones Santa Cecilia Limitada, Chilean ID Number 96.529.050-8 is wholly owned by the spouse of Mr. Victor Hugo Puchi Acuña, Myriam Cecilia Reyes Abarca, Chilean ID Number 7.162.539-7, Rodrigo Alejandro Puchi Reyes, Chilean ID Number 9.586.465-1 and Inversiones Nueva VHP SpA, Chilean ID Number 76.349.672-4, which is wholly owned by Mr. Victor Hugo Puchi Acuña, Chilean ID Number 6.680.823-8. Inversiones MPA Limitada, Chilean ID Number 76.897.150-1 is wholly owned by the Puchi Germani family, comprising the spouse of Mr. Mario Puchi Acuña, Loreto Esmirna Germani Diaz, Chilean ID Number 7.153.034-5 and Claudio Humberto Puchi Germani, Chilean ID Number 10.308.367-2, Carlos Mauricio Puchi Germani, Chilean ID Number 10.308.374-5, Gabriel Alejandro Puchi Germani, Chilean ID Number 15.302.702-1, and Valle Chico SpA, Chilean ID Number 76.412.301-8, which is wholly owned by Mr. Mario Puchi Acuña, Chilean ID Number 6.270.533-7

annual report empresas aquachile s.a.

chapter 04

Inversiones JCP SpA, Chilean ID Number 76.898.370-4 is wholly owned by Mr. Juan Carlos Puchi Acuña, Chilean ID Number 7.961.289-8, Juan Carlos Puchi Ramirez, Chilean ID Number 16.358.648-7 and Francesca Paz Puchi Ramirez, Chilean ID Number 17.271.200-2, and Inversiones JCP Dos Ltda, Chilean ID Number 76.309.834-6, which is wholly owned by Mr. Juan Carlos Puchi and Isidora Fernanda Puchi Rojas, Chilean ID Number 22.701.540-3 and Josefa Catherine Puchi Rojas, Chilean ID Number 24.322.430-6. Inversiones Altair Ltda, Chilean ID Number 76.901.610-4 is wholly owned by Mr. Pablo Enrique Aguilera Marin, Chilean ID Number 4.808.232-7, his spouse Lesdi Margarita Soto Sad, Chilean ID Number 4.719.370-2 and Inversiones Tres Hermanos, Chilean ID Number 76.061.568-4, which is wholly owned by Pablo Alberto Aguilera Soto, Chilean ID Number 10.987.616-K, Enrique Ignacio Aguilera Soto, Chilean ID Number 10.987.907-K and Fernando Antonio Aguilera Soto, Chilean ID Number 10.987.906-1.

A.2 Individuals or legal entities related to the Fischer Llop family, comprising the brothers Humberto Jose Fischer Llop, Chilean ID Number 6.687.633-0 and Claudio Felix Fischer Llop, Chilean ID Number 7.378.806-4. Members of the Fischer Llop family exercise their voting rights as individuals or through investment companies that belong to the same family. Chilean ID Number

ownership interest %

76.474.078-5

33.03%

Inversiones Salmones Ltda.

76.238.778-6

33.01%

Claudio Félix Fischer Llop

7.378.806-4

0.01%

Holding Salmones Limitada

Humberto José Fischer Llop Sociedad de Inversiones Inmobiliarias Ltda.

6.687.633-0

0.01%

78.648.080-9

0.003%

Holding Salmones Limitada, Chilean ID Number 76.474.078-5 is wholly owned directly or indirectly by the Fischer Llop family, comprising the brothers Humberto Jose Fischer Llop, Chilean ID Number 6.687.633-0 and Claudio Felix Fischer Llop, Chilean ID Number 7.378.806-4. Members of the Fischer Llop family exercise their voting rights as individuals or through investment companies that belong to the same family.

TWELVE LARGEST SHAREHOLDERS: Table B lists the twelve largest shareholders of Empresas AquaChile, and indicates their number of shares and their percentage interest as of December 31, 2017. TABLE B company name

fig. 51

number of shares

% interest

HOLDING SALMONES LIMITADA

382,115,000

33.03%

INVERSIONES PATAGONIA LIMITADA

382,115,000

33.03%

Inversiones Megeve Capital Ltda.

103,452,673

8.94%

MONEDA SA AFI PARA PIONERO FONDO DE INVERSION

81,582,000

7.05%

47,634,177

4.12%

26,697,788

2.31%

18,671,215

1.61%

BTG PACTUAL CHILE S A C DE B COMPASS SMALL CAP CHILE FONDO DE INVERSION BANCHILE C DE B S A SIGLO XXI FONDO DE INVERSION CREDICORP CAPITAL SA CORREDORES DE BOLSA

16,499,551

1.43%

16,464,468

1.42%

LARRAIN VIAL S A CORREDORA DE BOLSA

8,245,967

0.71%

FONDO DE INVERSION SANTANDER SMALL CAP

6,771,686

0.59%

5,868,389

0.56%

CHILE FONDO DE INVERSION SMALL CAP

annual report empresas aquachile s.a.

ownership and shares chapter 04

SHARES, THEIR CHARACTERISTICSS AND RIGHTS Chapter 4.2

I. SHAREHOLDERS The total number of shareholders registered in the Company’s Shareholders Register as of December 31, 2017 is 150. II. SIGNIFICANT CHANGES OF OWNERSHIP DURING 2017 The largest shareholders had no significant transactions during 2017. SHARES, THEIR CHARACTERISTICS AND RIGHTS I. Share series description The subscribed and paid-up share capital of Empresas AquaChile S.A. was represented by 1,157,000,000 single series shares, as of December 31, 2017. II. Dividend policy The Company does not have accumulated earnings that could be distributed as a dividend as of December 31, 2017. Although the Company generated a positive net income this year, it has cumulative losses from previous exercises, so it cannot distribute dividends to its shareholders, in accordance with Article 78 of Corporate Law. The Company’s bylaws indicate that it should distribute a cash dividend to its shareholders in proportion to their interests in the company of at least 30% of the net income of each year, unless a Shareholders Meeting unanimously agrees to distribute a lower percentage. III. Statistical information Dividends AquaChile has not paid any dividends to its shareholders over the past 10 years. Stock Exchange transactions Quarterly transactions made through the Santiago Stock Exchange, the Chilean Electronic Stock Exchange and the Valparaíso Stock Exchange, are detailed below:

STOCK EXCHANGE TRANSACTIONS summary 2017

fig. 52

number of shares traded

value traded (ch$)

average price (ch$)

market presence

I quarter

21,416,138

7,566,677,361

353

46.7%

II quarter

33,909,836

12,790,526,349

377

51.1%

III quarter

57,973,315

17,729,582,238

306

68.9%

IV quarter

29,983,076

9,465,375,375

316

70.6%

Source: The Santiago Stock Exchange, the Chilean Electronic Stock Exchange and the Valparaíso Stock Exchange ** Stock market presence on the Santiago Stock Exchange at the end of each quarter

The chart below shows AquaChile’s share price evolution compared to the IPSA3 index evolution during 2017.

AQUACHILE SHARE PRICE AND IPSA IN 2017 (BASE 100) AQUACHILE

fig. 53

IPSA

160 140 120 100 80 60 40 20 0 jan

feb

mar

apr

may

jun

jul

aug

sep

oct

nov

dec

Source: Santiago Stock Exchange

Transactions by related shareholders During 2017 there were no transactions between related shareholders.

IPSA: Selective price index for Chilean shares, calculated by the Santiago Stock Exchange. It includes the 40 shares with the highest traded value in a given year.

CORPORATE GOVERNANCE

Annual Report AquaChile 2017

5.1 Board

of Directors 95

5.2 Annual

report of the directorâ&#x20AC;&#x2122;s committee

5.3 Management

100 102

corporate governance

BOARD OF DIRECTORS Chapter 5.1

BOARD OF DIRECTORS

The Board is formed by seven members, elected by a Shareholders' Meeting. Their term of office is three years, in accordance with the Company’s bylaws. The Company does not have any substitute directors Law 18,046, governing Corporations, regulates its main functions, which comprise managing the company. The Board judicially and extra-judicially represents the Company as required to fulfill its business objectives, and in order to achieve that goal, it has all the administrative authority that the law and the bylaws provide, except for the matters exclusively reserved for a General Shareholders Meeting. The Board meets every month to evaluate and guide the financial, environmental and social aspects of the Company’s business. Board remuneration is based on attendance to the board meetings. The directors do not receive any variable remuneration that depends on fulfilling the Company’s financial, social or environmental objectives.

annual report empresas aquachile s.a.

Board Members:

Víctor Hugo Puchi Acuña

chapter 05

- - - -

Chairman of the Board Chilean Identification Number: 6.680.823-8 Date appointed: April 28, 2016 Business Administration Degree from the Pontificia Universidad Católica de Chile and MBA from the Chicago University. His career spanned the financial departments of companies such as Iansa, BHC Group and Quiñenco. He is currently director of Centrovet and Empresas Hidronor. He has real estate, tourism and livestock business interests in the Tenth and Eleventh Regions.

Humberto Fischer Llop

- Director - Chilean Identification Number: 6.687.633-0 - Date appointed: April 28, 2016 - Veterinary Degree from the Universidad Austral de Chile. He was one of the pioneers in the Chilean salmon industry, forming Salmones Pacífico Sur S.A. in 1985, a company focused on the marine grow-out stage and the final product marketing. He has investments in tourism, agriculture, livestock and real estate.

Mario Puchi Acuña

- Director - Chilean Identification Number: 6.270.533-7 - Date appointed: April 28, 2016 - Technical Fisheries Degree from the Universidad Técnica del Estado. He began his career in the Agricultural and Livestock Service in Aysen, and then in the National Fisheries Service in the same region, which enabled him to specialize and participate in the project that introduced the Pacific Salmon in Chile. He has business interests in aquaculture and livestock in the Los Lagos and Aysen Regions.

Alejandro Pérez Rodríguez

- Director - Date appointed: April 28, 2016 - Fecha de Nombramiento: 28 de abril de 2016 - Degree in Industrial Engineering from the Universidad de Chile and a Masters in Economics from the Chicago University. Vice Chairman of Clinica Indisa S.A., Director of Entel S.A., Director of Clinica Los Andes de Puerto Montt S.A., and Board member of the Universidad San Sebastián. He has also served as Director of Copec S.A., Chief Executive Officer of Celulosa Arauco y Constitución S.A., and of Soprole S.A.

Bernardo - Director Fontaine Talavera - Chilean Identification Number: 6.371.763-0

- Date appointed: April 28, 2016 - Economist from the Pontificia Universidad Católica de Chile. Director of Coca-Cola Embonor S.A., Bicecorp S.A., Banco Bice, Bice Vida Compañía de Seguros S.A., and of the NGO El Buen Samaritano. He was Chairman of Ópticas Place Vendôme and Board Member of Metro S.A. and LAN Airlines. Francisco Puga Matte

- Director - Chilean Identification Number: 7.176.902-K - Date appointed: April 28, 2016 - Degree in Industrial Engineering from the Universidad de Chile. He is the Chief Executive Officer at Puga, Mujica Asociados S.A. (PUMA), which is a Chilean engineering and construction company. He was Chief Executive Officer at Hatfield International Chile, Operations Manager at Bomasa S.A., Chief Executive Officer at Lácteos Miraflores S.A. (Ecuador), and Chief Executive Officer at Salmones Mainstream Chile S.A.

Jorge Tagle Ovalle

- Director - Chilean Identification Number: 10.581.967-6 - Date appointed: April 28, 2016 - Degree in Industrial Engineering from the Pontificia Universidad Católica de Chile and MBA from the Wharton School at Pennsylvania University. He is partner at Altis Servicios Financieros and Board Member at Megeve Investments. He has served as Director of Banchile Administradora General de Fondos S.A. and other companies within the Luksic group, Deputy Chief Executive Officer and Commercial Banking Division Manager at Banco de Chile. He has also served as Executive Vice President at Nexans S.A., Corporate CEO at Alusa S.A., Corporate CFO at Madeco S.A. and New Business Manager at Quiñenco.

The Board meets on a monthly basis to evaluate and guide the development of the company on its economic, environmental and social aspects

BOARD EXPENSES During 2017, the expenses of the Board added up to ThUS$ 370. This includes travel expenses, including national and overseas accommodation, for ThUS$ 128.5, Advisory services for ThUS$ 115, and other general expenses for ThUS$ 126.5. ADVISORY EXPENSES The Board spent ThUS$ 115 in Advisory Services during 2017. BOARD AND DIRECTOR’S COMMITTEE REMUNERATION The Directors and members of the Director’s Committee received a remuneration for participating on the Board of Empresas AquaChile S.A. as follows (US$):

BOARD REMUNERATION (US$)

fig. 54

name

board of directors (attendance fee) 2016 2017

Victor Hugo Puchi Acuña

Chairman

81,775

85,221

executive committee (fixed salary) 2016 2017 84,000

director’s committee (attendance fee) 2016 2017

84,000

total 2016

2017

165,775

169,221

Humberto Fischer Llop

Director

44,563

42,542

84,000

8,681

10,304

137,244

136,846

Mario Humberto Puchi Acuña

Director

40,887

42,611

84,000

124,887

126,611

Alejandro Perez Rodriguez

Director

40,760

38,721

8,667

10,309

49,427

49,030

Bernardo Fontaine Talavera

Director

33,629

42,580

33,629

42,580

Francisco José Puga Matte

Director

22,523

42,662

7,511

10,314

30,034

52,976

Jorge Andrés Tagle Ovalle

Director

33,630

42,478

33,630

42,478

Claudio Fischer Llop

Former director

7,133

María del Pilar Lamana Gaete

Former director

7,284

1,174

8,458

Ex-Former director

7,188

319,372

336,815

252,000

26,033

30,927

597,405

619,742

Piero Solari Donaggio TOTAL

Note: The Ordinary Shareholders' Meeting held on April 28, 2016, changed the Board composition for the following statutory three-year period.

The remuneration of the Board of Directors during the year ended December 31, 2017 amounted to ThUS$ 620 (ThUS$ 575 for the year ended December 31, 2016).

annual report empresas aquachile s.a.

corporate governance chapter 05

ANNUAL REPORT OF THE DIRECTOR’S COMMITTEE Chapter 5.2

Chilean legislation requires to all publicly held corporation to appoint at least one independent director and a Director’s Committee, provided its stock market value is equal to or greater than UF 1,500,000, and at least 12.5% of its voting shares are held by shareholders that individually control or own less than 10% of such shares. The Board has seven members, and three of them are members of the Director’s Committee, which fulfills the functions established by the Law governing Corporations. The Director’s Committee has the authority and duties established in Article 50 bis of Law 18,046 governing Corporations and other appropriate legislation, which include the following:

/ / /

Reviewing external auditor’s reports, and the financial statements submitted by Management to the shareholders. Providing their opinion on these documents prior to shareholder approval. Proposing external auditors to the Board, which will be submitted to the corresponding Shareholders Meeting. Examining and reporting on information that relates to transactions with related parties. Advising the Board whether the external audit company can undertake services that are not part of the external audit, when these are not prohibited.

The requirements relating to director independence are established in the Law governing Corporations and its amendments. A director is considered independent when he/she does not have significant connections, interests, or financial, professional, commercial or credit dependence on the company, or the other companies within the same group, its internal controller, or senior executives, nor family relationships with them, or the other connections referred to in Law 18,046 governing Corporations. As of December 31, 2017, the Director’s Committee is formed by Mr. Francisco Puga Matte (Independent Director), Mr. Humberto Fischer Llop (Director) and Mr. Alejandro Pérez Rodríguez (Director and Chairman of the Director’s Committee).

100

DIRECTOR’S COMMITTEE MANAGEMENT REPORT Membership of the Director’s Committee The Director’s Committee of Empresas AquaChile S.A. was established by Board agreement on May 3, 2012, in accordance with the Law governing Corporations. The current Board was elected at the Ordinary Shareholders Meeting held on April 28, 2016. At a Board meeting held on April 28, 2016, the only Independent Director appointed the other members of the Director’s Committee from the remaining Board members, excluding the Chairman who could not be appointed. Therefore, the Independent Director Mr. Francisco Puga Matte appointed Mr. Humberto Fischer Llop and Mr. Alejandro Pérez Rodríguez as the other two members of the Director’s Committee. At Director’s Committee Ordinary Meeting N° 17 held on May 26, 2016, Mr. Alejandro Pérez Rodríguez was appointed as Chairman of the Committee, and Mr. Humberto Fischer Llop as Vice Chairman. At the same meeting the attorney Alvaro Varela Walker was appointed as the Committee Secretary. The Committee holds ordinary meetings at least every three months, and special meetings as frequently as necessary, as established in the Committee’s Operating Regulations. DIRECTOR’S COMMITTEE MEETINGS During 2017, the Committee met regularly to fulfill its duties as established by law. It held four ordinary meetings and five special meetings, and all of its members attended every one of them. Furthermore, the Committee invited the Chief Executive Officer and the Chief Financial Officer to attend. Also, depending on the matters being addressed, the Internal Controller of the Company was also invited to attend to some meetings.

During 2017, the Committee discussed and advised on the following subjects: the Director’s Committee Annual Management Report; the Internal Controller’s reports; extensions to previously adopted agreements regarding buying shares from third parties in Salmones Chaicas S.A.; reviewing and examining the audited annual financial statements as of December 31, 2016 and the interim consolidated financial statements as of March 31, 2017, June 30, 2017 and September 30, 2017; appointing PricewaterhouseCoopers to undertake the services that are not part of the audit; reviewing senior executive remuneration; reviewing quotes and proposals for external audit services for 2017; reviewing the fraud detection project for acquisitions; reviewing the Internal Controller’s management report; reviewing the Internal Controller's plan for 2018. The Committee approved the annual and interim financial statements on each occasion following their submission by Management, and agreed to recommend their approval at the corresponding Board meeting. The minutes of the Committee meetings held during 2017 were signed by all the participating Directors.

5.- Special Meeting N°21 29/6/17: - Review the Internal Controller’s Report 6.- Special Meeting N°22 27/7/17: - Review senior executive remuneration. - Review the Internal Controller’s operating structure. 7.- Sesión Ordinaria N° 22 31/8/17 - Review and approve the interim consolidated financial statements as of June 30, 2017. - Analyze the procedures to prevent fraud during acquisitions. 8.- Ordinary Meeting N°23 17/11/17: - Review and approve the interim consolidated financial statements as of September 30, 2017. 9.- Special Meeting N°23 28/12/17: - Review the fraud detection project for acquisitions. - Review the Internal Controller’s Management Report. - Review the Internal Controller's Plan for 2018.

The Director’s Committee spent its annual budget for 2017, set by the Ordinary Shareholders' Meeting at US$ 30,927, which covers fees for attending meetings. Meetings summary:

1.- Special Meeting N° 19 01/26/2017: - Review of the Annual Management Report. - Internal Audit Report. - Extending agreements regarding buying shares from third parties in Salmones Chaicas S.A. 2.- Ordinary Meeting N° 20 9/3/17: - Review and approve the audited Annual Financial Statements of 2016 and the Earnings Report for the same exercise. 3.- Special Meeting N°20 30/3/17: - Review quotes and proposals for external audit services for 2017. 4.- Ordinary Meeting N°21 19/5/17: - Review and approve the interim consolidated financial statements as of March 31, 2017. - Appoint PricewaterhouseCoopers to undertake the services that are not part of the audit.

101

annual report empresas aquachile s.a.

corporate governance

MANAGEMENT Chapter 5.3 chapter 05

Víctor Hugo Puchi Acuña Chairman Humberto Fischer Llop Director Mario Puchi Acuña Director Bernardo Fontaine Director

Alejandro Pérez Rodríguez Director Jorge Tagle Director Francisco Puga Director

Alejandro Pérez Rodríguez Chairman of the Board Committee Humberto Fischer Llop Director

Francisco Puga Director

Agustín Ugalde CEO

Francisco Matamala Internal Controller

Álvaro Varela Attorney

Ignacio Sandoval Process Manager Juan Carlos López Farming Manager

Felipe Díaz Freshwater Manager IX & X Region Juan Carlos Puchi Freshwater Manager XI Region Francisco Lepeley Chief Financial Officer

Alejandra Cid Human Resources Manager Vicente de la Cruz Chief Commercial Officer Rodolfo Alvarado Technical Manager

Matías del Campo General Manager AquaInnovo S.A.

Alexis Martínez General Manager Laboratorio Antares S.A.

102

Vicente de la Cruz General Manager AquaChile Inc. Luis Guillermo Vásquez General Manager at Grupo ACI S.A.

Guido Fuentes Operations Manager

SENIOR EXECUTIVES The senior executives at Empresas AquaChile S.A. and subsidiaries as of December 31, 2017 are as follows: José Agustín Ugalde Preuss

- - - -

CHIEF EXECUTIVE OFFICER Chilean Identification Number: 8.209.622-1 Agricultural Engineer Pontificia Universidad Católica de Chile

- CHIEF FINANCIAL OFFICER Francisco - Chilean Identification Number: 8.322.331-6 Lepeley Contesse - Industrial Engineer - Pontificia Universidad Católica de Chile - MBA Chicago University, USA

Vicente de la cruz - CHIEF COMMERCIAL OFFICER weinstein - Chilean Identification Number: 14.122.961-3 - Business Administrator - Pontificia Universidad Católica de Chile

Álvaro Varela Walker

Rodolfo Alvarado Rodríguez

- - - - -

TECHNICAL MANAGER Chilean Identification Number: 7.689.170-2 Agricultural Engineer Pontificia Universidad Católica de Chile MBA Universidad de Chile

Alejandra Cid Peña

- - - -

HUMAN RESOURCES MANAGER Chilean Identification Number: 10.493.106-5 Business Administrator - Certified Public Accountant Universidad de Santiago - Univ. Austral de Chile

Guido fuentes meneses

- - - -

OPERATIONS MANAGER Chilean Identification Number: 13.108.324-6 Industrial Engineer Universidad de la Frontera

- HEALTH MANAGER Claudio Valenzuela Rojas - Chilean Identification Number: 12.202.584-5 - Veterinarian - Universidad Austral de Chile

- ATTORNEY - Chilean Identification Number: 6.017.650-7 - Universidad de Chile; Universidad de Barcelona, Spain

EXECUTIVES AT SUBSIDIARIES:

Management is composed of senior managers that undertake important functions for the Company:

Francisco Javier Matamala Ubilla

- - - -

INTERNAL CONTROLLER Chilean Identification Number: 10.207.093-3 Industrial Engineer Universidad de Santiago

Juan Carlos López - FARMING MANAGER Sebastián - Chilean Identification Number: 11.592.385-4 - Veterinarian - Universidad Austral de Chile - Master in Veterinary Science from Universidad Austral de Chile - MBA Universidad Adolfo Ibáñez Ignacio Sandoval - - Gallardo - -

PROCESS MANAGER Chilean Identification Number: 7.555.354-4 Industrial Engineer Pontificia Universidad Católica de Chile

- - - -

FRESHWATER MANAGER XI REGION Chilean Identification Number: 7.961.289-8 Mechanical Engineer Instituto Nacional de Capacitación

Juan Carlos Puchi Acuña

Luis Felipe Díaz Cortés

- FRESHWATER MANAGER IX & X REGIONS (AQUASAN S.A.) - Chilean Identification Number: 7.014.536-7 - Veterinarian - Universidad Austral de Chile

Alexis Martínez Hernández

- GENERAL MANAGER AT LABORATORIO ANTARES S.A. - Chilean Identification Number: 13.591.140-2 - Biochemist - Universidad Austral de Chile

Luis Guillermo Vázquez Cabezas

- - - -

GENERAL MANAGER AT GRUPO ACI S.A. Identification Number: 0205050466 Business Administrator with a major in Finance Universidad Latina de Costa Rica

Vicente de la Cruz - GENERAL MANAGER AT AQUACHILE INC. Weinstein - Identification Number: 14.122.961-3 - Business Administrator - Pontificia Universidad Católica de Chile Matías del Campo - GENERAL MANAGER AT AQUAINNOVO S.A. Barquín - Chilean Identification Number: 12.636.715-5 - Aquaculture Engineer - Universidad Andrés Bello - Ph.D. in Bioeconomy, Stirling University. UK

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chapter 05

SENIOR MANAGERS REMUNERATION Total gross remuneration received by senior managers at Empresas AquaChile was ThUS$ 4,660 for the year ended December 31, 2017 (ThUS$ 4,953 for the year ended December 31, 2016). Incentive plan Empresas AquaChile and its subsidiaries have an incentive plan based on the Company’s operating performance that consists of an annual bonus payable to its senior executives and other employees who meet the Company’s criteria for inclusion in the plan. This scheme aims to motivate, reward and improve executive and employee loyalty using a formal scheme to reward good individual performance and team work.

HEADCOUNT The headcount of Empresas AquaChile S.A. and its subsidiaries was 4,849 as of December 31, 2017, and was distributed as follows: fig. 55 / fig.56

EXECUTIVE’S AND DIRECTOR’S SHAREHOLDINGS The direct and indirect shareholdings of senior executives and directors in the Company as of December 31, 2017 were as follows: fig. 57

104

STAFF HEADCOUNT - PARENT COMPANY AND SUBSIDIARIES 2017

fig. 55

senior executives administrators and and managers technicians

staff

total

Empresas aquachile s.A.

396

1,066

1,484

Filiales y subsidiarias

542

2,807

3,365

TOTAL

938

3,873

4,849

STAFF HEADCOUNT - NATIONAL AND FOREIGN STAFF

2017

Matriz y Filiales Nacionales Filiales y Subsidiarias Extranjeras Total

fig. 56

senior executives administrators and and managers technicians

785

staff

total

3,122

3,940

153

751

909

938

3,873

4,849

EXECUTIVE’S AND DIRECTOR’S SHAREHOLDINGS

fig. 57

1. senior executives

position

shareholding

Agustin Ugalde Preuss

executive - ceo

Francisco Lepeley Contesse

executive-cfo

Vicente de la Cruz Weinstein

executive - cco

Álvaro Varela Walker

attorney

0.01%

1i. directors

Victor Hugo Puchi Acuña

Chairman of the Board

Majority shareholder

33.74%

Humberto Fischer Llop

Director

Majority shareholder

33.03%

Mario Humberto Puchi Acuña

Director

Majority shareholder

33.03%

Alejandro Perez Rodriguez

Director

Bernardo Fontaine Talavera

Director

Francisco José Puga Matte

Director

Jorge Andrés Tagle Ovalle

Director

*Includes the companies where they are shareholders 105

CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT

Annual Report AquaChile 2017

6.1 Aquachile 6.2 The

and our people

environment

109 116

corporate social responsibility and sustainable development

AQUACHILE AND OUR PEOPLE Chapter 6.1

AquaChile was born in the south of Chile and throughout its history it has always sought to provide stable and high-quality work for its employees, and to improve their well-being and that of their families. Therefore, the Company prefers to recruit locally, and this is evidenced in 2017 by 91.71% of employees living and working in the same area. The Company signed a Labor Relations Cooperation and Strengthening Agreement with its employees in 2017, in order to provide job stability and further strengthen its harmonious and reliable labor relations. This agreement was the result of several conversations with AquaChile’s trade unions and an approach formulated by the National Workers Coordinator for Salmon and Related Industries. This organization was formed after the algal bloom, by trade unions from several companies in the sector, in order to protect jobs in the sector. The Company currently provides its employees with several benefits including life insurance, complementary health insurance, dental agreements, collective private health insurance agreements, cancer treatment insurance, staff transfer services, and other benefits. At Christmas it provided gifts for people hired as of November 30 (3,488 employees), and toys for the children up to 12 years old of employees hired as of November 30. AquaChile provided various benefits to its employees during 2017, such as financing ophthalmological, medical, gynecological and dental surgery, and influenza vaccinations, which benefited over 480 people. As in previous years, the Company ran the "My kids meet my Company" program, where visits were organized during winter vacations for children to discover more about the place where their parents work, and learn about the salmon production process. A total of 150 children visited the Cardonal and Calbuco plants. Additionally, during 2017 the "Getting to know my Company” program was again carried out, and administrative staff visited the Abtao and Chidhuapi farming centers twice. Furthermore, throughout the year various celebrations were held, including the celebration of Mother’s Day, Women’s Day, and Independence Day.

109

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chapter 06

TRAINING Continuous employee training is a priority for AquaChile. During 2017, 2,400 employees participated in 63,896 hours of training, where courses covering international standards represented 49.8% of all training hours. Other courses relating to certified compliance with standards, job skills, and occupational health and safety were carried out. Employees at processing plants received the most training in 2017, with a total of 51,687 hours (80.89% of total hours). The courses included:

/ / / /

Good Manufacturing Practices: A course covering international standards, which was inspected by Sernapesca. It is run every year at the processing plants and was attended by 1,712 people. Operational Sanitation Procedures: A course covering international standards, involving 1,512 employees from processing plants. Healthy Lifestyle: A job skills course, which was attended by 260 employees from the Cardonal plant. Occupational Risks Prevention: An Occupational Health and Safety course for 623 employees in processing plants.

During 2017, AquaChile received two awards from the National Training and Employment Service (SENCE) for its training programs, specifically for the number of people it trained. AquaChile was also invited by the SENCE Regional Director of Los Lagos Region to participate as panelists at the "Human Capital: a journey to extraordinary worldsâ&#x20AC;? meeting, where the Company gave a presentation on its training courses for 2017.

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annual report empresas aquachile s.a.

EMPLOYEE SAFETY Occupational health and safety management for 2017 focused on monitoring and eliminating critical risks and reinforcing behavioral change, through campaigns and training aimed at preventing accidents, and training employees to become occupational health and safety monitors. chapter 06

The Mutual de Seguridad organization awarded AquaChile a prize during 2017 for its outstanding Risk Prevention and Occupational Safety Management. This was the result of a 57% reduction in the number of occupational accidents and diseases between 2014 and 2016. The Company conducted job rotation, guided compensatory exercise routines (pauses), and training in high risk tasks, as part of its concern for occupational health and safety. AquaChile has an Occupational Health and Safety Management program based on a systematic working process in the Company's operations. It also has a special regulation for contractors and subcontractors, as protecting the lives of those who work at the Company is a central and universal concern for Management. The main initiatives include the following:

/ / /

Improve preventative communication within the organization, where each supervisor has direct contact with employees in the field, by developing safe working practices, based on the value of safety for all who work at the Company. Outstanding performance in this area was rewarded. Encourage occupational health and safety leadership. This involved including safety within the decision-making process, reducing risks at their source, incorporating the lessons learned, and simplifying and improving processes. Develop a preventive culture, by training employees to understand that a safe job is a job well done, based on compliance with procedures and vital safety regulations, while strengthening the management of Joint Hygiene and Safety Committees. Provide safe working environments and the equipment and tools required by employees to carry out their functions in a healthy and safe manner, through continuous risk identification processes and incident management at all productive units, in order to promptly communicate the measures that will prevent incidents from recurring at any Company facility.

Furthermore, the "Stop, think and act" campaign was run during 2017, which urged all employees to identify the risks involved in performing their tasks, and take measures to protect their own safety. 1,028 people participated in this campaign. The accident rate increased slightly in 2017 (0.05 points) compared to 2016, due to an increase in the number of minor injuries to seasonal staff.

TASA DE ACCIDENTABILIDAD 2012

2013

2014

2015

2016

2017

3.95

3.78

3.5

3.52

2.82

2.87

Accident Rate: Number of accidents (excluding accidents to and from work)/ Average number of employees x 100

112

LOCAL COMMUNITIES AquaChile is committed to the communities that neighbor its facilities, moreover it prefers to recruit locally and engages in cooperative activities with local communities. Specifically, community meetings were arranged during 2017, in order to help neighbors to understand its business, to resolve some of their doubts and to establish direct communication channels. This developed closer ties with the neighborhood associations, schools and municipalities that are close to our farming centers and processing plants. Education was a focus in 2017, and the Company participated in three initiatives: /

An annual agreement with the NGO Canales. This foundation aims to strengthen technical education and provide equal access to education. It operates in 26 municipalities in four Chilean regions: Los Ríos, Los Lagos, Aysen and Magallanes. The "Connecting Education and Business" program aims to connect technical and professional colleges with companies. AquaChile actively participated during 2017, and provided its hatcheries, farming centers and processing plants for students to experience the salmon producing process. Over 72 students visited AquaChile hatcheries and processing plants, while three senior highschool students obtained an internship through this program. An annual agreement with the Enseña Chile Foundation, who seeks to overcome the educational gap in Chile by selecting and preparing professionals from various disciplines to teach students from Seventh grade to Highschool Senior grade at remote and highly vulnerable schools. This program runs at 19 schools with 42 professionals taking part in classes within municipalities such as Los Muermos, Puerto Varas, Puerto Montt, Ancud, Castro, Quinchao, Chonchi and Quellón, Coyhaique, Puerto Aysen and Villa Cerro Castillo. A semi-annual agreement with the Calbuco Polytechnic college, which provided more than 500 hours of training to 40 Senior students who are studying Aquaculture, Industrial Mechanics and Industrial Food Handling. Each student was given the opportunity to take five different courses, undertake internships at the AquaChile plant in that municipality, attend lectures and finally to do their practical placement there.

For the second consecutive year AquaChile participated in a scholarship program, together with other companies in the industry, helping young people from Melinka to finish their senior high school studies in Chiloé or Puerto Montt. This support scholarship is paid every month to students that have been selected and registered by the municipality to receive this benefit. It benefits close to 300 students from the municipality. AquaChile contributed to constructing a health care center for indigenous communities in the Caburga area. It supported visiting medical services for remote locations, especially in Huapi, Abtao and Butachauques, and participated in medical services undertaken by SalmonChile in agreement with universities (Isla Cailín, Quellón) by providing transportation and logistics. The Company joined the "Octay Boats" initiative, which encourages lake-based activities for the community around Puerto Octay through the construction of amateur yachts, sailing lessons for young people, and their subsequent participation in various sailing races on Lake Llanquihue. This initiative benefited 15 families within this community. AquaChile sponsored various sporting events, such as the 2017 Chiloé Cycle Tour II, donating the Castro team uniform and rewarding the best Chiloé athlete; a family run, organized by the Chilean Navy at Puerto Cisnes where over 100 people participated; and the sponsorship to Deportes Puerto Montt football team throughout the season, by paying for advertising on giant screens at their Chinquihue stadium. In addition to these activities, AquaChile aims to foster a good neighborly spirit. Therefore, the Company’s employees, particularly in the more remote farming centers, have established cooperative links with local communities. An example is the daily shuttle service using the Company's boats that takes teachers from Piedra Blanca (in Quellón) and from Huapi and Abtao island (in Calbuco) to their schools. The Company also cooperates during medical emergencies, while weekly and monthly visits of medical services and priests are personally coordinated by boat operators and farming center managers. At Christmas, gifts were distributed to over 250 children from the Huelpun and Piedra Blanca municipalities in Quellón, from Queullin island in Calbuco, from the El Bosque community in Cochamó and from Tentelhue, Punta Nao, Puntilla Urón, Rolecha and Quetén in the Hualaihue municipality, and Christmas gifts were also distributed to all the teachers at the Bernardo O'Higgins School, close to the Calbuco plant.

During 2017, 27 students undertook their internships in AquaChile departments. The Company has also implemented an open-door policy in order to help the local community understand the stages involved in processing salmon. Over 340 people, including elementary school children, junior and senior high school children, university students, neighbors, and even traditional market vendors visited AquaChile hatcheries, farming centers and processing plants in 2017.

113

114

DIVERSITY IN THE BOARD, GENERAL MANAGEMENT AND THE ORGANIZATION HEADCOUNT BY GENDER woman

HEADCOUNT BY NATIONALITY chilean

men

foreing

4.849

board

7 managers

staff

board

managers

staff

HEADCOUNT BY AGE RANGE women - age

board of directors

Less than 30 30 - 40 41 - 51 51 - 61 61 - 70 over 70 Total

managers

staff 516 625 481 209 31 2 1,864

1 1

men - age

Less than 30 30 - 40 41 - 51 51 - 61 61 - 70 over 70 Total

3 4

6 22 6 2

960 934 655 348 82 6 2,985

HEADCOUNT BY LENGTH OF SERVICE women - age

board of directors

less than 3 3-6 6-9 9 - 12 over 12 Total

managers

staff

1 2

1,253 454 46 41 70 1,864

9 9 2 4 12 36

1,751 670 189 116 259 2,985

men - age

less than 3 3-6 6-9 9 - 12 over 12 Total

3 1

3 7

GENDER WAGE GAP BY AVERAGE BASIC SALARY proportion women to men

executive administrative technical operative Total

Total

0.53 0.81 0.64 0.93 0.73

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annual report empresas aquachile s.a.

corporate social responsibility and sustainable development

chapter 06

THE ENVIRONMENT Chapter 6.2

Caring for the environment is one of the pillars of AquaChileâ&#x20AC;&#x2122;s operations. Therefore, it adopts voluntary commitments with the aim of preserving the environment and complying with standards that exceed those required by the authority. For example, the Company, together with other entities, signed a Clean Production Agreement in 2015, to support the conservation of blue whales and large cetaceans in Northern Patagonia. The guidelines and indicators contained in this Agreement were updated in 2017, in conjunction with the Universidad Austral de Chile, WWF and other participants. The number of satellite transmitters to trace their migratory habits was increased from 5 to 20 units, which are expected to be installed during 2018 by a team from the Blue Whale Center. During 2017, 64 Environmental Reports (INFA) were prepared in conjunction with Sernapesca, which analyze the environmental conditions at each farming center. Monitoring activities took place two months before the harvest began (when the biomass reaches its maximum), or prior to smolt stocking. The Company doubled the number of studies, and completed 65 additional INFAs. It also introduced the use of microscopes at the marine farming centers during 2017, in order to examine microalgae on site. It provided training for professionals at farming centers to help them take immediate action when events such as algal blooms occur, thus minimizing the environmental and productive risks. AquaChile is constantly monitoring the potential effects that our operations can have on the environment, and we regularly meet with people from our local communities. We have also established a communication channel, named "Your opinion is important to us", to listen to our neighborâ&#x20AC;&#x2122;s suggestions. This channel includes a toll-free number (800 700 100) and an e-mail: suopinion@aquachile.com. During 2017, and in collaboration with a team of British entrepreneurs, the company made progress in the development of an artificial intelligence tool - that draws on information provided by cameras

116

at the production units- aimed to "learn" from the fish movement, and be able to understand when it is prudent to suspend or resume feeding. Therefore, optimizing this process and minimizing the impact on the ocean floor, by giving the fish just the right amount of food. A Liquified Natural Gas supply station was installed at the access dock of the Punta Aguada farming center in the Aysen Region, with the aim of supplying fuel to the outboard engines on the boats serving this farming center. Using gas instead of petrol reduces the impact of these boats on the environment. Two similar facilities will be the installed during 2018, to ensure that all the boats in the Aysen Region will be converted to gas by the end of the year. Furthermore, 60% of the boats used by the Company in the Los Lagos Region use this fuel. As in previous years, in 2017 AquaChile participated in the International Beach Cleaning Day, which was held at the end of September. The beaches where Company staff participated were Lake Villarrica, Chinquihue beach in Puerto Montt, Reloncaví Estuary, Rio Negro in Hornopiren, and Puerto Cisnes. AquaChile also took part in the “United for the Estuary" campaign, which brought together the community, trade unions, associations, the municipality, and salmon and mussel farming companies, to clean this coast. Other activities related to environmental care, where the company took part, were oriented to involve the community in the reuse of discarded equipment from the industry. These included a collaboration with members of the horticulture committees of Rio Claro and Coyhaique Bajo on the "Reusing salmon industry materials to grow vegetables" project that was launched by the Ministry of the Environment. Through this project, discarded equipment was transformed into materials for the construction of greenhouses, perimeter fences and rainwater collection tanks. The Company donated various materials that were reused by the community, for example floating corridors used at farming centers gained a new life when transformed into pedestrian bridges or piers; bins were converted into rainwater collection tanks; and pipes were converted into complete irrigation systems or perimeter fences. AquaChile together with the Cisnes municipality, the Ministry of Environment, WWF and the Raúl Marín Balmaceda community took part in the definitions of the management strategies for the Protected Marine Area at Pitipalena and Añihué, in the Aysen Region. The Company participated in meetings aimed to reach agreements that secure responsible salmon farming in this area, and took this as an opportunity to prove that salmon farming is compatible with these conservation objectives. Following these efforts, the Company became a supporting partner of the Pitipalena and Añihue Protected Marine Area Foundation, and makes annual donations of resources that are used to carry out studies and undertake maintenance and preservation tasks in the area.

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annual report empresas aquachile s.a.

WASTEWATER TREATMENT IN 2017

WASTE AND EFFLUENTS

chapter 06

During 2017, 75.6% of the waste generated by the Company corresponded to organic fish waste generated by its processing plants and by the fish mortality at farming centers and hatcheries. This type of waste is almost completely reused in the production of fishmeal and fish oil.

HATCHERIES

PRIMARY TREATAMENT

FINAL DESTINATION OF WASTE

166,677,070 M3/year

destination

quantity (ton)

Recycling Authorized Hazardous Waste Landfill Authorized Non-Hazardous Waste Landfill

percentage (%)

35,158.7

76.6%

590.7

1.3%

10,129.5

22.1%

Recycled Organic Waste

34,687.6

75.6%

Total

45,878.9

100%

All the water used by the Companyâ&#x20AC;&#x2122;s productive processes is subsequently treated in accordance with the wastewater emission standards for each type of establishment.

PLANTS

PRIMARY TREATAMENT 1,003,172 M3/year

Wastewater treatment in 2017

Facilities

m3/year

Primary treatment

17 hatcheries

166,677,070

Primary treatment

5 Plants

1,003,172

CERTIFIED COMPLIANCE WITH INTERNATIONAL STANDARDS AquaChile is constantly working to obtain certifications covering the various stages of its productive processes, such as hatcheries, farming centers and processing plants. These high standards address very important issues for the Company, such as: compliance with legislation, corporate social responsibility, employee safety and rights, Global Food Safety Initiative awards, water and effluent quality, fish feed management, controls to stop fish escapes, biodiversity and conservation, chemical and waste management, drug use, animal health and welfare, biodiversity and disease management, food safety, quality assurance, and identification and traceability. An important event this year was the achievement of the Aquaculture Stewardship Council certification. By the end of 2017, AquaChile

118

was ASC certified and completed the audit process for several other farming centers that are applying for this certification. Compliance with these standards ensures that: the fish production process at a particular farming center meets the current health, environmental and employment standards; that it complies with the best productive and operative practices; and that it has developed close relationships with local communities. Processing plants are also audited by some customers, to verify that they comply with high standards relating to food safety, environmental care, occupational health and safety, employment legislation, and quality assurance, among others.

CERTIFICATIONS ACHIEVED BY EMPRESAS AQUACHILE DECEMBER 2017 CHILE

municipality

HACCP

BAP

ASC

BAP

ASC

BASC

Seafood Watch

IFS

GLOBALG.A.P. CoC ASC Kosher Halal

NCh 17025

Laboratories Puerto Montt Alab Processing Plants Puerto Montt Cardonal Calbuco Procesadora Aguas Claras (1) Chonchi Antarfood Chonchi Guafo Quellón Salmones Cailin Freshwater Facilities Puerto Varas Rio Maullin Puerto Octay Agua Buena Quemchi Aucar Puerto Montt Salmones Chaicas Puerto Varas Ensenada Puerto Varas Rio Las Marcas Cochamó Rio Rollizo Corral Halcones Chicos Sea Farms En X y XI regiones Verlasso Quellón Mauchil Quellón Punta Paula Cisnes Benjamin Cisnes Caleta Madina Cisnes Canal Temuan Cisnes Cascada Cisnes Punta Porvenir Cisnes Canalad 1 Hualaihué Ensenada Queten Puerto Montt Puqueldón Puerto Montt Capera Puerto Montt Huenquillahue Puerto Montt Huelmo Calbuco Abtao Puqueldón Detif Quellón Yatac Cisnes Canal Pérez Norte Cisnes Valverde Guaitecas Betecoi Cisnes Pangal 1 Cochamó Serapio Quemchi Chauques Calbuco Quilque Sur

CHILE

Processing Plants Terrapez S.A Freshwater Facilities Aquacorporacion Internacional S.A Sea Farms Aquacorporacion Internacional S.A

municipality

FSSC 22000

Esencial COSTA RICA

CoC ASC

Cañas Cañas Cañas

Certified Audited in November 2017. Waiting for results and certificates Audited in December 2017. Waiting for results and certificates. (1): Aguas Claras was certified under SQF until May 8th, 2017, when the standard was replaced by IFS

119

INFORMATION REGARDING SUBSIDIARIES, ASSOCIATES AND INVESTMENTS IN OTHER COMPANIES Annual Report AquaChile 2017

7.1 Subsidiaries

and Associates

122

annual report empresas aquachile s.a.

information regarding subsidiaries, associates and investments in other companies chapter 07

SUBSIDIARIES AND ASSOCIATES Chapter 7.1

Empresas AquaChile S.A. is the parent company that consolidates the participation in the remaining firms that form the group. Operationally, it is dedicated to farm, process and market salmon and trout. The subsidiary Grupo ACI, in Costa Rica, is dedicated to the production of tilapia. The associates Alitec Pargua S.A., in Chile, and Biomar Aquacorporation Products, which is a subsidiary of Grupo ICA in Costa Rica, are dedicated to the production of fish feed. While the subsidiary AquaInnovo is dedicated to the aquaculture genetics business. ORGANIZATIONAL STRUCTURE AS OF DECEMBER 31, 2017 Empresas AquaChile S.A. runs its business directly and through related companies in the group, as follows:

OPERATIONAL DIAGRAM OF EMPRESAS AQUACHILE S.A. AND ITS SUBSIDIARIES

fig. 58

empresas aquachile s.a 100.00%

100.00%

50.00%

79.96

empresas

inversiones

antarfish

aquachile

Salmones

alitec

grupo

salmones

antarfish

s.a.

inc.

Chaicas S.A.

pargua

aci s.a

australes ltda.

ltda (2)

(3)

s.a.

(4)

aquachile s.a.

100.00%

Aquainnovo Laboratorio s.a.

Antares s.a.

(1)

salmon and trout

feed

tilapia

Genetics and Laboratory Freshwater Production Marine Production Process Marketing Feed

122

(1): Includes AquaChile S.A., Salmones Cailín S.A., Salmones Australes S.A., Salmones Maullín S.A., Salmones Maullín Ltda., Acuícola El Volcán Ltda., Piscicultura Aquasan S.A. and Procesadora Hueñocoihue (2): Includes: Aguas Claras S.A. and Antarfood S.A. (3): Includes Servicios Aguas Claras S.A. and Procesadora Aguas Claras Ltda. (4): Includes Aquacorporación Internacional S.A., Terrapez S.A., Aquacultura del Pacífico S.A., RFA Inc., Aquapanamá S.A., Biomar AquaCorporation Products S.A. and Aquasea de Costa Rica S.A.

genetic

laboratory

annual report empresas aquachile s.a.

EMPRESAS AQUACHILE S.A. chapter 07

The parent company that consolidates the companies within the group. It is operationally dedicated to salmon and trout farming, processing and marketing. Marketing is carried out directly in Asia, Europe, Latin America and the USA. The latter market is served by the subsidiary AquaChile Inc., based in Miami. The Company produces Atlantic salmon, Pacific salmon and trout, and it has marine facilities and enough concessions to meet its current and future harvest volumes. Its finished products are produced at its plant in Puerto Montt as well as in other group processing plants. I.- GENETICS AND BREEDERS: AquaInnovo S.A. > This company is dedicated to genetic and biotechnology R&D, based on AquaChile’s genetic improvement projects. It is financed by competitive non-refundable grants from the Chilean Economic Development Agency (CORFO), through the Business Innovation Sub Committee at Innova Chile. AquaInnovo S.A. was born in the salmon industry as an investment project, worth US$ 10,000,000, that encompasses all potential developments in aquaculture. The project aims to become a genetic benchmark for both national and international salmon industry. Today Empresas AquaChile wholly owns this company. Salmones Chaicas S.A.> It operates a technologically advanced recirculation hatchery- located 30 km to the south of Puerto Montt- that produces Atlantic salmon breeders, eggs and smolts. It has a production capacity of 120 million eggs and 4.2 million smolts at the first stage, to total 12.6 million smolts at its full capacity. Empresas AquaChile acquired all the shares in this company in February 2017. II.- SALMONID PRODUCTION: Empresas AquaChile S.A. is the parent company and is described above. Salmonid production takes place at several of its subsidiaries: Inversiones Salmones Australes Ltda. > A subsidiary of Empresas AquaChile S.A., which controls the following companies: AquaChile S.A. > It is dedicated to producing salmon fry and smolts in freshwater, mainly for Empresas AquaChile S.A. This company has facilities on land, lakes and estuaries in the Metropolitan Region and between the Ninth and Eleventh Regions. Fry production covers the three species marketed by the parent company, and eggs are primarily supplied by Salmones Chaicas S.A. AquaChile also buys eggs through third party contracts. Salmones Australes S.A. > It has installed capacity for the sea farming of salmon. Its grow-out centers are around Chacabuco, in the Aysen Region. It is only involved in the growing-out stage. Salmones Cailín S.A. > It operates a processing plant in Quellón, Chiloé Island. This plant initially provided processing services to third parties. Its processing capacity is predominantly used to process Pacific salmon for Aguas Claras S.A., and Atlantic salmon for Empresas AquaChile S.A.

124

Salmones Maullín S.A. > It has fresh water and marine facilities that are leased to other group companies to produce Atlantic salmon smolts and salmon and trout in the sea. It also has a processing plant, which is currently not operational. Antarfish S.A. > It provides administration services, and its subsidiaries are Servicios Aguas Claras S.A. and Procesadora Aguas Claras Ltda, which has a processing plant in Calbuco. Its processing capacity is mainly being used by Empresas AquaChile S.A. subsidiaries to process trout. Aditionally Empresas AquaChile S.A. owns the subsidiary Inversiones Antarfish Limitada, through which it controls the following companies that form an integral part of the salmon and trout farming process. Aguas Claras S.A. > It has sufficient marine resources to sustain its current production and future growth. It is dedicated to the production of trout and Pacific salmon. It also has sufficient fresh water resources to meet its own requirements, either through its own resources or by subcontracting some of the fresh water production stages to AquaChile S.A. or Aquasan S.A. Its production is processed at plants operated by its subsidiaries Antarfood S.A., Procesadora Aguas Claras Ltda, Procesadora Hueñocoihue SpA, or at plants operated by other group companies.

Inc., which operates in Florida, USA, and Terrapez S.A., which is dedicated to tilapia processing. These companies operate complementary businesses: AquaCorporación Internacional S.A. produces tilapia at its own farms in Cañas; Terrapez S.A. processes tilapia at its own facilities, also in Cañas; and finally, the production is mostly sold to RFA Inc., which sells these products throughout the North American market. V.- FISH FEED PRODUCTION: Alitec Pargua S.A. > Empresas AquaChile, in partnership with Biomar -a world leader in animal nutrition- produces fish feed at this company located in Pargua, Los Lagos Region in Chile. The plant has sufficient capacity to produce 126,000 tons of feed per year. Biomar Aquacorporation Products > Grupo ACI, in partnership with Biomar, produces fish feed at this company in Cañas, Guanacaste in Costa Rica. The plant has sufficient capacity to produce 50,000 tons of feed per year.

Antarfood S.A. > It has a processing plant in Chonchi, Chiloé Island. This plant initially provided processing services to third parties. Its processing capacity is mainly being used by group companies, such as Aguas Claras S.A. and Empresas AquaChile S.A. III.- MARKETING AND SALES IN THE USA: AquaChile Inc. > This subsidiary was incorporated in Miami, USA, and is dedicated to market and sell the products of Empresas AquaChile S.A. and its subsidiaries in the USA. IV.- TILAPIA PRODUCTION: Grupo ACI S.A. (AquaCorporación Internacional) > It is based in Costa Rica and has been part of the tilapia industry for over 30 years. Its commercial strategy focuses on supplying fresh tilapia to large supermarket chains, distributors and restaurant chains in the USA. Grupo ACI S.A. is dedicated to the production and market of tilapia. It has a tilapia hatchery and processing plant in Cañas, Guanacaste, Costa Rica. Grupo ACI S.A. controls the following companies: RFA

125

annual report empresas aquachile s.a.

chapter 07

ORGANIZATIONAL STRUCTURE AS OF DECEMBER 31,

99.9999%

empresas aquachile s.a.

99.99938% 0.000011%

99.9727% 65.60%

aguas claras s.a.

49.0000%

7.00%

99.9908%

99.9816%

126

antarfood s.a.

0.0184%

salmones australes s.a.

procesadora aguas claras s.a.

c. de innovacion aquainnovobiomar s.a

50.9999%

0.0092%

laboratorio antares s.a.

0.13%

aquainnovo s.a.

99.87%

0.01%

0.0273%

99.99%

servicios aguas claras s.a.

99.8751%

58.38

aquachile s.a.

70.00%

inversiones antarfish ltda.

antarfish s.a.

0.0001%

34.40%

0.1249%

99.999989%

inversiones salmones australes ltda.

82%

99.99998%

100%

79.95857%

salmones maullín s.a.

Aquachile INC.

grupo aci s.a.

41.618%

50.00% alitec pargua s.a.

salmones cailín s.a.

0.00002%

0.00003%

piscicultura aquasan s.a.

99.93%

cultivos acuícolas el volcán ltda.

0.07%

99.99997% 100.00%

procesadora hueñocoihue spa.

99.946%

0.01%

salmones maullín ltda.

salmones chaicas s.a.

0.054%

99.99%

100.00%

aquacorporación intl s.a.

100.00%

terrapez s.a.

100.00%

aquacultura del pacífico s.a.

100.00%

Rain Forest Aquaculture Inc

50.00%

biomar aquacorporation products s.a.

100.00%

acuapanamá

100.00%

Acuatecnología CR S.A.

100.00%

Administradora de Acuicultura S.A.

127

annual report empresas aquachile s.a.

Company

Business Purpose

chapter 07

I. SALMONID PRODUCTION Inversiones Salmones Australes Ltda.

a) Invest in companies, whether Chilean or foreign, civil or commercial, collectives, limited partnerships, limited liability companies or corporations, which are dedicated to extracting, fishing, hunting, breeding, cultivating, capturing, freezing, cooling, preserving, preparing, reducing, transforming, exploiting, marketing, industrializing and distributing any water-based life form; making fishmeal and fish oil and their derivatives; generally benefiting from the fishing industry and its derivatives; making canned food and other consumer or industrial products; generally benefiting from, industrializing and using any marine products and their derivatives; and anything directly or indirectly related to these objectives, in order to develop these companies businesses and those that they invest in. b) Provide services related to technical, commercial, economic, administrative and financial activities that directly or indirectly relate to the companyâ&#x20AC;&#x2122;s purpose, including those related to fishing and aquaculture, either directly through the company, or indirectly through other companies. Execute any transaction or business approved by the shareholders and related to these objectives.

128

AquaChile S.A.

In the broadest sense benefit from any hydro-biological resource, through cultivation, production, distribution, marketing, industrialization, extraction, import and export, for itself or on behalf of third parties; provide related training and advice, carry out research and develop technologies.

Salmones Australes S.A.

Benefit from aquaculture and any related activity, either directly or through third parties; carry out fishing, including freezing and processing any water-based life from; manage concessions, including those in the sea, inland waterways, lakes, at piers, on the sea bed, for fishing and at beaches and any other place that fulfills these objectives, including importing and exporting goods.

Salmones CailĂn S.A.

Undertake sea fishing using owned or third party boats and equipment; purchase, lease and generally acquire any kind of fishing vessel; acquire and install plant and machinery to industrialize fish, seafood and their by-products or derivatives; sell and distribute its own products or those of third parties, in Chile and abroad; and install equipment, hatcheries, and any other activity related to the fishing industry. Invest in other companies, even if they are not dedicated to fishing and form alliances with any other individuals or legal entities to buy shares in already established companies and become part of them. Generally undertake any activity and business that appropriately fulfills these objectives.

Main Contracts with the Parent Company

n.a.

Supply smolts and provide outsourced aquaculture concession services

Provide outsourced or leased aquaculture concession services.

Provide outsourced or leased aquaculture concession services and outsourced processing services.

Direct and Indirect Ownership

99.9999%

99.9994%

Share Capital (ThUS$)

Percentage of Net Equity Net Income Parent Legal Company’s Representative (ThUS$) (ThUS$) Assets

38,088

103,864

52,069

42,654

14,287

-192

Board of Directors

Agustín Ugalde Preuss

n.a.

11.0%

Agustín Ugalde Preuss

Víctor Hugo Puchi Acuña Humberto Fischer Llop Mario Puchi Acuña Agustin Ugalde Preuss Francisco Lepeley Contesse

Humberto Fischer Llop Mario Puchi Acuña Agustin Ugalde Preuss Francisco Lepeley Contesse

Agustin Ugalde Preuss Francisco Lepeley Contesse Juan Carlos López Sebastián

14.2%

100%

2,535

3,016

378

0.9%

Agustín Ugalde Preuss

100.0000%

7,400

8,486

-134

1.5%

Agustín Ugalde Preuss

129

annual report empresas aquachile s.a.

Company

Business Purpose

Salmones Maullín S.A.

(i) Extracting, fishing, hunting or farming any water-based life form, including marine and freshwater aquaculture; (ii) freezing, preserving, preparing and transforming these life forms; (iii) constructing or repairing industrial or commercial fishing vessels; (iv) manufacturing, processing, or preparing food or other products; (v) providing any service; (vi) marketing products or merchandise, including by representing Chilean or foreign entities; (vii) investing in other companies, legal entities and associations; (viii) any other related, ancillary or complementary activities, as agreed by the shareholders. The company may act on its own or on behalf of third parties, within Chile or abroad.

chapter 07

Salmones Maullín Ltda.

Cultivos Acuícolas El Volcán Ltda.

Piscicultura Aquasan S.A.

Extracting, fishing, hunting or farming of any water-based life form, including marine and freshwater aquaculture; (ii) freezing, preserving, preparing and transforming these or other life forms; (iii) constructing or repairing industrial or commercial fishing vessels; marketing, importing and exporting products and merchandise, including by representing Chilean or foreign entities. Manufacturing products and providing services. Investing in other companies or legal entities and any other activity approved by the shareholders.

Extracting, fishing, hunting or farming of any water-based life form, including marine and freshwater aquaculture; freezing, preserving, preparing and transforming these or other life forms; constructing or repairing industrial or commercial fishing vessels; marketing in Chile or abroad its own products or those produced by similar companies; and investing in other companies or legal entities, regardless of their objectives.

Farming, breeding, producing, developing, capturing and marketing any waterbased life form, whether in the sea, lakes or rivers; industrializing, preparing, processing, preserving, freezing, dehydrating, packaging, marketing, exporting and importing these life forms; commercially benefiting from these products; developing, researching and implementing procedures and techniques for breeding and artificially reproducing any salmonid species; provide outsourced breeding and processing services; and constructing equipment related to undertaking and marketing aquaculture.

Salmones Chaicas S.A.

Procesadora Hueñocoihue Spa.

130

Processing fish, especially salmon, managing processing plants, and any other related activity unanimously agreed by the shareholders.

Main Contracts with the Parent Company

Direct and Indirect Ownership

Share Capital (ThUS$)

Percentage of Net Equity Net Income Parent Legal Company’s Representative (ThUS$) (ThUS$) Assets

Board of Directors

Supply smolts and provide outsourced processing 100.0000% services

27,632

5,473

498

0.8%

Agustín Ugalde Preuss

Víctor Hugo Puchi Acuña Humberto Fischer Llop Mario Puchi Acuña Agustin Ugalde Preuss Francisco Lepeley Contesse

Supply smolts and provide outsourced or leased 100.0000% aquaculture concession services.

13,514

-4,499

277

3.9%

Agustín Ugalde Preuss

n.a.

100

0.2%

Agustín Ugalde Preuss

n.a.

Luis Felipe Díaz Cortés

Mario Puchi Acuña Humberto Fischer Llop Agustin Ugalde Preuss Francisco Lepeley Contesse Juan Carlos López Sebastián

Provide outsourced or leased aquaculture concession services.

Supply smolts.

100.0000%

4,843

-1,715

639

7.1%

Supply smolts.

100.0000%

7,100

6,637

-87

4.4%

Provide outsourced processing services

100.0000%

593

-7,477

-704

1.0%

Víctor Hugo Puchi Acuña Humberto Fischer Llop Mario Puchi Acuña Agustin Ugalde Preuss Francisco Lepeley Contesse

n.a.

131

annual report empresas aquachile s.a.

Company

Business Purpose

chapter 07

Aguas Claras S.A.

Farming, breeding, producing, extracting, fishing, capturing, freezing, cooling, preserving, preparing, reducing, transforming, marketing, industrializing, packaging and distributing any water-based life form, including eggs; manufacturing preserves; preparing fish feed, fishmeal, fish oil and their derivatives; generally benefiting from, industrializing and marketing any marine product; and undertaking anything directly or indirectly related to these objectives.

Inversiones Antarfish Ltda.

Antarfood S.A.

Antarfish S.A.

132

Providing services related to the aquaculture, fishing and manufacturing industries; farming, breeding, producing, extracting, fishing, capturing, freezing, cooling, preserving, smoking, preparing, reducing, transforming, marketing, industrializing, packaging and distributing any water-based life form, including eggs; breeding, fattening and marketing any other animal species; manufacturing food; manufacturing preserves; preparing feed for fish or other living beings; benefiting from, industrializing and marketing any marine or animal product and their derivatives; and any other related activity agreed by the shareholders.

Extracting, fishing, hunting, breeding, cultivating, capturing, freezing, cooling, preserving, preparing, reducing, transforming, exploiting, marketing and distributing any water-based life form; making fishmeal and fish oil and their derivatives; generally benefiting from the fishing industry and its derivatives; making canned food and other consumer or industrial products; generally benefiting from, industrializing and using any marine products and their derivatives; and anything directly or indirectly related to these objectives.

Main Contracts with the Parent Company

Provide outsourced or leased aquaculture concession services.

n.a.

Provide outsourced processing services

Providing administrative services.

Direct and Indirect Ownership

Share Capital (ThUS$)

Percentage of Net Equity Net Income Parent Legal Company’s Representative (ThUS$) (ThUS$) Assets

Board of Directors

100.0000%

19,275

20,568

18,950

11.3%

Agustín Ugalde Preuss

Víctor Hugo Puchi Acuña Humberto Fischer Llop Mario Puchi Acuña Agustin Ugalde Preuss Francisco Lepeley Contesse

100.0000%

15,996

11,795

11,510

1.6%

Agustín Ugalde Preuss

n.a.

Agustín Ugalde Preuss

Víctor Hugo Puchi Acuña Humberto Fischer Llop Mario Puchi Acuña Agustin Ugalde Preuss Francisco Lepeley Contesse

Agustín Ugalde Preuss

Humberto Fischer Llop Mario Puchi Acuña Víctor Hugo Puchi Acuña Agustin Ugalde Preuss Francisco Lepeley Contesse

100.0000%

2,978

925

-3,345

14,572

-920

9,574

1.6%

2.5%

133

annual report empresas aquachile s.a.

Company

Business Purpose

chapter 07

Procesadora Aguas Claras Ltda.

Farming, breeding, producing, extracting, fishing, capturing, freezing, cooling, preserving, smoking, preparing, reducing, transforming, marketing, industrializing, packaging and distributing any water-based life form, including eggs; breeding, fattening and marketing any other animal species; manufacturing food; manufacturing preserves; preparing feed for fish or other living beings; benefiting from, industrializing and marketing any marine or animal product and their derivatives; developing agricultural, livestock keeping and agro-industrial activities; and any other activity agreed by the shareholders.

Servicios Aguas Claras S.A.

Providing services and advice related to the aquaculture, fishing and manufacturing industries; farming, extracting, fishing, capturing, freezing, cooling, preserving, smoking, preparing, reducing, transforming, industrializing, packaging and distributing any water-based life form, including eggs; breeding, fattening and marketing any other animal species; manufacturing food; manufacturing preserves; preparing feed for fish or other living beings; benefiting from, industrializing and marketing any marine or animal product and their derivatives; and any other activity agreed by the shareholders.

AquaChile Inc.

Marketing and distributing products.

II. TILAPIA PRODUCTION

Grupo ACI S.A.

Trading, tourism, agriculture, aquaculture, forestry and any other profitable activity, without limitations except those established by law, and consequently to purchase, sell, mortgage, pledge, own and dispose of any movable and immovable property, and real and personal rights.

III. SALMON FEED PRODUCTION

Alitec Pargua S.A.

134

Preparing, producing, developing and processing feed for fish at the companyâ&#x20AC;&#x2122;s plant in Pargua, Calbuco, Los Lagos Region, and subsequently selling, distributing and marketing these products to its shareholders and related companies; and sign any document that enables it to fulfill these objectives.

Main Contracts with the Parent Company

Provide outsourced processing services.

Direct and Indirect Ownership

100.0000%

Share Capital (ThUS$)

4,981

Percentage of Net Equity Net Income Parent Legal Company’s Representative (ThUS$) (ThUS$) Assets

5,967

2,414

2.2%

Board of Directors

Agustín Ugalde Preuss

n.a.

100.0000%

-20,000

-3,180

1.8%

Agustín Ugalde Preuss

Víctor Hugo Puchi Acuña Humberto Fischer Llop Mario Puchi Acuña Agustin Ugalde Preuss Francisco Lepeley Contesse

Selling and marketing finished products.

100.0000%

200

2,800

287

4.9%

Vicente de la Cruz

Víctor Hugo Puchi Acuña Humberto Fischer Llop Agustin Ugalde Preuss

9.0%

Luis Guillermo Vasquez Cabezas

Carlos González Pinto Humberto Fischer Llop Mario Puchi Acuña Ricardo Castro Pinto

Jaime Jorquera

Humberto Fischer Llop Agustín Ugalde Preuss Francisco Lepeley Contesse Carlos Díaz Verdugo Eduardo Hagedorn Hermosilla Alejandro Doerner

n.a.

Supply fish feed.

79.95857%

50.0000%

10,964

16,658

20,887

7,640

-3,174

537

4.4%

135

annual report empresas aquachile s.a.

Company

Business Purpose

IV. GENETICS AND LABORATORY Aquainnovo S.A. chapter 07

a) Invest directly or indirectly, in Chile and abroad, in the biotechnology industry and generally in scientific research; developing and giving advice on scientific research aimed at improving competitiveness; and opening new business opportunities in the aquaculture industry by incorporating biotechnological tools and molecular genetics into the productive process; b) Providing consulting and advisory services aimed at applying advances in science and biotechnology to breeding hydrobiological species and animals. Providing advice on biotechnological issues that contribute to improving aquacultural and agroindustrial efficiency; delivering added value by selling and marketing products and services and by producing and marketing hydro-biological species and animals; c) invest directly or indirectly, in Chile and abroad, in the biotechnology industry and generally in scientific research or anything related to it, such as manufacturing, importing, exporting, distributing and marketing general services, and chemical, pharmaceutical and veterinary products, as a partner, shareholder or any other participatory interest in Chilean or foreign companies, in the pharmaceutical, clinical, diagnostic and veterinary science business that are dedicated to research, development, innovation, financing, promotion, management, investment and experimentation of treatments that contribute to human and animal welfare. Providing professional, administrative and industrial or other services, technical advice, and services related to any other business activity, covering clinical and pharmaceutical laboratories or anything related to them, including support or advice regarding research and development for pharmaceutical products; carrying out any other related activities that enables it to fulfill these objectives; d) Lease facilities to develop trials and provide general experimental studies and analysis.

Centro de Innovaciรณn Aquainnovo-Biomar S.A.

Laboratorio Antares S.A.

136

a) Invest directly or indirectly, in Chile and abroad, in the biotechnology industry and generally in scientific research or anything related to it, such as manufacturing, importing, exporting, distributing and marketing general services, and chemical, pharmaceutical and veterinary products, as a partner, shareholder or any other participatory interest in Chilean or foreign companies, in the pharmaceutical, clinical, diagnostic and veterinary science business that are dedicated to research, development, innovation, financing, promotion, management, investment and experimentation of treatments that contribute to human and animal welfare. Providing professional, administrative and industrial or other services, technical advice, and services related to any other business activity, covering clinical and pharmaceutical laboratories or anything related to them, including support or advice regarding research and development for pharmaceutical products; and b) carrying out any other related activities that enables it to fulfill these objectives.

Main Contracts with the Parent Company

Technical genetic advisory services and bioassay services.

Leasing facilities

Laboratory services.

Direct and Indirect Ownership

100.0000%

Share Capital (ThUS$)

1,184

9,176

208

Percentage of Net Equity Net Income Parent Legal Company’s Representative (ThUS$) (ThUS$) Assets

7,122

799

-566

149

337

Board of Directors

0.8%

Luis Matías del Campo Barquín

Víctor Hugo Puchi Acuña Humberto Fischer Llop Mario Puchi Acuña Agustin Ugalde Preuss Francisco Lepeley Contesse

1.2%

Luis Matías del Campo Barquín

Víctor Hugo Puchi Acuña Humberto Fischer Llop Mario Puchi Acuña Eduardo Hagedorn Hermosilla Michael Adler Eggers

Agustín Ugalde Preuss

Víctor Hugo Puchi Acuña Humberto Fischer Llop Mario Puchi Acuña Agustin Ugalde Preuss Francisco Lepeley Contesse

0.2%

137

annual report empresas aquachile s.a.

chapter 07

SUMMARIZED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ThUS$

Empresas AquaChile S.A. (Individually) 2 016 2017

Inversiรณn Salmones Australes Ltda. 2 016 2017

Total current assets

370,020

445,322

109,206

23,967

Total non-current assets

300,256

286,820

180,620

182,485

Total assets

670,275

732,141

289,825

206,452

111,286

149,715

179,185

95,885

Total non-current liabilities

235,302

197,295

1,281

1,019

Total liabilities

346,588

347,009

180,466

96,904

Equity attributable to owners of the parent company

323,687

385,132

105,750

103,864

3,610

5,683

Total equity

323,687

385,132

109,359

109,548

Total equity and liabilities

670,275

732,141

289,825

206,452

Total current liabilities

Non-controlling interests

Consolidated Statement of Comprehensive Income by Function ThUS$

Empresas AquaChile S.A. (Individually) 2 016 2017

Inversiรณn Salmones Australes Ltda. 2 016 2017

Operating revenue

377,904

485,624

232,928

181,912

Cost of sales

-375,515

-385,762

-192,713

-146,464

2,389

99,862

40,214

35,448 -21,220

Gross margin pre fair value Fair value of harvested and sold biological assets

3,006

-60,442

-19,853

Fair value of biological assets for the year

44,304

68,277

32,458

9,775

Gross margin

49,700

107,697

52,820

24,002

Administration expenses and distribution costs

-15,279

-17,600

-4,387

-3,585

920

1,774

270

Financial costs

-17,268

-15,614

-145

-85

Other income / expenses (1)

-10,784

8,135

-909

2,750

Financial income

Income tax expense

1,146

-24,888

-15,741

-9,063

Net income (loss) for the year

8,435

59,505

31,709

14,290

Net income (loss) attributable to owners of the parent company

8,435

59,505

31,580

14,287

129

Net income (loss) attributable to non-controlling interests (1) "Other income by function" plus "Other expenses by function" plus "Exchange differences" plus "Gain/(loss) on indexation".

Indirect Statement of Cash Flows

ThUS$

Empresas AquaChile S.A. (Individually) 2 016 2017

Cash flows from (used in) operating activities

58,630

100,256

5,717

10,894

Cash flows from (used in) investing activities

-3,558

-12,231

9,820

-3,323

Cash flows from (used in) financing activities

-39,977

-76,549

-4,128

-17,428

Net increase (decrease) in cash and cash equivalents

14,974

12,151

11,409

-9,074

Cash and cash equivalents at end of period

17,885

30,038

14,721

5,647

** ** Alitec Pargua S.A. has been accounted for as an associate since 2012, accordingly its assets, liabilities and net income have been recognized proportionally (50%), in accordance with IFRS 11

138

Inversiรณn Salmones Australes Ltda. 2 016 2017

Grupo ACI S.A.

Alitec Pargua S.A.**

AquaChile Inc.

Salmones Chaicas S.A.

2 016

2017

2 016

2017

2 016

2017

21,039

21,744

30,708

37,519

33,302

36,176

2 016

2017 7,133

46,856

43,850

2,260

2,320

24,762

67,896

65,594

32,968

39,839

33,338

36,219

31,895

22,987

26,046

32,340

38,916

30,824

33,418

9,679

20,848

18,662

641

664

15,579

43,835

44,708

32,981

39,580

30,824

33,418

25,258

24,061

20,887

-7

129

2,514

2,800

6,637

-7

129

24,061

20,887

-13

259

2,514

2,800

6,637

67,896

65,594

32,968

39,839

33,338

36,219

31,895

Grupo ACI S.A. 2 016

Alitec Pargua S.A.** 2017

2 016

AquaChile Inc.

2017

2 016

Salmones Chaicas S.A. 2017

2 016

2017

51,253

56,634

56,312

55,410

186,675

204,895

11,816

-50,748

-53,687

-55,289

-53,543

-184,370

-202,635

-10,507

506

2,947

1,023

1,867

2,305

2,260

1,309

506

2,947

1,023

1,867

2,305

2,260

1,309

-5,140

-4,682

-840

-1,030

-1,855

-1,780

-1,878

-2,157

-190

-196

-5

-4

-1,387

-1,233

236

-73

-76

1,018

469

-21

-30

-180

-188

-61

-7,681

-3,174

-97

537

269

287

879

-7,681

-3,174

-97

537

269

287

-87

Grupo ACI S.A.

Alitec Pargua S.A.**

AquaChile Inc.

Salmones Chaicas S.A.

2 016

2017

2 016

2017

2 016

2017

2 016

2017

-6,642

3,329

2,239

2,912

587

-812

-1,483

2,275

-69

-577

-544

-7

-22

-60

4,968

-1,728

-1,685

-113

601

1,532

-23

2,253

580

-834

-1,598

1,884

3,417

1,360

3,613

2,502

1,669

145

139

INFORMATION REGARDING MARKETâ&#x20AC;&#x2122;S INTEREST INFORMATION Annual Report AquaChile 2017

8.1 Essential

facts

142

information regarding market’s interest information

annual report empresas aquachile s.a.

information regarding market’s interest information chapter 08

ESSENTIAL FACTS Chapter 8.1

On February 15, 2017, Empresas AquaChile reported as an Essential Fact that on February 14, 2017 it acquired control of Salmones Chaicas S.A. by signing share purchase agreements with Inversiones La Montaña S.A., Fondo de Inversión Privado Patagonia Dos and Holding Salmones S.A., being the second two entities related to Empresas AquaChile S.A. The transaction was reviewed and unanimously approved by the Director’s Committee and the Board of Empresas AquaChile S.A., although those directors with an interest in this transaction abstained from voting.

142

On April 21, 2017, an Annual General Shareholders' Meeting agreed the following: To approve the annual report, financial statements and external audit report for the year ended December 31, 2016; to accept the proposed remuneration of the Board for 2017; to approve the Board budget for 2016; to set the remuneration for the members of the Director’s Committee and its budget for 2017; to appoint PricewaterhouseCoopers as external auditors for the financial statements of 2017; and select the electronic newspaper El Libero for the Company’s publications.

SUMMARY OF COMMENTS AND PROPOSALS SUBMITTED BY SHAREHOLDERS AND THE DIRECTORâ&#x20AC;&#x2122;S COMMITTEE Annual Report AquaChile 2017

9.1 Comments

and proposals

147

summary of comments and proposals submitted by shareholders and the directorâ&#x20AC;&#x2122;s committee

COMMENTS AND PROPOSALS Chapter 9.1

At the Annual General Shareholders' Meeting held on April 21, 2017, the shareholder Moneda S.A. AFI on behalf of Pionero Fondo de InversiĂłn and Moneda S.A. AFI on behalf of Moneda Chile Fund Ltd. expressed its opposition to the proposal of appointing PricewaterhouseCoopers as external auditors for 2017 exercise, and in consequence voted for their rejection.

147

annual report empresas aquachile s.a.

148

financial information

annual report empresas aquachile s.a.

EARNINGS REPORT

Annual Report AquaChile 2017

annual report empresas aquachile s.a.

Earnings report based on the consolidated financial statements as of december 31, 2017 chapter 01

The Earnings Report that follows present an analysis based on the consolidated financial statements of Empresas AquaChile S.A., that were prepared under International Financial Reporting Standards (IFRS) for the year ended December 31, 2017. Empresas AquaChile S.A. and its subsidiaries ("AquaChile" or the "Company") farms, processes and sells salmon, trout and tilapia into various markets. Through its subsidiaries, the Company also (i) undertakes research and genetic consultancy for the aquaculture industry, (ii) produces salmon and trout eggs and smolts, and (iii) produces feed for salmon and tilapia.

1. INCOME STATEMENT ANALYSIS Table NÂ°1 displays the main components of the Income Statement of Empresas AquaChile S.A. Consolidated sales of Empresas AquaChile for the year ended December 31, 2017 increased by 2% compared to 2016, while operating costs decreased by 14%, as a result of cost reduction measures and greater efficiencies. Operating income pre fair value adjustments (EBIT pre FV adj.*) reached US$107.7 million, which compares favorably with the US$ 23.5 million recorded the previous year. Consolidated EBITDA pre fair value adjustments4 was US$ 141.9 million for the year ended December 31, 2017, which was higher than the US$ 56.2 million recorded for 2016. This increase in EBITDA was due to increased sales margins from all species. The Company had a loss on revaluing the biomass to fair value of US$ -3.6 million for the year ended December 31, 2017, compared to a gain of US$ 58.9 million recorded for the same period in 2016.

This is due mainly to: (i) a fish biomass revaluation adjustment of US$ +78.1 million , which is higher than the US$ +73.1 million recorded in the same period for the previous year, due to higher observed market prices for salmon and trout; (ii) the provision reversal for the lower realizable value of finished products of US$ -0.6 million as of December 31, 2017, which was lower than the provision of US$ +5.9 million recorded as of December 31, 2016; and (iii) a higher cost of US$ -81.1 million as a result of revaluing to fair value the fish biomass harvested and sold as of December 31, 2017, which was lower than the US$ -22.8 million recorded in the same period for the previous year, mainly due to the positive difference between the prices used to revalue Atlantic salmon, trout and Pacific salmon during the year ended December 31, 2017 and the year ended December 31, 2016. (See Note 11 Biological assets). Other costs and operational expenses increased by 6% compared to the previous year. Administration expenses increased by 19.0% if compared to the previous exercise, mainly due to the consolidation of Salmones Chaicas S.A. this year. Distribution costs decreased by 3.1%, primarily due to lower storage, dispatch and refrigeration costs given the lower sales volumes. The Non-operating loss was US$ -18.9 million, which compares favorably with the loss of US$ -64.8 million in the same period for the previous year. The latter figure was mainly due to recognizing a loss of US$ -43.5 million associated with fish mortality caused by the harmful algal bloom that affected farming centers in the Tenth Region during the first quarter of 2016. The Companyâ&#x20AC;&#x2122;s Net income was US$ +58.9 million for the year ended December 31, 2017, compared to a net income of US$ +6.9 million for the same period in the previous year. This is mainly due to: (i) decreased cost of sales for Atlantic salmon, Pacific salmon and tilapia; and (ii) good sales prices during the period for the salmon and trout segments.

(*): AquaChile measures its financial performance under IFRS using EBIT pre fair value adjustments (before any fish biomass revaluation adjustments to fair value). Fish biomass fair value adjustments arise from IFRS requiring the biomass to be revalued to fair value. Changes in prices and the biomass composition during the period can impact its value. AquaChile reports its EBIT pre fair value adjustments to disclose the performance of its operations during the period.

The fish biomass at a commercial selling weight is valued at fair value according to IFRS and AquaChile uses market price in these circumstances. The market price is obtained from the most recent Company sales in the previous month or observed market prices that would apply to future sales. AquaChile considers each product type separately when conducting this revaluation. It focuses on the principal products sold by the Company, which do not occupy a niche that the Company believes might generate higher returns. The Company uses Fillet Trim D for Atlantic salmon, and headless and gutted fish (HG) for trout and Pacific or Coho salmon. The Company grows and sells Pacific or Coho salmon. This species has marked seasonality, as it is normally stocked in farming centers between November and March each year, and harvested between October and February, when the optimal commercial weight is reached. However, growing fish normally reach average weights above 2.5 kg WFE towards the end of December, which classify them for fair value valuation, in accordance with Company policy, and consequently generates an impact on the Companyâ&#x20AC;&#x2122;s financial result for the year due just to the natural growth of this biomass. 5

152

This figure includes a gain in the fair value of growing fish biomass of US$ +15.1 million as of December 31, 2017.

Table N°1

Consolidated Income Statement THUS$

4T17

4T16

2017

2016

OPERATING REVENUE

208,849

215,048

-3%

632,738

618,628

+2%

OPERATING COSTS (1)

-150,073

-145,932

+3%

-462,133

-535,395

-14%

58,777

69,116

-15%

170,606

83,233

+105%

OPERATING MARGIN

OTHER OPERATING EXPENSES (2)

∆TOT

∆AOA

-8,714

-6,571

+33%

-28,664

-26,999

+6%

EBITDA PRE FV ADJ.

50,062

62,545

-20%

141,942

56,235

+152%

% EBITDA / OPERATING REVENUE

+24,0%

+29,1%

+22,4%

9,1%

ADJUSTMENT FOR DEPRECIATION AND AMORTIZATION EXPENSE

-9,542

-8,644

+10%

-34,273

-32,748

+5%

EBIT PRE FV ADJ.

40,520

53,901

-25%

107,669

23,487

+358%

NET EFFECT OF BIOMASS FAIR VALUE ADJUSTMENT (3)

806

2,184

-63%

-3,610

59,916

EBIT POST FV ADJ.

41,327

56,085

-26%

104,059

83,402

+25%

FINANCIAL COSTS

-4,293

-5,695

-25%

-18,215

-18,957

-4%

272

213

+28%

1,025

664

+54%

-1,283

-2,215

+42%

-1,678

-46,480

+96%

-10,824

-12,815

-16%

-26,278

-11,733

+124%

-29%

58,912

6,896

+754%

+9,3%

1,1%

FINANCIAL INCOME OTHER NON-OPERATING INCOME AND EXPENSES (4) INCOME TAX EXPENSE NET INCOME (LOSS)

25,199

35,573

% NET MARGIN (5)

+12,1%

+16,5%

(1) "Cost of sales" less the "Adjustment for depreciation and amortization". (2) “Distribution costs” plus “Administration expenses” (3) “Fair Value of biological assets harvested and sold" plus "Fair Value of biological assets for the year" (See Note 10 - Biological assets in the Consolidated Financial Statements). (4) "Other Income by function" plus "Other expenses by function" plus "Exchange differences" plus "Gain/(loss) on indexation". (5) Net income (loss) / Operating revenue Note: All these figures are obtained directly from the consolidated statement of net income. Fuente: AquaChile

Table N°2

Fair value analysis THUS$

ATLANTIC SALMON 2017 2016

PACIFIC SALMON 2017 2016

TROUT

TOTAL

2017

2016

2017

2016

6,482

78,052

76,762

FAIR VALUE OF BIOLOGICAL ASSETS FOR THE YEAR

46,640

44,304

16,322

25,976

15,090

ADJUSTMENT FOR VALUATION OF FISH BIOMASS UNDER PRODUCTION

46,640

42,571

16,322

25,976

15,090

4,537

78,052

73,083

1,734

1,946

3,679

IMPAIRMENT TEST ON BIOMASS NOT SUBJECT TO FAIR VALUE FAIR VALUE OF FISH HARVESTED AND SOLD

-46,978

3,006

-19,236

-15,814

-15,448

-4,039

-81,662

-16,847

COST INCREASE FOR FAIR VALUE OF BIOMASS HARVESTED AND SOLD

-47,047

-2,192

-19,236

-16,513

-14,817

-4,055

-81,100

-22,761

NET REALIZABLE VALUE OF FINISHED PRODUCTS NET FAIR VALUE

5,198

700

-630

-562

5,914

-338

47,311

-2,914

10,162

-358

2,443

-3,610

59,916

Fuente: AquaChile

153

annual report empresas aquachile s.a.

Earnings report based on the consolidated financial statements as of december 31, 2017 chapter 01

1.1. SALES ANALYSIS

Table N°3

Table N°3 displays the changes in consolidated sales, indicating the effects of price and volume for the main business segments.

∆ volume

∆ price

Sales 2016

+4 -32

-1

633

-2

-5

Other Income

-40

+20

Feed

+9 +1

tilapia

+58

Pacific Salmon

619

Sales 2017

Trout

The sales prices for Atlantic salmon, trout and Pacific salmon during the year ended December 31, 2017 were higher than the prices for the same period in 2016. Atlantic salmon prices rose 21%, while trout and Pacific salmon prices rose 16%. These market price increases are in response to (i) solid foundations for global salmon demand, (ii) higher prices for Chilean salmon compared to other countries in our target markets, and (iii) moderate supply growth within the principal producer countries.

Analysis of changes in consolidated sales (price and volume effect) Figures in US$ million

Atlantic Salmon

Consolidated sales revenues at Empresas AquaChile amounted to US$ 632.8 million for the year ended December 31, 2017, showing an increase of 2% (∆+ US$ 14.1 million) with respect to the same period for the previous year, mainly due to higher sales of Atlantic salmon, trout and tilapia, which together increased by US$ +31.6 million, due to: i) US$ +66.3 million attributable to higher sales prices, and (ii) US$ -34.6 million attributable to lower sales volumes (∆- 4,280 tons WFE). Pacific salmon sales decreased by US$ -11.2 million, due to lower sales volumes (∆- 6,533 tons WFE). In addition, sales related to "Other Businesses” decreased by US$ -6.35 million.

Source: AquaChile

Table N° 4 displays a comparison of the year ended December 31, 2017 with the year ended December 31, 2016, and reflects an increase in the relative contribution from Atlantic salmon and trout, mainly due to higher sales of these species as a result of higher export prices during the period. This is not the case for Pacific salmon, where despite high sales prices, lower sales volumes produced a lower relative contribution in comparison to the same period for the previous year. The relative contribution from "Other sales " decreased by 1%, mainly due to lower sales volumes of third party’s finished products.

Table N°4

Consolidated sales distribution by business segment

2016 Atlantic salmon Trout Pacific salmon tilapia Feed others

US$ million 283 58 128 43 33 74

2017

US$ million 301 68 117 46 31 70

Source: AquaChile 5

154

Includes sales of third party finished products, organic waste, eggs, smolts, outsourced processing, and laboratory and genetics services.

2016

% 46 9 21 7 5 12

2017

% 48 11 18 7 5 11

tons WFE).

The volumes of Atlantic salmon sales decreased by 12% (∆- 6,075 tons WFE), trout sales volumes increased by 1% (∆+ 145 tons WFE), Pacific salmon sales volumes decreased by 21% (∆- 6,533 tons WFE) and Tilapia sales volumes increased by 10% (∆+ 1,650

Table N°5 displays the Company's sales distributed by segment and market.

Earnings report based on the consolidated financial statements as of december 31, 2017 (Figures in US$ million)

Table N°5

Sales distribution by segment and market 2017

USA

EUROPE

ASIA

CHILE

OTHERS

TOTAL

151

301

TROUT

PACIFIC SALMON

100

117

OTHER SALMON

TILAPIA

OTHER TILAPIA

FEED

OTHERS

204

162

532

101

241

164

633

283

ATLANTIC SALMON

TOTAL FINISHED GOODS SALES (1) OTHER SALES (2) TOTAL SALES

2016 ATLANTIC SALMON

127

TROUT

PACIFIC SALMON

115

128

OTHER SALMON

TILAPIA

OTHER TILAPIA

FEED

OTHERS TOTAL FINISHED GOODS SALES (1) OTHER SALES (2) TOTAL SALES

178

180

512

107

221

181

619

VARIATION 2017 / 2016 ATLANTIC SALMON

+23

-10

-3

+18

TROUT

-2

+10

PACIFIC SALMON

-2

-15

-11

OTHER SALMON

-7

-0

-4

-3

-14

TILAPIA

-0

OTHER TILAPIA

-0

FEED

-2

OTHERS TOTAL FINISHED GOODS SALES (1) OTHER SALES (2) TOTAL SALES

-0

+27

-18

-1

+20

-7

-0

-6

+20

-18

-2

+14

Source: AquaChile (1)

Sales of the Company’s own finished products. A mix with their respective sale terms and conditions, which includes fillets, portions, HG (headless and gutted) and HON (gutted with head on), fresh and frozen, for the various sizes sold.

(2)

These are the Company’s sales of other by-products, such as organic waste, eggs, smolts, third party raw materials, outsourced processing, skins, scales, breaded product, tilapia meal and oil, tilapia feed, etc. 155

annual report empresas aquachile s.a.

Earnings report based on the consolidated financial statements as of december 31, 2017 chapter 01

Table N°6

Analysis of sales volumes, valued sales and margins by segment Q4 2017

Q4 2016

∆QOQ

2017

2016

∆ YOY

ATLANTIC SALMON VOLUME SOLD SALES AVERAGE PRICE EBIT EBIT / KG WFE

TON WFE

17,008

14,060

+21%

45,979

52,054

-12%

THUS$

100,897

94,568

+7%

301,156

282,744

+7%

US$ / KG WFE THUS$ US$ / KG WFE

5.93

6.73

-12%

6.55

5.43

+21%

19,892

23,818

-16%

57,051

-2,386

1.17

1.69

-31%

1.24

-0.05

2,135

2,876

-26%

10,238

10,093

+1%

TROUT VOLUME SOLD SALES AVERAGE PRICE EBIT EBIT / KG WFE

TON WFE

12,667

19,292

-34%

68,152

57,972

+18%

US$ / KG WFE

THUS$

5.93

6.71

-12%

6.66

5.74

+16%

THUS$

1,847

6,525

-72%

18,924

10,402

+82%

US$ / KG WFE

0.87

2.27

-62%

1.85

1.03

+79%

TON WFE

14,332

14,586

-2%

24,098

30,630

-21%

THUS$

68,260

70,065

-3%

116,505

127,689

-9%

4.76

4.80

-1%

4.83

4.17

+16%

19,038

24,759

-23%

33,433

20,111

+66%

1.33

1.70

-22%

1.39

0.66

+111%

PACIFIC SALMON VOLUME SOLD SALES AVERAGE PRICE EBIT EBIT / KG WFE

US$ / KG WFE THUS$ US$ / KG WFE

TILAPIA VOLUME SOLD SALES AVERAGE PRICE EBIT EBIT / KG WFE

TON WFE

3,844

4,119

-7%

18,196

16,546

+10%

THUS$

10,452

10,205

+2%

46,196

43,150

+7%

US$ / KG WFE

2.72

2.48

+10%

2.54

2.61

-3%

THUS$

-257

-1,201

+79%

-1,739

-4,640

+63%

US$ / KG WFE

-0.07

-0.29

+77%

-0.10

-0.28

+66%

37,319

35,642

+5%

98,511

109,324

-10%

192,276

194,130

-1%

532,010

511,554

+4%

TOTAL VOLUME SOLD SALES AVERAGE PRICE EBIT EBIT / KG WFE Source: AquaChile

156

TON WFE THUS$ US$ / KG WFE THUS$ US$ / KG WFE

5.15

5.45

-5%

5.40

4.68

+15%

40,520

53,901

-25%

107,669

23,487

+358%

1.09

1.51

-28%

1.09

0.21

+409%

1.2. SEGMENT ANALYSIS

An analysis of the performance by business segment for the year ended December 31, 2017 compared to the same period for 2016 is shown in Table N°6. Sales of Atlantic salmon increased by 7% (US$ +18.4 million) with respect to the same period in 2016, due to a 21% increase in sales prices, which was partially offset by a 12% decrease in sales volumes (∆- 6,075 tons WFE). The EBIT Pre FV Adj. was a profit of US$ +57.1 million, compared to a loss of US$ -2.4 million for the same period in 2016. The EBIT Pre FV Adj. /kg WFE for the segment reached US$ +1.24 /kg WFE (compared to US$ -0.05 /kg WFE last year). This increase in margins is mainly due to a decrease in the cost of sales and an increase in export prices.

Table N°7 displays the changes in the unitary EBIT for the salmon and trout segment during the year. Table N°7

Changes in the unit EBIT for the salmon and trout segment ebit 2016 +94%

+8%

+3%

ebit 2017 1.36

-6%

0.3

Others

AE/DC

Total cost

Source: AquaChile

Sales of Tilapia increased by 7% (US$ +3.0 million) with respect to the same period in 2016, due to a 10% increase in sales volumes ∆+ 1,650 tons WFE), which was partially offset by a 3% decrease in sales prices. The EBIT Pre FV Adj. was a loss of US$ -1.7 million, compared to a loss of US$ -4.6 million for the same period in 2016. The EBIT Pre FV Adj. /kg WFE for the segment reached US$ -0.10 /kg WFE (compared to US$ -0.28 /kg WFE last year). This improvement in margins is due to a decrease in cost of sales and an increase in sales volumes. Table N°8 displays the changes in unitary EBIT for the tilapia segment during the year. Table N°8

Change in unit EBIT for the tilapia segment ebit 2016

ebit 2017

+29% +105%

+4%

-0.10

-0.28

Source: AquaChile

AE/DC

Others

Total cost

-37%

Price

Sales of Pacific or Coho salmon decreased by 9% (US$ -11.2 million) with respect to the same period in 2016, due to a ∆21% decrease in sales volumes (∆- 6,533 tons WFE), which was partially offset by a 16% increase in sales prices. The EBIT Pre FV Adj. was a profit of US$ +33.4 million, compared to a profit of US$ +20.1 million for the same period in 2016. The EBIT Pre FV Adj. /kg WFE for the segment reached US$ +1.34 /kg WFE (compared to US$ +0.66 /kg WFE last year). This increase in margins is mainly due to a decrease in the cost of sales and an increase in export prices.

Price

Sales of trout increased by 18% (US$ +10.2 million) with respect to the same period in 2016, due to a∆16% increase in sales prices. The EBIT Pre FV Adj. was a profit of US$ +18.9 million, compared to a profit of US$ +10.4 million for the same period in 2016. The EBIT Pre FV Adj. /kg WFE for the segment reached US$ +1.85 /kg WFE (compared to US$ +1.03 /kg WFE last year). This increase in margins is mainly due to an increase in export prices.

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Earnings report based on the consolidated financial statements as of december 31, 2017 chapter 01

2. STATEMENT OF FINANCIAL POSITION Table N°9

Statement of Financial Position Summary THUS$ CURRENT ASSETS

2017

2016

∆ AOA

398,929

364,117

+9.6%

NON-CURRENT ASSETS

395,961

395,435

+0.1%

TOTAL ASSETS

794,890

759,552

+4.7%

CURRENT LIABILITIES

179,105

174,766

+2.5%

NON-CURRENT LIABILITIES

224,260

256,206

-12.5%

TOTAL LIABILITIES

403,365

430,972

-6.4%

EQUITY

385,132

323,687

+19.0%

NON-CONTROLLING INTERESTS

6,393

4,893

+30.7%

TOTAL LIABILITIES AND EQUITY

794,890

759,552

+4.7%

payments on June 22 and December 22, 2017, and reclassifying part of the debt from non-current to current. This was partially offset by an increase of US$ 17.8 million in "Related company payables, non-current" mostly due to the acquisition of Salmones Chaicas S.A. The increase in current liabilities is mainly due to an increase of US$ 10.0 million in "Trade and other payables" and an increase of US$ 3.2 million in "Current tax liabilities". This was partially offset by a decrease of US$ 8.5 million associated with the effect of offsetting the two repayments of US$ 15 and US$ 10 million on March 22 and December 22, 2017 respectively, both from the repayable tranche of the syndicated loan, and reclassifying part of the debt from non-current to current.

Fuente: AquaChile

The main changes in the consolidated statement of financial position as of December 31, 2017, compared to December 31, 2016 are summarized below: Total assets increased by US$ 35.3 million (4.7% higher than as of December 31, 2016), mainly due to an increase of US$ 34.8 million in current assets and to a lesser extent by an increase of US$ 0.5 million in non-current assets. The increase in current assets is mainly due to: i) an increase of US$ 19.3 million in "Biological assets, current", associated with an increased volume of fish biomass (See Note 11 - Biological assets); (ii) an increase of US$ 7.6 million in "Current tax assets", mainly due to an income tax credit that came from profits absorbed by tax losses generated by dividend payments by the subsidiary Aguas Claras S.A.; and (iii) an increase of US$ 5.4 million in "Related company receivables, current". The increase in non-current assets is due to: (i) an increase of US$ 10.0 million in "Goodwill", due to changes in the difference between the acquisition price and the book value of Salmones Chaicas S.A.; (ii) an increase of US$ 12.0 million in "Property, plant and equipment", due to consolidating that Company’s assets; and (iii) an increase of US$ 7.2 million in "Biological assets, noncurrent". These increases were partially offset by: (i) a decrease of US$ 7.3 million in "Related company receivables, non-current"; and (ii) a decrease in “Deferred tax assets" of US$ 22.2 million. Total liabilities decreased by US$ 27.6 million (6.4% lower than as of December 31, 2016), due to a decrease of US$31.9 million in non-current liabilities, which were partially offset by an increase of US$ 4.3 million in current liabilities. The decrease in non-current liabilities is mainly due to the decrease of US$ 47.4 million in "Other financial liabilities, noncurrent" due to a voluntary capital repayment of US$35.0 million from the revolving tranche of the syndicated loan, through 158

The Company’s consolidated financial debt was US$ 218.7 million as of December 31, 2017, 20.4% lower than the US$ 274.6 million as of December 31, 2016. "Cash and cash equivalents" totaled US$ 40.8 million as of December 31, 2017. Therefore, the Company’s net financial debt (financial debt less cash) by the end of the year was US$ 178.0 million, 25.1% lower than the US$ 237.7 million as of December 31, 2016. On December 22, 2016, Empresas AquaChile S.A. signed an agreement with a group of creditor banks, comprising Rabobank, DNB, BBVA, BCI, Santander, Banco de Credito del Peru, Banco de Chile and Banco Estado. The terms and conditions contained rescheduled financing and liabilities with a final 5-year term. A summary of the principal refinancing agreements are as follows. a.- The rescheduled syndicated debt is up to US$ 251 million and comprises two tranches: one amortizable tranche for US$ 150 million, and a revolving line of credit for US$ 101 million. Both tranches with a final 60-month term. The repayable tranche has minimum capital repayments over time, which could be increased if permitted by the Company’s cash flow. b.- The interest rate is defined as the 180-day USD LIBOR plus a variable margin, that will be defined for each interest period based on capital level (measured using the Equity Ratio) and debt coverage (measured as Adjusted Net Interest Bearing Debt / Adjusted EBITDA) for the previous period. The spread over LIBOR for the first interest period was set at 4.50%pa, while for the second six-month period - that began on June, 22, 2017- the margin fell to 4.25%pa. The margin for the 6-month period that began on December 22, 2017 was reduced to 3%pa, in accordance with the indicators as of June 22, 2017.

c.- Additionally, specific financial covenants must be met. These obligations include compliance with specific financial ratios (covenants) calculated on the consolidated financial statements of Empresas AquaChile S.A. as of December 31, 2016, and March 31, June 30, September 30 and December 31, of the subsequent five years. These ratios are the Equity Ratio, Adjusted Net Interest Bearing Debt/Adjusted EBITDA, Current Liquidity, and Borrowing Limits, as described below. FINANCIAL COVENANTS

CONVENANT

4Q-16

1Q-17

2Q-17

3Q-17

4Q-17

EQUITY RATIO (1)

> O IGUAL A

40.0%

42.5%

ADJUSTED NET FINANCIAL DEBT / ADJUSTED EBITDA (2)

< O IGUAL A

6.0X

4.5X

CURRENT LIQUIDITY (3)

> O IGUAL A

1.2X

BORROWING LIMIT (US$ MILLION) (4)

< O IGUAL A

280

(1) Equity Ratio: Ratio between "Total equity" and "Total assets” from the consolidated statements of financial position. (2) Adjusted Net Interest Bearing Debt / Adjusted EBITDA: Ajusted NIBD is the sum of the following consolidated statement of financial position accounts: /a/ Other financial liabilities, current; plus /b/ Other financial liabilities, non-current; plus /c/ Trade payables at over one hundred and twenty days; less /d/ Cash and cash equivalents. Excluding any current and noncurrent financial liabilities, trade payables at over one hundred and twenty days and cash and cash equivalents at Grupo ACI, Alitec S.A. and Salmones Chaicas S.A. Adjusted EBITDA for the last twelve months is defined as follows. /a/ Operating revenue; less /b/ Costs of sales; less /c/ Administrative expenses; less /d/ Distribution costs; plus /e/ Depreciation and amortization expenses, excluding these amounts under /a/, /b/, /c/, /d/ and /e/ for Grupo ACI S.A., Alitec S.A. and Salmones Chaicas S.A. (3) Current Liquidity: Total current assets divided by total current liabilities, though excluding from the latter all the restructured obligations, as the fish biomass excluded from harvesting plans for the next twelve months will be excluded from current assets. (4) Borrowing Limit: The sum of the following accounts in the consolidated financial statements: /a/ Other financial liabilities, current, and /b/ Other financial liabilities, non-current.

d.- The contract allows voluntary early loan repayments as well as some specific information obligations, and other restrictions that are standard for such agreements. e.- 151 maritime aquaculture concessions, with a book value of ThUS$ 21,640, have been pledged converted into mortgages as of December 31, 2017. These assets belong to Empresas AquaChile S.A., Aguas Claras S.A., Salmones Maullín Ltda., AquaChile S.A. and Salmones Cailin S.A. Also, five facilities - with a book value of ThUS$ 30,335 as of December 31, 2017- have been pledged in guarantee. The Company has established additional guarantees in favor of the creditor banks with a commercial value of ThUS$ 35,000. f.- Aguas Claras S.A., Salmones Maullín Ltda. and AquaChile S.A. are joint debtors and guarantors in favor of the Banks, to guarantee fulfilment of the obligations assumed by the borrowers, under the terms, conditions, and limitations defined in the contract. g.- Shares of AquaChile S.A., Salmones Maullín S.A., Aguas Claras S.A., and Antarfish S.A. have been pledged all in favor of the creditor banks, to guarantee compliance with the borrower’s obligations.

Table 10

Financial covenants and their measurement FIGURES AS OF DECEMBER 31ST

2017

COVENANT

STATUS

EQUITY RATIO (%)

49.3%

>= 42.5%

COMPLIES

ADJUSTED NET FINANCIAL DEBT / ADJUSTED EBITDA (TIMES)

1.15

<= 4.5X

COMPLIES

CURRENT LIQUIDITY RATIO (TIMES)

2.22

>= 1.2X

COMPLIES

BORROWING LIMIT US$ MILLION

219

<= US$ 280 MILLION

COMPLIES

h.- On December 29, 2011, a financing contract was signed between Salmones Chaicas S.A. and Rabobank Chile S.A. for ThUS$ 12,500, with repayments beginning on April 30, 2013 and considering biannual installments of ThUS$ 893. The interest payable on this contract is based on 6 Month Libor plus 5.09%pa, which includes an insurance premium from a policy with EKF. (See Note 19: Other financial liabilities, current and non-current) The financial covenants for this financing contract are measured on December 31 each year, and are as follows. 1) Maintain minimum solvency ratio of 45% or a minimum net tangible value of ThUS$ 10,500, whichever is higher. 2) Maintain the debt coverage ratio over 1.3 times. 3) Maintain the financial debt over EBITDA ratio below 2.5 times. Empresas AquaChile S.A. and its subsidiaries have been fully compliant with the established obligations as of December 31, 2017, and have maintained the declarations and warranties in all their material aspects, as established in the Debt Refinancing Agreement. The Company’s total equity increased by US$ 61.4 million compared to December 2016, mainly due to the Net Income of the year. 2.1. FINANCIAL KPI’S

Table N°12 displays the changes on the debt indicators, that were affected by: i) capital repayments of US$ 35.0 million from the revolving tranche of the syndicated loan and US$25.0 million from the repayable tranche, and the reclassification of some debt from non-current to current (both decisions taken on the noncurrent liabilities); and (ii) an increase in total equity as a result of the positive earnings of the year. These decisions and results of the year affected the total short and long-term debt ratios. The proportion of short-term debt (∆ - 25% less than in 2016) and long-term debt (∆- 20% less than in 2016) were mainly affected by point (i) of the preceding paragraph. The increase in EBIT (US$ 66.6 million higher than for the year ended December 31, 2016) generated an improvement of the interest coverage ratio, which increased its value by +3.69 times in comparison to interest coverage at the close of 2016.

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Earnings report based on the consolidated financial statements as of december 31, 2017 chapter 01

The main financial KPI’s as of December 31, 2017, compared to December 31, 2016 are as follows: Table N°11

Liquidity Indicators 2017

2016

LIQUIDITY INDICATORS CURRENT LIQUIDITY

(TIMES)

2.23

2.08

(TIMES)

0.79

0.75

(CURRENT ASSETS/CURRENT LIABILITIES) ACID RATIO (AVAILABLE FUNDS (*) / CURRENT LIABILITIES) Source: AquaChile

The increased volume of fish biomass (See Note 11 - Biological assets) resulted in an increase in the short-term financial structure, which explains the rise in the current liquidity index (∆+ 0.14 times higher than the index at the close of 2016). Meanwhile, the increase in cash and cash equivalents (US$ 3.8 million higher than the cash and cash equivalents as of December 31, 2016) is due to a higher level of collections from salmon and trout sales during the period and an increase in current tax assets (∆+ US$ 7.6 million) mainly due to the income tax credit for profits absorbed by tax losses, which increased available funds and explains the increase in the acid ratio during the period (∆+ 0.04 times higher than the ratio at the close of 2016), as displayed in Table N°11.

Table N°12

Debt Indicators 2017

2016

DEBT INDICATORS NET DEBT RATIO

(TIMES)

1.03

1.31

(TIMES)

0.46

0.53

(TIMES)

0.57

0.78

44.4%

40.6%

55.6%

59.4%

(TIMES)

5.68

1.98

2017

2016

(CURRENT LIABILITIES + NON-CURRENT LIABILITIES / EQUITY) SHORT-TERM DEBT RATIO (CURRENT LIABILITIES / TOTAL LIABILITIES) LONG-TERM DEBT RATIO (NON-CURRENT LIABILITIES / TOTAL LIABILITIES) SHORT-TERM DEBT PROPORTION (CURRENT LIABILITIES / CURRENT LIABILITIES + NON-CURRENT LIABILITIES) LONG-TERM DEBT PROPORTION (NON-CURRENT LIABILITIES / CURRENT LIABILITIES + NON-CURRENT LIABILITIES) FINANCIAL EXPENSE COVERAGE (EBIT FOR THE LAST TWELVE MONTHS (*) / FINANCIAL COSTS FOR THE LAST TWELVE MONTHS) Source: AquaChile (*) EBIT for the last twelve months: "Pre-tax net income for the last twelve months" plus "Financial costs for the last twelve months".

Table N°13

Activity Indicators ACTIVITY INDICATORS INVENTORY TURNOVER

(TIMES)

1.82

2.15

(DAYS)

198

167

(COST OF SALES FOR THE LAST TWELVE MONTHS / (INVENTORIES + AVERAGE BIOLOGICAL ASSETS)) INVENTORY DURATION (AVERAGE INVENTORIES / COST OF SALES FOR THE LAST TWELVE MONTHS *360) Source: AquaChile

The decrease in cost of sales (US$ 71.7 million lower than at the close of 2016) and the increase in growing-out biomass explain the changes in activity displayed in Table N°13.

160

Table N°14

Profitability Indicators RETURN ON EQUITY

2017

2016

16.8%

2.6%

7.7%

1.1%

US$ / SHARE

0.051

0.007

N.A

(ANNUAL NET INCOME / AVERAGE EQUITY) RETURN ON ASSETS (ANNUAL NET INCOME / AVERAGE TOTAL ASSETS) EARNINGS PER SHARE (NET INCOME / NUMBER OF SUBSCRIBED AND PAID SHARES) DIVIDEND YIELD DIVIDEND PER SHARE / MARKET PRICE Source: AquaChile

Table N°14 displays the changes on the profitability indicators. The return on equity (ROE) and the return on assets (ROA) show an increase that is mostly explained by the higher Net Income of the period.

3. CASH FLOW DESCRIPTION Table N°15

ThUS$ CIFRAS EN MILES DE US$

2017

2016

∆YOY

NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES

99,313

58,522

+40,791

NET CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES

-16,114

8,532

-24,646

NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES

-80,869

-39,369

-41,500

3,779

27,547

-23,768

CASH AND CASH EQUIVALENTS AT START OF YEAR

36,993

9,446

+27,547

CASH AND CASH EQUIVALENTS AT END OF YEAR

40,772

36,993

+3,779

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Changes in the main components of the consolidated statements of cash flow are as follows: Net cash flow from operating activities increased (US$ +40.1 million) as of December 31, 2017, in comparison to the cash flow generated in the same period of the previous year. This is mainly due to higher collection levels from salmon and trout sales during the year, and lower payments to suppliers. Both movements generated an increase of US$ +50.6 million. This was partially offset by an income tax payment of US$ 8.6 million. Net cash flow used in investment activities resulted in increased payments during the year ended December 31, 2017, compared

to the same period of the previous year. This is mainly explained by the payment of US$ -3.6 million to acquire Salmones Chaicas S.A. and US$ -14.8 million associated to CAPEX investments in the sea farming area. Net cash flow used in financing activities increased during the year ended December 31, 2017, compared to the same period of the previous year. This is mostly due to a total capital repayment of US$ 60.0 million of the syndicated loan (US$ 35 million for the revolving tranche and US$ 25 million for the repayable tranche). Finally, the “Cash and cash equivalents" held by the Company as of December 31, 2017 exceeded the balance held as of December 31, 2016 by US$ +3.8 million.

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Earnings report based on the consolidated financial statements as of december 31, 2017 chapter 01

4 . PRODUCTION INDICATORS As of December 31, 2017, the Company achieved a salmon and trout harvest ratio of 2,574 tons WFE per harvested sea farm. The farming densities at its marine grow-out aquaculture concessions by species as of December 31, 2017 are as follows: i)

Atlantic salmon: 6.20 kg/m3; ii) Pacific salmon: 8.40 kg/m3; and iii) trout: 4.90 kg/m3 The survival rates of the closed groups as of December 31, 2017 were as follows: i) Atlantic Salmon: 88%; ii) Pacific salmon: 87%; and iii) trout: 86%.

Source: AquaChile

Table N°16

Production Indicators 4T17

4T16

2017

2016

37,765

37,409

82,371

81,616

2,098

2,078

2,574

2,148

PRODUCTION INDICATORS SALMONID HARVEST

TONS WFE

CENTERS HARVESTED OR BEING HARVESTED DURING THE PERIOD

SALMONID HARVEST / CENTERS HARVESTED OR BEING HARVESTED DURING THE PERIOD

TONS WFE

CENTERS IN USE*

SALMON HARVEST / CENTERS IN USE*

TONS WFE

1,302

1,169

2,840

2,551

FARMING DENSITY** ATLANTIC SALMON

KG / M3

6.20

6.30

6.20

6.30

PACIFIC SALMON

KG / M3

8.40

9.90

8.40

9.90

TROUT

KG / M3

4.90

6.30

4.90

6.30

SURVIVAL OF CLOSED GROUPS*** ATLANTIC SALMON

93%

83%

88%

83%

PACIFIC SALMON

84%

91%

87%

90%

TROUT

79%

89%

86%

Source: AquaChile * Centers in use at the end of the period. ** Density for marine grow-out aquaculture concessions. *** Survival rates for fish groups (farming centers) closed during the period.

4.1. HARVEST VOLUMES

The Company achieved a slight increase in the harvest volumes of salmonids of 0.9% (∆+ 755 tons WFE), as of December 31, 2017, when compared to the same period of 2016, as shown in Table N°17. This is mainly due to an increase of 6.0% (∆+ 1,370 tons

WFE) in the volume of harvested Pacific salmon and an increase of 0.8% in the volume of harvested trout (∆+ 82 tons WFE), which were partially offset by a decrease of 1.4% in the volume of harvested Atlantic salmon (∆- 697 tons WFE).

Table N°17

Historical Harvests 2016 Q3-16

Q4-16

2016

Q1-17

Q2-17

2017 Q3-17

Q4-17

2017

5,945

5,353

16,060

48,762

11,755

10,038

7,586

18,685

48,065

-1.4%

259

1,850

3,447

10,039

3,554

1,908

3,332

1,326

10,121

+0.8%

TONS WFE

Q1-16

Q2-16

ATLANTIC SALMON

21,404

TROUT

4,483

∆ YOY 2017/2016

PACIFIC SALMON

4,728

186

17,902

22,815

6,400

17,753

24,186

+6.0%

TOTAL SALMONIDS

30,615

6,204

7,388

37,409

81,616

21,709

11,947

10,950

37,765

82,371

+0.9%

4,275

4,462

4,667

4,019

17,424

5,068

4,342

4,091

3,849

17,351

-0.4%

34,891

10,666

12,055

41,428

99,040

26,778

16,289

15,041

41,614

99,722

+0.7%

TILAPIA (COSTA RICA) TOTAL SALMONIDS AND TILAPIA Source: AquaChile

RISK ANALYSIS

The Company, its assets and the aquaculture industry in general are exposed to a range of risks and contingencies that could lead to a number of effects on the Company’s solvency, its market position, or financial situation, and that should be taken into account when making investment decisions. The most important risks are described below, without prejudice to any other risks or contingencies 162

that could equally affect the Company's business and operating performance. OPERATIONAL BUSINESS RISKS

Environmental risks Empresas AquaChile and its subsidiaries have geographically diversified their production facilities in Chile. Nevertheless, the salmon industry is exposed to natural risks, such as variations in sea temperatures, climatological phenomena, seismic movements, harmful algal blooms7, natural predators and other factors that may affect its production facilities. These circumstances can all affect the Company’s growth, negatively impact the quality of its products and even increase mortality rates, which would result in lower production volumes, sales and financial performance Phytosanitary risks Diseases, parasites and pollutants are a recurring problem in the aquaculture industry, and may reduce the quality of its products, increase mortality and reduce production. Empresas AquaChile and its subsidiaries have invested significant resources in research, genetic improvements, mass vaccination programs, independent area management systems, fish health monitoring programs, reducing population densities in fish cages, and sanitary barriers that help to control and reduce these risks. However, new diseases or pests may appear that affect salmon, trout and tilapia production. Product quality and traceability risks The products that Empresas AquaChile S.A. and its subsidiaries farm, produce and market are for human consumption, and a contamination risks arise from potential negligence during production or inadequate handling during the distribution process or delivery to the final consumer, by customers, consumers or third parties, which could affect the Company’s sales and financial performance. AquaChile has developed and implemented comprehensive controls to classify food quality and safety, in order to mitigate these risks. These are being constantly monitored internally and also externally by the sectoral authority. The Company has introduced complete fish traceability, to monitor food safety, and the law requires that fish are analyzed prior to harvest to rule out any trace of medicines or other types of residue. The processing plants are also sampled to safeguard raw material and processing safety. Therefore, the authorities and customers can verify the healthiness of AquaChile’s products. As fish are growing in an open marine environment, they are exposed to diseases that can impact their health. AquaChile has a health department composed of veterinarians, to control these

impacts. They have established a preventative policy and monitor the health of the fish population. If any diseases appear, they establish the appropriate treatment to combat them. Failure to do this would expose the fish population to risks that could impact the Company’s financial performance. Raw Materials’ price risks Fishmeal and fish oil are significant components of salmon production costs. Even though Empresas AquaChile and its subsidiaries have diversified their sources of fish feed to include new alternatives, and have invested in two feed plants to supply a proportion of their requirements, they may still be positively or negatively affected by changes in the prices of these raw materials, due to circumstances beyond their control. International price trends The supply of salmon and trout largely depends on the productive strategies operated by each company in the industry, as well as by unexpected biological or climatic events. Therefore, forecasting and estimating an equilibrium price for its products over the medium and long term is complex. Fortunately, the growth in demand for farmed salmon has been strong and sustained in recent years. Although, imbalances between supply and demand for salmon products could lead to price volatility, which could positively or negatively affect the Company’s financial performance. However, the salmon industry has been subject to dynamic global and local consolidation and regulatory changes, which suggests that estimated future growth should tend to be more balanced. Moreover, diversification of species and target markets mitigate the negative effect of price changes. Changes in consumption within target markets Historical trends indicate that sustained increases in global consumption of fish and other aquatic products can be expected over the next few years. However, the Company cannot assume that this trend and intensity will continue over time. A change or reversal of this trend could significantly affect the Company’s operating performance. Economic changes in target markets Currently, the Company's exports are sold mainly into markets in the USA, Japan, Brazil and Russia. Although, an economic crisis, depression, stagnation or the emergence of trade barriers cannot be ruled out. Any of these would lead to a reduction in demand, which if verified could negatively affect the Company’s business and operating performance. Nevertheless, increases in personal income within emerging economies could open up new markets and increase the demand for salmon and Company sales.

163 7 Natural phenomena are also known as harmful algal blooms (HABS). These occur in aquatic ecosystems and are caused by phytoplankton organisms that multiply explosively in the right environmental conditions, to become concentrated, thus causing alterations to marine life and fish mortality.

annual report empresas aquachile s.a.

Earnings report based on the consolidated financial statements as of december 31, 2017 chapter 01

FINANCIAL RISK

OTHER RISKS

Concentration of financial liabilities The Company has signed loan contracts with its financial creditors, which establish repayment terms, interest rates, minimum financial ratios, and guarantees, and require that the Company complies with various other obligations. They also contain various mechanisms for the creditors to approve any exceptions to these obligations. Failure to pay any of the installments of capital and interest on the due dates, or failure to comply with the Company’s obligations for more than 90 days, may result in the financial creditors immediately calling in all the capital and interest due on these loans, which could negatively impact the Company’s financial position and performance.

Asset risks Fixed assets such as buildings and facilities, finished products and civil liability risks are covered by insurance policies with terms and conditions that are usual for the market. The Group has an insurance policy that partially covers any damage to its biological assets caused by diseases, theft and natural risks, such as storms, hurricanes, storm surges, tsunamis, earthquakes, volcanic eruptions, floods, avalanches, landslides, underwater currents and harmful algal blooms. Consequently, significant damage or loss to such assets could still have an adverse effect on the Company’s business and financial position. Nevertheless, the geographical diversity of its facilities on land and sea at least mitigates the risk of such events, although it will not eliminate that risk.

Foreign exchange risks AquaChile is a global company, so fluctuations in exchange rates can positively or negatively affect the Company’s performance, as some of its costs, such as labor and transportation services among others, are indexed to the Chilean peso, while its sales are affected by the relative value of the foreign currencies used by its target markets, such as the US dollar, the Euro, the Yen, the Rouble and the Real. The Company’s presentation currency is US dollars, so changes in the exchange rate between the US dollar and the other currencies used by the Company may negatively or positively affect its financial performance. REGULATORY AND ENVIRONMENTAL RISKS

Changes in environmental and other legislation Caring for the environment is an essential component of Company business policy. However, productive processes that result in natural resources becoming contaminated have resulted in a growing awareness and concern among consumers, intermediary groups and authorities in the field, who require productive systems that care for the environment and guarantee that natural resources are protected over the long term. These requirements have resulted in rigorous standards and procedures that secure environmental sustainability, but that lead to increased production costs and introduce restrictions to the Company’s productive processes Changes in aquaculture and concession legislation The Company has implemented processes and constant monitoring, in order to correctly manage its fish farms, and it has a technical and legal department that ensures that aquaculture concessions are properly used and managed. However, issues such as failure to comply with changes in aquaculture and concession legislation and standards, failure to adequately manage aquaculture concessions, failure to comply with relevant sustainability standards and carefully operate the system as a whole, and unjustifiable or unauthorized failure to use concessions, could lead to sanctions or restrictions that could negatively affect the Company’s business and operating performance. These measures could even include the authorities revoking aquaculture concessions, where such legislation permits. 164

Subsidiaries and associates Empresas AquaChile S.A. is the parent company and associate of several other companies. A significant proportion of the Company’s business is performed by these companies and its operating performance and financial position substantially depends on them. Any significant deterioration in the business and performance of its subsidiaries and associated companies may have an adverse effect on its own business and operational performance. Insurance The insurance policies held by Empresas AquaChile S.A. and its subsidiaries as of December 31, 2017 are explained in detail in Section 3.4 of this Report.

6. DIFFERENCE BETWEEN COMMERCIAL AND BOOK VALUES OF ASSETS There were no significant differences between the commercial and book values of the Company’s main assets as of December 31, 2017. Investments in related companies acquired prior to January 2003 are disclosed using the equity method, while any new investments are recognized at fair value, in accordance with the standards established in Circular 1,697 issued by the Superintendent of Securities and Insurance, and Technical Bulletin 72 issued by the Chilean Institute of Accountants A.G. Biological assets such as salmon and trout, cover spawning fish, eggs, fry, smolt and small growing-out fish. They are measured at their fair value less the estimated costs to sell them, except when fair value cannot be measured reliably in accordance with the definitions in IAS 41. Therefore, in the first instance a reference market for these assets is sought. As there is no active market for live fish at these stages, they are valued at cumulative cost as of the reporting date. However, if conditions warrant, the Company performs impairment testing

on its growing biomass, and any net cumulative effect is expensed against net income for the period. Biological assets covering heavier growing-out salmon and trout are measured at their fair value less estimated processing and selling costs. Direct and indirect costs incurred in the productive process form part of the value of biological assets. Accumulated costs at each reporting date are compared and adjusted to the fair value of the biological asset. Changes in the fair value of these biological assets are recorded in the statement of income for the period. The estimated fair value is based on market prices for harvested fish, and adjusted according to their distribution in size and quality or range of normal weights at harvest. This price is adjusted for expected harvesting, processing and freight costs to destination, to value its condition as fully grown bled fish (WFE8). Thus, the biomass valuation considers the life cycle stage, its current weight and expected distribution by size at harvest. This estimate of fair value is recognized in the Company’s statement of income.

BIOLOGICAL ASSETS - SPAWNING TILAPIA AND GROWING-OUT TILAPIA

Spawning tilapia are initially recorded at cost and are valued at cumulative cost as of the reporting date, net of impairment, if appropriate. Growing-out tilapia are recorded at cost, since market prices are not available in Costa Rica, and alternative fair value estimates are considered unreliable. Cost includes all raw materials, indirect and labor costs during the tilapia grow-out phase. The following method is used for tilapia. STAGE

ASSET

VALUATION

FRESH WATER

TILAPIA

DIRECT AND INDIRECT CUMULATIVE COSTS AT THEIR VARIOUS STAGES

A summary of the valuation criteria is as follows: STAGE

ASSET

VALUATION

FRESH WATER

SPAWNING FISH

DIRECT AND INDIRECT CUMULATIVE COSTS AT THEIR VARIOUS STAGES

FRESH WATER

EGGS

DIRECT AND INDIRECT CUMULATIVE COSTS AT THEIR VARIOUS STAGES

FRESH WATER

FRY AND SMOLTS

DIRECT AND INDIRECT CUMULATIVE COSTS AT THEIR VARIOUS STAGES

FISH IN THE SEA

FAIR VALUE, ACCORDING TO THE FOLLOWING: • ATLANTIC SALMON, ABOVE 4.0 KG WFE; • PACIFIC SALMON, ABOVE 2.5 KG WFE; • TROUT, ABOVE 2.5 KG WFE CUMULATIVE COST AT THE REPORTING DATE IS USED FOR SMALLER FISH. HOWEVER, DUE TO POTENTIAL ADVERSE SITUATIONS THAT MAY AFFECT THE SALMON MARKET, THE COMPANY PERFORMS AN IMPAIRMENT TEST ON ITS GROWING-OUT BIOMASS PROJECTED TO HARVEST, AND THE CUMULATIVE NET EFFECT IS TAKEN TO THE STATEMENT OF NET INCOME.

SEA WATER

165 6

WFE (Whole Fish Equivalent): is a standard measure within the industry, which refers to the weight of whole bled salmon, also internationally known as round weight (RW).

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Earnings report based on the consolidated financial statements as of december 31, 2017 chapter 01

166

7. FOREIGN EXCHANGE EXPOSURE

8. TRENDS

Note 28 of the Companyâ&#x20AC;&#x2122;s consolidated financial statements discloses its assets and liabilities by currency of origin.

It is not part of AquaChileâ&#x20AC;&#x2122;s policy to publish its forecasted financial performance, nor the variables that may significantly impact it, in particular variables that are outside the Companyâ&#x20AC;&#x2122;s control, such as the market price of our products. However, the consensus among industry analysts indicates that the demand for marine products will continue to be good, specifically for healthy proteins and foods. This is due to income growth within the population, changes in eating habits toward healthier foods, and growth conditions continuing in developing countries.

annual report empresas aquachile s.a.

FINANCIAL STATEMENTS

Annual Report AquaChile 2017

10.1

Independent auditorâ&#x20AC;&#x2122;s report

10.2

Financial statements

170 172

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chapter 02

INDEPENDENT AUDITORS' REPORT Puerto Montt, February 22, 2018 Dear Shareholders and Directors of Empresas AquaChile S.A.

We have audited the accompanying consolidated financial statements of Empresas AquaChile S.A. and subsidiaries, which comprise the consolidated statements of financial position as of December 31, 2017 and 2016 and the corresponding consolidated income statements by function, comprehensive income, changes in equity and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management's responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). This responsibility includes the design, implementation and maintenance of relevant internal controls for the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditorâ&#x20AC;&#x2122;s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in Chile. Those standards require that we plan and perform the audit to obtain reasonable assurance that the consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditorsâ&#x20AC;&#x2122; judgment, including an assessment of the risks of material misstatement in the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal controls relevant for the preparation and fair presentation of the consolidated financial statements of the entity in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entityâ&#x20AC;&#x2122;s internal control.

170

Puerto Montt, February 22, 2018 Empresas AquaChile S.A. 2

Accordingly, we do not express such an opinion. An audit also includes evaluating the appropriateness of accounting policies and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Empresas AquaChile S.A. and subsidiaries as of December 31, 2017 and 2016, and the results of its operations and cash flows for the years then ended, in accordance with International Financial Reporting Standards.

Gonzalo Mercado T. Chilean Identification Number: 11.222.898-5

171

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Financial Statements chapter 02

EMPRESAS AQUACHILE S.A. AND SUBSIDIARIES Consolidated statements of financial position As of december 31, 2017 and 2016 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

NOTE

12/31/2017 THUS$

12/31/2016 THUS$

36,993

ASSETS CURRENT ASSETS CASH AND CASH EQUIVALENTS

40,772

OTHER NON-FINANCIAL ASSETS, CURRENT

1,935

1,412

TRADE AND OTHER RECEIVABLES, CURRENT

76,125

82,383

RELATED PARTY RECEIVABLES, CURRENT

10,239

4,805

INVENTORIES, CURRENT

68,976

64,542

BIOLOGICAL ASSETS, CURRENT

188,147

168,876

TAX ASSETS, CURRENT

12,735

5,106

398,929

364,117

TOTAL CURRENT ASSETS NON-CURRENT ASSETS

172

OTHER FINANCIAL ASSETS, NON-CURRENT

TRADE AND OTHER RECEIVABLES, NON-CURRENT

288

RELATED PARTY RECEIVABLES, NON-CURRENT

1,050

8,374

EQUITY METHOD INVESTMENTS

760

INTANGIBLE ASSETS OTHER THAN GOODWILL

42,968

41,419

GOODWILL

63,224

53,247

PROPERTY, PLANT AND EQUIPMENT

191,448

179,413

BIOLOGICAL ASSETS, NON-CURRENT

31,132

23,910

DEFERRED TAX ASSETS

65,841

88,015

TOTAL NON-CURRENT ASSETS

395,961

395,435

TOTAL ASSETS

794,890

759,552

The accompanying notes 1 to 34 are an integral part of these consolidated financial statements.

EMPRESAS AQUACHILE S.A. AND SUBSIDIARIES Consolidated statements of financial position As of december 31, 2017 and 2016 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

NOTE

12/31/2017 THUS$

12/31/2016 THUS$

EQUITY AND LIABILITIES LIABILITIES CURRENT LIABILITIES OTHER FINANCIAL LIABILITIES, CURRENT

25,348

TRADE AND OTHER PAYABLES, CURRENT

124,136

114,163

RELATED PARTY PAYABLES, CURRENT

18,139

18,049

TAX LIABILITIES, CURRENT

11,349

8,142

EMPLOYEE BENEFIT PROVISIONS, CURRENT TOTAL CURRENT LIABILITIES

33,826

133

586

179,105

174,766

NON-CURRENT LIABILITIES OTHER FINANCIAL LIABILITIES, NON-CURRENT

193,383

240,822

TRADE AND OTHER PAYABLES, NON-CURRENT

7,868

10,216

RELATED PARTY PAYABLES, NON-CURRENT

19,044

1,225

DEFERRED TAX LIABILITIES

3,738

3,943

OTHER NON-FINANCIAL LIABILITIES, NON-CURRENT

227

TOTAL NON-CURRENT LIABILITIES

224,260

256,206

TOTAL LIABILITIES

403,365

430,972

EQUITY SHARE CAPITAL

514,463

ACCUMULATED LOSSES

(142,860)

(202,365)

OTHER RESERVES

(4,404)

(6,344)

REVALUATION SURPLUS

17,933

385,132

323,687

6,393

4,893

391,525

328,580

794,890

759,552

EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY NON-CONTROLLING INTERESTS TOTAL EQUITY TOTAL EQUITY AND LIABILITIES

The accompanying notes 1 to 34 are an integral part of these consolidated financial statements.

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Financial Statements chapter 02

EMPRESAS AQUACHILE S.A. AND SUBSIDIARIES Consolidated income statement by function for the years ended december 31, 2017 and 2016

CONSOLIDATED INCOME STATEMENT BY FUNCTION

NOTE

12/31/2017 THUS$

12/31/2016 THUS$

OPERATING REVENUE

632,738

618,628

COST OF SALES

(496,406)

(568,142)

GROSS MARGIN BEFORE FAIR VALUE ADJUSTMENTS

136,332

50,486

FAIR VALUE OF HARVESTED AND SOLD BIOLOGICAL ASSETS 1

(81,662)

(16,847)

FAIR VALUE OF BIOLOGICAL ASSETS FOR THE YEAR2

78,052

76,762

GROSS MARGIN

132,722

110,401

OTHER INCOME BY FUNCTION

2,104

3,607

DISTRIBUTION COSTS

(15,213)

(15,694)

ADMINISTRATIVE EXPENSES

(13,451)

(11,305)

OTHER EXPENSES BY FUNCTION

(4,109)

(49,224)

FINANCIAL INCOME

1,025

664

FINANCIAL COSTS

(18,215)

(18,957)

(85)

327

(778)

85,190

18,629

(26,278)

(11,733)

58,912

6,896

SHARE OF INCOME (LOSSES) OF EQUITY METHOD ASSOCIATES AND JOINT VENTURES EXCHANGE DIFFERENCES INCOME (LOSS) BEFORE TAX INCOME TAX EXPENSE INCOME FROM CONTINUING OPERATIONS INCOME (LOSS) FROM DISCONTINUED OPERATIONS INCOME FOR THE YEAR

58,912

6,896

INCOME ATTRIBUTABLE TO INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS

INCOME FOR THE YEAR

59,505

8,434

(593)

(1,538)

58,912

6,896

EARNINGS PER SHARE BASIC EARNINGS PER SHARE BASIC EARNINGS PER SHARE FROM CONTINUING OPERATIONS

0.0509

0.0060

BASIC EARNINGS (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS

0.0000

0.0509

0.0060

DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS

0.0000

DILUTED EARNINGS (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS

0.0000

DILUTED EARNINGS (LOSS) PER SHARE

0.0000

BASIC EARNINGS PER SHARE

DILUTED EARNINGS PER SHARE

174

The accompanying notes 1 to 34 are an integral part of these consolidated financial statements. 1 The change in the value of inventories as a result of the fair value of the biomass harvested and subsequently sold as finished product. If applicable, any negative adjustment in the net realizable value of inventories for finished products is added to this value. (See Note 11 - Biological assets). 2 The change in the fair value of the biomass for the year, plus any biomass impairment valued at cost for the year. (See Note 11 - Biological assets).

EMPRESAS AQUACHILE S.A. AND SUBSIDIARIES Consolidated statement of comprehensive income for the years ended december 31, 2017 and 2016

12/31/2017 THUS$

12/31/2016 THUS$

58,912

6,896

OTHER COMPREHENSIVE INCOME AND REVALUATION GAINS (LOSSES), BEFORE TAX

INCOME TAX RELATED TO INVESTMENTS IN EQUITY INSTRUMENTS OF OTHER COMPREHENSIVE INCOME

OTHER COMPREHENSIVE INCOME

TOTAL COMPREHENSIVE INCOME

58,912

6,896

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME INCOME FOR THE YEAR

COMPREHENSIVE INCOME ATTRIBUTABLE TO COMPREHENSIVE INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS TOTAL COMPREHENSIVE INCOME

The accompanying notes 1 to 34 are an integral part of these consolidated financial statements.

59,505

8,434

(593)

(1,538)

58,912

6,896

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Financial Statements chapter 02

EMPRESAS AQUACHILE S.A. AND SUBSIDIARIES Consolidated statements of changes in equity for the years ended december 31, 2017 and 2016

OPENING BALANCE AS OF 01/01/2017 INCREASE (DECREASE) DUE TO ERROR CORRECTION RESTATED OPENING BALANCE

OTHER MISCELLANEOUS RESERVES THUS$

EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT COMPAN THUS$

EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS THUS$

TOTAL EQUITY THUS$

323,687

4,893

328,580

SHARE CAPITAL THUS$

SHARE PREMIUM THUS$

514,463

17,933

(6,344)

(202,365)

323,687

4,893

328,580

58,912

REVALUATION SURPLUS THUS$ 17,933

(6,344)

ACCUMULATED LOSSES THUS$ (202,365)

CHANGES IN EQUITY COMPREHENSIVE INCOME INCOME FOR THE YEAR

59,505

(593)

OTHER COMPREHENSIVE INCOME

59,505

(593)

58,912

COMPREHENSIVE INCOME SHARES ISSUED DIVIDENDS INCREASES (DECREASES) DUE TO TRANSFERS AND OTHER CHANGES

1,940

2,093

4,033

TOTAL CHANGES IN EQUITY

1,940

59,505

61,445

1,500

62,945

514,463

17,933

(4,404)

(142,860)

385,132

6,393

391,525

514,463

17,933

(6,344)

(210,523)

315,529

6,508

322,037

514,463

17,933

(6,344)

(210,523)

315,529

6,508

322,037

6,896

CLOSING BALANCE AS OF 12/31/2017 OPENING BALANCE AS OF 01/01/2016 INCREASE (DECREASE) DUE TO ERROR CORRECTION RESTATED OPENING BALANCE CHANGES IN EQUITY COMPREHENSIVE INCOME INCOME FOR THE YEAR

8,434

(1,538)

OTHER COMPREHENSIVE INCOME

8,434

(1,538)

6,896 -

COMPREHENSIVE INCOME SHARES ISSUED

DIVIDENDS

INCREASES (DECREASES) DUE TO TRANSFERS AND OTHER CHANGES

(276)

(77)

(353)

8,158

(1,615)

6,543

514,463

17,933

(6,344)

(202,365)

323,687

4,893

328,580

TOTAL CHANGES IN EQUITY CLOSING BALANCE AS OF 12/31/2016

176

Las notas adjuntas nÃºmeros 1 a 34 forman parte integral de estos estados financieros consolidados.

EMPRESAS AQUACHILE S.A. AND SUBSIDIARIES Consolidated statements of cash flows, direct method for the years ended december 31, 2017 and 2016 12/31/2017 THUS$ CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES

12/31/2016 THUS$

630,526

630,446

RECEIPTS FROM OPERATING ACTIVITIES RECEIPTS FROM SALES OF GOODS AND SERVICES RECEIPTS FROM OTHER OPERATING ACTIVITIES PAYMENTS TO SUPPLIERS FOR GOODS AND SERVICES PAYMENTS TO AND ON BEHALF OF EMPLOYEES PAYMENTS FOR PREMIUMS AND CLAIMS, ANNUITIES AND OTHER POLICY OBLIGATIONS DIVIDENDS RECEIVED INTEREST RECEIVED INCOME TAXES REFUNDED (PAID)

3,432

8,935

(538,937)

(589,517)

(51,020)

(51,976)

(3,835)

(1,326)

544

664

156

(8,622)

1,587

OTHER CASH RECEIPTS (PAYMENTS)

67,105

59,673

NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES

99,313

58,522

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES PAYMENTS TO OBTAIN CONTROL OF SUBSIDIARIES OR OTHER BUSINESSES RECEIPTS FROM THE SALE OF EQUITY OR DEBT INSTRUMENTS OF OTHER ENTITIES RECEIPTS FROM THE SALE OF PROPERTY, PLANT AND EQUIPMENT

(3,599)

15,388

2,283

PURCHASES OF PROPERTY, PLANT AND EQUIPMENT

(14,798)

(6,944)

NET CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES

(16,114)

8,532

7,371

8,914

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES PROCEEDS FROM SHORT-TERM LOANS LOANS FROM RELATED PARTIES LOAN REPAYMENTS

220

1,290

(72,180)

(32,778)

LOAN REPAYMENTS TO RELATED COMPANIES

(1,300)

(200)

INTEREST PAID

(15,273)

(16,595)

OTHER CASH RECEIPTS (PAYMENTS) NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES NET INCREASE IN CASH & CASH EQUIVALENTS BEFORE EFFECT OF CHANGES IN EXCHANGE

293

(80,869)

(39,369)

2,330

27,685

RATES EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS

1,449

(138)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

3,779

27,547

CASH AND CASH EQUIVALENTS AT THE START OF THE YEAR

36,993

9,446

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

40,772

36,993

The accompanying notes 1 to 34 are an integral part of these consolidated financial statements.

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annual report empresas aquachile s.a.

cap.03

FINANCIAL STATEMENTS OF SUBSIDIARIES AND ASSOCIATES Chapter 3

Financial statements for the subsidiaries Salmones Australes Ltda., Grupo ACI S.A. and AquaChile Inc. can be found on the Company’s website. They are also available to the public at the Company’s offices and the offices of the Superintendent of Securities and Insurance.

178

ANNUAL REPORT’S SIGNATURES The undersigned declare themselves responsible for the veracity of the information contained in this Annual Report of Empresas AquaChile S.A. for the year ended December 31, 2017.

Víctor Hugo Puchi Acuña Chairman 6.680.823-8

Humberto Fischer Llop Director 6.687.633-0

Mario Humberto Puchi Acuña Director 6.270.533-7

Alejandro Pérez Rodríguez Director 5.169.389-2

Bernardo Fontaine Talavera Director 6.371.763-0

Francisco Puga Matte Director 7.176.902-k

Jorge Tagle Ovalle Director 10.581.967-6

Agustín Ugalde Preuss CEO 8.209.622-1

179