UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13A-16 OR 15D-16

OF THE SECURITIES AND EXCHANGE ACT OF 1934

 

Includes financial statements and their related notes for the nine-month period ended December 31, 2012 filed by Sociedad Química y Minera de Chile S.A. before the Chilean Securities and Insurance Commission (Superintendencia de Valores y Seguros) on March 5, 2012.

 

SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.

(Exact name of registrant as specified in its charter)

 

CHEMICAL AND MINING COMPANY OF CHILE INC.

(Translation of registrant's name into English)

 

El Trovador 4285, Santiago, Chile (562) 2425-2000

(Address and phone number of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F x                                                            Form 40-F ¨

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes ¨                                                            No x

 

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82_________

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

For the year ended

December 31, 2012

 

SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. AND SUBSIDIARIES

In Thousands of United States Dollars

 

 

This document includes:

 

	-	Independent Auditor’s Report
	-	Consolidated Classified Statements of Financial Position
	-	Consolidated Statements of Income by Function
	-	Consolidated Statements of Comprehensive Income
	-	Consolidated Statements of Cash Flows
	-	Statements of Changes in Equity
	-	Notes to the Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

Table of Contents – Consolidated Financial Statements

 

Note		Page
	Consolidated Classified Statements of Financial Position	7
	Consolidated Statements of Income by function	9
	Consolidated Statements of Comprehensive Income	11
	Consolidated Statements of Cash Flows	12
	Statements of Changes in Equity	14
	Notes  to the consolidated financial statements
1	Identification and Activities of the Company and Subsidiaries
	1.1   Historical background	17
	1.2   Main domicile where the Company performs its production activities	17
	1.3   Codes of main activities	17
	1.4   Description of the nature of operations and main activities	17
	1.5   Other background	19
2	Basis of presentation for the consolidated financial statements
	2.1    Accounting period	21
	2.2    Financial statements	22
	2.3    Basis of measurement	22
	2.4    Accounting pronouncements	23
	2.5    Foreign currency transactions	26
	2.6    Basis of consolidation	28
	2.7   Significant accounting judgments, estimates and assumptions	31
3	Significant accounting policies
	3.1    Inventories	32
	3.2    Trade and other receivables	33
	3.3    Equity-accounted investees	33
	3.4    Property, plant and equipment	34
	3.5    Segment reporting	36
	3.6    Revenue recognition	37
	3.7    Income tax and deferred taxes	39
	3.8    Earnings per share	40
	3.9    Impairment of non-financial assets	41
	3.10  Financial assets	42
	3.11  Financial liabilities	43
	3.12  Environment	45
	3.13  Minimum dividend	45
	3.14  Consolidated statement of cash flows	45

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note		Page
	3.15  Obligations related to employee termination benefits and pension Commitments	45
	3.16  Financial derivatives and hedging transactions	47
	3.17  Leases	49
	3.18  Prospecting expenses	50
	3.19  Other provisions	50
	3.20  Compensation plans	51
	3.21  Good and service insurance expenses	51
	3.22  Intangible assets	51
	3.23  Research and development expenses	53
	3.24  Classification of balances as current and non-current	53
4	Financial risk management
	4.1   Financial risk management policy	54
	4.2   Risk factors	55
	4.3   Risk measurement	58
5	Changes in estimates and accounting policies (consistent presentation)
	5.1   Changes in accounting estimates	59
	5.2   Changes in accounting policies	59
6	Background of companies included in consolidation
	6.1   Parent’s stand-alone assets and liabilities	60
	6.2   Parent entity	60
	6.3   Jointly arrangements of controlling interest	60
	6.4   Information on consolidated subsidiaries	62
	6.5   Detail of transactions between consolidated companies	68
7	Cash and cash equivalents
	7.1  Types of cash and cash equivalents	69
	7.2   Short-term investments, classified as cash equivalents	70
	7.3   Information on cash and cash equivalents by currency	70
	7.4   Amount of significant restricted (unavailable) cash balances	71
	7.5   Short-term deposits, classified as cash equivalents	72
8	Inventories	73
9	Related party: disclosures
	9.1   Related party disclosures	74
	9.2   Relationship between the Parent and the entity	74
	9.3   Intermediate parent that publicly issues financial statements	75
	9.4   Detailed identification of the relationship between the Parent and subsidiary	75

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)
Note		Page
	9.5   Detail of related parties and related party transactions	77
	9.6   Trade receivables due from related parties, current	79
	9.7   Trade payables due to related parties, current	80
	9.8   Board of Directors and Senior Management	81
	9.9   Key Management Personnel Compensation	83
10	Financial instruments
	10.1   Types of other financial assets	84
	10.2   Trade and other receivables, current and non-current	84
	10.3   Hedging assets and liabilities	88
	10.4   Financial liabilities	90
	10.5   Trade and other payables	100
	10.6   Financial liabilities at fair value through profit or loss	100
	10.7   Financial asset and liability categories	101
	10.8   Financial assets pledged as guarantee	103
	10.9   Estimated fair value of financial instruments and financial derivatives	103
	10.10 Nature and scope of risks arising from financial instruments	105
11	Equity-accounted investees
	11.1   Investments in associates recognized according to the equity method of accounting	105
	11.2   Assets, liabilities, revenue and expenses of associates	106
	11.3   Detail of investments in associates	107
12	Joint ventures
	12.1   Policy for accounting for joint ventures in a Parent’s separate financial statements	108
	12.2   Disclosures of interest in joint ventures	108
	12.3   Detail of assets, liabilities and profit or loss of significant investments in joint ventures by company	109
	12.4   Detail of investments in joint ventures	110
13	Intangible assets and goodwill
	13.1  Balances	111
	13.2  Disclosures on intangible assets and goodwill	111

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)
Note		Page
14	Property, plant and equipment
	14.1   Types of property, plant and equipment	115
	14.2   Reconciliation of changes in property, plant and equipment by type	117
	14.3   Detail of property, plant and equipment pledged as guarantee	119
	14.4   Additional information	119
15	Employee benefits
	15.1   Provisions for employee benefits	120
	15.2   Policies on defined benefit plans	121
	15.3   Other long-term benefits	122
	15.4   Post-employment benefit obligations	123
	15.5   Staff severance indemnities	125
16	Executive compensation plan	125
17	Disclosures on equity
	17.1   Capital management	127
	17.2   Disclosures on preferred share capital	128
	17.3   Disclosures on reserves in equity	130
	17.4   Dividend policies	131
	17.5   Provisional dividends	132
18	Provisions and other non-financial liabilities
	18.1   Types of provisions	134
	18.2   Description of other provisions	135
	18.3   Other non-financial liabilities, current	135
	18.4   Changes in provisions	136
	18.5   Detail of main types of provisions	138
19	Contingencies and restrictions
	19.1   Lawsuits or other relevant events	139
	19.2   Restrictions to management or financial limits	142
	19.3   Commitments	144
	19.4   Restricted or pledged cash	144
	19.5   Sureties obtained from third parties	144
	19.6   Indirect guarantees	145

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)
Note		Page
20	Revenue	147
21	Earnings per share	147
22	Borrowing costs	148
23	Effect of fluctuations on foreign currency exchange rates	149
24	Environment
	24.1   Disclosures on disbursements related to the environment	150
	24.2   Detail of information on disbursements related to the environment	151
	24.3   Description of each project indicating whether these are in process or have been finished	168
25	Other current and non-current non-financial assets	175
26	Operating segments
	26.1   Operating segments	177
	26.2   Operating segments disclosures	179
	26.3   Statement of comprehensive income classified by operating segments based on groups of products	181
	26.4   Revenue from transactions with other company operating segments	183
	26.5   Disclosures on geographical areas	184
	26.6   Disclosures on main customers	184
	26.7   Segments by geographical areas	185
	26.8   Property, plant and equipment classified by geographical areas	186
27	Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature
	27.1   Revenue	187
	27.2   Cost of sales	187
	27.3   Other income	188
	27.4   Administrative expenses	188
	27.5   Other expenses by function	189
	27.6   Other income (expenses)	189
	27.7   Summary of expenses by nature	190

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)
Note		Page
28	Income tax and deferred taxes
	28.1   Current tax assets	191
	28.2   Current tax liabilities	192
	28.3   Tax earnings	192
	28.4   Income tax and deferred taxes	193
29	Disclosures on the effects of fluctuations in foreign currency exchange rates	202
30	3.14  Consolidated statement of cash flows	207
31	Subsequent events
	31.1   Authorization of the financial statements	208
	31.2   Disclosures on events occurring after the reporting date	209
	31.3   Detail of dividends declared after the reporting date	209

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION

 

ASSETS		Note No.				As of December  31, 2012				As of December 31, 2011
						ThUS$				ThUS$
Current assets
Cash and cash equivalents			7.1				324,353				444,992
Other current financial assets			10.1				316,103				169,261
Other current non-financial assets			25				67,820				63,792
Trade and other receivables, current			10.2				510,616				412,062
Trade receivables due from related parties, current			9.6				101,372				117,139
Current inventories			8				896,236				744,402
Current tax assets			28.1				30,234				4,765
Total current assets							2,246,734				1,956,413
Non-current assets
Other non-current financial assets			10.1				29,492				30,488
Other non-current non-financial assets			25				17,682				24,651
Trade receivables, non-current			10.2				1,311				1,070
Investments in equity-accounted investees			11.1				70,298				60,694
Intangible assets other than goodwill			13.1				24,013				4,316
Goodwill			13.1				38,388				38,605
Property, plant and equipment			14.1				1,988,290				1,755,042
Deferred tax assets			28.4				223				304
Total non-current assets							2,169,697				1,915,170
Total assets							4,416,431				3,871,583

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION, (continued)

 

Liabilities and Equity		Note No.				As of December 31, 2012				As of December 31, 2011
						ThUS$				ThUS$
Liabilities
Current liabilities
Other current financial liabilities			10.4				152,843				161,008
Trade and other payables, current			10.5				207,944				183,032
Trade payables due to related parties, current			9.7				19				873
Other current provisions			18.1				18,489				16,937
Current tax liabilities			28.2				23,624				75,418
Provisions for employee benefits, current			15.1				33,974				30,074
Other current non-financial liabilities			18.3				172,200				161,961
Total current liabilities							609,093				629,303
Non-current liabilities
Other non-current financial liabilities			10.4				1,446,194				1,237,027
Other non-current provisions			18.1				7,357				8,595
Deferred tax liabilities			28.4				125,445				98,594
Provisions for employee benefits, non-current			15.1				40,896				33,684
Total non-current liabilities							1,619,892				1,377,900
Total liabilities							2,228,985				2,007,203
Equity			17
Share capital							477,386				477,386
Retained earnings							1,676,169				1,351,560
Other reserves							(20,772	)			(16,112	)
Equity attributable to owners of the Parent							2,132,783				1,812,834
Non-controlling interests							54,663				51,546
Total equity							2,187,446				1,864,380
Total liabilities and equity							4,416,431				3,871,583

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED STATEMENTS OF INCOME BY FUNCTION

 

						Between January and December
		Note				2012				2011
		No.				ThUS$				ThUS$
Revenue			20				2,429,160				2,145,286
Cost of sales			27.2				(1,400,567	)			(1,290,494	)
Gross profit							1,028,593				854,792
Other income			27.3				12,702				47,681
Administrative expenses			27.4				(106,442	)			(91,760	)
Other expenses by function			27.5				(34,628	)			(63,047	)
Other gains (losses)			27.6				683				5,787
Profit (loss) from operating activities							900,908				753,453
Finance income							29,068				23,210
Finance costs			22				(54,095	)			(39,335	)
Share of profit of associates and joint ventures accounted for using the equity method							24,357				21,808
Foreign currency translation differences			23				(26,787	)			(25,307	)
Profit (loss) before taxes							873,451				733,829
Income tax expense, continuing operations			28.4				(216,082	)			(179,710	)
Profit (loss) from continuing operations							657,369				554,119
Profit for the year							657,369				554,119
Profit attributable to
Owners of the Parent							649,167				545,758
Non-controlling interests							8,202				8,361
Profit for the year							657,369				554,119

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED STATEMENTS OF INCOME BY FUNCTION (continued)

 

						Between January and December
		Note				2012				2011
		No.				US$				US$
Earnings per share
Common shares
Basic earnings per share (US$ per share)			21				2.4665				2.0736
Basic earnings per share (US$ per share) from continuing operations							2.4665				2.0736
Diluted common shares
Diluted earnings per share (US$ per share)			21				2.4665				2.0736
Diluted earnings per share (US$ per share) from continuing operations							2.4665				2.0736

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

		Between January and December
		2012				2011
Statements of comprehensive income		ThUS$				ThUS$
Profit for the year			657,369				554,119
Components of other comprehensive income before taxes and foreign currency translation differences
Gain (loss) from foreign currency translation differences, before taxes			982				(2,890	)
Other comprehensive income before taxes and foreign currency translation differences			982				(2,890	)
Cash flow hedges
(Gain) loss from cash flow hedges before taxes			(7,872	)			(1,241	)
Other comprehensive income before taxes and cash flow hedges			(7,872	)			(1,241	)
Other comprehensive income before taxes and actuarial gains (losses) from defined benefit plans			711				(918	)
Other miscellaneous reserves			-				(1,677	)
Other components of other comprehensive income before taxes			(6,179	)			(6,726	)
Income taxes associated with components of other comprehensive income
Income taxes associated with cash flow hedges in other comprehensive income			1,580				218
Income taxes associated with components of other comprehensive income			1,580				218
Other comprehensive income			(4,599	)			(6,508	)
Total comprehensive income			652,770				547,611
Comprehensive income attributable to
Owners of the Parent			644,507				539,359
Non-controlling interests			8,263				8,252
Total comprehensive income			652,770				547,611

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Statement of Cash Flows		Note No.		12/31/2012 ThUS$				12/31/2011 ThUS$
Cash flows from (used in) operating activities
Profit for the year					657,369				554,119
Adjustment to reconcile profit for the year
Adjustment for decreases (increases) in inventories					(167,826	)			(147,238	)
Adjustment for decreases (increases) in trade receivables					(52,993	)			(135,401	)
Adjustment for decreases (increases) in other receivables from operating activities					(57,300	)			(37,393	)
Adjustment for decreases (increases) in trade payables					(49,025	)			(44,566	)
Adjustment for decreases (increases) in other payables from operating activities					(204,067	)			(72,976	)
Adjustment for depreciation and amortization					196,158				195,897
Adjustment for provisions					33,657				23,055
Income tax expense					216,082				179,710
Adjustment for unrealized foreign currency translation loss (gain)					26,787				25,307
Adjustment for undistributed profit from associates					(24,357	)			(21,808	)
Other adjustments for items other than cash					67,244				54,369
Other adjustments for the effects on cash from investing or financing activities					(200	)			(3,680	)
Reconciling adjustments					(15,840	)			15,276
Cash flows from (used in) operating activities					641,529				569,395
Dividends received					15,126				4,299
Interest paid					(6,449	)			(2,349	)
income taxes paid					-				-
Net cash from (used in) operating activities					650,206				571,345
Cash flows from (used in) investing activities
Cash flows from loss of control of subsidiaries or other businesses					961				5,736
Payments to acquire interests in joint ventures					(197	)			(4,909	)
Loans granted to related parties					(4,000	)			-
Proceeds from the sale of property, plant and equipment					2,050				43,231
Acquisition of property, plant and equipment					(445,984	)			(501,118	)
Cash advances and loans granted to third parties					(623	)			83
Payment of loans granted to third parties					-				-
Other cash inflows (outflows)					(115,092	)			(59,251	)
Net cash from (used in) investing activities					(562,885	)			(516,228	)

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

 

		Note No.				12/31/2012 ThUS$				12/31/2011 ThUS$
Cash flows from (used in) financing activities
Proceeds from long-term loans							366,502				550,000
Repayment of loans							(220,000	)			(370,000	)
Dividends paid							(334,762	)			(277,334	)
Other cash inflows (outflows)							(9,437	)			(7,862	)
Net cash from (used in) financing activities							(197,697	)			(105,196	)
Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate							(110,376	)			(50,079	)
Effects of exchange rate fluctuations on cash held							(10,263	)			(29,581	)
Net increase (decrease) in cash and cash equivalents							(120,639	)			(79,660	)
Cash and cash equivalents at beginning of year							444,992				524,652
Cash and cash equivalents at end of year			7				324,353				444,992

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

STATEMENTS OF CHANGES IN EQUITY

 

		Share capital				Foreign currency translation difference reserves				Cash flow hedge reserves				Actuarial gains  (losses) from  defined benefit  plans				Other miscellaneous reserves				Other reserves				Retained earnings				Equity attributable  to owners of  the Parent				Non-controlling interests				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Equity at beginning of the year			477,386				(1,251	)			(10,230	)			(2,954	)			(1,677	)			(16,112	)			1,351,560				1,812,834				51,546				1,864,380
Restated opening balance of equity			477,386				(1,251	)			(10,230	)			(2,954	)			(1,677	)			(16,112	)			1,351,560				1,812,834				51,546				1,864,380
Profit for the year																											649,167				649,167				8,202				657,369
Other comprehensive income							921				(6,292	)			711								(4,660	)							(4,660	)			61				(4,599	)
Comprehensive income							921				(6,292	)			711				-				(4,660	)			649,167				644,507				8,263				652,770
Dividends																											(324,558	)			(324,558	)			(5,146	)			(329,704	)
Increase (decrease) in transfers and other changes																											-				-				-				-
Increase (decrease) in equity			-				921				(6,292	)			711				-				(4,660	)			324,609				319,949				3,117				323,066
Equity as of December 31, 2012			477,386				(330	)			(16,522	)			(2,243	)			(1,677	)			(20,772	)			1,676,169				2,132,783				54,663				2,187,446

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

STATEMENTS OF CHANGES IN EQUITY

 

		Share capital				Foreign currency translation difference reserves				Cash flow hedge reserves				Actuarial gains  (losses) from  defined benefit  plans				Other miscellaneous reserves				Other reserves				Retained earnings				Equity attributable  to owners of  the Parent				Non-controlling interests				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Equity at beginning of the year			477,386				1,530				(9,207	)			(2,036	)			-				(9,713	)			1,155,131				1,622,804				48,016				1,670,820
Restated opening balance of equity			477,386				1,530				(9,207	)			(2,036	)			-				(9,713	)			1,155,131				1,622,804				48,016				1,670,820
Profit for the year																											545,758				545,758				8,361				554,119
Other comprehensive income							(2,781	)			(1,023	)			(918	)			(1,677	)			(6,399	)							(6,399	)			(109	)			(6,508	)
Comprehensive income							(2,781	)			(1,023	)			(918	)			(1,677	)			(6,399	)			545,758				539,359				8,252				547,611
Dividends																											(349,329	)			(349,329	)			(3,706	)			(353,035	)
Increase (decrease) in transfers and other changes																											-				-				(1,016	)			(1,016	)
Increase (decrease) in equity			-				(2,781	)			(1,023	)			(918	)			(1,677	)			(6,399	)			196,429				190,030				3,530				193,560
Equity as of December 31, 2011			477,386				(1,251	)			(10,230	)			(2,954	)			(1,677	)			(16,112	)			1,351,560				1,812,834				51,546				1,864,380

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

Notes to the Consolidated Financial
Statements as of December 31, 2012

Sociedad Química y Minera de Chile S.A.

and Subsidiaries

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 1 – Identification and Activities of the Company and Subsidiaries

 

1.1

Historical background

 

Sociedad Química y Minera de Chile S.A. "SQM" is an open stock corporation organized under the laws of the Republic of Chile, Tax Identification No.93.007.000-9.

The Company was incorporated through a public deed dated June 17, 1968 by the notary public of Santiago MR. Sergio Rodríguez Garcés. Its existence was approved by Decree No. 1,164 of June 22, 1968 of the Ministry of Finance, and it was registered on June 29, 1968 in the Registry of Commerce of Santiago, on page 4,537 No. 1,992. SQM's headquarters are located at El Trovador 4285, Fl. 6, Las Condes, Santiago, Chile. The Company's telephone number is +56 2 425-2000.

The Company is registered with the Securities Registry of the Chilean Superintendence of Securities and Insurance (SVS) under No. 0184 dated March 18. 1983 and is subject to the inspection of the SVS.

 

1.2

Main domicile where the Company performs its production activities

 

The Company’s main domiciles are: Calle Dos Sur plot No. 5 - Antofagasta; Arturo Prat 1060 - Tocopilla; Administración Building w/n - Maria Elena; Administración Building w/n Pedro de Valdivia - María Elena, Former Florencia office w/n - Sierra Gorda, Anibal Pinto 3228 - Antofagasta, Kilometer 1378 Ruta 5 Norte Highway - Antofagasta, Coya Sur Plant w/n - Maria Elena, kilometer 1760 Ruta 5 Norte Highway - Pozo Almonte, Pampa Yumbes w/n - Tal-tal.

 

1.3

Codes of main activities

 

The codes of the main activities as established by the Chilean Superintendence of Securities and Insurance are as follows:

 

-

1700 (Mining)

-

2200 (Chemical products)

-

1300 (Investment)

 

1.4

Description of the nature of operations and main activities

 

Our products are mainly derived from mineral deposits found in northern Chile. We mine and process caliche ore and brine deposits. The caliche ore in northern Chile contains the only known nitrate and iodine deposits in the world and is the world’s largest commercially exploited source of natural nitrates. The brine deposits of the Salar de Atacama, a salt-encrusted depression within the Atacama desert in northern Chile, contain high concentrations of lithium and potassium as well as significant concentrations of sulfate and boron.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 1 – Identification and Activities of the Company and Subsidiaries (continued)

 

1.4

Description of the nature of operations and main activities, continued

 

From our caliche ore deposits, we produce a wide range of nitrate-based products used for specialty plant nutrients and industrial applications, as well as iodine and iodine derivatives. At the Salar de Atacama, we extract brines rich in potassium, lithium, sulfate and boron in order to produce potassium chloride, potassium sulfate, lithium solutions, boric acid and bischofite (magnesium chloride). We produce lithium carbonate and lithium hydroxide at our plant near the city of Antofagasta, Chile, from the solutions brought from the Salar de Atacama. We market all of these products through an established worldwide distribution network.

 

We sell our products in over 100 countries worldwide through our global distribution network and generate our revenue mainly from abroad.

 

Our products are divided into six categories: specialty plant nutrition, iodine and its derivatives, lithium and its derivatives, industrial chemicals, potassium and other products and services, described as follows:

 

Specialty plant nutrients: This business is characterized by being closely related to its customers for which it has specialized staff who provide expert advisory in best practices for fertilization according to each type of crop, soil and climate. Within this type of business, potassium derivative products and specially potassium nitrate have had a leading role given the contribution they make to develop crops insuring an improvement in post-crop life in addition to improving quality, flavor and fruit color. The potassium nitrate, which is sold in multiple formats and as a part of other specialty mixtures, is complemented by sodium nitrate, potassium sodium nitrate, and more than 200 fertilizing mixtures.

 

Iodine: The Company is a major producer of iodine at worldwide level. Iodine is widely used in the pharmaceutical industry, technology and nutrition. Additionally, iodine is used as X ray contrast media and polarizing film for LCD displays.

 

Lithium: the Company’s lithium is mainly used for manufacturing rechargeable batteries for cell phones, cameras and notebooks. Through the manufacturing of lithium-based products, SQM provides significant materials to face great challenges such as the efficient use of energy and raw materials. Lithium is not only used for rechargeable batteries and in new technologies for vehicles propelled by electricity, but is also used in industrial applications to lower melting temperature and to help saving costs and energy

 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 1 – Identification and Activities of the Company and Subsidiaries (continued)

 

1.4

Description of the nature of operations and main activities, continued

 

Industrial Chemicals: Industrial chemicals are products used as supplies for a number of production processes. SQM participates in this line of business during more than 30 years producing sodium nitrate, potassium nitrate, boric acid and potassium chloride. Industrial nitrates have increased their importance over the last few years due to their use as storage means for thermal energy at solar energy plants, which are widely used in countries as Spain and the United States in their search for decreasing CO₂ emissions

 

Potassium: The potassium is a primary essential macro-nutrient, and even though does not form part of the plant’s structure, has a significant role for the developing of its basic functions, validating the quality of a crop, increasing post-crop life, improving the crop flavor, its amount in vitamins and its physical appearance. Within this business line, SQM has also potassium chlorate and potassium sulfate, both extracted from the salt layer located under the Salar de Atacama (the Atacama Saltpeter Deposit.)

 

Other products and services: This business line includes revenue from commodities, services, interests, royalties and dividends.

 

1.5

Other background:

 

Staff

 

As of December 31, 2012 and 2011, staff was detailed as follows:

 

		31/12/2012				31/12/2011
Permanent staff			5,643				4,902

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 1 – Identification and Activities of the Company and

               subsidiaries (continued)

 

1.5

Other background, continued

 

Main shareholders

 

The table below establishes certain information about the beneficial property of Series A and Series B shares of SQM as of December 31, 2012 and 2011. In respect to each shareholder which has interest of more than 5% of outstanding Series A or B shares. The information below is taken from our records and reports controlled in the Central Securities Depository and reported to the Superintendence of Securities and Insurance (SVS) and the Chilean Stock Exchange, whose main shareholders are as follows:

 

Shareholders as of December 31, 2012		No. of Series A with ownership				% of Series A shares				No. O0f Series B with ownership				% of Series B shares				% of total shares
Inversiones El Boldo Limitada			44,751,196				31.33	%			17,571,676				14.60	%			23.68	%
Sociedad de Inversiones Pampa Calichera S.A.(*)			44,558,830				31.20	%			9,003,799				7.48	%			20.35	%
The Bank of New York			-				-				46,559,106				38.68	%			17.69	%
Inversiones RAC Chile Limitada			19,200,242				13.44	%			2,699,773				2.24	%			8.32	%
Potasios de Chile S.A.(*)			17,919,147				12.55	%			-				-				6.81	%
Inversiones Global Mining (Chile) Limitada (*)			8,798,539				6.16	%			-				-				3.34	%
Banco Itau on behalf of investors			-				-				4,579,293				3.80	%			1.74	%
Inversiones La Esperanza Limitada			3,693,977				2.59	%			-				-				1.40	%
Banco Santander on behalf of foreign investors			-				-				3,238,105				2.69	%			1.23	%
Banco de Chile on behalf of non-resident third parties			-				-				3,082,612				2.56	%			1.17	%

 

(*) Total Pampa Group 30,50%

 

Shareholders as of December 31, 2011		No. Of series A with ownership				% of Series A shares				No. of Series B with ownership				% of Series B shares				% of total shares
Inversiones El Boldo Limitada			44,751,196				31.33	%			17,571,676				14.60	%			23.68	%
Sociedad de Inversiones Pampa Calichera S.A.(*)			44,758,830				31.34	%			12,241,799				10.17	%			21.66	%
The Bank of New York			-				-				42,036,912				34.92	%			15.97	%
Inversiones RAC Chile Limitada			19,200,242				13.44	%			2,699,773				2.24	%			8.32	%
Potasios de Chile S.A.(*)			18,179,147				12.73	%			156,780				0.13	%			6.97	%
Inversiones Global Mining (Chile) Limitada (*)			8,798,539				6.16	%			-				-				3.34	%
Banchile Corredores de Bolsa S.A.			136,919				0.10	%			4,890,193				4.06	%			1.91	%
Corpbanca Corredores de Bolsa  S.A.			11,189				0.01	%			4,264,250				3.54	%			1.62	%
Inversiones La Esperanza Limitada			3,693,977				2.59	%			-				-				1.40	%
Banco Itau on behalf of investors			-				-				3,693,080				3.07	%			1.40	%

 

(*) Total Pampa Group 31,97%

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 2 - Basis of presentation for the consolidated financial statements

 

2.1

Accounting period

 

These consolidated financial statements cover the following periods

 

-

Consolidated Statements of Financial Position for the years ended December 31, 2012 and 2011

 

-

Consolidated Statements of Changes in Equity for the years ended December 31, 2012 and 2011.

 

-

Consolidated Statements of Comprehensive Income for the years between January and December 31, 2012 and 2011.

 

-

Statements of Cash Flows – Indirect method for the years ended December 31, 2012 and 2011.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.2

Financial statements

 

The consolidated annual financial statements of Sociedad Química y Minera de Chile S.A. and Subsidiaries, have been prepared in accordance with International Financial Reporting Standards (hereinafter “IFRS”) and represent the full, explicit and unreserved application of the aforementioned international standards issued by the International Accounting Oversight Board (IASB).

 

These annual consolidated financial statements reflect fairly the Company’s equity and financial position and the results of its operations, changes in the statement of recognized revenue and expenses and cash flows, which have occurred during the periods then ended.

 

IFRS establish certain alternatives for their application. Those applied by the Company and its subsidiaries are included in detail in this Note.

 

The accounting policies used in the preparation of these consolidated and annual accounts comply with each IFRS in force at their date of presentation.

 

2.3

Basis of measurement

 

The annual consolidated financial statements have been prepared on the historical cost basis except for the following material items:

 

-

inventories are recorded at the lower of cost and net realizable value;

-

other current and non-current financial liabilities at amortized cost;

-

financial derivatives at fair value; and

-

staff severance indemnities and pension commitments at actuarial value.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.4

Accounting pronouncements

 

Accounting pronouncements

 

At the date of these consolidated financial statements, the following accounting pronouncements had been issued by the IASB but its application date is not effective.

 

Standards and interpretations		Mandatory for the years beginning on
IAS 19 Revised “Employee Benefits”		01/01/2013
Issued in June 2011, supersedes IAS 19 (1998). This revised standard amends the recognition and measurement of defined benefit plan expenses and termination benefits. Additionally, it includes amendments to disclosures of all employee benefits.
IAS 27 “Separate Financial Statements”		01/01/2013
Issued in May 2011, supersedes IAS 27 (2008). The scope of this standard is restricted from this change solely to separate financial statements, given that the aspects linked to the definition of control and consolidation were removed and included in IFRS 10.  Its early adoption is allowed together with IFRS 10, IFRS 11 and IFRS 12 and the amendment to IAS 28.
IFRS 9 “Financial Instruments”		01/01/2015
Issued in December 2009, amends the classification and measurement of financial assets.
Subsequently, this standard was amended in November 2010 to include the treatment and classification of financial liabilities. Its early adoption is permitted.
IFRS  10 “Consolidated Financial Statements”		01/01/2013
Issued in May 2011, supersedes SIC 12 “Consolidation – Special Purpose Entities” and the focus on the control and consolidation of IAS 27 “Consolidated Financial Statements”. It establishes clarifications and new parameters for the definition of control, as well as the preparation of consolidated financial statements. Its early adoption is permitted together with IFRS 11, IFRS 12 and amendments to IAS 27 and IAS 28.
NIIF 11 “Joint Arrangements”		01/01/2013
Issued in May 2011, supersedes IAS 31 “Interests in Joint Ventures” and SIC 13 “Joint Controlled Entities”. Provides a more realistic reflection of joint agreements focusing on the rights and obligations arising from agreements ore than their legal form. Its amendments include the elimination of the concept of jointly-controlled assets and the possibility of proportional consolidation of entities under common control. Its early adoption is permitted together with IFRS 10, IFRS 12 and amendments to IAS 27 and IAS 28.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.4

Accounting pronouncements, continued

 

Standards and interpretations		Mandatory for the years beginning on
		01/01/2013
IFRS 12 “Disclosure of Interests in Other Entities”
Issued in May 2011, gathers in solely one standard all the disclosure requirements in the financial statements related to interests in other entities, Esther classified as subsidiaries, associates or joint operations. It is applicable to all entities with investments in subsidiaries, joint ventures and associates. Its early adoption is permitted together with IFRS 10, IFRS 11 and amendments to IAS 27 and IAS 28
IFRS 13 “Fair Value Measurement”		01/01/2013
Issued in May 2011, gathers in one single standard the method for measuring fair value of assets and liabilities and disclosures required for this purpose and incorporates new concepts and clarifications for measurement.

 

Amendments and improvements		Mandatory for the years beginning on
IAS 1 “Presentation of Financial Statements”		01/07/2012
Issued in June 2011, the main amendment is that it requires that items in Other Comprehensive Income must be classified and grouped by assessing whether they will be reclassified to profit or loss in subsequent periods. Its early adoption is permitted.
IFRS 7 “Financial Instruments” Disclosures”		01/01/2013
Issued in December 2011, requires improving the current disclosures of offsetting financial assets and financial liabilities with the aim of increasing convergence between IFRS and US GAAP. These disclosures are focused on quantitative information on financial instruments recognized which are offset in the Statement of Financial Position. Its early adoption is permitted.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.4

Accounting pronouncements, continued

 

Amendments and improvements		Mandatory for the years beginning on
IAS 32 “Financial Instruments” Presentation””		01/01/2014
Issued in December 2011. It clarifies the requirements for offsetting financial assets and financial liabilities in the Statement of Financial Position. Particularly, it indicates that the offsetting right should be available at the financial statement date and not depending on a future development. It also indicates that it must be legally binding for the counterparties both during the normal course of the business operations, as well as in the event of default, insolvency o bankruptcy. Its early adoption is permitted.
Improvements to International Financial Reporting Standards issued in May 2012.		01/01/2013
IAS 16 “Property, Plant and Equipment” – This clarifies that spare-parts and service equipment will be classified as Property, plant and equipment more than as inventories when it meets the Property, plant and equipment definition.
IAS 32 “Financial Instruments: Presentation” – This clarifies the treatment of income taxes related to distributions and transaction costs.
IAS 34 “Interim Financial Reporting” – This clarifies the asset and liability exposure requirements by segments in interim periods, ratifying the same requirements applicable to the annual financial statements.
IFRS 10“Consolidated Financial Statements”, IFRS 11 “Joint Arrangements” and IFRS 12 “Disclosures of Interests in Other Entities.”		01/01/2013
Issued in June 2012. This clarifies the transitional provisions for IFRS 10, indicating that their application is required on the first day of the period in which the Standard is adopted. Accordingly, it might be necessary that amendments be made to comparatives presented in that period, if the assessment of the control on investments differs from that recognized in accordance with IAS 27/SIC 12.

 

The Company's management estimates that the adoption of standards, amendments and interpretations described above are under evaluation and it is expected that they will not have a significant impact on the Consolidated Financial Statements of the Company.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.5

Transactions in foreign currency

 

(a)

Functional and presentation currency

 

The Company’s annual consolidated financial statements are presented in United States dollars (“U.S. dollars” or “USD”), which is the Company’s functional and presentation currency and is the currency of the main economic environment in which it operates.

 

Consequently, the term foreign currency is defined as any currency other than U.S. dollar.

 

The annual consolidated financial statements are presented in thousands of United States dollars without decimals.

 

The conversion of the financial statements of foreign companies with functional currency other than U.S. dollars is performed as follows:

 

-	Assets and liabilities using the exchange rate prevailing on the closing date of the consolidated financial statements.
-	Statement of income account items using the average exchange rate for the year.
-	Equity accounts are stated at the historical exchange rate prevailing at acquisition date.

 

Foreign currency translation differences which arise from the conversion of financial statements are recorded in the account “Foreign currency translation differences" within equity.

 

(b)

Basis of conversion

 

Domestic subsidiaries:

 

Assets and liabilities denominated in Chilean pesos and other currencies other than the functional currency (U.S. dollar) as of December 31, 2012 and 2011 have been translated to U.S. dollars at the exchange rates prevailing at those dates. The corresponding Chilean pesos were converted at Ch$479.96 per US$1.00 as of December 31, 2012, and Ch$519.20 per US$1.00 as of December 31, 2011.

 

The values of the UF (a Chilean peso-denominated, inflation-indexed monetary unit) used to convert the UF denominated assets and liabilities as of December 31, 2012 amounted to Ch$22,840.75 (US$47.59), and as of December 31, 2011 amounted to Ch$22,294.03 (US$42.94).

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.5

Transactions in foreign currency, continued

 

Foreign subsidiaries:

 

The exchange rates used to translate the monetary assets and liabilities expressed in foreign currency at the closing date of each period in respect to the U.S. dollar are detailed as follows:

 

		31/12/2012				31/12/2011
		US$				US$
Brazilian real			2.04				1.88
New Peruvian sol			2.75				2.77
Argentinean peso			4.92				4.30
Japanese yen			86.58				77.74
Euro			0.76				0.77
Mexican peso			12.99				13.98
Australian dollar			1.05				1.03
Pound Sterling			0.62				0.64
South African rand			8.47				8.10
Ecuadorian dollar			1.00				1.00
Chilean peso			479.96				519.20
UF			47.59				42.94

 

(c)

Transactions and balances

 

Non-monetary transaction balances denominated in a currency other than the functional currency (U.S. dollar) are translated using the exchange rate in force for the functional currency at the transaction date. Monetary assets and liabilities denominated in a foreign currency are translated at the exchange rate of the functional currency prevailing at the closing date of the consolidated statement of financial position. All differences are taken to the statement of income with the exception of all monetary items that provide an effective hedge for a net investment in a foreign operation. These items are recognized in other comprehensive income upon the disposal of the investment, at which time they are recognized in the statement of income. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.

 

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.5

Transactions in foreign currency, continued

 

(d)

Group entities

 

The profit or loss, assets and liabilities of all those entities with a functional currency other than the presentation currency are translated to the presentation currency as follows:

 

-

Assets and liabilities are translated at the closing date exchange rate as of the date of the consolidated statement of financial position.

-

Revenue and expenses in each profit or loss account are translated at average exchange rates for the year.

-

All resulting foreign currency exchange differences are recognized as a component separate in the foreign currency translation difference reserve

 

In consolidation, foreign currency exchange differences which arise from the conversion of a net investment in foreign entities are taken to net equity (other reserves). At the disposal date, these exchange differences are recognized in the statement of comprehensive income as part of the loss or gain from the sale.

 

2.6

Basis of consolidation

 

(a)

Subsidiaries

 

Subsidiaries are all those entities on which Sociedad Química y Minera de Chile S.A. has the control to lead the financial and operating policies, which, in general, is accompanied by participation greater than half the voting rights. Subsidiaries are consolidated from the date in which control is transferred to the Company and are excluded from consolidation on the date in which this control ceases to exist. Subsidiaries apply the same accounting policies that its Parent.

 

In order to recognize the acquisition of an investment, the Company uses the acquisition method. Under this method, the acquisition cost is the fair value of assets delivered, of equity instruments issued and of liabilities incurred or assumed at the exchange date plus costs directly attributable to acquisition. Identifiable assets acquired and identifiable liabilities and contingencies assumed in a business combination are initially stated at their fair value at the acquisition date. For each business combination, the acquirer measures the non-controlling interests in the acquiree at fair value or as a proportional part of the acquiree’s net identifiable assets.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.6 Basis of consolidation, continued

 

Companies included in consolidation:

 

								Ownership interest
				Country of				31/12/2012												31/12/2011
TAX ID No.		Foreign subsidiaries		origin		Functional currency		Direct				Indirect				Total				Total
Foreign		Nitratos Naturais Do Chile Ltda.		Brazil		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Nitrate Corporation Of Chile Ltd.		United Kingdom		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM North America Corp.		USA		US$			40.0000				60.0000				100.0000				100.0000
Foreign		SQM Europe N.V.		Belgium		US$			0.8600				99.1400				100.0000				100.0000
Foreign		Soquimich S.R.L. Argentina		Argentina		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Soquimich European Holding B.V.		The Netherlands		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Corporation N.V.		Dutch Antilles		US$			0.0002				99.9998				100.0000				100.0000
Foreign		SQI Corporation N.V.		Dutch Antilles		US$			0.0159				99.9841				100.0000				100.0000
Foreign		SQM Comercial De México S.A. De C.V.		Mexico		US$			0.0013				99.9987				100.0000				100.0000
Foreign		North American Trading Company		USA		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Administración Y Servicios Santiago S.A. de C.V.		Mexico		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Perú S.A.		Peru		US$			0.9800				99.0200				100.0000				100.0000
Foreign		SQM Ecuador S.A.		Ecuador		US$			0.0040				99.9960				100.0000				100.0000
Foreign		SQM Nitratos Mexico S.A. De C.V.		Mexico		US$			0.0000				51.0000				51.0000				51.0000
Foreign		SQMC Holding Corporation L.L.P.		USA.		US$			0.1000				99.9000				100.0000				100.0000
Foreign		SQM Investment Corporation N.V.		Dutch Antilles		US$			1.0000				99.0000				100.0000				100.0000
Foreign		SQM Brasil Limitada		Brazil		US$			2.7900				97.2100				100.0000				100.0000
Foreign		SQM France S.A.		France		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Japan Co.  Ltd.		Japan		US$			1.0000				99.0000				100.0000				100.0000
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		US$			1.6700				98.3300				100.0000				100.0000
Foreign		SQM Oceania Pty Limited		Australia		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Rs Agro-Chemical Trading A.V.V.		Aruba		US$			98.3333				1.6667				100.0000				100.0000
Foreign		SQM Indonesia S.A.		Indonesia		US$			0.0000				80.0000				80.0000				80.0000
Foreign		SQM Virginia L.L.C.		USA		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Italia SRL		Italy		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Comercial Caimán Internacional S.A.		Cayman Islands		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Africa Pty.		South Africa		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Lithium Specialties LLC		USA		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Iberian S.A.(c)		Spain		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Iodine Minera B.V.		The Netherlands		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Agro India Pvt.Ltd.		India		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Beijing Commercial Co. Ltd.		China		US$			0.0000				100.0000				100.0000				100.0000

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.6

Basis of consolidation, continued

 

Companies included in consolidation:

 

								Ownership interest
				Country of				31/12/2012												31/12/2011
TAX ID No.		Domestic subsidiaries		origin		Functional currency		Direct				Indirect				Total				Total
96.801.610-5		Comercial Hydro  S.A.		Chile		US$			0.0000				60.6383				60.6383				60.6383
96.651.060-9		SQM Potasio S.A.		Chile		US$			99.9999				0.0000				99.9974				99.9974
96.592.190-7		SQM Nitratos S.A.		Chile		US$			99.9999				0.0001				100.0000				100.0000
96.592.180-K		Ajay SQM Chile S.A.		Chile		US$			51.0000				0.0000				51.0000				51.0000
86.630.200-6		SQMC Internacional  Ltda.		Chile		Chilean peso			0.0000				60.6381				60.6381				60.6381
79.947.100-0		SQM Industrial S.A.		Chile		US$			99.0470				0.9530				100.0000				100.0000
79.906.120-1		Isapre Norte Grande Ltda.		Chile		Chilean peso			1.0000				99.0000				100.0000				100.0000
79.876.080-7		Almacenes y Depósitos Ltda.		Chile		Chilean peso			1.0000				99.0000				100.0000				100.0000
79.770.780-5		Servicios Integrales de Tránsitos y Transferencias S.A.		Chile		US$			0.0003				99.9997				100.0000				100.0000
79.768.170-9		Soquimich Comercial S.A.		Chile		US$			0.0000				60.6383				60.6383				60.6383
79.626.800-K		SQM Salar S.A.		Chile		US$			18.1800				81.8200				100.0000				100.0000
78.602.530-3		Minera Nueva Victoria Ltda.(d)		Chile		US$			0.0000				0.0000				0.0000				100.0000
78.053.910-0		Proinsa Ltda.		Chile		Chilean peso			0.0000				60.5800				60.5800				60.5800
76.534.490-5		Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.		Chile		Chilean peso			0.0000				100.0000				100.0000				100.0000
76.425.380-9		Exploraciones Mineras S.A.		Chile		US$			0.2691				99.7309				100.0000				100.0000
76.064.419-6		Comercial Agrorama Ltda. (a)		Chile		Chilean peso			0.0000				42.4468				42.4468				42.4468
76.145.229-0		Agrorama S.A. (b)		Chile		Chilean peso			0.0000				60.6377				60.6377				60.6377

 

(a) Comercial Agrorama Ltda. was consolidated given that the Company has control through the subsidiary Soquimich Comercial S.A.

 

(b) This subsidiary was incorporated on April 7, 2011.

 

(c) On December 14, 2011, Fertilizantes Naturales S.A. changed its company name to SQM Iberian S.A.

 

(d) On November 30, 2012, Minera Nueva Victoria Ltda. merged with SQM Potasio S.A. and was absorbed by it.

 

Subsidiaries are consolidated on a line by line basis by including in the consolidated financial statements all of their assets, liabilities, revenues, expenses and cash flows upon making the respective adjustments and eliminations of intragroup operations.

 

The results from subsidiary companies acquired or disposed of during the year are included in consolidated statement of income accounts from the effective date of acquisition or up to the effective date of disposal, as applicable.

 

Non-controlling interests represent the portion of subsidiary net assets and operating results not owned directly or indirectly by the parent.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.7

Significant accounting judgments, estimates and assumptions

 

The information contained in these consolidated financial statements is the responsibility of the Company’s management, who expressly indicate that they have applied all the principles and criteria included in IFRS, issued by the IASB.

 

In the accompanying consolidated financial statements, judgments and estimates have been made by management to quantify certain assets, liabilities, revenues, expenses and commitments recorded and or disclosed therein. Basically, these estimates refer to the following:

 

-

The useful lives of tangible and intangible assets and their residual values.

-

Impairment evaluations of certain assets, including trade receivables.

-

Assumptions used for the actuarial calculation of commitments for employee pensions and staff severance indemnities.

-

Provisions for commitments assumed with third parties and contingent liabilities.

-

Inventory provisions based on technical studies which cover the different variables affecting products in stock (density. humidity. among others) and allowances on slow-moving spare parts in inventory.

-

Future costs for the closure of mining facilities.

-

The determination of the fair value of certain financial and non-financial assets and derivative instruments.

-

The determination and allocation of fair values in business combinations

 

Although these estimates have been made considering information available as of the date of preparation of these consolidated financial statements, it is possible that events that may occur in the future could make their modification necessary in future years. Changes would be recorded prospectively, recognizing the effects of the change in estimates in the respective future consolidated financial statements.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies

 

3.1

Inventories

 

The Company states inventories for the lower of cost and net realizable value. The cost price of finished products and products in progress includes direct costs of materials and; as applicable, labor costs, indirect costs incurred to transform raw materials into finished products and general expenses incurred in carrying inventories to their current location and conditions. The method used to determine the cost of inventories is weighted average cost.

 

The net realizable value represents the estimate of the sales price less all finishing estimated costs and costs which will be incurred in commercialization, sales and distribution processes.

 

Commercial discounts, rebates obtained and other similar entries are deducted in the determination of the acquisition price.

 

The Company conducts an evaluation of the net realizable value of inventories at the end of each year recording an estimate with a charge to income when these are overstated. When the circumstances, which previously caused the rebate ceased to exist, or when there is clear evidence of an increase in the net realizable value due to a change in the economic circumstances or prices of main raw materials, the estimate made previously is modified.

 

The valuation of obsolete, impaired or slow-moving products relates to their net estimated net realizable value.

 

Provisions on the Company's inventories have been made based on a technical study which covers the different variables which affect products in stock (density, humidity, among others.)

 

Raw materials, supplies and materials are recorded at the lower of acquisition cost or market value. Acquisition cost is calculated according to the annual average price method.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies (continued)

 

3.2

Trade and other receivables

 

Trade and other receivables relate to non-derivative financial assets with fixed and determinable payments and are not quoted in any active market. These arise from sales operations involving the products and/or services which the Company commercializes directly to its customers

 

These assets are initially recognized at their fair value (which is equivalent to their face value, discounting implicit interest for installment sales) and subsequently at amortized cost according to the effective interest rate method less a provision for impairment loss. An allowance for impairment loss is established for trade receivables when there is objective evidence that the Company will not be able to collect all the amounts which are owed to it according to the original terms of receivables.

 

Implicit interest in installment sales is recognized as interest income when interest is accrued over the term of the operation.

 

3.3

Investments recognized using the equity method

 

Interests in companies in which control is exercised together with another company (joint ventures) or in which the Company has significant influence (associated companies) are recorded using the equity method. Significant influence is assumed to exist when the Company has interest exceeding 20% of the investee's equity.

 

Under this method, the investment is recognized in the consolidated classified statement of financial position at cost plus changes subsequent to the acquisition in an amount proportional to the net associated company’s equity using the ownership interest in the associate. The associated goodwill is included at the carrying value of the investee, and it is not subject to amortization. The debit or credit to profit or loss reflects the proportional amount in the associated companies’ results for the reporting period.

 

Unrealized profit on transactions with associates and subsidiaries are eliminated in consolidation of the ownership percentage that the Company has on these entities. Unrealized losses are also eliminated unless the transaction provided evidence of loss from impairment of the assets transferred.

 

Changes in equity of the associates are recognized proportionally with a debit or credit to “Other reserves” and classified according to their origin.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies (continued)

 

3.3

Investments recognized using the equity method, continued

 

The associated companies and the Company’s reporting dates and policies are similar for equivalent transactions and events under similar circumstances.

 

In the event that significant influence is lost or the investment is sold or is available-for-sale, the equity value method is discontinued, suspending the recognition of proportional income.

 

If the resulting amount according to the equity method is negative, the Company’s equity interest is reduced to zero in the consolidated financial statements, unless the Company has a contractual commitment to resolve the equity position. In this case, the respective provision for risks and expenses is recorded.

 

Dividends received in these companies are recorded by reducing the equity value and proportional profit or loss recognized in conformity with their interest, and are included in the consolidated statement of income under the caption “Equity in income (losses) of associates and joint ventures accounted for using the equity method”.

 

3.4

Property, plant and equipment

 

Tangible property, plant and equipment assets are stated at acquisition cost, net of the related accumulated depreciation, amortization and impairment losses that they might have experienced.

 

In addition to the price paid for the acquisition of tangible property, plant and equipment, the Company has considered the following concepts as part of the acquisition cost, as applicable:

 

1.    Accrued interest expenses during the construction period which are directly attributable to the acquisition, construction or production of qualifying assets, which are those that require a substantial period prior to being ready for use. The interest rate used is that related to the project’s specific financing or, should this not exist, the average financing rate of the investor company. The amount capitalized for this concept is ThUS$14,156 as of December 31, 2012 and ThUS$22,249 as of December 31, 2011.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies (continued)

 

3.4

Property, plant and equipment, continued

 

2.     The future costs that the Company will have to experience related to the closure of its facilities at the end of their useful life are included at the present value of disbursements expected to be required to settle the obligation.

Construction-in-progress is transferred to property, plant and equipment in operation once the assets are available for use and the related depreciation and amortization begins on that date.

 

Extension, modernization or improvement costs that represent an increase in productivity, ability or efficiency or an extension of the useful lives of property, plant and equipment are capitalized as a higher cost of the related assets. All the remaining maintenance, preservation and repair expenses are charged to expense as incurred.

 

Property, plant and equipment, net in the case of their residual values are depreciated using thee straight-line method over its estimated useful lives. When portions of a property, plant and equipment item have different useful lives, these portions are recorded as separate items.

 

The useful life is reviewed annually, and revised if necessary. The useful lives used for the depreciation and amortization of assets included in property, plant and equipment are presented below.

 

The replacement of full assets which increase the asset’s useful life or its economic capacity, are recorded as a higher value of property, plant and equipment with the related derecognition of replaced or renewed elements. Based on the impairment analysis conducted by the Company’s management it has been considered that the carrying value of assets does not exceed the net recoverable value of such assets. When portions of a property, plant and equipment item have different useful lives, these portions are recorded as separate items.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies (continued)

 

3.4

Property, plant and equipment, continued

 

The useful lives used for the depreciation and amortization of assets included in property, plant and equipment are presented below.

 

Types of property, plant and equipment		Minimum life or rate				maximum life or rate
Buildings			3				60
Plant and equipment			3				35
Information technology equipment			3				10
Fixtures and fittings			3				35
Motor vehicles			5				10
Other property, plant and equipment			2				30

 

 

Gains or losses which are generated from the sale or disposal of property, plant and equipment are recognized as income (or loss) in the period and calculated as the difference between the asset’s sales value and its net carrying value.

 

The Company obtains property rights and mining concessions from the Chilean State Government. Property rights are usually obtained without any initial cost (other than the payment of mining licenses and minor registration expenses) and when rights are obtained on these concessions, the Company retains them while it pays the related annual license fees. Such license fees, which are paid annually, are recorded as prepaid expenses and amortized over the following twelve month period. Amounts attributable to mining concessions acquired from third parties, which are not from the Chilean State, are recorded at their acquisition cost in property, plant and equipment.

 

Costs derived from daily maintenance of property, plant and equipment are recognized when incurred.

 

3.5

Financial information by operating segments

 

IFRS 8 requires that companies adopt a “management approach” to disclose information on the operations generated by its operating segments. In general, this is the information that management uses internally for the evaluation of segment performance and making the decision on how to allocate resources for this purpose.

 

An operating segment is a group of assets and operations responsible for providing products or services subject to risks and performance different from those of other business segments. A geographical segment is responsible for providing products or services in a given economic environment subject to risks and performance different from those of other segments that operate in other economic environments.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies (continued)

 

3.6

Financial information by operating segments, continued

 

For assets and liabilities the allocation to each segment is not possible given that these are associated with more than one segment, except for depreciation, amortization and impairment of assets, which are directly allocated to the applicable segments, in accordance with the criteria established in the costing process for product inventories.

 

The following operating segments have been identified by the Company:

 

-         Specialty plant nutrients

-         Industrial chemicals

-         Iodine and derivatives

-         Lithium and derivatives

-         Potassium

-         Other products and services

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies (continued)

 

3.6

Revenue recognition

 

Revenue includes the fair value of considerations received or receivable for the sale of goods and services during performance of the Company's activities. Revenue is presented net of value added tax, estimated returns, rebates and discounts and after the elimination of sales among subsidiaries.

 

Revenue is recognized when its amount can be stated reliably, it is possible that the future economic rewards will flow to the entity and the specific conditions for each type of activity -related revenue are complied with, as follows:

 

(a) Sale of goods

 

Sales of goods are recognized when the Company has delivered products to the customer, the customer has total discretion on the distribution channel and the price at which products are sold and there is no obligation pending compliance that could affect the acceptance of products by the customer. The delivery does not occur until products have been shipped to the customer or confirmed as received by customers when the related risks of obsolescence and loss have been transferred to the customer and the customer has accepted products in accordance with the conditions established in the sale, the acceptance period has ended or there is objective evidence that those criteria required for acceptance have been met.

 

Sales are recognized in consideration of the price set in the sales agreement, net of volume discounts and estimated returns at the date of the sale. Volume discounts are evaluated in consideration of annual foreseen purchases and in accordance with the criteria defined in agreements.

 

(b) Sales of services

 

Revenue associated with the rendering of services is recognized considering the degree of completion of the service as of the date of presentation of the consolidated classified statement of financial position, provided that the result from the transaction can be estimated reliably.

 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.6

Revenue recognition, continued

 

(c)   Interest income

 

Interest income is recognized when interest is accrued in consideration of the principal pending payment using the effective interest rate method.

 

(d)   Income from dividends

 

Income from dividends is recognized when the right to receive the payment is established.

 

3.7

Income tax and deferred taxes

 

Corporate income tax for the year is determined as the sum of current taxes from the different consolidated companies.

Current taxes are based on the application of the various types of taxes attributable to taxable income for the year.

 

Differences between the book value of assets and liabilities and their tax basis generate the balance of deferred tax assets or liabilities, which are calculated using the tax rates expected to be applicable when the assets and liabilities are realized.

 

In conformity with current Chilean tax regulations, the provision for corporate income tax and taxes on mining activity is recognized on an accrual basis, presenting the net balances of accumulated monthly tax provisional payments for the fiscal period and associated credits. The balances of these accounts are presented in current income taxes recoverable or current taxes payable, as applicable.

 

Tax on companies and variations in deferred tax assets or liabilities that are not the result of business combinations are recorded in statement of income accounts or equity accounts in the consolidated statement of financial position, considering the origin of the gains or losses which have generated them.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.7

Income tax and deferred taxes, continued

 

As of the date of these consolidated financial statements, the carrying amount of deferred tax assets has been reviewed and reduced to the extent there will not be sufficient taxable income to allow the recovery of all or a portion of the deferred tax assets. Likewise, as of the date of the consolidated financial statements, deferred tax assets that are not recognized were evaluated and not recognized as it was not more likely than not that future taxable income will allow for recovery of the deferred tax asset.

 

With respect to deductible temporary differences associated with investments in subsidiaries, associated companies and interest in joint ventures, deferred tax assets are recognized solely provided that it is more likely than not that the temporary differences will be reversed in the near future and that there will be taxable income with which they may be used.

 

The deferred income tax related to entries directly recognized in equity is recognized with an effect on equity and not with an effect on profit or loss.

 

Deferred tax assets and liabilities are offset if there is a legally receivable right of offsetting tax assets against tax liabilities and the deferred tax is related to the same tax entity and authority.

 

3.8

Earnings per share

 

The basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary owners of the parent by the weighted average number of ordinary shares outstanding during the year.

 

The Company has not conducted any type of operation of potential dilutive effect that assumes diluted earnings per share other than the basic earnings per share.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.9

Impairment of non-financial assets

 

Assets subject to depreciation and amortization are subject to impairment testing, provided that an event or change in the circumstances indicates that the amounts in the accounting records may not be recoverable. An impairment loss is recognized for the excess of the book value of the asset over its recoverable amount.

 

The recoverable amount of an asset is the higher between the fair value of an asset or cash generating unit (“CGU”) less costs of sales and its value in use, and is determined for an individual asset unless the asset does not generate any cash inflows that are clearly independent from other assets or groups of assets.

 

When the carrying value of an asset exceeds its recoverable amount, the asset is considered an impaired asset and is reduced to its net recoverable amount.

 

In evaluating value in use, estimated future cash flows are discounted using a discount rate before taxes which reflects current market evaluation on the time value of money and specific asset risks.

 

An appropriate valuation model is used to determine the fair value less selling costs. These calculations are confirmed by valuation multiples, quoted share prices for subsidiaries quoted publicly or other available fair value indicators.

 

Impairment losses from continuing operations are recognized with a debit to profit or loss in the categories of expenses associated with the impaired asset function, except for properties reevaluated previously where the revaluation was taken to equity. In this case impairment is also recognized with a debit to equity up to the amount of any previous revaluation.

 

As of December 31, 2012 and 2011, the Company is unaware of any indication of impairment with regard to its assets.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.9

Impairment of non-financial assets, continued

 

For assets other than acquired goodwill, an annual evaluation is conducted of whether there is impairment loss indicators recognized previously that might have already ceased to exist or decreased. The recoverable amount is estimated if such indicators exist. An impairment loss previously recognized is reversed only if there have been changes in estimates used to determine the asset’s recoverable amount from the last time in which an impairment loss was recognized. If this is the case, the carrying value of the asset is increased to its recoverable amount. This increased amount cannot exceed the carrying value that would have been determined net of depreciation if an asset impairment loss would have not been recognized in prior years. This reversal is recognized with a credit to profit or loss unless an asset is recorded at the revalued amount. Should this be the case, the reversal is treated as an increase in revaluation

 

3.10

Financial assets

 

The Company classifies their financial assets under the following categories: at fair value through profit or loss, loans and trade receivables, financial assets held-to-maturity and available-for-sale financial assets. The classification depends on the purpose for which financial assets were acquired. Management determines the classification of its financial assets at the time of initial recognition.

 

The Company assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of assets is deemed to be impaired if and only if there is objective evidence of impairment as a result of one or more events occurring after the initial recognition of the asset or group of assets. For the recognition o fan impairment loss, the loss event should have an impact on the estimate of future flows of the asset or group of financial assets.

 

(a)   Financial assets at fair value through profit or loss

 

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if it is acquired mainly for the purpose of being sold in the short-term. Derivatives are also classified as acquired for trading unless they are designated as hedge accounts. Assets under this category are classified as current assets and variations generated in fair value are directly recognized in profit or loss.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.10

Financial assets, continued

 

(b)    Loans and trade receivables

 

Loans and trade receivables are non-derivative financial assets with fixed o determinable payments not quoted in any active market. These are included in current assets, except for those with maturities exceeding 12 months from the closing date, which are classified as non-current assets. Loans and trade receivables are included under the caption “Trade and other receivables” in the consolidated classified statement of financial position and are stated at amortized cost. The subsequent measurement at amortized cost is calculated using the effective interest rate method less impairment.

 

(c)   Financial assets held-to-maturity

 

Financial assets held-to-maturity are non-derivative financial assets with fixed or determinable payments and fixed maturities which management has the positive intention and ability of holding to maturity. If a significant amount of financial assets held to maturity were to be sold, the full category would be reclassified as available for sale. Assets in this category are stated at amortized cost.

 

(d)   Financial assets available for sale

 

Financial assets available for sale are non-derivative instruments that have been designated in this category or are not classified in any of the other categories. They are included in non-current assets unless the Company intends to dispose of the investment in the 12 months following the closing date. These assets are stated at fair value, recognizing in other comprehensive income those variations in fair value, if any.

 

3.11

Financial liabilities

 

The Company classifies its financial liabilities under the following categories: at fair value through profit or loss, trade payables, interest-bearing loans or derivatives designated as hedging instruments.

 

The Company’s management determines the classification of its financial liabilities at the time of initial recognition.

 

Financial debt obligations are recorded at face value and as non-current when maturity is over twelve months and as current when maturity is less than twelve months. Interest expenses are recorded the year in which they are accrued under a financial approach.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.11

Financial liabilities, continued

 

In accordance with IAS 32 and 39, debt-related expenses are accounted for in the accompanying consolidated statement of financial position, deducting the associated debt and are imputed to the results of the year within the life of the debt using the effective interest rate method.

 

Financial liabilities are derecognized when the obligation is repaid, settled or it expires.

 

(a)   Financial liabilities at fair value through profit or loss

 

Financial liabilities are classified at fair value when these are held for trading or designated in their initial recognition at fair value through profit or loss. This category includes derivative instruments not designated for hedge accounting.

 

(b)   Trade payables

 

Trade payables to suppliers are subsequently stated at their amortized cost using the effective interest rate method.

 

(c)   Interest-bearing loans

 

Loans are subsequently stated at amortized cost using the effective interest rate method. Amortized cost is calculated considering any premium or discount from the acquisition and includes costs of transactions which are an integral part of the effective interest rate.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.12

Environment

 

In general, the Company follows the criteria of considering amounts used in environmental protection and improvement as environmental expenses. However, the cost of facilities, machinery and equipment used for the same purpose are considered property, plant and equipment

 

3.13

Minimum dividend

 

According to the Corporations Act, a publicly traded corporation must pay dividends according to the policy decided at the General Shareholders' Meeting of each year, with a minimum of 30% of the profit for the year ended December 31, 2012 if the corporation does not have unabsorbed accumulated deficit from prior years, unless it is otherwise decided with the unanimous vote of the issued and subscribed shares.

 

3.14

Consolidated statements of cash flows

 

Cash equivalents relate to short-term, highly liquid investments that are readily convertible into known amounts of cash and are subject to low risk of change in value, and expire in less than three months from the date of acquisition of the instrument

 

For the purposes of the consolidated statements of cash flows, cash and cash equivalents comprise the balance of cash and cash equivalents as defined previously.

 

The statement of cash flows includes cash movements performed during the year, determined using the indirect method.

 

3.15

Obligations related to employee termination benefits and pension commitments

 

Obligations with the Company’s employees are in accordance with that established in the collective bargaining agreements in force formalized through collective employment agreements and individual employment contracts, except for the United States that is regulated in accordance with employment plans in force up to 2002.

 

These obligations are valued using actuarial calculations, according to the projected unit credit method which considers such assumptions as the mortality rate, employee turnover, interest rates, retirement dates, effects related to increases in employees’ salaries, as well as the effects on variations in services derived from variations in the inflation rate.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.15

Obligations related to employee termination benefits and pension commitments, continued

 

Actuarial losses and gains that may be generated by variations in previously defined obligations are directly recorded in profit or loss for the year.

 

Actuarial losses and gains have their origin in departures between the estimate and the actual behavior of actuarial assumptions or in the reformulation of established actuarial assumptions.

 

The discount rate used by the Company for calculating the obligation was 6% for the periods ended December 31, 2012 and 2011.

 

The Company’s subsidiary SQM North America has established pension plans for its retired employees that are calculated by measuring the projected obligation using a net salary progressive rate net of adjustments for inflation, mortality and turnover assumptions, deducting the resulting amounts at present value using a 6.5% interest rate. The net balance of this obligation is presented under the non-current provisions for employee benefits.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.16

Financial derivatives and hedge transactions

 

Derivatives are recognized initially at fair value as of the date in which the derivatives contract is signed and subsequently they are valued at fair value. The method for recognizing the resulting loss or gain depends on whether the derivative has been designated as an accounting hedge instrument and if so, it depends on the type of hedging, which may be as follows:

 

(a)   Fair value hedge of assets and liabilities recognized (fair value hedges);

 

(b)   Hedging of a single risk associated with an asset or liability recognized or a highly possible foreseen transaction (cash flow hedge);

 

At the beginning of the transaction, the Company documents the relationship existing between hedging instruments and those entries hedged, as well as their objectives for risk management purposes and the strategy to conduct different hedging operations.

 

The Company also documents its evaluation both at the beginning and the end of each period of whether derivatives used in hedging transactions are highly effective to offset changes in the fair value or in cash flows of hedged entries.

 

The fair value of derivative instruments used for hedging purposes is shown in Note 10.3 (hedging assets and liabilities). Changes in the cash flow hedge reserve are classified as a non-current asset or liability if the remaining expiration period of the hedged item is higher than 12 months and as a current asset or liability if the remaining expiration period of the entry is lower than 12 months.

 

Investing derivatives are classified as a current asset or liability, and the change in their fair value is recognized directly in profit or loss.

 

(a)   Fair value hedge

 

The change in the fair value of a derivative is recognized with a debit or credit to profit or loss, as applicable. The change in the fair value of the hedged entry attributable to hedged risk is recognized as part of the carrying value of the hedged entry and is also recognized with a debit or credit to profit or loss.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.16

Financial derivatives and hedging transactions, continued

 

For fair value hedges related to items recorded at amortized cost, the adjustment of the fair value is amortized against profit or loss during the period through maturity. Any adjustment to the carrying value of a hedged financial instrument for which the effective rate is used is amortized with a debit or credit to profit or loss at its fair value attributable to the risk being covered.

 

If the hedged entry is derecognized, the fair value not amortized is immediately recognized with a debit or credit to profit or loss.

 

(b)   Cash flow hedges

 

The effective portion of gains or losses from the hedge instrument is initially recognized with a debit or credit to other reserves, whereas any ineffective portion is immediately recognized with a debit or credit to profit or loss, as applicable.

 

Amounts taken to equity are transferred to profit or loss when the hedged transaction affects profit or loss, as when the hedged interest income or expense is recognized when a projected sale occurs. When the hedged entry is the cost of a non-financial asset or liability, amounts taken to other reserves are transferred to the initial carrying value of the non-financial asset or liability.

 

Should the expected firm transaction or commitment no longer be expected to occur, the amounts previously recognized in equity are transferred to profit or loss. If a hedge instrument expires, is sold, finished, and exercised without any replacement, or if a rollover is performed or if its designation as hedging is revoked, the amounts previously recognized in other reserves are maintained in equity until the expected firm transaction or commitment occurs.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.17

Leases

 

(a)   Lease – Finance lease

 

Leases are classified as finance leases when the Company holds substantially all the risks and rewards derived from the ownership of the asset. Finance leases are capitalized at the beginning of the lease at the lower of the fair value of the leased asset or the present value of minimum lease payments.

 

Each lease payment is distributed between the liability and the interest expenses to obtain ongoing interest on the pending balance of the debt. The respective lease obligations, net of interest expense, are included in other non-current liabilities. The interest element of finance cost is debited in the consolidated statement of income during the lease period so that a regular ongoing interest rate is obtained on the remaining balance of the liability for each year. The asset acquired through a finance lease is subject to depreciation over the lower of its useful life or the life of the agreement.

 

(b)   Lease – Operating lease

 

Leases in which the lessor maintains a significant part of the risks and rewards derived from the ownership are classified as operating leases. Operating lease payments (net of any incentive received from the lessor) are debited to the statement of income or capitalized (as applicable) on a straight-line basis over the lease period.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.18

Prospecting expenses

 

Those prospecting expenses associated with mineral reserves being exploited are included under Inventory and amortized according to the estimated mineral content reserves. Prospecting expenses associated with future mineral reserves are presented under other non-financial assets as and when minerals included in the future reserve have caliche ore-grade, which makes the mining property economically commercializable.

 

Those expenses incurred on mining properties in which the product has a low caliche ore-grade that is not economically commercializable, are directly charged to profit or loss.

 

3.19

Other provisions

 

Provisions are recognized when:

 

-

The Company has a present obligation as the result of a past event.

 

-

It is more likely than not that certain resources must be used, including benefits, to settle the obligation.

 

-

A reliable estimate can be made of the amount of the obligation.

 

In the event that the provision or a portion of it is reimbursed, the reimbursement is recognized as a separate asset solely if there is certainty of income.

 

In the consolidated statement of income, the expense for any provision is presented net of any reimbursement.

 

Should the effect of the time value of money be significant, provisions are discounted using a discount rate before taxes that reflects the liability’s specific risks. When a discount rate is used, the increase in the provision over time is recognized as a finance cost.

 

The Company’s policy is maintaining provisions to cover risks and expenses based on a better estimate to deal with possible or certain and quantifiable responsibilities from current litigation, compensations or obligations, pending expenses for which the amount has not yet been determined, collaterals and other similar guarantees for which the Company is responsible. These are recorded at the time the responsibility or the obligation that determines the compensation or payment is generated.

 

The Company determines and recognizes the cost related to employee vacation on an accrual basis.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.20

Compensation plans

 

Compensation plans implemented through benefits in share-based payments settled in cash, which have been provided, are recognized in the financial statements at their fair value, in accordance with International Financial Reporting Standard No. 2 "Share-based Payments.” Changes in the fair value of options granted are recognized with a charge to payroll on a straight-line basis during the period between the date on which these options are granted and the payment date. (See Note No.16).

 

3.21

Good and service insurance expenses

 

Payments for the different insurance policies which the Company contracts are recognized in expenses considering the proportional amount related to the time that they cover, regardless of payment terms. Amounts paid and not consumed are recognized as prepayments within current assets.

 

Costs of claims are recognized in profit or loss immediately after they become known, net of recoverable amounts from insurance companies. Recoverable amounts are recorded as a reimbursable asset from the insurance company under “Trade and other receivables", calculated as established in the respective insurance policies.

 

3.22

Intangible assets

 

Intangible assets mainly relate to goodwill acquired, water rights, trademarks, and rights of way related to electric lines, development expenses, and computer software licenses.

 

(a)   Goodwill acquired

 

Goodwill acquired represents the excess in acquisition cost on the fair value of the Company's ownership of the net identifiable assets of the subsidiary on the acquisition date. Goodwill acquired related to acquisitions of subsidiaries is included in goodwill, which is subject to impairment tests every time consolidated financial statements are issued and is stated at cost less accumulated impairment losses. Gains and losses related to the sale of an entity include the carrying value of goodwill related to the entity sold.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.22

Intangible assets, continued

 

This intangible asset is assigned to cash-generating units with the purpose of testing impairment losses. It is allocated based on cash-generating units expected to obtain benefits from the business combination from which the aforementioned goodwill acquired arose.

 

(b)

Water rights

 

Water rights acquired by the Company relate to water from natural sources and are recorded at acquisition cost. Given that these assets represent legal rights granted to the Company for a given period, these are amortized during its useful life.

 

(c)

Right of way for electric lines

 

As required for the operation of industrial plants, the Company has paid rights of way in order to install wires for the different electric lines in third party land. These rights are presented under Intangible assets. Amounts paid are capitalized at the date of the agreement and charged to income according to the life of the right of way.

 

(d)

Computer software

 

Licenses for IT programs acquired are capitalized based on costs that have been incurred to acquire them and prepare them to use the specific program. These costs are amortized over their estimated useful lives.

 

Expenses related to the development or maintenance of IT programs are recognized as an expense as and when incurred. Costs directly related to the production of unique and identifiable IT programs controlled by the Group and which probably will generate economic benefits that are higher than costs during more than a year, are recognized as intangible assets. Direct costs include expenses incurred for employees who develop IT programs and an adequate percentage of general expenses.

 

The costs of development for IT programs recognized as assets are amortized over their estimated useful lives.

 

No impairment of intangible assets exists as of December 31, 2012 and December 31, 2011.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.23

Research and development expenses

 

Research and development expenses are expensed in the period in which the disbursement is made, with the exception of property, plant and equipment acquired for use in research and development, which are recognized in the accounting under the respective item within property, plant and equipment.

 

3.24

Classification of balances as current and non-current

 

In the attached consolidated statement of financial position, balances are classified in consideration of their remaining recovery (maturity) dates; i.e., those maturing on a date equal to or lower than twelve months are classified as current and those with maturity dates exceeding the aforementioned period are classified as non-current.

 

The exception to the foregoing relates to deferred taxes, which are classified as non-current, regardless of the anticipated recovery date

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 4 -    Financial risk management

 

4.1

Financial risk management policy

 

The Financial Risk Management Policy of the Company is oriented towards safeguarding the stability and sustainability of Sociedad Química y Minera de Chile S.A. and Subsidiaries in relation to all such relevant financial uncertainty components.

 

The operations of the Company are subject to certain financial risk factors that may affect the financial position or results of the same. Among these risks, the most relevant are market risk, liquidity risk, currency risk, bad debt risk, and interest rate risk

 

There may be additional risks that are currently unknown to us or other known risks but that we currently believe are not significant, which could also affect the commercial operations, the business, the financial position or the results of the Company.

The financial risk management structure includes identifying, determining, analyzing, quantifying, measuring and controlling these events. The Management, in particular the Finance Management, is responsible for constantly assessing the financial risk. The Company uses derivatives to cover a significant portion of these risks.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 4 -    Financial risk management (continued)

 

4.2

Risk factors

 

4.2.1

Market risk

 

Market risks are those uncertainties associated with fluctuations in market variables that affect the assets and liabilities of the Company, such as:

 

a)

Country risk: The economic position of the countries where the Company has a presence may affect its financial position. For example, the sales carried out in emerging markets expose SQM to risks related to economic conditions and trends in those countries. On the other hand, inventories may also be affected by the economic situation of these countries and/ or the global economy, amongst other probable economic impacts.

 

b)

Price volatility risk: The prices of the products of the Company are affected by the fluctuations of international prices of fertilizers and chemical products and changes in productive capacities or market demand, all of which might affect the Company’s business, financial condition and operational results.

 

c)

Commodity Price risk: The Company is exposed to changes in the prices of raw materials and energy which may have an impact on its production costs, thus giving rise to instability in the results.

 

At present, the Company has a direct annual expense close to US$130 million on account of petrol, gas and equivalents and close to US$ 60 million on account of electricity. Variations of 10% in the prices of energy the Company required to operate, may involve in the short-term movements in costs of approximately US$17 million.

 

4.2.2

Doubtful accounts risk

 

A contraction of the global economy and the potentially negative effects in the financial position of our clients may extend the receivables collection time for SQM, increasing the bad debt exposure. While measures have been taken in order to minimize risk, the global economy may trigger losses that might have a material adverse effect on the business, financial position or the results of the Company’s operations.

 

As a way to mitigate these risks, SQM actively controls debt collection and uses measures such as, loan insurance, letters of credit, and prepayments with regard to some receivables.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 4 -    Financial risk management (continued)

 

4.2.3

Currency risk

 

As a result of the influence in the price determination, of its relationship with sales costs and since a significant part of the business of the Company is carried out in that foreign currency, the functional currency of SQM is the United States dollar. However, the global business activities of the Company expose the same to the foreign exchange fluctuations of several currencies with respect to the US dollar. Therefore, SQM has hedge contracts to mitigate the exposure generated by its main mismatches (assets net of liabilities) in currencies other than the US dollar against the foreign exchange fluctuation. Those contracts are periodically up-dated depending upon the mismatch amount to be covered in these currencies. Occasionally and subject to the Board of Directors’ approval, the Company insures cash flows from certain specific items in currency other tan U.S. dollar at short-term.

 

A significant portion of the costs of the Company, particularly payroll, is related to the Chilean peso. Therefore, an increase or decrease in the exchange rate against the dollar would affect the net income of SQM. Approximately US$ 440 million cost of the Company are related to the Chilean peso. A significant part of the effect of such obligations in the statement of financial position is covered by operations of derivative instruments that hedge the mismatch of balance in this currency.

 

As of December 31, 2011, the Company had derivative instruments classified as hedging currency and interest rate associated with all the obligations denominated bonds both in Chilean pesos and UF, with a fair value of US$ 56.1 million. As of December 2012, this value amounts to US$ 100.6 million, both for SQM.

 

As of December 31, 2012, the Chilean peso to US dollar Exchange rate was Ch$ 479.96 per US$ 1.00, and as of December 31, 2011 it was Ch$ 519.20 per US$ 1.00.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 4 -    Financial risk management (continued)

 

4.2.4

Interest rate risk

 

Interest rate fluctuations, due to the uncertain future behavior of markets, may have a material impact on the financial results of the Company.

 

The Company has short and long-term debts valued at LIBOR plus a spread. The Company is partially exposed to fluctuations of said rate, as SQM currently holds hedging derivative instruments to hedge a portion of its liabilities subject to the LIBOR rate fluctuations.

 

As of December 31, 2012, approximately 21% of the Company’s financial obligations are valued at LIBOR; therefore significant increases in the rate may impact its financial position. A 100 point variation in this rate may trigger variations in the financial expenses close to US$ 3.1 million. Notwithstanding, this effect is significantly counterbalanced by the returns of the Company’s investments that also relate to LIBOR.

 

In addition, as of December 31, 2012, the Company's financial debt is mainly in the long-term, with 8% with maturities under 12 months which decreases the exposure to changes in the interest rates.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 4 -    Financial risk management (continued)

 

4.2.5

Liquidity risk

 

Liquidity risk is related to the fund requirements to comply with payment obligations. The object of the Company is to keep financial flexibility by comfortably balancing the fund requirements and the flows from the regular business conduct, bank loans, public bonds, short term investments, and negotiable instruments, amongst other.

 

The company has an important capital expense program which is subject to change over time.

 

On the other hand, world financial markets go through contraction and expansion periods that are not foreseeable in the long-term and may affect SQM’s access to financial resources. These factors may have a material adverse impact on the business, financial position, and operational results of the Company.

 

SQM constantly monitors that its obligations and investments match, taking care as part of its financial risk management strategy of the obligations and investments maturities from a conservative perspective. As of December 31, 2012, the Company had non-committed and available bank credit lines for working capital for a total of approximately US$ 530 million.

 

The position in other cash and cash equivalents so generated by the Company is invested in highly liquid mutual funds which have an AAA risk rating.

 

4.3

Risk measurement

 

The Company has methods to measure the effectiveness and efficiency of financial risk hedging strategies, both prospectively and retrospectively. Those methods are consistent with the risk management profile of the Group.

 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 5 - Changes in accounting estimates and policies (consistent presentation)

 

5.1

Changes in accounting estimates

 

There are no changes in accounting estimates as of the closing date of the consolidated financial statements.

 

5.2

Changes in accounting policies

 

As of December 31, 2012, the Company’s consolidated financial statements present no changes in accounting policies or estimates compared to the prior period.

 

The consolidated classified statements of financial position as of December 31, 2012 and December 31, 2011 and the statements of comprehensive income, equity and cash flows for the periods ended December 31, 2012 and December 31, 2011, have been prepared in accordance with IFRS, and accounting principles and criteria have been applied consistently.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 6 - Background of companies included in consolidation

 

6.1

Parent’s stand-alone assets and liabilities

 

		12/31/2012				12/31/2011
		ThUS$				ThUS$
Assets			3,908,259				3,626,748
Liabilities			(1,775,476	)			(1,813,914	)
Assets (liabilities)			2,132,783				1,812,834

 

6.2

Parent entity

 

As provided in the Company’s by-laws, no shareholder can concentrate more than 32% of the Company’s voting right shares and therefore there is no controlling entity.

 

6.3

Joint arrangements of controlling interest

 

Sociedad de Inversiones Pampa Calichera S.A., Potasios de Chile S.A., and Inversiones Global Mining (Chile) Limitada, collectively the Pampa Group, are the owners of a number of shares that are equivalent to 30.50% as of December 31, 2012 of the current total amount of shares issued, subscribed and fully-paid of the Company. In addition, Kowa Company Ltd., Inversiones La Esperanza (Chile) Limitada, Kochi S.A. and La Esperanza Delaware Corporation, collectively the Kowa Group, are the owners of a number of shares equivalent to 2.08% of the total amount of shares of SQM S.A. issued, subscribed and fully-paid.

 

The Pampa Group and the Kowa Group have informed SQM S.A., the Chilean SVS and the relevant stock exchanges in Chile and abroad that they are not and have never been related parties between them. In addition, this is regardless of the fact that both Groups on December 21, 2006 have entered into a Joint Action Agreement (JAA) related to those shares. Consequently, the Pampa Group, by itself, does not concentrate more than 32% of the voting right capital of SQM S.A., and the Kowa Group does not concentrate by itself more than 32% of the voting right capital of SQM S.A.

 

Likewise, the Joint Action Agreement has not transformed the Pampa and Kowa Groups into related parties between them. The Joint Action Agreement has only transformed the current controller of SQM S.A., composed of the Pampa Group, and the Kowa Group into related parties of SQM S.A.

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 6 - Background of companies included in consolidation (continued)

 

6.3

Joint arrangements of controlling interest, continued

 

Detail of effective concentration

 

Tax ID No.		Name		Ownership interest %
96.511.530-7		Sociedad de Inversiones Pampa Calichera S.A.			20.35
96.863.960-9		Inversiones Global Mining (Chile) Limitada			3.34
76.165.311-5		Potasios de Chile S.A.			6.81
Total Pampa Group					30.50
79,798,650-k		Inversiones la Esperanza (Chile)  Ltda.			1.40
59.046.730-8		Kowa Co Ltd.			0.30
96.518.570-4		Kochi S.A.			0.29
59.023.690-k		La Esperanza Delaware Corporation			0.09
Total Kowa Group					2.08

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 6 - Background of companies included in consolidation (continued)

 

6.4

Information on consolidated subsidiaries

 

Financial information as of December 31, 2012 of the companies in which the group exerts control and significant influence is as follows:

 

12/31/2012
				Country of				Ownership interest												Assets				Liabilities				Total equity				Net profit (loss)
Subsidiary		Tax ID No.		incorporation		Functional currency		Direct				Indirect				Total				ThUS$				ThUS$				ThUS$				ThUS$
SQM Nitratos S.A.		96.592.190-7		Chile		US$			99.9999				0.0001				100.0000				735,546				534,869				200,677				148,768
Proinsa Ltda.		78.053.910-0		Chile		Chilean peso			-				60.5800				60.5800				221				-				221				-
SQMC Internacional  Ltda.		86.630.200-6		Chile		Chilean peso			-				60.6381				60.6381				292				-				292				2
SQM Potasio S.A.		96.651.060-9		Chile		US$			99.9974				-				99.9999				1,149,717				14,306				1,135,411				259,578
Serv. Integrales de Tránsito y Transf. S.A.		79.770.780-5		Chile		US$			0.0003				99.9997				100.0000				357,590				326,522				31,068				4,330
Isapre Norte Grande Ltda.		79.906.120-1		Chile		Chilean peso			1.0000				99.0000				100.0000				1,527				872				655				263
Ajay SQM Chile S.A.		96,592,180-K		Chile		US$			51.0000				-				51.0000				26,262				6,226				20,036				9,980
Almacenes y Depósitos Ltda.		79.876.080-7		Chile		Chilean peso			1.0000				99.0000				100.0000				451				-				451				(11	)
SQM Salar S.A.		79.626.800-K		Chile		US$			18.1800				81.8200				100.0000				1,611,208				464,669				1,146,539				318,275
SQM Industrial S.A.		79.947.100-0		Chile		US$			99.0470				0.9530				100.0000				1,988,068				1,070,450				917,618				93,488
Exploraciones Mineras S.A.		76.425.380-9		Chile		US$			0.2691				99.7309				100.0000				31,944				4,383				27,561				(236	)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.		76.534.490-5		Chile		Chilean peso			-				100.0000				100.0000				1,037				902				135				17
Soquimich Comercial S.A.		79.768.170-9		Chile		US$			-				60.6383				60.6383				186,462				73,470				112,992				8,555
Comercial Agrorama Ltda.		76.064.419-6		Chile		Chilean peso			-				42.4468				42.4468				17,208				15,996				1,212				(185	)
Comercial Hydro  S.A.		96.801.610-5		Chile		Chilean peso			-				60.6383				60.6383				8,100				230				7,870				430
Agrorama S.A.		76.145.229-0		Chile		Chilean peso			-				60.6377				60.6377				14,250				14,093				157				47
SQM North America Corp.		Foreign		United States		US$			40.0000				60.0000				100.0000				319,812				284,290				35,522				23,737

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 6 - Background of companies included in consolidation (continued)

 

6.4

Information on consolidated subsidiaries, continued

 

12/31/2012
				Country of				Ownership interest												Assets				Liabilities				Total equity				Net profit (loss)
Subsidiary		Tax ID No.		incorporation		Functional currency		Direct				Indirect				Total				ThUS$				ThUS$				ThUS$				ThUS$
RS Agro Chemical Trading A.V.V.		Foreign		Aruba		US$			98.3333				1.6667				100.0000				5,214				-				5,214				(10	)
Nitratos Naturais do Chile Ltda.		Foreign		Brazil		US$			-				100.0000				100.0000				290				5,005				(4,715	)			(284	)
Nitrate Corporation of Chile Ltd.		Foreign		United Kingdom		US$			-				100.0000				100.0000				5,076				-				5,076				-
SQM Corporation N.V.		Foreign		Dutch Antilles		US$			0.0002				99.9998				100.0000				86,953				3,724				83,229				(3,314	)
SQM Perú S.A.		Foreign		Peru		US$			0.9800				99.0200				100.0000				904				1,214				(310	)			(165	)
SQM Ecuador S.A.		Foreign		Ecuador		US$			0.0040				99.9960				100.0000				19,419				18,065				1,354				244
SQM Brasil Ltda.		Foreign		Brazil		US$			2.7900				97.2100				100.0000				723				942				(219	)			78
SQI Corporation N.V.		Foreign		Dutch Antilles		US$			0.0159				99.9841				100.0000				17				43				(26	)			(8	)
SQMC Holding Corporation L.L.P.		Foreign		Aruba		US$			0.1000				99.9000				100.0000				24,597				1,657				22,940				2,422
SQM Japan Co.  Ltd.		Foreign		Japan		US$			1.0000				99.0000				100.0000				2,476				711				1,765				(125	)
SQM Europe N.V.		Foreign		Belgium		US$			0.8600				99.1400				100.0000				391,590				356,719				34,871				(14,928	)
SQM Italia SRL		Foreign		Italy		US$			-				100.0000				100.0000				1,360				18				1,342				-
SQM Indonesia S.A.		Foreign		Indonesia		US$			-				80.0000				80.0000				5				1				4				-
North American Trading Company		Foreign		United States		US$			-				100.0000				100.0000				305				39				266				-
SQM Virginia LLC		Foreign		United States		US$			-				100.0000				100.0000				29,204				14,829				14,375				(1	)
SQM Comercial de México S.A. de C.V.		Foreign		Mexico		US$			0.0013				99.9987				100.0000				79,092				55,672				23,420				3,254

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 6 - Background of companies included in consolidation (continued)

 

6.4

Information on consolidated subsidiaries, continued

 

12/31/2012
				Country of				Ownership interest												Assets				Liabilities				Total equity				Net profit (loss)
Subsidiary		Tax ID No.		incorporation		Functional currency		Direct				Indirect				Total				ThUS$				ThUS$				ThUS$				ThUS$
SQM Investment Corporation N.V.		Foreign		Dutch Antilles		US$			1.0000				99.0000				100.0000				64,264				40,239				24,025				743
Royal Seed Trading Corporation A.V.V.		Foreign		Aruba		US$			1.6700				98.3300				100.0000				242,707				253,736				(11,029	)			(2,435	)
SQM Lithium Specialties LLP		Foreign		United States		US$			-				100.0000				100.0000				15,785				1,265				14,520				(1	)
Soquimich SRL Argentina		Foreign		Argentina		US$			-				100.0000				100.0000				422				176				246				(39	)
Comercial Caimán Internacional S.A.		Foreign		Panama		US$			-				100.0000				100.0000				333				1,146				(813	)			(58	)
SQM France S.A.		Foreign		France		US$			-				100.0000				100.0000				351				114				237				-
Administración y Servicios Santiago S.A. de C.V.		Foreign		Mexico		US$			-				100.0000				100.0000				50				811				(761	)			127
SQM Nitratos México S.A. de C.V.		Foreign		Mexico		US$			-				51.0000				51.0000				33				23				10				-
Soquimich European Holding B.V.		Foreign		The Netherlands		US$			-				100.0000				100.0000				179,048				102,950				76,098				(4,932	)
SQM Iberian S.A		Foreign		Spain		US$			-				100.0000				100.0000				81,429				81,883				(454	)			(2,135	)
Iodine Minera B.V.		Foreign		The Netherlands		US$			-				100.0000				100.0000				16,929				-				16,929				3,708
SQM Africa Pty Ltd.		Foreign		South Africa		US$			-				100.0000				100.0000				98,127				91,370				6,757				(2,921	)
SQM Oceania Pty Ltd.		Foreign		Australia		US$			-				100.0000				100.0000				5,621				1,613				4,008				755
SQM Agro India Pvt. Ltd.		Foreign		India		US$			-				100.0000				100.0000				18				11				7				(38	)
SQM Beijing Commercial Co. Ltd.		Foreign		China		US$			-				100.0000				100.0000				3,637				1,779				1,858				1,621
Total																					7,805,674				3,847,033				3,958,641				848,596

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 6 - Background of companies included in consolidation (continued)

 

6.4

Information on consolidated subsidiaries, continued

 

12/31/2011
				Country of				Ownership interest												Assets				Liabilities				Total equity				Net profit (loss)
Subsidiary		Tax ID No.		incorporation		Functional currency		Direct				Indirect				Total				ThUS$				ThUS$				ThUS$				ThUS$
SQM Nitratos S.A.		96.592.190-7		Chile		US$			99.9999				0.0001				100.0000				819,424				665,515				153,909				106,473
Proinsa Ltda.		78.053.910-0		Chile		Chilean peso			-				60.5800				60.5800				204				-				204				(1	)
SQMC Internacional  Ltda.		86.630.200-6		Chile		Chilean peso			-				60.6381				60.6381				268				-				268				(4	)
SQM Potasio S.A.		96.651.060-9		Chile		US$			99.9974				-				99.9974				771,112				120,138				650,974				246,439
Serv. Integrales de Tránsito y Transf. S.A.		79.770.780-5		Chile		US$			0.0003				99.9997				100.0000				277,296				250,558				26,738				4,302
Isapre Norte Grande Ltda.		79.906.120-1		Chile		Chilean peso			1.0000				99.0000				100.0000				1,127				716				411				28
Ajay SQM Chile S.A.		96,592,180-K		Chile		US$			51.0000				-				51.0000				26,977				9,855				17,122				10,066
Almacenes y Depósitos Ltda.		79.876.080-7		Chile		Chilean peso			1.0000				99.0000				100.0000				419				1				418				(17	)
SQM Salar S.A.		79.626.800-K		Chile		US$			18.1800				81.8200				100.0000				1,438,672				610,538				828,134				286,239
SQM Industrial S.A.		79.947.100-0		Chile		US$			99.0470				0.9530				100.0000				1,889,981				1,066,598				823,383				93,062
Minera Nueva Victoria S.A.		78.602.530-3		Chile		US$			99.000				1.0000				100.0000				112,628				4,527				108,101				4,069
Exploraciones Mineras S.A.		76.425.380-9		Chile		US$			0.2691				99.7309				100.0000				31,878				4,082				27,796				(207	)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.		76.534.490-5		Chile		Chilean peso			-				100.0000				100.0000				757				648				109				(23	)
Soquimich Comercial S.A.		79.768.170-9		Chile		US$			-				60.6383				60.6383				191,346				82,750				108,596				7,220
Comercial Agrorama Ltda.		76.064.419-6		Chile		Chilean peso			-				42.4468				42.4468				11,555				10,264				1,291				29
Comercial Hydro  S.A.		96.801.610-5		Chile		Chilean peso			-				60.6383				60.6383				7,681				241				7,440				334
Agrorama S.A.		76.145.229-0		Chile		Chilean peso			-